The Narendra Modi government’s flagship crop-insurance programme was launched in 2016 with a promise that no farmer would be left alone in the face of climate-fuelled disaster. Yet across India’s flood-hit countryside, the gap between that promise and lived reality has rarely felt wider.
This year, torrential rain and flash floods battered Kharif crops in Punjab, Maharashtra, Haryana, Madhya Pradesh, Himachal Pradesh, Uttar Pradesh, Bihar, Uttarakhand and Jammu & Kashmir. The devastation should have triggered the protection India’s farmers pay for—however little. Instead, it exposed a system in which state governments scramble for relief funds, farmers queue endlessly for compensation, and insurance companies shield themselves behind contractual fine print.
Under the Pradhan Mantri Fasal Bima Yojana (PMFBY), farmers are told they need pay only 2% of the premium, while the Centre and states jointly bear the remaining 98%. For 2024–25, about 4.19 crore loan-holding farmers and 5.22 crore non-loan farmers were enrolled. The Centre set aside ₹14,600 crore, with states contributing roughly the same.
But for all this public money, the scheme appears to be delivering little. Most affected farmers have received less than 10% of their actual losses. Some have been credited with compensation so absurdly tiny that it borders on the insulting. In Madhya Pradesh’s Jabalpur district, farmers in Kunwarhatta village received a total of ₹17. In Maharashtra’s Shilotar village, one farmer received ₹2.30 for losses on 11 acres of paddy, less than the cost of a cup of tea.
The government has touted satellite-based crop assessment as a fix for long-standing manipulation in ground surveys, where officials and insurers often understated yields to reduce payouts. But satellite images can only show what is green, not what is grain. They cannot capture a harvest where husk outweighs the crop. Nor do they account for the early-stage destruction that heavy rain and waterlogging cause—damage that insurers frequently refuse to cover.
In August 2025, the ministry distributed ₹3,200 crore to three million affected farmers using the new assessment system,₹1,120 crore in Rajasthan, ₹1,156 crore in Madhya Pradesh, ₹150 crore in Chhattisgarh and the remainder among other states. Yet even this apparently large figure has become a source of public anger as individual payouts trickle in at derisory levels.
Frustrated, state governments have stepped in to plug the gaps. Punjab has disbursed ₹1,623.51 crore to 23.81 lakh farmers. Maharashtra has released ₹1,356.30 crore for losses across 60 lakh hectares. Others are still calculating damage. The pattern is stark: while taxpayers pour billions into insurers’ coffers, governments are forced to shell out yet more money to provide relief the insurance scheme was supposedly designed to deliver.
The question, then, is unavoidable: what purpose is the crop-insurance scheme really serving? Increasingly, critics argue it benefits insurers far more than farmers. In nearly a decade, insurance companies have rarely reported losses—even in seasons when farmers have watched entire harvests wash away.
Reform now appears unavoidable. A credible damage-assessment system must combine satellites with on-ground verification and crop-cutting trials. Penalties should be imposed on insurers for arbitrary reductions in payouts. States need transparent, farmer-friendly portals that show exactly how compensation is calculated. A legally mandated minimum payout relative to premium contribution is essential. And above all, the scheme must begin covering early-stage losses and natural disasters that are becoming the new normal in the era of climate breakdown.
Crop insurance was meant to be a lifeline. Instead, for millions of India’s farmers, it has become another bureaucratic maze, one that offers little protection against a changing climate and even less against systemic indifference. If the programme is to survive with any credibility, it must be redesigned not as a shield for insurance companies but as the financial safety net farmers were promised.
