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Indonesia to spend US$33m on farmer insurance programme
Publication Date : 01-08-2013
Indonesia's Agriculture Ministry has proposed to allocate 345 billion rupiah (US$33.6 million) in the 2014 state budget draft to finance a farmer insurance programme expected to begin early next year.
The ministry’s financing director, Mulyadi Hendiawan, said as an initial step, the government would allocate the budget to cover insurance for 2.4 million hectares of rice fields, or 20 per cent out of a total 12 million hectares of rice fields in the country.
According to Mulyadi, only farmers owning less than two hectares of land will be included in the programme,
“Most Indonesian farmers own less than that [two hectares], with the average field possession around 0.25 hectares,” he told reporters on Wednesday.
“We want to ensure that the programme will be right on target.”
Mulyadi said the government would cover 80 per cent or 144,000 rupiah out of total 180,000 rupiah of the insurance premium, while farmers would only need to pay the other 20 per cent, or 36,000 rupiah.
The premium will be paid once in each planting period, which falls in April-September and October-March.
Should there be harvest failures, farmers can claim 6 million rupiah a hectare.
However, only farmers suffering failures in 75 per cent of their total hectares can claim compensation, and only harvest losses attributed to drought, floods and herbs and pests will be covered.
Officials from the ministry and the appointed insurance company will check the claimed losses, and if proven, the farmers will receive compensation in 14 days.
“The insurance company will likely be state-owned firm such as PT Jasindo, but they are free to form a consortium with other private companies,” Mulyadi said.
He said the ministry was formulating a ministerial regulation to stipulate the insurance.
The ministerial regulation is a follow up to the newly endorsed Protection and Empowerment of Farmers Law, which includes an obligation for the government to provide agricultural insurance to cover losses caused by harvest failures due to natural disasters, pests and weeds, infectious crop disease outbreaks and climate change.
The law specifically obliges the government to appoint state-owned insurance companies as insurance providers.
In contrast, under the existing programme. the government provides only social aid in the form of seeds and fertiliser to compensate for losses caused by harvest failures.
The ministry launched a pilot project covering 1,500 hectares of land in South Sumatra and East Java last year, with 160 hectares hit by harvest failures.
The pilot project was supported by the Japan International Cooperation Agency (JICA), which paid 80 per cent of the total premium provided by Jasindo.
The realisation for the pilot project was only half of a total target of 3,000 hectares of fields, Mulyadi said, as farmers were first reluctant to engage with the project.
“They did not see the point in paying an amount of money for something that had yet to happen,” Mulyadi explained.
“But when failures engulfed their harvests, they started to convey their interest in joining the programme.”