Pradhan Mantri Fasal Bima Yojana : ‘One Nation – One Scheme’

Pradhan Mantri Fasal Bima Yojana : ‘One Nation –ONE Scheme deals with the need,objectives,risks,unit of insurance,limit of coverage,features of the PMFBY scheme.


Pradhan Mantri Fasal Bima Yojana : ‘One Nation –

One Scheme’

Pradhan Mantri Fasal Bima Yojana : ‘One Nation – One Scheme’

Pradhan Mantri Fasal Bima Yojana : ‘One Nation –
One Scheme’



The Union Cabinet has given green signal to Pradhan Mantri Fasal Bima Yojana, a new crop insurance scheme to boost farming sector in the country and to help farmers cope with crop losses. PMFBY replaced the
  • National Agricultural Insurance Scheme (NAIS) and
  • Modified National Agricultural Insurance Scheme (MNAIS).

The new Crop Insurance Scheme has been formulated in line with One Nation–One Scheme theme.PMFBY is designed to reduce the burden of crop insurance on farmers and ensure early settlement of crop assurance claim for the full insured sum.

The Weather-Based Crop Insurance Scheme (WBCIS) remains in place, though its premium rates have been made the same as in PMFBY. The Scheme shall be implemented through a multi-agency framework by selected insurance companies under the overall guidance & control of the Department of Agriculture, Cooperation & Farmers Welfare (DAC&FW) (under Ministry of Agriculture & Farmers Welfare (MoA&FW), Government of India (GOI)) and the concerned State.



Before the PMFBY, the National Agriculture Insurance Scheme (NAIS) and Modified NAIS (MNAIS) were there.The sum insured under MNAIS, particularly for the risky crops, was meagre.It was based either on the quantum of crop loans or on the capping of the sum insured; the crop damage assessment based on crop cutting experiments was time-consuming, and compensation to farmers often took several months —very often, more than a year. The existing insurance schemes are unable to protect the farmers against price fluctuations.Getting data on reliable yield and price is difficult because it keeps on fluctuating from season to season.The time taken to fulfill claims is quite high. This is despite the rules stating settlement within 45 day.


  • To provide insurance coverage and financial support to the farmers in the event of failure of any of the notified crop as a result of natural calamities, pests & diseases.
  • To stabilize 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.


All farmers growing notified crops in a notified area during the season who have insurable interest in the crop are eligible.


The enrolment under the scheme, subject to possession of insurable interest on the cultivation of the notified crop in the notified area, shall be compulsory for following categories of farmers:

  •  Farmers in the notified area who possess a Crop Loan account/KCC account (called as Loanee Farmers) to whom credit limit is sanctioned/renewed for the notified crop during the crop season.
  •  Such other farmers whom the Government may decide to include from time to time.


Voluntary coverage may be obtained by all farmers not covered in  above, including Crop KCC/Crop Loan Account holders whose credit limit is not renewed.



Following risks leading to crop loss are to be covered under the scheme:

1. YIELD LOSSES (standing crops, on notified area basis): Comprehensive risk insurance is provided to cover yield losses due to non-preventable risks, such as

  • Natural Fire and Lightning
  • Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Tornado etc.
  • Flood, Inundation and Landslide
  • Drought, Dry spells
  • Pests/ Diseases etc.

2. PREVENTED SOWING (on notified area basis): In cases where majority of the insured farmers of a notified area, having intent to sow/plant and incurred expenditure for the purpose, are prevented from sowing/planting the insured crop due to adverse weather conditions, shall be eligible for indemnity claims upto a maximum of 25% of the sum-insured.

3. POST-HARVEST LOSSES (individual farm basis): Coverage is available upto a maximum period of 14 days from harvesting for those crops which are kept in “cut & spread” condition to dry in the field after harvesting, against specific perils of cyclone / cyclonic rains, unseasonal rains throughout the country.

4. LOCALISED CALAMITIES (individual farm basis): Loss / damage resulting from occurrence of identified localized risks i.e. hailstorm, landslide, and Inundation affecting isolated farms in the notified area.

5. EXCLUSIONS: Risks and Losses arising out of following perils shall be excluded: War & kindred perils, nuclear risks, riots, malicious damage, theft, act of enmity, grazed and/or destroyed by domestic and/or wild animals. In case of Post–Harvest losses the harvested crop bundled and heaped at a place before threshing, other preventable risks.


  • PMFBY fixes a uniform premium of 2% of the value of sum insured to be paid by farmers for all kharif crops, 1.5% of sum insured for all rabi crops, and 5% of sum insured for annual commercial and horticultural crops or actuarial rate, whichever is less.
  • The balance premium will be paid by the government to provide the complete insured amount to farmers against crop loss on account of natural calamities.
  • The subsidy is divided equally between the state and the Central government. There is no upper limit on government subsidy for actuarial premium.
  • 25% of the likely claim will be settled directly in farmers account.
  • There will be one insurance company for the entire state.
  • The scheme also provides for coverage of post-harvest losses. The scheme will also cover localised crop losses like hailstones.
  • The use of technology like smart phones will be used to capture and upload data of crop cutting to reduce the delays in claim payment to farmers.
  • Remote sensing, GPS, drones will be used to reduce the number of crop cutting experiments.

Unit of Insurance:

The Scheme shall be implemented on an ‘Area Approach basis’ i.e., Defined Areas for each notified crop for widespread calamities with the assumption that all the insured farmers, in a Unit of Insurance, to be defined as “Notified Area‟ for a crop, face similar risk exposures, incur to a large extent, identical cost of production per hectare, earn comparable farm income per hectare, and experience similar extent of crop loss due to the operation of an insured peril, in the notified area.

Defined Area (i.e., unit area of insurance) is Village/Village Panchayat level by whatsoever name these areas may be called for major crops and for other crops it may be a unit of size above the level of Village/Village Panchayat. In due course of time, the Unit of Insurance can be a Geo-Fenced/Geo-mapped region having homogenous Risk Profile for the notified crop.


In case of Loanee farmers under Compulsory Component, the Sum Insured would be equal to Scale of Finance for that crop as fixed by District Level Technical Committee (DLTC) which may extend up to the value of the threshold yield of the insured crop at the option of insured farmer. Where value of the threshold yield is lower than the Scale of Finance, higher amount shall be the Sum Insured. Multiplying the Notional Threshold Yield with the Minimum Support Price (MSP) of the current year arrives at the value of sum insured. Wherever Current year’s MSP is not available, MSP of previous year shall be adopted. The crops for which, MSP is not declared, farm gate price established by the marketing department / board shall be adopted.

Further, in case of Loanee farmers, the Insurance Charges payable by the farmers shall be financed by loan disbursing office of the Bank, and will be treated as additional component to the Scale of Finance for the purpose of obtaining loan.

For farmers covered on voluntary basis the sum-insured is upto the value of Threshold yield i.e threshold yield x (MSP or gate price) of the insured crop.


De-risking agriculture does not begin or end with insurance. The assessment of risk should begin much before sowing and proceed beyond harvest. The decision of what to sow and reap is currently not a well informed choice based on a sound assessment of soil, yield and prices. If insured, small and marginal farmers show an increasing tendency to sow cash crops reliant on the monsoon—a classic case of moral hazard. It is here that better risk assessment, contract design and cooperatives prove handy. Mixed farming and inter-cropping also helps in diversifying the risks generally associated with mono cropping. Commodity futures are yet another solution to achieve price risk management and price discovery. Unfortunately in India, no significant price discovery has occurred in agricultural commodity markets which started their operation a decade ago. This is primarily because of the lack of integration between the futures and spot markets.



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