The NDA government recently launched a new crop insurance scheme titled Pradhan Mantri Fasal Bima Yojana (PMFBY) to mitigate the rural distress caused by crop failure or damage due to factors like unseasonal rains, monsoon failure, storms, floods, pests and diseases.
According to the Agriculture Census Report 2010-11, the number of operational holdings (all land which is used wholly or partly for agricultural production and is operated as one technical unit by one person alone or with others without regard to the title, legal form, size or location) was 138.35 million of which wholly owned and self-operated holdings accounted for 97.61 per cent in 2011. The small and marginal holdings (below 2 hectare) constituted 85.01 per cent.
The report says there are around 118.6 million cultivators in the country. The government aims to cover at least 50% of farmers with its crop insurance scheme. The present coverage is below 25%.
Under the new scheme, a farmer has to pay a uniform premium of 2% of the total value (arrived at by factoring in MSP) for all Kharif crops, 1.5% of the value all Rabi crops and 5% on all commercial (cocoa, coffee, cotton, tea, tobacco) and horticultural crops. The balance amount towards the premium will be paid by the government. PMFBY is likely to cost the central government Rs 8,800 crore. State governments also have to contribute an equal amount for this scheme.
In the Modified National Agricultural Insurance Scheme, the premium was in the range of 2-15% of the sum insured. The government provided a subsidy of 75% if the premium was above 15%. The insurance companies calculated the premium based on actuarial rate which for some crops were very high that went up to 40%. If the actuarial rate was higher than the capped rate, then the sum insured would come down accordingly. For example, let us consider that the sum insured for a crop is Rs 30,000 with premium capped at 11%. If the actuarial rate is 22% for the crop, then the sum insured will be reduced to Rs 15,000 under MNAIS.
In PMFBY scheme there is no cap on the total value government will be contributing towards the subsidy. Even if balance premium is 90% it will be borne by the government. The removal of capping on premium is expected to encourage more farmers to join the scheme.
The insurance companies providing the cover play an important role in executing the scheme and thereby its successful implementation. KG Krishnamoorthy Rao, MD & CEO, Future General India Insurance said, “scheme proposed seems to be good from the farmer’s point of view since the premium payable from the farmer is likely to be reduced and the claim settlement process is made simpler. However we need to see the detailed rules about the scheme to understand it better.”
Anuj Tyagi, Member of Executive Management, Corporate & Rural Business and Reinsurance, HDFC ERGO also agreed that the scheme has a host of features which makes it a perfect solution tailor made to suit the needs of the Indian farmer.