Collectivisation. Empowering agri cooperative credit societies through digitalisation

“Cooperation is only one aspect of a vast moment which promotes voluntary association of individual sharing common needs to combine towards the achievement of common economic ends” —Vaikunthbhai Mehta, pioneering leader of the Indian cooperative movement

Cooperatives in India are pivotal institutions for fostering inclusive growth in rural areas. Rural cooperatives have played a significant role in the areas of credit and agricultural production. The newly formed Ministry of Cooperation will enable primary agricultural cooperative credit societies (PACS) to be effective organisations to address the needs of millions of farmers and the rural population.

PACS are the short-term cooperative credit structure (STCCS) building blocks in the country. As per Reserve Bank of India, as of March 31, 2018, there are 95,238 PACS covering 6,39,342 villages in India. Countrywide we have roughly one PACS for every six villages.

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Despite having a good network, PACS have failed in delivering services to the rural population and projected a regressive growth. Lack of accountable democratic practices by members has led to poor services and low productivity. PACS are deprived of funding from district cooperative banks. The scarcity of human resources and technological infusion has resulted in poor management of information systems, lack of transparency, laxity in internal control systems, and malpractices and stagnated growth.

Need to revive PACS

Although PACS are primarily meeting the credit requirements of farmers, they need to transition from a credit society to a multi-services society that can act as a single window for credit and services.

The Vaidyanathan Committee recommended reviving the STCCS through measures like professionalisation of staff, capacity building and infusion of technology.

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The revival also calls for reorienting PACS as service organisations in tune with the latest focus of the Government, which integrate cooperatives with various agriculture and allied sector activities, and function as an economic enterprise that explores business opportunities in tune with market forces and consumer demand.

The recent call to treat PACS on par with farmer producer organisations (FPO) will provide them the impetus to secure more financial support and diversify services. The success stories of FPOs in Maharashtra, Gujarat, Tamil Nadu and Andhra Pradesh serve as beacons to encourage PACS to be professional institutions that address village-level needs through cooperation.

Financing facility

The Central Sector Scheme of Financing Facility, under the Agriculture Infrastructure Fund announced in 2020, shall provide a medium- to long-term debt financing facility for investment in viable projects for post-harvest management, and infrastructure and community farming assets through interest subvention. Under the scheme, banks and financial institutions will provide ₹1 lakh crore as loans to PACS, marketing cooperative societies, FPOs, and so on.

It’s time for PACS to have a better financial proposition to benefit from the scheme for the creation of assets for the community.

Value chain promotion

The synergy between value chain infrastructure and PACS would improve growth and create economic opportunities, enhance options for the farmer, and promote financial inclusion. The intention is to enable PACS to support farmers in post-harvest marketing activities and other ancillary services such as the creation of storage and processing facilities, custom hiring centres, and collective purchase of inputs.

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PACS can also play a major role by integrating its warehouse with agro-commodities supply chain. The SMART project of Maharashtra has entered into a memorandum of understanding with Prayag Chikhli PACS from Kolhapur district. This PACS is engaged in jaggery crop production with 1,008 shareholders and has 600-tonne godown capacity

Digital inclusion

The inherent cooperative principle of ‘cooperation among cooperatives’ can be leveraged by having internet of things (IoTs), which will bring a localised, low-cost shift in communication and participation. This transformation can be replicated through digital inclusion. PACS can play an important role in providing digitally inclusive facilities to farmers. This digitalisation will ensure better access to market and finance, facilitate social benefits, and provide access to welfare schemes such as direct benefit transfers (DBT). There have been numerous stories of empowered and successful PACS in several villages. Each PACS needs to be conceived of as a single-window facilitation centre for all farmer needs — from credit to marketing. The need of the hour is intensive capacity building of PACS to understand digital marketing and transactions on E-NAM, e-commerce websites, e-NWR, fintech, agritech, and future trading or derivative market platforms.

Way forward

PACS is a microfinance institution that focuses on the short-term financing needs of small and marginal farmers. Timely provision of loans will assist farmers in increasing productivity, resulting in overall economic growth. PACS are meant to operate as effective multipurpose societies, providing a suite of services to rural residents, including finance, agricultural inputs and implements, consumer goods, marketing services, and technical guidance, in addition to mobilising their resources as deposits. To accomplish these goals, there is a need to revitalise credit cooperatives. Improving transparency, inculcating professionalism through capacity building, good governance and digital inclusion could be a few revival strategies for PACS. The need of the hour is to enhance digital literacy through consistent training and skill development of the members.

(Yadav is Director and Paliwal is Professor, VAMNICOM, Pune)

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