Pradhan Mantri Fasal Bima Yojana (PMFBY) – crop insurance scheme: Protecting peasants or enriching insurance companies?

Peasants in Tamilnadu, like their brothers in other states, are on the warpath. Faced with dire drought conditions, the failure of the crop insurance scheme dashed all their hopes of getting any compensation.

Empaneled insurance companies

1) Agricultural Insurance Company of India Ltd

2) ICICI - Lombard General Insurance Company Ltd

3) HDFC - ERGO General Insurance Company Ltd.

4) IFFCO - Tokio General Insurance Company Ltd.

5) Cholamandalam MS General Insurance Co. Ltd

6) Bajaj Allianz General Insurance Company Ltd

7) Reliance General Insurance Company Ltd

8) Future Generali India Insurance Company Ltd

9) Tata - AIG General Insurance Company Ltd

10) SBI General Insurance Company Ltd

11) Universal Sompo General Insurance Company Ltd

The Pradhan Mantri Fasal Bima Yojana (PMFBY) was initiated in 2016, replacing earlier insurance schemes. The insurance unit is a village/panchayat for major crops and a unit of larger size for other crops. This means that even if a farmer loses his entire crop because of some natural disaster (say pests or hail), he will not get compensation unless the entire village or measurement unit is declared as affected by the disaster by the authorities. Only in that case will the farmer get compensation for loss, based on the average estimated loss in crop production for that village or unit.

A farmer questioned, “But tell me, if two people out of a bus load of 50 die in a road accident, do they say, "We will pay insurance amount only when 50 per cent die? So, why this discrimination when it comes to poor farmers?”

The PMFBY covers food grains, pulses, and oil seeds, cotton, and horticultural crops. It is season based (rabi and Kharif) for crops grown seasonally, and annual for others. The PMFBY does not cover tree plantations such as mango, tamarind, lemon and palm. It does not cover coffee, tea and rubber plantations as well as cashew and tubers. The scheme also does not cover the risks and losses inflicted by wild animals like elephants, boars and neelgais, which is a major problem in certain states.

State abrogates its duty towards peasants

The first issue is that this scheme excludes the most vulnerable sections of the peasantry. While it is mandatory for those peasants who have taken loans to pay a premium to cover the value of the loan, those peasants who have not taken a loan (non-loanee) have to submit evidence of land records to join the scheme. State tenancy laws make it difficult for share-cropper or tenant farmers to provide any documentation of records. Consequently, the percentage of non-loanee farmers availing insurance remained less than 5 per cent during Kharif 2016 and Kharif 2015 according to an assessment by Centre for Science and Environment (CSE).

The second issue which makes the PMFBY a mockery, is that the assured value or value of insurance cover is kept at a minimum. According to an assessment by the Centre for Science and Environment, for soybean crop in Bundli district in Rajasthan, farmers were insured to a maximum of Rs 16,539 per hectare while potential output value was Rs 50,000. Similarly for paddy, the sum insured was Rs 17,096 against potential output per hectare of Rs 65,000. In Beed district of Maharashtra, against the cost of cultivation worked out at Rs 34,147 per hectare, the sum insured was a maximum of Rs 18,000 per hectare. Which means even if the loss a farmer incurs is more than 50%, he will hardly get any compensation. For the kharif 2016 season, an investigation has showed that the maximum claim that was applicable in moong had been worked out to Rs 16,130, which is only 40% of the total value of the crop.

In sum, what the farmer who is covered by this insurance scheme can hope to get as compensation for crop damage is much less than the actual losses suffered by him or her. The authorities calculate the loss on the basis of an average loss suffered by the village or measuring unit in the current season. This average loss is calculated on the basis of the difference between the average yield for the unit over the past seven years and the actual yield in the current season. With the sum insured kept deliberately low, the claim amount becomes a small fraction of the cost of production.

No new mechanisms have been set up for efficient and timely implementation of the PMFBY. This scheme is managed by the same mechanism, the State Level Co-ordination Committee on Crop Insurance (SLCCCI). The earlier schemes have been a total failure. The fact that the same mechanism has been retained shows the utter callousness of the central government.

According to the scheme the farmer’s premium is fixed at 2 per cent, 1.5 per cent and 5 per cent of Kharif, Rabi and annual commercial crops respectively. The remaining premium is to be shared equally by the central and state governments. However, what is set as the insured value of a crop in a particular district or cluster, is determined by bidding by insurance companies for the lowest rate. Keeping the insured value low enables the insurance companies to maximize their profits, by minimizing what they may have to shell out as compensation to farmers.

Monopoly profits from distress of peasants

The PMFBY scheme has fattened the purses of insurance companies, a majority of which are private monopolies (see Box). In the crop year 2016-17, a total of Rs 22,437 crore was paid to the insurance companies, according to RTI responses received by the Indian Express. Against such a large premium, the crop loss claims finalised by the insurance companies, including 11 companies in the private sector, came to Rs 8,088 crore. This leaves the insurance companies with a massive profit of Rs 14,349 crore.

The CSE assessment exposed that the PMFBY scheme provided humongous profit for insurance companies: Agriculture Insurance Company (AIC), a public-sector company, and 17 private companies. These companies profited at the expense of the tax paying working people while the farmers were provided no security from natural disasters. PMFBY played a significant role in the growth of non-life insurance industry in 2016-17. The gross premium of general insurance companies grew by 32 per cent, from Rs 96,376 crore in 2015-16 to Rs 1.27 lakh crore in 2016-17. Nearly half of this growth came from crop insurance.

Tamilnadu Case Study


A poster in Tamil demanding universal insurance coverage, payment of insurance claims without delay, setting up bank collection centres in revenue villages for insurance premium, agricultural inputs at affordable prices, unconditional cancellation of all peasant loans and an end to the insurance fraud.

In Keelamangam village of the rainfed Thoothukudi district, 230 peasants have paid their premium under the PMFBY scheme. Out of this only 20 urad dal farmers and 8 moong dal farmers have received compensation. Those who did not receive compensation have not been offered any explanation. Similarly in Chillangulam village, out of more than a 100 farmers only 25 were given compensation. The implication is that farmers who are already broke do not have money to start the next crop. They become victims of the vicious cycle of debt. Many cases of fraud have surfaced where city-based landlords who have left their land fallow for many years have managed to received compensation on bogus insurance claims with the help of corrupt government officials.

Same is the case with other districts such as Madurai, Ramanathapuram, Sivagangai, Pudukottai, Virudhunagar and Tirunelveli. In the Cauvery delta districts of Thanjavur, Tiruvarur and Nagapattinam, crores of insurance dues for 2015-16 and 2016-17 remains unpaid.

In Thoothukudi district of Tamilnadu, the Thamizhaga Vivasayigal Sangam along with other organisations has been agitating for full coverage of all farmers under the scheme and proper implementation of the scheme (See poster). Farmers have come out frequently in demonstrations in anger pointing our that: 1) only 10% of farmers get any compensation, 2) no explanation is provided to a farmer for exclusion, 3) partial compensation is delayed beyond sowing for the next season and 4) not all crops are covered under insurance. After massive demonstrations, the peasants had won partial victory in getting banana, chilly and coconut included in PMFBY.

In September 2017, condemning the undue delay in disbursing the crop loss compensation by ICICI Lombard, peasant activists blocked vehicular traffic at Ambasamudram, Tenkasi, Sivagiri, Sankarankovil Town and Thiruvenkatam. The police arrested 459 protesters, including 153 women agitators. In Thoothukudi district, the farmers staged road roko at Kovilpatti, Ottapidaaram, Srivaikundam and Naalaattinpudhur, where police arrested 275 protesters, including 60 women. In Kanniyakumari district, the police detained 87 protesters when they attempted to block traffic at Thuckalay.


Crop insurance has been a fraud committed by the Indian state on peasants, and on the general public. After complete devastation, peasants come to the insurance company in the hope that they will recover at least a part of their loss and keep their families away from hunger. However, the greed of capitalist insurance companies for maximum profits deprives the peasants of their due and pushes them to suicide.

Weather data for the past 117 years shows that there has been a steady increase in extreme weather events in India. Our peasants who feed the entire country need to be provided a mechanism to face this. It is the duty of the state to ensure the well-being of peasants by providing a robust irrigation network, improved farm related infrastructure, technology for crop diversification, necessary inputs for multi-cropping, assured and remunerative support price, guaranteed purchase of all crops through a universal public procurement system. All these need to be taken care of first. Crop insurance is the last resort. However, the Indian state has pushed the peasants to the brink of disaster. The insurance monopolies have descended like vultures, eager to profit from the misery of the peasants.

Experience of the peasants in all parts of the country has amply proved that the Indian State serves the interests of big monopoly capitalists. It does not protect the peasantry. The State keeps introducing schemes to pacify the peasants while the capitalist-imperialist system impoverishes them day in and day out.

The way forward for all peasants is to continue and escalate the struggle against the big capitalists and the Central and state governments which do their bidding. The way forward is to unite firmly with the working class and fight with the goal of putting an end the rule of the parasitic capitalist class and replacing it with workers’ and peasants’ rule!


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crop insurance    Apr 16-30 2018    Political-Economy    Economy     2018   

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