New Delhi, January 15th 2016:



The new Pradhan Mantri Fasal Bima Yojna [PMFBY], announced with much fanfare by the NDA government, is hardly the historic and path-breaking scheme that the government claims it to be. The Government appears to have dressed up the existing crop insurance schemes, made minor improvements, provided some additional resources and added a lot of hype to create an impression as if the Indian farmers have been finally secured from recurrent crop losses. If anything, the limited information available about the scheme in the public domain suggests that this scheme represents a missed opportunity to redress a long-standing and critical problem of the farm sector.


Widespread damage and loss of Kharif crop last year due to drought served to highlight the insecurity of the Indian farmers in the face of various challenges beyond their control: drought, hailstorms, unseasonal rains, cyclones, wild animals, epidemics and seed or technological failures, among others. Facing an agrarian crisis, the Indian farmer desperately needs state support in the form of relief, compensation and insurance payment. Effects of climate change have increased the frequency of extreme whether events and accentuated this need. So far, the state response has been very weak. Crop-loss compensation (or “Crop Advance”) paid by most state governments tends to be too little, too late, totally arbitrary, discriminatory and full of corruption. The crop insurance schemes have failed to protect and enthuse the farmers so far. The various crop insurance schemes have had very limited subscription, that too mainly through compulsory insurance of Kisan Credit Card holders, limited coverage and very complicated ways of assessing damage and making payments.


Farmers movements have been demanding a comprehensive relief-cum-insurance scheme that is universal in its coverage (all farmers, all crops, all forms of damage and at every stage of crop cycle), affordable for the farmers, offers adequate amount of compensation, has quick and simple ways of assessing crop damage and is free of corruption and hassle in the delivery of the insurance amount.


Unfortunately, the PMFBY, fails to meet most of these expectations. It appears to be a slightly improved version of the two existing schemes, namely NAIS (National Agricultural Insurance Scheme) and the MNAIS (Modified NAIS). While the simplification of the scheme and reduction of the premium in some cases is to be welcomed, there is little in the scheme to justify the Government’s claim that it is a “path-breaking scheme for farmers’ welfare[1]” and that ‘all previous weaknesses and shortcomings have been removed’”.  As we await more details about the scheme, the following issues need to be noted:


1.     The government’s claim about reduction in premium for the farmer is only partially true. The existing NAIS, which has fairly low premiums of 1.5-3.5 per cent for foodgrains and oilseeds crops and actuarial rates for horticultural and cash crops, is already run in 14 states. The Modified NAIS (MNAIS) with higher premium rates is run in only six states. States where NAIS runs with lower premium rates than MNAIS still have very low coverage of farmers and area under crop insurance. Thus the problems related to insurance run far deeper than premium rates[2]

2.     The Government’s expectation that insurance cover will go up from existing 23% to 50% in three years appears to be based more on hope than any evidence. Previous experience has belied all such hopes. There does not seem to be a political will to offer a universal coverage to all farmers, all crops against all forms of damage and at all stages of crop cycle, even though agrarian crisis and farmers’ suicides are mounting with every season.

3.     For the same reason, the Government’s claims about a big expansion in subsidies is a hyperbole for the coverage may not go up. Besides, the subsidies are to be borne in a 50:50 ratio between Centre and State. It is unclear yet if the states have come forward to bear their share of the subsidies.

4.     There does not seem to be anything in this scheme to address the problem of tenant farmers who bear the risk of crop failure but are not entitled for compensation and insurance payments. The new crop insurance scheme has nothing concrete for identification of Cultivators and bringing them under crop insurance cover.

5.     While the declaration about bringing localized risks and post-harvest damages within the scope of insurance is to be welcomed, it appears that risks such as destruction by wild animals are still not covered.

6.     One key problem of crop loss or damage compensation, the unit of assessment, remains unaddressed in the new scheme. The farmers movements have been demanding for long that the unit of crop-damage assessment should be reduced from Tehsil/block/Panchayat to the village and if possible to the individual farm.

7.     Another critical issue relates to the method of damage assessment. The new scheme, as most of the existing ones, is a yield-based insurance scheme that depends critically on “Crop-Cutting Experiment” [CCE] methodology. This method is limited to mono-crop farms and needs much technical improvement in its sampling. It is not clear whether the new scheme has made any such improvement. It is also not clear whether the benchmark of a normal yield has been changed to incorporate a rolling average of the last few years or the best years of the last decade.

8.     The Government has highlighted the use of remote sensing technology, but the scientists themselves are not sure about how remote sensing technology or other technologies can replace CCEs other than come in useful for verifying (and may be not assessing) some localized risk and damage/loss.

9.     It is not clear if the new scheme has taken any steps to delink enrolment of cultivators from banks being used as the transaction points by insurance companies. When all loanee and non-loanee farmers are covered directly by the crop insurance company which has to come to the forefront (rather than being invisible hiding behind the banker as of today), the accountability in the entire insurance process will be more explicit and in favour of farmers.

10.  While the move towards payment of insurance amount directly to bank account of the farmers is to be welcomed, it is vital that the payment be made to saving bank account and not the loan account that the banks can access to recover their loan. Or else these schemes have become loan insurance for the banks rather than crop insurance for the farmers.

It is unfortunate that the government came up with the new scheme announcement without due consultations. When the government claims that the best features of existing schemes have been taken into one scheme, it appears that it has based it on the understanding within the departments and insurance companies on what is “best” without incorporating the view of the farmers, farmers movements and indeed the recommendations of the P K Mishra Committee appointed by the Government.


The farm movements do not see in this new scheme any expansion of choices as far as farmers are concerned. Unless the long standing demands of farmers were not addressed comprehensively, the new scheme is not going to lead to improved coverage or mitigation of farm distress, because reduction in premium rates will not be a silver bullet to achieve this.


For more information, contact:

Kavitha Kuruganti (ASHA) at +91-8880067772;

Yogendra Yadav & Avik Saha (Jai Kisan Andolan): +91-9560092986;

Narasimha Reddy (Chethana Society): +91-9010205742;

Kiran Vissa (Raithu Swarajya Vedika): +91-9701705743;

Dr K Sunilam (NAPM & Kisan Sangharsh Samiti): +91-94-251-09770;

Yudhvir Singh (Indian Coordination Committee of Farmers Movements): +91-9868146405.

[1] PIB Release ID: 134431, dated 13th January 2016 titled Cabinet approves New Crop Insurance Scheme – Pradhan Mantri Fasal Bima Yojana – A boost to the farming sector

[2] : Lok Sabha Unstarred Question No.1544, 8/12/2015

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