Beed Model of Pradhan Mantri Fasal Bima Yojana
- 12 Jun 2021
- 5 min read
Why in News
Recently, the Maharashtra Government asked the Prime Minister for state-wide implementation of the ‘Beed model’ of the crop insurance scheme Pradhan Mantri Fasal Bima Yojna (PMFBY).
- About Beed Model:
- Beed is a district of Maharashtra located in the drought-prone Marathwada region.
- 80-110 Formula: This model is also called 80-110 Formula.
- Under this plan, the insurer’s potential losses are restricted.
- The insurance firm does not have to entertain claims above 110% of the gross premium. The state government has to bear the cost of compensation above 110% of the premium collected to insulate the insurer from losses (bridge amount).
- However, if the compensation is less than the premium collected, the insurance company would keep 20% of the amount as handling charges and reimburse the rest to the state government (premium surplus).
- Reason for Implementing this Model:
- Benefits to States:
- Another Source of Fund: In most years, the claims-to-premium ratio is low. In the Beed model, the profit of the insurance company is expected to reduce and the state government would access another source of funds.
- Reduce the Burden of Financing PMFBY: The reimbursed amount can lead to lower budgetary provision for PMFBY by the state for the following year, or help in financing the paying the bridge amount in case of a year of crop loss.
- Flaws in PMFBY:
- Fiscally-stressed states have over the years dissented to footing the premium bill for the PMFBY, resulting in insurers not honouring the farmers’ claims on time.
- In 2020, far-below-normal monsoon rainfalls in central Maharashtra’s Beed district dissuaded insurers from covering farmers in the district under the PMFBY for kharif 2020.
- Benefits to States:
- Questions remain on how the state government is going to raise the excess amount, and how the reimbursed amount would be administered.
- For farmers, this model does not seem to have any direct benefit.
Pradhan Mantri Fasal Bima Yojana
- About: PMFBY was launched in 2016.
- It provides a comprehensive insurance cover against failure of the crop thus helping in stabilising the income of the farmers.
- Scope: All food & oilseed crops and annual commercial/horticultural crops for which past yield data is available.
- Premium: The prescribed premium is 2% to be paid by farmers for all Kharif crops and 1.5% for all rabi crops. In the case of annual commercial and horticultural crops, the premium is 5%.
- Premium cost over and above the farmer share is equally subsidized by States and GoI.
- However, GoI shared 90% of the premium subsidy for North Eastern States to promote the uptake in the region.
- PMFBY 2.0 (PMFBY was revamped in the 2020 Kharif Season):
- Completely Voluntary: Prior to 2020, the scheme was optional for farmers who did not have loans pending, but mandatory for loanee farmers. Since 2020, it has been optional for all farmers.
- Limit to Central Subsidy: The Cabinet decided to cap the Centre’s premium subsidy under the scheme for premium rates up to 30% for unirrigated areas/crops and 25% for irrigated areas/crops.
- More Flexibility to States: The government has given the flexibility to states/UTs to implement PMFBY and given them the option to select any number of additional risk covers/features.
- Investing in ICE Activities: Insurance companies have to spend 0.5% of the total premium collected on information, education and communication (IEC) activities.
- Use of Technology under PMFBY:
- Crop Insurance App:
- Provides for easy enrollment of farmers.
- Facilitate easier reporting of crop loss within 72 hours of occurrence of any event.
- Latest Technological Tools: To assess crop losses, satellite imagery, remote-sensing technology, drones, artificial intelligence and machine learning are used.
- PMFBY Portal: For integration of land records.
- Crop Insurance App:
- Performance of the Scheme:
- The Scheme covers over 5.5 crore farmer applications on average per year.
- Aadhar seeding (linking Aadhaar through Internet banking portals) has helped in speedy claim settlement directly into the farmer accounts.
- One notable example is mid-season adversity claims of nearly Rs. 30 crore in Rajasthan during Rabi 2019-20 Locust attack.