Role of cooperatives in the Indian economy


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The NCAER recently undertook a study on the cooperative agribusiness and the identification of institutional financial gaps in the cooperative movement.

The cooperative movement in India has regained the upper hand after the Union government recently created a Ministry of Cooperation to provide a separate legal and administrative policy framework for the rationalization of cooperatives. The movement should echo the movement down to the local level to facilitate the growth of a people-based model of economic development. It envisions an environment that would enable ‘sahkar se samriddhi’ (prosperity through cooperation) and the promotion of ‘ease of doing business’ for cooperatives through various proactive measures, including the development of multi-state cooperatives. (CSM).

The genesis of the current movement dates back to the enactment of the Cooperative Credit Societies Act by the British in 1904. Subsequently, Prime Minister Jawaharlal Nehru gave it a boost by integrating cooperatives into the five-year plans. His vision of “convulsing India with the cooperative movement … to make it, in the broad sense, the basic activity of India, in every village as elsewhere, even to make the cooperative approach the common thought of India ”was a forerunner of the establishment. cooperative societies, especially in rural India, thus laying the foundations for the largest cooperative movement in the world.

The establishment of cooperative marketing societies by the National Development Council (NDC), coupled with the passage of the Multistate Cooperative Societies Act by Parliament in 1984, reinforced the importance of the movement. By definition, therefore, cooperative societies were viewed as a combined agglomeration of people coming together voluntarily to meet their common economic, social and cultural needs through a jointly owned and democratically controlled enterprise.

It was expected that the cooperative movement would be largely concentrated in the agricultural sector, playing an important role in operations spanning production, distribution and consumption. Two of the most significant successes resulting from the implementation of this model have been the White Revolution and the Green Revolution. According to data from the National Dairy Development Board, in 2019-2020, dairy cooperatives purchased 4.80 crore liters of milk from 1.7 crore of members, while selling 3.7 crore liters of liquid milk per day. . Agriculture sector experts point out that cooperatives have also had a positive impact on post-harvest processing, storage, transport, trade and supply of inputs for a range of activities in the agricultural sector.

The move is said to have fostered 5.03 lakh cooperatives, 210 million members and a network spanning the span of rural India, while accounting for 46.31% of total agricultural credit and 23.5% of total fertilizer production across the country. These milestones were achieved through the establishment of 21 cooperative federations at the national level, 361 at the state level and 2,572 at the district level in the country. Thus, all spheres of national and local economic activity were literally placed under the influence of the cooperative movement.

But is the picture as rosy as these statistics seemingly indicate? Rumblings of dissatisfaction among farmers, in particular, and the agricultural sector in general, suggest that the contribution of cooperatives to real growth in the agricultural sector is far below expectations. Despite the need for substantial investments in the form of plant, machinery, tools and equipment in agriculture, the results reflect links of low capital and low productivity, as well as the need to increase infrastructure. underperforming marketing.

In order to identify basic obstacles and propose measures to overcome them, the National Council for Applied Economic Research (NCAER) recently undertook a study on cooperative agribusiness and the identification of institutional financial gaps in the sector. cooperative movement with particular attention to the role of the National Cooperative Development Company (NCDC). The NCAER study, covering 304 cooperative units in Assam, Chhattisgarh, Gujarat, Himachal Pradesh, Kerala, Maharashtra and West Bengal, found that smallholder farmers sell much of their agricultural products to private traders, preventing them from reaping the benefits of their products even during a bumper harvest. Their transactions in small quantities result in meager cooperative shares and weak negotiating power in the market. Lack of adequate storage facilities also compromises the processing of paddy, grains, and fruits and vegetables, which in turn negatively impacts product shelf life and compromises employment outcomes. . In addition, the study showed a decadal decline in the share of agribusiness in the total value of manufacturing output from 32.31 percent in 2000-2001 to 22.9 percent in 2011-12.

The NCAER estimates, based on the analysis of unit-level data from the 70th cycle of the National Sample Survey Office (NSSO), also highlight the need to provide cooperative support for marketing penetration and storage to smallholders. , which made up 86 percent of the total share of land holdings in 2015-16, according to the Tenth Agricultural Census. In this context, the NCDC, which has been at the forefront of the cooperative movement in the country, can provide essential support to the agricultural sector through the development of sustainable supply chains connecting farmers to processing centers and markets. . NCDC’s core funding for cooperative sector programs including fisheries, dairy and livestock, water conservation, micro-irrigation, agricultural insurance and credit, among others, has been more 49% of cumulative loans for the period 2008-2013. However, the company is not offered concessional financing under priority sector loans. Forced to obtain supplies from the market, NCDC faces constraints in offering loans to cooperatives at competitive rates, which has a dissuasive impact on post-harvest agricultural activities.

An evaluation of the capacity utilization of the units surveyed revealed that nearly 34% of them under-utilized their capacities in the order of 25 to 75%, for various reasons, such as an insufficient supply of products to transform, a shortage of skilled labor, shortage of funds, lack of demand and unavailability of advanced machinery. In addition, most states have low urban and rural representation of self-help groups and cooperatives in the distribution of food grains under the public distribution system (PDS) through the network of price stores. fair (FPS). Notwithstanding the policy of issuing FPS licenses to women’s self-help groups, village panchayats, urban local organizations and cooperatives, the combined percentage of their FPS presence in India is only around 26% with the remainder being held by individuals.

It is obvious that despite its monumental potential, the cooperative model of the country faces many political obstacles. As the administration of cooperatives has traditionally been the responsibility of the respective state governments, the creation of a central ministry to oversee their operation may also have certain political repercussions and revive the national debate on collaborative federalism. The immediate priority of the new ministry is therefore to reorganize the cooperation strategy at the national level to guarantee producers’ access, in particular in agriculture, to profitable institutional sources of credit, equipment and advanced technologies. . Another vital mandate for this would be to fulfill the fundamental objective of cooperatives of lifting illiterate and unskilled workers out of poverty by providing them with comprehensive infrastructural and marketing support for their livelihoods. It is undeniable that cooperatives have always been synonymous with viable solutions, even in a failing market. It remains to be seen whether the renewed political and economic focus on cooperatives can actually morph into a truly people-based movement at the local level, to usher in prosperity through people’s participation.

(Saurabh Bandyopadhyay is a member and Anupma Mehta is a writer at NCAER. The opinions expressed are personal.)

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