Prime Minister, Shaukat Aziz, on October 11th 2007, approved various insurance schemes to help farmers and low-income groups, presented to him by the Chairman of National Insurance Company Limited (NICL), in collaboration with financial institutions.
He, further, said that the scheme of crop insurance offered for the protection of agricultural loans taken by farmers from banks would not only safeguard the interests of peasants but would also enable them to re-cultivate their farms and also save them from becoming helpless victims in the hands of informal loan-giving agencies or feudals.
The Prime Minister congratulated NICL for taking this bold initiative and also praised other insurance policies prepared by NICL for urban low-income individuals covering life, health, accidents, etc. (Business Recorder: 12-10-2007). The step taken by NICL towards crop insurance is a great stride in the history of Pakistan insurance industry. This scheme had been deliberated upon in the past by the various departments and ministries of provincial and federal governments but unfortunately it never saw the light of the day.
Agriculture is the main stay of Pakistan's economy, with a value of over 1.3 trillion rupees and approximately 22 percent share of GDP. Pakistan's land resource consists of 79.61 million hectares. Out of which, 22.17 million hectares is cultivated area. A major portion (82 percent) of the cultivated area is irrigated while the rest is rain-fed. Irrigation sources are both canal as well as ground water resources. Indus river system accounts for 60 percent of the total water supply, rainfall accounts for 15 percent, and ground water is 25 percent.
This agro-sector is fundamental to overall economic development of Pakistan. It engages 44 percent of Pakistan's total labour force. It supports the prime industrial sector that is textile sector, which in turn, contributes about 67 percent to annual exports. This is the main reason that government has been enhancing agricultural credit every year. It allocated Rs 130 billion for the year 2005-2006; and during 2006-2007 it soared to Rs 168.3 billion. In the current fiscal year, it would be over Rs 200 billion. In view of the foregoing facts and figures, the enterprising step of NICL is laudable. I am sure it will go a long way in ameliorating the plight of farmers.
The details of the NICL crop insurance and other schemes have been carried by the leading daily of October 29th 2007: "The NICL is expected to offer crop insurance for next Kharif - in June or July 2008 - when sowing season begins. It will be offered to selected farmers to cover a maximum amount of Rs 2 million against natural perils, like diseases, pest infestations, fire, theft, an accidental death of the borrower who is given insurance coverage. Losses caused by malicious acts will be excluded because of moral hazard of borrowers - farmers as well as feudal.
It also excludes losses caused due to war, war-like operations, fluctuation and impact of the measures taken by the government in public interest. Premium rates are fixed at 1.25 - 1.75 percent on the sum insured. Besides crop insurance, the NICL has developed four products to cater to the needs of micro financing introduced by the government in the rural areas by providing compensation for the loss of life, health and of other assets of the poor man in the village."
This beneficial initiative of the NICL is heading in the right direction, as it will provide a credible financial cushion to the calamity-hit small farmers. Such tillers, possessing only limited financial means, often go bankrupt when a natural calamity hits them. Moreover, introduction of the scheme will also discourage malpractices by big landlords such as obtaining loans in the name of haris, which results in bad debts.
It would solve many of our socio-economic problems. It would affect savings for the government of the amounts that is spending on subsidies; it will protect farmers, especially the small ones from financial ruin and lending institutions from writing off debts. It will also reduce migration of population from rural to urban areas, thereby minimising economic problems.
Besides, it will bring financial security to farmers, remove food shortages, generate employment openings, improve our foreign trade balance and provide prosperity and comfort to our countrymen at large. Lastly, it would mark the beginning of proper accountability in agriculture; and thus help the government to know the yield of each unit, which in the long run, would assist the taxation authorities to bring all feudal, who are exempted at present, under the net of tax.