Agriculture and Rural Development Agriculture and Cooperation

Implement a farm insurance scheme to take care of crop loss due to unforeseen natural calamities.

Last Updated: Friday 09 March 2018
Wednesday 13 January 2016Press Information Bureau

Cabinet approves New Crop Insurance Scheme – Pradhan Mantri Fasal Bima Yojana – a boost to the farming sector

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi today has approved the ‘Pradhan Mantri Fasal Bima Yojana’ - a path breaking scheme for farmers’ welfare.

The highlights of this scheme are as under:

  1. There will be a uniform premium of only 2% to be paid by farmers for all Kharif crops and 1.5% for all Rabi crops. In case of annual commercial and horticultural crops, the premium to be paid by farmers will be only 5%. The premium rates to be paid by farmers are very low and balance premium will be paid by the Government to provide full insured amount to the farmers against crop loss on account of natural calamities.

  2. There is no upper limit on Government subsidy. Even if balance premium is 90%, it will be borne by the Government.

  3. Earlier, there was a provision of capping the premium rate which resulted in low claims being paid to farmers. This capping was done to limit Government outgo on the premium subsidy. This capping has now been removed and farmers will get claim against full sum insured without any reduction.

  4. The use of technology will be encouraged to a great extent. Smart phones will be used to capture and upload data of crop cutting to reduce the delays in claim payment to farmers. Remote sensing will be used to reduce the number of crop cutting experiments.

The new Crop Insurance Scheme is in line with One Nation – One Scheme theme. It incorporates the best features of all previous schemes and at the same time, all previous shortcomings/weaknesses have been removed.






PM Crop Insurance Scheme

Premium rate



Lower than even NAIS

(Govt to contribute 5 times that of farmer)

One Season – One Premium




Insurance Amount cover




On Account Payment




Localised Risk coverage


Hail storm

Land slide

Hail storm

Land slide


Post Harvest Losses coverage


Coastal areas - for cyclonic rain

All India – for cyclonic + unseasonal rain

Prevented Sowing coverage




Use of Technology

(for quicker settlement of claims)







Yes (target to double coverage to 50%)


In January earlier this year, in a move aimed at reducing the recurrence of agricultural distress without having to effect hefty hikes in the Minimum Support Prices (MSP), Narendra Modi led National Democratic Alliance government had announced a crop insurance scheme named Pradhan Mantri Fasal Bima Yojana (PMFBY).

Under the new scheme being implemented from Kharif season of 2016, the premium paid by farmers had been reduced to 2% of the insured value for the more rain-dependent kharif crop and 1.5% for the rabi season, compared with 3.5-8% charged for the two earlier schemes ---- National Agricultural Insurance Scheme (NAIS) and Modified National Agricultural Insurance Scheme (MNAIS). In the case of horticultural crops, farmers’ premium burden will be 5% of the sum assured or 50% of the total premium.

NAIS and MNAIS have been discontinued from Kharif 2016, but the ongoing Weather Based Crop Insurance Scheme (WBCIS) and Coconut Palm Insurance Scheme would continue to operate while premium to be paid under WBCIS has been brought on a par with PMFBY.

Later while unveiling the operational guidelines for the PMFBY at a massive farmers' rally in Sehore in Madhya Pradesh in February this year, Prime Minister Modi had noted that new crop insurance scheme would provide a solution for the farmers problems, in times of difficulty. He said care had been taken to eliminate the shortcomings of previous crop insurance schemes, and create trust among farmers with regard to crop insurance. He said technology would be used extensively with this scheme to ensure early settlement of claims, and exhorted farmers to take benefit of this scheme.

Under the PMFBY, there would be no upper limit on government subsidy provided by centre and state governments. “Even if the balance premium (after farmers’ contribution) is 90%, it will be borne by the government,” according to an agriculture ministry statement.

In the earlier schemes, there was a provision of capping the premium rate which resulted in low claims being paid to farmers. Officials said that this capping on premium was done to limit the government outgo on the premium subsidy. “This capping has now been removed and farmers will get claim against full sum insured without any reduction,” an official said.

This would ensure that farmers get the full sum insured without any reduction or hassles from the 11 designated insurance companies if natural calamities ravage their crops. Officials said that the following roll out of PMFBY, the crop insurance coverage is set to rise from 45 million hectares or 23% of the area under cultivation at present to 50% of the crop area by 2018-19.

Another benefit to farmers under the new crop insurance scheme is that losses incurred by them at any stage of the farming activity — from the sowing to the post-harvest season — would be covered. Earlier, only post-harvest losses can be offset by the insurance facility under the two existing schemes. Also, even those farmers who haven’t taken bank loans will be eligible for insurance cover under PMFBY.

“The new scheme will increase farmers’ income and resultant increase in rural demand,” an agriculture ministry official said. The subsidy would be borne by the Centre and the state government concerned equally. For PMFBY, finance minister Arun Jaitley had allocated  Rs 5,501 crore in 2016-17 while Rs 2,995 crore was allocated for various crop insurance schemes in the previous fiscal.

The biggest thrust of PMFBY has been the use of technology which would be encouraged to a great extent. “Smart phones will be used to capture and upload data of crop cutting to reduce the delays in claim payment to farmers. Remote sensing will be used to reduce the number of crop cutting experiments,” an official said.

In the earlier schemes, only 20 million of an estimated 120 million farmers in the country — earning for a population four to five times as many — had crop insurance cover in 2014-15, even as the facility was just against the cost of cultivation and barely provided any income protection.

According to the agriculture ministry data, most of the farmers who earlier took crop insurance were in Rajasthan, Bihar, Uttar Pradesh, Maharashtra, Karnataka and Andhra Pradesh. In terms of the value of the farm output, the MNAIS and the Weather-based Crop Insurance Scheme — fared even more dismally, with a coverage of only around 5.5%.

Progress so far

Since the launch of  PMFBY in January, states such as Andhra Pradesh, Jharkhand, Odisha, West Bengal, Himachal Pradesh and Uttarkhand have already awarded contracts to empanelled insurance companies for providing crop insurance coverage to large number of farmers in forthcoming kharif season. 

However states like Punjab and Haryana are yet to decide on rolling out the new crop insurance scheme so far. “The Punjab government has decided not to implement PMFBY while the state government is still discussing about implementing Weather Based Crop Insurance Scheme (WBCIS) whose premium has been brought on a par with PMFBY,” an official.

In case of Haryana, the State Level Coordination Committee on Crop Insurance meetings were held recently and state government is yet to decide on rolling out mega crop insurance scheme. However, Maharashtra, which had received deficient rainfall during last couple of years leading to fall in crop output, the state cabinet recently gave a nod for implementation of PMFBY.

In Gujarat, Uttar Pradesh and Chhattisgarh, the bidding process of identifying insurance companies have been completed and notifications are expected to be out shortly. The roll out of crop insurance would commence in Tamil Nadu and Assam after the state elections.

The Agriculture ministry has empaneled state-owned Agriculture Insurance Company of India (AIC) and 10 private companies including ICICI-Lombard General Insurance, HDFC-ERGO General Insurance, IFFCO-Tokio General Insurance and SBI General Insurance, for implementation of the mega scheme.

“The expansion of the crop insurance scheme would depend on the number of farmers voluntarily opting for it. Lower premium rates might encourage more farmers to take up crop insurance,” Ajay Vir Jahkar, chairman, Bharat Krishak Samaj, said

Meanwhile, the government has decided to entrust more responsibility on banks for covering more number of farmers under the PMFBY, a senior Agriculture ministry officer has said.

“Banks will be squarely responsible. In case there is crop loss to a loanee farmer who is not insured, the bank will have to make good the losses. The onus is now on banks and insurance companies to deliver”, Ashish Kumar Bhutani, Joint Secretary, Agriculture ministry recently said. He said that the government is trying to bring non-loanee farmers such as share-croppers too within the PMFBY fold. "There is a separate committee of the government looking into the land leasing policy and we should be able to address the aspect of sharecropper also getting the benefit of crop insurance,” he noted.

Experts say that PMFBY if implemented properly across the country would mitigate farm distress to a large extent especially when the erratic climates have become a norm rather than exception.

Implementation of Pradhan Mantri Fasal Bima Yojana

To provide financial support to farmers suffering crop loss/damage arising out of unforeseen events, a new scheme namely, Pradhan Mantri Fasal Bima Yojana (PMFBY) has been approved for implementation in all States and Union Territories from Kharif 2016 season in place of National Agricultural Insurance Scheme (NAIS) and Modified National Agricultural Insurance Scheme (MNAIS). PMFBY is a marked improvement over the earlier schemes on several counts and comprehensive risk coverage from pre-sowing to post-harvest losses has been provided under it. A budget provision of Rs.5501.15 crore has been made for the scheme during 2016-17.

The PMFBY is compulsory for loanee farmers availing crop loans for notified crops in notified areas and voluntary for non-loanee farmers.

Scale of Finance declared by the District Level Technical Committee has been taken as Sum Insured of the crops under the Scheme. There is no capping in premium, however, premium payable by farmers has been substantially reduced and simplified and there is one premium rate on pan-India basis for farmers which would be maximum 1.5%, 2% and 5% for all Rabi, Kharif and annual horticultural/commercial crops, respectively.

Salient Features of PMFBY

  • Provide comprehensive insurance coverage against crop loss on account of non-preventable natural risks, thus helping in stabilising the income of the farmers and encourage them for adoption of innovative practices.

  • Increase the risk coverage of Crop cycle – pre-sowing to post-harvest losses.

  • Area approach for settlement of claims for widespread damage. Notified Insurance unit has been reduced to Village/Village Panchayat for major crops.

  • Uniform maximum premium of only 2%, 1.5% and 5% to be paid by farmers for all Kharif crops, Rabi Crops and Commercial/ horticultural crops respectively.

  • The difference between premium and the rate of Insurance charges payable by farmers shall be provided as subsidy and shared equally by the Centre and State.

  • Uniform seasonality discipline and Sum Insured for both loanee and non-loanee farmers.

  • Removal of the provision of capping on premium and reduction of sum insured to facilitate farmers to get claim against full sum insured without any reduction.

  • Inundation has been incorporated as a localized calamity in addition to hailstorm and landslide for individual farm level assessment.

  • Provision of individual farm level assessment for Post harvest losses against the cyclonic and unseasonal rains for the crops kept in the field for drying upto a period of 14 days, throughout the country.

  • Provision of claims upto 25% of sum insured for prevented sowing.

  • "On-Account payment" upto 25% of sum insured for mid season adversity, if the crop damage is reported more than 50% in the insurance unit. Remaining claims based on Crop Cutting Experiments (CCEs) data.

  • For more effective implementation, a cluster approach will be adopted under which a group of districts with variable risk profile will be allotted to an insurance company through bidding for a longer duration upto 3 years.

  • Use of Remote Sensing Technology, Smartphones and Drones for quick estimation of crop losses to ensure early settlement of claims.

  • Crop Insurance Portal has been launched. This will be used extensively for ensuring better administration, co-ordination, transparency and dissemination of information.

  • Focused attention on increasing awareness about the schemes among all stakeholders and appropriate provisioning of resources for the same.

  • The claim amount will be credited electronically to the individual farmer’s Bank Account.

  • Adequate publicity in all the villages of the notified districts/areas.

  • Premium rates under Weather Based Crop Insurance Scheme (WBCIS) have also been reduced and brought at par with new scheme. Further, capping on Actuarial premium and reduction in sum insured has been removed in this scheme also.

  • In addition, a Unified Package Insurance Scheme (UPIS) has also been approved for implementation on pilot basis in 45 districts of the country from Kharif 2016 season to cover the other assets/activities like machinery, life, accident, house and student-safety for farmers along- with their notified crops (under PMFBY/ Weather Based Crop Insurance Scheme - WBCIS).

This information was given by the Minister of State for Agriculture & Farmers Welfare Shri Parshottam Rupala in the Rajya Sabha on March 17, 2017.

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