Treasury to stop pumping money into ailing state- backed agriculture insurance scheme
View(s):Sri Lanka’s Treasury will halt the practice of pumping money to keep afloat the ailing state- backed insurance scheme for agriculture sector making use of a new levy imposed on the profits of banking, finance and insurance institutions, government officials said.
Several commercial banks and finance companies have expressed concern on the new 1per cent levy as they believe this is due to the inability of the National Insurance Trust Fund (NITF) to properly implement previous crop insurance schemes.
Agricultural insurance is a complicated and low profit business which several bankers say they are compelled to (in the past) allocate 10 per cent of the lending portfolio for agriculture on a Central Bank directive.
On top of it, transform 2013 budget has proposed to transfer 1 per cent from their profits to the NITF, they said.
When asked for comments on this matter , Upali de Silva, Secretary General of the Sri Lanka Bank’s Association (SLBA) told the Business Times that the government is yet to spell out modalities of the new levy but it is an area of concern as most banks lend heavily to agricultural sector.
The low income of farmers and low awareness of the role of agricultural insurance are discouraging farmers with many farmers not opting for insurance. A senior Finance Ministry official told Business Times that the new levy on profits will not affect the financial stability of banks.
He noted that the contributions from farmers for the insurance fund are not enough to make their claims.
Every year the Treasury is pumping over Rs.130 million to the Agricultural and Agrarian Insurance Board, which runs a crop insurance scheme and pension scheme for farmers and fishermen, he said.
He revealed that there was a vast gap between the contribution and payments resulting in a deterioration of state backed pension and insurance funds.
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