The agricultural sector and its related industries continue to be the fundamental foundation of the Indian economy, providing numerous possibilities for employment. This sector contributes considerably to the country’s GDP and has a direct impact on food security, as well as supporting livelihoods and economic growth.
Despite several steps taken by the government to protect farmers against the crop losses due to the natural calamities and diseases through Pradhan Mantri Fasal Bima Yojana (PMFBY), farmers livelihoods are still threatened by technological difficulties and natural disasters.
Even with all the announcements of implementation of various schemes, agriculture insurance in India nis still small with focus only on crops. There should be an holistic view and more schemes to provide complete financial protection to farmers, encouraging sustainable practises and include wider coverage of livestock, agriculture tools and other assets of famers.
What has been done till now
In India, crop insurance has come a long way in the last five decades. It has improved from being just yield-based models to a tech-enabled and multi-stakeholder system that includes farmers, the state, central government, banks, related private agencies, and insurers.
Going back to 1985, when the Comprehensive Crop Insurance Scheme (CCIS) was established, the scheme’s objective was to help farmers get money if their crops failed because of floods or drought. The Indian government set up the National Agricultural Insurance Scheme (NAIS) in late 1999 to protect farms from natural disasters.
But the real gamechanger came in 2016 when Pradhan Mantri Fasal Bima Yojana was launched which provided subsidised rates across a broad spectrum of crops, including food grains, oilseeds, and horticulture crops.
Under the PMFBY, the farmers’ premiums were declared at an extremely low rate across the country. Farmers are charged a maximum of 2 per cent of the sum insured for Kharif crops, a maximum of 1.5 per cent of sum insured for Rabi crops and maximum 5 per cent of sum insured for commercial or the horticultural crops.
The remaining part of the premiums are equally shared by the central and the state government on the 50: 50 bases in most states, barring north-eastern states, where it is 90:10. PMFBY handles risks like drought, floods, pest and diseases attacks. But the ongoing reforms and innovations are key to ensuring it remains sustainable, inclusive, and efficient in protecting India’s vast farming population.
Livestock and Equipment insurance
Still, crop insurance is the most common type of farm insurance. Insurance for livestock and equipment is still largely unknown. Cattle and Livestock Insurance in fact started in 1970. However, the penetration has not been significant. Again in 2005-06, the livestock insurance was pushed with more thrust and structured efforts. Often, equipment insurance, such as coverage for tractors or irrigation systems, is part of more specific farm policies.
The Unified Package Insurance Scheme (UPIS) tries to cover everything, like crops, cattle, tools, and personal belongings, but it’s not very popular because not many people are familiar with it. We need to look at the numbers in the context of overall insurance, for example, only 21.01 lakh livestock have been insured in the previous financial year.
In our country the livestock insurance under the National Livestock Mission (NLM) operates on the demand basis and the department is encouraging states to send proposals of the insurance schemes so that more and more number of lives are covered by the insurance thereby helping the farmers.
According to the recent answers in the Lok Sabha, there are 10.08 crore households having livestock or poultry. So, one should imagine the scope of insuring the livestock in India and the benefits to the end farmers. Even though the government is trying hard to increase the penetration of the insurance of livestock, the farmer premium share, which was in the range of 20-50 per cent, has been brought down to 15 per cent, while the rest of the portion will be paid by the central and state government.
What can be done
India’s agricultural insurance landscape is poised for transformation by embracing livestock, equipment, and emerging sectors. By adopting global best practices and harnessing technology, India can create a dynamic, inclusive insurance framework. At one end government subsidies for premiums and robust data systems remain crucial, while private insurers and tech innovators drive progress. Among climate challenges and agricultural diversification, inclusive insurance will anchor a strong farming system in the country
To achieve this, policies must cover indigenous breeds and small ruminants. Microinsurance with premiums as low as ₹50–100 per animal can empower low-income farmers. Linking insurance with veterinary care, reduces livestock mortality. Community-based models, like farmer cooperatives, can lower costs. For equipment, subsidies for tools, rental equipment coverage, and maintenance-linked policies are key. Public-private partnerships with manufacturers can further integrate insurance, ensuring a prosperous and sustainable agricultural future.
The author is Head of Rural & Agriculture Insurance at Probus
Published on April 27, 2025