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Need for crop insurance




  • AGRICULTURAL PRODUCTION is typically a risky business. In all its aspects and relationships, agriculture is linked to a considerable element of uncertainty. As an enterprise’ which is, as a system of production, distribution and exchange, it is susceptible to all social and economic uncertainties. The sector has also to reckon with personal uncertainties arising from death, farmers’ sickness and also from its inability to effectively employ its labour power.


    AGRICULTURAL PRODUCTION is typically a risky business. In all its aspects and relationships, agriculture is linked to a considerable element of uncertainty. As an enterprise’ which is, as a system of production, distribution and exchange, it is susceptible to all social and economic uncertainties. The sector has also to reckon with personal uncertainties arising from death, farmers’ sickness and also from its inability to effectively employ its labour power.

     On top of these, agriculture is especially susceptible to uncertainties of climate. Indeed, one of the important features that distinguishes a farm as a business unit from a manufacturing plant or commercial enterprise is that the operator must be prepared to deal with what are known as the ‘vagaries of Nature’, crops and livestock may be destroyed by natural hazards such as hurricanes, floods, fire and droughts.

     The types of risks confronting farmers vary with the farming system and with climatological factors and institutional setting. They are particularly burdensome for small-scale farmers in developing countries. Even when an agricultural risk is accidental and measurable, it may remain uninsured unless its cost is within the means of an average farmer and this would require at least: premium must be reasonably low in proportion to the protection provided and, there must also be a demand for insurance amongst a sizable section of the farming community.

     Insurance even though beyond the means of the average farmers, may be available if the government subsidises a part of its cost as well as expenses, e.g. ‘all-risks’ insurance in many countries. The main objective of crop insurance, as compared to relief and concession, is that the insured farmer, in case of loss, can claim indemnity as a matter of right. Second, farmers themselves share the losses wholly or partly.

    A contractual right to assist in the event of crop failure; further enables farmers to improve their credit worthiness in general and more particularly by using the insurance policy as collateral for loans.

    The farmers also gain a great confidence in venturing upon the adoption of new and improved farming practices and making higher investment in agriculture for improving crop yields and increasing agricultural production. Finally, the government obligation, whenever undertaken, to provide relief in case of crop disaster is reduced.

    Crop insurance is an important measure to secure stabilisation in the agriculture industry. It is complementary on the one hand, to activate and to strengthen the base of agriculture, and on the other hand, to provide price and income support measures.

    The government has also taken substantial measures to increase agricultural production and to stabilise farmer’s income by arranging supply of inputs at subsidised rates and introduction of modern technology. No doubt, these measures have brought good results but the damage to crops is so heavy, that farmers sometime could not get anything out of their fields. These calamities are beyond the control of the farmer’s efforts.

    An effective crop insurance scheme may provide essential elements for agricultural development. By reducing risks, crop insurance can make small farmers more willing to try new technologies. Also in case of a crop failure any time, the protection provided by crop insurance payment serves to shorten the time that rakes to recover from a bad year.

    By: Dr. M Farooq, Dr. Shahzad, M.A Basra, Hafeez ur Rehman


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