The Maharashtra government is likely to opt out of the Centre’s flagship crop insurance scheme – Pradhan Mantri Fasal Bima Yojana (PMFBY) – and establish its own crop insurance company for farmers, following several representations from farmers.
Senior agriculture department officials, who were present for the review meeting called by state’s agriculture minister Dadasaheb Bhuse a couple of days ago, revealed that moves are afoot to get out of the scheme after receiving complaints about delays in payment of claims by insurance companies.
At the meeting, farmers and farm leaders alleged that the assessment of crop damage under the scheme was faulty and farmers have to struggle to get their compensation from insurance firms. This Rabi season, around 12.50 lakh farmers participated in the scheme and normally over 1 crore applications are received from farmers under the Kharif and Rabi seasons. After listening to representations by farmer organisations, the state’s agriculture minister directed officials to study the issue and draft a proposal on these lines. Due to several flaws in the PMFBY, losses incurred during the last two Kharif and Rabi seasons have not been compensated. The insurance companies still owe farmers Rs 271 crore in insurance claims for the 2020 season officials said. Insurance claims of Rs 2,800 crore for the Kharif 2021 are still being worked out, they said.
States and UTs can participate in the scheme keeping in view their risk perception and financial considerations. Since the inception of the scheme, 27 states and UTs implemented the PMFBY in one or more seasons. 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. Many states have demanded their share of the premium subsidy be capped at 30%. Already, Gujarat, Andhra Pradesh, Telangana, Jharkhand, West Bengal and Bihar have exited PMFBY, citing the cost of the premium subsidy to be borne by them. Madhya Pradesh and Tamil Nadu have adopted the Beed formula in several districts.
Following this, the Centre had written to state governments seeking their views on including the ‘Beed formula’ as an option under PMFBY. Under the ‘Beed formula’, also known as the 80-110 plan, the insurer’s potential losses are circumscribed – the firm does not have to entertain claims above 110% of the gross premium. The insurer will refund the premium surplus (gross premium minus claims) exceeding 20% of gross premium to the state government. The state government has to bear the cost of any claims above 110% of the premium collected to insulate the insurer from losses, but such higher level of claims rarely occurs, so the states reckon the formula in effect reduces their cost to run the scheme. Bhuse said that the Maharashtra government had written to the Centre seeking the inclusion of the ‘Beed formula’ but not much happened after that.
In December last year, the Centre appointed two separate groups of experts to suggest suitable working models with cost benefit analysis that will lower crop insurance premium and technology in crop yield estimation under PMFBY after the exit of several states from the scheme, citing high premium.