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Boost for farm sector in year’s first Cabinet meet
PM Modi's cabinet extends farm insurance schemes and boosts fertiliser subsidies to support farmers amid climate impacts and rising global prices.
Prime Minister Narendra Modi on Wednesday said that his government’s first decisions in the new year were dedicated to farmers, as the Union cabinet extended a technology-driven flagship farm-insurance scheme amid increasing shocks to agriculture due to the climate crisis and cleared a fresh tranche of fertiliser subsidy to cushion higher global prices due to geopolitical uncertainties.
The Union Cabinet, chaired by Modi, approved an extension to the Pradhan Mantri Fasal Bima Yojana (PMFBY) and Restructured Weather Based Crop Insurance Scheme till 2025-26 with an overall outlay of ₹69,515.71 crore. It also signed off on a proposal to top up the subsidy allocation for di-ammonium phosphate (DAP), a widely used fertiliser, with an additional outlay of ₹3,850 crore, an official statement said.
PMFBY is the country’s main subsidised crop insurance scheme, where farmers pay between 1.5% and 5% of the premiums depending on crop cycles. The remaining premium is shared 50:50 between the Centre and state governments. In case of northeastern states, the Centre pays 90% of the premium subsidy.
The council of top ministers approved a larger subsidy on DAP over and above the so-called nutrient-based subsidy (NBS) regime, at ₹3,500 per tonne as a one-time special package. Under the NBS policy, the government offers, on an annual basis, a fixed rate of subsidy on a per kg basis for crop nutrients containing nitrogen (N), phosphate (P), potash (K) and sulphur (S) to shield farmers from high market prices.
“The first Cabinet of 2025 is dedicated to enhancing prosperity for our farmers. I am glad that key decisions have been taken in this regard,” Modi said in a post on X. “We have approved an increase in the allocation for crop insurance scheme. This will provide more security to farmers’ crops and will also mitigate their concerns about any damage.”
The farmer-friendly decisions come in the backdrop of ongoing protests by agriculturists in Punjab, who are demanding legally guaranteed minimum support prices or MSPs. MSPs are federally determined floor prices for 23 key crops aimed at avoiding distress sales.
Launched in June 2016, PMFBY replaced a web of complicated, multiple farm insurance schemes, all running simultaneously, with a single countrywide plan.
Since the Russian invasion of Ukraine, global fertiliser prices, especially of inorganic varieties, have remained volatile, although they have come down from their peak of 2021. Disruptions in maritime routes due to ongoing attacks by Yemen’s Houthi rebels on Red Sea cargo ships have frayed supply chains, stocking fertiliser prices.
“This calls for policies to help smallholder farmers to build strong support systems to be more resilient and better able to cope with the adverse effects of rising inorganic fertiliser prices during polycrises and related shocks,” the World Bank had said in its mid-year review last year.
India relies on import of raw materials for crop nutrients as well as finished products. Fertiliser companies sell their products at a discount to cultivators through internet-enabled rural outlets. The government then pays the difference between market rates and the discount to the firms. Availability of affordable fertilisers is critical for food security of the world’s most-populous nation.
The fertiliser subsidy for FY25 has been pegged at ₹164,000 crore, down 13.18% from the revised estimate of FY24. This is now set to go up with Wednesday’s decision to increase the allocation for DAP.
In another related decision, the Cabinet also gave its clearance for a separate ₹824.77 crore fund for technology infusion in the implementation of farm-insurance programme.
“The Fund for Innovation and Technology (FIAT) has been created for the use of technology for faster assessment, faster claim settlement and lesser disputes,” Union information & broadcasting minister Ashwini Vaishnaw said, briefing reporters.
The technology fund will go into digital and remote-sensing technologies to bring efficiency and transparency in assessing crop damage and settling claims, the statement added.
In a statement, the agriculture ministry said the fund will be utilised towards funding technological initiatives under the scheme, such as Yield Estimation System using Technology (YES-TECH), which relies on remote-sensing tools for yield estimation with a minimum 30% weightage to technology-based yield estimates.
Wider coverage of YES-TECH is aimed at faster and accurate crop-damage assessment to calculate insurance payouts, farm minister Shivraj Singh Chouhan said in a separate briefing. He also said agriculture growth is expected to clock a targeted 4% during 2024-25.
“Farmers will need higher risk coverage due to increasing frequency of weather shocks to agriculture because of climate change, along with adaptation measures,” said Abhishek Agrawal, an analyst with Comtrade.
The government has already moved to advanced digital technologies developed by the Indian Space Research Organisation to assess crop damage and yield losses to speed up settlements. The YES-TECH application is being trialled in eight states before it is standardised for PMFBY by the Mahalanobis National Crop Forecasting Centre.
Part of the tech fund will also go toward expanding app-based enrolments of farmers for PMFBY, a practice started from last year’s kharif or summer-sown season. Using the AIDE app, authorized intermediaries will be able to enroll cultivators, an official said.
Despite increasing weather shocks, many states had earlier opted out of the insurance scheme, swamped by delayed payments that make them politically unpopular.
Assessment of crop damage is a time-consuming process. Among many issues, disagreements over the claim-premium ratio and claim settlements ratio are reasons for delayed payments to cultivators.
“The use of technology is aimed at ironing out these glitches,” the official added.
The agriculture ministry largely depends on production data provided by states. Local revenue officials called “patwaris” and district agriculture officials still use outdated “eye estimates” to determine yields. States also rely on manual crop-cutting experiments to estimate crop losses while calculating insurance payouts. This process involves physically cutting crop samples, drying them and then weighing the produce to measure yield losses. The tech fund will help to automate such processes.
