Explained: Why does Maharashtra want to withdraw from PMFBY?

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Maharashtra is the latest state to threaten to withdraw from Pradhan Mantri Fasal Bhima Yoga (PMFBY) if changes are not made.

Deputy Chief Minister Ajit Pawar, during his budget speech last Friday, said the state would withdraw from the program if the changes suggested by it were not taken into consideration. “Gujarat and some other states have already opted out of the Prime Minister’s crop insurance scheme. The Mahavikas Aghadi government has asked Hon. Prime Minister for regime change. If it is not accepted, I would like to clarify that we will consider other options to compensate the farmers,” he said.

A look at the issue and the other options available to the state if it opts out.

What is PMFBY?

Introduced in the 2016-17 kharif season, the PMFBY is a central state program that aims to protect farmers against crop losses. The central government and the state governments pay more than 95% of the premium amount while the farmer bears 1.5-5% of the premium. As the extensive use of technology is used to settle farmers’ claims within a stipulated time, farmers are required to complete online loss reports which are validated by insurance companies before the amount of compensation is released. not be paid directly into their accounts.

Prior to 2020, the scheme was compulsory for farmers who received institutional funding, but this has been changed and made voluntary for all farmers.

Maharashtra has historically seen a large number of farmers opting into the scheme even when it was not compulsory for non-loaned farmers. Till 2019-2020, over 357 lakh farmers had opted for the scheme and over 162 lakh farmers had received total compensation of Rs 10,048.67 crore.

Why is PMFBY criticized?

From the start, farm leaders across the state have criticized the program for a variety of reasons. One of the main arguments against it is that it helps insurance companies more than farmers. Farm leaders say insurance companies have made windfall gains at the behest of the Treasury and farmers.

Late payments and denied claims are other common complaints against insurance companies.

For their part, the companies point out that the nature of the insurance makes it possible to pay only in the event of a claim. Also, in the past few years, they have reported that their payouts were higher than the premium collected, which made the scheme unsustainable for them.

Last year, the state’s agriculture commissioner, Dheeraj Kumar, formally filed complaints against a particular insurance company for its failure to pay farmers on time. This concerned compensation for the loss of the 2020 kharif crop, which was excessively delayed. Kumar, in his letter, said that the company in question gave the lowest payment in recent seasons, while the premium received was the highest. His letter also pointed out that insurance companies had deceived farmers by not establishing offices or call centers at the taluka level, nor had they educated farmers on the correct methodology for reporting claims. .

Farm leaders also added to the chorus, demanding action against the companies.

Insurance companies have also been accused of not conducting enough crop-cutting experiments (CCEs), which measure the total loss suffered by farmers.

Which states withdrew from the program and why?

Gujarat, Bihar, West Bengal, Andhra Pradesh, Telangana and Jharkhand have withdrawn from the program.

The Lok Sabha Agriculture Standing Committee had noted in its August 2021 report that these states had decided to withdraw due to low claim rates and financial constraints. “State government financial constraints and the low loss ratio during the normal season are the main reasons for the non-implementation of the program by these states. However, they implemented the schemes with lower benefits than PMFBY on their own resources and without central government contribution,” the report states.

Interestingly, Gujarat is a BJP-led state, while in Bihar the party is in power with the JD(U).

What changes has the Maharashtra government proposed?

One of the main changes proposed by the state government is a share of premiums collected from insurance companies in a non-paying or normal year. Called the Beed model, after the district where it was tested for the first time during kharif 2020, according to this model, insurance companies provide coverage up to 110% of the premium collected. In case the amount of compensation exceeds this amount, the state government will cover the amount. If the amount of compensation is less than the premium collected, the company will reimburse 80% of the funds to the state government and retain 20% for administrative expenses.

The model was implemented by the government-run Agricultural Insurance Company.

While meeting with Prime Minister Narendra Modi, Maharashtra Chief Minister Uddhav Thackeray had called for the implementation of the Beed model. However, the Center did not give the green light for the same date.

The state has also called for greater accountability from insurance companies. Farm leaders called for the necessary infrastructure to be in place when implementing the program and the use of technology to help eradicate human interference.

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