Sri Lankan Journal of Agricultural Economics 7(1) 2005

The farmers’ pension and social security benefit scheme (FPSS) which was introduced in 1987 under the Parliament Act No: 12 in 1987, plays a vital role in farmer rehabilitation and welfare. However, as revealed by the official records, the scheme is financially unsustainable and socially less acceptable. Therefore necessary adjustments for the premium payment structure are needed in order to continue this farmer welfare programme. With this background, the aim of this study is to develop an income-based premium payment scheme, as an alternative to the present scheme.

The new premium payment scheme is developed using the Sri Lanka Integrated Survey (SLIS) data following the approaches suggested by Shetty (1971). A field survey was conducted in Kurunegala district to assess the farmers’ willingness to pay for the proposed scheme. A probit model was also fitted to find out the factors affecting the decision on willingness to make higher premiums.

The study revealed that 49% of the respondents are willing to pay for the new income-based scheme. Mean willingness to pay is Rs. 922.00. The analysis further revealed that decision on willingness to pay depends on the age, civil status, occupation and the membership in any other insurance scheme and its’ contribution. The study further found the present premium payment scheme can be revised with a different premium and pension payments that can be chosen irrespective of the contributor’s age.

* The authors are, respectively, final year undergraduate student at the time the study was conducted, senior lecturer in agricultural economics and business management, University of Peradeniya and senior lecturer in agricultural engineering, University of Peradeniya who was the former Chairman of the Agricultural and Agrarian Insurance Board..
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