India: Farmers turn away from crop insurance scheme
Source: Asia Insurance Review | Feb 2019
Subscription to the government-backed flagship crop insurance scheme – named Pradhan Mantri Fasal Bima Yojana (PMFBY) – has seen a steep decline, driven by pay-outs which are either delayed by months or not settled altogether.
Launched in February 2016, PMFBY saw the number of farmers covered by the scheme fall by 10% to 46m in the fiscal year ended 31 March 2018 (FY2018) from 51m in FY2017, according to the IRDAI’s annual report.
PMFBY provides cover for a variety of risks with farmers paying an insurance charge of 2% (of sum assured) for kharif (monsoon) and 1.5% for rabi (winter) crops. The central government and states share equally the difference between insurers’ premium rate and the rate of insurance charges payable by farmers.
Apart from compensation delay, another reason for the loss of farmers’ interest in PMFBY was that fewer farmers accessed fresh credit (due to a spate of farm loan waivers since mid-2017), reported Livemint. PMFBY enrolment is mandatory for farmers who take up crop loans.
Furthermore, in the event of any crop damage, farmers are at a loss as to whom to reach out to since most insurers have not set up field offices to attend to customer complaints.
However, despite the drop in enrolment, state funding for PMFBY has increased significantly. GWP rose by 32% to INR227.3bn ($3.2bn) in FY2018. A