What Ails PMFBY, the Crop Insurance Scheme and Why Are Farmers Not Satisfied with It?
In February 2020, the Indian government approved the revamping of the Pradhan Mantri Fasal Bima Yojana (PMFBY) or the crop insurance scheme to address some previous challenges in the implementation of the scheme.
 
The PMFBY is designed to protect farmers from natural calamities, pest or insect attack and diseases and help them get back on their feet by providing financial support through claim settlement.
 
The government made the scheme voluntary for all the farmers from Kharif-2020 onwards. Earlier, the scheme was compulsory for all the loanee farmers.
 
Now, farmers with loan dues can opt out of the scheme by submitting a simple declaration to their bank branch seven days before the cut-off date of enrolment. 
 
However, there are still some issues being faced by farmers, the major one being change in the insurance company every year, which they feel makes it difficult to submit claims and grievance redressal applications, if any. 
 
One of the readers, Santosh Kulkarni from Gadag district in Karnataka, shared his observations on the PMFBY scheme. He also shared feedback from farmers on the ground level. Based on his observation, Moneylife approached Shrirang Samant, who has worked in senior leadership roles in the general insurance industry, both in the public and private sectors, to understand the scheme. While he was not directly involved in the crop insurance business, he discussed this with several of his colleagues, who had worked in the segment and shared their feedback. We also approached another expert from the insurance industry, who shared his views on the scheme, but does not want to be named (we will refer to him as Mr Iyer). 
 
According to Mr Samant, the PMFBY follows a detailed operational manual, which covers all aspects of the scheme, right through to claims and grievance redressal in respect of claims. These guidelines are updated every year, the latest one, operational for Kharif 2020 is available on the PMFBY website. 
 
The Union government has designed and developed a National Crop Insurance Portal (http://www.pmfby.gov.inNCIP) (www.pmfby.gov.in) which has been in use since kharif 2018. NCIP has been operationalised for auto administration and seamless flow of data, information, reports on real-time basis. State governments are no longer allowed to create, or use a separate website for crop insurance purposes. Karnataka is already running its portals on crop insurance but eventually it will have to migrate to NCIP.
 
Broadly, the scheme covers a range of crop failure and diminution scenarios, at a basic crop unit of a loanee or non-loanee farmer. The geographical unit is a panchayat. Insurance companies are invited to tender and once that is accepted, the farmer pays a fixed percentage, the rest being paid by the state. There are well-defined procedures for lodging and adjusting claims. 
 
Here are the excerpts…
 
Q. Every time there is new insurance company being empanelled and farmers have been asked to pay insurance premium before due date. In my view, stakeholders like farmers, state government, non-government organisations (NGOs) and other stakeholders should be heard or given an opportunity to present their opinion before appointing an insurance company for any state.
 
Shrirang Samant: The scheme is out for tender each year and the lowest (L1) insurer is naturally selected, which explains why there is a new insurance company each year. Payment of premium before the inception of the cover is mandated under Indian Insurance Act – remember this is an insurance scheme. As for the other stakeholders, both the central and the state government have prescribed a consultative mechanism which has to be followed each year. 
 
Mr Iyer: Selection of insurance companies is carried out by the state government by adhering to operational guidelines issued by theunion government, under which sealed tenders are called upon and L1 (the lowest) bidder is selected as the implementation agency.
 
Q. Every year farmers across the nation will pay premiums by the due date. When it comes to claim settlement, there is no fixed timeline. When we contact the insurance company to obtain premium payment receipt details, they ask us to approach the PMFBY helpline. Generally this helpline does not attend to any calls.
 
Shrirang Samant: Claim settlement follows a laid down process – the starting point is the assessment of the shortfall in the yield on the basis of crop cutting experiments (CCE). The PMFBY scheme operates on the basis of ‘area approach’ i.e. the defined areas for each notified crop.  For widespread calamities like draught and flood the insurance unit is the village or village panchayat or any other equivalent unit.  
 
Mr Iyer: There are strict guidelines for cut off dates of submission of yield data by states to insurance companies (usually two months after harvesting).
 
Also, the insurance company needs to pay the claim within the stipulated time, usually 21 days. In case insurers do not pay the claim within the stipulated time, there is also a provision of levying penalty on the insurer.
 
3. There are no details of crop loss estimation done by officials of the government or insurance companies anywhere.
 
Shrirang Samant: Loss estimation is done on the basis of predetermined sample ‘yield’ of a number of crop fields, to determine the actual yield against the yield insured. The results of loss data for an ‘area’ have to be loaded on the portal. This is not in the hands of the insurance company but is the responsibility of the concerned state. All the estimations of yield or crop losses should be compulsorily uploaded within the stipulated timeline on the NCIP by the concerned stakeholders and the admissible claims will be calculated on the NCIP. The status of claims and the claim amount will accordingly be shared with the farmers through NCIP. 
 
Per para 23.4, the loss reports and actual yield data shall be approved or reverted (in case of any discrepancy, concern on the authenticity, correctness of report or data) by the insurance company. Based on the loss reports and actual yield data, eligible claims are calculated through the NCIP and accordingly the payment of claims are initiated by the concerned insurance company and remitted directly into the beneficiary account as per the pre-defined timelines. The application-wise payment details viz. amount, reference number and date are entered or synchronised with the National Crop Insurance Portal -NCIP.
 
Mr Iyer: Crop loss estimation in localised surveys is filled in the presence of the farmer only and a representative of the insurer along with one of the state government records it in their apps. Similarly, crop yield estimation is also done in front of the farmer and recorded in the app provided by the government of India.
 
4. There is no mechanism to lodge a complaint or grievances by the stakeholders of the PMFBY scheme, like the banking and insurance ombudsman.
 
Shrirang Samant: Para 30 of the operational guidelines lays down an elaborate grievance redressal mechanism at district, state and central levels.
 
Para 30.6 also lays down a grievance redressal mechanism to be put in place by the insurance company. 
 
Mr Iyer: There is a proper grievance redressal mechanism available on PMFBY portal. Farmers can also send their complaint to the respective block or district agriculture officer.
 
5. Recently I have raised an issue with the Prime Minister’s Office (PMO) through CPGRAMS, in response the nodal officer instructed Bajaj Allianz General Insurance Co officials to look into the matter. The insurance company gave me the standard reply that they have not received the required data from the concerned department. 
 
Shrirang Samant: The insurance company will not pay the claim if the requisite data has not been received from the government – apparently form district level authorities in this case. Has the complainant lodged the grievance with the appropriate authority? I have also learnt informally that a number of farmers do not understand the process or are not educated sufficiently about it. What is needed is the effort on the part of the company or the government to educate the insured farmers. I imagine that the insurance companies do not want to commit resources to do so because of the peculiar structure of the scheme (tendering process works against long term commitment). 
 
Mr Iyer: The insurance company can settle claims only when they receive the premium subsidies as well as the yield data in time. In Karnataka, the system is already highly evolved and the state has its own app and portal. In fact, the state has been highly proactive in the settlement of claims at the right time.
 
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    COMMENTS

    madhukarsheth

    5 days ago

    Farmers will never be satisfied, however much you may give them.
    They get (almost) free water, electricity, subsidised fertilizrs.
    They sell all their produce with very high MinSupportPrice.
    They get Rs. 3Lakh for committing suicide. No Income Tax !!

    Which industry gets MSP ? Does City Middle Class get all these inputs free ?
    Farmers have lobby but CityMiddleClass = CMC = has no lobby after Shripad Dange & George Fernandes left. CMC needs activists like you, Ms Dalal.

    Newme

    2 weeks ago

    Why all the Central Government schemes named in Hindi. Why not in English all can understand.
    It\'s the six non-Hindi States of Guj, Maha and 4 Southern states which contribute the maximum tax to Central coffers. In fact Hindi speaking BIMARU states are the most backward. Very irritating.

    MONEYLIFE EXCLUSIVE: Was Anugrah Stock & Broking Diverting Investors’ Money into Real Estate?
    Investors who seem in danger of losing nearly Rs1,000 crore with Anugrah Stock & Broking Pvt Ltd now suspect that the owner, Paresh Kariya, may have been diverting funds into real estate and other businesses. A director’s database search by the names of Mr Kariya and his wife throw up other directorships that included  Anugrah Realty Developers Private Limited (incorporated in 2007) and 10 other corporate entities. 
     
     
    According to the details readily available on the ministry of corporate affairs (MCA) website, Anugrah Realty Developers is currently an active entity and Paresh Kariya’s brother, Arvind Kariya is also a promoter of the company. 
     
    Digging deeper, it seems that the Kariya brothers are also part of a construction company called Dream Heritage Private Limited since 2011, along with its two founders, Kanayalal and Rajesh Mewada. The Mewadas had originally founded a now defunct construction company, Dream Infra and Projects Ltd with a registered address in Borivali, in 2011 and are currently joint directors with the Kariya brothers in Dream Heritage. The Kariya brothers most definitely seem to have ties in the real estate business, but whether investors' money from Anugrah was ever diverted to these companies remains to be seen. 
     
     
    Paresh Kariya’s wife Sadhana Kariya, has also been made director in the Anugrah group of companies (latest appointment in 2018) and is registered as the director in six corporate entities. Both Paresh and Sadhana are also promoters of a holding company called WW Technology Holdings Ltd (previously known as Suprabhat Holdings Ltd, 1983-2002). A quick search on Google reveals that this holdings company does not even have a functional website  which is filled with generic placeholder text.
     
     
    Looking into other companies that the Kariya brothers are both involved in, Wagad Fincap Ltd was founded and registered in 1993 by Paresh Kariya, and Sadhana Kariya was made a director in 2007. According to details present on the MCA website, this company is still active but other details as to its operations or functions are scarce. There is also no website for this company. 
     
    Together, the Kariya brothers are also directors on Polytex India Ltd, which according to its comparatively better maintained website (http://polytexindia.com/) is a registered non-banking finance company (NBFC) since 1987 and also on Rapid Credits and Mercantiles Private Ltd. Closer inspection also reveals that many of the aforementioned companies have been registered at the same Vile Parle address as Anugrah Stock & Broking. 
     
    Although there is no direct evidence connecting misappropriation or redirection of investors' funds to the sister concerns of Anugrah, these clues and details certainly do not provide any confidence in the company or its promoters' actions. 
     
    This is clearly a case for the police and economic offences wing (Mumbai EOW Registers Cheating Case against Anugrah Stock & Broking) to look into, since a case has already been registered. Investors of Anugrah, who may have blindly trusted the company, which had lured them with the offer of high monthly returns, have some hope of recovery if the police do find diversion of funds. Moneylife was the first to write about the fraud at Anugrah. All our reports can be accessed here.
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    COMMENTS

    aksharma.pnb

    2 weeks ago

    Liberalisation, privatization and globalisation are nothing but loot of public money via PSBs. Holding companies and subsidiaries should be totally banned and nobody should be director in more than one company. Every company must have owned separate office and MCA should monitor monthly and be made responsible. PSBs should monitor credit facilities daily and charged for any violation.

    Sudhir Mankodi

    2 weeks ago

    Real good investigative piece of journalism. How come when a journalist could find out such link and those sitting in the cosy offices of MCA and ROC, Mumbai could not see those connections and questioned the promotors? Gullible investors have to suffer now. The officials in charge should be made accountable and arrested, interrogated and punished after due legal process.

    s5rwav

    2 weeks ago

    EOW Wing of #MumbaiPolice should Make the #ROCMumbai as Co-Conspirator in the Financial Frauds of Thousands of Crores that seems to have Taken Place with Successive ROCs, Mumbai and RDs, Mumbai of Ministry of Corporate Affairs at Mumbai. I am Babubhai Vaghela from Ahmedabad on Whatsapp Number 9409475783. Thanks.

    Mumbai EOW Registers Cheating Case against Anugrah Stock & Broking
    The economic offences wing (EOW) of Mumbai Police has registered a case of cheating against the troubled stock-broking house, Anugrah Stock & Broking Pvt Ltd, for duping an investor of Rs8 crore. As Moneylife has reported in the past , the extent of investor losses in Anugrah could be as high as Rs1,000 crore and investigators have confirmed that more complaints having been subsequently coming to the EOW.
     
    The case was registered by Ashutosh Shah at Juhu police station against the firm’s director Paresh Kariya, and Kalap Shah and Anil Gandhi of Teji Mandi Analytics and others, under criminal breach of trust and criminal conspiracy. However, no arrests have been made yet. 
     
    Speaking to the Times of India, EOW chief Rajvardhan Sinha said, “We have received several complaint applications against the stock broking firm and others. A case has been registered and our teams are gathering details about the case.”
     
    The complainant was introduced to Anugrah by Teji Mandi Analytics, one of its many sub-brokers and was promised a 15% monthly profit/interest. He is one of the many investors who were lured in with promises of high returns and has now chosen to act by filing a complaint with EOW.
     
    During an inquiry, Mr Kariya has told the police that Anugrah has suffered losses of Rs600 crore and, hence, was not in a position to return the money to the complainant. Moneylife had also reported earlier that NSE had withdrawn all of the brokerage firm’s trading rights in the Future and Options (F&O), currency derivatives and commodity derivatives segment, on account of the regulatory concerns it had observed. 
     
    Investigation has been revealed that Mr Kariya had invested the complainant’s money in F&O and had also pledged his clients’ shares worth more than Rs100 crore to get a trading margin. Some of those shares were purchased using the complainant’s funds. 
     
    Mr Kariya has reportedly told the EOW that he suffered losses this year when the market crashed and that the clearing house had squared off his pledged shares, subsequently selling them at a lower price during this time. However, as one EOW officer pointed out, he had failed to keep his clients informed about the losses in the market. We have also recently learned that losses in the market are not entirely to blame for the present situation at Anugrah, as there have been indications that two ledgers were maintained for clients and regulators separately, a clear indication of fraud. 
     
    As per the latest update, a team led by senior inspector Rajesh Kelwe and assistant police inspector Deodikar of the EOW has carried out searches at Mr Kariya’s premises. 
     
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    COMMENTS

    s5rwav

    2 weeks ago

    #DailyReminder 13092020. Mr Sanjay Kumar the #ChiefSecretary to Govt of Maharashtra, Please Order to Dismiss the Incompetent and Inefficient and Corrupted Police Commissioner of Mumbai Refusing to File FIR against Mr #KamalGwalani the Rogue Officer of Indian Oil Corporation Limited at Mumbai and Not Arrested the Accused for Criminal Intimidation and Threatening to Babubhai Vaghela. I am Babubhai Vaghela from Ahmedabad. Thanks.....https://timesofindia.indiatimes.com/city/mumbai/maharashtra-sanjay-kumar-is-new-chief-secretary-ajoy-mehta-to-be-the-cm-uddhav-thackerays-advisor/articleshow/76620970.cms

    s5rwav

    2 weeks ago

    Dear #CPMumbai: Financial Frauds in Share Market, Concentrated at Mumbai, Happen Regularly and Routinely. However, EOW of #MumbaiPolice seem Unfazed unless Media News after Media News after Media News after Media News..... Report them these Financial Frauds of Thousands of Crores of Public Money. If You are Not #TotallyCorrupted like Your Officers Down the Line, Please Ensure these Financial Fraudsters who Brazenly Looted Thousands of Crores of Public Money are Arrested and Never get Bails & Not Allowed to Run Away from India to Other Countries that are Safe for these Financial Fraudsters. I am Babubhai Vaghela from Ahmedabad. Thanks.

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