Crop Insurance Coverage Declines in FY24 | PMFBY Update

What’s in today’s article?

• Why in News?
• What is Pradhan Mantri Fasal Bima Yojana (PMFBY)?
• What are the key features of the PMFBY?
• Crop insurance coverage declines in FY24

Why in News?

General insurance companies reduced their exposure to crop insurance under the Pradhan Mantri Fasal Bima Yojana (PMFBY) during FY24 despite the government’s push to expand the insurance coverage in the farm sector.

What is Pradhan Mantri Fasal Bima Yojana (PMFBY)?

• About:
  • A scheme of the Ministry of Agriculture & Farmers Welfare, PMFBY is an insurance service for farmers for their yields, launched in 2016.
  • The new Crop Insurance Scheme is in line with the One Nation One Scheme theme.
  • The PMFBY replaced the previous two schemes: the National Agricultural Insurance Scheme (NAIS) and the Modified NAIS. 
  • It has incorporated the best features of all previous schemes while eliminating all previous shortcomings.
• Objectives:
  • To provide insurance coverage and financial support to the farmers in the event of failure of any of the notified crops as a result of natural calamities, pests and diseases.
  • To stabilise the income of farmers to ensure their continuance in farming.
  • To encourage farmers to adopt innovative and modern agricultural practices.
  • To ensure flow of credit to the agriculture sector.

What are the key features of the PMFBY?

• Premium rates
  • There will be auniform premium of only 2% to be paid by farmers for all Kharif crops and 1.5% for all Rabi crops (winter sown). 
  • In case of annual commercial and horticultural crops, the premium to be paid by farmers will be only 5%. 
  • The balance premium will be paid by the Government (to be shared equally by central and state government). 
  • The idea is to provide a fully insured amount to the farmers against crop loss on account of natural calamities.
• Area based approach
  • The Scheme will be implemented on an 'Area Approach basis,' i.e., Defined Areas for each notified crop for widespread calamities, 
  • The unit of insurance shall be Village/Village Panchayat level for major crops and for other crops it may be a unit of size above the level of Village/Village Panchayat.
  • It is assumed that all insured farmers in a unit of insurance, to be defined as a "Notified Area" for a crop, face similar risk exposures.
• No upper limit to subsidy
  • There is no upper limiton Government subsidy. This means, even if the balance premium is 90%, it will be borne by the Government.
• Use of technology
  • The use of technology will be encouraged to a great extent. For example, 
    • Smartphones will be used to capture and upload data of crop cutting to reduce the delays in claim payment to farmers. 
    • Remote sensing will be used to reduce the number of crops cutting experiments.
• Exemptions from tax liabilities
  • There will be exemption from Service Tax liability of all the services involved in the implementation of the scheme. 
• Beneficiaries to be covered
  • All farmersgrowing notified crops in a notified area during the season who have insurable interest in the crop are eligible.
  • To address the demand of farmers, the scheme has beenmade voluntary for all farmers from Kharif 2020.
    • Earlier, the enrolment was compulsory for farmers who possess a Crop Loan account or Kisan Credit Card (KCC) account, etc).
• Risks covered under the scheme:
  • Comprehensive risk insurance is provided to cover yield losses due to non-preventable risks, such as Natural Fire and Lightning, Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Tornado. 
  • Risks due to Flood, Inundation and Landslide, Drought, Dry spells, Pests and Diseases will also be covered.
  • In cases where the majority of insured farmers in a notified area have intent to sow or plant and have incurred expenditure for the purpose, but are prevented from sowing or planting the insured crop due to adverse weather conditions,indemnity claims up to a maximum of 25% of the sum-insured may be made.
  • In post-harvest losses, coverage will be available up to a maximum period of 14 days from harvesting for those crops which are kept in “cut & spread” condition to dry in the field.
  • Loss and damage resulting from occurrence of identified localised risks like hailstorm, landslide and Inundation affecting isolated farms in the notified area would also be covered.

Crop insurance coverage declines in FY24

• Decline in insurance coverage
  • In FY24, general insurance companies reduced their participation in the PMFBY despite government efforts to expand farm sector insurance. 
  • The gross direct premium underwritten declined by 4.17% to Rs 30,677 crore from Rs 32,011 crore the previous year, even as farmers suffered crop losses from adverse weather conditions. This decline followed an 8.66% rise to Rs 29,465 crore in FY23.
  • A significant factor was the 32% drop in premium income by the state-owned Agriculture Insurance Company (AIC).
• Performance of PMFBY in FY24
  • In FY24, the PMFBY scheme covered nearly 4 crore farmers and over 50 crops. 
  • More than 55% of insured farmers were non-loanee, mainly enrolled through common service centres (CSCs), with 4 crore farmer applications registered.
  • To expand PMFBY coverage, the Ministry of Agriculture and Farmer Welfare launched the AIDE (App for Intermediary Enrolment) in Kharif 2023, allowing intermediaries to enrol non-loanee farmers. 
    • This initiative involved insurance brokers, resulting in 71% of enrolments through Point of Salespersons (PoSPs), covering 6.88 lakh farmer applications and over 4.15 lakh hectares across 11 states and 12 insurers.

Q.1. What is Agriculture Insurance Company (AIC)?

Agriculture Insurance Company of India (AIC) is a government-owned insurance provider that offers crop and livestock insurance to farmers. It aims to mitigate risks associated with agricultural losses due to natural calamities, pests, and diseases, promoting stability in rural livelihoods.

Q.2. What is Kisan Credit Card (KCC)?

Kisan Credit Card (KCC) is a credit facility provided to farmers in India, enabling them to access timely and affordable credit for agricultural expenses. It integrates crop loans and cash credit for farming needs, promoting financial inclusivity and agricultural productivity.

Source: Crop insurance coverage declines in FY24 as four top insurers cut exposure | Vikaspedia