While addressing the Kissan convention on June 10, 2004, President Pervez Musharraf announced a package of incentives for the agriculture sector to bring about a change in the condition of millions of small farmers and earmarked an amount of Rs 60 billion under the above incentives. Subsequently, the Prime Minister's special advisor, Dr Salman Shah, during a PTV programme delivered a good news in the month of March, 2005 for creating an Agriculture Support Fund (ASF), to provide financial help for acquiring necessary facilities and modern machinery for the purpose of value addition, and also for setting up fruit and vegetable processing zones.
All these incentives would certainly go a long way in increasing the productivity of crops. It would, definitely give a great push to the trade and industry of the country because agriculture accounts for 23.3 percent of GDP. It provides raw materials for a number of industries and it also serves as the support base for our major industries, especially textiles. Thus in both direct and indirect ways it creates the largest number of employment opportunities and also accounts for the bulk of the foreign exchange earnings. In brief, it is the back-done of the country's economic prosperity.
Now the question arises. Who would gain from these incentives? Feudals or poor farmers? Unfortunately, the lion's share of agricultural land in the country is owned by feudal lords and millions of farmers for whom the incentives are supposed to benefit, are only share croppers. Therefore, the real benefit of all these above concessions normally do not reach the small farmers. Their plight would remain unchanged. They would continue to toil, sweat and till their lands as they used to do before.
Such an act of largesse helps only big landowners, who are self-reliant and have access to agriculture loans. In support of the above contention, I quote a report from the leading daily newspaper published on January 05, 2005: "An official of the Committee on Rural Finance (CRF) has blamed big feudal lords for hijacking a major share of loans from Zarai Tarqqiati Bank Limited (ZTBL), commercial and co-operative banks.
The benefit of subsidised credit from these institutions has gone mainly to the influential farmers due to availability of collaterals and political influence. The disbursement of more than Rs 120 billion of agricultural credit in the last three years or so could only reach a very small number of elite farmers and thus, growth in agriculture seems to have been stunted. The benefit of increase in procurement prices of various crops, said to be Rs 145 billion in the last three years, has been shared by these elite farmers, who paid a small amount of Rs 2 billion as tax on their total income in all parts of the country.
Hardly, 15 percent of the farmers are availing institutional agricultural credit while 85 percent farmers are forced to seek assistance from the informal credit sector, where the rate of interest is unbelievably high at 50 percent to 100 percent. Bankers say that not even 15 percent farmers have access to the institutional credit because of the lack of title of farm ownership and collateral for the loans."
"Bankers estimate 6.5 million farms in the country, of which 86 percent are of one acre to 12.5 acre size. All owners of these farms have no title of ownership. Since these owners of small farms have no documents, bankers do not accept them as collateral and hence no pass-books are issued. They remain outside the net of the institutional credit and depend entirely on the informal credit system based on exorbitant rates of interest.
Thus, the big farmers borrow from ZTBL and other commercial banks in the name of "haris", servants and family members." The report also quotes from the 1986 study of the Punjab Economic Research Institute (PERI):
"The study found 35 percent loans were proxy and fictitious. Of these, 25 percent were disguised proxy. The 65 percent loans were "loans actually got. Of these, seven percent were family loans, 23 percent genuine loans, 22 percent were over reported and 20 percent were underreported. Main beneficiaries of proxy loans were the landlords who got 77 percent. The obvious conclusion is that only 15 percent of elite farmers have access to loans and the vast majority of farmers has not been benefited by the agriculture credit."
This is the true picture of the loanees in the farming sector; and if a look is taken towards the credit given by the 21 banks up to January 2005, it would be seen that under the State Bank's mandatory scheme, these above banks had disbursed about Rs 57.52 billion to farming sector. In this paper during February, 2005.
It is reported: "Five major banks, namely Allied Bank, Habib Bank, Muslim Commercial Bank, National Bank and United Bank made a combined farm lending of Rs 26.98 billion between July 2004 end January 2005. ABL paid Rs 2.17 billion against its full fiscal year target of Rs 3 bn; HBL Rs 8.59 billion against the target of Rs 10 bn; MCB Rs 3.31 bn against Rs 5 bn; NBP Rs 10.25 bn against Rs 15 bn and UBL Rs 2.66 bn against Rs 5 bn. Zarai Taraqqiati Bank Ltd disbursed Rs 20.54 bn against its target of Rs 34 bn. Punjab Co-operative Bank Rs 4.66 bn against Rs 8 bn. Other fourteen banks, Askari, Bank Al-Habib, Bank Alfallah, Metropolitan, PICIC, KASB, Saudi Pak, Soneri, Khyber, Bank of Punjab, Faysal, Union, Bolan, and Prime Bank have contributed Rs 5.32 billion against their full fiscal year target of Rs 5 billion.
The State Bank expects that the flow of farm credit during this fiscal year would rise to Rs 100 billion that would form pat of the overall private sector credit of Rs 350 billion."
It is observed that in seven months the total agricultural credit has reached Rs 75.51 billion and by the end of this fiscal year it would shoot up to Rs 100 billion. No doubt, these loans would bring an increase in our agricultural production but it would not bear those fruits for which these loans are disbursed. i.e. For the improvement of agricultural productivity and for the prosperity of the poor farmers, major portion of the loans would be hijacked by big land lords as discussed in the preceding pares.
Therefore, what is the solution? In 2003-04 the agriculture sector registered a growth of only 2.6 percent, which is very small. This tiny growth is wiped out by the population growth, which is the Achilles heel. Therefore to accelerate the growth of agriculture and to protect the small farmers from the clout and injustice of feudal lords, crop insurance is the only answer.
To overcome the menace of poverty among the helpless farmers, the developing countries like, Sri Lanka, Bangladesh, India, Indonesia, Malaysia, Thailand, Mauritius, Egypt and Philippines ete introduced crop insurance, which is now in full swing. It gave a salutary effect on the economy.
Although, the importance of crop insurance has been recognised in Pakistan and various schemes were evolved for the last three decades but, unfortunately, it was never initiated due to one or other season. Instead of giving incentives to farming sector in the shape of billions of rupees, would not be so effective as the introduction of crop insurance. When other small and less developed countries have introduced crop insurance, why not Pakistan? It has the resources and the expertise of crop insurance.
In 1996, on the advice of the Ministry of Commerce, the Insurance Association of Pakistan (IAP) prepared a well-planned scheme of crop insurance. This scheme is still with IAP. If the federal government instructs the current chairman of IAP, Saifuddin Zoomkawala, who is not only a good technocrat but also very well connected with the international insurance market, would be able to run this scheme by creating a consortium of private insurers in liaison with the overseas reinsurers.
To make this crop insurance a feasible scheme the government has to contribute initially rupees two billion as subsidy. In subsequent years, it would require only one billion a year as subsidy from the government; and thus, crop insurance would become feasible. Its modalities can be discussed with the chairman of IAP. The amount of rupees two billion can be entrusted to the committee of 21 commercial banks which have already lent Rs 57.51 billion during the current fiscal year.
In this way, the money of the government would be safe and in the first year the poor farmers would not have to contribute any amount towards premia. From the second year farmers would pay 50% and the other 50% would be payable by the government as subsidy; and this 50% subsidy will continue till farmers would be in a position to pay 100% of premia.
The salient features of this crop insurance scheme are: it will cover all production loans as sum insured (seeds, fertiliser etc plus 20 percent expenses of farm labour), all bank loans coverage is compulsory, initially crops of wheat, rice, cotton, tobacco and sun flower sees will be covered, areas of all four provinces be included, risks of damage to crop due to drought, fire, lightning, excessive rains, floods, hail storm, excessive frost, locusts and diseases caused by excessive rains and floods will be provided, losses up to 20% of the normal yield will not be paid, losses exceeding 20% will be payable proportionately after deducting 20% but in case of total loss of crop full will be paid sum assured i.e. without deduction of 20%, payment of claims will be made to loaning agencies and premium would also be paid by lending agencies on behalf of farmers. Therefor, the crop insurance is the right answer for alleviating poverty and accelerating agricultural productivity.
The importance of crop insurance for our agriculture sector cannot be denied or ignored. It is the need of the hour not only to boost the foodgrains of our country but also to combat the menace of population explosion and natural hazards, such as floods, rains, hailstorm, fire, locust invasion, pests etc. It will solve many socio-economic problems.
It would effect savings for the government of the amounts that it is spending on subsides. It will protect farmers; especially small ones from financial ruin and also help the lending agencies to reduce the writing off debts. It will remove food shortage, generate employment opportunities, improve foreign trade balance and provide prosperity to our people at large. Last but not the least, the introduction of crop insurance would help the government to know the yield of each unit, which would in the long run assist the taxation authorities to bring all feudals under the net of tax.
The prosperity of rural people or farmers consisting of sixty eight percent of the country's population, would be generated by the introduction of crop insurance which would in due course reduce the incidence of poverty for which World Bank (W.B) and Asian Development Bank (ADB) are also making all efforts. At present one third population of our country is living below poverty line. I hope, this time, W.B and ADB would also persuade the Government of Pakistan to introduce Crop Insurance without any further delay.
Comments
Comments are closed.