The Hindu : Business : Coop. sector revamp to cost Rs. 15,000 cr.

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Wednesday, Sep 14, 2005

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Business

Coop. sector revamp to cost Rs. 15,000 cr.

Special Correspondent

Package to be sent to Cabinet by October-end

NABARD AWARDS: The Union Finance Minister, P. Chidambaram, along with the Chairperson, NABARD, Ranjana Kumar, arriving at the NABARD National Awards function for self help groups, best performing farmers clubs and best performing co-operative banks, in New Delhi on Tuesday. — Photo: R. V. Moorthy

NEW DELHI: The Union Finance Minister, P. Chidambaram, on Tuesday said he was hopeful of finalising a Rs. 15,000-crore package for restructuring the cooperative sector and forward it to the Cabinet by the end of next month for approval.

Speaking at an award function organised by the National Bank for Agriculture and Rural Development (Nabard) here, Mr. Chidambaram disclosed that in this venture, the Centre would have to bear a burden of over Rs. 8,000 crore while the States and cooperatives could be asked to pitch in with the balance amount.

"I think we got a near-consensus. I hope that all the States will agree. [The] Centre will no doubt share the burden but states and cooperatives will have to bear a small burden," he said.

Although the Vaidyanathan panel, which went into the restructuring of the cooperatives, had recommended that the Rs. 15,000-crore package should be borne by the Centre, states and the cooperatives in the ratio of 53:31:16, Mr. Chidambaram said: "[From] what I gathered, the 16 per cent share of cooperatives is a problem."

Last week, the Finance Ministry had convened a meeting of the State Chief Ministers, which was chaired by the Prime Minister, Manmohan Singh, to sort out the thorny issues in the revamp package. A draft for the financial package was circulated among the states seeking their responses within three to six weeks. "The consensus package will then be taken up for Cabinet approval. We hope to get the Cabinet clearance latest by October 31," Mr. Chidambaram said.

Noting that the cooperatives were the only "weak link" in the way of increasing farm credit, the Finance Minister felt that they should be freed from political interference and democratised and professionalised, if they were to become powerful instruments for farm credit.

The Government would consult the states on six issues, namely, the eligibility criteria for getting recapitalisation, sharing the financial burden, fixing the minimum capital-adequacy ratio limit, retirement of the states' share capital and "special audit" on cooperatives so as to ensure that they do not misuse public funds. Nabard has been asked to find ways of hiking refinance to cooperatives and reducing the interest rates.

The Reserve Bank of India (RBI), on its part, would be asked to play a "leading role" in ensuring the financial health of the cooperatives but the Registrar of Cooperatives of States (RCS) would continue to regulate them.

Mr. Chidambaram said the agricultural sector would have to clock a growth of three to four per cent to enable the economy to sustain a high GDP (gross domestic product) growth of eight per cent. "Agriculture growth will be significantly better in 2005-06 than last year. For all crops, except one item, the area sown is higher than [in the] previous year."

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