Transcript - Pragati Darpan Agro Producer Co. Ltd.

THE ROLE OF PRODUCER COMPANY
IN BUILDING THE RURAL AREAS
For Pragati Darpan Agro
1.
MATRIX OF INDIAN RURAL ECONOMY
“INDIA Lives In Villages”
- Mahatma Gandhi, Father of the Nation
Indian economy is predominantly rural
* 66% of population live in rural ares
* 20% of GDP from agriculture
Although share of agriculture in total GDP is declining, it
continues its dominating influence on not only the total
GDP, but the country’s economy as a whole
Targeted 9% growth of the economy & food security for its
population call for agriculture to register 4% growth in
GDP as against 2.7% (2006-07)
Table 1: Sectoral growth rates of real GDP
Sector
2002-03
Agricultur
e & allied
-7.2 (21.9)
10.0
(22.2)
0.7 (20.8)
6.0 (19.9)
2.7 (18.5)
Industry
7.1 (25.9)
7.4 (25.8)
9.8 (26.0)
9.6 (26.1)
12.3
(26.4)
Services
7.4 (52.2)
8.5 (52.0)
9.6 (53.2)
9.8 (54.0)
11.0
(55.1)
3.8
(100.0)
8.5
(100.0)
7.5
(100.0)
9.0
(100.0)
9.4
(100.0)
Total GDP
2003-04
2004-05
2005-06
2006-07
Agenda “Agriculture for Development”,
GDP growth will be about 4 times more effective in removing
poverty among the poorest people if it originates in agriculture
than if it does elsewhere (World Development Report (2005).
2. COOPERATIVES - VEHICLE FOR
AGRICULTURE/RURAL DEVELOPMENT
“Coops – An Economic miracle of 19th Century”
-
Late Honorable President of India Dr. S. Radhakrishnan
Cooperatives in Rural Milieu
“Cooperatives” - basically designed and oriented to meet
economic and societal needs of rural segments,
particularly the poor. Starting with agricultural credit,
cooperatives encompassed all rural economic activities.
“Cooperatives” - single largest business model in the
country account for 20% of rural credit supply, 35% of
fertilizer supply, 60% of sugar production, 30% of wheat
procurement, 45% of cotton procurement, 40% of cloth
production, 48% of milk production etc.
Continued relevance of Coops for agriculture / rural
development
“Coops are the hope of Rural India. If they fail,
there will fail the hopes of Rural India”
- Royal Commission on agriculture in India (1928)

“Cooperatives” - with 80% of the farmers (small /
marginal), holding only 20% of the farm lands - an
imperative for securing sustainable livelihood and social
empowerment of rural poor.

“Cooperatives” - prime agencies for rural financial
services - with their vast network (over 1,00,000 outlets
covering all villages in the country), wide coverage (over
127 million membership) and out-reach to small /
marginal farmers and tenants, even in the remotest parts
of the country.
Table 2: Access to rural credit (as on 31st March 2005)
Agency
No. of rural borrowers
Average loan size
(Rs.)
Commercial Banks
16.5 million
32,000
PACs
45.1 million
8,964
Share of coops in the rural credit declining – 62% (199293) to 21% (2006-07) - but their quantum jumps continued
with annual growth rate of 10% (Rs.9,378 crores in 199293 to Rs.42,480 crores in 2006-07).
And, this is despite several odds and without level-playingground with the other market players.
Demonstrative success stories of coop leadership

Imperatives and relevance of cooperatives for agriculture
& rural development, emphasized by several Expert
Committees on the subject – right from the Maclagan
Committee (1915), Royal Commission on Agriculture
(1928) to the All India Rural Credit Survey Committee
(early 50s) and all the subsequent Expert Committees on
Rural Credit.

Demonstrative success stories of “Thrift and Credit”
societies (eg.CDF) and “Multi Purpose” coop societies
(eg.Mulkanoor) are given in Annexures 1 & 2.
3. FINANCING THE RURAL DEVELOPMENT –
ALTERNATIVE CHANNELS

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58mn (51.4%) of farm households have no access to
formal / informal credit (with no collaterals); (NSSO 2003)
Of these, 88% are small / marginal farmers and other
poorer groups. (without collaterals)
SHG route to provide access to formal credit channels
An effective financial inclusion initiative.
“SHGs more closer to the coop principles than the
coops themselves.”
“Rediscovering Coop (1996), IRMA”
SHGs – rural centric and women focussed - are basically
thrift & credit groups, functioning strictly on coop principles
& values. SHG model, the biggest-ever-experiment of the
size world over, evidenced by its magnitude.
Table 3: Performance of SHGs at a glance (as at end
2006-07)
Number
37 million SHG’s
Linkage
2.92 million SHGs
Access
41 million poor
households
Bank loans
Rs.1,80,410 million
200 million people
Savings
Rs.18,500 million
20% population
Savings
Rs.18,500 million
@ Rs.500 / month /
SHG
80% of total poor
Gender
90% women
4. COOPS - NON-CREDIT INPUTS FOR AGRICULTURE
i. Production of agro chemicals and fertilizers
 India third biggest fertilizer producer in the world.
 IFFCO and KRIBHCO, the two fertilizers giants in the
cooperative sector (1967-68), account for 19.1% in the
total installed capacity for nitrogenous fertilizers and
10.6% for phosphatic fertilizers in the country.
ii. Distribution
 Cooperatives - the main institutional agencies distribution network 20 State level marketing federations,
171 district level marketing societies and about 92,000
village level cooperative societies. Value of fertilizer
distributed by these PACS accounts for over 30% of
total.
iii. Other services to members - Capacity building and
extension services (community-building)
iv. Future concerns

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shift from administratively controlled prices and
quantities of fertilizers to be market oriented,
Government to withdraw its patronage by way of
subsidies and concessions,
sharing of profits between different cooperative
tiers for marketing of inputs,
review of credit component available to PACS
for the purchase of fertilizers (due to loan
defaults),
improvement of infrastructural facilities, and
professionalisation of management.
5. COOPS - AGRO PROCESSING & MARKETING
ACTIVITIES

India has about 50% of world’s buffaloes, and 20% of
cattle. It is the largest milk producing country in the world,
accounting for about 80 mt of production. Cooperative
dairy processing sector accounts for over 50% of the total,
integrated with chilling centres, cattle-feed mixing plants
and a wide range of distribution net-work.
“India’s achievement, in becoming the largest producer
of milk in the World, has an important message, viz.
concurrent attention to all lines in the “Production Processing – Marketing” chain through co-operative
and group endeavor will lead to striking results”
- Prof. M.S. Swaminathan

India’s successful model “AMUL” with strong economic
well-being and social empowerment had several
successful replications. Illustrative case of WARNA
appended (Annexure 3).
Future concerns

Substantial progress achieved in sugar, milk, oilseeds,
and fruits and vegetable sectors under the coop-umbrella,
not only to market their produce but also in creating rural
leadership and entrepreneurship.
Constraints
 Saddled with a variety of problems, mainly from the
outdated and non-cooperative cooperative law and
practice, conflicting with the basic tenets of cooperation
and sound business principles.

Parallel law viz. the A.P. Mutually Aided Cooperative
Societies Act, 1995 (AP MACS Act), followed by 10 other
States, providing for full autonomy to the cooperatives in
their functioning. Most of the dairy coops, among others,
have migrated to the new Act. However, the Act is not
being implemented giving full expression to its provisions,
vitiating the objectives and efficacy of the new Act.
6. COOP – RURAL NON-FARM SECTOR

“India lives in villages” – 60% of the rural population live
on agriculture, rest to survive on non-land based
activities.
“There is a deceleration in the employment-growth in
the organized sector by 1.2% to (-) 0.38%, although
the decline of total employment index from 2.1 (93-94)
to 1.6 (199-00) has been reversed to 2.5 (2004-05) –
Thanks to IT and Services sectors”.
- Hon. Union Finance Minister – Budget Speech (2007)

Surplus labour cannot be allowed to migrate to urban
areas in view of fragile urban infrastructure and
environmental threats, besides shrinking absorption
capacity in industry (post-reforms) – a jobless growth.
Difficult for agriculture to retain the work force, NFS holds
promise for reasonable livelihood.
“The cost of creating a self-employment job is a
fraction of what it costs to create a job in the
industrial sector”
- Nobel Peace Laureate Mohammed Yunus, Bangladesh
Handloom Weavers Coop. Societies (HWCS)

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Handloom weavers – 2.8 million out of a total of 3.5
million in numbers – are an integral part of the rural
society, next only to agriculture in size.
This sector not able to provide sustainable employment /
incomes


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Organizational inefficiencies & operational deficiencies (obsolete
looms, outdated designs, inadequate and untimely supply of
inputs and absence of marketing support equal to the tasks).
Choking of credit & overhang of debts
Piling up of stocks of final products
Future concerns
 Problems of weavers in coop sector an outcome of
historic neglect
 Expert Committee of Government of India proposed a
rehabilitation package, involving financial support &
restructuring.
 Solution lies in strengthening coops with market-led
interventions, in tune with the competitive environment.
(Chinese experience)
The fundamental relevance of coops as a mode of
community building is time tested. Needless to say,
coops as an organizational form of actualizing cooperation have to throw away their self-imposed blinkers.
They must learn to shun state patronage but fight for
justified preferential treatment. (infrastructure and other
support and skill development for market orientation)
They must be as professional and farsighted as any
private business, and turn-around as viable entities.
7. COOPS - COMMUNITY MOBILIZATION OF SPECIAL
GROUPS


India added over 200 million persons to its population
since 1980s.
Indian economy currently experiencing nearly a jobless
growth. Several millions of these poor in India face the
problem of inadequate livelihoods and livelihood
promotion is high on the agenda of development.
Market-led livelihood interventions have an inherent
element of sustainability. Success story of market led
intervention by BAIF (an NGO)– Annexure 4
Common property rights

Increasing awareness on environment, and imperatives of
rehabilitation of project effected (PAPs) as also CPR and NRD led to
a rediscovery of useful ways and a useful purpose for coops.
Community rights without participatory local institutions like
coops usually degenerate into bureaucratic control by default and
de-facto exploitation of the beneficiaries by the privileged.

A comparative study of the performance of fisheries in three
major reservoirs of Madhya Pradesh was carried out over a
period of time, across three different management systems
(public, private and coops) proved that the third alternative is
equitable and natural way of resettling displaced persons, while
bureaucratic management has failed to improve productivity,
private contractors have overexploited the fisheries.
- Sunil and Smita in Rediscovering co-operation, IRMA
8. COOPS - RURAL CREDIT – INSTITUTIONAL ISSUES
Challenges
a.
Failure of “coop” governance: 40-45% of coops are
devoid of elected boards and are run as para-statal
bodies.
b.
Absence of professional management: Almost all
coops are headed by Government nominees /
bureaucrats.
c.
Serious dent in the financial performance due to
external interference
•
•
d.
Continuing “Regulated” regime of un economic / unviable interest
rates.
Imposition of across-the-board waivers / concessions not only in
the interest rates but also in loans repayment.
Consequential growth of organizational inefficiencies absence of a strong HRD, systems / controls etc
Resultantly, it has lost its vibrancy & vigour. It lost its levelplaying-ground vis-à-vis the other market players (viz.
Commercial Banks, RRBs) due to, apart from the
operational constraints, the design prescriptions like
High transaction cost – due to issue of smaller loans /
widely spread out
 High cost, low return – due to heavy burden of social
banking
 Lack of diversification – due to absence of crosssubsidization in the loan portfolio
 High operational cost – due to excessive dependence on
borrowings
 And, GREATER RISK-PRONENESS (BOTH NATURAL
AND MAN-MADE) WITH AGRICULTURE BEING THEIR
MAIN PORTFOLIO.


Based on recommendations of Vaidyanathan Committee,
a Revival Package for the Short-Term Rural Co-operative
Credit Structure with an estimated outlay of Rs.13,596
crore stipulated.

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
Ushering in co-operative reforms in STCCS to provide
for autonomy especially in (i) fixation of interest rates
on deposits and loans as per RBI guidelines, (ii)
borrowings and investments, (iii) loan policies, (iv)
personnel policy and (v) appointment of Auditors.
Reducing equity of State Government in CCS to 25%
Freedom to CCS units to affiliate or disaffiliate with a
federal structure.
Restrictions on the State Government in supersession
of the boards.
Professionalisation of the boards of SCBs and DCCBs
and compliance with RBI norms of fit and proper
criteria for elected members and CEOs.
CONCERNS
 Slow acceptance / non-acceptance of the package, or
where accepted, its slow implementation, casts its
shadow on efficacy / speed of reforms.
 The lenience of the Government in allowing 2 years
lead-time to the States to join the reforms stream - with
an option not to join - is bound to have adverse impact
on the already ailing system.
 Accumulated losses aggregated Rs.5,500 crore as at
end March 2007, up by Rs.500 crores over the previous
year).
“ As on 31 March 2007, 7 SCBs and 127 DCCBs were not
complying with the Section 11(1) of the B.R.Act, 1949
(AACS). The total erosion in the value of assets of these
non-compliant co-operative banks, aggregated
Rs.14,514.25 crore, which had not only eroded their
entire owned funds but also affected deposits to the
extent of Rs.4,655.21 crore”.
- Source: NABARD annual Report, 2007

The vibrancy of the coop ethics and principles – call for
policy environment and supportive infrastructure but not
subsidies / interest concessions / loan waivers, germane
to political convenience rather than economic
expediency. Farmers look to timely and adequate credit
but not concessions and waivers – established by
empirical studies.

Therefore, essential for the state to ensure a strong
institutional rural credit delivery system is in place,
particularly in coop sector, to face the challenges of
meeting the increased credit needs of the rural economy
/ agriculture sector.
9. REAL SECTOR ISSUES – AGRICULTURE
“When we review our agricultural situation, it is clear that there
are four deficits we need to bridge. These four deficits are
(i) the public investment and credit deficit, (ii) the
infrastructure deficit, (iii) the market economy deficit and (iv)
the knowledge deficit; Taken together, they are responsible
for the development deficit in the agrarian and rural
economy”.
- Honorable Prime Minister at NDC meet on 9th December 2006
i. Public investment and credit deficit
 With the limitations in hiking public investment,
the imperatives of private investment call for
adequate credit support, which in-turn calls for a
strong institutional credit delivery system.
 Rural credit coops are called upon for greater
involvement in the credit dispensation to meet the
challenges of 4% growth in agriculture.
Rs.99,000 crores
- IXth Plan
Rs.2.71 lakh crores
- Xth plan
 This calls for favourable policy environment and a
massive effort by the coops in resource
mobilization and deployment.
Table 4: Gross Capital formation (GCF) in Agriculture
Year
Public
Sector
Private
Sector
Total
Ratio of GCF in Agriculture
to (%)
GDCF
Agri.
GDP
Total
GDP
19992000
7,716
(17.7)
35,757
(82.3)
43,473
8.6
8.9
2.2
2002-03
7,962
(17.0)
38,861
(83.0)
46,823
7.5
9.6
2.1
2005-06
13,219
(24.2)
41,320
(75.8)
54,539
4.5
9.6
1.9
Ratio of GCF (Ag)
Ratio of GCF (Ag)
Ratio of GCF (Ag)
to GCF
to total GDP
to GDP (Ag)
is declining
is declining
is stagnant
ii. Infrastructure deficit
“The Indian rural infrastructure report prepared by
NCAER, sponsored by Ratan Tata Trust, estimated the
requirement of investment in rural infrastructure
development at Rs.1,58,313 Crore with Public-Private
Partnership (Telecom – Rs.93,000 Crore, PowerRs.55,243 Crore, Roads & Transport – Rs.5,893 Crore,
Water & Sanitation – Rs.4,488 Crore.”
Source: - Hindu 26th February 2007
“We need to address the problem of mounting
subsidies on food, fertilizers and now, in petroleum,
which is a recent phenomenon. Over Rs.1 lakh crore
is going to be spent this year alone on these three
items. I would like my cabinet colleagues and the
Planning Commission to reflect what these mean for
our development options and what development
options these subsidies are shutting out. Do they
mean fewer schools, fewer hospitals, fewer
scholarships, slower public investment in agriculture
and poorer infrastructure? It is important that we
restructure subsidies so that only the really needy
and the poor benefit from them and all leakages are
plugged.”
Hon. Prime Minister’s address to Planning Commission
(November 2007)
iii. Market economy deficit
Table 5: Production of major food grains and non-food
grain crops
Crop
Target MT
200304
200405
Achievement MT
200506
200304
200405
Growth (%)
over previous
year
200506
200405
200506
Food
grains
220
225
215
213
198
210
-6.9
5.9
Oil
seeds
25
26
27
25
24
27
- 3.6
9.9
Sugar
cane
320
270
238
234
237
273
1.4
15.2
Cotton
15
15
17
14
16
19
19.7
15.2

Total Food grains production each year is less than the
annual target.
 At present levels of production, India registers low per
capita food.
India – 177 KG / pa (1998) (China – 370
KG / pa 1994)
 Food security requirement – 250 MT (2010) : 300 MT
(2020) up from the current requirement of 225 m tons
(which is also not met fully).
 India’s biggest challenge is ensuring food security &
making agriculture a market economy from the deficit
economy.
“Our Food Budget should be managed with home
grown foods, since agriculture is the back bone of
our rural livelihood security system”
- Dr. M.S. Swaminathan
iv. Knowledge deficit (Technology fatigue)
“If you are worried about only economic
competitiveness and not worried about scientific
competitiveness, then I think the future is bleak”
Dr. C.N.R. Rao, Scientific Advisor to Honorable PM
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The result is, “Productivity” of agriculture has taken the hit.
With the water, power and climate changes threatening
immense damage to the agricultural sector, serious efforts
are needed on the part of the policy makers, researchers
and farmers themselves in a synergy to un-lock the
productivity from dry-lands.
Index of “Neglect” (Deficit) : Extension : Reaches to less
than 6% farmers. FCI procurement of coarse grains – less
than 1% of total.
China’s sound agri. policy coupled with its massive
investments in infrastructure & R-D of farm sector, have
given it a clear edge internally as well as internationally.
Table 6: Agriculture productivity in India
Tonnes per ha
Crop
Rice
World’s
Average
India yield
10.4
Potential
Indian yield
(existing)
2.9
4 to 5
Wheat
8.0
2.6
4 to 5
Pulses
4.5
0.6
2 to 2.5
China’s agriculture productivity is 2 times that of India,
with less than half of India’s irrigation and arable land.
Table 7: R&D Status – comparative position
Country
Farm researchers
No
(millions)
USA
Expenditure on R&D
No. per
US $ BN
million
population
% GDP
Per
Capita in
$
1261
4374
290
2.8
1006.0
INDIA
118
112
21
0.7
19.8
CHINA
810
633
72
1.2
56.2
In less than 50 years after some devastating famines,
China achieved full food – security. In contrast, 60 years
after Independence, India – one of the fastest growing
economies in the world - is today still home to 57 millions
under-nourished (35% of world’s total) compared to China’s
mere 7% (UNICEF – 2005).
10. COORDINATION BETWEEN COOPS & PRIs

The 73rd Amendment to the Constitution - panchayats
entrusted with powers to undertake “area planning for
economic development and social justice”.
 Both the PRIs & Cooperatives being people’s
organizations based on democratic values, each has to
play a complimentary role for the common goals.
 Cooperatives would be major institutional vehicles to
assist the panchayats in implementation of various
components of local area plans.
If cooperatives are the principal ally of the poor and the
panchayats, then we must combat the challenges they face.
- Liberation from bureaucratic controls.
- Empowering cooperatives to compete in the market place.
- Public opinion to exert informed and sustained pressure
on the State.
- L.C. Jain: India’s Tryst with Cooperatives
11. THE ROAD AHEAD
11.1 The direction of Indian agriculture
 (i) For Indian economy and society, economic prosperity
and social well-being of rural India are of paramount
importance. Agriculture, the prime-mover of the rural
milieu is in the worst-ever-crisis, posing a serious threat
to the sustainable livelihood to the farmers and food
security to the nation. This syndrome has already
triggered the alarm bells, pushing the poverty and
hunger levels and the farmers suicides to unprecedented levels.

(ii)Social policy of the Government (subsidies and
security -net to the rural poor) are important but we have
to balance them with the economic policy compulsions.
Illustratively, strange revelations have come out of a
Pune based study of the Government of India’s praised
programme “Rural Employment Guarantee Scheme”.
“A Pune based study group which walked through the
Maharasthra heartland covering 153 villages in
twelve districts found that at least a crore of people
were going hungry, agriculture has almost
collapsed, PDS is in a mess and the Employment
Guarantee Scheme has gone corrupt. In short, there
is a complete lack of governance.”
- Shri P.R. Dubhashi, Bhavan’s Journal, October 15th 2007


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(iii) The need of the hour is bringing out the Second
Green Revolution on a war footing and sustaining it as
an “Ever Green Revolution” and it should be on the top
of the agenda backed by strong political will. The
package is well contoured in the Swaminathan
Committee recommendations (National Farmers
Commission, 2006).
Basically, rising production and productivity through
improved technology and extension and putting in place
the required rural infrastructure hold the key for turnaround of Indian agriculture.
11.2 Coops - The vehicle for rural development

(i) The tested and trust-worthy vehicle for securing rural
development is the coops. As highlighted from British rule
(Royal Commission) to the present independent rule
(Gadgil Committee) “Coops have failed but they must
succeed”.

And they will succeed if only they are allowed to function
on their own as demonstrated by the committed coop
leadership viz. CDF / Mulkanoor / Warna etc. but the
external interference reducing the coops as para-statal
bodies is killing the coops, and the coop spirit.

But Coops must shed self imposed blinkers and empower
themselves to turn around as viable, market-oriented
entities.

(ii) Can we build-up the political will and the national
consensus on the vital issue – which may be the last
chance for coop renaissance? Let us recall how close
we were to building up a strong, vibrant rural economy –
yet how indifferently we missed it, or ignored it! Let us
recall the words of the doyen of coop movement Dr.
Verghese Kurian who said, paying tributes to the
architect of the Mulkanoor Coop Rural Bank, that simply
replicating 41,000 more Mulkanoor type coops would
take the country to the top of the world in the
performance index of the agricultural economy. Such
appeals continued to fail in triggering action.

May be, the coop leaders should press for Constitutional
safe-guards for the coops as was done in the case of
PRIs under 73rd Constitutional Amendment.

(iii) It is the responsibility – an urgent one too – to build up the vehicle
of coops to take the rural economy to the desired destination of
building happy rural communities with sustainable livelihood and
social empowerment. There lies the future of India and if we fail to
deliver, the posterity will not pardon the present generation for the
quality of the national economy they inherit.
Future Agenda “Agriculture for Development”
- (World Development Report (2005)
“Coops are the hope of Rural India. If they fail,
there will fail the hopes of Rural India”
- Royal Commission on agriculture in India (1928)
“Everything else can wait but not agriculture”
- First Prime Minister of India, late Pandit Jawaharlal Nehru
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