KARACHI, Sept 12: Reports of acute water shortages -- as much as 40 per cent--in coming Rabi may adversely affect the launching of crop insurance scheme, which was set for a formal launch next month. Water shortages reports is feared to discourage banks from offering credits to the farmers as crop insurance scheme is linked to the credits.

The crop insurance is being talked about for at least last five years but is being delayed on one pretext or the other. Insurance companies fear clout of the big landlords, while bankers complain agri credit carry more administrative cost and involves more default risk.

Nonetheless, the crop insurance scheme is set to be launched for the next Rabi crop with holding of a formal ceremony next month, immediately after Eid by the government-controlled National Insurance Company (NICL).

A roundtable of experts from insurance, banking, farming, and agriculture sector and bureaucrats will be held to review crop insurance in many countries of the world, sources in NICL informed.

The NICL was involved in crop insurance scheme preparation exercise for last few years and was in negotiations with the National Bank and Zarai Tariqiati Bank.

The banks are negotiating with the insurance company the rate of premium, which is expected to be between 1.5 to 2 per cent, claims settlement modalities and coverage of losses. The key issue involved was declaring crop insurance mandatory for the borrowers.

Sources indicate that all these issues have apparently been resolved and by next year as many as 1.95 to 2 million borrowers of banks agri credit are expected to be covered by the crop insurance scheme. The Habib Bank Ltd is understood to be in consultation with New Jubilee Insurance. The UBL and other major banks are also discussing the crop insurance issues with the insurance companies. All these consultations between the banks and insurance companies on crop insurance are being held within the framework of a report given by a Task Force of insurance companies’ executives and bankers headed by HBL president Zakir Mahmood.

State Bank of Pakistan Governor Dr Shamshad Akhtar is very keen to remove exclusivity of financial services from the agricultural areas and had formed this task force.

On July 17 last, she convened the meeting of the task force in which Zakir Mahmood presented his report.

This signaled the commencement of serious business negotiations, which appear to be set for an action-oriented programme in next few months. Rabi sowing begins from late October and early December and includes sensitive and strategic wheat crop.