The Pradhan Mantri Fasal Beema Yojana (PMFBY) – Lesser than a Solution

Santosh Verma 

the past three and half decades, various governments at the centre introduced
several crop insurance schemes for the farmers to lessen the risks (partial or
full) involved due to natural calamities and crop diseases. In 1985, in its very
first attempt, the Government of India (GoI) launched Comprehensive Crop Insurance
Scheme (CCIS) with a mandate to a national coverage. In 1999, CCIS was replaced
with a new scheme called National Agricultural Insurance Scheme (NAIS). To
implement this scheme, w.e.f. April 1, 2003, the Government designated
Agriculture Insurance Company of India Ltd. (AIC), a public sector company, as
its implementing agency. Further, another scheme, Weather Based Crop Insurance
Scheme (WBCIS) was launched to cover the farmers in 20 states with a mandate to
provide insurance against inconsistent climatic conditions (drought, flood,
untimely rainfall, variations in temperature, frost, etc.)from the Kharif
2007. With the purpose of insuring farmers, another attempt was made,
when GoI introduced Modified National Agriculture Insurance Scheme (MNAIS) from
the Rabi season 2010-11. The Scheme was launched on pilot basis in 50
districts of the country. Again, from the Rabi season 2013-14, the GoI
started a new farmers’ insurance scheme – National Crop Insurance Programme
(NCIP) through merging the MNAIS and WBCIS. But, on the request of the state
governments, NAIS continued till the Rabi season 2015-16. Onwards the Kharif
2016, the BJP government replaced NAIS and NCIP with the Pradhan
Mantri Fasal Bima Yojana (PMFBY) and a restructuring of WBCIS was also made. So, the
newly launched scheme, PMFBY, is just a continuation of earlier existing schemes
with a few minor restructuring.

PMFBY – what is is there?
PMFBY was started with the objective to insure farmers against crop yield
losses. The yield loss for a particular crop would be calculated through the
difference between threshold yield (average yield for last seven years) and actual
yield for a crop in that season.The compensation would be fixed based on the
above said difference (degree of risk) for a particular notified crop. The
PMFBY is compulsory to all the farmers who avail institutional loan (credit) –
or to the farmers already having crop loan account/ Kisan Credit Card account
(loanee farmers) to whom limit of credit is sanctioned/renewed for a particular
crop. The Scheme also includes those farmers who are considered by the
Government to be fit for insurance time to time. Apart from yield losses, the
scheme insures against non-preventable risks, such as, lightening, storm,
cyclone, hailstorm, typhoon, natural fire, tempest, hurricane, tornado,
droughts, landslide, etc. So, if in a notified area, the insured farmers are
intended to sow/plant a crop and have incurred expenditure, but due to
bad/adverse weather conditions, farmers are not able to do so, in such cases, they
are liable to get claims up to 25 percent of their total sum-insured. The scheme
proposes that in a situation of post-harvest losses, the farmers would get
insurance, if there is a crop loss (in the condition of cut and spread) within
14 days from harvest.

assess such losses from the above said risks, there is need to make proper
records and digitization of the data on landholdings, area, production and
yield. But, at the current juncture, neither well managed land records are
available nor a highly mechanized remote sensing technology is being used in
agriculture to collect information in the pre or post natural calamity or in a
yield loss situation. Under these circumstances, when precariousness of
information (data) is a concern, it is imperative to find how the PMFBY will
work and provide a solution to the farmers, ailing under the long grown
structural bottlenecks commonly understood as agrarian distress. 

Mechanism of Premium
premium for the scheme under the Kharif crop, for a farmer, is 2 percent. For
the Rabi crops and oil seed crops, the same is 1.5 percent while for commercial
and horticultural crops, it is 5 percent. The remaining part of the premium is
shared by the Central and State governments.

Coverage under the PMFBY
PMFBY, according to the data provided by the Ministry of Agriculture and
Farmers’ Welfare (MoA&FW), insured only 33.8 percent of the total
cultivators (numbers based on the Census 2011) in the Kharif season of
2016 and 21.9 percent of the total cultivators got benefits of the scheme for
the same crop. But, if we ask the number of small and marginal farmers or the
details of sharecroppers getting benefits of the scheme, the government fails
to provide any such information. For the Kharif season 2017, the number
and proportion of insured farmers had declined in comparison to the previous Kharif
season of 2016. During the Rabi season of 2016, only 14.3 percent of
the total cultivators were insured and 3.3 percent farmers got their insurance
dues (Refer Table 1). So, coverage of the farmers under the PMFBY is very low
in comparison to total number of cultivators in India. Also, the government
fails to provide any data on the inclusion of marginal and small farmers as
well as sharecroppers and tenant farmers under the scheme. The CAG report
(2017) on Performance Audit of Agriculture Crop Insurance Schemes revealed that
there were specific allocations of fund to cover Schedule Castes (SCs) and Schedule
Tribes (STs) farmers, but data in terms of their coverage or use of fund for
them is missing.

1: Farmers Covered and Benefited under the PMFBY (in million)
Sr. No.
Total Cultivators*
No. of Farmers
No. of Small and
Marginal Farmers Covered under the Scheme
No. of Sharecroppers
and Tenant Farmers Covered under the Scheme
Total Farmers
Kharif (2016)
Data not available
Data not available
26 (21.9)
Kharif (2017)
34.7 (29.2)
Data not available
Data not available
12.2 (10.3)
Rabi (2016)
17 (14.3)
Data not available
Data not available
3.3 (2.8)
Source: Ministry of Agriculture and
Farmers’ Welfare, GoI.
Note: 1. * indicates data from the
Census 2011.
2. Figures within parentheses in Column
4 and 7 are percentages to the Total Cultivators.
Area Coverage under the PMFBY
The gross cropped area (GCA) in
India is 200.9 million hectares of which 37.8 million hectares (18.8 percent of
the GCA) were insured in the Kharif season of 2016, but in the next Kharif
of 2017, the area insured had declined under the PMFBY. In the Rabi
of 2016, only 18.5 million hectares (9.2 percent of the GCA) were
insured under the scheme.
Table 2: Area Insured under the PMFBY
Cropped Area (GCA) in India (in million hectares))
Insured (in million ha)
Insured  (% of GCA)
Kharif (2016)
Kharif (2017)
Rabi (2016)
Ministry of Agriculture and Farmers’ Welfare, GoI.
may ask why the coverage of crop insurance schemes remain abysmally low even if
they are being enforced from the last three decades.Likewise, the PMFBY, which
is being advertised by the BJP government as one of the solutions of crop
failures, is not able to cover majority of the farmers except a proportion of loanee
farmers.Also, information on inclusion of the sharecroppers and tenant farmers
– largely belonging to SCs, STs and middle castes is missing. Bansal et al.
(2018), in their analytical report on NSSO survey on Land and Livestock
Holdings, reported that in 2012-13, of the total cultivators in India, 15
percent were tenant farmers. They further elaborated that among all these
tenant farmer households, SCs were 11.6 percent, STs – 8.1 percent, Muslims –
10.8 percent whereas others were 10.3 percent. These tenant farmers had hardly
been insured, given, one of the conditions of loan, i.e. putting property
(land) as security against agricultural loans, which in the case of tenancy of
sharecropping, they hardly meet. So, one can fairly understand why the data on
insured tenants and sharecroppers are missing – because if they do not own
land, the banks would not provide them agricultural loan and they will not get
insured under the PMFBY.

the biggest drawback of the PMFBY is its designing itself. The target of the
scheme is only the loanee farmers for whom it is mandatory. However, for the
non-loanee farmers, it is not mandatory, and due to the reason their inclusion
under the scheme is abysmally low.Further, the scheme insures, largely, the
amount (loan) a farmer has taken from any commercial/regional bank for
agricultural purposes. So in such a case, the scheme works as loan insurance
instead of crop insurance. The CAG report (2017) on Performance Audit of Agriculture
Crop Insurance Schemes revealed that most of the farmers do not have proper
knowledge about crop insurance schemes. Also, the banks or insurance agencies
do not make visible efforts towards making farmers aware about the same.

Paid & Claimed, Loss to the Public and a Whopping Profit to the Insurance
the periods, 2016 and 2017, which include two Kharif and two Rabi crops,
total premiums paid by the farmers were Rs. 8716.5 crores; states’ premiums
were Rs. 19409.8 crores whereas GoI contributed Rs. 16973.0 crores as crop
insurance premium. So, the gross premium under the PMFBY was Rs. 45099.3
crores. The data provided by the MoA&FW shows that there are 18 insurance
companies (including public and private), involved in crop insurance, paid the
claims of Rs. 34780.2 crores leaving a loss of Rs. 12500 crores to the public
i.e. a whopping profit of the equal amount went to these handful of
companies(refer Table 3).

3: Profit (Loss to Public) to Crop Insurance Companies (in Rs. crores)
Crop Seasons
Farmers’ Premium
Gross Premium
Claims Paid
Kharif 2016
Rabi 2016
Kharif 2017
Rabi 2017*
Ministry of Agriculture and Farmers Welfare; Rabi 2017* crop insurance data has
been taken from Lok Sabha Unstarred Question no. 549

PMFBY, one of the most advertised schemes of the BJP government to provide
relief to the farmers, was just a restructured one of the old crop insurance
schemes. It could cover only 30 percent of the total cultivators and around 20
percent of the total cultivated area in India. This scheme largely covers
loanee farmers whereas non-loanee farmers, tenants, sharecroppers are mostly
left out. Neither the government nor the insurance companies provide data of
insured cultivators belonging to the marginalized communities. These crop
insurances are provided by both, public and private, insurance companies who
have earned a whopping profit of more than Rs. 12500 crores in the last two
years of implementation of the PMFBY.

lesser coverage (exclusion of cultivators) of the scheme is due to two reasons
– first, being the techno-managerial reason – where banks and insurance
companies show indifference and sluggishness towards the scheme itself. Second,
due to long grown structural bottlenecks in agriculture, such as – lack of land
records; absentee landlordism vis-à-vis high incidence of tenancy;high
incidence of landlessness; unavailability of in time proper data assimilation
on area, production and yield and overall stagnancy in public investment in
agriculture. Also, the marginal and small cultivators hesitate to avail banking
services due to various constraints, like, rigidness and difficult system of
the banking system in providing loans. These structural constraints are also
aggrandized due to the apathy of the political class towards agriculture where
except the left political parties in India, almost all national and regional
parties have reached to a consensus that agricultural sector would be taken
care of by the market (read, the dependency on private insurance companies for
crop insurance).  Any such drive where
policy intervention would be left for the market, without giving due attention
to the structural constraints involved in Indian agriculture, will have lesser
impact and will not provide solutions to distress ridden sector.

The author is Assistant Professor at TISS, Hyderabad 

Y. Usami and V. Rawal (2018): Agricultural Tenancy in
Contemporary India: An Analytical Report and A Compendium of Statistical Tables
based on NSSO Surveys of Land and Livestock Holdings, Society for Social and
Economic Research (SSER), New Delhi.
Comptroller and Auditor General of India
(CAG) (2017): Performance Audit of Agriculture Crop Insurance Schemes, Report
No. 7, Ministry of Agriculture and Farmers’ Welfare.
Ministry of Agriculture and Farmers’
Welfare (2017): Agricultural Statistics at a Glance, Government of India.