Union Agriculture Secretary Sanjay Agarwal will lead the discussions with the states. After receiving feedback from states during a recent review meeting on PMFBY, Agriculture Minister Narendra Singh Tomar reportedly instructed officials to make appropriate changes to the Scheme.
The states of Gujarat, Andhra Pradesh, Telangana, Jharkhand, West Bengal, and Bihar have already withdrawn from the Scheme due to the high cost of the premium subsidies. Punjab never implemented a crop insurance scheme, but Bihar, West Bengal, and Andhra Pradesh do, with farmers paying no premium but receiving a predetermined amount of compensation in case of crop failure.
Navneet Ravikar, CMD of Leads Connect Services, believes that claims assessment should be assigned to independent agencies using technology, preferably under the control of the Insurance Regulatory and Development Authority (IRDA). In crop insurance, claims-to-premium ratios have a direct impact on premiums charged in the following seasons.
Preliminary data from 19 states (excluding Karnataka) show that crop insurance enrolment fell by more than 11% during Kharif 2021, compared with 1.68 crore the year before.
Since Karnataka’s Kharif data for this year has yet to be uploaded to the central portal, it is not included. Several major producing states, including Chhattisgarh, Madhya Pradesh, Maharashtra, Odisha, Rajasthan, Tamil Nadu, and Uttar Pradesh, have seen enrollment declines of between 2 and 75 percent.
Due to the late start of enrolment, Tamil Nadu has witnessed a 75% drop in the number of enrolled farmers, while Madhya Pradesh has seen an 11% drop.
Both of these states joined late after the Centre approved their plans on August 2, and they only got one month to enrol against to the usual April-July period. While Madhya Pradesh implements the 80-110 plan, popularly known as the “Beed formula,” Tamil Nadu is doing it under an 80-20 plan.
Except for Rajasthan, Madhya Pradesh and Chhattisgarh, most other states have experienced a decrease in applications on-year during Kharif 2021. Because the same farmers with multiple landholdings apply individually for each land, the number of applications is always more than the number of farmers. Rajasthan has experienced a more than two and a half times rise in applications on -year as a result of the integration of digitised land records with PMFBY, despite a 2% reduction in the number of farmers enrolled.
In a previous meeting of the parliamentary standing committee on agriculture, the agricultural ministry noted that many of these states opted out of the PMFBY because of financial constraints, not because they disapproved of the program.
“Withdrawal/non-implementation of PMFBY by more states in coming years will undermine the exact purpose for why the Scheme was launched. The Committee, therefore, recommends the Department to thoroughly investigate the reasons/factors leading to the withdrawal/non-implementation of the PMFBY by Punjab, Bihar, West Bengal, Andhra Pradesh, Gujarat, Telangana, and Jharkhand, and to take appropriate steps so that States continue to implement the Scheme and farmers benefit from it,” the committee said in a report submitted last month.
The ‘Beed formula,’ also known as the 80-110 plan, circumscribed the insurer’s potential losses — the company is not required to accept claims that exceed 110 percent of the gross premium. The insurer shall reimburse to the state government any premium surplus (gross premium minus claims) that exceeds 20% of the gross premium. To insulate the insurer from losses, the state government must bear the cost of any claims that exceed 110 percent of the premium collected. The gross premium and claims/profit of the state government and insurer will be shared at an 80:20 ratio in the 80-20 plan respectively.
PMFBY requires farmers to pay a premium of 1.5% of the insured amount for rabi crops, 2% for Kharif crops, and 5% for cash crops.
The balance premium is evenly divided between the Centre and the states. Many states have requested that their share of the premium subsidy be capped at 30% while others have insisted that the Centre should bear the entire subsidy.