PRADHAN MANTRI FASAL BIMA YOJANA

1. Background

• Insurance is a tool to protect you against a small probability of a large unexpected loss. 
• It is a technique of providing people with a means to transfer and share risk where losses suffered by few are met from the funds accumulated through small contributions made by many who are exposed to similar risks. 
• Insurance is not a tool to make money but a tool to help compensate an individual or business for unexpected losses that might otherwise cause a financial disaster.
• Crop insurance is a means of protecting the agriculturist against financial losses due to uncertainties that may arise from crop failures/losses arising from named or all unforeseen perils beyond their control.
•  Weather-Based Crop Insurance aims to mitigate the hardship of the insured farmers against the likelihood of financial loss on account of anticipated crop loss resulting from incidence of adverse conditions of weather parameters like rainfall, temperature, frost, humidity etc.

2. Objective of PMFBY

Pradhan Mantri Fasal Bima Yojana (PMFBY) aims at supporting sustainable production in the agriculture sector by way of 

    arising out of unforeseen events 

    farming 

    practices 

    to food security, crop diversification and enhancing growth and   

    competitiveness of the agriculture sector besides protecting farmers   

    from production risks.

3. Recent developments

• THE UNION Agriculture Ministry announced on Tuesday that Andhra Pradesh has decided to rejoin the crop insurance scheme Pradhan Mantri FasalBimaYojana (PMFBY) from the ongoing Kharif season. Andhra Pradesh Was one among six states that had stopped the implementation of the scheme over the last four years. 
• The other five, which remain out, are Bihar, Jharkhand, West Bengal, Jharkhand, and Telangana

4. Reasoning for opting out by this states-OPTING OUT/OPTING IN

• ANDHRA PRADESH: The state left the PMFBY from the rabi season 2019-20. Sources said the state had mentioned several reasons: that the scheme should be voluntary; that states should be given the option of choosing the risks covered; that the schemes should be universal; that the cut-off date for enrolment should be flexible; and that Andhra Pradesh should be given the option of using its database of Europe, an application used by the state government collect information about crops. “All these issues have been resolved now,”.
• BIHAR: Sources say there were three main reasons for the state's decision. First, Andhra Pradesh wanted universal coverage under the scheme. Second, the state government wanted zero premium for farmers (meaning the entire premium should be paid by the government).UnderthePMFBY, a farmer is required to pay as premium2%of the sum insured or actuarial rate, whichever is less, for all Kharif foodgrain and oilseed crops;1.5%of sum insured or actuarial rate, whichever is less, for all rabi food grain and oilseed crops; and 5% for horticultural crops. Sources said the Centre Cannot Make farmers' premium zero. However, states such as Haryana, Goa and Puducherry are paying the farmers’ share from their budgets for selected crops. The third reason was thattherateofpremiumwasveryhighforBiharbecauseofthe history of claims under earlier schemes. 
• JHARKHAND: Jharkhand stopped implementing the scheme soon after the Centre revamped it in 2020, effective from Kharif 2020. Under the revised guidelines, “The Non-payment of the State Share Of premium subsidy within the prescribed timelines as defined in the seasonality discipline will lead to the disqualification of the State Government to implement the scheme the next season.” Sources said Jharkhand’s share of premium subsidy was overdue for 2018-19 and 2019-20.
• WEST BENGAL: Sourcessaidthereason for West Bengal not implementing the PMFBY is purely “political”. The state wants to implement the scheme without mentioning Pradhan Mantri in the scheme’s name, which is not possible, sources said. West Bengal implemented the scheme for threeyearsfrom2016-17 to2018-19,covering 41.3lakhfarmers in2016-17,40.4lakh in2017-18, and51.3lakhin2018-19. 
• GUJARAT: Gujarat implemented the PMFBY from 2016-17 to 2019-20, covering 19.8 lakh farmers in 2016-17, 17.6 lakh in 2017-18, 21.7 lakh in 2018-19, and 24.8 lakh in2019-20.Sources say that after the scheme was revamped, Gujarat invited tenders for three years in 2020 but insurance companies quoted a very high premium, and hence the state opted out. 
• TELANGANA: In successive years before stopping in 2020- 21. Telangana’s share of premium was overdue for 2018-19 and 2019-20, the main reason why it didn't notify the scheme for 2020-21. 
• The Agriculture Ministry is in talks with the state government to bring it back on board. 

Structure of the scheme

• The government launched PMFBY from Kharif in 2016. Under The Scheme, all farmers including sharecroppers and tenant farmers growing “notified crops” in the “notified areas” are eligible for coverage. Initially, the scheme was compulsory for loanee farmers
• In 2020, the centre revised it to make it optional for all farmers. 
• In the initial scheme, the difference between the actuarial premium rate and the rate of the insurance premium payable by farmers, which is called the rate of normal premium subsidy, was to be shared equally between the Center and states. 
• However, states and Union Territories are free to extend additional subsidies over and above the normal subsidy from their budgets. 
• Center decided to restrict its premium subsidy to 30% for unirrigated areas and 25% for irrigated areas (from the existing unlimited). 
• Earlier, there was no upper limit for the central subsidy. 
• Food crops (cereals, millets and pulses); oilseeds; and annual commercial/annual horticultural crops are covered under the scheme. 
• In addition, pilots for coverage can be taken for those perennial horticultural/ commercial crops for which standard methodology for yield estimation is available, state the scheme guidelines.