Farmers Left In The Lurch As Crop Insurance Payouts Plummet 90%

In a shocking revelation, crop insurance payouts to farmers in Haryana have dropped by over 90%, raising serious questions about the effectiveness of the Pradhan Mantri Fasal Bima Yojana (PMFBY). Similar declines in States like Madhya Pradesh, Odisha, and Rajasthan highlight a growing disenchantment among farmers.

When I read a news report today (Feb 14, 2025), saying "In Haryana, crop insurance payments to farmers drop by over 90 per cent," I was reminded of another story (published on Dec 25, 2024) wherein a well-known environmentalist and a small farmer, Pandurang Hedge, whose farm is situated in Sirsi taluka in Karnataka, had penned down his travails with crop insurance.

"Is India perhaps the only country in the world where the governments collude with private insurance companies to profit from farmers' distress?" he asked in conclusion after detailing the sordid details of his experiments with crop insurance.

Just before concluding his article (Chasing the mirage of crop insurance, in Deccan Herald), he writes: "At the scheme's launch, the prime minister stated that it would provide financial security to farmers against nature's vagaries reward their hard work. However, after eight years of chasing the mirage of crop insurance, it is merely a tool to siphon off public money into the coffers of private insurance companies." In the next paragraph, he writes: "It is naive to believe that the government is unaware of the flaws in the scheme's implementation. What is alarming is the continued State support for this systematic exploitation in the name of crop insurance."

To some, these words may appear too harsh. But how do you explain when a farmer cannot get compensation despite having paid the premium for eight years.

Nevertheless, the news report today about crop insurance payments to farmers dropping by 90 per cent comes as a rude shock. In a reply in Parliament, the Minister of State for Agriculture and Farmers Welfare Ram Nath Thakur informed that Haryana had witnessed a drop in crop insurance payments from Rs 2,496.89-cr in 2023-24 to a mere Rs 224.43-cr under the Pradhan Mantri Fasal Bima Yojna (PMFBY) as well as under the Restructured Weather-based Crop Insurance Scheme (RWBCIS). Interestingly, the Congress MP Deepender Hooda, who had asked the question, later said: "The PMFBY has become a scheme for filling the coffers of private insurance companies by looting the hard-earned money of the farmers."

What Hooda said is no different from what the Karnataka farmer had also explained earlier.

Surprisingly, Haryana is not the only State where insurance payments to farmers have dropped. In Madhya Pradesh, insurance payments to farmers have fallen to Rs 565.28-cr in 2023-24 from Rs 1,027.48-cr a year earlier, in 2022-23; in Odisha, to Rs 209.03-cr in 2023-24 from Rs 568.03-cr in 2022-23; and in Rajasthan, from Rs 4,141.98-cr in 2022-23 to Rs 2,066.02-cr in 2023-24. This may be an indication of the growing disenchantment among farmers for PMFBY or it is because of some systemic failures that the government has so far failed to address, I am not sure but there are certainly some flaws that have not been corrected so far.

Incidentally, in a reply to a question in Rajya Sabha, the then Agriculture Minister Narendra Singh Tomar, had said that ever since the PMFBY was launched on April 1, 2016, insurance companies had earned Rs 40,000-cr in the five years, till Kharif 2021-22 crop season. The popularity of the scheme had dropped subsequently after the initial year of the launch. While Punjab never joined the scheme, States such as West Bengal, Jharkhand, Bihar, Gujarat, Andhra Pradesh, and Telangana had opted out. However, Andhra Pradesh had later joined the PMFBY.

But let's first to try to understand what led to Haryana's drop in crop insurance claims. Last year, on July 17, 2024, a news report said that for three consecutive years there had been no cover for crop insurance available in the seven districts of Ambala, Karnal, Sonepat, Hisar, Jind, Mahendragarh and Gurugram districts, which together formed the Cluster 2.

Accordingly, the reason was that no insurance firm had come forward to implement the scheme in these districts.

This was essential because some reports say that a prolonged farmers' protest earlier in Hisar had forced a private insurance company to make payments against a widespread crop failure in cotton, which was devastated by pink bollworm pests. Since then, private insurance companies have stayed away from providing insurance cover in these districts.

Let us now go back to Karnataka to understand the reasons for the disenchantment of the small farmers towards the flagship crop insurance scheme. He explains that in December his crop was flattened by the Cyclone Fengal and the continuous rains thereafter. But after he approached the local cooperative to claim the compensation, his ordeals began. He was told that the cooperative couldn't be of much help as the responsibility for assessing crop losses was with the revenue department. "When I reported the destruction, the revenue officials told me that they had already collected samples from another plot where the crop was good. Shockingly, he admitted that personnel from the insurance company had insisted on selecting plots with higher yields to avoid paying compensations. This blatant manipulation of data at the ground level effectively denied benefits to farmers."

Further, he adds: "Despite having digital evidence of the destruction as proof, I had no avenue for grievance redressal. I found myself against an insensitive bureaucracy and an insurance company indifferent to registering claims."

As long as the fundamental question that the Karnataka farmer had raised remains unanswered, I don't think farmers will be enthused to seek financial security through the mechanism of crop insurance. Knowing the procedural hurdles that are deliberately created by insurance companies, as was demonstrated by the Karnataka farmer, the over-dependence on private insurance companies needs a rethink.

As I have often said, the entire PNFBY scheme seems to be tailor-made for private insurance companies, which have walked away with huge profits. That is why the immediate need is to overhaul the scheme, get the private insurance companies out, and hand over the crop insurance business to public sector companies. After all, if the public-sector companies can lead in non-crop insurance schemes I see no reason why the same agencies cannot be relied upon for delivering crop insurance.

(The author is a noted food policy analyst and an expert on issues related to the agriculture sector. He writes on food, agriculture and hunger)