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Revamped crop insurance scheme falters in settlement of claims in drought hit areas

LiveMint logoLiveMint 20-07-2017 Sayantan Bera

New Delhi: A revamped crop insurance scheme launched by the government in 2016 has brought more crop area under insurance but faltered in its promise of faster settlement of claims and providing relief to farmers in states hit by severe drought in an otherwise normal monsoon year.

Under the revamped Pradhan Mantri Fasal Bima Yojana (PMFBY), insurance companies collected Rs15,686 crore in premium from farmers, the centre, and state governments for the Kharif (summer crop) of 2016, the government told the lower house of the Parliament in a written reply on 18 July.

Insurance companies have received claims of Rs5,621 crore so far (for Kharif 2016), but have settled claims for just 65% or Rs3,634 crore, data included in the reply shows. The settlement ratio is poor given that claims are submitted not by farmers but the government machinery on their behalf. Also the claims settlement has been delayed by more than seven months as the farmers harvested their crops in November last year.

“While insurance companies have raked in a lot of money through premiums, PMFBY has failed on its two core promises- faster settlement of claims and providing relief to drought hit farmers in states like Tamil Nadu,” said Yogendra Yadav, member of Jai Kisan Andolan, a pan India farmers’ movement, and president of political party Swaraj Abhiyan.

The data shows that in Tamil Nadu—reeling under its worst drought in 140 years—insurance companies collected Rs963 crore as premium while reported claims stood at just Rs22 crore.

Yadav added that “PMFBY is the only insurance in the world where the insuree does not know he is insured” referring to the fact that for farmers who avail subsidised crop loans insurance premiums are deducted automatically, often without their knowledge. Under PMFBY, like in earlier schemes, farmers do not have any insurance document which shows the extent of coverage and premium paid.

The litmus test of any insurance is how fast claims are settled and the performance of PMFBY has been poor so far, said Ashok Gulati, agriculture chair professor at the Delhi- based Indian Council for Research in International Economic Relations. “While state governments delayed paying their share of premium, thus delaying claim settlement, the premium rates earned by companies did not come down with higher area coverage,” Gulati said, adding, “the scheme was enforced in a hurry and the government ended up paying more to insurance companies.”

Gulati further said that states continued using an archaic and bureaucratic machinery to assess crop loss which delayed filing of claims, (against the promise of using new technology like drones, satellites and smart phones to transmit data on crop loss).

Responding to a debate on agrarian distress in Parliament, agriculture minister Radha Mohan Singh admitted on Wednesday that there were hitches in the first year roll-out. “We expect the claims to go up to 63% of premium collected (in 2016-17),” Singh said, adding, “insurance companies made use of the situation where states’ delayed estimating crop loss... we have told states they can float their own insurance companies. Gujarat and Punjab are planning to do so.”

“We have received complaints against insurance companies from states like Rajasthan and Tamil Nadu and the government will investigate,” Singh said

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