People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 35

September 01,2013

Build United Movement to Protect Primary Agricultural Cooperative Societies

THE All India Kisan Sabha demanded that the government of India, and in particular the Ministry of Finance, to immediately intervene and stop the Reserve Bank of India and the NABARD from arbitrarily imposing the recommendations of Prakash Bakshi Committee Report on Short Term Cooperative Credit Structure (ST CCS) of the country. In a statement issued on August 26, 2013, the AIKS opined that the unilateral steps taken by NABARD on behalf of RBI are an attack on the federal character of the country. It appealed to all state governments to ensure protection of the cooperative structure as it is a state subject.

The RBI appointed Prakash Bakshi Committee has come up with a report whose recommendations hit at the very foundation of cooperative credit societies. The Primary Agricultural Cooperative Societies (PACS) will be converted into mere business correspondents and their assets and members will be transferred to the Central Cooperative Banks, it stated. PACS not being any longer borrowing entities of CCBs would not be having voting rights for elections to the Board of Directors of the CCB. The RBI can issue directives and be conferred with powers that supersede elected Boards of Cooperatives and the state governments.

Rural credit cooperatives were born more than 100 years ago and are decisive in providing agricultural credit especially to small and middle peasants and agricultural workers. They primarily meet the crop loan requirements. It is a three-tier structure in most of the states with PACS having farmers as their members at the base level, Central Cooperative Banks (CCBs) as the intermediate federal structure with PACS as principal affiliated members, and the State Cooperative Bank (StCB) at the apex State level with CCBs and other cooperatives as its principal members. This three-tier Cooperative Credit Structure is popularly known as the Short-Term Cooperative Credit Structure (ST CCS). As on March 31, 2012, the ST CCS comprised about 93,000 PACS, 370 CCBs and 32 StCBs.

The AIKS statement notes that though cooperatives are providing only 17 per cent of agriculture credit, the share of cooperatives in total number of agricultural accounts held by the banking system is substantial. Cooperatives provided agricultural credit to 3.09 crore farmers during 2011-12 compared to only 2.55 crore farmers by commercial banks and 82 lakh by the RRBs. In fact, cooperatives financed 67 lakh new farmers during 2011-12 compared to 21 lakh new farmers by commercial banks and only 9 lakh new farmers by RRBs. Cooperative exposure to small and marginal farmers is 67 per cent out of its total loan portfolio which is far better than commercial banks. Also the share of term deposits was about 10 per cent higher for cooperatives as compared to commercial banks and about 17 per cent higher than RRBs.

Given the increasing trend in fragmentation of holdings and growing preponderance of small and marginal farmers who would require much smaller quantities of loans as compared to medium and large farmers, cooperatives are increasingly supporting the neglected or sidelined category of small and marginal farmers while the commercial banks extend around 55 per cent and RRB’s around 72 per cent respectively of their agricultural loan accounts to small and marginal farmers.

Both CCBs and StCBs are federal structures and their sustainability very largely depends on the sustainability of the lower tiers. The argument of RBI and NABARD is that PACS are not banks and they cannot issue Aadhar card linked, Information and Communication Technology (ICT) enabled Kisan Credit Card (KCC). Moreover, if PACS are made to function as Banking Correspondents of CCBs/StCBs, then only their deposits and loans can be covered under Deposit Insurance and Credit Guarantee Corporation (DICGC) insurance cover. But, these are mere alibis, as alternative arrangements for DICGC insurance cover can be easily done as is being done in Kerala and elsewhere. The issue of finding a technological solution to overcome problems of integration of PACS to ICT enabled platforms also is possible if there is dedication and willingness on behalf of GOI/RBI/NABARD, felt AIKS.

The Bakshi Committee also has recommended an autonomous cooperative election authority to be set up in each state to conduct elections for StCBs and CCBs and the authority to remove the boards of StCBs and CCBs needs to be solely vested with RBI. It thus seeks to ensure overriding powers to RBI.

The AIKS asserted that the move to deplete PACS is nothing but an attack on the peasantry and rural working class and these sections – at present 4.2 crore borrowing members at the level of PACS – will be left to the mercy of usurious money-lenders and new generation banks and chit funds mushrooming in countryside and semi-urban areas. This is a blatant attempt to centralise capital and power by over-riding the state in India’s federal structure and also the autonomy of the PACS. AIKS sees this move as part of the government of India’s reform programs for intensifying corporatisation of agriculture by supporting the big capital to establish its predominance over the vast agriculture credit sector. Kisan Sabha vowed to fight this onslaught on peasant agriculture jointly with other organisations.

The AIKS has decided to submit representations to the prime minister and the finance minister urging them to halt this anti-peasant move aimed to crush the basic foundation of Short-Term Cooperative Credit Structure.

Already AIKS has held widespread united protests in Kerala and Andhra Pradesh and similar actions are planned in other states too. Notably, the All India NABARD Employees Association (AINBEA) has also come out strongly against the move which they have pointed out as having a deep interconnection with proposed NABARD Act Amendment Bill pending in Lok Sabha. The AIKS also called upon its units to join hands with the workers and director board members of PACS, with the trade unions and all other peasant and agricultural workers’ organisations across the political spectrum to form mass action committees to protect PACS and to launch united solidarity movements at the village and Grama Panchayat level against this blatant attack on primary cooperative structures.