Central govt. cuts its share in flagship crop insurance scheme

Enrolment in two schemes has been made voluntary for all farmers

February 19, 2020 11:08 pm | Updated 11:08 pm IST - NEW DELHI

Farmers in Raichur district are busy in land preparation for kharif sowing

Farmers in Raichur district are busy in land preparation for kharif sowing

The Centre has almost halved its contribution to its own flagship crop insurance schemes, slashing its share of the premium subsidy from the current 50% to just 25% in irrigated areas and 30% for unirrigated areas from the kharif season of 2020.

The Union Cabinet approved the revamp of the Pradhan Mantri Fasal Bima Yojana (PMFBY) and the Restructured Weather Based Crop Insurance Scheme at its meeting on Wednesday.

In another significant step, enrolment in the two schemes has also been made voluntary for all farmers, including those with existing crop loans. When the PMFBY was launched in 2016, it was made mandatory for all farmers with crop loans to enrol for insurance cover under the scheme.

Announcing the decision after the Cabinet meeting, Agriculture Minister Narendra Singh Tomar said that 58% of farmers enrolled in the schemes are loanees who will no longer have to compulsorily take insurance cover. “The numbers [of enrolled farmers] may go down in the first year, but it will pick up again after that,” he said, adding that the Centre would launch an awareness campaign to encourage farmers to voluntarily sign up for crop insurance policies. Coverage under the scheme is now 30% of cropped area, according to government data.

Flak for PMFBY

PMFBY has come in from flak from a wide variety of stakeholders. Farmers groups and opposition politicians have claimed that private insurance companies have made windfall gains on the scheme. Several major insurers, including ICICI Lombard and Tata AIG, have opted out of the scheme in 2019-20, reportedly due to losses because of high claims ratios. Several States, including Punjab and West Bengal, have refused to participate in the scheme as well.

The Centre has made changes to the scheme based on consultations with States and inputs from all stakeholders, said Mr. Tomar.

Farmers pay a fixed share of the premium: 2% of the sum insured for kharif crops, 1.5% for rabi crops and 5% for cash crops. Currently, the Centre and State split the balance of the premium equally. However, the revamp now reduces the burden on the Centre and increases the share of States.

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