Book of Extended summaries ISDA

International Conference on Reimagining Rainfed Agro-ecosystems: Challenges &
Opportunities during 22-24, December 2022 at ICAR-CRIDA, Hyderabad
To insure against crop losses, government of India is implementing Prime Minister Fasal
Bhima Yojana (PMFBY) scheme with a huge premium subsidy since 2016. However, after
initial good response, some states are withdrawn from the scheme and started their own crop
insurance scheme. Now only 21 of the 34 states are implementing this scheme while others are
doing it on their end or some states don’t have any crop insurance scheme. The states like
Telangana, Andhra Pradesh, Bihar, Gujarat, Jharkhand and West Bengal are withdrawn from
the scheme in past few years. Since beginning of the scheme, Punjab is not participated. Under
the scheme, area insured decreased from 55.0 million hectares in 2018 to 45.2 million hectares
in 2021. Number of farmers are similarly decreased and now only about 3 crore farmers are
participating in crop insurance out of 12 crore farmers in India. It shows there is some problems
in implementation of the scheme in some states. However, some positive aspect is, recently
after 4-5 years of withdrawal, both Telangana and Andhra Pradesh states are re-enrolling in to
the scheme after getting assurance of universal coverage. Past experience shows that, the main
reasons for withdrawal are (i) more out go as premium subsidy compared to claims received
by the farmers in some states, (ii) delay in claim payments, (iii) specific needs of the states for
example, in states like Punjab low risk states and crop loss is very rare due to floods or droughts,
but they face hailstorms, against which they may need insurance at least cost, (iv) general lack
of awareness about crop insurance among farmers and (iv) laborious and complex process of
determining premium levels, estimating crop loss and ultimately paying claims to farmers.
The riskiness of crop production and risk bearing ability of the farmers vary significantly with
the type of crops grown, irrigated and non-irrigated areas, level of commercialization, small vs
big farmers and stage of development etc. Any crop insurance scheme not considering these
variations in designing the schemes may suffer from low enrolments.
In crop insurance, threshold yield is the basis for payment of claims. The threshold yield of a
crop is equal to the average yield multiplied by the Indemnity level. Farmers get claims, only
if the actual yield is below the threshold yield. Under PMFBY three levels of indemnity are
applicable at90, 80 and 70 per cent. It means, claims will be given to farmers, only if the loss
is more than 10, 20 and 30 per cent respectively. But, in states like Punjab, yield loss above
10% rare, hence, appropriate indemnity level should be 95%, so that even if losses are 5%,
farmers get claims. Punjab is not generally hit by droughts or floods but occasionally suffer
due to hailstorms, to cover this farmer wants to take single peril insurance with a premium of
not beyond 1%, unlike uniform1.5% to 5% under PMFBY. Similarly assured irrigated areas of
paddy and wheat in other states are also very low risk areas, who don’t want to pay higher
premium. But in contrast, in drought districts like Rayalaseema region of Andhra Pradesh or
Vidarbha region of Maharashtra, or in Thar desert of Rajasthan or in cultivation of fruits and
vegetable is riskier, yield loss of30% is common, hence these farmers are willing to pay higher
premium for indemnity level of 30% to cover frequent losses. These types of geographical
variations need to be accommodated in the PMFBY.
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