Indian agriculture is inherently susceptible to the unpredictable forces of nature, with farmers often facing the brunt of erratic weather patterns, pests, and other natural calamities. In this context, the imperative for a robust crop insurance system becomes paramount to safeguard the livelihoods of millions dependent on agriculture. The Pradhan Mantri Fasal Bima Yojana (PMFBY) emerges as a pivotal initiative in this realm. This government-sponsored scheme aims to provide financial relief to farmers in the event of crop failure due to various reasons, ensuring a safety net against unforeseen adversities. The salient features of PMFBY encompass its comprehensive coverage, affordable premiums, and timely claim settlements, fostering resilience among farmers. As a crucial component of agricultural risk management, PMFBY not only mitigates the economic vulnerability of farmers but also promotes sustainable farming practices.
Tag: Disaster and disaster management.
Decoding the Question:
- In Intro, try to Introduce with writing some data related to agricultural losses due to vagaries of natural.
- In Body, Explain need of crop insurance and along with that write about salient features of PMFBY.
- Try to conclude answer as per context
Answer:
India’s agricultural sector, which contributed 16 percent of the country’s GDP in 2017, supports the livelihoods of 43.9 percent of the population. Employment in this sector has decreased by 10 percentage points within a decade, from 53.1 percent in 2008 to 43.9 percent in 2018. The sector is facing manifold problems such as crop failures, non-remunerative prices for crops, and poor returns on yield. Agrarian distress is so severe, that it is pushing many farmers to despair; about 39 percent of the cases of farmer suicides in 2015 were attributed to bankruptcy and indebtedness.
The PMFBY is a crop insurance scheme that improved upon its predecessors to provide national insurance and financial support to farmers in the event of crop failure: to stabilize income, ensure the flow of credit, and encourage farmers to innovate and use modern agricultural practices.
Need for crop insurance:
- Unpredictable monsoon: Nearly 66% of total land is following rainfed. The phenomena like El-Nino and ENSO have a very bad impact on the monsoon.
- Protection from disasters: Natural disasters like cyclones, floods, landslides, droughts etc. prove to be disastrous for farming communities. Irregular climatic conditions like hailstorms and cloud bursts etc. are on rise.
- Financial support to farmers: In adverse conditions like floods, hail storms etc insurance gives some relief in times of disasters. Insurance will provide crop and revenue protection.
- Reduced burden on Banks of NPA: It augments the repaying capacity of farmers that reduces NPA stress on banks and other financial institutions.
- Reduced pressure of packages on the government: Untimely relief packages do have to imply extra-budgetary provision to fulfill demand. Its impact is visible in the fiscal deficit, hampering resource availability to other development needs.
Salient features of PMFBY:
- Coverage of Farmers: The scheme covers loanee farmers (those who have taken a loan), non-loanee farmers (on a voluntary basis), tenant farmers, and sharecroppers.
- Coverage of Crops: Every state has notified crops (major crops) for the Rabi and Kharif seasons. The premium rates differ across seasons.
- Premium Rates: The PMFBY fixes a uniform premium of two percent of the sum insured, to be paid by farmers for all Kharif crops, 1.5 percent of the sum insured for all Rabi crops, and five percent of sum insured for annual commercial and horticultural crops or actuarial rate, whichever is less, with no limit on government premium subsidy.
- Area-based Insurance Unit: The PMFBY operates on an area approach. Thus, all farmers in a particular area must pay the same premium and have the same claim payments. The area approach reduces the risk of moral hazard and adverse selection.
- Coverage of Risks: It aims to prevent sowing/planting risks, loss to standing crop, post-harvest losses and localized calamities. The sum insured is equal to the cost of cultivation per hectare, multiplied by the area of the notified crop proposed by the farmer for insurance.
- Innovative Technology Use: It recommends the use of technology in agriculture. For example, using drones to reduce the use of crop cutting experiments (CCEs), which are traditionally used to estimate crop loss; and using mobile phones to reduce delays in claim settlements by uploading crop-cutting data on apps/online.
- Cluster Approach for Insurance Companies: It encourages L1 bidding amongst insurance companies before being allocated to a district to ensure fair competition. A functional insurance office will be established at the local level for grievance redressal, in addition to a crop insurance portal for all online administration processes.
Issues related to PMFBY:
- However, it is unclear how states should choose the major crops during a season for different districts, which results in the exclusion from insurance coverage of farmers who grow non-notified crops.
- Vulnerable farmers in debt and need of new loans are unable to avail of insurance unless all dues are paid, putting them in a vicious cycle of debt.
- Farmers are apprehensive about the scheme because of a trust deficit, which is a result of mandatory credit-linked insurance. The premium is deducted from a farmer who has taken a loan from any banking institution without their consent and, sometimes, even without their knowledge.
- Sometimes, a farmer is insured for the wrong crop or the bank may be late in paying premiums to the insurance companies, leaving the farmer in a lurch and unable to claim payments
- Non-loanee farmer participation has been low because they might not own the required provision documents such as an Aadhaar card.
- Leasing agricultural land is prohibited in Kerala and J&K, while states such as Bihar, MP, UP and Telangana have conditions on who can lease out land, which prevents many tenant farmers from buying insurance.
Thus, new crop insurance has a wide approach in itself to cover various calamities and protect farmers from the same. This scheme has made crop insurance universally available to farmers at affordable cost but being only a yield-protection insurance, this scheme is not holistic and fails to take into account revenue protection.
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