PMFBY and Restructured Weather Based Crop Insurance Scheme
Recently, the Union Cabinet has approved revamping of the country’s two nodal crop insurance schemes - “Pradhan Mantri fasal Bima Yojana (PMFBY) and Restructured Weather Based Crop Insurance Scheme (RWBCIS)” to address the existing challenges in implementation of crop Insurance Scheme
• Enrolment in the two schemes has been made voluntary for all farmers, including those with existing crop loans. When the PMFBY was launched in 2016, it was made mandatory for all farmers with crop loans to enroll for insurance cover under the scheme.
• The main objectives of the PMFBY are:
To provide insurance coverage and financial support to the farmers in the event of failure of any of the notified crops as a result of natural calamities, pests and diseases.
To stabilize the income of farmers to ensure their continuance in farming.
To encourage farmers to adopt innovative and modern agricultural practices.
To ensure flow of credit to the agriculture sector.
Government has proposed to modify certain parameters/provisions of ongoing scheme of PMFBY and RWBCIS:
Allocation of business to Insurance Companies to be done for three years (Both PMFBY and RWBCIS).
Flexibility to States/UTs to implement the Scheme with option to select any or many of additional risk covers/features like prevented sowing, localised calamity, mid-season adversity, and post-harvest losses. Further, States/UT can offer specific single peril risk/insurance covers, like hailstorm etc, under PMFBY even with or without opting for base cover (Both PMFBY/RWBCIS).
Government slashing its share of the premium subsidy from the current 50% to just 25% in irrigated areas and 30% for the unirrigated areas for the kharif season of 2020.
Enrolment in two schemes has also been made voluntary for all farmers, including those with existing crop loans.
Farmers pay a fixed share of the premium: 2% of the sum insured for kharif crops, 1.5% for Rabi crops and 5% for cash crops. Currently, the Centre and State split the balance of the premium equally. However, the revamp now reduces the burden on the Centre and increases the share of States.
Central Share in Premium Subsidy to be increased to 90% for North Eastern States from the existing sharing pattern of 50:50 (Both PMFBY/RWBCIS).
Above change is aimed to increase the coverage in the north-eastern region enabling farmers to manage their agriculture risk in a better way.
Farm gate price will be considered for the other crops for which MSP is not declared.
They can offer specific single peril risk covers, like a hailstorm, etc., under PMFBY.
Why there was need of change
In earlier rules of PMFBY, farmers across the country had no choice. There was one single comprehensive insurance product, which covered risks right from pre-sowing to post harvesting.
Every farmer who wanted crop insurance had to take this comprehensive product without any customization. This leads to payment of a higher premium. The farmer had no flexibility to choose for which risk they wanted to get insured and pay premium.
For example, suppose a farmer in Bihar doesn’t want to take risk coverage for drought or a farmer in Rajasthan wants to opt out from flood coverage, there was no provision in earlier scheme.
That was demand from farmers groups for giving more flexibility and freedom to states and farmers in choosing insurance products for risk hedging as per the proneness of the particular state to the specific weather vagary.
In addition to this rigid basket of risks, the scheme was made mandatory for loanee farmers, further restricting their choice.
With these changes in the country’s two nodal crop insurance schemes, it is expected that farmers would be able to manage risk in agriculture production in a better way and will succeed in stabilizing the farm income. Further, it will increase coverage in the north eastern region enabling farmers of NER to manage their agriculture risk in a better way. These changes will also enable quick and accurate yield estimation leading to faster claims settlement.
Objective of RWBCIS
Restructured Weather Based Crop Insurance Scheme (RWBCIS) aims to mitigate the hardship of the insured farmers against the likelihood of financial loss on account of anticipated crop loss resulting from adverse weather conditions relating to rainfall, temperature, wind, humidity etc.
RWBCIS uses weather parameters as “proxy‟ for crop yields in compensating the cultivators for deemed crop losses. Pay-out structures are developed to the extent of losses deemed to have been suffered using the weather triggers.