The Agriculture Insurance Organisation (OGA) is the backbone of the island’s farmers and should be modernised, not closed down, the general secretary of the Cyprus Farmers Union (EKA), Panicos Champas said on Wednesday.
During a House agriculture committee meeting on Tuesday MPs were told of the government decision to close down OGA as it is now unable to provide insurance coverage to farmers and the government is called to pick up the tab each year whenever compensations are in order.
The OGA, was established in 1978, and its mission was to provide compulsory insurance coverage to farmers against damage caused by unavoidable natural causes.
Between 2000 and 2016, €180m was paid for farmers’ insurance – €116m by the state and €64m by the farmers – of which only €128m was paid back to farmers as compensation, Agriculture Minister Nicos Kouyialis said. “The way OGA operates, for every €1 it pays as compensation, it needs €0.40 for operational expenses and to cover the pensions of former employees,” he said.
If the government had not paid €18m last year as compensation for the drought, farmers would have been be “left hung-out to dry”. The way the OGA operates today, Kouyialis said, farmers are not insured.
The organisation was in a position to pay only 15per cent of damage compensation last year, with the state covering the rest, Kouyialis said. He added that half has already been paid “for the first time within the year the damage was suffered”.
For 2017 the organisation’s proceeds – the farmers’ contribution – are estimated at €2.2m against €2.5m which are its expenses, the minister said, “thus it will not be in a position to cover the slightest damage”.
The government cannot continue paying €20m to cover the weaknesses of any insurance organisation, Kouyialis said.
He added that in February OGA would be closed down and that his ministry would present a new plan. Farmers would have to insure their crops at private companies, but with a 50 per cent premium subsidy and additional support through the national compensation framework by up to 80 per cent, which is the maximum percentage the EU accepts as state aid, Kouyialis said.
“The existing system limits agricultural insurance within the framework of OGA. Since the end of 2014 this has been deemed as illegal by the European Commission, thus the state cannot subsidise the insurance fees farmers pay to OGA,” Kouyialis said.
“OGA is the backbone of the agricultural economy. Any action to discontinue solidarity and support measures are to the detriment of farmers,” Champas told the Cyprus Mail.
Farmers would like to see the modernisation of OGA and not its closure, Champas said. He added that they had been promised copies of the new plan to study.
OGA is the second semi-governmental agricultural organisation slated for closure.
Kouyialis had said last month that the cabinet would decide in January whether the Grains Commission will close down, as it is no longer viable, with accumulated losses of €15m over the last four years.