Pradhan Mantri Fasal Bima Yojana (PMFBY)

• Context (PIB): In February, 2025, Pradhan Mantri Fasal Bima Yojana (PMFBY) marks its nine-year anniversary.
• Witnessing the success and potential of the scheme, the Union Cabinet in January 2025 approved the continuation of Pradhan Mantri Fasal Bima Yojana and Restructured Weather Based Crop Insurance Scheme till 2025-26 with a total budget of ₹69,515.71 crore.

About Pradhan Mantri Fasal Bima Yojana (PMFBY)

• The Pradhan Mantri Fasal Bima Yojana (PMFBY) is a crop insurance scheme from pre-sowing to post-harvest period. It was launched in 2016.
• It was formulated in line with the One Nation-One Scheme theme by replacing:
  • National Agricultural Insurance Scheme (NAIS) and
  • Modified National Agricultural Insurance Scheme (MNAIS).
• Type: Central Sector Scheme.
• Implementing Agency: Department of Agriculture, Cooperation & Farmers Welfare, Ministry of Agriculture & Farmers Welfare and the concerned State.

Objectives of PMFBY

• Provide insurance to farmers for crop failure due to unforeseen events (natural calamities, pests and diseases).
• Stabilise the income of farmers to ensure their continuance in farming.
• Encourage farmers to adopt innovative and modern agricultural practices.
• Ensure credit flow to the agriculture sector to ensure food security, crop diversification, and growth and competitiveness.

Crops Covered by PMFBY

• Food crops (Cereals, Millets, and Pulses)
• Oilseeds
• Commercial/Horticultural crops

Rate of Premium Paid by the Farmer to Insurance Company under PMFBY

• Remaining premium amount is shared equally by the Central & State Governments (for north eastern states: in 90:10 ratio).

Farmers Covered by PMFBY

• The scheme is optional for all farmers. (Before 2020, it was mandatory for farmers who have taken institutional loans)

Coverage of Risks under the PMFBY Scheme

• Crop risks leading to crop loss covered under the scheme are:
  • Prevented Sowing/Planting/Germination Risk
  • Standing Crop (Sowing to Harvesting)
  • Post-Harvest Losses
  • Localized Calamities
  • Crop loss due to attack by wild animals

General Exclusions

• Losses due to
  • War and nuclbear risks, 
  • Malicious damage, and
  • Other preventable risks.

Benefits of PMFBY

• Timely Compensation: PMFBY aims to process claims within two months of the harvest to ensure that farmers get the compensation quickly, preventing them from falling into debt traps.
• Comprehensive Coverage: The scheme covers natural disasters (droughts, floods), pests, and diseases, along with post-harvest losses due to local risks like hailstorms and landslides.
• Technology-Driven Implementation: PMFBY integrates advanced technologies like satellite imaging, drones, and mobile apps for precise estimation of crop loss, ensuring accurate claim settlements.

Achievements of PMFBY

• Improvement over its predecessors: PMFBY is in line with One Nation – One Scheme theme; incorporates the best features of all previous schemes & removes their shortcomings.
• Expansive coverage: Non-loanee farmers’ coverage has increased to 55% of the total coverage under the scheme during 2023-24, which shows the voluntary acceptability/popularity of the scheme..
• Inclusion of Localized Risks such as hailstorm, landslide, and inundation affecting isolated farms.
• Support to poor farmers: No upper limit on Government subsidy and 50% upfront premium to be paid to insurers at the beginning of the season by both Centre and states.
• Ensures timely payment due to mandatory penalty to be paid by the states for the delay in the release of their share of premium. In case of excessively delayed payment, states disallowed to participate in subsequent seasons.
• Use of Technology: Use of Remote Sensing Technology, Smartphones & Drones for quick estimation of crop losses to ensure early settlement of claims.

Failures of PMFBY

• Exclusion errors: Lack of clarity on how states choose the major crops, which results in exclusion from insurance coverage of farmers who grow non-notified crops.
• Incomplete coverage: Covers only weather-based risks and not Price risks (Market shocks).
• Lack of competition serves as a disincentive for insurance companies to improve or upgrade their products and pricing, leading to a monopoly over the scheme.
• Delays in assessment and settlement of claims due to lack of trained professionals to handle Crop Cutting Experiments (CCEs), and unreliable current technology.
• Lack of rural infrastructure: Insurers still face problems in reaching farmers to convey to them the benefits of insurance.
• Exits by States & Farmers: States such as Gujarat, Jharkhand, WB, Bihar etc. have opted out of the scheme, citing high cost of premium subsidy.
  • Farmers’ enrolments have seen more than 20% decline due to inadequate & delayed compensation from state govt (premium subsidy) & insurance companies (insurance claims).
• Lack of awareness: According to a CAG report, 2/3rd of the farmers were unaware of the scheme.
• Grievance redressal gap: Standing Committee noted that only 15 states/UTs have notified Grievance Redressal Committees at both the state and district level, as mandated under the scheme.

Way Forward

State Governments Related Measures

• Strengthen capacity of state governments by increasing funds for rural infrastructure, incentivising development & use of technology like remote-sensing, satellite imagery for effective implementation.

Insurance Companies Related Measures

• Strict compliance with timelines for claim settlement to ensure timely compensation to farmers.
• Competitive insurance products by having at least two insurance companies in a cluster of villages.
• Use of CSR funds by insurance companies in the districts from where profits are earned.

Other Measures

• Mandatory awareness programmes for farmers on the benefits of crop insurance via radio, word of mouth, campaigns and farmer meetings.
• Holistic approach: Combining scheme provisions with efforts towards land and water management, irrigation development, soil conservation and improvement in public delivery systems.