Proposed changes to the government-backed crop insurance scheme, Pradhan Mantri Fasal Bima Yojana (PMFBY), would cap the central government funding of the scheme to 30%, leaving state governments to bear more of the costs.
Under the proposed revamp, the share of the crop insurance premium of farmers remains unaltered: they continue to pay between 1% and 2% of the total premium.
Before the change, the rest of the premium was shared between the central government and states equally. The central government has now restricted its share to 30% in unirrigated areas and 25% for irrigated lands.
In addition, farmers can now choose whether to buy crop insurance or not. Earlier, insurance was compulsory for farmers who have taken out crop loans. This meant that insurers obtained a lot of business from low risk areas.
With the change, premium rates are likely to go up because only farmers who perceive their crops to be “high risk” will buy the insurance, Mr Rajeev Choudhary, general manager of the state-run Agriculture Insurance Company of India, told Hindustan Times.
Mr Malay Kumar Poddar, chairman and managing director of Agriculture Insurance Company of India told Press Trust of India, “We are waiting for the detailed guidelines. Yes, I think we will have to revisit our products and premium of crop insurance, taking into account the new developments.”
The PMFBY was launched in February 2016 by Prime Minister Narendra Modi.