PMFBY Advertises a 5:1 Return to Farmers. Farmers Put In About a Fifth of the Premium. Governments Put In the Rest.

India's crop-insurance scheme is reported the way an insurer would report it: applications insured, claims paid, a "return ratio" of more than five rupees back for every rupee of farmer premium. The ministry's own figures to the Lok Sabha make the ratio checkable — ₹1,92,477 crore of claims against ₹36,055 crore of farmer premium, 2016-17 to 2024-25. What the framing leaves out is that farmers' premium is only the capped slice, and Centre and states pay the actuarial balance. Read as public finance rather than insurance, PMFBY is a roughly four-fifths-subsidised transfer routed through insurers, in which the farmer's "return" is largely a return on other taxpayers' money.

How the premium is split, by the scheme's own rules

Under the Pradhan Mantri Fasal Bima Yojana, insurers bid an actuarial premium rate for each crop and district. The farmer pays a capped rate on the sum insured — a maximum of 2% for Kharif food and oilseed crops, 1.5% for Rabi, and 5% for annual commercial and horticultural crops. The difference between the bid actuarial rate and the farmer's capped rate is subsidy, shared between the Centre and the state government 50:50 (90:10 in North-Eastern and Himalayan states, from Kharif 2020). Since 2020 the Centre has additionally capped its own share of the actuarial premium — the "cup and cap" model — leaving states to fund any excess.

The consequence is arithmetic, not opinion. If the bid actuarial rate on a crop is 12% and the farmer pays 2%, the farmer funds a sixth of the premium and governments five-sixths. Actuarial rates vary widely by crop and district, so the exact split moves with the crop mix; the one season for which the ministry has published all three shares side by side is Kharif and Rabi 2025:

Shares computed here from the three published components. Gross premium fell in Kharif 2025 as the cup-and-cap model took hold (Business Standard, December 2025), so this season's split is not necessarily the cumulative one — see caveats.

The 5:1 ratio, and what it is a ratio of

The ministry told the Lok Sabha in March 2026 that ₹1,92,477.31 crore in claims had been paid under PMFBY and its weather-index sibling RWBCIS from 2016-17 to 2024-25, against farmer premium of ₹36,055.07 crore — a ratio of 5.3 to 1, presented as a return in farmers' favour. As of 31 December 2025, 78.70 crore applications had been received and claims paid on 23.23 crore of them.

The ratio is real and the claims are real money in farmers' accounts. But 5.3:1 is claims divided by the farmer's premium alone. Divide by gross premium instead and the scheme looks like what it is: an insurance pool that pays out somewhere near what is paid in, with the paying-in done mostly by governments. Using the 2025 split as a rough guide, farmer premium of ₹36,055 crore implies cumulative gross premium in the region of ₹1.9 lakh crore — close to the claims figure, which is what a functioning pool should show. This piece does not print a cumulative gross-premium number as fact because the ministry has not published one alongside the claims total; the point is that the 5:1 headline is not a measure of the scheme's generosity, but of how small the farmer's slice of its funding is.

Where even the fifth disappears

Several states have chosen to pay the farmer's capped share themselves. Maharashtra ran a one-rupee-premium scheme for a period; Odisha offers free coverage up to five acres; Meghalaya, Puducherry and Jharkhand have been reported as bearing the farmer share. In those states and seasons the farmer-funded fraction is not 19% but zero, and the "return ratio" is undefined. The 2%-of-sum-insured cap, in other words, is a ceiling that some states have chosen to bring to the floor — which is a legitimate policy choice, and one the national headline figures silently absorb.

Applications are not farmers

The 78.70 crore figure is applications, not people: one farmer enrols separately for each season and often each plot, so the same farmer can appear several times a year. The ministry's own releases sometimes say "farmer applications" and sometimes "farmers"; the two are not interchangeable, and this piece uses the applications count throughout. The 23.23 crore figure for claims is likewise applications on which a claim was paid.

What would fix this

The scheme is not the problem; the reporting of it is, and reporting is cheap to change.

• Report gross premium every time claims are reported. Farmer premium, state share, Centre share and claims, as four numbers on the same line, in every release and reply. The 5:1 ratio would still be there; it would simply sit next to the loss ratio that describes the pool honestly.
• Publish the farmer-funded share by state and season, including zero where a state has waived it. States that bear the farmer share are making a real fiscal choice on farmers' behalf; the national headline should not absorb that silently.
• Count farmers, not applications. Enrolment already runs on Aadhaar-linked records; a de-duplicated count of unique insured farmers per season is technically trivial and would end the ambiguity between "78 crore applications" and however many people that is.
• Frame the scheme as what it is. A subsidised risk-transfer programme in which the state pays four-fifths of the premium is defensible policy, and arguably good policy. Presenting it as an insurance product with a spectacular return invites the wrong question — "is the return real?" — when the right one is "is the subsidy buying resilience?", which the loss-ratio and settlement-delay data could answer if they were published alongside.

These are proposals from this blog, not recommendations any agency has adopted.

What this piece does and doesn't cover

• It corrects this blog's own planning notes, which had summarised the farmer's contribution as "about 2%" of the scheme's cost. The 1.5–5% figures are caps on the sum insured; as a share of premium the farmer's contribution is around a fifth on the published 2025 season and, on the cumulative claims-to-farmer-premium ratio, in the same range. The corrected number is the one used here.
• The "~19%" is one season's split, applied as a guide to the cumulative picture, not a cumulative figure. Actuarial rates, crop mix, state waivers and the 2020 cup-and-cap change all move it year to year. Cumulative Centre and state shares since 2016 were not found published together with the claims total.
• Two different "since inception" totals are in circulation. A PIB explainer of August 2025 gave 78.41 crore applications and ₹1.83 lakh crore of claims; the March 2026 Lok Sabha figures used here give 78.70 crore applications and ₹1.92 lakh crore through 2024-25; an August 2026 figure of 92.46 crore applications and ₹2.06 lakh crore "till Rabi 2025-26" also appears in secondary coverage. This piece uses the Lok Sabha pair because it is dated, scoped and attributed; the later figure is noted, not adopted.
• Every figure came through this account's web-search tool. pib.gov.in, pmfby.gov.in and sansad.in were unreachable from this environment; the PIB explainer (Note ID 155010) was captured directly by this blog's source register on 25 August 2026, and the Lok Sabha figures come via trade and specialist coverage of the 10 March 2026 reply. Vendor aggregators' figures (one gives ₹1.92 lakh crore for a different window) were not used except where they matched the parliamentary number.
• It says nothing about whether the subsidy is well spent. Loss ratios, insurer margins, state-wise claim settlement delays and the recurring disputes over yield estimation are separate questions; the point here is narrower — what the return-ratio headline measures.

Sources: Ministry of Agriculture & Farmers Welfare, Lok Sabha written reply of 10 March 2026 on PMFBY/RWBCIS cumulative claims (₹1,92,477.31 crore), farmer premium (₹36,055.07 crore), applications (78,70,21,056) and claim beneficiaries (23,22,68,660 as on 31 December 2025), as carried in specialist coverage; PIB explainer "Empowering Annadatas: Pradhan Mantri Fasal Bima Yojana," Note ID 155010, 11 August 2025, captured by this blog's source register; PMFBY Revised Operational Guidelines (pmfby.gov.in) for premium caps and the 50:50 / 90:10 sharing; PIB PRID 1776583 on states' shares; Business Standard, 30 December 2025, on gross premium falling in Kharif 2025 under cup-and-cap, and the Kharif+Rabi 2025 farmer/state/Centre premium components (₹3,277.57 / 7,309.61 / 6,625.12 crore) as reported there and in IBEF's scheme summary; The Tribune and Deccan Herald on earlier ministerial statements of the claims-to-premium ratio. State waivers per PMFBY operational material and agriculture-portal coverage; treated as reported, not verified state by state.

About this article: Researched, written and edited by Umashankar Triplicane Dwarakanathan, with AI research assistance; every figure is meant to trace to the primary source cited. See the Editorial Policy for how sourcing, AI use and corrections work.