Pradhan Mantri Fasal Bima Yojana (PMFBY)


    In News

    • Maharashtra may follow several other big states and opt-out Pradhan Mantri Fasal Bima Yojana (PMFBY).
      • Farmer groups have flagged irregularities in PMFBY & demanded a new state-level programme.

    About the scheme

    • PMFBY insures farmers against all non-preventable natural risks from pre-sowing to post-harvest.
    • Farmers have to pay a maximum of 2 per cent of the total premium of the insured amount for Kharif crops, 1.5 per cent for rabi food crops and oilseeds as well as 5 per cent for commercial/horticultural crops.
    • The balance premium is shared by the Union and state governments on a 50:50 basis and on a 90:10 basis in the case of northeastern states.
    • Claims are worked out on the basis of shortfall in actual yield, vis-a-vis the threshold yield in the notified area.
      • It shall be implemented through a multi-agency framework by selected insurance companies under the overall guidance & control of the Department of Agriculture and state government.
      • There is no upper limit on Government subsidies. The premium rates to be paid by farmers are very low and the balance premium is paid by the Government to provide the full insured amount to the farmers.

    Objectives of the scheme

    • To provide insurance coverage and financial support to the farmers in the event of failure of any of the notified crops as a result of natural calamities, pests & diseases.
    • To stabilize the income of farmers to ensure their continuance in farming.
    • To encourage farmers to adopt innovative and modern agricultural practices.
    • To ensure the flow of credit to the agriculture sector.


    • However, despite the severity of crop loss due to extreme weather events increasing in recent years, the number of farmers opting for crop insurance has been declining.
      • Andhra Pradesh, Jharkhand, Telangana, Bihar, Gujarat, Punjab and West Bengal all predominantly agriculture states have already opted out of the scheme.
      • Some of these states have their own insurance schemes.
    • Major issues for opting out are denial and delay of claims along with a huge subsidy burden on state governments.
    • Most tribal farmers are small farmers, own farm plots with steep slopes and are dependent on the monsoon for their only season of farming.
    • Public and private insurance agencies bid with their premium rates for a district in a state.
      • The lowest bidder is awarded the contract to provide insurance under the scheme for one agricultural season only.
      • This discouraged them from investing in that district in terms of awareness activities or assigning personnel.
    • The most fundamental problem in the design of the scheme is the method used for determining crop loss in an area.
      • The scheme outlines a series of crop-cutting experiments (CCEs), which are based on a method standardized by state agriculture universities.

    Way Forward/ Suggestions

    • One way out of this could be a simpler version of crop insurance, based only on rainfall data.
      • The number of recording locations can be increased and all farmers with less than 10 acres of rain-fed farmland can be included.
    • The process of farmers having to apply on an individual basis and paying the premium should also be done away with.
    • If crop insurance can reach tribal farmers in remote villages, cultivate rain-fed, single-season foodgrains and provide some income protection in cases of dry spells or sudden bursts of intensive rains, this would indicate that the scheme has considerably reduced its weak links and the chain has become stronger.

    Maharashtra’s Beed district Model/ BEED Formula

    • The model of crop insurance in place in Maharashtra’s Beed district is being studied by a central government panel set up to suggest suitable working models for PMFBY.
    • In the Beed model, there is a cap on the profit of the insurance companies.
    • If the claims exceed the insurance cover, the state government pays the bridge amount.
    • If the claims are less than the premium collected, the insurance company keeps 20 percent of the amount as handling charges and reimburses the rest to the state government.
    • The Beed model will reduce the state’s subsidy burden but we have to see if it is benefitting the farmers.
    • The issues of delay in claim settlement and getting a fair amount still remains for farmers under the model.

    Source: DTE