Cooperatives set up in ’23 reap rural gains

Three national cooperatives in India are driving the country's rural economy through exports, seed production, and farm produce procurement.

Three national cooperatives established last year are becoming the pivot for India’s rural economy through exports, seed production and procurement of farm produce, review of their commercial activities show.

Union minister of cooperation Amit Shah (ANI)

The cooperation ministry headed by Amit Shah has modified laws, including the Multi-State Cooperative Act 2023, which has enabled cooperatives to expand operations to 22 new businesses, including running of petrol pumps.

“The new multistate cooperatives are projected to handle more than $1 billion worth of commerce and trade in the next five years,” an official said, seeking anonymity. For instance, the National Cooperative Export Ltd (NCEL) is extending a range of services to ramp up overseas shipments of organic produce.

The NCEL has connected connect the trade and foreign ministries and Indian embassies to boost market linkages and supply chains for export of farm produce, the official said. It will develop into a “complete export ecosystem”, covering procurement, storage, processing, marketing, branding, labelling, packaging and certification, a statement said. At least 50% of profits will go to farmers, according to its proposed business model.

“The NCEL is launched in the cooperative sector with six objectives of increasing exports, prospering the farmer, changing the crop pattern, providing global market for organic products, gaining a place for India in the global market for biofuel and strengthening the cooperative sector,” Shah said recently.

At the heart of the push for a rural economy led by co-operatives lies a huge network of nearly 60,000 rural grassroots financial centres, of which only 36,000 run profitably. They have been around for decades, some since Independence. The central government wants to transform these entities, known as primary-level cooperative societies (PACS) to overcome unemployment and spur business opportunities.

Among the initiatives, a new programme to build the “world’s largest grain storage plan” worth ₹1 lakh crore will be driven by farm cooperatives, which traditionally deliver agricultural credit to millions of farmers.

Cooperatives are jointly owned by participating members, who share profits and losses. The popular milk brand Amul is a cooperative and so is India’s largest fertilizer maker, Indian Farmers Fertiliser Cooperative (IFFCO).

In July 2021, the government created a ministry for cooperation helmed by Shah, carving it out of the farm ministry. The Centre has since rolled out several changes to digitise and expand a sector that plays a key role in the rural economy. At the time, Shah had said the cooperative sector was “going to make the largest contribution to Prime Minister Narendra Modi’s dream of making India a $5 trillion economy”.

Under the Constitution’s Seventh Schedule, which divides responsibilities between the Centre and states, state governments have jurisdiction over cooperatives. However, the Centre has control over policymaking for cooperatives that operate in more than one state, known as multistate cooperatives. The Centre has also formed a 47-member panel headed by former Union minister Suresh Prabhakar Prabhu to formulate a national policy on cooperatives.

The Centre will not interfere or dilute states’ jurisdiction over cooperatives but the sector needed to be in lockstep with a national goal, Shah had said.

In a recent meeting between the Centre and the states, Shah said the Centre will launch a national policy that can “guide states” to align their policies on cooperatives with a broader all-India blueprint.

The mandate given to the Prabhu committee to form a new national policy revolves around widening the scope of businesses for cooperatives, such as lending for consumption and medical loans, against collateral such as bonds and commodities, as well as a range of financial services.

A key issue is that farmers’ shares in cooperatives are often too small, which results in poor payouts. Small farmers sell a major chunk of their produce to private traders, which “prevents them from reaping the profits of their produce even during a bumper harvest”, according to a recent study by the National Council of Applied Economic Research. “Their small quantity transactions translate into meagre cooperative shares and weak bargaining power in the market,” the think tank said.

“There’s a lot of scepticism around cooperatives, especially in Maharashtra, which is associated with politics and power,” said policy analyst Sakshi Abrol. “The advantages of a revamp would be that we should learn from earlier mistakes and bring transparency. That is the key.”