Beed Model of Farm Insurance

1. Low Penetration: Only 22% of agricultural land was covered under crop insurance in 2014.  
2. Low Sums Insured (SI): The sums insured (SI) were low. It was based on the cost of inputs rather than prospective income. 
3. High Premium: Huge premium was charged. It was as high as 10% of the sums insured.  
4. Delayed claims settlement: Claims used to lie unclaimed till six months & beyond.
5. Low Literacy: Farmers don’t know about these schemes and their benefits.
6. Inadequate Infrastructure: Absence of infra to measure data accurately at farm level.

PMFBY has been formulated according to the One Nation–One Scheme theme. It replaced the existing two schemes (i.e. NAIS (National Agricultural Insurance Scheme and Modified NAIS) by removing their inherent drawbacks and incorporating the best features of all previous schemes.

Features of PMFBY

1. Target: To bring at least 50% cropped area under Insurance Cover.
2. PMFBY removes any artificial capping of the Sums Insured(SI). The SI will be calculated by multiplying the MSP of a crop by the average seven-year yield for the particular village panchayat area where it is grown.
3. Uniform premium: Farmers will pay a uniform premium of
   • 2 per cent for all Kharif crops
   • 1.5 per cent for all Rabi crops
   • 5 per cent for annual horticultural and commercial crops.
4. Governments to fully meet the gap between the actuarial premiums and the rates payable by farmers at Union and State levels. 
5. Use of technology: Government will encourage the use of technology, especially mobiles and remote sensing, for quick estimation and early settlement of losses. 
6. The scheme is extended to cover post-harvest losses as well.
7. In 2018, the Centre allowed States to set up their own insurance companies for implementing Pradhan Mantri Fasal Bima Yojana (PMFBY). The move comes after several requests from states.

1. Increase in Insured Area: The area insured has reached 610 lakh ha (2023-24), insuring 5.5 crore farmers. PMFBY has become the largest crop insurance scheme in the world in terms of farmer enrolments and the third largest in terms of insurance premiums. It fares well in this regard.
2. Methodology of Risk Assessment: Earlier, risk assessment was done at the district level, which was later changed to the block level. The Sum Insured (SI) is now measured at the Village level, which is closer to reality.
3. During the arduous seasons of 2017, 2018 and 2019 marred by weather extremities, the scheme proved to be a decisive factor in securing the livelihoods of farmers, wherein the claims paid ratio in several states averaged more than 100 per cent against the gross premium collected. For example, the States of Chhattisgarh (2017), Odisha (2017), Tamil Nadu (2018), and Jharkhand (2019) received 384 per cent, 222 per cent, 163 per cent and 159 per cent of claims ratio against a gross premium.
4. To improve the efficacy, the government has started various initiatives under PMFBY. These include
   1. DigiClaim: All the claims are worked out through the National Crop Insurance Portal (NCIP).
   2. CROPIC i.e. Collection of Real-Time Observations and Photo of Crops:  Collect periodic photographs of crops during their life cycle. These photographs validate sown crops and assess crop damage.
   3. Yield Estimation Based on Technology (YES-Tech): It is a technology-based yield estimation mechanism.
   4. Weather Information and Network Data Systems (WINDS): It aims to develop hyper-local weather data by setting intense network of Automatic Weather Stations (AWS) at the block level and Automatic Rain Gauges (ARGs) at the Panchayat level.
5. Government has also approved the creation of the Fund for Innovation and Technology (FIAT) with the corpus of Rs. 824 crore to fund the technological innovations like YES-TECH, WINDS  etc. and other research and development activities.

But Issues

1. The critical factor of analyzing the efficacy of an insurance scheme is the ability to settle its claims quickly. PMFBY failed in this aspect as it took several months to pay compensation to the farmers.
2. There are allegations of profiteering by Insurance Companies.
3. It is alleged that most of the increase in insured areas is due to mandatory insurance for loanee farmers. According to the Public Account Committee Report (2023), the percentage of non-loanee farmers is negligible. Additionally, there is poor awareness of the scheme among small and marginal farmers.
4. PMFBY does not cover tenant farmers.
5. No governance reforms have been initiated. This scheme is also implemented with the help of rusted old machinery consisting of Patwaris and revenue officers.
6. Lack of farmer awareness: According to the CAG, out of 5,993 farmers surveyed, only 37% were aware of the schemes.
7. One-size fits all approach: All the farmers in the country have been treated as similar without any option to choose an insurance that meets the specific needs of their region.
8. No provision for competitive pricing: As per the scheme guidelines, every cluster has a specific insurance company selling insurances, creating infrastructure and manpower for three years. Lack of competition creates a monopoly over the scheme. 

Due to the above issues, various states are replacing PMFBY with their own insurance schemes. E.g., Jharkhand has started its own insurance scheme (in 2021) called Kisan Fasal Rahat Yojana, which will be implemented by Jharkhand’s Department of Agriculture, Animal Husbandry and Co-operative. Gram Sabha has been assigned a major role in accessing crop loss.