Economy
Agricultural Economy
Crop Insurance and Income Support
Crop insurance and farm income support for CGPSC: CCIS to PMFBY, premium rates, risks covered, 2020 and 2025 reforms, RWBCIS, PM-KISAN and state income schemes.
Prerequisites
- Agricultural Credit: crop insurance began as a way to protect crop loans
- MSP and Procurement: price support, the alternative that income support competes with
- Climate and the Indian Monsoon: the weather risk insurance is meant to cover
The Hook: A Dry August in Surguja
Connect
In a rain-fed upland village in Surguja, the paddy is planted on time, but August is dry and the yield is half the usual. Down the road, in Bastar, elephants trample a field of standing crop. Both farmers took a crop loan in June. One loss has been insurable for decades; the other became insurable only from kharif 2026.
Meanwhile, ₹2,000 lands in both farmers’ bank accounts every few months whether the crop succeeds or not. How does India insure farmers against crop failure, and why has it added unconditional income transfers on top of price support?
Why it matters: Prelims asks the PMFBY premium rates, the risks covered, and PM-KISAN details. Mains GS-III asks why crop insurance claims are delayed, whether income support is better than price support, and what Chhattisgarh’s own schemes add.
How Crop Insurance Evolved
| Scheme | Year | Key feature |
|---|---|---|
| Pilot Crop Insurance Scheme | 1979 | Area approach, loanee farmers, voluntary for states |
| Comprehensive Crop Insurance Scheme (CCIS) | 1985 | First nationwide scheme; linked to crop loans; area approach |
| National Agricultural Insurance Scheme (NAIS) | 1999-2000 (rabi) | Wider crop coverage; compulsory for loanee farmers, voluntary for others |
| Agriculture Insurance Company of India (AIC) | 2002 | Public sector insurer specialising in crop insurance |
| Weather Based Crop Insurance Scheme (WBCIS) | 2007 | Pays on weather parameters (rain, temperature) instead of measured yield |
| Modified NAIS (MNAIS) | 2010-11 | Actuarial premiums with subsidy |
| Pradhan Mantri Fasal Bima Yojana (PMFBY) | Kharif 2016 | Replaced NAIS and MNAIS; very low farmer premium; technology for yield estimation |
| Restructured WBCIS (RWBCIS) | 2016 | Weather-index scheme run alongside PMFBY |
Pradhan Mantri Fasal Bima Yojana (प्रधानमंत्री फसल बीमा योजना)
Premium paid by the farmer
| Crop | Farmer’s share of premium (of sum insured) |
|---|---|
| Kharif food and oilseed crops | 2% |
| Rabi food and oilseed crops | 1.5% |
| Annual commercial and horticultural crops | 5% |
The rest of the actuarial premium is paid by the Centre and the State, 50:50, and 90:10 in the north-eastern and Himalayan states (from kharif 2020).
Risks covered
| Stage | Risk | How the loss is assessed |
|---|---|---|
| Prevented sowing | Rain deficit or adverse weather stops sowing | Area-based; up to 25% of the sum insured |
| Standing crop (sowing to harvest) | Drought, dry spells, flood, pests, disease, landslide, fire due to natural causes, lightning, storm, cyclone | Area approach: yield measured by crop cutting experiments (CCEs) in a notified area, compared with the threshold yield |
| Mid-season adversity | Severe adversity during the season | On-account payment |
| Post-harvest losses | Cyclone, cyclonic rain, unseasonal rain or hailstorm while the crop lies in the field in “cut and spread” condition | Individual farm, up to 14 days from harvest |
| Localised calamities | Hailstorm, landslide, inundation, cloudburst, natural fire | Individual farm assessment |
| Add-on: wild animal attack | Crop damage by wild animals notified by the state | Individual farm, from kharif 2026 |
Damage must be reported quickly (within 72 hours for localised risks), through the crop insurance app, the insurer, the bank or the agriculture department.
Reforms over time
| Year | Change |
|---|---|
| 2020 (from kharif 2020) | Scheme made voluntary for all farmers, including loanee farmers (earlier compulsory for those with crop loans); Centre’s premium subsidy capped at a 30% premium rate for unirrigated areas and 25% for irrigated areas; 90:10 sharing in the north-east |
| January 2025 | PMFBY and RWBCIS extended to 2025-26 with an outlay of about ₹69,515 crore; a Fund for Innovation and Technology (FIAT) of about ₹824 crore for YES-TECH (yield estimation using technology such as remote sensing) and WINDS (Weather Information Network and Data Systems) |
| November 2025 | New norms announced: wild animal attack added as a localised-risk add-on and paddy inundation brought back as a localised calamity (it had been removed in 2018), both from kharif 2026 |
| 2026 | Approval for the 2026–31 cycle was under process in mid-2026, with an interim advisory to continue the scheme from kharif 2026 |
Why paddy inundation matters
Flooded paddy fields are a common loss in eastern India’s low-lying areas. Dropping inundation from individual assessment in 2018 left such farmers dependent on area-wide yield data; restoring it from kharif 2026 brings back farm-level claims.
Problems with crop insurance (Mains material)
- Delayed claim settlement, often because states pay their premium share late or yield data is disputed.
- Quality of crop cutting experiments: too few, poorly supervised; one notified area’s average can hide individual losses.
- Low awareness and coverage: many non-loanee and small farmers do not enrol, especially since the 2020 voluntary switch.
- Tenants and sharecroppers are hard to cover without land records or tenancy documents.
- Insurers’ margins: in good years premiums greatly exceed claims, raising questions about value for public money.
- States opting out: several states have at times left PMFBY to run their own schemes, Bihar (Rajya Fasal Sahayata Yojana, 2018) being the best known.
Way forward: technology-based yield estimation (YES-TECH, satellite and drone data, CROPIC crop photographs); timely state premium releases and penalties for delayed claims; cluster tendering for longer contracts; coverage for tenants; awareness through PACS and banks.
Income Support: Paying the Farmer Instead of the Crop
PM-KISAN (प्रधानमंत्री किसान सम्मान निधि)
| Feature | Detail |
|---|---|
| Announced | Interim Budget, 1 February 2019; effective from 1 December 2018 |
| Launched | 24 February 2019, Gorakhpur |
| Benefit | ₹6,000 a year in three instalments of ₹2,000, by Direct Benefit Transfer |
| Who | Landholding farmer families. Initially only those with up to 2 ha; extended to all landholding farmers from June 2019 |
| Exclusions | Institutional landholders; income-tax payers; serving or retired senior officials; professionals such as doctors, engineers and lawyers; pensioners above a threshold; holders of constitutional posts |
| Funding | 100% Central Sector scheme |
State income-support schemes
| State | Scheme | Started | Model |
|---|---|---|---|
| Telangana | Rythu Bandhu | 2018 | Per-acre investment support each season to landowners (since restructured as Rythu Bharosa) |
| Odisha | KALIA (Krushak Assistance for Livelihood and Income Augmentation) | December 2018 | Support to small and marginal farmers and landless households |
| Chhattisgarh | Rajiv Gandhi Kisan Nyay Yojana | 21 May 2020 | Per-acre input subsidy (₹10,000 per acre at launch for paddy, maize, sugarcane) |
| Chhattisgarh | Krishak Unnati Yojana | 12 March 2024 | Input assistance equal to the gap between MSP and ₹3,100 per quintal, for up to 21 quintals per acre; crop-shift aid from kharif 2025 |
| Chhattisgarh | Deendayal Upadhyay Bhumihin Krishi Majdoor Kalyan Yojana | 20 January 2025 | ₹10,000 a year to landless agricultural labourer families |
For details of the Chhattisgarh schemes, see Agricultural Schemes in Chhattisgarh.
Price support or income support?
| Point | Price support (MSP, procurement) | Income support (PM-KISAN, per-acre transfers) |
|---|---|---|
| Who benefits | Farmers who sell surplus to procurement agencies, mostly larger farmers in procurement states | All landholders, including small farmers who sell little |
| Crop neutrality | Biased to rice and wheat | Crop-neutral if per-acre or per-farmer |
| Market distortion | High: stocks, storage, cropping pattern, WTO | Low: classed as minimally distorting (“green box”) support under WTO rules when decoupled from production |
| Leakage | Middlemen, quality disputes | Low with DBT and Aadhaar |
| Gaps | Distress sales below MSP where there is no procurement | Tenants and landless excluded when tied to land records; amount small relative to costs |
A hybrid in Chhattisgarh
Krishak Unnati Yojana is a hybrid: it is paid as per-acre “input assistance”, but the amount depends on paddy sold at MSP. That gives it the income security of a transfer and the paddy bias of price support. The kharif 2025 crop-shift extension is the state’s attempt to make it more crop-neutral.
Memory Tricks
PMFBY premium: '2 – 1.5 – 5'
Kharif 2, Rabi 1.5, Commercial/horticultural 5: “Kharif 2 Rabi 1.5 Cash 5”. Rabi is cheaper because winter crops face less weather risk.
Insurance ladder: '85-99-07-16-20-25'
1985 CCIS → 1999 NAIS → 2007 WBCIS → 2016 PMFBY → 2020 voluntary → 2025 extension and new add-ons (effective kharif 2026).
PM-KISAN: '6-3-2'
₹6,000 a year, 3 instalments, ₹2,000 each.
Don’t Confuse
| This | vs | That |
|---|---|---|
| PMFBY: pays on yield loss (crop cutting experiments) | vs | RWBCIS: pays on weather index deviation |
| Area approach: standing crop loss for a notified area | vs | Individual assessment: localised calamities, post-harvest, wild animals |
| PM-KISAN: ₹6,000/year, central, landholders | vs | Deendayal Upadhyay scheme (CG): ₹10,000/year, state, landless labourers |
| Rythu Bandhu: Telangana, per acre | vs | KALIA: Odisha, includes landless households |
| Kisan Nyay (2020): flat per-acre subsidy | vs | Krishak Unnati (2024): gap to ₹3,100 per quintal sold |
Common Mistakes
Trap 1: 'PMFBY is compulsory for loanee farmers'
That was true until 2019. From kharif 2020 enrolment is voluntary for all farmers.
Trap 2: 'Farmers pay 2% premium for all crops'
2% is for kharif food and oilseed crops. Rabi is 1.5%, and annual commercial and horticultural crops 5%.
Trap 3: 'PM-KISAN covers landless labourers'
PM-KISAN goes to landholding farmer families. Landless labourers are covered by schemes such as Odisha’s KALIA and Chhattisgarh’s Deendayal Upadhyay scheme.
Trap 4: 'Wild animal damage has always been covered'
Wild animal attack is a new add-on from kharif 2026, announced in November 2025.
Practice
All questions below are original practice questions in CGPSC style. They are not previous-year questions.
Level 1: Foundation
- Under PMFBY, the farmer’s premium for rabi food crops is ______% of the sum insured.
- PM-KISAN was formally launched at ______ on 24 February 2019.
- Post-harvest losses under PMFBY are covered for up to ______ days from harvest.
Answers
- 1.5%.
- Gorakhpur (Uttar Pradesh).
- 14 days (crop in “cut and spread” condition).
Level 2: Prelims MCQs
Q1. Consider the following statements about the Pradhan Mantri Fasal Bima Yojana:
- Since kharif 2020, enrolment has been voluntary for all farmers, including those with crop loans.
- The premium for annual commercial and horticultural crops is 5% of the sum insured.
- Losses due to wild animal attacks have been covered since the scheme began in 2016.
Which of the statements given above is/are correct?
- (a) 1 only
- (b) 1 and 2 only
- (c) 2 and 3 only
- (d) 1, 2 and 3
Answer and explanation
(b) 1 and 2 only. The 2020 revamp made PMFBY voluntary for all, and the commercial/horticultural premium is 5%. Wild animal attack was added as an add-on only from kharif 2026, so statement 3 is wrong.
Q2. Match List I (Scheme) with List II (State or feature):
| List I | List II |
|---|---|
| A. Rythu Bandhu | 1. Odisha; includes landless households |
| B. KALIA | 2. Telangana; per-acre investment support |
| C. RWBCIS | 3. Claims based on weather parameters |
| D. Krishak Unnati Yojana | 4. Chhattisgarh; gap between MSP and ₹3,100 per quintal |
- (a) A-1, B-2, C-3, D-4
- (b) A-2, B-1, C-3, D-4
- (c) A-2, B-1, C-4, D-3
- (d) A-2, B-3, C-1, D-4
Answer and explanation
(b) A-2, B-1, C-3, D-4. Rythu Bandhu (Telangana, 2018) paid per acre; KALIA (Odisha, December 2018) also reaches landless households; RWBCIS pays on weather-index deviations; Krishak Unnati (Chhattisgarh, 2024) pays the gap to ₹3,100 per quintal.
Q3. Under PM-KISAN, eligible farmer families receive:
- (a) ₹6,000 a year in two instalments
- (b) ₹6,000 a year in three instalments
- (c) ₹10,000 a year in three instalments
- (d) ₹12,000 a year in four instalments
Answer and explanation
(b) ₹6,000 a year in three instalments of ₹2,000 each, by DBT. ₹10,000 a year is the Chhattisgarh landless-labourer scheme, a likely distractor.
Q4. Which of the following is the first nationwide crop insurance scheme of India?
- (a) National Agricultural Insurance Scheme, 1999
- (b) Comprehensive Crop Insurance Scheme, 1985
- (c) Weather Based Crop Insurance Scheme, 2007
- (d) Pradhan Mantri Fasal Bima Yojana, 2016
Answer and explanation
(b) Comprehensive Crop Insurance Scheme, 1985. It was linked to crop loans and used the area approach. NAIS replaced it from rabi 1999-2000; PMFBY replaced NAIS and MNAIS from kharif 2016.
Level 3: Mains Answer Writing
Q1. (60 words) What changes were made to PMFBY from kharif 2026?
Model answer outline
- Announced November 2025, effective kharif 2026.
- Wild animal attack added as a localised-risk add-on: states notify animals and vulnerable districts; farmers report within 72 hours with geotagged photos.
- Paddy inundation restored as a localised calamity (dropped in 2018).
- Relevance for Chhattisgarh: elephant damage in the north and Bastar, flooded low-lying paddy.
Q2. (150–200 words) “Direct income support is a better instrument than price support for Indian farmers.” Critically examine, with reference to Chhattisgarh.
Model answer outline
- Intro: India supports farmers through price support (MSP, procurement) and, since 2018–19, direct income support (PM-KISAN, Rythu Bandhu, KALIA, Chhattisgarh’s schemes).
- Case for income support: reaches all landholders, not just surplus sellers; crop-neutral; less market and WTO distortion; low leakage with DBT; predictable cash for inputs.
- Limits: tenants and landless excluded when tied to land records; ₹6,000 a year is small relative to costs; no protection against a price crash or crop failure; fiscal cost.
- Case for price support: price stability, food security stocks, bargaining power in thin markets.
- Chhattisgarh angle: a hybrid model: Krishak Unnati pays the gap to ₹3,100 on paddy sold (income support with a paddy bias); crop-shift aid from kharif 2025; ₹10,000 a year to landless labourers (2025) fills the land-record gap.
- Conclusion: neither alone is enough; a mix of crop-neutral income support, targeted procurement, insurance and inclusion of tenants works best.
Quick Revision Table
| Fact | Detail |
|---|---|
| CCIS | 1985, first nationwide; loan-linked |
| NAIS | 1999-2000 (rabi) |
| AIC | 2002 |
| WBCIS / RWBCIS | 2007 / 2016 |
| PMFBY | Kharif 2016 |
| Premium | 2% kharif · 1.5% rabi · 5% commercial/horticultural |
| Premium sharing | Centre:State 50:50; 90:10 in NE and Himalayan states |
| 2020 revamp | Voluntary for all; Centre’s subsidy capped (30% unirrigated, 25% irrigated) |
| Jan 2025 | Extended to 2025-26 (about ₹69,515 crore); FIAT about ₹824 crore (YES-TECH, WINDS) |
| From kharif 2026 | Wild animal attack add-on; paddy inundation restored |
| Post-harvest | Up to 14 days, cut-and-spread crop |
| PM-KISAN | ₹6,000/year, 3 × ₹2,000; announced 1 Feb 2019; launched 24 Feb 2019, Gorakhpur; effective 1 Dec 2018 |
| Rythu Bandhu / KALIA | Telangana 2018 / Odisha Dec 2018 |
| CG income schemes | Kisan Nyay (21 May 2020); Krishak Unnati (12 Mar 2024); landless ₹10,000/year (20 Jan 2025) |
Key Takeaways
Key Takeaways
- Crop insurance evolved from CCIS (1985) to NAIS (1999) to PMFBY (2016), with RWBCIS for weather-index cover.
- Farmers pay 2% / 1.5% / 5%; the rest is shared by Centre and State (50:50, or 90:10 in the north-east).
- PMFBY became voluntary in 2020; wild animal attack and paddy inundation are covered from kharif 2026.
- PM-KISAN gives ₹6,000 a year to landholding families; it is crop-neutral but excludes tenants and the landless.
- Chhattisgarh runs a hybrid: Krishak Unnati’s ₹3,100 top-up, crop-shift aid, and ₹10,000 a year for landless labourers.
What’s Next
- Agricultural Economy: Quick Revision: the whole chapter on one page
- Agricultural Schemes in Chhattisgarh: the state schemes in full
- Welfare and Development Programmes: central DBT schemes beyond agriculture
- Poverty, Unemployment and Inclusive Growth: rural incomes and the farm–non-farm transition
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