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Pradhan Mantri Fasal Bima Yojana (PMFBY)


Pradhan Mantri Fasal Bima Yojana (PMFBY)

The role of farmers is highly underrated, but as the saying goes, they are the backbone of the society we live in. The Government of India introduced the Pradhan Mantri Fasal Bima Yojana (PMFBY) in the year of 2016 with the primary objective of insuring the farmers and backing them with necessary financial support on the occurrence of a failure of any of the notified crops owing to natural calamities, pests and diseases. In this article, we look at PMFBY in detail.


The primary objective of the scheme, as we now understand, is to insure the farmers in the event of a failure of any of the notified crops. Furthermore, it seeks to accomplish the following objectives:

  • To stabilize the income of farmers to ensure continual farming.
  • To promote the utilization of innovative and contemporary agricultural practices.
  • To ensure flow of credit to the agricultural sector.

Salient Features of the Scheme

  • The scheme is mandatory for the farmers who have availed loans.
  • Farmers merely need to pay a unified premium of 2% for all Kharif crops, 1.5% for all Rabi crops and 5% for annual commercial and horticultural crops.
  • Three levels of indemnity (70%, 80% and 90%) corresponding to crop risks in the area will be available for all crops.
  • The premium rates to be paid by the farmers are considerably low and the remaining premium will be paid by the Government to provide the complete insured amount to the farmers against crop loss on account of natural calamities.
  • Government subsidy has no upper limits.
  • Removal of caps to provide complete compensation to the farmers.
  • As an initiative to benefit the sector with the advances of technology, smart phones will be used to capture and upload data of crop cutting and remote sensing will be used to reduce the number of crop cutting experiences.
  • The cost of using technology will be equally shared among the State/UT and Central Governments.

Implementation Process

The scheme will be processed through a multi-agency framework by selected insurance companies under the overall guidance and control of the Department of Agriculture, Cooperation and Farmers Welfare (DAC&FW), Ministry of Agriculture and Farmers Welfare (MoA&FW), Government of India and the concerned state in co-ordination with the pertinent agencies.

Given a scenario of crop loss, the farmer will be compensated by determining the difference between the threshold yield and actual yield. The threshold yield is calculated based on average yield of the last seven years. The compensation is fixed based on the scale of risk for the notified crop.

The scheme will be implemented on an ‘Area Approach Basis’ for each notified crop for widespread calamities. The unit of insurance could be demographically mapped with the region which has a homogeneous risk profile for the particular crop.

With respect to risks pertaining to localized calamities and post-harvest losses on account of defined peril, the Unit of Insurance for loss assessment shall be the affected insured field of the individual farmer.

The Aspect of Coverage

Let us now understand the coverage of the scheme with respect to farmers, crops and risk.

Coverage of Farmers

Farmers who are growing notified crops in notified areas are considered to be eligible for the scheme. The scheme must be mandatorily availed by the following category of farmers, subject to the possession of insurable interest on the cultivation of the notified crop in the notified area:

  • Farmers in the notified area holding a Crop Loan Account/KCC account in whose favor the credit limit is sanctioned or renewed for the notified crop during the crop season.
  • Other farmers whom the Government may decidedly include.

On the other hand, voluntary coverage may be availed by the farmers who are not covered above.

Coverage of Crops

The following crops are covered under the scheme:

  • Food crops (Cereals, Millets and Pulses)
  • Oilseeds
  • Annual commercial / Annual horticultural crops

Coverage of Risks

The following risk factors are covered under the scheme:

  • Yield losses which resulted out of risks that couldn’t have been prevented. A few examples can be storm, cyclone, etc.
  • Indemnity claims up to 25% of the sum insured.
  • Post harvest losses can be availed within a period of 14 days from harvesting for those crops which are kept in “cut and spread” condition to dry in the field.
  • Occurrence of loss or damage due to unidentified localized risks such as landslide, hailstorm etc

Insurance Providers

The following companies are designated to provide insurance services with respect to the scheme:

  • Agriculture Insurance Company
  • Cholamandalam MS General Insurance Company
  • Reliance General Insurance Co. Ltd.
  • Bajaj Allianz
  • Future Generali India Insurance Co. Ltd.
  • HDFC ERGO General Insurance Co. Ltd.
  • IFFCO Tokio General Insurance Co. Ltd.
  • Universal Sompo General Insurance Company
  • ICICI Lombard General Insurance Co. Ltd.
  • Tata AIG General Insurance Co. Ltd.
  • SBI General Insurance
  • United India Insurance Co.