Provincial seminar on Crop Insurance

KARACHI: A public subsidy programme should be developed to create incentives for agricultural insurers to expand their services to small farmers. This was observed by speakers and participants of the Provincial Seminar on Crop Insurance entitled ‘Issues and Challenges in Crop Insurance in Pakistan’ jointly organised by Participatory Development Initiatives (PDI) Oxfam-GB and European Commission at a local hotel on Tuesday. Public support should focus on the development of risk market infrastructure and public goods that would give agricultural insurers incentives to offer affordable and effective insurance to farmers, particularly small ones.
Sindh Chamber of Agriculture President Nadeem Qamar, Sindh Agriculture Department Deputy Secretary Shafiq Sheikh, National Bank Agriculture Credit Officer Ayaz Baloch, agriculture expert Dr Fateh Marri, United Insurance Co of Pakistan Ltd General Manager S Abdul Majeed and PDI representatives, Khalida Brohi and Noor Baladi and Romana Lakho spoke on the occasion. They adopted various resolutions in the seminar in which they demanded of the federal government to develop an appropriate legal and regulatory framework to support agriculture insurance. They recommended that the insurance law is applicable on agriculture insurance, but enabling of different provisions should be made for the agriculture insurance – for this appropriate regulations should be made under the insurance law.
They observed that the government should devise a mechanism to collect and manage reliable data regarding agriculture production, losses, product prices and market trends. The banks and companies dealing in insurance should have easy access to such data.
Speakers of the seminar suggested that the government along with private banks and insurance companies should chalk out a programme to educate the small farmers about the procedures to avail different crop insurance products to be launched in the future and those existing and the benefits for ensuring their crops. It was recommended by the agriculture experts that the federal and provincial governments should take efforts to engage international re-insurers to encourage the local banks and insurance companies to come forward with different crop insurance schemes focused on small farmers.
They opined that the role of the federal and provincial governments in the financing of catastrophic risks in agriculture should be clarified saying that if the federal government wishes to offer a subsidy to local insurance companies, it should offer free stop loss reinsurance at an agreed proportional level to the provincial government as well as provincial insurance companies.
It was recommended that a technical support unit should act as a central agriculture insurance service provider, which should have support of the federal government and links to the provincial governments, insurers and re-insurers.
The government should devise a mechanism for coordination among different existing pilot crop insurance schemes. The successes and failures of these pilots should be evaluated and the schemes should be refurbished accordingly, agriculture experts suggested. They observed that both multiple peril and index-based crop insurance are feasible in the country. The government learning from different crop insurance models should facilitate the banks and insurance companies to design products that can sustain in Pakistani context, they added.
They maintained that there are no clear international precedents for a general agricultural insurance law. Therefore, if the federal government decides that such a law is necessary or desirable, it would be important to tailor that law given the policy goals of Pakistan government. It would likely be unwise to turn to any other country for ‘model agricultural insurance legislation’ as such legislation simply does not exist. They added that the majority of the present insurance premium is derived from farmers insured in former military reclamation areas, where individual grower crop programmes are feasible because of the unique features of the reclamation areas, large farm structure and the organisation of agriculture, these MPCI products are not well-suited to the wide-scale replication with small farmers outside the reclamation areas, they noted.
Sindh Chamber of Commerce president opposed the agriculture tax saying that growers and agriculturalists were already paying indirect taxes. He opined that it was need of the hour that the government practically launched Crop Insurance Policy for small farmers in the country. He added that State Bank has announced the Crop Insurance Policy but it only exists on papers and has not been launched in real sprit. He added that bankers were reluctant to give crop insurance to rural areas growers and only they are providing agriculture crop insurance loans to a few big landowners who have sugar mills, not small farmers. He added that agriculture is contributing more than 85 percent of the gross domestic product and not 25 percent. Textile industry, which contributes in the GDP, is totally dependable on cotton crop.
He opposed the federal government’s recent taxes imposed on agriculture sector saying that already growers are paying huge amounts on agriculture input like fertilizer, seeds, pesticides and on machinery used by farmers.