Pradhan Mantri Fasal Bima Yojana: Assessment Report Shows ‘Super Normal Profits’ by Insurance Firms

A recent assessment of the Pradhan Mantri Fasal Bima Yojana (PFMBY) for 2017-18 shows that the Narendra Modi government’s flagship agriculture scheme is proving to be the final nail in the coffin for Indian farmers. The first of its kind assessment highlights the pattern of increased premium but lower claims.

In 2017-18, the average premium paid by each farmer was Rs. 4,634, which is 20%  more than 2016-17. The total premium collected by insuring agencies in 2017-18 was Rs. 23,206.18 crore, a giant leap of about 12% compared with 2016-17.  

The evaluation supported by the Union Ministry of Agriculture and Farmers’ Welfare (MoA&FW) was first tabled in Parliament in August 2018, but was not made available in the public domain till recently. The report exposes the poor performance of the flagship programme as farmers are angry over delays in claim settlement, rejections and paltry compensation.

Keeping up with the pattern of the scheme proving to be a bonanza for insurance companies, this year’s report recommends the need to check the ‘super normal’ profits of the insurance companies and also putting a cap on their participation, limiting the scheme to 10 companies.

Also Read: PMFBY: Another Modi Scheme Bites the Dust

The report shows a rise in the participation of insurance companies- a total of 16 insuring companies participated in 2016-17, out of which 11 were private agencies and seven were public agencies. In the latest assessment, the number of insurance companies has gone up to 18.

To little surprise, the report pointed out that enrolment of farmers has reduced significantly in the past two years, falling from 5.72 crore in 2016-17 to less than 4.9 crore in 2017-18. The report added that even the area covered is reducing. Three-fourth of the total claims and three-fourth of the total premium is concentrated only in 25% of the districts, said the study.

The total area insured under the scheme decreased by 13.27% from 2017-18 to 2016-17. The area insured per farmer in the crop in 2017-18 was 0.02 hectares lesser than that in 2016-17.

Assam, Jammu & Kashmir, Manipur, Meghalaya and Sikkim saw the highest gains in area coverage, whereas the states of Goa, Karnataka, Maharashtra and Tripura saw large falls in area covered under the insurance.

More Premium Less Benefit  

The total sum insured under the scheme in 2017-18 was Rs. 1.91 lakh crore, a marginal increase of 0.12% from 2016-17. While the sum insured per farmer increased up to Rs. 4,597 per farmer, the sum insured per hectare increased up to Rs. 3,580 in 2017-18 compared with 2016-17.

The sum insured in Kharif 2017 was Rs. 1.22 lakh crore, which was 1% lower than Kharif 2016. In Rabi 2017-18, sum insured was Rs. 68,000 crore which was 3.16% higher than Rabi 2016-17.

The premiums paid by the central and state governments were Rs. 9,679 crore each.  In 2017-18, the total premium paid by farmers was Rs. 3,916 crore, 1% lesser than the previous year. The report pointed out that the benefit of the scheme had to be taken back to its true beneficiaries- the farmers.

Speaking with NewsClick, Jaswinder Singh of the All India Kisan Sabha (AIKS) said, “Is yojana ke tehat, kisan ek mohra ban gaya hai aur sarkar khud agent (Under this scheme, the farmers have become mere pawns for the insurance companies and the government, their agent.)”

 ‘Insurance Companies Sabotage Farmers’ Claims’

Reflecting on the ground realities of the scheme, he highlighted the systemic problems that plague the programme -- as part of procedure, the farmers give some premium while the balance is given in equal parts by the center and the state governments. All this premium goes to insurance companies involved in providing crop insurance. Then, at the harvesting time, farmers file claims for insurance pay-out, and the companies test their claims. Singh added, “The scheme has caused huge losses to the farmers as the companies end up sabotaging the farmer’s claims about crop damage.”

The coverage is required to include mainly yield losses due to non-preventable risks, prevented sowing, post-harvest losses and localised calamities. The losses are calculated based on the difference from threshold yield which is calculated on seven years’ data and indemnity levels. The damage claims are often verified through a lengthy process involving representatives of companies and district level government offices.

Also Read: The Facade of Fasal Bima Yojana

Giving the example of Madhya Pradesh, Singh pointed out, “There are no officials on the ground to make assessments of the damage leading to delays and the process is being scuttled.” The claims of the farmers are often met with objections from the insurance company leading to severe complications in the process and many claims being rejected.

The study authored by the project coordinator, Ranjan Kumar Ghosh of Centre for Management in Agriculture, Indian Institute of Management, Ahmedabad, recommended the use of crop-cutting technology that allows measuring yield, increasing operational window for insurance companies, and lowering the number of insurance companies under the scheme.

According to the report, the scheme may have an edge over the previous National Agriculture Insurance Scheme but still needs to provide insurance companies performance linked incentives or penalise them for below-par performance.

Full report can be accessed here.