Crop Insurance in Punjab, Pakistan
Crop Insurance in Punjab, Pakistan
Tanveer Ahmed
Agriculture (crops)
Agriculture, Crops Insurance, Punjab
Crops Insurance in Punjab When we think about insurance we think about cars, factories, buildings, machinery, people etc. One form of insurance that does not get much attention but should be widespread, particularly in a country like Pakistan, is Crop Insurance. Punjab is the most populous province of Pakistan with a population of over 110 million. With a share of 60% in the national economy, the province is the most prominent in the agricultural sector. It provides 76% of the country’s annual grain production. Crop Loan Insurance Scheme (CLIS) was introduced countrywide in 2008 by the SBP. It provides insurance coverage for five major crops, wheat, rice, sugarcane, cotton and maize. The cover provided under CLIS is against unavoidable loss of crop or part thereof resulting directly from the peril(s) such as Flood, Excessive Rains, Frost, Drought, Hailstorm, Cyclone, diseases like Viral, Bacterial and Locust attack. With the support of the government, the insurance premium is subsidized for subsistence farmers, defined as those having up to 25 acres of land for cultivation. The crop loan insurance scheme attracts premium subsidy support from the government. The maximum net premium rate is 2% per crop per season per borrower and the cover is from sowing to harvesting. Since Rabi 2008/09 CLIS has been available for the aforementioned five major crops. The policy adopts a unique two-trigger indemnity procedure: 1) catastrophe losses as a result of an insured peril that exceeds 50 percent of the normal average regional area yield must first be declared by a competent authority, and 2) this opens the policy for a loss adjustment at the individual farmer level. For CLIS, the delivery channel is through linkage to agricultural credit for farmers through the banks. Crop insurance is compulsory for farmers who have taken seasonal loans from the banks. The scheme carries a maximum agreed indemnity limit of 300 percent loss ratio. Now, the Punjab government is also providing crop insurance, which might be a game-changer for farmers of the province. The Punjab government has introduced Punjab Fasal Bema Scheme for the farming community in case of natural calamities/disasters. The first phase of the scheme was launched in Sheikhupura, Sahiwal, Lodhran and Rahim Yar Khan in Kharif 2018, it was applicable only to cotton and rice farmers. When the government saw the importance of this scheme, the scope of this program was expanded in 2019 and it was started in 18 districts of Punjab. These 18 districts included Sahiwal, Sheikhupura, Lodhran, Rahim Yar Khan, Multan, Muzaffargarh, Narowal, Faisalabad, Rajanpur, Bhakkar, DG Khan, Kasur, Khanewal, Layyah, Mandi Bahauddin, Bahawalpur, Bahawalnagar and Okara. Under this scheme, the Punjab government provided 100 percent subsidy on insurance premium to farmers owning 5 acres of land, similarly, the government also provided 50 percent subsidy on insurance premium to farmers of 5 acres to 25 acres and in the case of orchards also provided 50 percent subsidy on insurance premium to farmers. In the first phase (Kharif 2018), insurance was applied to agricultural creditors (E-Credit, CLIS) as crop insurance schemes were mandatory for agricultural creditors of E-Credit, therefore, they were registered under the automated system. Moreover, agricultural creditors were asked to approach their respective agricultural banks. In the next phase (Rabi 2018) crop insurance scheme was brought to other farmers besides the agricultural creditors. For fasal bema, the farmers used to register themselves with the Department of Agriculture, Punjab. For Kharif 2021/22 season crops, the process of insurance program registration has been started for cotton and paddy farmers in 27 districts of Punjab to compensate for climate change, natural disasters and locust damage. Similarly, South Punjab includes Multan, Lodhran, Khanewal, Vehari, DG Khan, Muzaffargarh, Rajanpur, Layyah, Bahawalpur, Bahawalnagar and Rahim Yar Khan Districts. The program will provide 100 percent subsidy on premium for farmers owning up to 5 acres of land and 50 percent subsidy on insurance premium for farmers owning 5 to 25 acres of land. Policy certificates will be issued to farmers who insure cotton and paddy crops in Kharif 2021/22. In case of loss of production at the tehsil level, an announcement will be made in December 2021 and the concerned insurance company will contact all the insured farmers in January 2022 and will be bound to compensate for the loss. The most important point is that it does not cover crop damage at the level of an individual farmer or field. Rather, under this method, production loss or a specific geographical area (such as a district, tehsil, union council or village) is considered, however, the geographical area is usually called the Unit Area of Insurance or UAI. Under this method, in case of less than average production in UAI by area (index), area, production, index product pays compensation. Moreover, the loss is estimated on the average yield of a given area (tehsil) rather than the individual farmer’s land. AYII is based on scientific principles and in this index, crop harvesting experiments are carried out scientifically in different places at the level of a specific area (tehsil) in Punjab.