Review PMFBY

Business Standard     30th July 2020     Save    
QEP Pocket Notes

Context: The continuing issues and the recent changes in the Pradhan Mantri Fasal Bima Yojana (PMFBY) are counterproductive and demand a revisit.

Issues with the Scheme

  • Issues with the states:
  • States feel that premium quoted by the insurance companies are high: which leads to a sizeable part of the agriculture budget being spent on the scheme.
    • As many as 6 states – West Bengal, Bihar, Jharkhand, Andhra Pradesh, Telangana and Punjab – have opted out of it.
  • More burden on states: as the Centre has reneged on its earlier willingness to take up to 90% of the subsidy load by lowering its share.
    • Issues with private insurers: 
  • Commercially unattractive and practically cumbersome agriculture: making insurers not keen to operate the scheme.
  • Not able to find re-insurers for it.
  • Only 10 of the 18 empanelled insurance firms are available for implementation. 
    • Issues with the farmers:
  • Low compensation and inordinate delays: make farmers feel that they do not gain much from the scheme even after a nominal payable premium – 1.5% -rabi, 2% -Kharif and 5% -horticulture.
  • Farmers are well off without the scheme: has been corroborated by the Comptroller and Auditor General of India- hardly 35% subscribe for insurance
  • Most of them are bound to take insurance in case they have taken loans from banks.
    • Recent counterproductive changes: 
  • The decision to make the scheme voluntary: rather than compulsory for loanee farmer may further curtail the subscribers to the scheme.
  • Reduction in Centre’s share in premium subsidy: has displeased states, which has been reduced to 30% for rainfed and 25% for irrigated ones, from 50% for all crops earlier.

Way Forward:

  • Revisit PMFBY: involving all the stakeholders in the exercise.
  • Leave it on the states: to recompensate the farmers for their losses. The Centre can provide financial assistance required, as done in case of natural disasters.
QEP Pocket Notes