Tamil Nadu Asks PM Modi to Remove Capping on Centre’s Share in PMFBY

Tamil Nadu Chief Minister M K Stalin has asked Prime Minister Narendra Modi to eliminate the restriction on the Central share of premium subsidy under the Pradhan Mantri Fasal Bima Yojana (PMFBY). 

In a letter to Modi, Stalin stated that the Fasal Bima Yojana has been successfully implemented, and that Tamil Nadu has seen a big increase in regards of area insured and farmer enrollment as a result of the state's honest efforts and best practices. 

Furthermore, during the past 5 years, the state's contribution of premium subsidies has climbed at a compound annual growth rate of 28.07 percent. 

“This has thwarted the scheme's core aim, as the Tamil Nadu government is finding it tough to continue the scheme due to rising financial liabilities, especially throughout this pandemic era.” 

The initial distribution pattern (2016-17) was 49:49:2 (central, state, and farmer's share). The Central portion of premium subsidy has now been capped at 25% for irrigated areas and 30% for rain-fed areas, resulting in a considerable rise of the state share of premium subsidy by 12%. 

Following the limitation of the Central part of premium subsidy, the state share of premium subsidy, which was only Rs 566 crore in 2016-17, has increased by 239 percent to Rs 1,918 crore in 2020-21. 

“Due to excessive Actuarial Premium Rates (APR) offered by the insurance companies empanelled by the government of India, this has additionally escalated to Rs.2,500 crore during 2021-22,” Stalin added, emphasizing that the financial consequences on the state were creating a lot of anxiety. 

The PMFBY, which began with the laudable goal of reducing farmers' economic losses during natural disasters, has grown into a significant liability for states over time, according to Tamil Nadu's chief minister. 

The objective of capping the subsidy in order to lower the APR has not materialized, as insurance companies continue to quote expensive APRs, citing factors such as high loss ratios, insufficient financial means, and a lack of reinsurer assistance. 

States are being pressured to change existing directives and embrace new co-insurance models, putting them at greater risk. Otherwise, the insurance firms will not participate in the bidding process. 

The burden of bearing a large state share of premium subsidies under PMFBY is prohibitive at a time when the state is already suffering from a serious financial crisis as a result of the coronavirus outbreak. 

According to Stalin, the limitation of the Central portion of the premium subsidy has been a key impediment to the implementation of PMFBY, which was designed to provide social security for farmers. 

“As a result, I respectfully request that you take immediate action to lift the cap on the Central share of premium subsidies under PMFBY and restore the 49:49:2 premium sharing ratio for the sake of the state's farming community.”