Case for national agricultural insurance scheme
As Sri Lanka faces worsening climate uncertainty, rising input costs, and falling farmer confidence, the time has come for bold action to secure the future of its agriculture. One of the most effective tools available is agricultural insurance—a safety net that protects both farmers and the national economy from the shocks of climate change, market volatility, and production failures.
Across the tropical world in 2025, agricultural insurance schemes have evolved into essential components of rural development policy. From India and the Philippines to Kenya and Brazil, governments have recognised that traditional relief after disaster is no longer sufficient. Instead, they are moving toward proactive, insured farming systems that promote resilience, reduce dependence on emergency funds, and encourage continuous investment in cultivation.
The Indian example stands out for its scale and scope. Under the Pradhan Mantri Fasal Bima Yojana (PMFBY), over 2 million farmers are insured annually, with the government covering up to 90% of the premium in rain-fed areas. In 2025, India further expanded the Restructured Weather Based Crop Insurance Scheme (RWBCIS) to include key plantation crops such as tea, coffee, rubber, and coconut. Using weather indices like rainfall and temperature to trigger payouts, these schemes ensure income stability for long-term crop growers—exactly the kind of protection Sri Lanka’s tea and rubber smallholders need.
Thailand’s Rice Insurance Programme, operated through a government-private partnership, provides rice farmers with up to $418 per hectare in compensation, while the Philippines’ PCIC programme has integrated satellite-based yield indices to streamline claims processing for rice, corn, and high-value crops. In Cambodia, a pilot programme offered drought insurance with premiums as low as $10 per hectare and payouts up to $100—designed specifically to match the average profit margins of rice farmers. Meanwhile, in Kenya, mobile-based platforms like “SeeItGrow” enable farmers to submit crop photos and receive rapid payouts of up to $40 per acre, with premiums as low as $1.60.
These programmss share common design features: they rely on weather or yield indices to avoid costly field surveys, pool risk across geographical units, and heavily subsidise premiums—typically covering 50–90% through public funds. Most importantly, they are tailored to smallholders. Technologies like satellite imaging, mobile reporting, and digital payments have slashed administrative costs and reduced fraud, making insurance viable even for farmers with less than 1 hectare.
Sri Lanka currently lacks a comparable system. While we have a strong plantation sector, a growing high-value fruit and vegetable market, and a vast community of rain-fed paddy farmers, they remain largely exposed to unmitigated risks. The cost of inaction is visible: loss of livelihood, food insecurity, and long-term declines in productivity as farmers abandon cultivation. Post-disaster relief is expensive, slow, and unsustainable. The only logical alternative is a structured, proactive crop insurance framework.
The inclusion of perennial crops in these insurance models is critical. While annual crops like paddy and maize can be replanted each season, perennials such as tea, rubber, coconut, and fruit trees require years of investment. A single climatic event—such as prolonged drought, high wind, or pest infestation—can erase years of farmer income. India, Vietnam, and Uzbekistan have already demonstrated that it is possible to design indexed insurance products for perennials, calibrated to climate zones and historical production data. These models can—and should—be adapted for Sri Lanka.
The motivations behind these global insurance schemes are clear and shared across nations:
Financial resilience:
Farmers receive payouts when crops fail, allowing them to replant or repay loans.
Cultivation encouragement:
Farmers are more likely to stay in agriculture if risks are partially covered.
Credit access:
Banks are more willing to lend when insured crops serve as collateral.
Technology adoption:
Insurance is often bundled with climate-resilient practices, input support, and advisories.
Climate adaptation: Insurance cushions the economic impact of droughts, floods, and pests—now increasingly frequent.
Sri Lanka should take urgent steps to legislate and implement a National Agricultural Insurance Scheme covering both annual and perennial crops, starting with pilot districts in each province. The government can partner with private insurers, use satellite and meteorological data to define risk zones, and structure premiums similar to India’s capped 2–5% contribution by farmers. Compensation levels can reflect actual production costs, with payouts of $300–700 per hectare for high-value crops like tea and rubber.
In conclusion, agriculture is the backbone of our economy and a key pillar of our national identity. Protecting it is not just about helping farmers—it is about safeguarding food security, sustaining exports, and achieving economic stability. Agricultural insurance is a tested and scalable solution. Sri Lanka must act now—not after the next drought, not after the next flood, but today—to institutionalise agricultural insurance as a national priority.
Let us shift from reactive relief to proactive protection. Let us build a climate-resilient, insured agriculture sector that empowers our farmers, strengthens our plantations, and protects our future.
Source - https://island.lk
