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PMFBY: Maharashtra Likely to Opt out of Scheme Due to Payment Delays

Payment delays and Farmers' representations are the reasons for which the Maharashtra government is thinking of opting out of the flagship scheme-PMFBY.

Shivani Meena
Farmers are suffering due to payment delays of PMFBY
Farmers are suffering due to payment delays of PMFBY

Following multiple farmer protests, the Maharashtra government is expected to opt-out of the Pradhan Mantri Fasal Bima Yojana (PMFBY), the Major flagship crop insurance scheme, and develop its crop insurance firm. 

Senior agricultural department officials who attended a review meeting organized by state agriculture minister Dadasaheb Bhuse a few days ago indicated that plans are being made to withdraw from the scheme after getting complaints about insurance companies' delays in transfer payments. 

Inadequacies and Flaws of PMFBY scheme 

Farmers and agricultural leaders said during the meeting that the scheme's evaluation of crop damage was flawed and that farmers were having difficulty getting reimbursement from insurance companies. Approximately 12.50 lakh farmers participated in the scheme in the Rabi season, and over 1 crore registrations are received from farmers throughout the Kharif and Rabi seasons. Following representations from farmer organizations, the state's agricultural minister asked authorities to investigate the matter and develop a plan along these lines. Losses incurred during the previous two Kharif and Rabi seasons have not been paid due to many inadequacies in the PMFBY.

According to authorities, insurance firms still owe farmers Rs 271 crore in insurance claims for the 2020 season. Insurance claims of Rs 2,800 crore for Kharif 2021 are still being processed, they claimed. 

States and UTs can engage in the scheme based on their risk tolerance and financial resources. Since the scheme's inception, 27 states and UTs have used the PMFBY in one or more seasons. Farmers must pay a premium of 1.5 % of the insured amount for rabi crops, 2 % for Kharif crops, and 5 % for cash crops under PMFBY. 

What is the “BEED Formula”?

The balance premium is shared equally by the Centre and the states. Many states have insisted that their portion of the premium subsidy be limited to 30%. Already, Gujarat, Andhra Pradesh, Telangana, Jharkhand, West Bengal, and Bihar have withdrawn from PMFBY, claiming the high cost of the premium subsidy. The Beed formula has been implemented in numerous areas in Madhya Pradesh and Tamil Nadu. Following this, the Centre wrote to state governments asking for their thoughts on introducing the 'Beed formula' as an alternative under PMFBY.

The 'Beed formula,' also known as the 80-110 plan, limits the insurer's possible losses — the company is not required to accept claims that exceed 110 % of the gross premium. The insurer will refund to the state government any premium surplus (gross premium minus claims) that exceeds 20% of the gross premium. To shield the insurer from losses, the state government must shoulder the cost of any claims above 110 % of the premium collected; however, much higher levels of claims are uncommon, and the states believe the formula decreases their cost of running the scheme. 

According to Bhuse, the Maharashtra government wrote to the Centre requesting the adoption of the 'Beed formula,' but nothing came of it. After some states withdrew from the scheme due to high premiums, the Centre convened two independent groups of experts in December last year to offer viable working models with cost-benefit analysis which will lower crop insurance premiums and technology in crop yield estimation under PMFBY. 

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