Modi – government has been under persistent attack for its obsession with promoting the manufacturing sector [under its flagship “Make in India”] but neglecting agriculture on which nearly 2/3rd of people depend for their livelihood. Critics have also lambasted it for alleged takeover of their land under the Land Acquisition [Amendment] Act 2015 to promote industrial development at their cost.
However, to demonstrate that it cares for the farmers, the government has launched the Pradhan Mantri Phasal Bima Yojna [PMPBY] which it claims will bring about a drastic improvement in their economic conditions. Under PMPBY, the government’s intent is to compensate every farmer for the crop loss [due to a variety of factors such as natural calamities, hailstorms, unseasonal rains etc] for a small premium and arrange for prompt release of compensation.
The Yojna has been crafted in a manner so as to make its architecture free from anomalies that bedevilled the existing two crop insurance schemes and came in the way of farmers joining them [not more than 20% opted for coverage under those schemes]. The key features on whose strength Modi hopes that this number will be more than doubled to 50% are:-
Unlike the previous schemes when the premium was high, under PMPBY, farmers need to pay uniform premium of 2% of sum assured for all kharif [April-September] crops and 1.5% for all rabi [October-March] crops. For annual commercial and horticultural crops, the premium will be 5%. The excess of actual over the rate paid by farmers will be shared equally by centre and states.
The criteria for triggering claim have been relaxed. Thus, a farmer on loosing 33% of crop will qualify down from 50% under earlier schemes. The scheme will also seek to address a long standing demand of farmers and provide farm level assessment for localised calamities including hailstorms, unseasonal rains, landslides and inundation. If, farmer suffers post-harvest loss due to cyclone or unseasonal rains, he will get compensated. In case, he is prevented from sowing the crop, that too will be covered.
Unlike all previous schemes, under PMPBY, the government proposes to fully leverage technology for determination of the loss. Smart phones will be used to capture and upload data of crop cutting to reduce the delays in claim payment to farmers. Remote sensing will be used to reduce the number of crop cutting experiments,
Over 2/3rd of cultivated land area is under rain-fed conditions making farmers growing crops therein vulnerable to fluctuation in weather/monsoon. In this backdrop, one spell of drought can spell doom for the farmers. Even losses during handling and transportation can severely dent their income.
Invariably, farmers take loans [including loans from money lenders at exorbitant rates] to fund purchase of agricultural inputs viz., seeds, fertilizers, pesticides etc and pay for other expenses in crop cultivation. If, the crop output is lost entirely or substantially, he won’t be able to pay back the loan. The resulting indebtedness leads them to commit suicide.
No wonder, we have seen tens of thousands of farmers committing suicide every year. The only way this can be stemmed and farmers enabled to protect their incomes from the ravages of drought/pest/poor infrastructure is to put in place a robust and comprehensive scheme of insurance coverage for them. The PMPBY seeks to achieve precisely that.
The Yojna is ambitious. It can be a potent tool to remove a major impediment in the way of ensuring a reasonable and stable income stream for majority of the farmers and combating agrarian distress. But, the challenge is daunting.
Given the scale of natural calamities leading to unprecedented loss, there is a big question mark on its financial sustainability. The insurance companies are well aware of these inherent risks/vulnerabilities. Accordingly, they will keep the premium high which could even stretch up to 50% or even higher depending on their assessment of crop/soil/rains scenario.
With premium to be borne by farmers pegged as low as 1.5%, the financial burden will fall on centre and states. This is bound to destabilize their fiscal budget already under strain due to a variety of expenditure commitments [7th pay commission, OROP [one rank one pension] etc]. If, the government forces state insurance companies to keep premium low, this will risk latter’s financial viability.
It may be argued that having provided for insurance cover, the government would have saved money on drought relief operations. This is easier said than done. The assistance for relief and rehabilitation in the event of a drought [or any other natural disaster] is a state responsibility. This has to be necessarily given and cannot be stopped by merely citing that crop is insured.
The determination of crop loss is very tricky. This is all the more when the scheme seeks to accommodate losses emanating from all possible sources viz., drought/excessive rains/pest attack/handling/storage etc. This can lead to lot of discretion and scope for misuse and even bogus claims. The possibility of large-scale corruption creeping is not ruled out.
The scheme is not targeted. Any farmer coming forward to join will be eligible. This will lead to a scenario whereby a large chunk of better-off farmers who also happen to be well connected will avail of subsidized premium even as majority of poor would be left out due to sheer lack of connectivity. If, this is how 50% coverage going to be achieved, that will be inequitable.
The intention of the scheme is laudable. But, the proof of pudding is in eating. Much will depend on effective implementation which will require coordinated action by all stakeholders viz., Union government, states, insurance companies, banks, IT [information technology] companies on a gigantic scale tying all loose ends and minimizing scope for misuse.
Finally, having provided insurance cover, the government must not sit complacent and should proceed to address the fundamental causes that make farming a risky business in the very first place. It should intensify efforts to build irrigation and other infrastructure to reduce farmer’s susceptibility to fluctuating weather and market uncertainties.