India's government has modified its crop insurance scheme to attract more farmers
- The Indian government’s flagship
crop insurancescheme, PMFBY, faces a host of problems including delayed payment of claims and declining enrollment numbers.
- In light of this, the Indian
governmenthas moved to penalise insurers and state governments for delaying payments and imposed enrollment targets on insurance companies.
- The Indian government has also increased the risks that can be covered under the scheme. The new rules are set to come into effect next month.
However, it has not exactly been the success story it was envisioned to be.
The problems are manifold. State governments haven’t transmitted data to insurers on time, Claims payments have been delayed, sometimes for as long as 18 months, and enrollment numbers are declining. Around 48.4 million farmers signed up for the scheme in 2017-18, a 16% drop from the previous year.
In light of this, the government has announced a number of changes to the scheme with the view of resolving the aforementioned problems.
The first action is punitive in nature. The government has said it will penalise insurance companies and state governments for the delayed payment of claims. While insurers will face a 12% interest penalty if they don’t settle with farmers within two months of the prescribed deadline, state governments will also be hit with a 12% charge if they don’t transfer subsidies to insurers within three months.
Secondly, the government has also imposed enrollment targets on insurers. They will be required to increase enrollments of non-loanee farmers by 10% on an annual basis. Unlike loanee farmers, non-loanee farmers do not receive subsidised crop loans as a result of a pre-existing scheme.
Thirdly, to increase awareness of the programme, insurance companies have to spend 0.5% of the revenue earned in gross premiums on advertising and publicity for the scheme. The government has effectively outsourced its responsibility of promoting its own programme.
Finally, the Indian government has also increased the risks that can be covered under the scheme. Farmers will now get coverage for hailstorms, crop fires, damage from animals, landslides and rainstorms. More importantly, farmers will now get 72 hours instead of 48 hours to inform state governments about crop damage.
The new rules are set to come into effect from the beginning of the rabi crop season next month. Earlier this year, in February, the Ministry of