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NEWS ALERTS | A cutback in PMFBY funding may further affect the timely release of compensation for crop failures
A cutback in PMFBY funding may further affect the timely release of compensation for crop failures

A cutback in PMFBY funding may further affect the timely release of compensation for crop failures

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published Published on Feb 8, 2022   modified Modified on Feb 8, 2022

On February 18, 2016, India’s Prime Minister Shri Narendra Modi launched the Pradhan Mantri Fasal Bima Yojana. After its launch, the PMFBY was implemented by 21 states during kharif 2016, whereas in rabi 2016-17, 23 states and 2 UTs implemented the same. The Central Government launched the PMFBY in the kharif season of 2016 with the intention to help farmers cope with crop losses because of unseasonal and extreme weather. The scheme came into operation with effect from April 1, 2016. It replaced the National Agricultural Insurance Scheme (NAIS) and the Modified National Agricultural Insurance Scheme (MNAIS). 

After going through the Budget Documents of 2022-23, one would detect that the budgetary allocation for PMFBY has been curtailed from Rs. 15,989.39 crore to Rs. 15,500.00 crore between 2021-22 (Revised Estimate) and 2022-23 (Budget Estimate). The scheme was promised an allocation of Rs. 16,000.00 crore in 2021-22 (B.E.). Please consult table-1.

Due to the almost doubling of budgetary expenditure on 'Agriculture and Allied Activities' from Rs. 63,259 crore in 2018-19 (actual) to Rs. 1,12,452 crore in 2019-20 (actual), the budgetary allocation on PMFBY as a proportion of 'Agriculture and Allied Activities' spending fell from 18.87 percent to 11.24 percent between 2018-19 (actual) and 2019-20 (actual). This hike in budgetary expenditure on 'Agriculture and Allied Activities' happened due to the launch of the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) with an allocation of Rs. 20,000 crore in 2018-19 (R.E.) and Rs. 75,000 crore in 2019-20 (B.E.).

While the budgetary spending on PMFBY as a proportion of 'Agriculture and Allied Activities' increased from 10.54 percent to 10.82 percent between 2020-21 (actual) and 2021-22 (R.E.), this figure has decreased to 10.23 percent in 2022-23 (B.E.). Similarly, the percentage share of PMFBY expenditure in the total budgetary spending has fallen from 0.42 percent to 0.39 percent between 2021-22 (R.E.) and 2022-23 (B.E.).

Table 1: Trends in Expenditure on Pradhan Mantri Fasal Bima Yojana

Source: Expenditure of Major Items 2022-23, please click here to access  

Expenditure of Major Items 2021-22, please click here to access  

Expenditure of Major Items 2020-21, please click here to access 

Expenditure of Major Items 2019-20, please click here to access  

Expenditure of Major Items 2018-19, please click here to access  

Notes on Demands for Grants, 2022-2023, Department of Agriculture and Farmers' Welfare, Ministry of Agriculture and Farmers' Welfare, please click here to access

Notes on Demands for Grants 2021-22, Department of Agriculture, Cooperation and Farmers' Welfare, Ministry of Agriculture and Farmers' Welfare, please click here to access 

Notes on Demands for Grants 2020-21, Department of Agriculture, Cooperation and Farmers' Welfare, Ministry of Agriculture and Farmers' Welfare, please click here to access 

Notes on Demands for Grants 2019-20, Department of Agriculture, Cooperation and Farmers' Welfare, Ministry of Agriculture and Farmers' Welfare, please click here to access

Notes on Demands for Grants 2018-2019, Department of Agriculture, Cooperation and Farmers' Welfare, Ministry of Agriculture and Farmers' Welfare, please click here to access

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The important question to ask here is whether the reduction of funds for the PMFBY is going to affect the farmers or not. We will address that question in this news alert. However, before that, we need to know that the PMFBY is a Central Sector Scheme. The insurer (i.e., the insurance company that is appointed by the government after being selected through bidding) charges the premium on an actuarial rate (an estimate of the expected value of future loss). The farmers enrolled under the PMFBY are supposed to pay a fixed two percent of the sum insured for kharif crops, 1.5 percent for rabi and oilseed crops, and 5 percent for commercial/ horticultural crops. The Central and State Governments pay the rest of the amount for premium. The Central Government has revamped the PMFBY with effect from kharif 2020, and among other things, revised the premium subsidy-sharing pattern for North Eastern States from 50:50 to 90:10 between the Central and the State Governments. The premium-sharing pattern of the remaining States/ UTs is 50:50 subject to other provisions of the scheme.

Being a Central Sector Scheme, state-wise allocation/ release is not made under the PMFBY. Funds are released to the Central fund routing agency i.e., Agriculture Insurance Company of India Ltd. (AIC) which in turn releases the applicable Central Government’s share in premium subsidy on receipt of respective State Government’s share, to the concerned insurance companies.  

Let us now go through the following points one by one to understand why the farmers are unable to get the insurance compensation in time even after reporting claims related to crop damage or failure because of weather events (like heavy rainfall or hailstorm), pest attacks, or fire.  

• The reply to unstarred question no. 356 (answered on November 30, 2021 in the Lok Sabha) states that the admissible claims under the PMFBY are supposed to be paid by the concerned insurance companies within two months of completion of Crop Cutting Experiments (CCEs)/harvesting period and one month of notification for invoking the risks/perils of prevented sowing, mid-season adversity and post-harvest losses subject to receipt of total share of premium subsidy from the concerned Government within time. However, the settlement of few claims in some states got delayed due to reasons like delayed transmission of yield data, late release of their share in premium subsidy, yield related disputes between insurance companies and states, non-receipt of account details of some farmers for transfer of claims to the bank account of eligible farmers and National Electronic Fund Transfer (NEFT) related issues, erroneous/ incomplete entry of individual farmers' data on National Crop Insurance Portal (NCIP), delay in remittance of farmers' share of premium/ non-remittance of farmers' share of premium to concerned insurance company, etc. 

• The reply to unstarred question no. 356 (answered on November 30, 2021 in the Lok Sabha) provides the reasons for the pendency of claims across various states (as on November 25, 2021). The reply shows that in the year 2018-19, as a consequence of payment failure, Rs. 0.08 crore of claims were pending for Andaman and Nicobar Islands, Rs. 4.29 crore for Andhra Pradesh, Rs. 0.27 crore for Haryana, Rs. 0.57 crore for Karnataka, 0.17 crore for Madhya Pradesh, and Rs. 3.27 crore for Maharashtra. Due to the pendency of state subsidies, Rs. 0.18 crore of claims were pending for Gujarat, Rs. 633.95 crore for Jharkhand, and Rs. 438.43 crore for Telangana. Because of both payment failure and pendency of state subsidies, Rs. 5.67 crore of claims were pending for West Bengal. In total, an amount of Rs. 1,086.89 crore of claims under the PMFBY were pending in 2018-19.

• The reply to unstarred question no. 356 (answered on November 30, 2021 in the Lok Sabha) indicates that in the year 2019-20, as a consequence of payment failure, Rs. 4.98 crore of claims were pending for Andhra Pradesh, Rs. 18.02 crore for Chhattisgarh, Rs. 4.72 crore for Haryana, Rs. 0.93 crore for Himachal Pradesh, Rs. 8.85 crore for Maharashtra, Rs. 0.93 crore for Puducherry, and Rs. 1.73 crore for Rajasthan. In 2019-20, as a result of the pendency of state subsidies, Rs. 21.27 crore of claims were pending for Assam, Rs. 257.73 crore for Gujarat, Rs. 25.46 crore for Jharkhand, Rs. 32.14 crore for Tamil Nadu, and Rs. 512.78 crore for Telangana. Due to payment failure as well as pendency of clarifications from the State Government, Rs. 223.02 crore of claims were pending for Karnataka, and Rs. 24.01 crore were pending for Uttar Pradesh. Thanks to payment under process, Rs. 44.57 crore of claims were pending for Madhya Pradesh. Due to pending clarifications from the State Government, Rs. 17.30 crore of claims were pending for Odisha. In total, claims to the tune of Rs. 1,198.48 crores under the PMFBY were pending in 2019-20.

• The reply to unstarred question no. 356 (answered on November 30, 2021 in the Lok Sabha) shows that in 2020-21 (provisional), due to pendency of state subsidies as well as payment failure, Rs. 28.14 crore of claims were pending for Chhattisgarh, Rs. 7.36 crore for Haryana, Rs. 17.06 crore for Himachal Pradesh, and Rs. 160.73 crore for Rajasthan. As a consequence of the pendency of state subsidies, Rs. 33.01 crore of claims were pending for Kerala, Rs. 370.73 crore for Maharashtra, Rs. 16.25 crore for Puducherry, and Rs. 4.36 crore for Uttar Pradesh. Thanks to payment under process, Rs. 53.87 crore of claims were pending for Karnataka, and Rs. 4.25 crore for Odisha. As a result of payment failure, Rs. 4.84 crore of claims were pending for Uttarakhand. Due to payment under process as well as payment failure, Rs. 386.75 crore of claims were pending for Tamil Nadu. In total, claims to the tune of Rs. 1,087.35 crore under the PMFBY were pending in 2020-21 (provisional). 

Thus, in four out of 10 states, the claims related to PMFBY were pending in 2018-19 because of the pendency of state subsidies (either alone or in conjunction with some other reason). In five out of 16 states, the claims related to PMFBY were pending in 2019-20 because of the pendency of state subsidies (either alone or in conjunction with some other reason). In eight out of 12 states, the claims related to PMFBY were pending in 2020-21 (provisional) because of the pendency of state subsidies (either alone or in conjunction with some other reason). Out of Rs. 3,372.72 crore of total claims pending during the three years i.e., 2018-19, 2019-20, and 2020-21 (provisional), the claims pending as a consequence of the pendency of state subsidies alone were Rs. 2,346.29 crores (i.e., 69.57 percent of the total claims pending). Please note that we have not considered in this calculation the claims that were pending because of the pendency of state subsidies along with some other reason for the delay in payment of claims.   

A government document on PMFBY states that improved technology like remote sensing, drone, etc. will be utilised for estimation of yield losses at the time of Crop Cutting Experiments. While the Finance Minister in her recent budget speech has spoken about promoting ‘Kisan Drones’ for crop assessment, digitisation of land records, spraying of insecticides, and nutrients, many experts think that this may not help much in timely compensation related to crop failures. This fact gets clearer from the reply the government has given in the Parliament to queries related to the pendency of claims under the PMFBY, which we have discussed above.

References

Expenditure of Major Items 2022-23, please click here to access  

Expenditure of Major Items 2021-22, please click here to access  

Expenditure of Major Items 2020-21, please click here to access 

Expenditure of Major Items 2019-20, please click here to access  

Expenditure of Major Items 2018-19, please click here to access  

Notes on Demands for Grants, 2022-2023, Department of Agriculture and Farmers' Welfare, Ministry of Agriculture and Farmers' Welfare, please click here to access

Notes on Demands for Grants 2021-22, Department of Agriculture, Cooperation and Farmers' Welfare, Ministry of Agriculture and Farmers' Welfare, please click here to access 

Notes on Demands for Grants 2020-21, Department of Agriculture, Cooperation and Farmers' Welfare, Ministry of Agriculture and Farmers' Welfare, please click here to access 

Notes on Demands for Grants 2019-20, Department of Agriculture, Cooperation and Farmers' Welfare, Ministry of Agriculture and Farmers' Welfare, please click here to access

Notes on Demands for Grants 2018-2019, Department of Agriculture, Cooperation and Farmers' Welfare, Ministry of Agriculture and Farmers' Welfare, please click here to access

Union Budget Speech 2022-23, which was delivered by Smt. Nirmala Sitharaman on February 1, 2022, please click here to access

A Note on Pradhan Mantri Fasal Bima Yojana (PMFBY), please click here to access

Pradhan Mantri Fasal Bima Yojana (PMFBY), Department of Financial Services, Ministry of Finance, please click here to access  

FAQ: Pradhan Mantri Fasal Bima Yojana, Ministry of Agriculture and Farmers' Welfare, please click here to access  

Press release: Central Share in Premium Subsidy under PMFBY, Press Information Bureau, Ministry of Agriculture and Farmers’ Welfare, released on December 17, 2021, please click here and here to access   

PMFBY in Uttar Pradesh, Reply to Unstarred Question no. 2653 to be answered on December 14, 2021 in the Lok Sabha, Ministry of Agriculture and Farmers' Welfare, please click here to access

Payment of insurance claims under PMFBY, Reply to Unstarred Question No. 356 to be answered on November 30, 2021, Lok Sabha, Ministry of Agriculture and Farmers' Welfare, please click here to access  

Pradhan Mantri Fasal Bima Yojana: An Assessment, Centre for Science and Environment, released on July 21, 2017, please click here to access

News alert: 1,750 Indians died due to extreme weather events in 2021, says new IMD report, Inclusive Media for Change, Published on Jan 28, 2022, please click here to access  

News alert: PM Fasal Bima Yojana is suffering from low coverage since the last 2 years, Inclusive Media for Change, Published on Feb 20, 2019, please click here to access  

News alert: There is so much confusion about the Pradhan Mantri Kisan Samman Nidhi Yojana, Inclusive Media for Change, Published on Feb 5, 2019, please click here to access

Crop insurance claims over Rs 3,300 crore pending due to payment failure, delay in state subsidy -Shagun Kapil, Down to Earth, 30 November, 2021, please click here to access  

 

Image Courtesy: Inclusive Media for Change/ Shambhu Ghatak



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