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Pradhan Mantri Fasal Bima Yojana

Last Updated : 03 Nov, 2022
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The Pradhan Mantri Fasal Bima Yojana (PMFBY) is a government-sponsored crop insurance scheme that was launched on 18th February 2016. The scheme aims to provide financial assistance to farmers in the event of crop loss due to natural calamities. The scheme is open to all farmers, regardless of their income level or social status. Under the scheme, farmers are required to pay a premium of 2% of the sum assured for rain-fed crops, and 5% for irrigated crops. In the event of crop loss, farmers will receive a compensation of up to 75% of the sum assured. The scheme is implemented by the Ministry of Agriculture and Farmers’ Welfare.

Objectives of the Pradhan Mantri Fasal Bima Yojana (PMFBY):

The Pradhan Mantri Fasal Bima Yojana (PMFBY) is an insurance scheme for farmers in India. The scheme was implemented by the Ministry of Agriculture and Farmers Welfare.

  • The objectives of the scheme are to provide insurance cover to farmers against crop loss due to natural calamities, to encourage them to adopt new technology and to improve their financial resilience.
  • The scheme provides insurance cover for both pre-harvest and post-harvest risks. The premium for pre-harvest risks is 2% of the sum insured and for post-harvest risks, it is 1.5% of the sum insured.
  • Ensuring the flow of finance to the agricultural industry helps to increase the sector’s growth and competitiveness while also promoting crop diversification and food security.
  • The scheme helps many farmers in India by providing them with financial assistance in times of need. It also encourages them to adopt new technology and improve their farming practices.

Importance of the Pradhan Mantri Fasal Bima Yojana:

  • The Pradhan Mantri Fasal Bima Yojana is a Central sector scheme which aims to provide financial support to farmers in the event of crop loss due to natural calamities. The scheme is a part of the government’s efforts to double farmers’ incomes by 2022.
  • The scheme is voluntary and open to all farmers, regardless of whether they are small or marginal, or whether they cultivate rain-fed or irrigated land. Under the scheme, farmers will pay a premium of only 2% for rain-fed crops and 5% for irrigated crops. In the event of crop loss, farmers will receive an insurance payout of up to Rs.20,000 per hectare.
  • The Pradhan Mantri Fasal Bima Yojana is a much-needed safety net for farmers, who are often at the mercy of the vagaries of the weather. The scheme will help reduce the financial risk associated with farming and will enable farmers to invest more in their farms and improve their productivity.

Risk Coverage of  Pradhan Mantri Fasal Bima Yojana:

The Pradhan Mantri Fasal Bima Yojana covers the following risks and situations:

  • Yield Losses of standing crops, on a notified area basis.
  • Yield losses which are brought by unavoidable risks including natural fires and storms, lightning, cyclones, hailstorms, tempests, tornadoes, and hurricanes.
  • Flood, inundation, and landslide risks.
  • Additionally covered dry spells, pests, and diseases.
  • When the majority of covered farmers are unable to seed because of unfavourable weather and have incurred sowing expenditures.
  • Losses after harvest.
  • Regional issues are also explored.

Revamped PMFBY 2.0:

The new PMFBY 2.0 was launched in 2020 to address concerns with the execution of the crop insurance plan. The Union Cabinet has approved a revision of the PMFBY and adjustments. Some of the features are:

  • The Center has resolved to cap the PMFBY premium rates at a maximum of 30% in non-irrigated areas and 25% in irrigated areas, against which it would carry 50% of the subsidy.
  • More Flexibility to States in implementing PMFBY and giving them the choice of a virtually unlimited number of extra risk coverage and features.
  • Enrollment is completely voluntary, starting with the 2020 Kharif crop. Before, it was required of loanee farmers to open a Crop Loan/Kisan Credit Card (KCC) account for the designated crops.
  • Investing in ICE Activities by insurance companies, as they are required to spend 0.5 percent of all premiums received on information, education, and communication (IEC) initiatives.

Drawbacks of the Pradhan Mantri Fasal Bima Yojana:

The Pradhan Mantri Fasal Bima Yojana has the potential to benefit farmers, but it has several drawbacks that need to be addressed. The scheme has been criticized for its high premium rates, low claim settlements, and for excluding small and marginal farmers. Here are some of the drawbacks:

  • High premium rates: The premium rates under the PMFBY are quite high, especially for small and marginal farmers. For example, the premium rate for wheat is 4.5%, which is quite high considering the fact that wheat is a relatively low-risk crop.
  • Low claim settlements: The PMFBY has a very low claim settlement ratio, with only 30% of claims being settled so far. This is largely due to the fact that insurance companies are finding it difficult to assess crop losses.
  • Exclusion of small and marginal farmers: Small and marginal farmers are the most vulnerable to crop losses, but they are also the ones who are excluded from the PMFBY. This is because the scheme requires farmers to have a minimum land area of 1 hectare.

Way Forward:

Despite receiving a premium subsidy of 95–98%, if the farmer is not enthusiastic about crop insurance, the product as a whole needs to be improved. To better manage both good and poor years, insurance companies should bid for a cluster that lasts for around three years in this situation. Before the start of the Kharif/rabi season, the bids should be concluded. In Maharashtra, the “Beed model” is used, where a company only accepts liability up to 110 percent of the premiums received or splits profits with the State government during a successful year. This paradigm may show up as a solution to the current issue.

Frequently Asked Questions Related To Pradhan Mantri Fasal Bima Yojana:

Q1. What is Pradhan Mantri Fasal Bima Yojana?

Answer: The Pradhan Mantri Fasal Bima Yojana is a government-sponsored crop insurance scheme that was launched in 2016. The scheme aims to provide financial assistance to farmers in the event of crop loss due to natural calamities. The scheme is open to all farmers, regardless of their income level or social status. Under the scheme, farmers are required to pay a premium of 2% of the sum assured for rain-fed crops, and 5% for irrigated crops. In the event of crop loss, farmers will receive a compensation of up to 75% of the sum assured. 

Q2. State the objectives of the Pradhan Mantri Fasal Bima Yojana.

Answer: The objectives of the Pradhan Mantri Fasal Bima Yojana (PMFBY) are to provide insurance cover to farmers against crop loss due to natural calamities, and to encourage them to adopt new technology and improve their financial resilience. The scheme provides insurance cover for both pre-harvest and post-harvest risks. The premium for pre-harvest risks is 2% of the sum insured and for post-harvest risks, it is 1.5% of the sum insured.

Q3. Mention the importance of the Pradhan Mantri Fasal Bima Yojana.

Answer: The Pradhan Mantri Fasal Bima Yojana is a Central sector scheme that aims to provide financial support to farmers in the event of crop loss due to natural calamities. The scheme is a part of the government’s efforts to double farmers’ incomes by 2022.

  • The scheme is voluntary and open to all farmers, regardless of whether they are small or marginal, or whether they cultivate rain-fed or irrigated land. 
  • The Pradhan Mantri Fasal Bima Yojana is a much-needed safety net for farmers, who are often at the mercy of the vagaries of the weather. 
  • The scheme will help reduce the financial risk associated with farming and will enable farmers to invest more in their farms and improve their productivity.

Q4. What are the drawbacks of the Pradhan Mantri Fasal Bima Yojana?

Answer: Here are some of the drawbacks of the PM Fasal Bima Yojana:

  • High premium rates: The premium rates under the PMFBY are quite high, especially for small and marginal farmers. For example, the premium rate for wheat is 4.5%, which is quite high considering the fact that wheat is a relatively low-risk crop.
  • Low claim settlements: The PMFBY has a very low claim settlement ratio, with only 30% of claims being settled so far. This is largely due to the fact that insurance companies are finding it difficult to assess crop losses.
  • Exclusion of small and marginal farmers: Small and marginal farmers are the most vulnerable to crop losses, but they are also the ones who are excluded from the PMFBY. This is because the scheme requires farmers to have a minimum land area of 1 hectare.

Q5. What is Revamped PMFBY 2.0?

Answer: The revamped PMFBY 2.0 was launched in 2020 to address concerns with the execution of the crop insurance plan. The Union Cabinet has approved a revision of the PMFBY and adjustments. Under this, the Center has resolved to cap the PMFBY premium rates at a maximum of 30% in non-irrigated areas and 25% in irrigated areas, against which it would carry 50% of the subsidy.



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