Crop Insurance Schemes in India

Crop insurance schemes in India aim to protect farmers from financial losses due to crop failure or damage caused by natural disasters, pests, and diseases. These schemes play a vital role in stabilizing farmers’ incomes and ensuring the sustainability of agriculture. Read here to learn more.

The Union Cabinet extended the one-time special subsidy on fertilizer Diammonium Phosphate (DAP) at a rate of ₹3,500 per metric tonne from January 1, 2025, until further orders.

The Cabinet also approved the continuation of the Pradhan Mantri Fasal Bima Yojana and the Restructured Weather-Based Crop Insurance Scheme until 2025-26.

Crop Insurance

Crop or Agriculture Insurance covers risks of anticipated loss in yield of various crops. Almost all Crop Insurance business comes from ‘Schemes’ or ‘Programs’.

These Schemes operate on principles of ‘Area Approach’. Coverage is compulsory for farmers taking crop loans from rural financial institutions (RFIs) for cultivation of crops, i.e., loanee farmers.

Non-loanee farmers can also insure their crops under the same schemes.

Key Objectives of Crop Insurance:

1. Financial Protection: Mitigate losses from crop failure.
2. Stability in Farm Income: Enable farmers to recover from adverse events and reinvest in agriculture.
3. Credit Accessibility: Assures banks of repayment, encouraging credit to the agricultural sector.
4. Encouragement of Modern Practices: Reduce risks associated with adopting new farming techniques.

Major Crop Insurance Schemes in India

1. Pradhan Mantri Fasal Bima Yojana (PMFBY) (Launched in 2016)

• Objective: To provide financial support to farmers in case of crop loss due to natural calamities.
• Key Features:
  • Premium rates for farmers:
    • Kharif crops: 2% of the sum insured.
    • Rabi crops: 1.5% of the sum insured.
    • Commercial and horticultural crops: 5% of the sum insured.
  • The remaining premium is subsidized by the Central and State Governments.
  • Coverage for pre-sowing to post-harvest losses, including localized calamities (e.g., hailstorms).
• Technology Use: Remote sensing, drones, and GPS for faster claim assessment and transparency.

2. Restructured Weather-Based Crop Insurance Scheme (RWBCIS) (Launched in 2016)

• Objective: To provide insurance against adverse weather conditions that impact crop yields.
• Key Features:
  • Covers weather parameters like rainfall, temperature, humidity, and wind speed.
  • Premium rates are similar to PMFBY.
  • Quick claim settlement based on weather data.
• Focus: Suited for crops sensitive to weather fluctuations, such as horticultural crops.

3. National Agricultural Insurance Scheme (NAIS) (1999–2016)

• Replaced by PMFBY in 2016.
• Covered all farmers and various crops, but had limitations in timely claim settlement and transparency.

4. Modified National Agricultural Insurance Scheme (MNAIS) (2010–2016)

• The predecessor to PMFBY with higher premium rates but offered improved coverage and claim settlement processes.

5. Coconut Palm Insurance Scheme (CPIS)

• Objective: To insure coconut palms against natural disasters, pests, and diseases.
• Target Farmers: Owners and cultivators of coconut palms.
• Coverage: Losses due to cyclones, drought, and pest attacks.

6. Unified Package Insurance Scheme (UPIS) as pilot in 45 districts

• Objective: To provide financial protection and comprehensive risk coverage of crops, assets, and life and student safety to farmers.
• The pilot will include 7 sections – Crop Insurance (PMFBY / WBCIS), Loss of life (Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)), Accident Insurance (Pradhan Mantri Suraksha Bima Yojana – PMSBY), Student safety, Household, Agriculture implements and Tractor.
• Crop insurance will be compulsory. However, farmers can choose at least 2 sections from the remaining.
• Farmers may be able to get all requisite insurance products for farmers through one simple proposal/ application Form and a single window.
• Two flagship schemes of the Government viz PMSBY & PMJJBY have been included apart from insurance of assets.
• The pilot scheme will be implemented through a single window.
• Processing of claims (other than Crop Insurance) based on individual claim reports.

7. State-Specific Schemes

• Some states, like Maharashtra and Gujarat, have launched their crop insurance schemes to supplement central schemes.

Key Benefits of Crop Insurance Schemes

• Risk Mitigation: Provides financial support to farmers in the face of uncertainties like droughts, floods, or pest infestations.
• Income Stability: Ensures steady income for farmers, reducing distress and reliance on informal credit.
• Encourages Modernization: Promotes investments in high-value and commercial crops.
• Supports Agricultural Productivity: Encourages farmers to adopt best practices and technology without fear of financial loss.

Challenges in Crop Insurance Implementation

• Low Penetration: Limited awareness among farmers, especially smallholders and marginal farmers.
• Delayed Claim Settlement: Bureaucratic hurdles and delays in claim processing.
• Premium Payment Issues: Non-payment of premium subsidies by some states, affecting scheme viability.
• Dependence on Weather Data: Accuracy and availability of weather data for claim settlement remain concerns.
• Exclusion of Tenant Farmers: Sharecroppers and tenant farmers often lack access to insurance benefits.

Recent Reforms and Recommendations

• Voluntary Enrolment: Since 2020, PMFBY enrolment is voluntary for all farmers.
• Technological Integration: Enhanced use of drones, satellite imagery, and AI for faster claim assessment and transparency.
• Improved Awareness: Campaigns to educate farmers about the benefits and processes of crop insurance.
• Inclusion of Tenant Farmers: Policies to include sharecroppers and tenant farmers.
• Subsidy Revisions: Timely release of premium subsidies by state governments.

Future Prospects

Crop insurance in India has the potential to be a cornerstone of agricultural resilience.

• Enhanced Transparency: Faster claim settlement with robust digital systems.
• Public-Private Partnerships: Encourage collaboration to expand reach and efficiency.
• Decentralized Management: Empower local governments and organizations to implement schemes effectively.
• Increased Coverage: Target small and marginal farmers who are most vulnerable to losses.

By addressing implementation challenges and leveraging technology, these schemes can significantly contribute to the financial security of farmers and the sustainability of Indian agriculture.

Previous Year Questions

Q. With reference to ‘Pradhan Mantri Fasal Bima Yojana’, consider the following statements: (Prelims 2016)

1. Under this scheme, farmers will have to pay a uniform premium of two per cent for any crop they cultivate in any season of the year.
2. This scheme covers post-harvest losses arising out of cyclones and unseasonal rains.

Which of the statements given above is/are correct? 

(a) 1 only

(b) 2 only 

(c) Both 1 and 2

(d) Neither 1 nor 2

Frequently Asked Questions (FAQs)

Q. What are the benefits of crop insurance?

Ans: Crop insurance plays a vital role in agricultural risk mitigation. Crop insurance, with coverage against risks like natural disasters, pests, and diseases, is an ideal tool for managing uncertainty. This allows them to focus on improving their farming practices without the constant fear of losing their crops.

Related articles:

• New schemes for farmers
• Green agriculture
• E-technology in the aid of farmers
• Indian agriculture: Farming types, features and challenges

-Article by Swathi Satish