Cover for farmers drops sharply as many States opt out of PMFBY

Several farmers across the country will go without insurance protection for their crops this Kharif season as there has been a sharp drop in coverage under the Pradhan Mantri Fasal Bhima Yojana (PMFBY).

In Kharif 2020, the total number of farmers covered under this government-sponsored scheme was 1.28 crore, a drop of 32 per cent from Kharif 2019. Area insured was 189 lakh hectares, down from 288 lakh hectares last year. Total premium collected by insurers was ₹13,017.9 crore, down 26 per cent from last year, of which the farmers’ share was ₹1,643 crore.

The drop in coverage under PMFBY follows the scheme becoming voluntary for loanee farmers (those who have borrowed bank loan) from Kharif season this year. While Andhra Pradesh, Bihar and West Bengal had already opted out of it, States including Gujarat, UP, Jharkhand and Telangana, too, chose not to participate in the scheme this Kharif season, citing high premium and relatively low claim settlement as the reasons.

In February, the Centre introduced many changes in the PMFBY scheme, but this failed to put the concerns of the States to rest.

“Even after seeing changes in the scheme, many States were reluctant to join. They waited till end of July to see the progress of the monsoon, and, finally, they decided to opt out. Let’s see how States including Bihar compensate their farmers, with their crops having been destroyed by floods,” said Siraj Husain, former Secretary of Agriculture and Farmers’ Welfare (GoI).

Alternative schemes

Many States are announcing an assistance scheme for farmers, which is not likely to help much. Gujarat, for instance, has launched — Mukhya Mantri Kisan Sahay Yojana — a fully State-funded scheme. If there are two successive years of crop loss and loss in yield of over 100 per cent, how will the State manage, asked an official of a top general insurer who didn’t want to be named.


In Beed district of Maharashtra, the State Government has entered into an arrangement with Agriculture Insurance Company (a PSU crop insurance company) to share the profit/loss.

However, one is not sure if the re-insurer will be happy with this deal as its profits will be capped.

Says Satyajit Tripathy, GM, GIC Re: “Depending on the quantum of such business (where the insurer shares his profits with the State government) in the portfolio of an insurance company and the amount of risk, the re-insurer may take a call on offering his service…”

Risk sharing

If re-insurers do not agree to share risk, insurance companies won’t be able to offer crop insurance policies as they may have to shoulder a large amount of risk. Already, companies including ICICI Lombard, Tata AIG General Insurance and Cholamandalam MS General have cited reasons including non-availability of re-insurance arrangement for their withdrawal.

Missing features

States that have launched their version of the crop insurance scheme have not been able to provide features that are as attractive as those available under the PMFBY.

For instance, in Bihar, the State Government introduced a scheme called – Bihar Rajya Fasal Sahayata Yojana (BRFSY) in Kharif 2018.

While it assured coverage to all farmers without taking any premium, it has kept the indemnity level at 70 per cent (against 90 per cent under PMFBY). This means a farmer under BRFSY will be eligible to claim only if the actual yield is less than 70 per cent of the threshold yield.

Further, as per media reports, under BRFSY too claims continue to be delayed.

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