In the early years following its 2016 release, insurers used to complain of the high claim ratio under the crop insurance scheme; state after state they have now abandoned the scheme as they find the rising premium bill difficult to pay. Some states seem to have been motivated to develop cold feet about the flagship program of the Modi government, Pradhan Mantri Fasal Bima Yojana (PMFBY), by a noted propensity among insurers to consider fewer farms’ claims and by a delay in the settlement of claims.
Earlier this year, Andhra Pradesh, Telangana, and Jharkhand submitted their decisions for the exit of the scheme to the center. The two states, Gujarat and Madhya Pradesh have not signed the deadline for registration in compliance with the existing Kharif crop scheme until 31 July. Bihar and West Bengal have their crop insurance policies, which farmers are under no premium, even though Punjab never introduced PMFBY.
The State premium share of the PMFBY and Weather-based Crop Insurance Scheme (WBCIS) in the FY20 jumped from 41 percent in FY 17 to 44 percent, while the Centre ‘s share rose to 42 percent over that year. The premium claims ratio of more than 90% in two consecutive seasons fell to 65% in 2019 (as on 30 June 2020), while 52% over normal monsoon rains occurred last September, which declined by around 60% in seasonal sown area (almost 64 lakh hectare).
The premium for farmers under PMFBY is 1.5% of the amount insured for rabbits, 2% for Kharif, and 5% for cash crops. The balance premium between core and state is split equally.
Effective Kharif 2020, the Centre, as long as the gross premium level is up to 30% of the total insured in non-irrigated areas and 25% in irrigated areas, agreed to cover the amount of PMFBY subsidy. This is the duty of states to enforce the policy even though insurers quote a premium higher than 25-30 percent. It has put unnecessary pressures on states which were concerned about the costs of implementing the systems already.
According to experts, the rapid decline in the premium ratio in Kharif 2019 also shows the insurers’ unwillingness to consider the farmers’ premiums.
Gujarat could not finalize the premium bid and conduct the scheme before the deadline of 31 July as Madhya Pradesh still has to agree on the offers. Both states are most likely not in a position to implement this year’s crop insurance scheme, official sources say.
If Madhya Pradesh decides to proceed in a future process, insurance firms can call, as the monsoon season is already two months away and the outlook for crops is now clearer, according to the sources.
The Centre recently wrote to government officials urging them to challenge the insurance company penalty provision which failed to resolve farmers’ claims under PMFBY. This move followed estimates that insurers had not remedied as much as a third of crop insurance claims for the 2019 Kharif season by farmers as on 30 June and the new crop year began on 1 July.
