Maharashtra likely to withdraw from PMFBY
Following this, the Center wrote to state governments asking for their views on the inclusion of the “Beed Formula” as an option under the PMFBY.
The Maharashtra government is likely to withdraw from the Centre’s flagship crop insurance program – Pradhan Mantri Fasal Bima Yojana (PMFBY) – and set up its own crop insurance company for farmers, following several representations from farmers.
Senior agriculture department officials, who were present at the review meeting convened by the state agriculture minister, Dadasaheb Bhuse, a few days ago revealed that steps were being taken to withdraw from the program after receiving complaints about delays in paying claims by insurance companies.
At the meeting, farmers and farm managers alleged that the assessment of crop damage under the program was flawed and that farmers had to fight to get their compensation from insurance companies. This Rabi season, about 12.50 lakh farmers participated in the scheme and normally more than 1 crore of applications are received from farmers during Kharif and Rabi seasons. After listening to representations from farmers’ organizations, the state agriculture minister asked officials to study the issue and draft a proposal along these lines. Due to several flaws in the PMFBY, the losses suffered in the last two seasons of Kharif and Rabi have not been compensated. Insurance companies still owe farmers Rs 271 crore in insurance claims for the 2020 season, officials said. Insurance claims of Rs 2,800 crore for the Kharif 2021 are still being worked out, they said.
States and UTs may participate in the program based on their perception of risk and financial considerations. Since the program’s inception, 27 states and UT have implemented PMFBY in one or more seasons. Under the PMFBY, the premium payable by farmers is set at 1.5% of the sum insured for rabi crops and 2% for kharif crops, while it is 5% for cash crops. The balance bonus is divided equally between the Center and the States. Many states have required that their share of the premium subsidy be capped at 30%. Already, Gujarat, Andhra Pradesh, Telangana, Jharkhand, West Bengal and Bihar have left PMFBY, citing the cost of premium subsidy borne by them. Madhya Pradesh and Tamil Nadu have adopted the Beed formula in several districts.
Following this, the Center wrote to state governments asking for their views on the inclusion of the “Beed Formula” as an option under the PMFBY. Under the “Beed formula”, also known as the 80-110 plan, the insurer’s potential losses are circumscribed: the company does not have to process claims greater than 110% of the gross premium . The insurer will reimburse the excess premium (gross premium less claims) exceeding 20% of the gross premium to the state government. The state government must bear the cost of any claim above 110% of the premium collected to protect the insurer from loss, but such a higher level of claims rarely occurs, so states feel that the formula actually reduces their cost of administering the plan. Bhuse said the Maharashtra government wrote to the Center asking for the inclusion of the ‘Beed formula’ but not much happened after that. In December last year, the Center appointed two separate expert groups to suggest suitable working models with cost-benefit analysis that will reduce crop insurance premium and crop yield estimation technology under the PMFBY after several states exited the program, citing a high premium.
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