Under Modi’s Bima Yojana, Profit is Private, But Liability is Public

Prime Minister Narendra Modi’s Bima Yojana (PMFBY) collected a total of Rs 22,437 crore as premium in 2016-17. Out of this, Rs 15,100 crore has been claimed by the farmers till August 15. While the insurance companies had approved the claims for Rs 9,446 crore, only Rs 6,624 crore from that has been paid to farmers till date. This data was reported by Indian Express from an RTI filed by them.

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 have been reinsured by the companies, allowing them to lose very little on the claims made by the farmers.

Newsclick reported earlier on the performance of the insurance schemes in the first season of 2016, along with the issues arising in implementation on the ground level. Down to Earth magazine recently wrote about the wrong weather predictions by Indian Meteorological Department (IMD) that caused huge crop losses. The IMD predicted early monsoon on the basis of heavy pre-monsoon showers, without properly assessing wind patterns. Accordingly, they issued an advisory to farmers for early sowing of crops. Following the advisory, farmers sowed their crops in late April and early June. However, they were soon met with a three week long dry spell, which led to the widespread devastation of the crops. Mid-June onwards, the rainfall diminished, but the IMD issued no apology for its earlier mistake of declaring an early monsoon, and cautioning farmers about sowing their crop early.

It is in such situations that the Fasal Bima Yojana is supposed to enter the picture and save farmers from heavy losses. But no such thing happened as the banks delayed collection of premium from farmers till mid of August. Since the premium was deducted after the farmers had already suffered losses, they will not be eligible for making any insurance claims. So they end up losing their crop and additional money for the premium payment while remaining out of insurance coverage.

According to the rules of Fasal Bima, if 75% or more of the crop sowing fails for a notified crop, then the notified farmers get 25% of the total insured sum immediately. The rest of the payment is made after loss assessment. However, Down to Earth reported, that during the last Rabi season in Tamil Nadu, only two districts received the payment of the insured sum after the sowing failed.

Not only have their been gross delays in payment of claims, there has also been a complete failure on part of the insurance companies and banks in addressing the concerns of the farmers. In village of Sohna district, Haryana, no farmer has received any insurance money. They have contacted the authorities, registered formal complaints, and even sat on protests, but their claims still haven't been paid.

No action has been taken against the insurance agencies, for this delay in payment of these claims. The CAG (Comptroller and Auditor General) audited the Yojana, and stated, “In Rajasthan, the performance of HDFC Ergo General Insurance Company was declared by the State Government to be below par for the last seven crop seasons by the end of Kharif season 2014. However, DAC & FW has not acted on the recommendation of the State Government to de-empanel the insurance company.”

A crucial part of the claims payment involves CCEs or Crop Cutting Experiments, which give the threshold yield for the crops. If a farmer has a yield which is lower than the threshold yield, he or she is eligible to make an insurance claim. As reported earlier, a massive number of CCEs are required to get the threshold yield at the level of the insurance unit, which is the village. An agriculture department official of Haryana confessed that CCEs were not conducted in all places, as the scheme has increased the department’s workload. Officials of the department, in fact, went on a strike in September last year protesting against the number of CCEs that they were expected to conduct. Farmers said, however, that when the government officials came for estimating the yield, they did not conduct any experiments, they simply asked the farmers how much the yield is and used that for deciding the threshold yield.

A report released by Centre for Science and Environment (CSE) in Delhi called “Fasal Bima Yojana - An Assessment” presents an in-depth analysis of the performance of the scheme across the country. According to their report, PMFBY is a classic case of a poor implementation of a good scheme.

They have mentioned in their report how insurance companies do not have any offices at the Tehsil level or any agents who will go to villages for assessment of claims. This is a requirement which is mandated in the crop insurance policy. Because of this, plenty of cases have been reported across the country where claims cannot be paid because the insurance company failed to send an agent to assess the loss for which the claim is being made.

Moreover, often farmers are declared ineligible for claiming insurance because they have grown a crop which is different from the one they had been insured for. This happens since the banks often enrol farmers without consulting them. Any farmer who has availed a loan is automatically enrolled in the scheme, and he or she is insured for the crop which is stated on the farmer’s KCC (Kisan Credit Card). The information on the card is almost always outdated.

Another way in which the farmers are being denied their insurance claims is by the states declaring threshold yields which are much lower than the actual yields. CSE presented a case study of Maharashtra where the declared threshold yield was less than half of what the actual crop yield generally is. So even if a farmer produces less than half of what he generally does, he will not be able to claim any insurance, since the threshold will still be lower.

If in a particularly bad agricultural season, the claims made exceed the premium collected by 35%, then the Centre will pay the excess. But there is nothing in the policy on what will be done with the excessive profits made by the insurance companies everywhere on these collected premiums. “Under PMFBY, profit is private, but liability is public,” stated the report.

CSE’s report also stated that the crop insurance scheme has played a significant role in the growth of non-life insurance industry in 2016-17. The gross direct premium of general insurance companies grew by 32%, from Rs 96,376 crore in 2015–16 to Rs 1.27 lakh crore in 2016–17. Nearly half of this growth came from crop insurance.

If the ground level issues are looked at carefully, it would seem that the crop insurance scheme has been designed without taking the reality into consideration. It can also be easily concluded that the ones benefitting from this scheme are definitely not the farmers. It is a poorly disguised welfare scheme which works for the benefit of the private insurance companies.

Disclaimer: The views expressed here are the author's personal views, and do not necessarily represent the views of Newsclick.