Revamping Of Crop Insurance Schemes

  • 22 Feb 2020

  • On 19th February, 2020, the Union Cabinet approved revamping of "PradhanMantri Fasal Bima Yojana (PMFBY)" and "Restructured Weather Based Crop Insurance Scheme (RWBCIS)" to address the existing challenges in implementation of Crop Insurance Schemes.
  • These changes are proposed to be implemented from Kharif2020 Season throughout the country.


  • The move is aimed at increasing the coverage rate and enabling farmers to manage their agricultural risk in a better way.


  • The Centre was under pressure to make necessary changes in PM FasalBimaYojana after Andhra Pradesh, West Bengal and Bihar decided to exit the scheme citing high costs and the need to customize it based on geographical diversities.

Major Changes Made

Reduced Premium Share of Centre

  • Until now, farmers pay a fixed share of the premium: 2% of the sum insured for kharif crops, 1.5% for rabi crops and 5% for cash crops. Currently, the Centre and State split the balance of the premium equally.
  • Now it is decided to cap the Centre’s premium subsidy under these schemes for premium rates up to 30% for un-irrigated areas/crops and 25% for irrigated areas/crops.
  • Districts having 50% or more irrigated area will be considered as irrigated area/district for both the schemes.
  • However, Central share in Premium Subsidy to be increased to 90% for North Eastern States from the existing sharing pattern of 50:50.

Advance Technology Solution for Loss Estimation

  • For estimation of crop losses/admissible claims, two-Step Process to be adopted based on defined Deviation Matrixusing specific triggers like weather indicators, satellite indicators, etc. for each area along with normal ranges and deviation ranges.
  • Crop Cutting Experiments (CCEs) will not be mandatory for crop estimation, which is used to determine claim payouts.
  • Only areas with deviations will be subject to Crop Cutting Experiments (CCEs) for assessment of yield loss (PMFBY).

Cut-off Date 

  • Now cut-off dates for states to release their share of premium subsidy has been fixed.
  • Cut-off dates for invoking this provision for Kharif and Rabi seasons will be 31st March and 30th September of successive years respectively.
  • If states don’t release their share before the stipulated date, they won’t be allowed to implement the scheme.

Flexibility for States to Select Risk Cover 

  • The government has given flexibility to states/UTs to implement PMFBY and RWBCIS, and given them the option to select any number of additional risk covers/features like prevented sowing, localised calamity, mid-season adversity, and post-harvest losses. Earlier, these risk covers were mandatory.
  • Further, States/UTs can offer specific single peril risk/insurance cover, like hailstorm, etc. under PMFBY even with or without opting for base cover.

Voluntary Enrollment 

  • In another significant change, enrolment in the two schemes has also been made voluntary for all farmers, including those with existing crop loans. When the PMFBY was launched in 2016, it was made mandatory for all farmers with crop loans to enroll for insurance cover under the scheme.

Compulsory Time Period for Insurance Companies

  • It is proposed to modify certain parameters and provisions of the ongoing schemes of PMFBY and RWBCIS under which allocation of business to insurance companies will be done for three years.
  • Currently, the tenders floated by the States are for one-year, two-year or three-year periods.

Expected Benefits

  • Stabilizing Farm Income:With these changes it is expected that farmers would be able to manage risk in agriculture production in a better way and will succeed in stabilizing the farm income.
  • Better Risk Management and Increased Coverage:Further, it will increase coverage in north eastern region enabling farmers to manage their agricultural risk in a better way.
  • Accurate Loss Estimation:The proposed two-step loss estimation processwill enable quick and accurate yield estimation leading to faster claims settlement.


  • The Centre’s decision has invited criticismfrom many with some saying the move foretells the impending death of the scheme.According to the critics, reduction in premium subsidy means that the states will have to bear extra burden on premiums. As such, many states have been unable to bear their share of premiums.
  • By capping the subsidy for premium rates up to 30%, the Centre wants to dis-incentivise certain crops in such areas where growing these crops involve high risks in terms of crop insurance premiums.
  • Additionally, it will lead to a rise in the rates of premium, as the area covered under insurance and the number of enrolled farmers is expected to come down significantly.
  • Further, making participation voluntary is one way of lifting the security net of farmers.Non-loanee farmers under the crop insurance schemes are much fewer than loanee farmers. If the latter opt out of the schemes, the number of insured farmers will drastically come down.
  • PMFBY drew flak from a wide variety of stakeholders. Farmer groups and opposition politicians have claimed that private insurance companies have made windfall gains on the scheme.
  • Contrarily, several major insurers, including ICICI Lombard and Tata AIG, have opted out of the scheme in 2019-20, reportedly due to losses because of high claims ratios.

Pradhan Mantri Fasal Bima Yojana (PMFBY)

  • PMFBY was launched in 2016, after scraping down the earlier insurance schemes viz. Modified National Agricultural Insurance Scheme (MNAIS),Weather-based Crop Insurance Scheme and the National Agriculture Insurance Scheme (NAIS).


  • To provide insurance coverage and financial support to the farmers in theevent of failure of any of the notified crop as a result of natural calamities,pests & diseases.
  • To stabilise the income of farmers to ensure their continuance in farming.
  • To encourage farmers to adopt innovative and modern agricultural practices.
  • To ensure flow of credit to the agriculture sector.

Restructured Weather Based Crop Insurance Scheme (RWBCIS)

  • Launched in 2016, RWBCIS aims to mitigate the hardship of the insured farmers against the likelihood of financial loss on account of anticipated crop loss resulting from adverse weather conditions relating to rainfall, temperature, wind, humidity, etc.
  • WBCIS uses weather parameters as “proxy” for crop yields in compensating the cultivators for deemed crop losses.
  • Pay-out structures are developed to the extent of losses deemed to have been suffered using the weather triggers.

Coverage of Crops

  • Food Crops (Cereals, Millets and Pulses)
  • Oilseeds
  • Commercial/ Horticultural Crops