Launched in 2016, the Pradhan Mantri Fasal Bima Yojana (PMFBY) is a large-scale crop subsidy insurance scheme that was aimed to safeguard farmers. This flagship scheme was designed in line with the One Nation–One Scheme and replaces three older initiatives—Modified National Agricultural Insurance Scheme (MNAIS), Weather-based Crop Insurance Scheme and the National Agricultural Insurance Scheme (NAIS)—by incorporating their best features and removing inherent shortcomings to improve insurance services available to farmers. This scheme is being administered by the Department of Agriculture, Cooperation and Farmers’ Welfare under the Ministry of Agriculture, along with empanelled general insurance companies.
The scheme provides coverage for the entire cropping cycle from pre-sowing to post-harvest and midseason adversities. It extends coverage against financial losses incurred by farmers due to unforeseeable events such as crop failure due to localised risk, post-harvest losses, natural calamities, unseasonal rainfall, crop diseases and pest infestations. The primary goal of the initiative is to reduce the burden of insurance premiums on farmers and ensure early settlement of claims.
The PM Fasal Bima Yojana operates under the ‘One Nation, One Crop, One Premium’ motto and aims to achieve the following goals:
Insurance Coverage under the PMFBY Scheme
Under this scheme, the insurance cover is limited to specific crops and agricultural risks related to the crop yield. The list of notified crops includes food crops (i.e., cereals, millets, and pulses), oilseeds, annual commercial crops, and annual horticultural crops.
It also covers all stages of the crop production cycle. The inclusions and exclusions of insurance cover provided are as follows:
The insurance claim size is based on the proportion of shortfall from the threshold yield multiplied by the sum insured. The sum insured is calculated over the scale of finance provided to farmers and the threshold crop yield is calculated based on seven-year data and indemnity levels.
Premiums under the PMFBY Scheme
To avail insurance benefits under this scheme, farmers are required to pay a nominal share of actuarial premiums—Kharif crops (2%), Rabi crops (1.5%), Commercial crops (5%) and Horticultural crops (5%). However, 95-98.5% actuarial premium is fulfilled by the state and central governments and shared on a 1:1 ratio. For example, if a farmer has a sum of Rs. 35,000 (US$ 477) and one hectare of land insured, the actuarial premium charged by insurance companies is Rs. 4,000 (US$ 54.5). In this scenario, if the farmer grows Kharif crops on the insured land, then he is required to only pay 2% of the actuarial premium, i.e., Rs. 800 (US$ 10.9), while the remaining amount of Rs. 1,600 (US$ 21.8) each will be paid by state and central governments.
Beneficiaries of the PMFBY Scheme
According to the government, under this scheme, all farmers (including sharecroppers and tenant farmers) growing notified crops in the notified areas are eligible for coverage, if they have insurable interest for the insured crops.
The eligible farmers can be broadly classified into two categories:
Categories
Description
When the scheme was launched in 2016, a total of 5.8 crore farmers were insured, wherein 75% farmers received mandatory coverage as per the SAO loan allocations and 25% farmers voluntarily opted for insurance.
The table provides details of the number of farmers enrolled for insurance, the total crop sown area covered under insurance and the number of farmers who benefitted from the insurance programme.
Financial Year
Farmers Insured
(in lakh)
Area Insured
(in lakh hectare)
Farmers Benefitted
(in lakh)
