The Pradhan Mantri Fasal Bima Yojana (PMFBY) launched in April 2016,
compensates farmers for any losses in crop yield. In the event of a crop
loss, the farmer will be paid based on the difference between the
threshold yield and actual yield.
The threshold yield is calculated
based on average yield for the last seven years and the extent of
compensation is set according to the degree of risk for the notified
crop.
The scheme is compulsory for farmers who have availed of
institutional loans.
The scheme insures farmers
against a wide range of external risks — droughts, dry spells, floods,
inundation, pests and diseases, landslides, natural fire and lightning,
hailstorms, cyclones, typhoons, tempests, hurricanes and tornadoes.
The
scheme also covers post-harvest losses up to a period of 14 days.
While
the idea of insuring farmers against crop losses isn’t new, the PMFBY
is an attempt to plug the holes in the older crop insurance schemes —
the National Agriculture Insurance scheme (NAIS) introduced in 1999 and
the Modified NAIS (mNAIS) introduced in 2011
These
older schemes didn’t find too many takers among farmers, the main
dampener being their limited risk coverage. In mNAIS, the premium was
capped at 8 to 12 per cent of the sum insured to limit the government’s
subsidy outgo.
Thus, for crops where actuarial rates were higher (that
is, the premiums were steeper), insurance companies proportionally
reduced the sum insured. Many a time, the ‘compensation’ fell way short
of even the farmer’s cost of production.
The Fasal
Bima Yojana has done away with this cap on premium.
The sum insured per
hectare for a farmer is now decided by the District Level Technical
Committee and is pre-declared and notified by the State Level
Coordination Committee on Crop Insurance.
The farmer also pays less —
the premium he shells out is 2 per cent of the sum insured for all
kharif crops and 1.5 per cent of it for all rabi crops.
For horticulture
and commercial crops, the premium is 5 per cent of sum covered.
The
remaining premium is paid by the government.
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