BJP Manifesto: Voluntary Enrolment Under PMFBY Could Kill the Programme

Making the BJP's flagship crop-insurance scheme voluntary is either an admission of its failure, or intended to be 'the death of the scheme'.

New Delhi: In its manifesto for the 2019 elections released on Monday, the BJP sketched out a future for India’s troubled agricultural sector, making a range of promises under its goal of doubling farmer income by 2022.  

Most of the promises – like extending PM Kisan to all farmers, interest free loans on Kisan credit cards, expanding the irrigation scheme – involved extending the scope of existing schemes.

On the Pradhan Mantri Fasal Bima Yojana, the government’s flagship crop insurance scheme, on the other hand, the party’s promise will, in all likelihood, end up reducing the scope of the existing scheme.  

Here is the full text of the particular promise:

“Our scheme, Pradhan Mantri Fasal Bima Yojana (PMFBY) has ensured risk mitigation and provided insurance cover for all farmers. We will make enrolment of farmers under the scheme voluntary.”

Eighteen of the twenty-eight words in the promise are dedicated to a self-congratulatory note on the performance of the scheme. The operative word – and the crux of the promise – among the other 10 is ‘voluntary’. The PMFBY will now be voluntary.

“This essentially means the death of the scheme,” said a former top official of the agriculture ministry.  

Negative impact

Why would this have a negative impact on the scheme?

Until now, those availing loans on their Kisan credit card (KCC) were automatically enrolled in the PMFBY. The premium amount due to be paid by them – a maximum of 2% for kharif crops and 1.5% for rabi crops – was automatically deducted from the amount of the loan disbursed.

The farmers who enrolled in the scheme via this process are identified as ‘loanee farmers’ in the PMFBY database. Those who voluntarily opt for the scheme are identified as ‘non-loanee farmers’.

Also read: How the PM’s Crop Insurance Scheme Turned Into a Goldmine for 10 Private Insurers

In a working paper for the think tank Indian Council for Research on International Economic Relations (ICRIEAR), Ashok Gulati, Prerna Terway and Siraj Hussain comment on how crucial loanee farmers are to the insurance scheme.

“According to data from the industry, the PMFBY, like previous schemes, is primarily covering only loanee farmers as they account for 74% of total farmers insured in Kharif 2016 and 79% in Rabi 2016-17,” they wrote.

The Wire had also obtained data for 2017-18 through a Right to Information (RTI) request in October 2018 and found that in absolute numbers, the total number of non-loanee farmers enrolled in PMFBY had declined slightly since 2016-17. The overall percentage of non-loanee farmers however increased slightly because the total number of farmers enrolled in PMFBY reduced from 57 million to 48 million.

Loanee and non-loanee farmers enrolled in PMFBY in 2016-17 and 2017-18

Total farmers (in millions) Loanee farmers (in millions) Non-loanee farmers (in millions) Percentage of loanee farmers
2016-17 57.22 43.55 13.66 76.12
2017-18 48.77 35.14 13.63 72.04

Source : Data obtained by The Wire through an RTI

There is another catch.

“A large number of farmers that are registered as non-loanee in the database, are in fact those who are enrolled in the scheme because they have taken a loan on their KCC. Most of these cases are from Maharashtra,” said a senior official of one of the key companies that provides crop insurance.

The reason that they are registered as ‘non-loanees’ though is because a Bombay high court judgement that ruled that premium cannot be deducted from the loan amounts of farmers without their consent.

“To work around this, most farmers in Maharashtra are registered as non-loanee farmers,” said the former agriculture ministry official.

Maharashtra’s data, while only for a single state, is not insignificant. In 2016-17, the Western state accounted for 57% of India’s non-loanee farmers and in 2017-18, 58%. It is one of the few states where non-loanee farmers are more than loanee farmers and the only state where this difference is substantial. In 2016-17, Maharashtra had twice the number of non-loanee farmers as against loanee farmers, and in 2017-18, that proportion increased to four times.

“There is no doubt that Maharashtra is artificially inflating the number of non-loanee farmers,” said the insurance company official.

Therefore, if the scheme is made voluntary, as the BJP manifesto promises, it could reduce in scope substantially. The above-quoted official said, “If it is made voluntary, its coverage will reduce to 10% or 5% if the Maharashtra anomaly is corrected.”

Also read: BJP Releases 2019 Manifesto – Here’s How It Compares to Congress Promises

“It would essentially mean that the scheme is over.”

The former agriculture ministry official agreed. “Nothing will remain in the scheme. We have seen this with the animal insurance scheme which is voluntary and nobody opts for it,” he said.

With the scope of the scheme coming down, insurance premiums too could increase by as much as 80%.

“Now, only those farmers will enrol who are sure that there will be a claim. This means that most of the coverage will be high risk for the companies. So, the premium amounts that they charge will be anything between 70 and 80% of sum insured,” said the insurance company official.

President of Swaraj Abhiyan Yogendra Yadav argued that the promise in the manifesto is an admission by the BJP of the scheme’s failure.

“It is an admission that the scheme has not worked. It is an admission that it was thrust upon farmers and they did not want it. It will be officially dead,” he said.