India’s cooperative movement, dating back to the early 20th century, was designed to democratize credit, empower rural populations, and counter exploitative intermediaries. Over time, cooperatives have played a crucial role in agricultural credit, dairy production, and rural marketing. In recent times, the government has placing immense importance on cooperative driven development.
What is the present status of Cooperative Sector in India? What have been the government steps in this regard?
As per the Economic Survey 2022-23, India has over 8.5 lakh cooperative societies, covering around 30 crore members, with PACS forming the backbone of the rural credit system. There are more than 65000 functional Primary Agricultural Credit Societies (PACS) across country. The government’s plan to establish two lakh PACS and has taken several measures for the same:
1. New Model Bylaws- The government through the new model bylaws has allowed PACS to expand beyond traditional territories, promoting modernization and diversification.
2. Phased Rollout of PACS- The government has been implementing PACS in two phases
Phase 1: Establishment of 32,750 cooperatives with NABARD, 46,000 dairy cooperatives with NDDB, and 5,500 fishery cooperatives with NFDB.
Phase 2: Expansion to cover 15,000 new villages.
3. Liquidation of Defunct PACS- The government has been establishing SOPs to replace non-functional cooperatives, unlocking opportunities in 15,000 new villages.
4. Inclusivity Focus- There has been an explicit emphasis on the participation of women, Dalits, and tribals, fostering social and economic equity.
5. Global Supply Chain Integration- Leveraging PACS for forward and backward linkages, addressing past limitations in market access and competitiveness.
6. Digital Integration- Initiatives like micro-ATMs and RuPay Kisan Credit Cards have been introduced to modernize PACS operations. NABARD, NDDB, and NFDB have been actively involved in the establishment of cooperatives in their respective sectors.
7. Alignment with Budget 2023-24- The government has allocated Rs.900 crore to strengthen PACS under the Cooperative Development Fund.
What is the Significance of Cooperative Sector in India?
1. Grassroots Empowerment- By democratizing credit and resources, PACS can empower rural populations and reduce dependency on intermediaries.
2. Rural Development- Integration of Cooperatives into global supply chains can enhance market competitiveness and boost farmer incomes.
3. Promoting Financial Inclusion- PACS serve as the first point of credit access for small and marginal farmers. PACS account for 41 % of the KCC loans given by all entities in the Country and 95 % of these KCC loans through PACS are to the Small and Marginal farmers.
4. Social Equity- Inclusivity measures can foster social harmony and economic equity among marginalized groups.
5. Agricultural Productivity- PACS can play a pivotal role in enhancing agricultural productivity through better credit access and value-added services.
What are the Challenges with the cooperative sector in India?
1. Growing Political Interference- Many cooperatives have become vote banks, which are being controlled by local elites, which have sidelined marginal farmers and labourers.
2. Inefficient Management- Lack of professional governance has led to financial mismanagement and operational failures.
3. Lack of financial viability and sustainability- Excessive reliance on government subsidies have made the cooperatives economically fragile and uncompetitive. Many PACS struggle with high NPAs due to poor loan recovery mechanisms and inadequate risk assessment.
4. Operational Inefficiency- Slow adoption of technology, including digital platforms for loan processing and record-keeping, have reduced the operational efficiency of cooperatives.
5. Limited Inclusivity- Women, Dalits, and tribal communities have been historically excluded from decision-making roles in the cooperatives.
6. Fragmented Approach- Most cooperatives remain sector-specific, failing to integrate into value chains, reducing market efficiency.
What should be the Way Forward?
1. Data-Driven Approach- Conduct comprehensive surveys to identify areas where PACS are most needed, thereby optimizing resource allocation.
2. Grassroots Participation- Involve local communities in decision-making to foster ownership and accountability.
3. Public-Private Partnerships- Collaborate with the private sector to access modern technology and global markets.
4. Policy Consistency- Ensure consistent policy implementation across states with cooperation between central and state governments.
5. Focus on Value Addition- Expand PACS activities to include food processing, cold storage, and export facilitation.
6. Professionalization of Management- Capacity-building programs must impart financial literacy and modern management skills.
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