The Hindu : Politicisation of cooperatives bane of farmers

Online edition of India's National Newspaper
Monday, Mar 29, 2004

Kerala

Kerala

Politicisation of cooperatives bane of farmers

By Roy Mathew

THIRUVANANTHAPURAM, MARCH 28. Farm loans from cooperatives cast a heavy burden on farmers of Kerala as they struggle to be internationally competitive.

For the past several years, they were facing fall in prices, especially of plantation crops, as India opened up to imports from Sri Lanka and other countries. During those years, they were paying interests as high as 18 per cent on loans from primary cooperative societies. Though interest rates have come down now, they are still high compared to national and international lending rates.

Many farmers are struggling to repay high-cost loans taken by them from the primary cooperative agricultural and rural development banks and agricultural credit societies during the last five years. They have organised themselves in groups all over Malabar and had launched an agitation in front of the Secretariat recently. (The agitation has since been suspended on the basis of promises given by the Government to examine their problems after the elections).

The agitation, apart from the immediate issue of debt relief, has raised questions about the functioning of the cooperatives, which the farmers allege are not working to the interests of the farmers but to a political class that controls the societies.

The National Bank for Agriculture and Rural Development (Nabard) now provides refinance to the cooperatives at rates ranging from 5.75 per cent to 7 per cent. The primary agriculture and rural development banks lend them to the farmers at rates ranging from 9 per cent to 11 per cent. Short-term credit costs more. The credit cooperatives lend money at even higher rates — ranging from 9.5 per cent to 11 per cent for medium and short-term loans. Ordinary loans would cost 12 per cent to 13 per cent, which is the limit set by the Registrar of Cooperatives.

The interest rates at the primary level are high because the credit cooperatives are organised as a three-tier system and agriculture development banks as a two-tier system in the State. (One more tier is added when Nabard is also taken into account). Each tier claims a margin, adding to the overall interest rate payable by the farmers. The National Cooperative Development Corporation provides a small portion of the funds of the cooperatives. (Rs. 50.18 crores in 2002-03). Though its interest rate, which was 13.75 per cent in 2000-01, has been brought down to 10.5 per cent by 2003, it is still high compared to the current market rates. The cooperatives raise short-term deposits paying up to 7 per cent interest. However, margins push up the cost of funds further as money is transferred from the apex State Cooperative Bank to the primary cooperatives through district cooperatives. Besides, the cooperatives charge heavy penalties in case of default. So, questions arise whether the system is really beneficial to farmers. One of the advantages of the tier system was that it made monitoring easy. But with computerisation and modern management practices, problems in monitoring large number of societies have diminished. So, even the Nabard is considering direct lending to the primary cooperatives. Co-operators feel that this, combined with the lowering of interest rates and pressure on margins, could eventually make a multi-tier system unviable.

However, the real problems are not just of margins alone. The cooperative sector in the State has grown over the years and now enjoys considerable financial muscle. This led to vested interests developing around many of them. If genuine co-operators largely built the sector in the past, today politicians whose main motive is self-interest control most of the cooperatives. The farmers have virtually lost a say in important policy matters. A change in Government in the State was always accompanied by all-out wars to gain control of as many cooperatives as possible through partisan use of Governmental powers.

The total loan disbursed through the 1,628 primary credit societies in the State in 2002-03 was Rs. 8,750.50 crores. Every year, the annual deposit mobilisation drives exceed targets. Last year, the drive fetched Rs. 914.08 crores against a target of Rs. 400 crores. The working capital of the State Cooperative Bank was about Rs. 2,620 crores in 2003. This is a financial empire from which the politicians will not easily take their hands off.

The politicisation of cooperatives has affected the management of the societies though the CPI(M) cadres have been able to launch some successful cooperative ventures outside the agricultural fold in north Kerala. Corruption is taking root in the sector. More than half of the primary credit societies are running at a loss owing to these and other reasons. A study on innovative behaviour in 30 cooperatives in Kerala undertaken in 2001-02 by the Tilburg University, notes that appointment of secretaries to the cooperatives were not always based on managerial skills, but rather on political linkages. Neither the Government nor the apex organisation played a significant role either in the innovative or in the non-innovative cooperatives.

All these make a rethinking on the structure and organisation of cooperatives imperative. Already some agriculture credit societies in city suburbs are concentrating on non-agricultural credit. The district cooperative banks too could be taken out of the chain of agriculture credit and allowed to concentrate on allied and other sectors. Besides, the indebtedness of small-scale farmers and marginal groups such as tribals needs to be addressed. The Cooperative Department has been implementing a one-time settlement scheme. However, farmers argue that this did not benefit most of them. The waiver of penal interest and compound interest was marginal, compared to their liability, and lumpsum payment was to be made with 12 per cent interest from the date on which repayments became due.

The credit disbursed for agriculture purposes had jumped from Rs. 2,100.64 crores in 2001-02 to Rs. 4,554.97 crores in 2002-03. This, however, could not be taken as anything positive as much of this meant rollover of existing loans that the farmers could not actually repay. The loan outstanding with primary agricultural credit societies had increased by 55 per cent between 1999-2000 and 2002-03 while loan overdue increased by 113 per cent.

The drought in various parts of the State and crop loss has added to the problem of indebtedness.

Printer friendly page
Send this article to Friends by E-Mail

Kerala