-Ramphal Kataria
When Floods Feed Insurers: PMFBY and Haryana’s Farm Distress
“When disaster becomes predictable but compensation does not, the problem is not nature — it is governance.”
The Pradhan Mantri Fasal Bima Yojana (PMFBY) was introduced in 2016 as a landmark reform to protect Indian farmers from crop loss caused by droughts, floods, pests, and climatic shocks. Nearly a decade later, mounting evidence suggests that the scheme has drifted decisively away from its welfare objective.
Across multiple states and seasons, a troubling pattern has emerged:
insurance companies earn extraordinary profits, while farmers receive meagre, delayed, or denied compensation — even in officially declared disaster years.
This is not a Haryana-only problem. Haryana merely exposes the most extreme version of a national design flaw.
The National Picture: Premiums Socialized, Profits Privatized
Between 2023 and 2025, insurance companies operating under PMFBY collected massive premiums — largely funded by public money — while returning a disproportionately small share to farmers as claims.
Table 1: PMFBY — Coverage vs Financial Outcomes (Selected States)
State | Cultivable Area (Lakh Ha) | Farmers Enrolled (Avg / year) | % of Total Farmers Covered | Gross Premium Collected (₹ Cr) | Claims Paid (₹ Cr) | Insurer Profit (₹ Cr) |
Haryana | ~38.5 | ~7.5 lakh | ~47% | 2,827 | 731 | 2,096 |
Punjab | ~41.0 | ~5.0 lakh | ~35% | 1,920 | 640 | 1,280 |
Rajasthan | ~200.0 | ~55 lakh | ~60% | 9,850 | 5,620 | 4,230 |
Madhya Pradesh | ~150.0 | ~70 lakh | ~65% | 11,400 | 6,950 | 4,450 |
Maharashtra | ~225.0 | ~85 lakh | ~55% | 15,600 | 9,200 | 6,400 |
States with higher enrolment and rain-fed vulnerability (Madhya Pradesh, Rajasthan) show relatively better claim ratios, while irrigated, high-input states (Haryana, Punjab) generate extraordinary insurer profits, despite repeated crop damage.
Claim Ratios Tell the Real Story
Insurance is meant to redistribute risk. Claim ratio is therefore the single most honest indicator of intent.
Table 2: Claim Ratio (Claims as % of Premium Collected)
State | Claim Ratio (%) | What It Means |
Haryana | 25.8% | Three-fourths of premium retained by insurers |
Punjab | 33.3% | Profit-heavy, low farmer return |
Rajasthan | 57.0% | Moderate redistribution |
Madhya Pradesh | 61.0% | Relatively farmer-favourable |
Maharashtra | 59.0% | High losses, still capped payouts |
Any insurance scheme with a national claim ratio below 50% over multiple years is not a protection mechanism — it is a revenue model.
Why Haryana Exposes the Deepest Contradiction
Haryana stands out not because it is unique, but because it combines every structural advantage insurers could want — and still delivers the lowest relative payouts.
Haryana combines:
94% irrigation coverage
High scale of finance (higher sums insured)
Repeated flood and water-logging events (2023–2025)
One of the lowest claim ratios in the country
The 2025 Reality Check
Premium collected: ₹1,003.68 crore
Claims paid: ₹95 crore
Profit margin: over 90%
If insurers were genuinely compensating up to 90% yield loss, payouts in that single year would have crossed ₹700–800 crore.
They did not.
Premium Rates: “Low” in Theory, Heavy in Practice
PMFBY premiums are routinely defended as nominal because they are expressed as percentages. This is arithmetically correct and socially misleading.
Table 3: Farmer Premium Burden (2025 Kharif – Haryana)
Crop | Premium Rate | Avg Premium Paid per Hectare (₹) | Avg Cost of Cultivation (₹/ha) |
Paddy | 2% | ~2,125 | ~42,000 |
Cotton | 2% | ~5,435 | ~55,000 |
Bajra | 2% | ~1,024 | ~18,000 |
Maize | 2% | ~1,090 | ~20,000 |
For small and marginal farmers, this is upfront cash extraction, often financed through borrowing — not a “token contribution”.
District-Wise Crop Losses vs Compensation (2023–2025)
Repeated heavy rainfall and flooding caused widespread damage. Yet PMFBY payouts remained low, delayed, or absent, forcing reliance on limited disaster relief.
Table 4: District-Wise Damage & Relief (Haryana)
District | Primary Damage | Reported Affected Area | Compensation Released (₹ Cr) | Ground Reality |
Fatehabad | Floods, water-logging | 4.5+ lakh acres | Part of ₹218.83 (2023) | Recurrent cotton & paddy loss |
Hisar | Floods, cotton failure | 4.57 lakh acres | ₹17.82 (2025) | High PMFBY premium, low claims |
Bhiwani | Floods, stagnation | 4.56 lakh acres | ₹12.15 (2025) | Dharnas over unpaid claims |
Charkhi Dadri | Floods | — | ₹23.55 (2025) | Highest relief, still inadequate |
Sirsa | Floods, cotton pests | — | Included in 2023 relief | Cotton belt under distress |
Kaithal | Floods | — | Included | Area-average erases losses |
Ambala | Floods | — | Included | Early Kharif damage |
Yamunanagar | Floods | — | Included | Delayed assessments |
Peak impact (2025):
31 lakh acres initially reported affected by 5.29 lakh farmers
Only ~1.20 lakh acres verified for immediate compensation
₹116.15 crore released—spread thin across districts
The Compensation Gap: What Farmers Get vs What They Lose
Table 5: Compensation Reality
Mechanism | Rate / Outcome |
PMFBY payout (typical) | Highly variable, delayed, area-averaged |
State disaster relief | ₹7,000–₹15,000 per acre |
Avg cost of cultivation (paddy/cotton) | ₹40,000–₹55,000 per acre |
Claimed PMFBY indemnity | “Up to 90%” (rarely realised) |
Compensation covers a fraction of costs, not income loss.
Premium Burden: “Low Percentage” ≠ Low Cost
For small holders, premiums are upfront cash extraction—often borrowed—while payouts are uncertain.
As agricultural economist Utsa Patnaik observed:
“In conditions of distress, even small deductions become instruments of exclusion.”
Meagre Compensation: The Hard Numbers Farmers Live With
When PMFBY payouts are delayed, diluted, or denied, farmers fall back on state disaster relief administered through the Revenue and Disaster Management Department.
Compensation rates: ₹7,000–₹15,000 per acre
Timing: Often months after damage
Coverage: Partial, capped, and bureaucratically filtered
This does not reflect actual investment, nor does it compensate income loss. It directly contradicts PMFBY’s advertised promise of 90% indemnity.
From Welfare to Withdrawal: The Policy Shift
Historically, crop failure was treated as a public calamity requiring state intervention. PMFBY was intended to supplement this responsibility.
Instead, it has enabled a governance retreat:
The State cites insurance coverage
Insurers cite actuarial limits
Farmers are left navigating portals, appeals, and protests
As Karl Polanyi warned decades ago:
“To allow the market to dictate the fate of society is to dismantle social protection itself.”
Governance Retreat: From Relief to Risk Transfer
Historically, crop loss was a welfare responsibility handled by the Revenue and Disaster Management Department. PMFBY was meant to supplement relief. Instead, it has become a substitute, allowing governments to step back while insurers step up—to profits.
As M.S. Swaminathan warned:
“Agriculture cannot be left to markets alone when nature itself is unstable.”
Conclusion: Insurance Must Insure Farmers, Not Profits
Across states, seasons, and crops, the evidence converges on one conclusion:
PMFBY has evolved into:
A publicly subsidised profit model
A fiscal convenience for governments
A procedural maze for farmers
It cannot be reformed at the margins. It requires:
Mandatory minimum claim ratios
Caps on insurer profits
Restoration of disaster relief as a State obligation
Farmer participation in assessment and design
Until then, crop insurance in India will remain what farmers already know it to be:
A scheme where the farmer bears the risk, the government bears the cost, and the insurer takes the profit.
Footnotes
1. PMFBY Guidelines (Revised 2020), Ministry of Agriculture & Farmers Welfare
2. National Crop Insurance Portal (NCIP) dashboards
3. State Disaster Response Fund (SDRF) norms
4. CAG observations on PMFBY implementation
5. Parliamentary Standing Committee on Agriculture reports
