What it does? It provides insurance coverage to the farmers in the event of failure of any of the notified crop as a result of natural calamities, pests & diseases.
Coverage of Risks- Prevented Sowing/Planting, Yield losses due to non-preventable risks, such as Drought, Dry spell, Flood, Inundation, widespread Pests and Disease attack, post-harvest losses, localised calamities etc.
Note: States may consider providing add-on coverage for crop loss due to attack by wild animals.
Risks not covered: Losses arising out of war and nuclear risks, malicious damage and other preventable risks shall be excluded
Premium: The Premium to be paid by Farmers: Kharif Crops: 2%, Rabi Crops: 1.5%, Commercial and Horticultural Crops: 5%. The balance premium is paid equally by Centre and States.
Coverage: Loanee farmers, non-loanee farmers, sharecroppers and tenant farmers (those who farm on rented land).
IMPLEMENTATION CHALLENGES IN PMFBY
Negligible coverage of sharecropper and tenant farmers due to lack of legal recognition of Land leasing.
Mixed cropping and crop diversification discouraged: A limited number of crops are notified by states under PMFBY. Only these crops can avail of insurance.
Poor awareness about PMFBY: Only 30% of the farmers are aware about PMFBY and its benefits.
Inadequate and delayed claim payment to farmers: Only 5-10% of the claims made for crop losses have been paid on time; Many insurance companies cited delay in receiving the state and Central government subsidies as the main reason for delay in reimbursing claims
Very high actuarial premium rates: Insurance companies have charged much higher actuarial premium rates in some states and regions.
Loopholes in assessment of crop loss: PMFBY encourages the use of satellite, remote sensing technology and drones to improve the speed and reliability of the Cost Cutting Experiments (CCEs); most of the states have been unable to carry out the crop cutting experiments in a reliable and fool proof manner.
RECENT CHANGES INTRODUCED IN MARCH 2020
Limit on the Centre's Premium: The Centre would contribute its share of the premium amount, provided the premium is up to 30% for unirrigated areas/crops and 25% for irrigated areas/crops. If the premium is above the threshold, then the centre would not provide the additional premium amount. So, in that case, the additional premium amount would be borne by the respective state government.
Voluntary enrolment of farmers: Earlier, the scheme was mandatory for the loanee farmers and optional for non-loanee farmers. The recent changes have made the enrolment under the scheme voluntary even for the loanee farmers.
Higher share of centre's contribution in North-Eastern States to 90:10 (earlier 50:50)
Timely payment of Insurance premium by States: States would not to be allowed to implement the Scheme in subsequent Seasons in case of considerable delay in payment of premium in previous season.
IMPLICATIONS OF THE NEW CHANGES
Higher Subsidy burden on the States due to limit on capping on premium contribution by Centre.
Increase in the insurance premium: The move to done away with the compulsory enrolment of loanee farmers would lead to decrease in the area as well as the number of farmers covered under the scheme. This is expected to lead to increase in the insurance premium under the scheme.