While addressing the Kissan Convention on June 10, 2004, President Musharraf announced a package of incentives for the agriculture sector to bring about a change in the condition of millions of small farmers.
These incentives, as said by the President, are aimed at enhancing productivity, scaling down rates of agricultural inputs and above all, to bring about a green revolution in the country.
These incentives include the lining of 87,000 water channels at a cost of Rs 66 billion under a crash programme since water is the mainstay of this sector.
Pakistan has one of the world's largest and oldest irrigation networks; however, more than 50 percent of irrigation water is wasted due to widespread seepage.
Theft of water is another acute problem, which occurs on account of dilapidated condition of these water courses.
OTHER SALIENT FEATURES OF THE PACKAGE ARE:
1. Abolition of customs duty on agricultural implements, establishment of tractor plants, and permission to import tractors below 35H.P and above 100H.P with no GST or withholding tax, the importers will have to pay a 10percent import duty only;
2. The farmers who return their loans within the stipulated time, will be charged only 8 percent mark-up;
3. The rate of 9 percent will be charged on all types of new loans. The on-going loans will also be at 9 percent;
4. The loans upto Rs 500,000 defaulted beyond December 31, 2000 will stand fully settled on payment of 50 percent of the amount outstanding;
5. A special concession will be provided to farmers in the calamity-hit areas of Balochistan. All loans up to Rs 200,000 in the calamity-hit areas of Balochistan, defaulted beyond December 31, 2000, shall stand settled on payment of 25 percent of the principal amount;
6. Zarai Taraqiati Bank (ZTBL) shall not exercise the special powers given under the Land Revenue Act, by virtue of which ZTBL could arrest poor farmers.
It is expected that when the above incentives would be implemented in full, they would revolutionise the condition of farmers economically as well as socially and also generate about 1,000,000 employment opportunities for the rural people; and avert wastage of water to the enormous benefit of the nation.
All these incentives would certainly go a long way in alleviating the lot of small farmers and also increase the productivity of crops; unfortunately the lion's share of agricultural land in the country is owned by feudal lords, and millions of farmers for whom the new package is supposed to benefit are only share croppers.
Therefore, the real benefit of these incentives would not reach them. The plight of small farmers would remain unchanged. They would continue to toil, sweat and till their lands as they used to do before.
The immediate need of the hour is not the package of incentives recently gifted by the President but the answer to the ills of our agriculture lies in the introduction of crop insurance.
Why crop insurance? Because Pakistan, like other Asian countries, is predominantly an agricultural country. It is the single largest sector of Pakistan's economy accounting for 20 percent of GDP, employing 52 percent of rural labour force and contributing 45 percent of export earnings of the country.
The total cultivated area of Pakistan is 20.43 million hectares out of which 15.47 million hectares ie 76.2 percent, is irrigated and the remaining area is rain fed.
About 68 percent of Pakistan's population lives in rural areas. An analysis of agrarian structure of rural Pakistan shows that there are about 4 million farms out of which 3.7 million are small farms, which constitute 92 percent of the total farms.
Cropping and land use intensity on small farms are high as compared to large farms. Due to surplus family labour, the intensity of small farms is 140 percent as against 107 percent of large farms.
This shows the potential, which can be realised through an integrated guidance system of technological information, credit package, government policies and follow-up programs through effective monitoring and evaluation systems.
Agriculture has maintained a steady pace of expansion, ie over 4 percent per annum from the early sixties.
Adoption of high yielding varieties, widespread use of chemical fertiliser, increased water availability, efficient farm water management, farm motive power, expansion in agricultural credit disbursements, are the important factors that may contribute to increase productivity and output of small farms.
The President, while announcing the aforesaid "package" might have kept the foregoing in view. But such measures are not a permanent cure to the malady of our agro-based industry.
The President said, "Today the total agricultural credit has reached Rs 65 billion and by next year it will increase to Rs 100 billion." No doubt, these loans have brought an increase of about 40 percent in our agricultural production. But still, in the real sense of terms, our agriculture has not developed as much as we think it has. I think what we require is to turn our entire agriculture into a well-knit industry.
Over the past two decades, the government has been paying subsides to farmers and huge debts are being written off by lending agencies. How long would it continue? And how long would our agriculture sector move on crutches provided by the government at the nation's cost?
In 2003-04 the agriculture sector registered a growth of only 2.6 percent, which is very small. It happened due to untimely rains and pest attacks.
This tiny growth would be wiped out by the population growth, which is the Achilles heel.
Therefore, to combat the menace of population growth, natural hazards beyond human control, such as floods, rains, hailstorm, frost, fire, locust invasion, pests and insects etc and also to keep the steady pace of the growth of agriculture produce, crop insurance is the only answer.
The need and effectiveness of crop insurance has been felt in a large number of developed and developing countries in the last 40 years or so.
Crop insurance in one form or the other is being practised in North America, Europe, Canada and Japan on the side of developed countries and in Sri Lanka, Bangladesh, India, Indonesia, Malaysia, South Korea, Mexico, Mauritius, Philippines and Thailand etc amongst the developing countries.
In countries where crop insurance was initiated either as a pilot project or at the national level, it has not been abandoned, rather has been expanded or strengthened due to its salutary effects on the economy.
Although, the importance of crop insurance has been recognised in Pakistan and various agencies, namely the Ministries of Food and Agriculture, Commerce, Finance, ADBP, State Bank of Pakistan, Pakistan Insurance Corporation (PIC) and National Insurance's Corporation (NIC) etc had deliberated on the vital subject of crop insurance several times but no concrete steps had so far been taken to provide the farmer with such a useful and urgently required protection.
During 1996 the federal government was very keen to introduce crop insurance and the then Commerce Minister was entrusted to do this job as early as possible.
At that time, the private sector insurers under the umbrella of their Associations (IAP) were also invited along with PIC and NIC to prepare this scheme.
IAP after having several meetings with various ministries and lending agencies evolved the scheme of crop insurance. Its salient features are elaborated hereunder for the benefit of federal and provincial governments and lending agencies, especially ZTBL.
1. NATURE OF THE PROJECT: It will be a pilot project and shall cover all production loans plus 20 percent expenses of farm labour.
2. THE LOANING AGENCIES: All commercial banks, ZTBL, and Federal Bank for Co-operatives.
3. CROPS: Wheat, rice, cotton, tobacco and sunflower seeds.
4. PERIOD OF PILOT PROJECT: Three years.
5. AREAS: To all four provinces.
6. SUM ASSURED: The amount will be equal to the loan for cost of seed, fertiliser and pesticides, plus 20 percent of farm labour.
7. RISKS COVERED: Damage to crop due to drought, fire, lightning, excessive rains, floods, hail storm, excessive frost, locusts and diseases caused by excessive rains and floods.
8. BASIS OF LOSS SETTLEMENT: (a) Loss upto 20 percent of the normal yield not tube paid; (b) Loss exceeding 20 percent will be payable proportionately (after applying the said deductible of 20 percent); (c) Total loss of crop will be paid fully ie without deduction of 20 percent.
9. ASSESSMENT OF CLAIMS: Claims will be settled by the manager with the approval of the management board. In the event of any dispute or difference as to liability or quantum of loss, arbitration shall be followed.
10. PAYMENT OF CLAIMS: Claims shall be paid to the loaning agency.
11. RATE OF PREMIUM: 3.5 percent to 6 percent depending on the area and crop.
12. COLLECTION OF PREMIUM: Lending agencies will collect the premium from the borrowers and remit to insurers along with a proposal form.
13. ISSUE OF POLICY: Policy will be issued in the joint name of lending agency and farmers.
14. SUBSIDY: Premium to be charged from the farmer and 50 percent to be subsidised by the lending agency and this subsidy of 50 percent will be recoverable from the federal government.
15. COMPULSORY OR VOLUNTARY: It will be compulsory for borrowers.
16. ADMINISTRATION OF CROP INSURANCE: The insurance scheme will be run by private sector reinsures, who have joined the scheme. The consortium shall carry the name of crop insurance Underwriters. All staff members required for the project shall be recruited by the scheme properly trained within Pakistan and abroad. The management scheme shall be headed by the Management Board, with Adamji Insurance Co as its manager.
17. SIZE AND MAGNITUDE OF THE SCHEME: Since crop insurance shall be limited to the production loan and not development loan, it is estimated that the total sum insured would be in the vicinity of Rs 8 to 10 billion, to which shall be added 20 percent to cover the cost of farm labour.
This will also provide the opportunity to crop insurance underwriters, to gain experience across the country and on all five crops, and over all four seasons of the year.
Such a size is essential for any meaningful pilot project, so that after 3 years experience, the crop Insurance Underwriters hopefully will be ready to embark on total nation-wide crop insurance underwriting, and also extend to such other corps that are not included at present in the pilot project.
18. FUNDS REQUIRED FOR THIS SCHEME: This scheme will require initially an amount of rupees one billion from the federal government for its establishment.
This sum is peanuts as compared to the money that would be expended on the above incentives announced by the President.
Once crop insurance is introduced, it would require less support from the government in the long run.
The introduction of crop insurance as suggested above would solve many of our socio-economic problems. It would affect savings for the government of the amounts that it is spending on subsidies; it will protect our farmers, especially the small ones from financial ruin and lending agencies from writing off debts.
It will also reduce immigration of population from rural to urban areas, thereby minimising ekistical problems. Besides, it will bring economic security to our farmers, remove food shortages, generate more employment opportunities, improve our foreign trade balance and provide prosperity and comfort to our people at large.
It would have been very heartening and appropriate, if the President while announcing his "package of incentives" had also included the scheme of crop insurance. Because the situation and the times demand that crop insurance must be introduced without any further delay. We must act now lest we may feel sorry for having missed the bus.
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