Over 3 years to 2020, as India’s farm crisis deepened, 18 insurance companies running Prime Minister Narendra Modi’s crop-insurance scheme rejected nearly a million claims. As pandemic and pestilence devastated farms, we reveal how the scheme’s complex fine print frustrates farmers and disregards individual loss
Hisar, Haryana: As 2020 began, Haryana cotton farmer Ramandeep sensed it would be harsher than the previous years: the winter rains were scanty, withering his crop of mustard and wheat.
In February that year, Ramandeep—a short, sturdy and self assured 34-year-old—allowed the automatic renewal of his farm-insurance policy under the Pradhan Mantri Fasal Bima Yojana (PMFBY), the Prime Minister’s Crop Insurance Scheme.
In 2017, when Ramandeep took a Rs 180,000 loan from a rural bank, he had no option but to sign up for the PMFBY—a five-year-old programme supposed to provide a safety net for those of India’s 290 million farmers who lost their crop to pest, flood and famine. If he wanted the loan, the government required him to sign up for the PMFBY.
As 2020 began, the government removed that requirement, but not only did Ramandeep think it was a good idea to keep the PMFBY insurance policy running, he persuaded others farmers in his home village of Kirtan in the western Haryana district of Hisar to follow suit.
“I sensed that this year (2020) might be extremely hard,” Ramandeep, told Article 14. Ramandeep’s advice appeared prescient.
On 24 March 2020, Modi imposed a national lockdown at a four-hour notice to stem the spread of Covid-19. Supply chains were disrupted, and, as the months rolled on, Ramandeep (who uses only one name) could not get seeds and fertiliser for the monsoon planting.
Then came the whiteflies, tiny insects about a third to a fifth the size of a grain of rice. They blanketed Kirtan’s cotton farms and killed the plants by sucking their life-giving sap. About a thousand farm families in Kirtan lost their cottoncrop, as did Ramandeep on his 1.5 acres, a little more than a football field.
Ramandeep said he lost about 80% of his crop. In a good year, he usually harvested 1,200 kg of cotton; in 2020 he got no more than 200 kg. He expected Rs 26,400 per acre as compensation, a figure he arrived at using the claims calculator on the PMFBY website. The calculator says a farmer would be paid Rs 33,000 per acre, if 100% of cotton crop is lost.
Ramandeep claimed Rs 26,400 per acre from Reliance General Insurance, one of 18 companies offering insurance for farmers under the PMFBY. But he got Rs 4,600 per acre, or about a seventh of the amount insured. Others farmers in Kirtan, similarly, got a fraction of what they claimed.
Kirtan’s farmers complained to the sarpanch, or village head, Rajpal Punia, who requested intervention from the district commissioner, Priyanka Soni. As proof, the farmers attached a countersigned report from the deputy tehsildar, who estimated that Kirtan lost 51% to 75% of its cotton harvest in 2020.
The farmers of Kirtan were not the only ones to feel hard done by the PMFBY. The claims of more than 928,000 farmers who had signed up for PMFBY were rejected across India in 2019-2020.
Agriculture Minister Narendra Singh Tomar in February 2021 told Parliament that the number of crop insurance claims rejected by insurance companies under PMFBY has multiplied 10 times in just two years, from 92,869 in 2017-18; to 204,000 in 2018-19; and 928,000 in 2019-20.
Priority To Profit
The key criticism and discontent with the PMFBY—as our conversations with farmers, government officials and insurance companies made evident—appears to be in its method of treating client farmers as a group, not individuals.
Insurance payouts are determined by offsetting large losses of some farmers against smaller losses, leaving many with grossly inadequate compensation. This makes the PMFBY financially viable for the government and insurance companies but leaves many farmers feeling cheated.
This discontent is reflected in the fact that more than 8.4 million farmers—around 15% of those who originally enrolled in PMFBY in 2016 had opted out of it by 2017-2018, according to documents accessed on September 2018 under the Right to Information (RTI) by an activist based in Haryana, P P Kapoor.
"PMFBY is a group insurance not an individual insurance,” acknowledged Gajraj Dandi, Haryana’s joint director for agriculture. “The yield was calculated for the entire village, not individual farmers. If the government as well as insurance companies started calculating crop loss acre wise, we will start running in losses.”
Ramandeep refused to accept this explanation, and other farmers we spoke to in his village and in Himachal Pradesh agreed. The logic offered by Dandi is evidence of the scheme’s primary weakness, said experts.
“If there are 100 families in a village and only one family lost its crops, that family would not be paid any compensation because 99 others did not report any loss,” said Himanshu (he uses only one name), associate professor and economist at the Centre for Economic Studies and Planning at the Jawaharlal Nehru University. “That is the very fault in the design of the scheme.”
Himanshu compared the logic used by Modi’s agricultural-insurance scheme with accident insurance. “Consider there are 100 drivers on a road, only one had an accident,” said Himanshu. “Can the insurers say that they would not pay that one driver because 99 others did not have an accident?”
Some farmers signed up, they said, because at the time there was no option, if they had taken loans or received credit cards under a government programme, as we explain later. Others were unaware of the calculations and fine print, none of it explained to them.
“We were cheated by PM Modi’s scheme that promised to help us during trouble,” he said. “When we needed it the most, PMFBY has let farmers down badly.”
The Promises The Scheme Made
PMFBY is a subsidised crop-insurance programme aimed at stabilising the income of farmers in a country where it has increased by Rs 2,500 per month in four years, about the same as per capita income increase in the general population. (Our calculation is based on data sourced from here, here, here and here.)
The programme was made compulsory for farmers who had taken crop loans and had Kisan Credit Cards (KCC) until 2020. Issued by commercial banks, small finance banks and cooperatives, the KCC cards allow farmers credit for agricultural and allied activities.
“The whole agricultural crop-insurance mechanism is a big fraud,” said Himanshu. “In PMFBY, over 90% of the farmers insured are in debt. It is their bank that is insuring its own loan given to farmers under KCC, rather than farmers insuring its crops through this scheme.”
The PMFBY is one of the world’s largest such insurance programmes, by farmers participating and third-largest by premia paid, according to the government. It allows farmers to pay 2%-5% of the premium, depending on cropping season and type of crop; the rest is shared equally between state and central governments.
While inaugurating the scheme in Madhya Pradesh in 2016, Modi had asked farmers to trust him. “Even if a single farmer’s crop is damaged in a village he will get the benefits of insurance," Modi said.
“More crop per drop,” the prime minister tweeted on 16 February 2016. Advertisements released by the ministry of agriculture promised that no farmer would be “alone in times of distress”; they would have “minimum premium, maximum, insurance”.
“I got to know that the scheme is optional from 2020,” said Ramandeep, who also doubles as a stringer for a local Hindi newspaper. “But in the middle of the pandemic, the general wisdom was to get our crops insured.”
Haryana cotton growers were already worried, as their share of premium under the PMFBY increased over 2.5 times, from Rs 620 per acre to Rs 1,650 in 2020, as the state withdrew its subsidy.
Ramandeep paid Rs 1,650 per acre as premium to Reliance General Insurance. The state of Haryana and the central government contributed Rs 3,102.
“However the insurance company paid me just Rs 4,600 per acre, which indicates that I had just 13% loss,” said Ramandeep. “There was no yield in the entire cotton belt. How can they arrive at this amount?”
A regional official of Reliance General Insurance, speaking on condition of anonymity because he is not authorised to speak to the media, said the calculations were done by the book. “The estimates for crop loss are given by the state government,” he said. “The formula to calculate the claim is also given by the central government. So where is the chance of discrepancy?”
Of the farmers enrolled under PMFBY, 84% are “small and marginal” farmers, which means their farms range from 2.5 to 5 acres, varying in size from one to four football fields. Finance Minister Nirmala Sitharaman set aside Rs 16,000 crore for the PMFBY for 2021-22, Rs 305 crore more than the previous year. That money is used to, among other things, subsidise premia, integrate land records with the PMFBY portal, run a crop insurance mobile-app and assess crop losses.
The PMFBY has been widely criticised (here, here and here). Former union agriculture secretary Siraj Hussain wrote that “out of all the ‘Pradhan Mantri’ schemes launched over the last few years—and there have been quite a few, including for “ideal” villages, life insurance, maternal health and irrigation—none has received as much criticism as the PMFBY”.
Himanshu, the economist, said aside from the fact it disregards individual losses, the PMFBY has other failings that its “humongous” budget does not address: not enough surveyors, no proper verification of crop losses, no outreach to make farmers aware of how it works.
The Cotton That Turned Black
Ramandeep has 7 acres of land but he tills no more than 5 acres. The rest is arid. He started sowing cotton on 1.5 acres of land in May 2020. Two months later, the whiteflies attacked.
"The whiteflies are so tiny that they look like a speck of dust,” said Ramandeep. “They stick to the veins of the leaves and eventually suck the water out of them. By August, my cotton plants turned black.”
Farmers across the tehsil, Bal Sambandh, also started reporting withered crops. The local administration was informed in August 2020. Ramandeep claimed the local revenue department’s initial report said farmers in his area lost no more than 10% of their crop to whiteflies. Protests broke out through Hisar.
“From local politicians to the farmer unions, all sat at Dharna outside the Deputy Commissioner’s office for over 10 days,” said Ramandeep. Protesting farmers questioned the report and demanded a special crop loss assessment.
The government agreed but substantially delayed the calculation of losses in Kirtan to September 2020. The chief criticism of the scheme revolves around calculating crop losses. The crop-cutting experiment, or CCE, estimates the yield of a crop during a cultivation cycle in a region, and it is this that determines insurance payouts.
The CCE is “the key” to the PMFBY, said a senior PMFBY official in Haryana, speaking on condition of anonymity since he was not authorised to speak to the media. “The measures of crop output from four different random locations in a village are taken at four times in a single season,” said the official “An average output is calculated out of that.”
“More the delay in assessment, less accurate the measurements,” he said.
Ideally, the CCE should be jointly done by state government and insurance officials. The agriculture ministry recommends use of satellite imagery and mobile phone apps to photograph images of destroyed crops and measure seasonal fluctuations to make accurate calculations. That does not always happen.
“In certain cases, local agriculture officers are manipulated by the insurance companies to show a good yield,” the PMFBY official said. “Sometimes the inverse is also true. Local politicians also force the officers to show poor yield despite good harvest for political gains in rural constituencies.”
Himanshu, the JNU economist, seconded that view.
“This is the problem with crop insurance,” he said. “They (officials) are looking at the average yield. Surveyors often take samples from only those areas in the village that have better yields, so that average will come down. Most of the time, surveyors do not even go on the field. That is how the data is fudged.”
The Complex Calculations, The Fine Print
A few km from Ramandeep’s home, we spoke to Sandeep Kumar Daila, 36, who also received Rs 4600 per acre as insurance payout for the losses he reported on his 6-acre cotton farm.
Complaints about the prime minister’s scheme were evident in neighbouring Himachal Pradesh (HP) as well. For the kharif or autumn crop of 2019, around 100 farmers in the southern district of Solan received less than Rs 200 per acre as compensation.
Two such farmers—Amar Nath and Ramki Devi—told Article 14 they were not even aware of any compensation due or paid. The duo, Dalit farmers from Jabli village, knew they were enrolled under PMFBY but did not know with which insurance company.
Despite repeated phone calls and text messages between 8 March and 11 March, Nisha Singh, Himachal’s additional chief secretary (agriculture), did not respond to Article 14’s queries.
“I am a reporter so I am aware how this scheme functions,” said Ramandeep. “However, many farmers don’t even know, and those who want to know are not told. Ignorance aids profits.”
The PFMBY officer quoted earlier explained the intricacies of the insurance payouts under the scheme: Actual yield (AY) determined through the CCE is compared with the average yield of the previous seasons (called threshold yield or TY) to calculate if the harvest was less than expected.
This is the formula:
Actual yield: average yield obtained in a farming season after CCEs. Threshold yield: average yield calculated from the best five years over the past seven years multiplied by sum insured.
“If the AY of the insured crop falls short of specified TY, all insured farmers growing that crop in the defined area are deemed to have suffered a shortfall in yield of similar magnitude,” said the scheme’s guidelines. “PMFBY seeks to provide coverage against such contingency.”
In other words, “if the average harvest falls short of the expected output in a village for a given season, then the farmer is compensated by multiplying the shortfall with sum insured”, explained Himanshu.
The local Reliance manager quoted earlier said figures for both TY and AY were given to the insurance firm by the Haryana Government. They calculated Ramandeep’s compensation, according to official government data and paid insurance into the bank accounts of farmers.
Asked for these calculations, Haryana joint director for agriculture, Dandi, said that the expected yield (TY) for the Kirtan village was 1304.45 kg per acre whereas the actual yield (AY) was 1112.83 kg per acre.
So, according to the government's estimate, the crop loss in Kirtan was just 191.17 kg per acre, compared to the 1,000 kg per acre that Ramandeep claims. “My expected yield is around 1200 kg,” he said. “In 2020, only 200 kg of cotton grew in my fields.”
Asked how the difference between a farmer’s claim and official calculations could vary by 800 kg, district agriculture officer Vinod Phogat, responsible for the CCE in Hisar district, disconnected the call. Despite repeated reminders, he refused to answer Article 14’s queries.
The official spokesperson of Reliance General Insurance did not respond to Article 14’s queries despite three weeks of requests. Instead Reliance General Insurance contacted this correspondent over nine times between 9 April 2020 and 12 April, 2020 seeking personal details of farmers quoted in the story.
Ramandeep’s claims were further substantiated by the deputy tehsildar, whose report, as we previously said, estimated the crop loss in Bal Sambandh tehsil as being between 51%-75%. The report said the audit was conducted by the patwari and kanungo (local revenue officers).
The PMFBY official said that the deputy tehsildar’s report was substantial proof to contest government’s estimates under CCE. “They should approach the courts,” he said. “They have enough proof.”
A local newspaper, the Tribune further reported that around 50,000 acres of cotton were damaged during the kharif season of 2020, describing the loss as the largest since 2015, when whitefly destroyed almost 70% of the region’s harvest.
Local revenue officer Rajbir Dhiman also told Article 14 he had proposed a relief fund of Rs 240 crore for farmers in Hisar district.
Dandi stood by the calculations of loss made by his officials.
"In that village (Kirtan) there would be farmers who had no loss, yet they would be getting compensation under PMFBY,” said Dandi. “And there would be farmers who had more loss than what was calculated as actual yield. After all, for the whole block one joint survey is conducted.”
“This is what it is!” exclaimed Himanshu. “Agriculture insurance, the way it is administered in our country, is exactly like that. In the area-based approach, you get compensation based on surveys done for the entire area, unlike individual insurance. That is why farmers like Ramandeep fail to get the security that PMFBY promises.”
(Srishti Jaswal is an independent journalist associated with Reporters’ Collective. She is an NFI grantee and mobile journalism fellow with Internews.Reportage for this story was supported by the National Foundation of India under its fellowship for independent journalists.)