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FARMING COOPERATIVES IN INDIA: PROBLEMS AND PROSPECTS

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FARMING COOPERATIVES IN the urban market, which can be perceived as
INDIA: PROBLEMS AND a modern market barter system.
PROSPECTS
Certain economic activities such as credit
By Adhip Narayan Banerjee disbursements and agricultural inputs
From School of Arts and Law, Manipal distribution are regarded as the core of
University Jaipur cooperative economic activities. The
cooperative movement was affluent in the
By Riddhi Banerjee rise of the GDP (Gross Domestic Product) of
From School of Law, Techno India rural India and reducing poverty. The global
University, Kolkata ordeal of development and reduction in
poverty shows that GDP (Gross Domestic
Product) growth originating in agriculture is
Introduction at least twice as effective in reducing poverty
The cooperative society is a consortium of a as GDP (Gross Domestic Product) growth
cluster of people with collective liabilities, originating outside agriculture3. Thus, we can
responsibilities, and thoughts for the come to the conjecture that the cooperative
upliftment of the needy, especially the system holds the cue to alleviate poverty and
underprivileged. “A cooperative is an tackle the issues of food security.
autonomous association of persons united
voluntarily to meet their common economic, Literature Review
social and cultural needs and aspirations a. NCUI4: In this literature, the growth of
through a jointly-owned and democratically- agricultural cooperative is justified with
controlled enterprise.” Under the umbrella
1
appropriate surveyed data concerning the
of cooperative several other branches fall finer and thinner divisions for better
under its ambit such as the development of segregation and classification of the data, to
agriculture, agro-processing, storage, be used for the study. This literature also
forestry, banking, credit, marketing, dairy, postulates the prospective and retrospective
fishing and housing and its filigree shelters aims of the Government in the cooperative
2
85% of the rural menage . It aids in many sector and acts as a report card of how much
aspects of agricultural burgeoning by of it has been achieved and which part is still
promoting the use of resources, the addition striving for excellence.
of value, market channels, distribution
channels, storage facilities, etc. Rural
marketing eases the flow of goods from rural
producers to urban consumers at a possible
time with just prices in lieu of resources from
1 3
United Nations (2012). International Co-Operative Swaminathana B, Sivabalanb KC. (2016) Role Of
Alliance Statement On The Co-Operative Identity. Agricultural Market Intelligence In Uplifting Small
International Year Of Cooperatives; 2012. And Marginal Farmers: Aspects, Prospects And
2
Dubey AK, Singh AK, Singh RK, Lakhan Singh, Suspects.
4
Pathak M, Dubey VK. Cooperative societies for Indian Cooperative Movement, A Statistical Profile
sustaining rural livelihood: A case study. Indian Res. (2012), National Cooperative Union of India, XIII
J. Ext. Edu. 2009;9(1). Edition, July 2012
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b. Om Ashtankar 5: This literature emphasizes and the decrease of support from its
the need for any economic measure to cover members.
the agricultural sector for it to pass the litmus
test and be successful. It also opined that the Statement of Problem
cooperative sector is the arch of the Indian The Cooperative system is thriving in the
economy in the contemporary scenario. The country for 50 years. Yet it is believed that
literature also provides the drawbacks and the the prospects of the system have not reached
advantages of the sector, what measures the agricultural sector completely.
should be taken to ensure its credibility and Addressing this issue will explain the
how it will sustain itself for the coming anticipated/actual prospects and drawbacks
generations. of the system, why the farmers chose to be
c. Sami Uddin6: This literature focuses on the included/not included in the cooperative
study of Uttar Pradesh’s cooperative system system.
about India’s cooperative guidelines. There is
also a comparative study of India’s Research Objective
cooperative system, Uttar Pradesh’s The research aims to provide a constructive
cooperative system and systems of foreign analysis of the current cooperative movement
countries such as Russia, Poland, China, prevailing pan India. It also aims to study the
Israel, Uganda, Syria, Czechoslovakia, Iraq, evolution of the cooperative system and how
Nigeria, etc. The literature also elucidates the it has impacted during its journey and its
five-year plans and the farming prospects in destination at the current time. The gradual
India. change and its impact have been backed by
d. E-Gyankosh7: Elucidates about the evolution the legislature and the propagation of the
of the cooperative system, the legislative movement has faced several positives and
measures taken by the Government after the negatives, the researcher aims to cover the
independence of India and the structure of the point of change and how the legislature
cooperative system to understand the affected the function of the farming
mechanism of its framework. cooperatives.
e. John Mugambwa8: The author elaborated on
the uprises and downfalls, the final failure of Research Questions
the movement in Papua New Guinea. The  What effect the cooperative system has on the
author also postulated the required core agricultural sector of the Indian economy and
values of a functioning cooperative system, what are its prospects and drawbacks in the
opined those frequent bureaucratic system?
interferences in the system engendered the  How is the system shaped to match the Indian
inability to attract large capital investments economy and analysis of the legislative
backing it has?

5 7
Om Ashtankar, Importance of Cooperative E-Gyankosh, COOPERATIVE LAGISLATION IN
Movement for Indian Agriculture Sector (2015), INDIA, Unit 18, State and Agricultural Sector By E-
IJAR, Gyankosh, 2019
6 8
Sami Uddin, Cooperative Farming and Rural John Mugambwa. The Saga of the Co-operative
Industrialisation with Reference to Uttar Pradesh Movement in Papua New Guinea, Journal of South
(1975), Aligarh Muslim University, 1975 Pacific Law, 2005, 9(1)
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agricultural credit cooperative system, in
Hypothesis India. As a result, the British Government
The cooperative system has caused agreed and introduced the Cooperative Credit
exponential growth in the economy and the Societies Act, 1904 that was enacted to
legislative backing has provided enough enable agricultural credit cooperatives in the
room and independence for the movement to rural and remotest parts of India, under the
grow and breathe. sponsorship and nurturing umbrella of the
Government. 8 years later, the act was
Research Methodology repealed with the introduction of the
This research will reach a conclusion Cooperative Societies Act, 191210. The latter
depending on the statistical data based on Act paved the way for the formation of
surveys and existing paperwork data, carried cooperative societies other than credit
out by several independent and governmental system, polishing the cooperative system for
agencies to justify the hypothesis. The the sake of rural India. Both the Acts played
research will also postulate the prospects and a very important role in strengthening and
drawbacks of the system employing several developing small, marginal, and weaker belt
case studies and ground-zero reports to avoid of the society. To induce better management
biases and provide accurate and independent of the system, the subject was made a
opinions and observations. The research is provincial matter with the enactment of the
based on both doctrinal and empirical Administrative Reforms Act, 1919
principles to understand the legislative recommended by the Viceroy of India Lord
backing of the movement and at the same Chelmsford and the Secretary of State for
time analysis of the practical availability of India Edwin Montagu, that covered 10 years
the benefits and/or drawbacks of the (1919-1929). The Act incepted a responsible
widespread movement. Government in India and ending the
benevolent despotism of the authorities. The
History and evolution of Cooperative aforementioned act also introduced the
Societies: The fountainhead diarchy system of Government in India. The
During the period of 1850s, the East India Government, later on, felt the need to cover
Company started their rampant process of societies that had their operations extended to
annexation and dismantling of traditional more than one or several states, hence, they
industries, which resulted in a huge chunk of introduced the Multi-Unit Co-Operative
the population shifting towards rural India. Societies Act, 194211. With the growing
This created a vast void, enough to initiate the independence struggle in India, it gave birth
cooperative movement in India. to several initiatives and institutions, moving
forward, after India gained independence
During the colonial rule in India, a British from the colonial rule, in 1984, the
official, Nicholson, suggested introducing independent democratic Government
9
Raiffeisen , the German model of repealed the act of 1942 and introduced a new

9 11
Named after Friedrich Wilhelm Raffeisen, who was The Multi-Unit Co-Operative Societies Act, 1942,
a German Mayor, and cooperative pioneer. No. 6, Acts of Parliament, 1942 (India)
10
The Cooperative Societies Act, 1912, No. 2, Acts of
Parliament, 1912 (India).
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act called the Multi-State Co-operative services, livestock and industrial activities
Societies Act, 198412. and majorly, to directly support cooperatives
against suitable security by investing major
The independent government recognized the capital funds.
cooperative sector as the third economic
sector that connected the private and public Role of Cooperatives: At a glance
sectors. Later in 1950, cooperatives were Cooperatives can be clustered into several
brought under the ambit of National groups in conformity with their activities:
Development Plans. The first plan during the (Kumar et al 2005)
period of 1951-1956 endorsed the training of  Production Cooperatives- It deals with
personnel who were involved in setting up industrial and agricultural productions.
and developing the cooperative marketing  Marketing Cooperatives- It deals with the
society. The second plan involved the marketing of agricultural productions.
expansion of activities under cooperatives  Service Cooperatives- Renders services for
and highlighted the importance of storage members of cooperatives such as
facilities. The third and fourth plan endorsed Cooperative Credit Societies, cooperative
the involvement of cooperatives in housing, cooperative banks, and, etc.
agricultural processing of commodities such  Allied Service Cooperatives- Dealing with
as sugarcane, cotton, milk, etc., take up other activities that are necessary for daily life
activities based on agriculture to promote businesses of farmers, agriculturists, artisans,
large scale production such as spinning and etc.
weaving employing the existing resources in
warehouses and consolidation of Centre for Study of Developing Societies
cooperatives system respectively. From the (CSDS) had conducted a survey15 comprising
ninth plan onwards (1997-2002) there was no of five thousand agriculture-dependent
specific mention of the cooperative system as households, situated across 18 states in India.
cooperation has been a State subject and It was evident from the statistics that seventy-
Multi State Cooperative Societies Act, six per cent of the households are considering
200213 propagated parallel cooperative different forms of livelihood, pushing sixty-
legislation for self-reliant cooperative one per cent of them towards the urban area
dwellers, giving the older laws a prospective in search of better healthcare, more earnings,
mode of operation. With the introduction of better education and more opportunities.
the National Cooperative Policy (2002) an Agriculture is slowly losing its charm and
ambidextrous burgeoning was anticipated, shine with mounting debts, unfavorable
being responsible to make a significant weather conditions, floods, droughts, pests
contribution to the agrarian economy of attack and a rise in prices of inputs.
India. NCDC Amendment Act, 200214 has
allowed it to bring under its ambit the notified

12 14
The Multi State Co-Operative Societies Act, 1984, The National Cooperative Development
No. 51, Acts of Parliament, 1984 (India). Corporation Act, 1962, No. 26, Acts of Parliament,
13
The Multi State Co-Operative Societies Act, 2002, 1962 (India)
15
No. 39, Acts of Parliament, 2002 (India). Lokniti, https://www.lokniti.org/otherstudies/state-
of-indian-farmers-161 (Last visited 11th May, 2021)
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The government had brought several reforms exploitation, coherence and harmonious
to benefit the farmers, but it was observed development through peace and unity. It has
such reforms benefitted the big farmers more also provided the unaware, a proper view of
than the poverty-stricken and/or small how the democratic setup and structure work,
landholding farmers, as ten per cent in the and the notion of self-governance.
survey has claimed that they received the Cooperatives have also opened avenues of
benefits provided by the government. year-long employment and income through
Seventy-four per cent of the farmers were agriculture and livestock products.
observed to not have been aware of the
schemes provided by the government, hence, Cooperatives connected with Agriculture: A
there is a huge discrepancy in the symmetry welfare intended vision.
of information provided by the local bodies. For the welfare of landowners, increasing
Sixty-four per cent of the farmers, also feel transparency and simplicity of the system and
that the Minimum Selling Price (MSP) for the consolidation of the farming
provided by the Government is not worthy of population and their lands, various land
the labor and energy they put into the reforms were introduced. The small and
production of the goods. All the facts bespeak fragmented holdings by farmers and
the rising farmer suicides in the country, and landowners were conjoined to form a robust
to resolve the agrarian crisis, that is the arch cooperative system, mooted by the Planning
of the economy is need of the hour. Commission. It ensures collective farming,
while at the same time keeping the private
Cooperatives have acted for the eradication property ownership rights intact with some
of middlemen to avoid exploitation of regulations. The initial response during its
farmers. Whatever profits are gained by the introduction was very poor due to the absence
cooperatives, are equitably shared between of some model to expound the growing
the members, to make a bridge and reduce the reforms to the members, hence they could not
gap between the incomes of rich and poor trust the intention of the sovereign.
farmers. The organizations also grant a The foundation of cooperative society in
significant amount of loans, that aids in India was laid with the initiation of a ginning
providing modern farming pieces of factory in 1917. Motivated by the same,
machinery, high-quality fertilizers and seeds factories for paddy milling, sugar processing,
for a better production rate increasing the groundnut processing, etc. were also set up.
turnover in profit. This engenders the They were pulled under the ambit of
farmers' safety from private borrowings cooperative rules as private owners were
which exploits them by unfair terms in the exploiting the farmers by giving unjust
agreement, unjustified negotiating position of resources and price for their labour. Most of
the promise in the contract (mostly ex-parte) the cooperative societies then founded failed,
and punitive interest rates. while Etikoppaka Cooperative made an
example with the proper backing of the
From the sociological perspective, Central Cooperative Banks and receiving
cooperatives propagate the extraordinary higher prices for the canes. The societies
values of toleration, brotherhood, bloomed gradually with the regular
condemnation of social evil, resisting intervention of the Government, and to

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provide simplicity and speedy solutions to
the issues to be addressed, State and national
level were created namely State level
Federations of Cooperative Sugar Factories
and the National Federation of Cooperative
Sugar Factories Ltd to mediate with the State
Governments and guide them in all facets.
But now the golden period of Sugar mills
look gleam due to truancy of
superintendence, lack of mediating steps, and
lack of managerial prospects and skills. The
cooperative society at this current situation is
gradually increasing its pace in the dairy
sector, oilseeds sector, tomato cultivation
sector through various firms and/or
companies and/or independent farmers under
the cooperative system.

Agricultural cooperative societies aim to

reify increase in production by the means of
bulk marketing strategy achieved through
favorable reforms for bargaining power of
farmers, abolishing middleman system (such
as arhthiyas), better storage facilities, etc.
The establishment of Krishak Bharati
Cooperative Limited (KRIBHCO) and Indian
farmers fertilizers Cooperative Federation
(IFFCO) propagated gain in inputs of
production by providing efficacious
fertilizers at low costs to farmers.

Primary Agricultural Cooperative Society

(PACS) is tied up with more than or equal to
ten members, founded at the grassroots level
for better outreach to the people and speedy
redressal, with a very negligent share to give
a chance for the poorest family in the
remotest village of the country to become a
member and take part in the movement. It
also acts as a connecting bridge with higher
financial authorities such as the RBI and/or
NABARD.

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Table 1. Operational status of PACS in India16

Operatio Financial Clients’ Staffing
nal status (in coverage pattern (in
Status (in No.& (in No.) No.)
No.) Rupees)
Total 9523 Societies 46405 Number of 639342 Total No. 1722
8 in Profit Villag of Staffs 87
es
Cover
ed by
Societ
ies
Viable 6438 Amount 41335859. Total 1305473 Full 4189
2 profit 15 members 80 Time Paid 6
Secretaries

Potentiall 1796 Societies 37838 Small 4369845 Part 2115

y Viable 5 in loss farmers 0 Time Paid 0
members Secretaries

Dormant 2709 Amount 73155672. Total 5069022 Other Staff 1092

loss 40 number of 0 (Clerk/Typ 41
borrowers ist/
Helper)
Defunct 1542 Number 51939 Small 1982093 Trained 7885
of (7214824. farmers 0 staff 5
Societies 81 Ton borrowers
with Own Capacity)
Go downs
Others 8640 Agricultu 20.75% Villages 85.06% Untrained 9343
ral Over (Short covered staff 2
dues to Term
Demand loan)

16
Ministry of Agriculture and Farmers Welfare Government of India, Agricultural Statistics at a Glance 2018, pp.405,
https://agricoop.gov.in/sites/default/files/agristatglance2018.pdf
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Problems of Cooperative Farming system, superstitions, and bad attitude of
a. Mismanagement and beguile of the government officials at low rank.
opportunity: The essence and singularity of d. Small organizational size: The cooperative
the movement were built around the concept farming societies have been formed on a very
of non-discriminating involvement of narrow foundation of members with a single
farmers based on the size of their objective. They are confined to few members
landholdings, but as time flew past, the idea and their impact was for only one or two
became polluted with the evil of corruption villages, hence there was a shortage of
and greed, which rendered big landholding required manpower and other resources. The
farmers to become more powerful. This razed cooperative is thus, unable to have a
the shiny and rapidly growing building of complete perspective to analyze and solve the
cooperative to the grounds. The elections of issues. Thus, the help that the cooperative
the cooperatives in various mills were society is supposed to provide, is not
manipulated by the influx of large amounts of satisfactory and as a result, there are
money, disregarding the pious and sacred grievances from farmers.
democratic process to elect a germane e. Lack of required attitude: The attitude of
chairman or vice-chairman, thus, gradually devotion and efforts towards the work on
turning the structure of cooperative into a behalf of the officials have rendered the
political fastener. movement useless. There is even a lack of a
b. Government interventions: Since the genesis professional approach towards the system as
of the movement, the Government had there is a lack of skill upgrade program from
adopted the attitude of patronizing the same a professional management training program.
and held the management of the cooperative It is also difficult to find qualified persons for
tightly within its fists, that it came within the farm management, such as managers to look
ambit of the Government. This hampered the after the operations and fathom the complex
growth of enthusiasm about cooperative issues and grievances.
farming, among the people, and they felt that
their freedom was being carried away with Perquisite of Cooperative Farming
the government’s frequent interference. Cooperatives play a cardinal role in the
c. Lack of awareness: The masses before being financial availability of rural people, aimed to
involved in a scheme, favours to know the cover a larger number of farmers. As per the
details of the scheme before investing study of World Bank’s Global Financial
themselves, as they do not want to risk any of Development Report 201417, it is an effective
their assets. Thus, it is of urgent need that the way for poverty reduction. The government
farmers are made aware and understood takes the seat of supervisor, thus there is
every single detail of the process of the lesser interference, while it is effectively
movement and the objectives of the same. managed by its competent members. To
The reasons behind this shortcoming are ensure and attest to the self-governing nature
multiple and swindled together such as lack of the cooperative society, it is essential to
of education, panchayat politics, caste

17
World Bank Global Financial Development Report ream/handle/10986/16238/9780821399859.pdf?seque
2014, nce=4&isAllowed=y, 2014
Available:https://openknowledge.worldbank.org/bitst
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maintain and increase the quality of medium-term loan. In the rural India, the
professional management. rural cooperatives can be reshaped into high-
spirited prosperous models for farmers’
Cooperative farming ensures that it prevents socio-economic development by ensuring
the dispersion of lands, which acts as a infrastructural development, good
hindrance to the accessibility of the governance, professionalism, policy
government schemes aimed at agricultural legislatives, strict guidelines, members’
development. Such consolidation of land will education, assured quality, market linkage,
result in higher production as there will be processing of produce, skilled staffing, and
more farming lands and hence attract foreign fair policies. Hence in the light of all the
direct investments. It results in increased information provided in this work it can be
creditworthiness. The large consolidation of concluded that the said hypothesis is proved
lands will also allow the movement of even though, the Government interference
modern farming pieces of machinery such as might affect the growth of this movement,
tractors, threshers, pump-sets, combine proper and robust legislative scaffolding has
harvester, effective irrigation system, etc. ensured the continuous and long term growth
Economic progress can be measured by the of the golden welfare scheme of Cooperative
efficiency of the industries in the production Farming, built in the lines of Raiffeisen.
and their exports, in this case, it is the
productivity of the farmers. The cooperative Bibliography
movement has also aided in employment 1. Research Gate
outside agriculture to make their economic 2. Government of India
progress through income by various sources. 3. CSDS
The supply of agricultural products can also 4. CJAST
be maintained to meet the demands of such 5. Times of India
workers. 6. Indira R, Paramashiaviah. A study on
cooperative sector banks in India: problems
Cooperative farming will lead to a marginal & prospects. Journal of Advances and
increase in the marketable surplus, which is a Scholarly Research in Allied Education.
determining factor of a country’s prosperity Ignited Minds Journals.2019;16(5):203-208.
in terms of exports and imports. This 7. Das B, Palai N, Das K. (2006). Problems and
movement is also favorable for the prospects of the cooperative movement in
government, as with a smaller number of India under the globalization regime. XIV
farms, it is easier to collect taxes, introduce International Economic History Congress.
better schemes, and provide significant Helsinki 2006, Session 72.
subsidies.
Conclusion *****
Cooperative societies can come up with both
technical and vocational service to the small-
scale farmers to convert agriculture into
agribusiness enterprise by combining the
supplies for realizing economies of scale
apart from financing credit in short term and

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