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LATEST NEWS UPDATES | PMFBY reaping the failure sown by states -Ashok Gulati

PMFBY reaping the failure sown by states -Ashok Gulati

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published Published on May 17, 2018   modified Modified on May 17, 2018
-Financial Express

The PMFBY involves farmers, banks, state and central government, insurance companies and re-insurers.

This article is second in the series to assess performance of BJP-led NDA government at the Centre in agri-food space over the last four years. The first one appeared in this paper on April 30 (goo.gl/AGnEaJ).Here, we look at BJP’s promise in its manifesto, namely, “implement a farm insurance scheme to take care of crop loss”. Prime minister Narendra Modi took a bold decision to revamp the existing crop insurance scheme after experiencing two years of successive droughts in 2014-15 and 2015-16. Pradhan Mantri Fasal Bima Yojana (PMFBY) was launched in April 2016. It fixed low premium for farmers — 1.5% for rabi crops, 2% for kharif crops, and 5% for horticulture and other commercial crops, and enhanced the sum insured to cover, basically, the cost of cultivation. It targeted bringing 100 million hectares (50% of gross cropped area, orGCA) under PMFBY by 2018-19. One had hoped that this new PMFBY will do the assessment of damages and settlement of claims expeditiously in the event of any natural calamity, and farmers will get enhanced compensation well in time. Has that happened?

In brief, the answer is ‘no’. One does not see PMFBY achieving its target of 50% of GCA by 2018-19. Except a few states (see graph), India’s current insurance cover is about 30% of GCA. As against this, China insures about 70% of its GCA and the US extends insurance cover to about 90% of GCA. The prime reason behind PMFBY’s lacklustre performance is that it suffers from several administrative glitches and typical red-tape that does not inspire farmer-confidence as farmers have to wait for months and even years, to get compensation for their crop-losses. The PMFBY involves farmers, banks, state and central government, insurance companies and re-insurers. The most important role, however, is played by the state government which finalises the insurance company for every cluster through open tenders, pays half of premium subsidy, conducts crop cutting experiments, and submits data of crop yield to the concerned insurance company.

In order to get reasonable rates of premium, timely finalisation of bids to discover premium is critical. This should be done ideally well before the first forecast of monsoon by IMD so that there is no adverse selection. However, the experience of the first two years shows that most states do not finalise the selection of insurance company in time. This year, for example, Gujarat and Rajasthan have still not finalised the insurance company for their clusters. We fear that in a year of poor forecast of monsoon, the companies will quote very high premium. In an appreciable decision, the Centre launched an insurance portal in kharif 2017, and the banks were directed to enter complete information of farmers onto the portal. However, due to teething problems, even data of kharif 2017 is not up to date. As a result, one does not know for sure whether area under the scheme has increased or fallen in 2017-18. From kharif 2018, one hopes that every farmer will receive an SMS from the insurance company showing the premium deducted and sum insured.

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Financial Express, 14 May, 2018, https://www.financialexpress.com/opinion/from-plate-to-plough-pmfby-reaping-the-failure-sown-by-states/1165854/


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