CROP INSURANCE SCHEME: A POLITICAL PLOY
Nov 21 - 27, 2011
Recent disastrous flooding in Pakistan's southern province Sindh amaged Kharif crops and resulted in a loss of $4bn in foreign exchange earnings to the country or 2.323 percent of the GDP. Cotton suffered a loss of 1.8 million bales, and a loss of Rs18bn was afflicted on sugarcane crop.
50 per cent of the harvested paddy crop was damaged in upper Sindh and hence losses of millions of rupees to the growers of the rice-growing belt of the country.
The other major crop affected adversely are chillies, tomatoes, onions, musk melons and bananas and the other vegetables of daily usage. The rain-triggered flooding destroyed over 15.9 million acres of land across the province. Rains hit Badin, Thatta, Golarchi, Tando Bago, Matli, Tando Muhammad Khan, Tando Allahyar, Tando Ghulam Ali, Mirpurkhas, Mithi, Hyderabad and some parts of Matiari.
In some areas, the 300ml rainfall damaged the irrigation and transport infrastructure. Forty percent damage was natural while 60 percent damage was due to the negligence of the authorities over breaching of irrigation channels.
Eventually, the destruction in Sindh province will impact heavily on national economy, already reeling from the losses from last year's unprecedented floods.
Although, it is not possible for human beings to overcome natural calamities, proper planning can minimize the impact of losses. The dream of national prosperity could not be materialized without strengthening the agriculture economy. Insurance is the only method to protect all sorts of calamities. Unfortunately, in our country we are not using this important sector to rebuild our economy.
Agriculture insurance scheme is one of the solutions to provide protection from financial losses to the farmers, enabling them to concentrate on increasing agri production.
Under the scheme, indemnities would be payable on natural calamities like excessive rains, hailstorms, frosts, flood and drought besides crop related disease like viral and bacterial attacks or any other damage caused to the crop like locust attack etc.
Government is not coming forward seriously to implement the new insurance protection plans for the benefits of agriculture sector despite that former president Pervez Musharraf's cabinet committee already introduced a mandatory crop loan insurance scheme (CLIS) for five major crops including wheat, rice, sugarcane, cotton and maize.
Since last many years, the agriculture sector has been at the mercy of banks. In USA, federal crop insurance is available for more than 100 different crops and in India crop insurance scheme is being implemented by a state-owned agriculture insurance company. The scheme is compulsory for all farmers who take agricultural loans from any financial institution. It is voluntary for farmers at very subsidized premium rates. This insurance follows the area approach, which means that instead of individual farmers, a specific area is insured.
The public sector NICL designed its crop insurance scheme and top five other insurance companies - Adamjee Insurance, Eastern Federal Insurance, New Jubilee Insurance, United Insurance and East West Insurance are also involved in a similar exercise. A task force has been set up to work out a blue print for the scheme.
Insurance companies are asking for government subsidy to run the scheme, as it has to do more as a social objective than as a business orientation. At present, two private insurance companies-East West and United Insurance-offer such coverage to farmers on a very limited scale.
However, no information is available as what have been the experiences of these two companies, in the field of crop insurance for last few years. The crop insurance operations of these two companies are very limited and confined to selected farmers.
The private insurance firms are cautious and they want any crop insurance scheme to be compulsory, and linked to agricultural loans for crops. Three official attempts were made in the past that failed to make any headway in the crop insurance as the insurance company relied heavily on subsidy. Until now, they have not developed their own products purely on commercial lines.
Crop insurance scheme can play a great job and great service to poor farmers, as it would provide them a safeguard against loss of crop caused by natural calamity. After the huge loses in this monsoon, the farmers are demanding security of their crops.
The agriculture sector is contributing 26 percent to the gross development product and 65 percent of people are working in this sector.
The government has kept silence on the crop insurance scheme that is supposed to cover the farmers' loss occurred due to flood as it has been claiming that this year all the crops would be insured and premium would be paid by the government.
The question arises that whether these are just the claims or the government actually is sincere in doing something for the farmers.
According to the market sources and some representatives of farmers associations, the government after or during the flood didn't mention the said scheme and kept silence on the issue. That reflects that nothing has been done in this regard and the scheme was just to gain political mileage.