Hit by weather and fires, Punjab to join Centre's crop insurance scheme after holding back for nine years

Punjab's Aam Aadmi Party government is set to formally request for the Union government to roll out the Pradhan Mantri Fasal Bima Yojana (PMFBY) in the agrarian state, said the state's agriculture minister Gurmeet Singh Khudian in a telephone interview. 

The reason it has agreed to implement the scheme is the huge losses suffered by farmers due to bad weather and farm fires.

"We are working on the modalities and soon will approach the union government to implement PMFBY in the state. The scheme will not only shield the farmers from vagaries of weather but also from unfortunate incidents such as farm fires especially during the wheat harvesting season (April-May)," said Khudian. 

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In 2023, the state government disbursed ₹256 crore to compensate farmers whose crops were damaged by floods.

Kamalvir Singh, a farmer from Patiala district in Punjab, said, “We welcome the government plan to implement the PMFBY. Our only suggestion is that the government must ensure that the compensation should be awarded in a time-bound manner in case of damage to crop."

Punjab had so far stayed out of the PMFBY, citing issues related to implementation costs, concerns over private insurance companies profiting without accountability, and a preference for developing its own mechanisms of support. The earlier stand was also shaped by the political friction between the state and the Centre, ruled by rival parties. 

However, rising claims of crop damage and the limitations of state-funded compensation appear to have pushed the state government to reconsider its stand.

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Punjab had been objecting to the scheme ever since it was launched in 2016. The state even drew up its own crop insurance scheme during the previous Congress government’s tenure in Punjab, but it never took off. AAP came to power in Punjab in 2022.

Launched in the kharif 2016 season by the Centre, the PMFBY offers comprehensive coverage against crop losses caused by unpredictable natural hazards such as hailstorms, drought, floods, cyclones, heavy and unseasonal rains, and pest or disease attacks.

The protection not only helps stabilize farmers' income but also encourages them to adopt innovative practices. The scheme is available for all states and UTs (Union Territories) and is voluntary for the states as well as farmers.

According to Economic Survey 2024-25, as many as 27 states and UTs have implemented the scheme in one or more seasons. At present, 23 states and UTs are implementing the scheme.

Aiming for transformation

Khudian said Punjab is coming up with a new agriculture policy by June this year aiming to transform the farming sector. "The draft is in consultation stage and currently we are taking views of stakeholders such as farmers and farm unions. We hope to introduce the policy by June this year," he added.

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Ironically, despite being top farming state, Punjab has never had an agriculture policy. 

Among the major recommendations of the proposed policy are establishing centres of excellence (CoE) for different crops, strengthening agriculture research and extensions, promoting crop diversification, providing a legal guarantee for the minimum support price (MSP), introducing a pension plan for farm workers and small farmers, a debt waiver scheme for small and marginal farmers and introducing crop insurance.

Economic and ecological challenges

Though farm productivity is high in Punjab, at present the state is passing through a phase of economic and ecological crisis due to rising costs of inputs, market uncertainty and its intensive agriculture model that has lowered farm returns while degrading land.

Unlike the national economy, agriculture and allied activities contribute a large share in Punjab’s economy, exceeding the share of industry. In 2022-23 (as per advance estimates), agriculture and allied sectors are expected to contribute 29% to Punjab’s Gross State Value Added (GSVA) -- second only to services.

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Agriculture and allied sectors are a source of livelihood for more than a quarter of the working population, so the sector continues to be the driver of Punjab’s economy, pulling up the industry and services sector in the state as well. So any impact on the agriculture sector impacts the economy of the state, Khudian said.

He also mentioned that to promote crop diversification and increase the acreage under cotton, the state government has decided to provide a 33% subsidy for BT cotton hybrid seeds, as recommended by Punjab Agricultural University (PAU), Ludhiana. Additionally, the state plans to shift 21,000 hectares of farmland from paddy to maize to reduce water-intensive paddy cultivation.