Policy Update
Tanmyi Anthwal
In India, where over half the population depends on agriculture for their livelihood, and more than 70% of farmers are small and marginal, they remain extremely vulnerable to climate variability and crop failures (NITI Aayog, 2019). The growing threat of global warming has intensified the frequency and severity of erratic weather patterns, worsened agricultural risks, and deepened the cycle of income insecurity and indebtedness among farmers. Recognizing this urgent challenge, the Government of India launched the Pradhan Mantri Fasal Bima Yojana (PMFBY) in 2016. It is a large-scale crop subsidy insurance scheme that aims to safeguard farmers. This scheme is being administered by the Department of Agriculture and Farmers Welfare.
This flagship scheme was designed as part of the One Nation One Scheme and replaces three older initiatives:
- Modified National Agricultural Insurance Scheme (MNAIS),
- Weather-based Crop Insurance Scheme and
- National Agricultural Insurance Scheme (NAIS)
The scheme targets all farmers, small, marginal, tenant, and sharecroppers, across all states and union territories, covering Food crops (Cereals, Millets, and Pulses), Oilseeds, and Annual Commercial / Annual Horticultural crops.
Objectives of the scheme
- To provide affordable, comprehensive 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 & disease, with expanded coverage across all sown areas.
- Stabilise the income of farmers to ensure their persistence in agricultural practices and reduce rural economic distress.
- To encourage the adoption of innovative and modern agricultural practices to improve productivity and resilience.
- Ensure smooth credit flow to the agriculture sector to ensure food security, crop diversification, and growth and competitiveness.
- Offer goods and services tax exemption to farmers to reduce input costs and enhance profitability.
Functioning
PMFBY operates through a sophisticated multi-stakeholder framework of governments, financial institutions, insurance companies, and technology partners. The scheme functions on a risk-sharing principle where farmers pay heavily subsidized premiums while governments bear the major financial burden.
| Crop | Rate of premium |
| Kharif crops | 2% |
| Rabi crops | 1.5% |
| Commercial/Horticultural crops | 5% |
Insurance Coverage under the PMFBY Scheme
- Initial Stage – Coverage is provided if the insured area fails to undergo successful sowing, planting, or germination due to insufficient rainfall or adverse weather conditions.
- Growth Stage – Insurance covers yield losses arising from non-preventable risks such as drought, dry spells, floods, inundation, pest attacks, crop diseases, landslides, natural fires, lightning, hailstorms, and cyclones.
- Harvest Stage – Applicable to crops left in the field for drying after harvest (cut-and-spread or small bundles). Coverage is extended for up to two weeks for damages caused by unseasonal rains, cyclonic rains, hailstorms, and cyclones.
- Protection against calamities – Applicable to crops left in the field for drying after harvest (cut-and-spread or small bundles). Coverage is extended for up to two weeks for damages caused by unseasonal rains, cyclonic rains, hailstorms, and cyclones.
- Exclusions – Damages arising from war and related perils, nuclear risks, riots, malicious acts, theft, damage by domestic or wild animals, and other preventable causes are excluded from coverage.
The scheme operates on an “Area Approach Basis” (i.e., Defined Areas) for widespread calamities, ensuring all farmers in defined insurance units receive proportionate coverage. Technology integration includes the National Crop Insurance Portal (NCIP), YES-TECH platform for satellite-based yield estimation, and CROPIC for geotagged crop verification. Monitoring is conducted through National, State, and District-Level Committees, ensuring compliance and facilitating grievance redressal.
Performance
PMFBY’s performance over the last three years (2021-2023) demonstrates both remarkable scale achievements and evolving implementation dynamics. The scheme has witnessed significant fluctuations in enrolment patterns, reflecting the impact of policy reforms and external factors, including the COVID-19 pandemic.
Number of farmers enrolled in the scheme
In the past 8 years, 56.80 crore farmer applications have been enrolled, with over 23.22 crore receiving claims totalling Rs 1,55,977 crore against Rs 31,139 crore paid by farmers as premium (Press Information Bureau, 2024). This exceptional claims ratio of Rs 500 received for every Rs 100 premium paid demonstrates effective risk transfer benefits.
The rollout of YES-TECH and CROPIC platforms has accelerated satellite-based yield estimation, covering over 50% of insured areas, reducing claim settlement timelines from 6-12 months to 2-3 months in technology-enabled regions. The National Crop Insurance Portal processes have enhanced transparency and direct benefit transfer mechanisms.
State-wise performance exhibits significant variations, with Maharashtra, Karnataka, Rajasthan, and Uttar Pradesh leading in consistent participation, while states like Gujarat, Jharkhand, West Bengal, and Bihar have shown limited engagement due to premium subsidy burden and administrative complexities.
Impact
- PMFBY delivers an exceptional claims-to-premium ratio of Rs 500 for every Rs 100 paid by farmers, providing substantial risk transfer benefits and making crop insurance accessible to resource-constrained farmers.
- The scheme has improved agricultural credit accessibility with banks reporting better loan portfolios and reduced non-performing assets in high coverage areas, particularly benefiting small and marginal farmers.
- PMFBY introduced farmers to digital tools, including satellite imagery and mobile applications through YES-TECH and CROPIC platforms, enhancing technological literacy and modernizing agricultural practices.
- Enhanced farmer confidence in agricultural investments, reduced distress migration during crop failures, and improved food security, with 42% non-loanee participation indicating voluntary acceptance.
- Area-based approach creates equity concerns, regional disparities result in unequal protection across states, and limited price risk coverage leaves farmers vulnerable to market volatility beyond natural calamities.
Emerging Issues
- Delayed premium subsidy releases by financially constrained state governments are affecting settlement timelines.
- High fiscal burden leading to voluntary state opt-outs and reduced participation
- Coordination gaps between stakeholders are causing enrolment and claim processing delays.
- Inadequate grievance redressal with limited institutional capacity at the district levels.
- Awareness deficits with significant populations uninformed about scheme benefits.
- Limited insurance company competition is reducing service quality and innovation.
Way Forward
- Secure financial sustainability by ensuring the timely release of premium subsidies from state governments while also exploring alternative funding mechanisms and risk-sharing models to reduce fiscal pressure and maintain stakeholder participation.
- Improve coordination and efficiency by establishing a centralized information-sharing platform and implementing clear communication protocols among all stakeholders to streamline enrolment and claims processing.
- Strengthen grievance redressal systems at the district level by expanding institutional capacity, setting up dedicated helpdesks, standardizing complaint procedures, and providing specialized training to staff.
- Increase awareness and accessibility through targeted, multilingual media campaigns and community outreach initiatives designed to inform and engage underserved populations.
- Foster healthy competition among insurers by simplifying empanelment processes, offering incentives for innovative product development, and applying performance-based evaluation metrics to enhance service quality.
References
About the contributor: Tanmyi Anthwal is a Research Intern with IMPRI.
Acknowledgment: The author sincerely thanks the IMPRI team for their valuable support.
Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.
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