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

Interior Minister Amit Shah (who is also in charge of cooperatives) recently wrote to all states for early advice on the matter, as the Center seeks to link every professional farmer in the country to a cooperative at the of the panchayat in the country, the official quoted above said.

India has nearly 95,000 Primary Agricultural Credit Societies (PACS) with 300 million members whose profits are shared among the participants. The sector accounts for around 20% of the country’s gross domestic product (GDP).

The aim of the new regulations is not only to make agriculture in India competitive, but also to use cooperatives as a way to boost the local economy and create jobs. Since co-operatives fall under the jurisdiction of the state government, the Center can only develop model laws on which states can base their own legislation.

Cooperatives are essentially collectives of small producers who draw on their resources to achieve scale and collective bargaining power in markets. PACS are member-run, last-mile rural financial entities that provide agricultural credit in a country where nearly half the population depends on income from agriculture.

One of the main objectives of the model regulations is to make the PACS “sustainable and allow for the diversification of economic activities to increase rural prosperity”, the official said. The draft statutes, of which HT has taken note, aim to overhaul the governance, as well as to add a wide range of commercial activities.

The main objective remains the provision of “timely and adequate short and medium-term credit…related to agriculture and agricultural products”, according to the draft regulations.

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

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

Although there are some iconic cooperative enterprises in the country, such as dairy giant Amul, papad manufacturer Lijjat Papad and fertilizer giant IFFCO, the sector is in many areas hampered by inefficiencies and patronage systems. opaque.

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

According to the draft statutes, cooperatives can be lenders for consumer and medical loans, among financial activities, against collateral such as bonds and commodities. A critical area that can boost employment, according to the official, is that cooperatives must be able to promote and develop so-called “backward linkages” with the agricultural economy.

Backward services include extension of agricultural demonstrations, drone-based services, fertilizers, seed production and agricultural machinery rental centers. Forward linkages include activities such as technical support to members for setting up cold storage, aggregation of agricultural produce, and quality-based grading and sorting.

The new financial activities proposed also include infrastructure development, management of fair price shops, LPG concession, petrol pumps, training for skills development, popularization of rural technologies, service to customers as as banking correspondents, as well as the provision of social security schemes. Co-ops will also serve as a source of data for the government, according to the draft regulations.

Cooperatives could boost rural prosperity when aligned with new economic activities, the first-quoted official said. “There would be a need for accountants and technical professionals, etc. These would be mostly local jobs.

Working in tandem, the Reserve Bank of India (RBI) last month raised the limit on individual housing loans issued by co-operative banks by more than 100%, as announced by Governor Shaktikanta Das, in view of the importance of cooperative banks in promoting inclusive growth.


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