CAG Findings on Crop Insurance Schemes

India is heavily dependent on the agriculture sector to feed its high population. Also, agriculture faces a lot of risk from drought, flooding, inflation, and many other factors thus it required special policies and attention of the government. To tackle and protect the farmers from such uncertainties the Government of India and various state governments have introduced many policies.

The report by Comptroller and Auditor General of India was tabled on 21st July 2017. The CAG report analysed crop insurance schemes like the National Agriculture Insurance Scheme (NAIS), Weather Based Crop Insurance (WBCIS) and Modified NAIS which were implemented from 2011 to 2016 whereas the Centre of Sciences and Environment (CSE) examines Pradhan Mantri Fasal Bima Yojna (PMFBY) which replaced all the existing schemes for Kharif crops from 2016.

The Crop Insurance scheme or the Pradhan Mantri Fasal Bima Yojna was launched on 6th August 2016 with an aim to provide farmers an inexpensive and viable option to sustain their cultivation even when the crops are damaged due to an unforeseen calamity. Market demand and supply changes, natural calamities, high debt have forced many farmers to look for other sources of employment and in extreme cases, many have committed suicide. To help solve this problem a uniform scheme like the CIS aka PMFBY has been introduced.

Key Features

• Even if the balance premium is 90% the cost will be borne by the government i.e. there is no upper limit on Government Subsidy.
• A uniform premium of 2% on Kharif Crops and 1.5% on all Rabi crops has been decided. For other commercial and horticultural crops, the premium payable by the farmer was set at 5%.
• The premium to be paid by the farmer is low and the major chunk is funded by the government to help the farmers.
• The claim payment has been streamlined with the use of smartphones and remote sensing.

CAG Findings

• The CAG and Centre for Science and Environment (CSE) a nongovernment body have claimed in their reports that the government backed insurance schemes for crops have benefited only the entities in the insurance sectors.
• As of April around Rs 10,000 crore was collected as a profit by these entities due to the premium collected and low rate of claims made by the farmers.in fact, the insurance entities grew by 32% mainly due to the crop insurances.
• There is a huge gap in the rules and the implementation. as per the provisions of PMFBY the claims money has to be paid within three working days of the claim but the on-ground report found that the states failed to release the subsidy on time and the claims related to Kharif season of 2016 were still pending. The problem of unpaid claims has in fact risen from 14% to 32% in 2016-17.
• The actuarial premium rate which was charged by the insurance entities was 12.55% which is higher than the average of previous schemes. This is testimonial to the fact that even though the load on a farmer is low but it has risen in the case of government exchequer.
• The CAG report also found that out of almost 14 crore farmers in the country 85% i.e. 12 crore farmers are underrepresented in various government insurance schemes. The coverage of such small and marginal farmers did not exceed 13.32%.
• The report also found out that the coverage of non-loaned farmers has been relatively low. Non-loaned farmers are those farmers who sign up for such schemes willingly.
• As per the report tabled by the CAG of the 6,000 farmers contacted in different states for assessment, two-thirds had no idea about the existence of crop insurance schemes by the government. This is an indicator of the fact that the farmers were not benefiting from the schemes of the government.
• The report also pointed out the lack of proper grievance redressal system and a mechanism for monitoring to ensure fast settlement of complaints made by farmers.
• The report by Comptroller and Auditor General of India that the state-owned Agriculture Insurance Company released premium worth around Rs. 3,622 crores to ten private insurers without proper verification.

Way Forward

Just after a year of launch the Crop Insurance Scheme has come back on the drawing table for revision and revamps. The motive for this scheme was not completely achieved due to roadblocks in forms of slow release of funds, and low claims by the farmers. The focus has now shifted to increase the competition amongst the insurers and lowering the average premiums. More and more natural calamities are being covered by insurances but the main problem lies in the dispensing of claims on time. The slow process of distributing the claims money is causing an erosion of trust from government schemes and also discourages the insured farmers to make their claims. The need of the hour is to make the Pradhan Mantri Fasal Bima Ypjna more holistic and win-win for all the parties involved.