Claims worth Rs 1,866 crore were yet to be paid to farmers, while defaulting states were to pay their shares of subsidy to the tune of Rs 1,680 crore as at the end of kharif 2019 season.

Inordinate delays in payment of premium by many state governments are forcing insurers to hold up claim settlements under Pradhan Mantri Fasal Bima Yojana (PMFBY), Centre’s flagship crop insurance scheme. Claims worth Rs 1,866 crore were yet to be paid to farmers, while defaulting states were to pay their shares of subsidy to the tune of Rs 1,680 crore as at the end of kharif 2019 season. The bulk of the outstanding dues are of Gujarat, Telangana and Jharkhand (together over 97%), resulting in farmers in these three states still waiting for unsettled claims of Rs 1,593 crore, according to official data (see chart). “While most of the claims were paid till 2017-18, the defaults occurred from 2018-19 onwards,” a top executive of a leading insurance company said. Unless the government pays the subsidy premium in time, insurers would find it difficult to clear the claims within the stipulated period, he said. The Centre also doesn’t pay its premium share unless the state concerned clears its dues. Though there is provision for penalty for delayed payments of premium by state governments, this mechanism has not proven to be effective. Under PMFBY, premium to be paid by farmers is fixed at 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 split equally between the Centre and states. In the revamped PMFBY guidelines, 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, according to PMFBY’s CEO Ashish Bhutani. However, the Centre has been lenient in invoking this provision after many states withdrew from PMFBY. In September 2018, the government imposed 12% interest for the delay in settlement of claims by insurers beyond two months of the deadline, after receiving all premia. It was made mandatory for states to pay 12% interest for the delay in release of their share of premium beyond three months from the cut-off date. The new guidelines also require 50% upfront premium (of the total premium amount in the previous season) to be paid to insurers at the beginning of the season by both Centre and states. The balance premium will be paid to the insurers in installments and it will be based on the business statistics and settlement of claims. Finance minister Nirmala Sitharaman in July last year had directed officials to follow up with states if and where subsidy releases are pending, particularly in those states which are not implementing the PMFBY in kharif 2020. Prior to the finance minister’s direction, the agriculture ministry had also written to the states to invoke the penalty clause on insurers that have defaulted on settling the claims made by farmers. As many states were complaining about ever increasing premium, the Centre in February last year changed the guidelines. The Centre will foot the PMFBY subsidy bill to the extent of its formulaic share so long as gross premium level is up to 30% of the sum assured in non-irrigated areas and 25% in irrigated areas. The onus is on the states if they want to implement the scheme even if insurers quote any premium above 25-30%. Source - https://www.financialexpress.com