Role of Co-operatives in Agricultural Economy
(1) Opening — Principle and aim of agricultural economy.
(2) Body — For the development of agriculture co-operatives are playing big role.
— Co-operative Banking.
— Primary Agricultural Credit Societies.
— Central Co-operative Banks.
— State Co-operative Banks.
— Primary Land Development Banks.
— Central Land Development Banks.
(3) Closing — Quote Dr. R.C. Dwivedi.
“One for all and all for one” is the basic principles of co-operation. The Co-operative movement was started in 1904 and now it has become a part and parcel of our economic, social, political and even religious activities. It aims at the optimum utilization of natural and human resources for accelerating the role of agricultural economic growth in particular and overall economic growth in general.
Agriculture is the chief occupation of the major part of our population. Eighty per cent of the population lives in rural India. Agriculture contributes roughly forty per cent of the national income and it is the seed-bed of our national economy. Therefore, it is essential to develop the sector of agricultural economy so that the industrial sector can also be developed on strong lines. Sugar, Cotton, Textile, Jute, Oil mills etc, are totally based on agriculture for their raw materials. Of late, Co-operatives are playing big role in both manufacturing and supply of essential farm inputs for accelerating agricultural progress in India. Their contribution in this respect may be discussed mainly with regard to supply of three major inputs, Credit, especially short-term credit, farm implements of improved types and fertilizer. Besides this, Co-operatives are now diversifying their activities and taking up the business of selection, multiplication and distribution of improved seeds, pesticides and agro-services including hiring out and repair of tractors and other light-to heavy farm implements.
In the field of farm credit, Co-operatives are supplying about 35 percent of the total credit needs of the Indian farmer and have recorded significant rates of growth, both linear and compound, over the last three decades with regard to membership, working capital loans advanced to members and number of Credit Co-operatives especially in the agriculturally advanced states like Punjab, Gujarat and other peninsular state. Today the government gives greater emphasis on reorganisation of Co-operatives as service Co-operatives with the objective of benefiting the farmers directly in their field and at home for magnifying per hectare yield and increasing benefit-cost ratio of scarce resources to bear on a right change in official attitude towards development of Co-operatives in this country. Beginning with modest single purpose supplying credit in India, the Co-operative movement could touch diverse aspects of the economic life of India through dynamic changes both in organisation and in Co-operative laws effected particularly in the post-independence years.
Co-operative credit history in India may be traced from the year 1904, when Co-operative Credit Societies Act was passed. The Government of India passed the Co-operative Societies Act in 1912 after a re-examination of the whole pattern of Co-operative societies, which gave a fillip to the setting-up of a large number of credit societies in the country. Since the inception of plan period in 1951, the Co-operative Movement has gained momentum. Independent India has accepted co-operation as an indispensable agency for agricultural development and national development. Co-operative banking structure in India functions at the village, district and state levels i.e., Primary Agricultural Credit Societies, Central Co-operative Banks, State Co-operative banks, Primary Land Development Banks and Central Land Development Banks.
The Co-operative Credit Society, commonly known as the Primary Agricultural Credit Society (PACS) may be started with ten or more persons, normally belonging to a village. The value of each share is generally nominal so as to enable even the poorest farmer to become a member. The management of the society is under an elected body consisting of President, Secretary, and Treasurer. The Primary Agricultural Credit Societies operating at the village level, have the following objectives-viz; 1) to accept deposit and to provide short-term loans on reasonable conditions; ii) to develop the habits of saving among the rural masses; iii) to assist in a better implementation of the Five year Plans in so far as they relate to agriculture and iv) to take up educative advisory and welfare functions for the benefit of farmer members.
Primary Agricultural Credit Societies advance loans to their members for short periods varying between six months to one year, to enable them to conduct their ongoing agricultural operation. The loan amount varies depending upon the purpose of loan, the character of the individual, his repayment capacity and the type of security that he can pledge to the society.
A short-term loan is sanctioned for the purpose of seeds, fertilizers and minor repairs. Medium-term loans are granted by the society for the purpose of cattle, pumpsets, agricultural implements etc., for periods varying between one to five years. Short-term loans are lent against personal security or against the security of other members upto a certain limit. For medium-term loans tangible securities have to be pledged.
The All-India rural Credit Review Committee brought out the following weaknesses of the primary agricultural Credit Societies:
(i) Co-operative credit still forms a small portion of the total borrowings of the farmers;
(ii) Tenants and small farmers find it difficult to satisfy their full needs;
(iii) Most primary credit societies are weak and are unable to meet fully the production-oriented credit needs;
(iv) Over-dues at all levels are increasing alarmingly indicating the failure of PACS and
(v) PACS have not been able to ensure adequate and timely credit for the borrowing farmers.
There are federation of Primary areas normally extending to the whole district. The necessity for establishing central Co-operative banks is that there should be an intermediary agency between the primary credit society with a rural bias run by agriculturists having no touch with the money market and the provisional Co-operative bank run mainly by city men with urban bias and having no close association with the countryside.
The main functions of the central Co-operative banks are guided by the following motives.
(i) To act as the connecting link between primary credit societies and state Co-operative banks;
(ii) To provide credit facilities it its member societies to enable them to function more effectively.
(iii) To act as a balancing centre by diverting funds from surplus Primary Credit Societies.
(iv) To guide and control the working of its member societies;
(v) To maintain a supervisory staff to watch carefully the activities of its member societies; and
(vi) To strengthen Co-operative movement in the district.
In the recent past NABARD has formulated a scheme for the rehabilitation of weak Central Co-operative Banks. NABARD is providing liberal assistance to state governments of contributing to share capital of the weak Central Co-operative banks selected for the purpose.
The State Co-operative Banks are the highest agencies for the supply of Co-operative credit for short and medium terms. They are at the top in the three-tire Co-operative credit structure. The jurisdiction of these banks is the whole state. The Central Co-operative bank. The main functions of a state Co-operative bank are: (i) it acts as an intermediary between the Central Co-operative bank and the money market. State Co-operative banks borrow money from the money market and make available loans to central Co-operative banks; (ii) it acts as a balancing centre by borrowing from those Central Co-operative banks which have excessive funds and disbursing this amount to the deficient Central Co-operative banks; (iii) it inspects the working of Central Co-operative banks and gives them timely, guidance and help as and when necessary; (iv) it operatives as an agency of the Reserve Bank of India to finance agriculture and (v) it aids state government in drawing up plans of agricultural and rural development and their implementation.
The state Co-operative banks do not lend funds directly to farmers. Loans are sanctioned to central Co-operative banks. These banks distribute them to primary agricultural credit societies and these societies lend funds to the ultimate borrowers.
The long-term requirements of the farmers were traditionally met by the moneylenders but later by other agencies also, such as State Gov
ernments and the Co-operatives Credit banks. But these agencies were found defective for one reason or the other. Thus, there was a great need in India for an institution specially designed to cater the long term needs of farmers, which would offer long term funds at moderate rates and recover loans in annual of semi-annual instalments spread over a number of years. Land Development banks (or Land Mortgage banks as they were previously called) were organized for the purpose of providing long-term credit to farmers.
The real beginning in land development banking was made by Madras, with the organization of Central Land Development Bank in 1929 for centralizing the issue of debentures and for co-ordinating the working of primary banks in the state The progress achieved by Land Development Banks in 1929 for centralizing the issue of debentures and for co-ordinating the working of primary banks in the state. The progress achieved by Land Development Banks was concentrated in only a few states, viz., Andhra Pradesh, Tamil Nadu, Karnataka, Maharashtra and Gujarat.
Land Development Banks provide credit for a variety of purposes, such as redemption of old debts, improvement of land, purchases of costly agricultural equipment, construction of wells and erection of pumpsets and so on. How ever, the farmers have been mostly borrowing from LDB for the purpose of land improvement and development including deepening of wells, and purchase of agricultural machinery.
The Co-operative credit movement in India should not be judged in merely quantitative terms, but should be analysed on an altogether different basis. That is why Dr. R.C. Dwivedi says “Overemphasis on the commercial aspect of Co-operatives, measuring their efficiency with the yardstick of the volume of profits, ignoring the social content of their business operations and obligations to execute the government policies, this is the visible trend which is a matter of anxiety and concern”.