Pradhan Mantri Fasal Bima Yojana

Also called: PMFBY · Topic: Land Use, Farming Systems and Cropping Seasons in India · NCERT: Class 7, Ch 1 "The Story of Indian Farming"

Meaning

The Pradhan Mantri Fasal Bima Yojana (PMFBY) is India's central crop insurance scheme, launched in 2016. It pays farmers when their crops fail because of natural calamities, pests or diseases. The farmer pays only a small premium: at most 2% of the sum insured for kharif food and oilseed crops, 1.5% for rabi food and oilseed crops, and 5% for annual commercial and horticultural crops.

It matters because about two-thirds of India's cropped area depends on rain. One failed season can push a small farmer into a debt trap. PMFBY is the government's main risk cover for farmers.

Explanation

Why farmers need crop insurance

• The monsoon is erratic. It can come late, stop early, fail, or bring too much rain at once.
• Too little rain → crops wilt and wells dry up → output falls.
• Too much rain in a short time → fields flood → standing crops are lost and topsoil is washed away.

• NCERT calls drought and flood the "twin menace" of Indian farming.

• Farmers borrow to farm. Seeds, fertilisers, pesticides, diesel and machines are costly. So small farmers borrow from banks or from moneylenders at high interest.

• Crop failure breaks the repayment chain.
• The crop is lost, so there is no income to repay the loan.
• The debt grows into a debt trap.

• In extreme cases, this ends in farmer suicides.

• Insurance breaks this chain. If the crop fails, the insurance payout replaces part of the lost income. The farmer can then repay loans and sow the next crop.

What the scheme covers

• Natural calamities: drought, flood, hailstorm and cyclone.
• Pests and diseases that damage crops.
• Climate change raises the need for cover. It brings rain at the wrong time and more extreme events, such as heatwaves and cloudbursts.

Who pays the premium

A premium is the fee paid for insurance. Sum insured is the amount the farmer is covered for.

Crop type	Maximum farmer premium (% of sum insured)
Kharif food and oilseed crops	2%
Rabi food and oilseed crops	1.5%
Commercial and horticultural crops (annual)	5%

• The farmer pays only this small, capped share.
• The rest of the premium is a government subsidy. Since Kharif 2020, the Centre and states share it 50:50. For the North-Eastern states, the split is 90:10 [3].

The 2020 revamp

• Before 2020: the scheme was compulsory for farmers who took crop loans.
• After the 2020 revamp: joining became voluntary for all farmers, including loanee farmers [3].
• Digital support: the Krishi Decision Support System (KDSS), under the Digital Agriculture Mission (2024), is a geospatial system (one based on maps and satellite data). It brings together remote-sensing data on crops, soil, weather and water resources [2]. It helps with crop estimates, drought monitoring and insurance claims.

Where it occurs

• All of India: PMFBY is a central scheme. It began in 2016 and is run by the Union government together with the states, which share the premium subsidy [3].
• North-Eastern states: these get a special subsidy split of 90:10 (Centre:state) [3].
• Rainfed drylands: these need cover the most. Yields are lowest here, only one crop is possible in most years, and there is no assured water.
• Flash-flood zones: flash floods (sudden floods from very heavy rain in a few hours) hit the drylands of Maharashtra, Gujarat and Rajasthan in 2006 and 2017. Dry soil soaks up water slowly, so heavy rain runs off and floods low ground.
• Distress hotspots: in 2022, the leading states for farmer suicides were Maharashtra (37.6%), Karnataka (21.2%), Andhra Pradesh (8.1%), Tamil Nadu (6.4%) and Madhya Pradesh (5.7%) [5]. These are mostly rainfed states, where crop risk is highest.
• Different risks in different regions: a dry Rajasthan farm mainly faces drought. A wet Assam farm mainly faces floods. PMFBY covers both kinds of loss.

Don't confuse with

• Personal Accident Insurance Scheme (PAIS): it covers the farmer's own life and body against accidents. PMFBY covers the crop.
• Kisan Credit Card (KCC): it gives cheap short-term loans for farm inputs. PMFBY gives insurance payouts after a crop loss. KCC is credit, PMFBY is risk cover.
• Minimum Support Price (MSP): a price the government sets before sowing, at which it buys certain crops. MSP protects against a price crash. PMFBY protects against a loss of output.
• Soil Health Card (2015): it tells each farmer their soil's nutrient status and the right fertiliser dose. It came in 2015, a year before PMFBY (2016).

Prelims Hooks

• PMFBY was launched in 2016. The Soil Health Card scheme came earlier, in 2015.
• Maximum farmer premium: Kharif 2% · Rabi 1.5% · Commercial/horticultural 5%. Trap: the rabi rate is lower than the kharif rate.
• Risks covered: natural calamities (drought, flood, hailstorm, cyclone) and pests and diseases.
• Since Kharif 2020, the premium subsidy is shared 50:50 by the Centre and states, and 90:10 in the North-East [3].
• Trap: PMFBY is not compulsory for loanee farmers any more. It has been voluntary for all farmers since 2020 [3].
• The KDSS (a separate DPI under the Digital Agriculture Mission, not part of AgriStack) uses remote-sensing data that supports insurance claims [2].

Mains Points

• Insurance as a shield against agrarian distress (GS-III): an erratic monsoon, tiny holdings (average 1.08 ha, with small and marginal farmers about 86% of holders in 2015-16 [4]) and costly inputs leave farmers exposed. Crop failure turns debt into distress. In 2022, 11,290 people in the farming sector died by suicide, which was 6.6% of all suicides in India [5]. PMFBY's low, capped premiums aim to break this crop failure → debt → distress chain.
• Regional need and design (GS-I/III): risk is sharpest in rainfed drylands, with drought, one crop a year and flash floods (Maharashtra, Gujarat and Rajasthan in 2006 and 2017). Cover is also growing more important as climate change brings more extreme weather. The 90:10 subsidy split for the North-East [3] shows how cost-sharing is adjusted for weaker regions.
• From compulsory to voluntary, and towards data (GS-III): the 2020 revamp made PMFBY voluntary for all farmers [3]. The Digital Agriculture Mission adds farmer IDs, geo-referenced village maps, plot-level crop surveys and the KDSS [2]. These can make crop-loss assessment and claim settlement faster and better targeted.

Related concepts

• Problems of Indian agriculture
• Agricultural indebtedness
• Agricultural underemployment
• Digital Agriculture Mission

Read more

• Problems of Indian agriculture and the support system