Pradhan Mantri Fasal Bhima Yojana (PMFBY) allows big businesses to profiteer at the cost of the farmers

Pradhan Mantri Fasal Bhima Yojana



Smt Nirmala Sitharaman

Union Finance Minister

Dear Smt Sitharaman,

I refer to a news report ( that Shri Dharmendra Pradhan, the Union Education Minister has written to the Union Agriculture and Farmers Welfare Minister, apparently on the basis of his own sordid experience in Odisha, to “launch an investigation into the ‘scam’ committed during the implementation of the Pradhan Mantri Fasal Bima Yojana (PMFBY)”. He referred to the “abysmally low insurance payment” to the farmers for crop loss suffered by them due to drought during the 2021 Kharif season, whereas huge premium amounts were pocketed by private insurance companies.

What Shri Dharmendra Yadav has cited in the case of Odisha represents only the tip of the iceberg of large scale diversion of public funds under PMFBY to private insurers’ pockets, cutting across almost all the States.

In this connection, I had addressed the Comptroller & Auditor General (CAG) of India in September this year ( seeking a comprehensive audit of the way the scheme has been designed and implemented, more to benefit private insurers than farmers. I have extracted below the relevant portions of the said letter for your ready reference.

The total premium paid under PMFBY by the Centre, the States and the farmers to insurance companies during the last 5 years was Rs 1,26,521 Crores, whereas the insurance companies in turn paid only Rs 87,320 Crores to the farmers towards settlement of claims. In other words, the insurance companies have benefited from PMFBS by Rs 39,201 Crores

Over the last 5 years, as a result of procedural hurdles in settlement of claims, the coverage of the scheme has declined. For example, over the 5-year time span, the number of farmers covered has come down by 29% during Kharif and 33% during Rabi.

The insurance companies paid only Rs 87,320 Crores to the farmers against the latter’s claims totalling Rs 92,954 Crores. Many farmers, though covered under the scheme, would not have filed their claims.

90% of the CPSE insurance companies have settled most claims, often incurring losses, whereas it is the private insurance companies that have fallen short of settling claims, profiting from the scheme by 60-70%.

For example, Bharti AXA profited to the extent of 72%, Reliance 59% and Future 61%.

In some States such as Maharashtra, private insurance companies received substantial premium amounts from the Centre, the States and the farmers but displayed reluctance to settle farmers’ claims, sometimes leading to law & order problems (

According to the PMFBY portal (, farmers have paid premium amounts, during Kharif & Rabi seasons during 2021-22, of Rs 2291 crores & Rs 1387 crores respectively, whereas the corresponding premium amounts paid by the States are Rs 6826 crores & 5304 Crores and by the Centre, Rs 6693 crores & 4416 crores respectively. The PMFBY portal, for reasons best known to the concerned Central Ministry, fails to disclose the crop insurance claims of the farmers duly settled, apparently to keep the public in the dark.

The way the Centre has designed PMFBY, the way it has created a wide opening for private insurance companies to exploit it and the fact that the concerned Central Ministries have chosen to remain insensitive to private insurers not settling the farmers’ claims for years, leads one to the inevitable conclusion that the Centre is more responsible than the States for the PMFBS “scam”, as Shri DharmendraYadav has rightly described it.

Why should the Centre, in the first instance, invoke its extraordinary authority under Article 282 to create a channel outside the Finance Commission’s oversight, to transfer funds directly to beneficiaries, in the guise of a Centrally Sponsored Scheme (CSS) such as PMFBY, leaving little flexibility to the States to adapt it to suit the local requirements? What is the role played by the insurance regulator in this matter, who is statutorily required to safeguard the interests of the policy holders?

Had the scheme been implemented by public sector insurance companies, its implementation would have benefited the farmers more, as corroborated by the data on their performance vis-a-vis private insurers.

Since large amounts of public funds stand diverted under PMFBY to private insurance companies, outside the oversight of the Finance Commission, I would ask your Ministry to order a comprehensive investigation by an independent investigating agency to assess the gains made by private insurers at the cost of the farmers and the public exchequer, for which the concerned Ministries at the Centre should own responsibility.

May I call upon you to order an urgent investigation into this matter?

Yours sincerely,

E A S Sarma
Former Secretary to government of India

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