The Pradhan Mantri Fasal Bima Yojana (PMFBY), the heavily subsidised crop insurance scheme, is gaining traction among the states that have either remained reluctant to roll it out, or quit briefly after joining, citing the costs to the exchequer.
Sources said after discussions with the Union ministry of agriculture and farmers’ welfare, Bihar has agreed to rejoin PMFBY by the next kharif season. Also, talks are on with Gujarat to persuade the coastal state to implement the scheme.
The rethink on the part of these states is in the wake of the falling claims-to-premium ratio over recent years, which has encouraged top insurers to stay put. The ratio declined to 75.2% in FY24 from close to 90% in FY20. Officials said that the average premium rate, too, has declined over the years due to competitive bidding and application of technology in crop assessment.
Andhra Pradesh and Jharkhand rejoined the scheme last year while Telangana has announced rolling it out from next kharif season.
At present, 23 states are implementing PMFBY.
Since the launch in 2016, six states had opted out of the scheme – Gujarat, Bihar, West Bengal, Andhra Pradesh, Telangana and Jharkhand – while Punjab, which at first declined to join the scheme citing secured irrigation and low indemnity level, later approved it for horticultural crops.
The Centre has shown unwavering commitment to run the scheme. Last week, the Union Cabinet had extended two crop insurance schemes — the PMFBY and its sub-scheme – the Restructured Weather Based Crop Insurance Scheme (RWBCIS) — by one more year till 2025-26 to align their implementation with the 15th Finance Commission period.
The total outlay for PMFBY and RWBCIS has been increased to Rs 69,515 crore for FY22 to FY26, from Rs 66,550 crore for FY21 to FY25.
States dropped out of the scheme because of the perception of high risk and financial or budgetary constraints. Under the scheme, comprehensive risk coverage for crops against all non-preventable natural risks — from pre-sowing to post-harvest stages of crops — is provided at a highly subsidised premium rate for the farmers. Farmers pay a fixed premium of just 1.5% of the sum insured for rabi crops and 2% for kharif crops, while it is 5% for cash crops.
The balance premium is equally shared between the Centre and states. For North-Eastern states, the premium is split in a 9:1 ratio between the Centre and states.
Officials said with the expansion of the crop insurance scheme, the Centre’s share for PMFBY is likely to exceed the Budget estimate of Rs 14,600 crore for FY25. The revised estimate for FY24 stands at Rs 12,948 crore. In FY24, enrolment under PMFBY crossed a record 40 million, and it is projected to increase significantly in the current fiscal.
An official said the crop insurance scheme is gradually moving towards a subscription-based model rather than a loan-based scheme. “More than 55% of farmers who are enrolled under the crop insurance scheme are those who had not availed loans from banks in FY24,” the official said.
Insurance claims of Rs 1.7 lakh crore have been paid to farmers against Rs 34,362 crore premium paid under PMFBY since its launch in 2016, according to the agriculture ministry data. Participation in PMFBY is optional for farmers.
Twenty insurance companies, both in public and private sectors, are implementing the scheme.
The PMFBY, which is followed widely, is a yield index-based scheme whereas RWBCIS, followed mostly in Maharashtra and introduced along with PMFBY, is a weather index-based scheme.