Pension for farmers

Why the haste?

Published On: June 21, 2016 12:50 AM NPT By: Bhairab Raj Kaini

As we age, we become increasingly incapable of working for income. We need support. Therefore there are pension systems to provide people with a means to cope with lack of income in old age. The primary policy objective of a pension scheme is thus to ensure well-being of elderly people.

Nepal’s existing pension covers only government employees. Or less than five percent of the population is covered by a formal pension or provident fund scheme. The vast majority of those engaged in agriculture are left out. Perhaps to compensate this, the Ministry of Agriculture Development has proposed a pension scheme for farmers. Its main source for financing will be premium and government subsidy. This scheme could, in theory, ensure social security of farmers and enhance agricultural productivity. But with the country in the middle of a serious economic crisis this is not the right time for such a program.

Besides, in a country where there are around 3.8 million farming households and farmers comprise 66 percent of total workforce, it will be a challenge to implement this scheme.

First, there is no proper record of the number of farmers in Nepal. Since we lack computerized information systems, we will have no reliable way to access detailed information on profiles and payment histories of farmers.

Second, we don’t yet have an Act for smooth functioning of the scheme. Besides, farmers are scattered across the country and it is therefore difficult to reach all of them. There is no monitoring system for effective functioning of pension programs either.

So I wonder why the government is making such haste. As per a study report entitled “Farmers Classification and Pension Scheme” prepared by a former lawmaker and political analyst, farm workers will pay an annual premium of Rs 5, 000 for the pension scheme. But experience from abroad shows that millions of farmers will not be able to pay such premiums. Why does the government think it will be different in Nepal?

Will it exempt some farmers from having to pay premiums? If so, it will result in a huge financial burden on the state. Our finance system could very well go bankrupt.

The proposed scheme has envisaged separate pension schemes for subsistence and commercial farmers. Farmers are also to be classified under four groups based on the size of their landholdings: farm workers, marginal farmers, petty bourgeoisie and large landowners.

The government will put in half the money, as per the plan, with the farmers contributing the rest. The report suggests that marginal farmers should pay annual premium of Rs 7,000 (or one percent of their yearly production). When they reach 55, they will be able to draw a monthly pension of Rs. 5,000.

For the petty bourgeoisie category, the annual premium has been proposed at Rs. 9,000 (or one percent of their annual income). Farmers in this category will get a monthly pension of Rs 7,000. The annual contribution for farmers with large landholdings has been set at Rs 15,000. They will draw a monthly pension of Rs 10,000 when they reach 65.

The government plans to implement the scheme as a pilot in 10 or 15 districts in the hills, Tarai and mountain regions. It will be extended to other 20 districts in six months.
The report also recommends an integrated service centre to collect premiums and distribute pensions.

However, the service center should be run by farmers themselves as they will know the beneficiaries, with the government acting as a facilitator. The local or provincial government as well as the federal government should monitor the center and the pension fund. But the report is silent on chances of duplication of farmer pension with the social welfare fund for the elderly.

If farmer pension scheme must be introduced, we need to be mindful of the following facts. We need to start by computerizing farmer records including their categorization, age, financial conditions and other necessary information. The eligible farmers who wish to enroll in the pension scheme will have to submit bank account details, mobile number and documents for verification of identity along with the application. Farmers should be educated on the benefits of the pension scheme and a criteria be developed to identify eligible farmers.

We need to identify farmers who have been in farming profession continuously for 20 years but who have no other income source. Besides, only those farmers above 60 should be considered eligible. Also, the beneficiaries should still be engaged in farming.

Above all, there should be supporting laws, regulations and guidelines in order to properly implement this scheme. Since extending pension coverage to farmers will involve heavy subsidies, their impact on national economy must be carefully studied.

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