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15th July 2022 (8 Topics)

Fasal Bima Yojana

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Context:

The Union Agriculture Ministry announced that Andhra Pradesh has decided to rejoin the crop insurance scheme Pradhan Mantri Fasal Bima Yojana (PMFBY) from the ongoing kharif season.

Constituents of the Scheme:

  • It is a crop Insurance Scheme launched in 2016. It is administered by the Ministry of Agriculture. It replaced previous insurance schemes National Agricultural Insurance Scheme (NAIS) as well as the Modified NAIS.
  • Objective: Aim to provide insurance coverage and financial support to the farmers in the event of crop failure, stabilizing the income of farmers to ensure their continuance in farming. The scheme also helps to encourage farmers to adopt innovative and modern agricultural practices along with ensuring the flow of credit to the agriculture sector.
  • Premium: 2% for all Kharif crops, 1.5% for all Rabi crops, and 5% for annual commercial and horticultural crops are to be paid by the farmers, and the remaining premium will be shared by center and states.

Why states are opting out?

  • Universal coverage: Various states have urged the scheme to have the feature of universal coverage. The absence of such feature compelled the states to opt out from the scheme. E.g. Andhra Pradesh opted out from the scheme due to absence of such provision.
  • Zero premium: State government wanted a zero premium for the farmers and the whole premium amount should be charged to the center and states equally. E.g. Haryana, Goa, and Puducherry are paying the farmer's share from their own budget.
  • High premium cost for various states: Various states with the claims of older schemes experienced an increase in the rate of premium, burdening the state exchequer. E.g. For Bihar the premium rate is very high, was the first state to opt out from the scheme.

What are the challenges that led to divergence in centre-state implementation measures?

  • Non-payment of the state share: Various states failed to pay their own share of premium subsidy within the prescribed timeline, subjecting to disqualification of the state for the implementation from next season.
  • Political divergence: Various states want to implement the3 scheme without the mentioning Pradhan Mantri in the scheme’s name. Ideological differences creating hindrances in the implementation process.
  • High premium charged by Insurance companies: Insurance companies, tendered by the state government, charge higher premium rates creating a potential barrier in insurance penetration and coverage.

Question

Do you think removing the farmer"s share of premium will be beneficial for the developmental process?

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