PM Fasal Bima Yojana

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The role of farmers has always been undervalued, but undoubtedly, they are the pillar of the society we live in. In April 2016, the Indian Government launched the Pradhan Mantri Fasal Bima Yojna (PMFBY), which scrapped all the earlier prevailing schemes on yield insurance. It is the flagship scheme of the agricultural insurance which supports the theme of One Nation- One Scheme. The focus of the scheme is to increase the awareness about the crop insurance in India as it covers post-harvest losses, localized risks due to unforeseen calamities etc. But unfortunately, due to multiple problems, the scheme has not been successful in the country. Many states have opted out of this scheme, Jharkhand and Telangana being the recent ones. It is predicted that there may be a 25% decline in the enrolment of PMFBY.

Salient features of the scheme

  • The farmers are required to pay 2% of the total premium for the Kharif crops, 1.5% for the rabi crops and 5% for the cash crops and horticulture crops.
  • For the farmers with availed loans, it is mandatory to be insured as per the provisions of PMFBY.
  • To secure the income of farmers, complete insurance is given to them in case of any unforeseen event. When there is any loss due to natural calamity, the premium rates of the total insured amount to be paid by the farmers are low and the rest of the premium amount is paid by the government.
  • One of the features of PMFBY is the removal of the cap and other reductions so that the farmers can claim full insured sum.
  • Landslide, Hailstorm and even flooding have also been added in the list of localized calamities.
  • Under this scheme, there is no upper limit on Government Subsidy.
  • The use of technology is highly supported by this scheme. For the timely settlement of the insured amount, usage of technological devices like drones, smartphones, remote sensing instruments are promoted.
  • For the effective implementation of this scheme, the cluster approach has been adopted which means a particular insurance company will monitor a group of districts.
  • Under this scheme, prevented sowing will now be eligible for indemnity claims up to 25% of the total sum insured.

How was the scheme introduced?

The Pradhan Mantri Fasal Bima Yojna has made many upgradations and enhancement when compared to the predecessor scheme like the National Agricultural Insurance Scheme (NAIS) and the Modified National Agricultural Insurance Scheme (MNAIS). The objective of this scheme is to help the farmers by providing them with insurance and reducing the burden on their shoulders. The PMFBY includes all Food and Oilseeds crops and Annual Commercial/Horticulture Crops in which previous yield data is available and for which the required number of Crop Cutting Experiments (CCEs) was done. The implementation process of the scheme is done by the general insurance company and their selection is done through bidding by the particular State Government. All the work and process related to the scheme is done in the supervision and direction of the Government of India, Ministry of Agriculture and Farmers Welfare, Department of Agriculture and the concerned state in coordination with the insurance agency. Further, the implementation of the scheme is done on ‘Area Approach Basis’, where the insurance amount is decided demographically based on risk factor for a particular crop.

Progress made under PMFBY

While presenting the budget of the financial year 2020-21, the Finance Minister Nirmala Sitharaman said that in the coming year the central government is committed to double the income of farmers. It is estimated that till now, approximately 6.11 crores framers have availed insurance benefits under this scheme launched by the PM. Among all the farmers insured under this scheme, 58% of them are loanees. In February 2020 the Indian government has approved several changes in PMFBY to make it more successful and plug the loopholes in the scheme. The scheme has been made optional for farmers. The PMFBY was launched by the government after including the best features and effacing the shortcomings of the earlier working schemes.

Why are states withdrawing from the scheme?

It has been witnessed that several states across the country are withdrawing from the PMFBY. There are myriads of reasons for this conundrum starting from the lack of interest shown by the particular state to the reluctancy on the part of insurance companies to invest. The data of last year shows that in the Kharif Season, seven States and four Union Territories were not covered by this scheme. It was estimated that only Rs. 8 crores were spent out of Rs. 1,400 crores earmarked for the north-eastern States under this scheme in 2019. There are some states like West Bengal and Bihar who have opted out of PMFBY to establish their State-level schemes. The goal of PMFBY is to be a transformative scheme, but there some loopholes in the implementation process and multiple complications in its execution at both district and state level. Other negative factors include the paucity of State budgetary resources, exorbitant administrative costs, lack of forecasting infrastructure, high actuarial premium rates etc. Unfortunately, there are some states in which the State governments are itself not interested in promoting the scheme.

Critical analysis

In India, it is estimated that approximately 43.9 % of the population depends on agriculture for their survival and livelihood. Since a few decades’ problems like poor returns, crop failures, indebtedness, have led to the agrarian distress all over the country. The Indian government has come up with multiple schemes and guidelines to support the farmers but some of them have failed immensely and or they have been hobbled by political variance. The PMFBY was launched with an initiative to reverse the risk-averse nature of the farmers, provide them with financial support and be their backbone in case of any debacle.

It is observed that although the scheme is an improved version of the earlier prevailing schemes still it faces some impediments at the structural, financial and logistic level. It is often said that the execution process of this scheme is seriously compromised. There were instances where the insurance company was reluctant to pay claims as they didn’t investigate the losses occurred due to the localized community. There are still farmers in the country who are not aware of this scheme because of the lack of efforts made by the insurance companies and state government in promoting and building awareness about the PMFBY.

A way forward

For the development and progress of the country, a fair, farmer-friendly and transparent agriculture insurance system is crucial. There must be a mechanism which ensures the timely settlement of claims, effective communication between farmers, insurance companies, government and are devoted to enhance and utilize the provisions of scheme to the full extent. If this insurance model is supported by Public-Private Partnership and technological advancements, it will surely do wonders by reaching out to the last farmer. This will not only uplift the economy but also lead to its financialization and formalization.


An efficacious crop insurance system is the need of an hour which can protect farmers from the income losses, escalate agricultural productivity and can finance inputs for agricultural production. Unfortunately, the present scheme has failed in many aspects. The PMBFY is neither helping the farmers in augmenting their income nor effacing the financial debt faced by them. It is now crucial for the Indian government to amend the policy wrinkles and glue the flaws in the scheme so that its objective is achieved.

Author: Shivi Shrivastava from Institute of Law, Nirma University.

Editor: Silky Mittal, Junior Editor, Lexlife India.