Public money, private profits: Crop insurance scheme as goldmine for corporates

By Vikas Meshram 

The farmer in India is not merely a food provider; he is the soul of the nation. For centuries, enduring natural calamities and bearing debt generation after generation while remaining loyal to the soil, this community now finds itself trapped in a different kind of crisis. In February 2016, the Modi government launched the Pradhan Mantri Fasal Bima Yojana (PMFBY) with the stated objective of freeing farmers from the shackles of debt. It was an ambitious attempt to provide a strong safety net to cultivators repeatedly devastated by excessive rainfall, drought, and hailstorms. However, as the scheme completes ten years, an unsettling reality has emerged. The question is being asked openly: has a programme initiated for farmers’ welfare turned into a profit centre for insurance companies?

If one examines the scheme’s financials, the figures are striking. In just three years, insurance companies collected ₹82,015 crore in premiums. During the same period, farmers received ₹34,799 crore as compensation for crop losses. This leaves a gap of over ₹47,000 crore between premiums and claims. These funds came from farmers’ contributions and from subsidies provided by the central and state governments — in other words, from public money. When such an imbalance between premiums and payouts appears, both taxpayers and farmers have reason to seek accountability.

The ground reality is equally troubling. In parts of Haryana, farmers have staged protests over rejected claims and prolonged settlement delays. On one hand, crops are destroyed and household finances shattered; on the other, farmers often face complex paperwork and procedural hurdles. Allegations of irregularities have surfaced in implementation, including reports of fake applications and fraudulent bank accounts misusing the scheme. When corruption allegations surround such a programme, it becomes difficult to assess how much of the intended benefit actually reaches genuine cultivators.

On the technological front, there have been positive efforts. The scheme has incorporated satellite imagery, drone technology, and computerized yield estimation systems. Measures such as digital identification of 84.8 crore farmers, geo-referenced crop surveys, and direct benefit transfers aim to enhance transparency. Yet technology is only a tool, not an end in itself. Without political will and efficient implementation, even the best systems prove inadequate. The real test of success lies in ensuring that when a farmer’s crop fails, compensation is swift and fair — a goal that many argue remains only partially achieved.

Beyond crop insurance, the broader debt crisis presents a worrying picture. A recent report indicates that farmers in Punjab and Haryana — states that spearheaded the Green Revolution — are among the most indebted in the country. In Punjab, the average outstanding debt per agricultural household is ₹2.03 lakh, while in Haryana it is ₹1.83 lakh. The national average stands at ₹74,121. Only Andhra Pradesh and Kerala report higher debt levels, while states such as Nagaland, Meghalaya, and Arunachal Pradesh show minimal agricultural debt. This contrast points to structural imbalances within Indian agriculture.

To understand why relatively prosperous agricultural states carry heavy debt burdens, one must revisit the history of the Green Revolution. Punjab and Haryana strengthened India’s food security and reduced dependence on imports. However, rising input costs, stagnant farm incomes, fragmented landholdings, erratic monsoons, procurement delays, and mounting household expenses have created a cycle of indebtedness that is difficult to escape. While institutional credit can boost productivity, it may also normalize debt as a persistent condition.

The central government maintains that it continues to work in farmers’ interests. The Reserve Bank’s proposal to align loan tenure under the Kisan Credit Card scheme with crop cycles is seen as a constructive step. Digital transfers and simplified credit access are also positive measures. However, unless farm incomes rise in proportion to production costs, crop diversification becomes viable, and climate-related risks are addressed, the debt cycle is unlikely to break. Managing debt more efficiently does not necessarily eliminate it.

At a global level, concerns about sustainability further complicate the picture. A recent report by the EAT-Lancet Commission notes that nearly 30 percent of global greenhouse gas emissions are linked to food systems, with production activities crossing several planetary boundaries. Animal-based products contribute significantly to emissions, while cereals dominate nitrogen, phosphorus, and water use. Such trends raise long-term environmental and food security concerns.

In India, cereal-based diets remain dominant. Ensuring sustainable food security by 2050 may require greater inclusion of vegetables, fruits, nuts, and legumes. However, such dietary shifts could increase prices, affecting economically vulnerable families. Food habits are also shaped by culture, religion, region, and income. Therefore, reducing excessive chemical inputs, promoting affordable minimally processed foods, and prioritizing regionally suitable crops through procurement policies may be more practical steps. Without curbing groundwater depletion, preventing soil degradation, and reducing fossil fuel dependence in agriculture, sustainability goals will remain elusive.

The Commission also warns that weak regulatory systems, unchecked market monopolies, labour exploitation, environmental degradation, and undue corporate influence could obstruct meaningful reform. Strengthening collective bargaining rights for small farmers and ensuring regulatory processes represent both consumers and cultivators are seen as essential safeguards.

As for PMFBY, stricter and more transparent auditing of insurance companies is widely recommended. The regulatory framework may need strengthening to ensure a balanced premium-to-claim ratio. Timely settlement of claims is critical; prolonged delays undermine trust. Increasing farmers’ participation in decision-making could also make the scheme more responsive to field realities.

On the debt front, easier credit alone is insufficient. Improving the income-to-cost ratio is central to breaking the debt cycle. Crop diversification, effective minimum support price mechanisms, streamlined procurement, groundwater conservation, and promotion of sustainable farming practices require consistent implementation rather than periodic announcements.

A decade after its launch, PMFBY stands at a crucial juncture. While it has expanded insurance coverage, debates continue over its financial and operational outcomes. A publicly funded scheme must demonstrably serve public interest, particularly that of farmers. Transparent audits, swift claim settlements, effective oversight of insurers, and greater farmer representation could help restore confidence. As Mahatma Gandhi observed, the soul of India resides in its villages and agriculture. Ensuring the security and dignity of farmers remains a shared responsibility of governments and society alike. “Prosperous farmers mean a prosperous nation” must translate from slogan to sustained policy commitment.