The Centre’s move to reduce its subsidy share in the case of high premium crops under its flagship agricultural insurance scheme will not increase the cost to farmers, said Pradhan Mantri Fasal Bima Yojana (PMFBY) CEO Ashish Kumar Bhutani. However, it should spur States to take steps to ensure that premiums are reduced, he added. “Farmers share of premium under PMFBY is not going to change under any circumstances,” said Dr. Bhutani at The Hindu Business Line’s Agri Summit on Friday. The scheme, which has so far been mandatory for farmers with crop loans, is becoming optional from April and is expected to see a 30% drop in enrolment. In such a scenario, Dr. Bhutani was at pains to reassure farmers that they could continue to avail comprehensive protection at the existing low premium rate: 2% for kharif and 1.5% for rabi crops.
Clarifies on cap
However, he clarified the Centre had capped its subsidy for premium rates up to 30% for unirrigated crops and 25% for irrigated areas and crops.
This means that so long as the premium for a crop in a particular district is below the cut-off figure of 30%, the Centre will equally split the subsidy burden with the State. If the premium is above 30%, the State will have to pay the entire additional amount, he said.
“When you have a premium rate of 60%, that should not be called insurance. We should be finding other ways to help farmers manage risk in such cases,” he said, listing the lack of long-term, structured and consistent data as the main reason for unsustainable premiums.
States should take steps to ensure that such data is made available or be prepared to bear the extra cost, said Dr. Bhutani. The other reason for high premiums may be that the crop is simply not viable in that area, in which case also insurance schemes are unsustainable, he added.