PMFBY Scheme: All About Pradhan Mantri Fasal Bima Yojana (PMFBY) Scheme

The Pradhan Mantri Fasal Bima Yojana (PMFBY) is a large-scale crop subsidy insurance scheme that was launched in 2016 to protect farmers. This flagship scheme was created by the One Nation–One Scheme, and it replaces three older initiatives—the Modified National Agricultural Insurance Scheme (MNAIS), the Weather-based Crop Insurance Scheme, and the National Agricultural Insurance Scheme (NAIS)—by incorporating their best features and eliminating their inherent flaws to improve insurance services available to farmers. The Ministry of Agriculture’s Department of Agriculture, Cooperation, and Farmers’ Welfare and empanelled general insurance companies operate this scheme.

From pre-sowing to post-harvest, as well as midseason obstacles, the scheme covers the complete cropping cycle. It protects farmers from financial losses caused by unforeseen occurrences such as crop failure owing to localised risk, post-harvest losses, natural calamities, unseasonal rainfall, crop illnesses, and insect infestations. The initiative’s main goal is to relieve farmers of the financial burden of insurance payments and to ensure that claims are resolved quickly.

Objectives of the PMFBY Scheme

The PM Fasal Bima Yojana operates under the ‘One Nation, One Crop, One Premium’ motto and aims to achieve the following goals:

• Provide comprehensive crop insurance at an affordable price to protect against crop failure, damage, and loss.
• Increase crop insurance penetration, with a major focus on covering the entire seeded area.
• Stabilize farmer earnings and ensure agricultural production’s long-term viability.
• Ensure that finance is available to the agricultural industry.
• Farmers should be encouraged to use creative and advanced farming practices.
• Encourage farm sector competition.
• Farmers should be protected against production risks.
• Farmers should be free from goods and services taxes.

Details About the PMFBY Scheme

Insurance Coverage under the PMFBY Scheme

The insurance coverage under this programme is confined to specific crops and agricultural risks related to crop yield. Food crops (cereals, millets, and pulses), oilseeds, annual commercial crops, and annual horticulture crops are among the notified crops.

It also encompasses the entire crop-producing cycle. The following are the insurance coverage’s inclusions and exclusions:

Initial Stage- Risk of sowing, planting and germination failure

Low rainfall or bad weather conditions hinder the insured region from successfully sowing, planting, or germination.

Growth Stage- Risk of standing crop failure

Planted crops are harmed in this circumstance due to unavoidable dangers. Drought, dry spells, floods, inundation, insect infestations, crop diseases, landslides, natural fires, lightning, hailstorms, and cyclones are all covered by insurance.

Harvest Stage-  Risk of post-harvest losses

Only those crops that must be dried in cut-and-spread or small bundles after harvesting are covered by this rule. Insurance coverage is provided for losses caused by hailstorms, cyclones, cyclonic rains, and unseasonal rains for a maximum of two weeks after harvesting these crops.

Protection against calamities-  It covers losses or damage to declared insured crops caused by defined localized risks such as hailstorms, landslides, cloud bursts, and natural fires.

Exclusions- The scope of coverage excludes loss or damage to notified insured crops caused by war, nuclear threats, malicious damage, and other preventable risks.

The magnitude of the insurance claim is determined by multiplying the percentage of the shortfall from the threshold yield by the total insured. The sum insured is determined using seven-year data and indemnity levels, and the threshold crop production is derived using the scale of loan provided to farmers.

Premiums Under the PMFBY Scheme

Farmers must pay a nominal proportion of actuarial premiums for Kharif crops (2%), Rabi crops (1.5%), Commercial crops (5%), and Horticultural crops (5%) to receive insurance benefits under this plan (5%). The state and federal governments, on the other hand, pay 95-98.5% of the actuarial premium and divide it into a 1:1 ratio. The actuarial premium charged by insurance firms is Rs. 4,000 (US$ 54.5) if a farmer has an amount of Rs. 35,000 (US$ 477) and one hectare of the land insured. If the farmer harvests Kharif crops on the insured land, he is only needed to pay 2% of the actuarial premium or Rs. 800 (US$ 10.9), while the balance of Rs. 1,600 (US$ 21.8) will be paid by the state and the insurer.

Beneficiaries of the PMFBY Scheme

All farmers (including sharecroppers and tenant farmers) planting notified crops in notified areas are eligible for coverage under this scheme, according to the government, assuming they have an insurable interest in the insured crops.

The eligible farmers can be broadly classified into two categories:

Loanee Farmers

• All farmers who have been sanctioned loans from financial institutions (FIs) for seasonal agricultural operations (SAO). Insurance premiums to be paid by farmers are deducted from SAO crop loans. Crop loans sanctioned against other collateral securities, such as fixed deposits, gold or jewel loans and mortgage loans, which do not include insurable interest on the insurable land are not covered.
• All loanee farmers are required to enrol under the PMFBY.

Non-Loanee Farmers

• All farmers who have opted for non-standard Kisan Credit Card (KCC) scheme-linked crop loans.
• All farmers who have not taken any crop loans.
• All loanee farmers can voluntarily enrol under the PMFBY to mitigate risk and claim insurance benefits.

When the scheme was started in 2016, a total of 5.8 crore farmers were insured, with 75% receiving mandated coverage as a result of their SAO loan allocations and the other 25% opting for insurance freely.