Farmers of Karnataka Trapped: Pradhan Mantri Fasal Bhima Yojana and the Insurance Companies

Farmers in Karnataka continue to be in a state of distress. While the Chief Minister Kumaraswamy had announced the much awaited loan waivers on July 5, 2018, this, as argued by many, was neither going to provide longtime solutions for farmers nor would it resolve all the issues faced by them. The farmers are now worried about the crop insurance. July 31, 2018 was the last day for registering for the scheme. The farmers had asked for an extension in the final date for registering for the Crop Insurance Scheme. A report in Prajavani noted that the Karnataka State Department of Agriculture has pointed at the central government for the farmers asking for an extension.

Pradhan Mantri Fasal Bhima Yojana (PMFBY) was relaunched by the then Congress government in the state with a zeal after renaming it as Karnataka Raita Suraksha Pradhan Mantri Fasal Bhima Yojana in 2016.

Also Read: PMFBY: Another Modi Scheme Bites the Dust

In 2017, 10.12 lakh farmers had opted for crop insurance for Kharif season and 5 lakh farmers for the Rabi season. Since the loan waivers were announced the previous month, the farmers haven’t been able to avail new loans and this in turn has made it difficult for the farmers to deposit the premium. Under the PMFBY, the farmers are to pay a uniform premium of 2% for all Kharif crops and 1.5% for all Rabi crops. In case of annual commercial and horticultural crops, the premium is 5%. The farmers in the state feel the dates allocated even for depositing the premium, needs to be extended. According to the Prajavani report, the farmers in the state depend largely on the rains for the yield; thus they cannot be certain about the kind of produce they are going to have. Hence the farmers were also asking for a premium depositing in installments.

MLA NH Shivshankar Reddy and MP Prahlad Joshi had informed the farmers that the dates have been extended by fifteen days. The State Department, however, has absolved itself from the responsibility of extending the dates for both registration of names and depositing the premium. The issue was raised and discussed in a meeting between the CM, District commissioners, and Panchayat leaders. The state government has now written a letter to the central government.

Also Read: The Facade of Fasal Bima Yojana

According to the State Department of Agriculture, 11 lakh farmers had registered for the scheme in the previous year and 13.5 lakh hectares of agricultural land was issued insurance coverage. This year, 9.68 lakh farmers have registered so far, covering 11.65 lakh hectares of agricultural land. For some crops however, according to the department, the last date for registration in August 14, 2018 and 15 lakh hectares of land is expected to be covered. The report noted that the Department of Agriculture is sure that the central government would say yes for the extension.

The actual catch however, is the main players of PMFBY, i.e. insurance companies. The insurance companies stand to earn huge profits from the reinsurers, even after the approved claims are paid in full. About 80-85% of the premium from these claims has been reinsured by the companies, allowing them to lose very little on the claims made by the farmers. The Department in the state has also placed the onus on the insurance companies. According to them, the insurance companies would deny such extensions to avoid losses: many farmers resort to apply for the insurance at the last minute, when they speculate losses. Thus, it is actually not the central government that is going to decide, but the insurance companies which have the final say in it. Would the insurance companies agree for an extension and payment of premium in installments?