Bad Ideas Have Bad Consequences: Crop Insurance Takes A Hit In States That Announced Farm Loan Waivers

In a written response submitted to the Rajya Sabha on Friday (3 August) the government revealed that there has been a 15 per cent decline in coverage of farmers under the Pradhan Mantri Fasal Bima Yojana (PMFBY) scheme during 2017-18. Among the possible reasons leading to the decline could be generous farm loan waivers by state governments, it has been reported by The Economic Times.

From about 5.73 crore farmers in 2016-17 the crop insurance scheme coverage declined to 4.88 crore farmers for the year 2017-18. The declines came mainly from the states of Rajasthan, Uttar Pradesh, Karnataka, Bihar and Maharashtra. Of these states Karnataka, Rajasthan, Uttar Pradesh and Maharashtra had rolled out farm loan waver schemes for farmers. In UP, Karnataka and Maharashtra the loan waiver schemes had been announced just before insurance enrolment cut-off dates for the crops.

Apart from loan wavers acting an dampeners against signing up for insurance, Aadhaar led de-duplicaiton measures have also played a role in pushing the numbers down.

The scheme, however, has been doing well in terms of premium paid in and claims filed under the plan. Rs 165 billion had been paid in as premium during the 2016 kharif crop season - this number was pegged at Rs 195 billion for the same kharif crop season in 2017. Claims disbursed stood at Rs 102 billion and Rs 118 billion for 2016 and 2017 kharif crop seasons respectively.

Also read: Fasal Bima Yojana Is Not Working; Modi Should Reform It Before Farmers’ Anger Boils Over