The Finance Ministry is considering using the crop insurance model instead of the government's coffers to pay for crop damage from natural disasters in an effort to reduce the cost of compensation, says Deputy Finance Minister Tanusak Lek-uthai.
He said the ministry is conducting a feasibility study that will take a few months, and the government plans to subsidise all premiums for crop insurance if the initiative materialises.
The investment will be worthwhile if the government pays 20-30 billion in premiums for crop insurance instead of the hundreds of billions of baht in compensation the government paid farmers the past five years, said Mr Tanusak.
The government has promised to pay about 2,700 baht a rai as compensation for farmers whose agricultural products are damaged by natural disasters including floods and droughts.
Mr Tanusak expects rice will be the first agricultural product to be insured.
Nationwide, 60 million rai is used for rice farming.
The Bank for Agriculture and Agricultural Cooperatives operates a crop insurance programme with Sompo Japan Insurance (Thailand), which charges farmers 129 baht a rai for coverage, with the government subsidising 69 baht.
An estimated 60,000 farmers nationwide participate in the scheme, covering less than 2 million rai of farmland used to grow rice, corn and cassava.
The state-owned bank recently said it is seeking Finance Ministry approval to require farmers participating in the government's rice-pledging scheme to insure their crops.
The rice-pledging scheme has been heavily criticised, as government guarantees to buy white paddy at 15,000 baht a tonne are 40-50% above global market prices.
But the pledging price will likely be slashed after this year's second crop due to a 136-billion-baht loss in the first year of the programme.