Centre may widen roles of cooperatives to boost jobs

Published on Jul 14, 2022 12:33 AM IST

Union home minister Amit Shah, who is also incharge of cooperatives, recently wrote to all states seeking expedited views on the matter, as the Centre seeks to link every occupational farmer in the country with a cooperative at the panchayat level in the country, an official said.

Union Home Minister Amit Shah. (HMO Twitter)
Union Home Minister Amit Shah. (HMO Twitter)
By, Ew Delhi

The Union government plans to expand the scope of economic activities undertaken by rural cooperatives to boost employment with a set of new model by-laws, a draft of which has been circulated to states, according to a person aware of the matter who asked not to be named.

Home minister Amit Shah (who is also in charge of cooperatives) recently wrote to all states seeking expedited views on the matter, as the Centre seeks to link every occupational farmer in the country with a cooperative at the panchayat level in the country, the official cited above said.

India has nearly 95,000 primary agricultural credit societies (PACS) with 300 million members whose profits are shared among participants. The sector accounts for roughly 20% of the country’s gross domestic product (GDP).

The objective of the new by-laws is to not just make agriculture in India competitive, but also use cooperatives as way to boost the local economy and generate employment. Since co-operatives come under the purview of the state government, the Centre can only make model laws on which states can base their own legislation.

Cooperatives are essentially collectives of small producers who pull in their resources to achieve scale and collective bargaining power in markets. PACS are member-run last-mile rural financial entities delivering farm credit in a country where nearly half the population depends on an agriculture-derived income.

A key aim of the model by-laws is to make PACS “viable and allow diversification of economic activities to increase rural prosperity”, the official said. The draft by-laws, a copy of which HT has seen, seek to overhaul governance, along with the addition of a wide array of business activities.

The main goal remains the delivery of “timely and adequate short-term and medium-term credit… related to agriculture and farm products”, according to the draft by-laws.

The newly created ministry of cooperation will focus on building cooperative societies as the pivot of a whole gamut of economic activities, from financial services to production of finished goods, Shah has previously said .

The country’s unemployment rate stood at 7.80% in June with the loss of 13 million jobs, mainly in the agriculture sector, according to the data released by economic think-tank Centre for Monitoring Indian Economy.

While there are some iconic cooperative businesses in the country, such as the dairy giant, Amul, papad-maker Lijjat Papad, and fertiliser major IFFCO, the sector in many areas is hobbled by inefficiencies and opaque patronage systems.

“There’s a lot of skepticism around cooperatives, especially in Maharashtra, which are associated with politics and power. The advantages would be they would learn from earlier mistakes and bring transparency. The key is implementation,” said Sakshi Abrol, policy manager at the Nation First Policy Research Centre.

According to the draft by-laws, cooperatives can be lenders for consumption and medical loans, among financial activities, against collateral such as bonds and commodities. A critical area that can spur employment, according to the official, is that cooperatives shall be able to promote and develop so-called “backward linkages” to the farm economy.

Backward linkage services include extending farm demonstrations, drone-based services, fertilisers, seed production, and hiring centres for farm machinery. Forward linkages include activities such as technical support to members for setting up cold storages, aggregation of farm produce and quality-based grading and sorting.

New financial activities being proposed also include infrastructure development, running fair-price shops, dealership for LPG, petrol pumps, training for skill development, popularisation of rural technologies, servicing of clients as bank correspondents, as well as delivery of social security schemes. Cooperatives will also act as a source of data for the government, the draft by-laws say.

Cooperatives could boost rural prosperity when brought in line with newer economic activities, the official quoted in the first instance said. “There would be need for accountants and technical professionals and so on. These would be mostly local employment.”

Working in tandem, the Reserve Bank of India (RBI) last month hiked the limit of individual housing loans extended by co-operative banks by over 100%, as announced by governor Shaktikanta Das, given the importance of cooperative banks in promoting inclusive growth.

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  • ABOUT THE AUTHOR

    Zia Haq reports on public policy, economy and agriculture. Particularly interested in development economics and growth theories.

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