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New Crop Insurance Scheme-PMFBY
Mar 14, 2016

Focusing on the agriculture front the government introduced of the New Crop Insurance Scheme (Pradhan Mantri Fasal Bima Yojana-PMFBY) on 13 January, 2016. There has been always a long felt need to bring together at one place all conceptual issues, detailed institutional framework and operational details related to farmers’ welfare, risk management of farming community and the crops during drought and floods and other localized risk factors.

Key Features

  • Under the new scheme that would cost government Rs 8,000-9,000 crore annually, the farmers' premium has been kept at a maximum of 2 per cent for foodgrains and oilseeds, and up to 5 per cent for horticulture and cotton crops.

  • The scheme is set to be rolled out from the Kharif season this year.

  • The new scheme will be executed also by private insurance companies.

  • For Rabi crops, the farmer’s share has been rightly fixed at 1.5 per cent—against actual premiums of 8-10 per cent.

  • For year-long cash crops and horticulture crops, this has been capped at 5 per cent.

  • The PMFBY will replace the existing two schemes National Agricultural Insurance Scheme (NAIS) as well as the Modified NAIS.

  • It is estimated that the new scheme will ensure about 75-80 per cent of subsidy for the farmers in insurance premium.

  • The PMFBY will also rid farmers of the web of complex rules of the earlier insurance schemes.

  • The new scheme includes successful aspects of the existing schemes and effectively addresses whatever was lacking in earlier schemes.
  • The scheme has the lowest premium, it entails easy usage of technology like mobile phone, quick assessment of damage and disbursement within a time frame.

  • The government would have to cough out Rs 8,800 crore annually whereas the coverage would be for a crop area of 194.40 million hectare.

  • The new Crop Insurance Scheme is in line with ‘One Nation-One Scheme’ theme.

  • There will be no upper limit on the Government subsidy. Even if balance premium is 90 per cent, it will be borne by the Government.

  • The new scheme envisages among other things that there will be use of technology. More technology and science will be encouraged.

  • Smart phones will be used to capture and upload data of crop cutting to reduce the delays in claim payment to farmers.

  • Remote sensing will also be used to reduce the number of crop cutting experiments.

Other Important Features

  • For the beneficiaries, risks leading to crop loss are to be covered under the scheme include: Yield Losses (standing crops, on notified area basis). Thus a Comprehensive risk insurance is provided to cover yield losses due to non-preventable risks, such as Natural Fire and Lightning, Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Tornado. Risks due to Flood, Inundation and Landslide, Drought, Dry spells, Pests/Diseases also will be covered.

  • Similarly in cases where majority of the insured farmers of a notified area, having intent to sow/plant and incurred expenditure for the purpose, are prevented from sowing/planting the insured crop due to adverse weather conditions, shall be eligible for indemnity claims upto a maximum of 25 per cent of the sum-insured.

  • In post-harvest losses, coverage will be available up to a maximum period of 14 days from harvesting for those crops which are kept in ‘cut & spread’ condition to dry in the field. For certain localized problems, Loss/damage resulting from occurrence of identified localized risks like hailstorm, landslide, and Inundation affecting isolated farms in the notified area would also be covered.

Experts also say that the mechanism of higher subsidy for crop premiums is not out of line with international standards. The United States, for instance, covers over 120 million hectares and gives subsidy to the tune of around 70 per cent. China insures its farmers for a sown area of around 75 million hectares with a subsidy on premiums of about 80 per cent. In Indian context, during the next five years, the plan would probably cover over 50 per cent of the cropped area.

 


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