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India - Centre revamps flagship scheme to ensure quick payment of claims to farmers

Ramalingam, an 80-year-old farmer of Mathur village in Tamil Nadu’s Ariyalur district, visited a common service centre (CSC) in his village on July 31 to get his groundnut crop insured for this kharif season under the Pradhan Mantri Fasal Bima Yojana (PMFBY). Ramalingam has been cultivating different crops from groundnut to black gram for the past many years. In 2018, his crop got damaged due to natural calamity, thereby, incurring a huge financial loss. Ramalingam, however, was not worried as his crop was insured under PMFBY. He later received Rs 48,000 as insurance claim.

His is not an isolated story. Since the launch of the PMFBY in 2016, millions of farmers have benefitted from the scheme. In the first three years, farmers paid Rs 13,000 crore as premium, while they received Rs 60,000 crore as insurance claim under PMFBY.

Rainfall deficits, dry spells, and the late onset of rainfall due to climate change underline the importance of crop insurance for farmers.

PMFBY aims to support production in agriculture by providing support to ensure inclusive risk cover for crops of farmers against all non-preventable natural risks from pre-sowing to the post-harvest stage. The scheme has completed four years and has been implemented in 27 states and UTs. The sum insured for each crop roughly corresponds to the cost incurred and gives farmers adequate financial protection. The sum insured has almost doubled under this scheme from Rs 22,000 per hectare to Rs 39,000 per hectare.

The combined claim ratio in the first three years of the scheme implementation is 88.3%. This means that for every Rs 100 received as total premium, Rs 88.3 have been paid as claims. Incidentally, the administrative charge and reinsurance cost is about 10-12% since this scheme is heavily reinsurance dependent. For kharif 2019, the claims to the premium ratio for data available till now stands at 80.2%. This is expected to increase further once claims for few states are fully reported.

PMFBY is a multi-stakeholder scheme which is evolving every day and has been reviewed regularly. After a detailed consultation with all stakeholders, the scheme was revamped in February, addressing most of the challenges impacting smooth implementation as well as acceding to the long-standing demand of the farmers to make the scheme voluntary. The revamped scheme envisages leveraging technology in a comprehensive manner to address the issues impacting timely assessment and payment of claims.

There has been some criticism regarding the increase in premium rates and resultant increased cost to the Centre and the states under the revamped scheme. Some increase in premium rates was bound to happen since the scheme has now been made voluntary for farmers, and farmers in low-risk areas would be less enthusiastic to get enrolled compared to those in high-risk areas with a higher concentration of enrolment from high-risk areas.

The allocation of work to insurance companies in a cluster has been set at three years for ensuring proper infrastructure creation, including setting up of stratified grievance redressal mechanism, one of the demands of the farmers. In the last four years of the scheme’s implementation, few companies have experienced high claim ratios and have taken a sabbatical. Coupled with this, the reinsurers have tightened their terms, thereby, also affecting the premium rates.

Certain states like Andhra Pradesh, Jharkhand, and Telangana have recently taken a break from the implementation of PMFBY. Incidentally, there has been pendency of state subsidy over the last three to four seasons in these states, which has affected timely payment of claims. It will be worth mentioning here that delay in the release of the state share of subsidy is the major reason in delay in payment of claims to farmers.

In the revamped PMFBY, a provision has been incorporated wherein states, where payment of state subsidy is excessively delayed, would not be allowed to participate in the scheme in subsequent seasons.

Kharif 2020 is the first season of implementation of the revamped scheme, and some states have faced challenges in terms of tendering and notifying the scheme in a timely manner, especially, amidst the Covid-19 pandemic. Madhya Pradesh and Gujarat are currently finalising their respective tenders for the implementation of PMFBY.

Awareness generation is one of the major challenges in the smooth implementation of the scheme. A lot more needs to be done in bringing about a behavioural change regarding the cost of insurance being a necessary input and not a money-back investment.

Insurance companies have to now spend 0.5% of the total premium collected on information, education and communication (IEC) activities. A central advisory committee has also been set up with the implementing state governments and insurance companies to ensure uniformity of message across the country and remove gaps in dissemination of information.

The National Crop Insurance Portal seamlessly links more than five crore farmers, and all other stakeholders. More than 1.75 lakh bank branches and 44,000 CSCs enter farmers’ data on the portal every season.

The scheme has also been notified under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, thereby, making Aadhaar number a mandatory precondition for enrolment. It has helped in data de-duplication and identifying cases of multiple insurance.

The initiative has also been taken to integrate land records of states with the portal seamlessly. It has so far been done for Maharashtra, Odisha, Karnataka and Gujarat, and integration makes the process of enrolment easy, saves time, and helps in plugging leakages and over insurance.

The entire effort of the government is to ensure transparent and timely assessment of the yield, and quick computation and payment of claims to the farmers, proportionate to the crop loss through a series of technological interventions and reforms to realise the goal of Atmanirbhar Krishi.

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