Pradhan Mantri Fasal Bima Yojna (PMFBY) And Flaws led to ineffectiveness


  • The Pradhan Mantri Fasal Bima Yojna (PMFBY) was introduced in 2016 by Prime Minister Shri Narendra Modi.
  • It was introduced with all best features but without shortcomings of all previous crop insurance schemes like NAIS/MNAIS (National Agricultural Insurance Scheme/ Modified NAIS.


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

Key features of the scheme:

(1) Premium paid by farmers:(2) Coverage of farmers:

All farmers including sharecroppers and tenant farmers growing the notified crops in the notified areas are eligible for coverage.

(3)  Coverage of crops:

(4) No upper limit on Government subsidy:

  • There is no upper limit on Government subsidy. Even if balance premium is 90%, it will be borne by the Government. Earlier, there was a provision of capping the premium rate which is low claims being paid to farmers. Now this is removed, and farmers will get claim against full sum insured without any reduction.
  • Centre and states equally (50%) share the cost of actuarial premium payable to insurance companies.

 (5) Risk coverage:

  • Sowing risk: covers losses due to deficit rainfall or adverse seasonal conditions at the sowing time.
  • Sowing to Harvesting: covers losses due to non- preventable risks, viz. Drought, Flood, Pests and Diseases, Hailstorm etc.
  • Post-Harvest Losses: covers the crops, ready to ‘cut and spread condition’. It will be available up to a maximum period of 14 days from harvesting.

 (6) Use of technology:

  • Satellite imagery, vegetation indices etc.
  • Mandatory usage of smart phones for increasing the speed and accuracy during yield estimation.
  • promotes the digitization of land records to minimize the area discrepancy in coverage.

(7) Unit of insurance:

Unit of insurance is Village/Village Panchayat level for notified crop. It is implemented on an ‘Area Approach basis’. In this approach a village or a village panchayat is defined as ‘notified area’. It is assumed that the farmers of this area face similar risk exposure, identical cost of production per hectare, earn comparable farm income per hectare, and experience similar extent of crop loss.

(8) Implementing Agency: The insurance plan will be handled under Agriculture Insurance Company of India (AIC) and some other private companies. There is one finance company for the whole state and the selection of the company is being done by the states itself. 

Modified PMFBY:

This scheme was modified in September 2018. Additional features of the scheme were-

  • Crop insurance companies will have to pay 12% interest to farmers on delaying claim payouts beyond two months from the prescribed.
  • Crop insurance companies will get 12% interest, if state government would delay release of their share of subsidy beyond three months of the submission of requisition.
  • Crop loss due to attack of wild animals will also be covered.
  • To avoid duplication of beneficiaries ‘Aadhaar number’ will be mandatorily captured.
  • The insurance companies will have to mandatorily spend 0.5% of gross premium per company per season for publicity and awareness of the scheme.

Evaluation of the scheme:

After the implementation of the PMFBY, the number of farmers covered by crop insurance has gone up only by 0.42%. On the other hand, premiums paid to insurance companies have increased by 350% as shown in the figure-

This shows that the scheme is benefiting insurance companies more than farmers. Decline in enrolments show trust deficit of farmers in the PMFBY. This is the ground reality of the scheme that it has failed to provide farmers with timely and adequate cover.

Reasons of declining the enrollment in the scheme or Drawbacks of PMFBY:

  • Delay in claim settlements:
  • Delayed assessment of crops loss and settlement of claims which took six to nine months to complete led to farmers losing interest.
  • Insurance companies do not agree on the yield data provided by the States, which results in disputes and delays in claims settlement.
  • The other problem is that the States do not pay their share of the premium on time, which means insurers are unable to process the claims.
  • Defraud by insurance companies: PMFBY involves a significant role of insurance companies. Insurance companies do wrong practices such as-
  • do not even maintain landholding-wise or crop-wise databases.
  • did not give insurance policy document and receipt to farmers.
  • Premium was collected by banks directly from farmer’s account multiple times.
  • Delay in reimbursement of claim.
  • Low Farmer Awareness: makes it easy for insurance companies not to provide claim payments.
  • Inadequate unit of insurance: The scheme treats village or village panchayat as a unit of insurance rather than an individual farm.
  • Standard crop insurance scheme for all states: Instead of standard insurance scheme for all states, Centre should allow the states to design their own insurance scheme as each state has its unique set of problems due to cropping, climate and access to irrigation.

What should be done to increase enrollments:

Only by gaining the farmer’s trust, enrollments could be increased. Timely payment of insurance claim is the only way to gain farmer’s trust again. For this, these ways could be adopted:

  • By changing unit of insurance: Treating the individual farm as the unit for insurance claims at the place of village/village panchayat, could be a way to understand the facts relating to the farmers loss.
  • By doing ground assessment by the insurance companies: Some time the revenue estimates of the crops damage are ready, the crop losses suffered do not tally with the crops that were insured by the private crop insured companies. Lack of actual ground assessment done by the insurance companies at the time of enrollment to know what crops were under cultivation.
  • By improving farmers awareness: Farmers must be informed before deducting crop insurance premium. They must be given a proper insurance policy document, with all relevant details. Panchayati Raj Institutions and farmers need to be involved at different stages of implementation.
  • More transparency is needed: All PMFBY related data related to farmers must be available in the public domain and shared openly with farmers.
  • Strict watch on Insurance companies: Insurance companies must be watched to prevent illegal registration. Companies should be bound to pay against claim on time.
  • Coordination between State and insurance companies: Coordination between state and insurance companies will give a favorable result. State should provide crop related data and its share on time which led to timely payment against claims.

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