BharatNotes Introduction
Indian agriculture is inherently risky — subject to monsoon variability, pest attacks, market price swings, and natural disasters. Agricultural insurance is the primary risk mitigation instrument, transferring production risk from individual farmers to insurance pools. India's flagship schemes — PM Fasal Bima Yojana (PMFBY) and the Restructured Weather Based Crop Insurance Scheme (RWBCIS) — operate under the Ministry of Agriculture and Farmers Welfare, with implementation through empanelled insurance companies.
Pradhan Mantri Fasal Bima Yojana (PMFBY)
Overview
PMFBY was launched in February 2016, replacing two earlier schemes — the National Agricultural Insurance Scheme (NAIS) and the Modified NAIS. It operates on an actuarial premium model, where premiums are risk-based rather than fixed administratively.
Premium Structure
| Crop Category | Farmer's Maximum Premium (% of Sum Insured) |
|---|---|
| Kharif crops | 2% |
| Rabi food and oilseed crops | 1.5% |
| Commercial / horticultural crops | 5% |
The difference between the farmer's contribution and the full actuarial/bidded premium is borne as subsidy by the Central and State Governments in a 50:50 ratio (general states). For North-Eastern States, the ratio is 90:10 (Centre:State) from Kharif 2020, recognising the fiscal constraints of these states.
State/UT governments may provide additional subsidy beyond this split from their own budgets, which is entirely borne by the state.
Coverage Statistics (Cumulative since 2016 through 2024-25)
| Indicator | Data |
|---|---|
| Total farmer applications insured | 78.41 crore |
| Total claims paid | Rs 1.83 lakh crore |
| Farmer applications receiving claims | 22.67 crore |
| Non-loanee farmer applications (2024-25) | 522 lakh (vs 20 lakh in 2014-15) |
| Global status | Largest crop insurance scheme in the world by farmer applications |
The scheme's total approved budget for continuation through 2025-26 is Rs 69,515.71 crore (Union Cabinet approval, January 2025).
2020 Reform: Optional for Loanee Farmers
A critical reform made PMFBY voluntary for all farmers from Kharif 2020, including loanee farmers who previously were mandatorily enrolled as a condition of availing crop loans/KCC credit. This was intended to:
- Reduce moral hazard and compulsory enrolment of disinterested farmers
- Improve scheme quality by enrolling only genuinely interested farmers
- Allow states to opt in or out of the scheme
Restructured Weather Based Crop Insurance Scheme (RWBCIS)
RWBCIS provides protection against weather parameter deviations (rainfall, temperature, humidity, wind speed) rather than actual crop yield losses. Unlike PMFBY:
| Feature | PMFBY | RWBCIS |
|---|---|---|
| Trigger | Actual crop yield loss (area approach) | Weather parameter deviation from threshold |
| Assessment basis | Crop Cutting Experiments (CCE) | Automatic Weather Station (AWS) data |
| Claim settlement speed | Slower — needs CCE data | Faster — weather data-driven |
| Basis risk | Lower — actual yield loss captured | Higher — weather proxy may not match farm loss |
| Premium structure | Actuarial, govt-subsidised | Actuarial, govt-subsidised (same farmer contribution caps) |
Both schemes run simultaneously, with States choosing which crops to notify under which scheme.
Technology in Crop Loss Assessment
One of the most significant recent reforms is the integration of technology to reduce dependence on slow, costly, and manipulation-prone Crop Cutting Experiments (CCEs):
| Technology | Application |
|---|---|
| Drones (UAVs) | Remote sensing of crop health, localised damage assessment, area estimation |
| Satellite imagery | Vegetation index (NDVI) monitoring for large-scale crop stress mapping |
| Smart phones + geotagging | Field-level reporting by insurance company representatives; farmer-captured crop loss evidence |
| Yield Estimation System using Technology (YES-TECH) | PMFBY's framework integrating satellite, drone, and weather data to estimate yields |
| Automatic Weather Stations (AWS) | Real-time weather data for RWBCIS trigger computation |
The government's YES-TECH initiative aims to replace or substantially supplement CCEs with technology-based yield estimation, cutting claim settlement time and reducing disputes.
Limitations and Criticisms of PMFBY
Despite scale, PMFBY faces structural challenges:
- High state premium burden: Several states (West Bengal, Andhra Pradesh, Bihar) have withdrawn from PMFBY citing unsustainable premium subsidy outgo — fragmenting national coverage
- Delayed claim settlements: CCE-based yield estimation is slow; farmers sometimes wait 18–24 months for claims
- Insurer profitability concerns: In low-loss years, large insurer profits from premium subsidy; in bad years, states struggle to pay subsidy — creating a cycle of dispute and under-payment
- Basis risk in RWBCIS: Weather station data may not capture localised farm-level losses; farmers in areas distant from AWS get inaccurate triggers
- Low voluntary enrollment post-2020: After making enrolment optional for loanee farmers, enrollment declined significantly in some states, reducing risk pooling effectiveness
- Coverage concentration: Large states like Maharashtra, MP, Rajasthan, and UP dominate enrollment; smaller and NE states remain under-covered
Related Schemes and Instruments
| Scheme | Description |
|---|---|
| Agri Infrastructure Fund (AIF) | Post-harvest risk reduction — reduces loss from price volatility after harvest |
| eNAM | National agricultural market to improve price discovery and reduce distress sales |
| Kisan Credit Card (KCC) | Working capital credit that now includes crop insurance integration |
| National Rainfed Area Authority (NRAA) | Addresses structural rainfall risk through watershed and dryland farming programs |
Recent Developments (2024–2026)
PMFBY 2024-25 — Technology Integration and Digital Claims Settlement
Pradhan Mantri Fasal Bima Yojana (PMFBY) enrolled approximately 4.19 crore farmer applications in 2024-25 (full year) — up from 3.17 crore in 2022-23 (32% increase) — making it the largest crop insurance scheme globally by enrolment. Total claims paid under PMFBY since 2016 have exceeded Rs. 1.83 lakh crore, with 78.41 crore cumulative insurance applications processed.
In FY 2024-25, the government accelerated technology integration: (1) YES-TECH (Yield Estimation System based on Technology) — using remote sensing (satellites), drones, and AI for automated crop yield assessment, currently mandatory for paddy/wheat from Kharif 2023 and soybean from Kharif 2024 across ~9 states; (2) WINDS (Weather Information Network Data Systems) — a dense network of weather stations for accurate weather-based crop insurance (RWBCIS); (3) AIDE (Sahayak) mobile app for insurance intermediary enrolment. A new Fund for Innovation and Technology (FIAT) with corpus of Rs. 824.77 crore was approved in January 2025 to scale technology adoption.
UPSC angle: PMFBY total claims paid (Rs. 1.83 lakh crore), cumulative applications (78.41 crore), YES-TECH and WINDS systems (technology in insurance), and the shift from crop cutting experiments to remote sensing are Prelims facts. PMFBY's effectiveness debate (claims payout delays, state withdrawal) is a Mains analytical topic.
State Withdrawals and PMFBY Reform Challenges
A major challenge facing PMFBY is the withdrawal of several states from the scheme — citing high insurance company premiums and state budgetary burdens. Bihar withdrew in 2018, West Bengal in 2019, and Andhra Pradesh, Gujarat, Telangana, and Jharkhand did not implement the scheme from Kharif 2020. Andhra Pradesh re-joined from Kharif 2022. These states often cite the actuarial premium model (where insurers quote high premiums for high-risk areas) as being unsustainable for state budgets.
The Central Government has responded with: (1) Capping actuarial premiums in certain categories; (2) Mandating quick grievance redressal (15-day claim settlement); (3) Proposing a restructured premium-sharing model to bring back withdrawn states. However, the fundamental tension — between making insurance financially viable for insurers vs making it affordable for states and farmers — remains unresolved.
UPSC angle: PMFBY state withdrawals (Bihar, West Bengal, Telangana), the actuarial premium model's fiscal burden on states, and the policy dilemma between universal coverage vs actuarial sustainability are key Mains GS3 agricultural risk management themes.
Budget 2025-26 — Agriculture Insurance Expansion and Horticulture Focus
Budget 2025-26 allocated Rs. 12,242.27 crore to PMFBY — a notable cut (~23%) from the FY 2024-25 RE of Rs. 15,864 crore. The combined PMFBY+RWBCIS scheme has an approved 5-year (2021-22 to 2025-26) outlay of Rs. 69,515.71 crore (Union Cabinet, January 2025). Horticultural and commercial crops have been covered under PMFBY since inception in 2016 at the 5% farmer-premium cap (not a 2025-26 announcement).
UPSC angle: PMFBY Budget 2025-26 allocation (Rs. 12,242 crore), 5-year combined outlay (Rs. 69,515 crore), and the FIAT (Rs. 824.77 crore, January 2025) for technology-driven loss assessment are key Mains GS3 themes in agricultural risk management reform.
Exam Strategy
For Prelims: Know PMFBY launch year (2016), farmer premium caps (2%/1.5%/5%), Centre-State subsidy ratio (50:50; 90:10 for NE states), 2020 reform (optional for loanee farmers), and key statistics (78.41 crore applications, Rs 1.83 lakh crore claims paid).
For Mains (GS3): Common question formats — evaluate PMFBY's effectiveness in providing income security to farmers; compare PMFBY and RWBCIS; suggest reforms for improving crop insurance penetration. Key arguments: PMFBY is the world's largest crop insurance scheme by enrollment but suffers from state withdrawal, delayed claims, and insurer moral hazard concerns; technology integration (drones, satellite, YES-TECH) is transforming assessment but implementation is uneven; making coverage optional post-2020 improved quality of enrollment but reduced scale. Cross-link with Ujiyari.com for current affairs on crop insurance reforms and kharif season developments.
