Agriculture Insurance in India: Co-ordinating the Efforts of a Dozen Stakeholders (and Counting)

In 2016, the Government of India introduced the Pradhan Mantri Fasal Bima Yojana (PMFBY), also known as the Prime Minister Crop Insurance Scheme, in a herculean effort to protect nearly 40 million farmers nationwide against agriculture production risks. (To learn more about India’s crop insurance scheme, refer to this previous blog post.)

Despite its remarkable success in the first year of launch, PMFBY is facing certain challenges in its implementation. In order to address these challenges and discuss some possible solutions, we decided to write a series of blog posts on “Agriculture Insurance in India”. In the first blog post of this series, we focused on the farmers’ perspective and discussed the challenges faced by them in the enrolment of the scheme. (To read the first blog post click here)

In the second blog post of this series, will we be focusing on the structure and implementation of the crop insurance scheme. A major challenge faced by the scheme is the confusion and delays caused in its implementation due to the large number of stakeholders involved. In order to understand the root of this problem, we first need to understand the existing structure of the scheme.


The Crop Insurance Operational Timeline

According to the current implementation of the scheme, farmers can enrol in crop insurance through a bank. The farmer enrolment information is then passed on to the respective insurance agencies by the banks. Once the enrolment period is over, the state and central government pay their share of the premiums to the insurance companies by a fixed date. At the end of the cropping season, crop yield assessment is carried out by the government, and this data is forwarded to the insurance agencies. On receiving this data, insurance companies would assess the loss claims and issue payouts through the bank. A more detailed breakdown of the process  for every cropping season can be seen in the timeline below:


More Than 15 Stakeholders Involved per State

According to the guidelines of the PMFBY scheme, “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), Ministry of Agriculture & Farmers Welfare (MoA&FW), Government of India (GOI) and the concerned State in co-ordination with various other agencies; viz Financial Institutions like Commercial Banks, Co-operative Banks, Regional Rural Banks and their regulatory bodies, Government Departments viz. Agriculture, Co-operation, Horticulture, Statistics, Revenue, Information/Science & Technology, Panchayati Raj etc.” That totals up to the involvement of about 15 government agencies per state, along with 18 empanelled insurance companies, and millions of farmers enrolling for the crop insurance. Sharing data and communication between such a large number of stakeholders for the implementation of the scheme leaves a lot of room for errors, and has caused confusion and delays in the claim settlement.

For instance, Arupathy P. Kalyanam (General Secretary, Federations of Farmers Associations of Delta Districts) complains, “Officials have bungled with names of the villages. They have sanctioned 29.27% attributed to Aruvapadi village in Mayiladuthurai block instead of Arupathy village of Sembanar Koil block — where I live — that was sanctioned 85.47% actually. When we enquired, the insurance companies blamed the Revenue, Agriculture and Cooperative departments for the disorganised disbursal while the respective department officials and bankers tried to blame the insurance firms.“ In other cases, the banks and primary agricultural cooperative societies have received the consolidated claim settlements but have yet to receive individual claim details to complete claim settlements. [1]

The miscommunication between different stakeholders and confusion regarding the processes involved in the scheme are largely responsible for the implementation issues of the crop insurance scheme. In order to achieve further success, it is necessary to ensure a high level of co-ordination between all the stakeholders.


How Can We Achieve Greater Co-ordination Among the Stakeholders?

While it is evident that the large number of stakeholders is a big challenge to tackle, it is important to note that a scheme of such a large magnitude cannot possibly be run without these stakeholders. It follows then, that a higher level of co-ordination between these stakeholders is necessary. Currently, the stakeholders involved are merely trusted to do their jobs on time and correctly, but a lack of a regulatory body has led to a poor implementation of the scheme. Since the structure of the scheme is highly interdependent, one misstep may cause a domino effect across the entire scheme.

In order to achieve greater co-ordination, a designated agency (either public or private) can be appointed to be in charge of the implementation of the PMFBY scheme in each state. This agency would ensure that both the state and the central government pay their premium shares to the insurance companies on time. It would assess the crop yield at the insurance unit level thoroughly, and convey this data to the insurance companies. It would then ensure that the insurance companies disburse the correct payouts in a timely fashion. Appointing a designated agency for implementation would thus be the first step towards solving the problems faced by the scheme.

Taking this step would reduce confusion and increase the accountability of errors, however it would not solve all the challenges faced in implementation. If we analyse the existing structure of PMFBY, it is evident that a large number of agencies had to be involved in order to carry out the Crop Cutting Experiments (CCEs) on the ground level to assess the crop yield, and communicate this data to the respective insurance companies. However, conducting these CCEs manually (in some cases 2,000 CCEs per district) across the entire country, and sharing this data with the concerned agency is not an easy task.

In order to achieve more streamlined implementation of the scheme, it is necessary to improve the crop yield assessment processes using technology to assess losses and sharing data among the stakeholders involved. Satellite imaging, Remote Sensing, and NDVI technology could be used to assess crop yields. This reduce the reliance on man power, speed up the settlement process, and also increase transparency. All the information regarding the PMFBY scheme can then be stored centrally in an online portal. This portal is key to clear data communication between all the stakeholders, and would ensure a successful implementation of the scheme.



Due to the current structure of the PMFBY scheme, the organisational challenges between a large number of stakeholders is impeding the successful implementation of the scheme. In order to overcome this, it would be helpful to appoint an agency that would be in charge of the organisation and implementation of the scheme. Additional progressive steps like the adoption of technology, and improved crop yield assessment processes are necessary for a better implementation of the crop insurance scheme.


Upcoming Blog Posts

In our last and final blog post of this series, we will explore the idea of an integrated portal in order to ease communication between all the stakeholders involved in the crop insurance scheme.


To read the first blog post in this series, click here

Published in Asia Crop Insurance IFM India


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