I congratulate Business Recorder of February 15 for writing an editorial highlighting the directive issued by Governor of State Bank of Pakistan, Dr, Shamshad Akhtar, while chairing the mid-term review meeting of Agricultural Credit Advisory Committee (ACAC) for the urgent need of crop insurance to help improve the performance of our agricultural sector.
In that meeting, Dr Shamshad Akhtar emphasised "exploring the possibilities of creating an effective crop insurance mechanism to reduce loss risks in the event of natural calamites. The value of such a mechanism cannot be over emphasised given the fact that our economy is still based on agriculture.
The biggest component of the industrial sector, textile industry, is dependent, too, on what goes on in the cotton growing farm lands of Punjab and Sindh, and of course, all essential food items and a number of other commodities are provided by agriculture for local needs and, in some instances, for export purposes as well."
The Governor of State Bank of Pakistan has touched the nerve centre of our economy because agriculture is the main stay of our economic development. Its value is over 1.3 trillion rupees and approximately 23 percent of Gross Direct Product (GDP). Pakistan's resources 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, rain-fall accounts for 15 percent and ground water is only 25 percent.
This agro sector is fundamental to overall economic development of Pakistan. It engages about 44 percent of country's total labour force. It supports the prime industrial sector, which 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. For the current fiscal year State Bank of Pakistan has set a target of Rs 200 billion, showing an increase of Rs 32 billion. Zarai Taraqiati Bank has been given a target of Rs 60 billion for disbursement for the year 2007-2008.
This large allocation of agricultural credit, no doubt, will certainly go a long way in improving the plight of tillers as well as increasing the productivity of crops. But, unfortunately, in the absence of crop insurance, the lion's share of the above credit would go to the feudals and not to the poor farmers. The large portion of agricultural land is owned by feudal lords and millions of farmers for whom the credit incentive is supposed to benefit, are only share croppers.
Small farmers have no collaterals to offer to banks and thus , the main benefit is availed by influential farmers. The result is that all these concessions do not benefit small farmers, who remain at the mercy of these largeland owners.
Whenever a natural calamity strikes, that is rains or drought, locusts or pests, small farmers have no recourse but to approach informal money-lenders or feudals to overcome these difficulties, and which, in turn multiply their miseries.
In these adverse circumstances constant support is required to enable them to re-sow their farms and, thus, free themselves from the clutches of feudals as well as informal Sahukaars ----- This constant support can only be provided to helpless poor peasants only by crop insurance.
For tiding over the menace of poverty of poor tillers, the developing counties like, Sri Lanka, Mauritius, India, Indonesia, Malaysia, Thailand, Egypt, Philippines had introduced crop reinsurance long ago. For the information of readers even Bangladesh which was born in 1971, has provided crop insurance for their small farm holders.
Here, let me tell all our countrymen that Begum Sahiba is a great advocate of crop insurance because she knows very well as she has served international monetary institutions for quite some time. President Musharraf, while addressing the Kissan Convention on June 10, 2004 announced a package of incentives and earmarked an amount of Rs 60 billion.
Dr Salman Shah, who was the Prime Minister's Special Advisor in March 2005, created an Agricultural Support Fund to provide financial help for acquiring necessary facilities and modern machinery for the purpose for value addition and setting up fruit and vegetable processing zones and agricultural credit of Rs 200 billion for the current fiscal year, would not change the continuing predicament of poor farmers; and the scheme, that can prove a panacea for all the ills of agriculture sector, lies only in the introduction of crop insurance.
With this fact in view, "Dr Shamshad Akhtar, again on, 15th September, 2007 invited five leading insurance companies' heads to her office to work out the modalities of launching a crop loan-insurance scheme (CLIS) to accommodate farmers' losses in case of natural calamities such as heavy rains, earthquakes, pest attacks, floods etc" (Business Recorder: 16-09-2007).
In that meeting it was agreed that insurers would prepare the desired scheme and submit it to the Governor State Bank of Pakistan in a month's time. But, unfortunately, it also met the same fate as all such meetings end normally.
Here, I would like to state for the benefit of readers as well as Dr Shamshad Akhtar, that National Insurance Company Limited (NICL) presented to the Prime Minister on October 11, 2007 the plan of crop insurance for the protection of agricultural loans taken by farmers from banks, which 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 and feudals.
Therefore, it would be in the interest of State Bank of Pakistan as well as all commercial banks, which disburse agri -loans to farmers, to contact the public-sector insurer (NICL) to comprehend the modalities of crop insurance so that this long-awaited and most neglected useful scheme may be implemented as early as possible. I hope, the Governor of State Bank of Pakistan will heed to my humble submission.
"The launching of the 'crop loan-insurance scheme' will clearly be a step in the right direction, as it will provide a credible financial cushion to the calamity - hit small farmers. Such land-holders, possessing only limited financial means often go bankrupt when a natural calamity hits them. Secondly, introduction of the scheme will also discourage malpractices by big landlords such as obtaining loans in the name of Haris, which only results in bad debts. (Business Recorder's Editorial -16-09-2007).
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 help the taxation authorities to bring all feudals, who are exempted at present, under the tax net.