Many states have opted out of the scheme in recent years due to delayed payments, time-consuming crop damage assessments, and financial implications. The PMFBY is a subsidized crop insurance scheme where farmers pay between 1.5% and 2% of the premiums depending on crop cycles, and the remaining share is shared 50:50 between the Centre and state governments.
Despite a major revamp, states have still had disagreements over the claim-to-premium ratio and claim settlements ratio. Therefore, state authorities foresee increasing climate-change-induced deviations in rainfall patterns and rising frequency of crop-roiling heatwaves, which has heightened their need for efficient farm insurance. Two states, Andhra Pradesh and Punjab, with significant impacts of heatwaves, have opted back into the PMFBY to mitigate weather risks.
Under the Centre’s likely revamp of the insurance program, where actuarial firms participate through open bids, providers will have to pay between 60% and 130% of the gross premium as claims.
However, if the claims are below the threshold, then the premium will stand forfeited. Climate scientists have warned that scorching heatwaves, among other extreme weather events, are being driven by global warming, posing a risk to the country’s food security and farm incomes.
The PMFBY, meant to shield farm incomes, eventually ran into many of the old problems. The one most troubling for farmers is a delay in payouts. The average delay in payment of claims, according to official data, is more than a year from the date of harvest.
The reasons for delays were two-fold. One, assessing crop damage itself is a time-consuming process, involving physical cutting and weighing of dried damaged crops to determine yield losses. Secondly, fiscally burdened states often lagged deadlines for releasing their share of the premium. Claims can only be settled once both Centre and states release their subsidy shares in full.
Both these key problems are being re-examined to fix them, including replacing the assessments to a “large extent” with “digital-satellite-remote sensing modes” of determining crop losses. This will greatly ease the burden of the states. Overall, the revamp of the PMFBY will provide more efficient farm insurance and better coverage for farmers and states alike, ultimately contributing to the country’s food security and farm incomes.
