Crop Loan Insurance: Calamity-hit areas deprived of scheme

The Crop Loan Insurance Scheme (CLIS), launched by the government in 2008 to protect small farmers in case of damage to crops from natural calamities, has so far not achieved its desired objectives as the high-ups of district administration in the country mostly notify areas other than calamity hit areas on the recommendation of parliamentarians and ministers.

“The government has allocated Rs 500 million in the current year’s budget and allocated Rs 500 million in budget 2012-13 for CLIS but due to political interference the allocated fund did not reach to deserving farmers as the concerned authorities mostly notify areas other than calamity hit areas”, sources told Business Recorder. Sources said that due to notification of areas other than calamity hit areas some of the insurance companies have decided to seek redressal through the courts.

Zarai Taraqiati Bank Limited (ZTBL) has entered into an agreement with the Adamjee Insurance Company and National Bank of Pakistan (NBP) along with National Insurance Company (NIC) for the insurance scheme specific to the agriculture sector. According to the criterion specified in the policy but not being implemented small farmers are defined as those having agricultural land-holdings of around 12.5 acres in Sindh and Punjab, 16 acres in the NWFP and 30 acres in Balochistan.

The insurance companies were to pay the loan with mark-up to the banks if farmers were not able to repay loan due to damage to crops; the scheme was targeted to benefit all the stakeholders, including banks, farmers and insurance companies. As per details of the scheme, all banks involved in agricultural lending and all insurance companies dealing in general insurance were allowed to participate in this scheme.

All borrowers receiving production loans from banks would have been eligible, as per the policy, to participate in this scheme as all production loans disbursed for major crops by the banks were to be compulsorily insured. The name of the farmer and his crop was to be entered in the land revenue record. The scheme was to be applicable to tenants, lessees etc. Regarding period covering the insurance, the scheme envisaged insurance cover for the period from sowing till harvesting.

Indemnity was to be payable on the happening of natural calamities, like excessive rain, hailstorm, frost, flood and drought besides crop related diseases like viral and bacterial attacks or any other damage caused to the crop like locust attack etc. The scheme, sum insured, was to be based on the per acre borrowing limits prescribed by the banks subject to a maximum amount agreed between the banks and insurance company.

The amount of claim was to be restricted upto 300 percent of the total premium received by the insurance company during the year or repayment period of the production loan. Maximum two percent of the loan amount per crop per season inclusive of standard levies. The bank was to collect the premium from the farmers on behalf of the insurance companies. For this purpose insurance companies were to open a collection account with the bank which would have deposited all premiums so collected.

A valid claim (as mutually agreed between the bank and the insurance company) under the scope of cover was to be payable subject to the following: Insured crop was to be situated in an area declared as calamity affected by the respective provincial government. Banks were to make all the necessary arrangements, to facilitate the insurance companies by providing them all the relevant data, as desired by them.

Copyright Business Recorder, 2012

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