Crop Insurance (PMFBY)

Full form: Pradhan Mantri Fasal Bima Yojana

Insurance

PMFBY provides crop insurance to farmers protecting against natural calamities, pests, and diseases. Premium is heavily subsidised: farmers pay 2% for kharif crops, 1.5% for rabi, 5% for horticulture. Government pays the remaining premium.

In detail

PMFBY coverage:nPre-sowing: prevented sowing risk due to rainfall failurenStanding crop: natural calamities, pests, diseasesnPost-harvest: cyclone, hailstorm during 2 weeks after harvestnLocalised calamities: hailstorm, landslide for individual farmsnnPremium rates (farmer share):nKharif (monsoon) crops: 2% of sum insurednRabi (winter) crops: 1.5% of sum insurednAnnual/commercial horticulture: 5% of sum insurednnClaim settlement: based on Crop Cutting Experiments (CCE) for large-scale failures. For localised damage: smartphone-based reporting.

Formula

Farmer premium = Sum insured x Farmer premium ratenSum insured = Scale of finance per hectare (set by district)

Real-life example

🇮🇳 India example

Sunita insures 2 hectares of paddy (kharif) at scale of finance Rs 50,000/hectare = Rs 1L sum insured. Her premium: 2% = Rs 2,000. Government pays Rs 12,000. Crop damaged by flood. Claim assessed at 80% loss. She receives Rs 80,000. Net: Rs 80,000 - Rs 2,000 = Rs 78,000 received for Rs 2,000 investment.

Frequently asked questions

Is PMFBY mandatory for farmers with KCC loans? ▼

PMFBY used to be mandatory for KCC farmers but was made voluntary from 2020. Farmers can opt in or out at time of KCC renewal. Given the heavily subsidised premium and comprehensive coverage, opting in is financially rational for most farmers in rain-dependent agriculture.