The schemes are being developed in line with the Governance and Economic Reform Work Plan introduced recently by Prime Minister Dr Baburam Bhattarai.
“We´ve already held meetings with high-ranking officials of the Insurance Board and they have fully agreed to help us design products,” Prabhakar Pathak, spokesperson for the agriculture ministry, told Republica.[break]
Along with product design, the board will also compute coverage amount and annual premium rates for different products. “Non-life insurance companies will then be mobilized to sell products to farmers,” Pathak said.
As per the work plan, the government will extend 50 percent subsidy on annual premium amount of insurance products that provide coverage to fishery, poultry and agricultural products. This means commercial farmers, who want to insure crops, fishery products and poultry, can purchase the policy by paying half the amount.
The agriculture ministry´s move comes at a time when the government is ratcheting up campaigns to promote the agricultural sector. Last year, for instance, the central bank made it mandatory for all banks and financial institutions to extend at least 10 percent of the total loans to agriculture and hydropower sectors. To exert pressure, Nepal Rastra Bank Governor Yuba Raj Khatiwada himself encouraged bankers to ease credit access for farmers and others working in the agriculture sector.
Although these moves have forced financial institutions to open up to the agriculture sector, they still do not feel comfortable about extending loans to farmers due to fear of losing money in events like floods, drought or epidemics.
Considering this, the agriculture ministry had come up with a concept paper on crops and livestock insurance around a year ago. This paper included a detailed plan on covering vegetable, fruit, cardamom tea, coffee and livestock farming with coverage amounts ranging from Rs 5,000 to Rs 200,000.
But the plan was later shelved due to lack of budget to extend subsidy to farmers.
Currently, NLG Insurance is the only insurer in the country which is offering insurance products to farmers. The company recently launched products that provide cover to dairy cow and buffalo and sells its policies for an annual premium ranging from Rs 2,500 to Rs 3,000.
“We are now planning to design insurance schemes for different agricultural products and fix premium amount on those policies,” Binod Aryal, executive director of the Insurance Board, said. “We will then make it mandatory for all non-life insurance companies to sell those products.”
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