Context

Flaws in the PM Fasal Bima Yojana have exposed the farmers to acute stress and debt traps, which have the potential to affect the food security of the country as well as lead to an increase in farmer suicides.

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Requirement of Crop Insurance

  • High Dependency on Agriculture:
    • In India, a majority of population is directly or indirectly dependent upon agriculture.
    • For e.g. the Labour Force Participation Rate in agriculture in the country is 42.6% in 2019, while more than 60% of the population is indirectly dependent on Agriculture.
    • Therefore, any losses in Agriculture have the tendency to affect a majority of population in the country.
  • Debt Trap: 
    • Rural areas in the country are still reeling from expensive loans and usurious interest rates because of low access to formal financial institutions.
    • This leads to many farmers being caught in the debt webs spun by the moneylenders, traders and middlemen.
    • A single-year crop failure has the potential to devastate a small or marginal farmer, leading to a high prevalence of suicide among debt-ridden farmers.
  • High dependence on Monsoons: 
    • At the same time, the country suffers from a lack of irrigation facilities in a majority of agricultural area.
    • In fact, 51.2% of 140 million hectares of India’s agricultural land remains rainfed, leading to farmers being dependent upon monsoons for irrigation.
    • Therefore, any monsoon-deficit season can wreak havoc for the over-leveraged Indian farmer.
  • Food Security: 
    • Due to its high population, India is especially vulnerable to crop losses and agricultural failures. Any such incident has the potential to affect food security and increase hunger & malnutrition in the country.
    • For e.g., in 2021, India lost 5.04 million hectares of crop area to weather events like cyclones, landslides, flash floods and cloudbursts, as per the Ministry of Agriculture and Farmers’ Welfare.
    • This translated into brief bouts of hyperinflation in the food sector.
  • Food Inflation: 
    • Any losses in the agriculture sector translate to a rise in prices of agricultural commodities.
    • This is difficult to bear for the majority of population in the country.
    • For e.g., India’s wholesale inflation rate in November 2021 was 14.23%, which is the highest in three decades.
    • Such price rise has the capacity to spoil the household budget plans in the country, if it translates into higher retail inflation.
    • Food Related Violence: 
      • Food, being one of the basic requirements of human and animal population, has the potential to incite riots in the population, as happened in 2011 in West Asia and Africa during Arab Spring. 
      • Therefore, it is pertinent to keep an eye on indicators like Food and Agricultural Organization’s Food Price Index, which showed that the food prices are increasing by 28% from last year on an average, being highest in the last decade.

Arab Spring

  • It was a series of pro-democracy revolutions which began and swept many of the countries in the Middle East.
  • It started in Tunisia and led to an overthrow of the governments in Libya and Egypt.
  • The main cause of the revolution was economic stagnation and prevalence of corruption in the respective countries.

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  • Aggravation in Extreme Weather Events: 
    • A controlled food price rise is not bad, per se, as it encourages farmers to increase production, by increasing their incomes. However, this is contradicted by the loss incurred due to extreme weather events like floods, droughts, untimely rains, hailstorms etc., which disincentivize farmers from investing more in their fields.
    • For e.g. between 1956 and 2010, there were nine double-digit inflation episodes, of which seven were caused by drought conditions as per RBI.
    • At the same time, the uncertainty in advanced predictions or knowledge distribution regarding such events also leads to losses for farmers.
  • Investment in Agriculture: 
    • Despite India being blessed with fertile land and perennial rivers, it suffers from low agricultural production due to lack of advancements in agriculture.
    • This increases the requirement for manual labour and leads to disguised unemployment in the economy, where a field is often farmed by more people than required.
    • This vicious cycle can be prevented by assuring adequate remuneration to the farmers through insurance schemes, so that they are encouraged to invest in increasing the production on their farmlands.

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PM Fasal Bima Yojana

  • PMFBY insures farmers against all types of agricultural risks from pre-sowing to post-harvest. The premium is subsidized for the farmers. They have to pay 2% of the total premium in the case of Kharif crop and 1.5%, in the case of Rabi Crops. For horticultural and commercial crops, farmers need to pay 5% of the total premium.
  • Government Contribution:
    • The amount of premium is determined on the basis of a bidding process.
    • After the farmer has paid her share, rest of the amount is shared by the Central and State government in the ratio of 50:50 or 90:10 for the hilly states.
  • Determination of Claims: 
    • Initially, a threshold yield is notified by the State government on the basis of yield of the past seven years. 
    • If there is a shortfall from the threshold yield, it means the claim can be successfully processed by the insurance company.
  • Loanee farmers
    • The scheme was initially compulsory for farmers who had taken an agricultural loan. However, it has been made voluntary since 2020.

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Other Steps Required

  • Improvements in PM Fasal Bima Yojana: 
    • As reported in the media, there is a need for further improvements in the scheme:
    • Calculation Methodology:
      • Many farmers have complained that the surveyors are not using market price for the calculation of claims, instead it is calculated on the basis of cultivation cost. 
      • This needs to be corrected to let farmers benefit from the scheme.
    • Inaccuracies in coverage: 
      • There have been reports of many farmers being left out arbitrarily while calculating the claim and transferring the amounts to their respective amounts.
      • This leads to a lack of trust between the farmers and the whole insurance process.
    • Delays in Payments:
      • As per a reply of the Minister of Agriculture and Farmers’ welfare in Lok Sabha, Rs 3372 Crore is pending to be paid, out of total claims of Rs 66,460 Crore.
      • The insurance companies, in turn, blame the State governments for not paying up their dues. 
      • This is not conducive to the future of the scheme and leads to farmers opting out of it.
    • States opting out:
      • Seven states viz. Punjab, Gujarat, Bihar, Jharkhand, Andhra Pradesh, Telangana and West Bengal, have opted out of PMFBY due to financial constraints. Similarly, in the 2021 Rabi season, only 19 of the 29 states participated.
  • Awareness Generation:
    • There is a need to educate farmers about the finer details of the scheme and their rights vis-à-vis the scheme.
    • For e.g., despite the government making PMFBY contribution voluntary even for the loanee farmers since 2020, many continue to pay the premiums due to a lack of knowledge.
  • Research and Development: 
    • Again, there is a need to address the lack of scientific interventions in agriculture in the country. For e.g., recent advances in weather prediction technology can be used to advise farmers to go for lesser water-intensive crops.
    • At the same time, more research is required to develop drought-resistant and disease-resistant crops, which are more suitable for Indian conditions.
  • Policy Support:
    • Agriculture is an emotive issue in India because of the dependence of a major part of the population on agriculture.
    • Therefore, it must be ensured that it is not issued as a political sop during elections and round the year focus is ensured on the development of agricultural infrastructure.
    • Similarly, farmer organizations have complained of export bans after shortages caused by global crop failures, leading to non-realization of highly remunerative prices by the farmers in the global market. This is a double-whammy for the farmers as they suffer from a steep fall in prices due to demand-supply mismatch, in case of bumper production in agriculture.

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Conclusion

  • PM Fasal Bima Yojana involves dependency on the private sector insurance schemes, whose main motive is profit.
  • At the same time, farmers lack the resources to fight big corporates against their unjust policies. Therefore, despite being a scheme with good intent, the scheme suffers from the lack of proper execution. 
  • There is a need to plug the loopholes so that the scheme can be used more intensively for the farmers’ welfare.

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