Efficiency and Potential Gain in Paddy Cropping: A DEA-Prospect Theory Analysis of PMFBYS in Karnataka

Abstract

The Pradhan Mantri Fasal Bima Yojana (PMFBY) is a crop insurance scheme launched by the Indian Government to provide financial security to farmers in the event of crop loss or damage. This study examines the performance of PMFBYS in insuring paddy crops in Karnataka using Data Envelopment Analysis (DEA) and analyzes farmers' decision-making behavior regarding crop insurance using Prospect Theory. The study was carried out from 2016 to 2022. Data on inputs such as farmer share premium, claim amount, sum insured, and outputs such as the number of farmers enrolled were collected. The study used the DEA methodology to calculate the efficiency scores of the program using variable Returns to Scale to analyze paddy efficiency in different districts. In particular, the BCC model was utilized to assess the pure procedural efficiency of decision-making units. The results indicate that 12 districts in Karnataka performed better than the other 19 districts by identifying the efficient districts. The application of Prospect Theory revealed a strong relationship between the insured and the settled claims, which has implications for promoting PMFBYS in Karnataka. The study also made an attempt to provide recommendations for farmers on increasing their potential gains in insurance to enhance the efficiency and effectiveness of PMFBYS for paddy cultivation in Karnataka. Overall, this study provides valuable insights into the efficiency of PMFBYS and its potential gains, especially in the 12 efficient districts.