Inordinate delays in payment of premium by many state governments are forcing insurers to hold up claim settlements under Pradhan Mantri Fasal Bima Yojana (PMFBY), Centre’s flagship crop insurance scheme, says a report in the Financial Express. Claims worth Rs 1,866 crore are yet to be paid to farmers, while defaulting states are to pay their shares of subsidy to the tune of Rs 1,680 crore at the end of kharif 2019 season.
The bulk of the outstanding dues are from Gujarat, Telangana and Jharkhand (together over 97%), resulting in farmers in these three states still waiting for unsettled claims of Rs 1,593 crore, according to official data. “While most of the claims were paid till 2017-18, the defaults occurred from 2018-19 onwards,” a top executive of a leading insurance company was quoted in the Financial Express report. Unless the government pays the subsidy premium in time, insurers would find it difficult to clear the claims within the stipulated period, he said.
The Centre also doesn’t pay its premium share unless the state concerned clears its dues. Though there is provision for penalty for delayed payments of premium by state governments, this mechanism has not proven to be effective. Under PMFBY, premium to be paid by farmers is fixed at 1.5% of the sum insured for rabi crops and 2% for kharif crops, while it is 5% for cash crops. The balance premium is split equally between the Centre and states.
As many states were complaining about ever increasing premium, the Centre in February last year changed the guidelines. The Centre will foot the PMFBY subsidy bill to the extent of its formulaic share so long as gross premium level is up to 30% of the sum assured in non-irrigated areas and 25% in irrigated areas. The onus is on the states if they want to implement the scheme even if insurers quote any premium above 25-30%.