The Hindu Business Line : `Inefficiency of co-ops hits farmers the hardest'

Mr V. Ramani, Secretary, Co-operation Department: "Higher the overheads of the co-operative institution, the lower the efficiency in loan delivery" at an affordable and realistic rate of interest.

Mumbai , Aug. 18

SIMPLY because co-operative societies are less efficient than they should be, the farmers who borrow from them for raising crops pay more than they need to as interest.

That, it is now officially conceded, is the case in Maharashtra. The primary co-operative societies, which deliver the loans and the last tier of banks, now charge up to 14 per cent at the highest end. The more efficient ones charge a whole five percentage points less - 9 per cent.

According to Mr V. Ramani, Secretary, Co-operation Department, this ought to be compressed into a smaller band of interest range, 9 - 11 per cent. The way he put it at a briefing for newsmen by the Chief Minister, Mr Sushilkumar Shinde, "Higher the overheads of the co-operative institution, the lower the efficiency in loan delivery" at an affordable and realistic rate of interest.

The Chief Minister, he said, has appointed a committee to explore ways and means to ensure that the outer limit of the interest rate band does not exceed 11 per cent.

When asked as to whether most or a large section was inefficient, he replied, "it is a mixed bag." The interest rates go up because it is jacked up at every level, right from the Nabard down to the primary co-operative society.

"More the levels, higher the interest charged."

Apparently, other official sources concede that interest rates, to which the urban borrowers whether for industry or housing, business or trade are much more sensitive to does not appear to hold true for the farmers.

"The poor chaps just go and borrow from wherever they can; timely loan and not the rate seems to matter because they are helpless," an official says.

That explains why they go to the local sahukar — the private moneylender — who practice usury at rates soaring up to 25 per cent per season when the first sowing fails and second sowing is a must.

Normally, the informal sector ends up charging a minimum of 36 per cent per annum. And the farmers accept the rates and then their financial situation, already precarious, wilts.

At one estimate, 70 per cent of all rural loans are from the private moneylenders.

Though the co-operative sector, along with nationalised banks, do not meet all the credit needs of the rural sector, especially of the small, marginal farmers and the artisans who are the most hurt when drought-related distress hits them, they have an exposure of Rs 5,690.96 crore at the end of the crop season. The interest burden on that is Rs 739.82 crore.

If only the co-operatives were efficient in that they had lower overheads, which they did not pass on to the farmers, this burden would have been substantially less.

The overheads in most co-operative undertakings have more to do with meeting the lifestyles of the co-operative bosses who in turn are local politicos with access, in the power pyramid, to the top.

This, says a Revenue Department official who sought anonymity "makes the co-operatives inimical to the interests of the farmers because of political concerns."

More Stories on : Farm credit | Co-operatives | Maharashtra

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