Manifestation of Agriculture

B. YERRAM RAJU*

Abstract:
This paper discusses the constraints to growth, policy initiatives thus far and their
impacts on farmers in different parts of the country. It deals with the linkages
between agriculture and non-farm activities and the reasons for out-migration from
villages. It vehemently argues for providing urban amenities in rural areas as
essential for preventing agriculture from non-performance. It also discusses in the
process the possible contribution that can from the cooperative sector which has a
structure that is currently under stress due to legacy issues, regulatory
compromises, State neglect, political interference and imperfect legal system
governing them.
While offering the solution there is an out-of-the-box thinking arguing for autonomy
with boundaries, transparency and social audit. It calls for adopting project
approach to the entire revival of the Cooperative Structure at the grass roots.
The approach is a win-win situation and avoids the pitfalls of the Company Act that
has thus far failed to arrest the oft-surfacing scams in several sectors. The author
feels that cooperative forms of organizations have the potential for better checks
and balances if certain legal and structural reforms are undertaken parallel to the
economic reforms. Institutional reforms and agricultural reforms are not two
parallel streams because the policy intent of the farmer is delivered at the hands of
the former.

SECTION - 1
1

The farmer today is caught in a scenario of limited access to land, with shrinking
employment opportunities in the rural sector forcing rural-urban migration, low level of
infrastructure, high cost of cultivation, un-remunerative prices for agricultural products,
inadequate credit facilities, poor quality of inputs, poor extension services and the threat
of cheaper imports of agricultural commodities at a time when the State appears to be
withdrawing from active supportive interventions. Availability of adequate and timely
credit can be of immense importance in widening the options facing the farmer and
improving his ability to tackle all the changes that are underway in the agricultural sector.
Policy Dilemma:
Agricultural policy in India was a
motley collection of piecemeal
changes and legislative acts within
an overall regulative mode. The
objective included protecting the
consumers who were largely of
modest means, and providing
incentives for accelerated growth
in production of food and industrial
raw materials.
The mould of policies came in for a major change with the onset of
liberalization in 1991 and soon thereafter India become a signatory to the new
world trade arrangement (under WTO), which for the first time included
agriculture.
Indias integration to the world trade regime became a part of the agenda of
reforms. The widely held notion that the Indian farmer was heavily protected
and subsidized in a regulated regime has come in for serious scrutiny, and it is
now held that the farmer is on the whole taxed rather than subsidized.
A major dilemma for policy makers is the classic trade-off between growth and equity.
Pursuit of high growth rates will mean concentrating on the large and medium farmers
who account for 70 per cent of the area under operational holdings, whereas giving
priority to the objective of achieving equity will require empowerment of small and
marginal farmers with holdings of less than a third of operated area. India being a country
of small sized holdings, the concerns of the small and marginal farmers who account for
over 80 per cent of the farmers has to be the centre of agricultural policy. Increasing
access to resources and inputs for these farmers is the first step to achieve increased per
hectare yields.
Some key issues for agricultural policy are discussed below:

1) Crop planning
A sustained effort has to be made to enthuse the farmers to take to crop planning
consistent with natural resource endowment. This would demand intensive extension
efforts from both the State Departments of Agriculture and already well-developed
Research Institutions. The time has come again when the Scientists, Policy makers and
economists have to work as a team. Peripatetic teams should be formed either with the
initiative of the farmers associations or the State Governments or Non-government
organizations to work at the village and Mandal levels for disseminating knowledge on
crop planning and cultural practices. We have misdirected subsidies routed through the
Public Distribution System, Fertilizer industry and loan write-offs at the will of the
politicians. Assured Minimum Price Support has encouraged farmers to go in for food
grain crops like paddy and wheat irrespective of the natural resources that are available
for such crops. With 70 percent of the production in the hands of only the medium and
large farmers, and with the small farmers growing crops mainly to sustain themselves and
their families, it is obvious that the subsidies in the name of the small are reaching the
big. This does not mean that we are doling out huge subsidies for the sector. But the
subsidies that should be given at the input level are being given at the output-end making
the sector inefficient. Unless there is a rethinking on these issues and we revisit our
policies, it would be difficult to convince the farmers of crop planning.
2) Regeneration of the Natural Resource base
Soil erosion and depletion of soil nutrients resulting from single crop cultivation or
inefficient crop rotation is a major problem in many parts of the country. For example, in
the Sangli-Satara-Kolhapur belt, sucrose yield of sugarcane has come down from 12 per
cent a decade and half ago to 6 per cent now, making the sugar industry uncompetitive.
There is depletion of ground water resources in several parts of the country including
Punjab, Haryana, Andhra Pradesh, Karnataka, Tamilnadu etc., where the energy required
for pulling out one unit of irrigable water has been on the increase. This is having a
cascading effect on the energy sector with the farmers refusing to go for metering the
energy consumption whether paid or unpaid. Capital expenditure for regeneration of
natural resources both from the public and private sectors was next to nothing during the
last decade. Bio-fertilization, penning of sheep and goats on farms in the pre-monsoon
period, soil replenishments, washing of soil salinity in large patches across the length and
breadth of the country etc., to cite a few measures, deserve the attention of the farming
community.
3) Land equity markets
A clear policy has to be framed depending on whether we prefer small-farmer oriented
growth or a consolidation of smallholdings. If a strategy based on consolidation were
chosen, the socio-psychological issues relating to consolidation will have tremendous
implications for their implementation. Is there a way we can protect the individual rights
on the land holding providing a comfort at the same time to the farmer thinking beyond
his holding?

Land markets in India are primitive. Lands have been partitioned for a variety of
purposes and these did not go on record. There is no State in India where the land records
are updated and all the latest mutations carried out.
Though Land constitutes an important factor of production, reforms in Land markets are
yet to be touched. Agricultural policy changes during the past decade have altered the
comparative advantages of property owners, tenants, and sharecroppers (These tenants
and sharecroppers have nothing to prove that they belong to that category). Today, one
will find more and more tenants cultivating farmlands than the owners despite the
number of operational holdings showing an increase consistently without corresponding
increase in the area of operational holdings. Government of India and different State
Governments spent more than Rs.500crores on Computerization of Land Records (CLR)
during the past ten years; still, not much has happened on this front. This is because of the
stakes that would like to perpetuate the present status.
Limited initiatives of finance for land purchases from credit institutions are severely
constrained by the lack of ROR and similar fate befalls on the credit for farming
operations. Imperfections in land markets, land being an important factor of production,
will lead to serious imbalances in agricultural production and investments in the CLR on
public-private participation model do not brook any further delay.
Although the programme of consolidation of holdings was suggested to State
Governments five decades back, it did not take place in several States excepting in
Punjab, Haryana and in Uttar Pradesh partly. Consolidation would also help in generating
environment-friendly agricultural operations (e.g. the effects of aqua culture on
agriculture in freshwater cultivating farms in States like Andhra Pradesh, Kerala, Orissa,
West Bengal, etc.). Without updating land records on a regular and continuing basis,
neither the farmers nor the policy makers would welcome the measures for consolidation.
But the country has to move forward and the farmers should have flexibility and easy
access to land markets. How? The creation of Land equity markets is one of the
suggested measures.
Would it not be wise to convert the piece or parcel of land the farmer holds into share
scrip in his hands so that land equity markets can emerge? Such markets could perhaps
respond to all the above issues in one go. One may wonder, How? Imagine a farmer
having just one acre or 100cents right now holds 100 share certificates where the share
value gets fixed with some basic price for a cent of land across the length and breadth of
the State with a multiplier for coefficients like (a) soil status (b) agro-climatic zone in
which it operates (c) type of irrigation he commands and (d) the nature of crops grown
round the year on the farm. If this scrip is tradable in Land Markets exclusively created at
the State and sub-State levels, then, whenever the land is divided amongst the family
members or partitioned for any purpose, the owner can just sell the script to the extent of
such transaction. As it is divided more and more, the value of the scrip goes down. Since
no farmer would like to see his scrip going down, he would like to seek consolidation
rather than sub-division. The tendency of the share certificate being transferred to new

owners becomes much faster and easier than to physical sub-division and fragmentation.
This could also facilitate formation of agricultural cooperative companies being floated.
Loans can be raised against the land-share certificates in the State and sub-State Land
Markets that could function under the control of the existing Stock Exchanges with
separate sets of rules that could be framed by the SEBI.
This idea can be discussed by the Farmers Associations from the point of view of
implementation and iron out the problems arising from such discussions. Thereafter, a
comprehensive document can be worked out giving the modalities of the instruments and
institutions of Land Equity Markets through a Think tank that could be set up at the State
level. The effect of such measure would be that the Revenue Department of the State
Government would be marginalized and this measure may therefore be struck down as
crazy, impracticable. Resistance can be meted out only with a well-thought out strategy
coming from the farmers themselves. Such markets can eventually be in a position to
raise loans from the Banks and other lending institutions. New financial instruments and
their derivatives may also shape up eventually giving rise to a vibrant agricultural
economy without the exchequer being burdened on one hand and on the other the
surpluses could also easily come under the tax net. There can be political resistance as
this move empowers the poor farmers. The flip side is that it can be resisted on the
ground of corporatisation of farming despite its inroads since one and half decades.
4) Increase Value Addition
More importantly, how do we provide value addition to the farmer? The entire supply
chain right from raising the crop at lowest cost to all the post-harvest operations to the
sale either as farm-fresh product or to the product-related industry has to be looked at
with eyes and ears wide open. At each link in the chain, interventions by various
agencies to strengthen the link will have to be worked out. There are nine ministries in
the Union Government, with each Ministry working out its own policy, many a time
independently and without evaluating the implications on the value addition of a Policy
measure. We should have a Regulatory Impact Assessment of every policy decision of
every Ministry before the Budget session every year or at the time of framing any law.
This Regulatory Impact Assessment should clearly lay bare the implications of the Policy
on the small and marginal farmers and other vulnerable sections of the population as also
on the links in the Supply Chain Management of the Farm Sector. Such assessment can
be done by the Planning Commission or its accredited consulting agencies and
institutions.

SECTION 2
Institutional Support System:

Unlike anywhere else in the world, farm and allied sectors are looked after by at least
fourteen ministries and a host of organizations heavily bureaucratized: Ministry of
Agriculture; Ministry of Animal Husbandry, Dairy Development, Fisheries; Ministry of
Major and Medium Irrigation; Ministry of Cooperation; Ministry of Revenue, Relief and
Rehabilitation; Ministry of Finance; Ministry of Food & Civil Supplies; Ministry of
Marketing & Warehousing at the State level and Ministry of Agriculture and
Cooperation, Ministry of Food Processing; Ministry of Finance; Ministry of Forests &
Environment; Ministry of Commerce and Trade; Ministry of Food and Civil Supplies at
the Central Government level. There is State Planning Board and the Union Planning
Commission at the helm to decide on many issues that concern all these ministries. Each
Ministry has its regulatory strings to apply on the farmer because each is an empire unto
itself and there is no coordination among them at the beginning of the agriculture season.
Planning Commission long back seized to be a coordination agency. It is content with
preparing grandiose plans and allocating limited resources through discussions at the
National Development Council. Exigencies of politics predominate over economic
necessities.
In Agrarian States like Andhra Pradesh, a beginning could be made in reorganizing the
ministries to start with and bringing the departments of agriculture, horticulture and allied
activities like animal husbandry, fisheries, that deal with production, cooperation,
marketing and civil supplies that deal with distribution under single Minister who should
have full comprehension and empathy for the farmers. The organisational structure could
be as follows:

ORGANISATIONAL CHART OF THE STATE MINISTRY OF AGRICULTURE

This would mean that the number of ministries at the State level would be reduced to
one from the existing four. There is a peer level relationship between the civil societies,
farmers associations on one side and the Minister for Irrigation on the other. Likewise,
the APC would have a peer level relationship with the Vice Chancellors of the
Agriculture Universities. At the beginning of the season, all the above functionaries
would have a meeting with all the functionaries in the chart for a day or two. In this
coordination meeting presided over by the Minister, Agriculture Production
Commissioner who is of the rank of Additional Chief Secretary, is expected to be fully
informed of all the links in the supply chain in production and value chain management
in agriculture right up to the distribution end and would be in a position to format the
decision making process depending upon the various issues that come up for discussion.
The Minister can also invite the principal secretary (Energy) and Principal Secretary
(Information Technology) for the half-yearly meetings to take into consideration the
issues and facilitation that could come from them to the farmers during and off the
season. Principal Secretary (Agriculture) should be the Member-secretary for this
coordination panel. He would draft the minutes within the next twenty-four hours and
arrange for issuance of appropriate instructions for all these line departments to follow
implicitly and the concerned departmental heads would be squarely responsible for any
and all lapses in implementing them. During the week that follows, the State Level
Bankers Committee should be convened to cause the financial arrangements to be put in
place. This mechanism would expand the burden of implementation on those who are

actually responsible. Transparency, Accountability and Governance would significantly

improve.
Whenever the disasters occur, emergency meeting shall be held to take collective
decision for coordinated implementation at the field level through the District Collectors.
The Minister for Revenue would coordinate with the Minister for Agriculture in
situations of natural calamities and other disasters.

AGRICULTURE BUDGET:
Share of Agriculture in total Budget Rs. Crores.
Year

Agriculture*

Total

% of (2) to
(1)

(5)

(6)

% of
(5) to
(1)
(7)

10829.69
12959.03
17058.30
14936.85
16371.99
19818.83

1.02
0.92
1.15
0.96
0.97
1.02

1.23
1.26
1.42
1.15
1.14
1.19

GDP *
(1)

(2)

2008-09
2009-10
2010-11
2011-12
2012-13(B)
2012-13(B)

883,956
1024,487
1197,327
1304,365
1430,825
1665,297

Plan(3)

Non
Plan(4)
9040
1789.69
9404
3555.03
13824
3234.30
12482.47 2454.38
13887.32 2484.67
17,095.00 2723.83

Source: Annual Budgets of the respective years, Ministry of Finance, Government of

India and Economic Survey, GoI for the respective years.
All figures are in terms of Achievement except where indicated in brackets as (B)Budgeted.
The tell-tale story of Achievements in Union Budget depicted above reflects the measly
allocations for Agriculture in the Union Budget year after year from 2008-09 during the
last six years. These figures do not reflect the subsidy allocations in regard to Fertilisers,
as the actual subsidy would be received by the Fertiliser Industry and not the farmers per
se. The paper has also not taken into consideration the allocations and achievements of all
the state governments in as much as even in the agriculture dominated States, the
percentage allocations have not crossed 3-4percent of the total budget. Another
interesting angle to the budget presentation is the announcement of credit allocation from
the public sector banks and Regional Rural Banks to give a silky touch to the budget.
Further, it should be noted that even these allocations are in terms of crop loans and not
credit for investment. There is also no specific allocation for the small and marginal
farmers and tenant farmers.

The measures discussed in the other sections would, therefore, make a significant
departure from each department pulling in different directions making the farmers cry
loud both at the beginning and end of the season. Further, the predominantly agrarian
States like Andhra Pradesh, Tamil Nadu, Punjab, Haryana, Karnataka (this State has
already started such initiatives) should put up Annual Agriculture Budget every year
preceded by presentation of Agriculture Survey of the State done by the Agriculture,
Animal Husbandry and Horticulture Universities. Agriculture Budget would specify the
direction of expenditure into subsidies, distribution and revenues that come from
marketing Cess and other sources and the deficit or surplus that it projects. The farmers
would know by the end of February every year, what the State is up to, to help them.
Further it would also promote integrated farming for small farms that would enable them
to cross-hold risks.
This would also help in reducing unnecessary expenditure in multiple delivery points in
meaningless directions.
This scenario would make one to believe that the credit is a necessary but not a
sufficient condition to agricultural growth. Little or no attention was paid to the
high transaction costs, administrative costs, quality of service, or to innovation in
financial services to the poor.
It was further assumed that the most farmers are too poor to save, and most rural
financial markets are dominated by the money lenders charging usurious rates of
interest and also that the commercial bankers were too conservative to lend to
agriculture and more particularly to the small and marginal farmers as also lease
hold and tenant farmers. A pressing need has been felt to reshape the agricultural
policies in keeping with the new demands of the fast-changing economic
environment. Credit for the farm sector continues to be a priority policy area.
The growing number of suicides by the farmers in different parts of the country in
recent years is largely the result of borrowing from non-institutional sources at
very high rates of interest. This scenario led the
RBI and Government of India to look at the financial inclusion as a necessary
policy intervention at this point of economic history of India.

High rate
of interest

High rate of
interest
Cash bag

Rural
Financial
market

Noninstitutional
sources

The National Agricultural Policy 2006 (Dr. M. S. Swaminathan) states that:

Progressive institutionalization of rural and farm credit will be continued for
providing timely and adequate credit to farmers. The rural credit institutions will be
geared to promote savings, investments and risk-management. Particular attention
will be paid to removal of distortions in the priority sector lending by commercial
banks for the agricultural and rural sectors. Special measures will be taken for
revamping of co-operatives to remove the institutional and financial weaknesses and
evolving simplified procedure for sanction and disbursement of agricultural credit.
The endeavor will be to ensure distribution equity in the disbursement of credit.

Alongside, the farm produces support the prices, and these subsidies increased
considerably over the years due to the political compulsions. However, despite
these financial costs, at the aggregate level, famine conditions and food scarcity
became a matter of history and India moved to the export zone even in the farm
sector in certain products.
Paradoxically, there are also massive
numbers of undernourished Indians.
Agriculture growth has delivered plenty of
food but has also left a trail of hunger and
malnutrition. According to Shovan Ray,
the noted agricultural economist, the
Indian farmer is much maligned as he toils
under a regime of price and trading
restrictions in which he ends up as a net
loser, despite his gobbling up a fair share
of his subsidy budget.
Villain of the piece is the declining public investments in agriculture during last
two decades and this has undermined the future prospects of agriculture, since it is
often complementary to the private investment in agriculture. The Budget
allocations from the Union Government in table above bear ample evidence.
Most private investment in agriculture is more debt-driven than equity-driven
and this debt comes both from institutional and non-institutional lenders. 70-80%

10

of capital investment went into just ten states in the countrymostly irrigated
tracts. These states are: Andhra Pradesh, Karnataka, Tamilnadu, Kerala,
Maharashtra, Gujarat, Punjab, Haryana, Uttar Pradesh, and West Bengal.

Capital
investments

There is lack of investment in the vast terrains of rain fed (dry land) systems that
depend on the monsoon and cover the greater proportion of the mainland of India
and in the arid and semi-arid tracts that include such tracts even in the above ten
states.
In recent years, some substantial investments have been made in developing
agricultural infrastructure in western India and in Andhra Pradesh. Some parts of
this region support cereals and sugarcane, absorbing both surface and
underground water resources in large measure. Cash crops like oil seeds and
cotton are grown in these areas. Crop diversification in search of new riches could
lead eventually to the food deficits, as the population dependent on agriculture did
not show the substantial decline. (The decline in six decades of independent India
is barely 10%).
Table 1.1
Certain key characteristics of operational holdings
1960-61 1970-71
1981-82 1991-92 2003
(17th)
(26th)
(37th)
(48th)
(59th)
Number of operational
holdings (in millions)
50.77
57.07
71.04
93.45
101.27
Percentage increase
12.4
24.5
31.5
8.4
Area operated (in million
hectares)
133.48
125.68
118.57
125.10
107.65
Average area operated (in
hectares)
2.63
2.20
1.67
1.34
1.06
Source: NSSO, Some Aspects of Operational Land Holdings in India, Various
Rounds.
Table 1.2

11

Changes in the size distribution of operational holdings and operated area

Category
of Percentage of operational holdings Percentage of operated area
holdings
1960- 1970- 1981- 1991- 2003 1960- 1970- 1981- 199161
71
82
92
61
71
82
92
(17th) (26th) (37th) (48th) (59th) (17th) (26th) (37th) (48th)
Marginal
39.2
45.8 56.0 62.8 69.1 6.8
9.2
11.5 15.6
Small
22.8
22.4 19.3 17.8 16.6 12.3 14.7 16.6 18.7
Semi-medium 19.8
17.7 14.2 12.0 9.2
20.7 22.6 23.6 24.2
Medium
14.8
11.0 8.6
6.1
4.3
31.2 30.5
Large
4.5
3.1
1.9
1.3
0.8
29.0 23.0
All sizes
100.0 100.0 100.0 100.0 100.0 100.0 100.0
Source: NSSO, Some Aspects of Operational Land Holdings
Rounds.

2003
(59th)
22.6
20.9
22.5

30.1 26.4 22.2

18.2 15.2 11.8
100.0 100.0 100.0
in India, Various

SECTION - 3

Employment Generation:
The rural-urban connect emerges from the farm sector. Several of the small farmer
families utilize their farm output for conversion into ready-to-eat foods although most of
them do not conform to health and hygiene standards. While the earlier DWCRA and
self-help groups endeavored to empower these vulnerable groups and reasonably
succeeded in such efforts, these have not proved to be sustainable. Another window of
opportunity became available for MNCs to use these groups to take their products at least
cost to rural markets while the MNCs did not make any effort to change the production
pattern to suit the ever-demanding market standards.
Increasing value addition in the production and marketing of agricultural produce should
be a major thrust of future agricultural policy. There are several links in the value chain
that links production on the farm to the last retail point to reach the consumer. The
production chain and the value chain extend from the farmers field to the retailers shelf
through a set of links that include post-harvest technologies and marketing interventions.
In the wake of WTO compulsions and the fast transforming demand scenarios in the rural
and semi urban areas, the other spectrum reflects a demand-shift in favor of quality
products, ready-to-eat food consumables, branded products, health and hygiene-backed
products etc. Last decade has witnessed a phenomenal growth in the Self-help groups,
particularly of the women supported by the Government sponsored DWCRA scheme,
non-governmental organizations, NBFCs, indirectly assisted by funding institutions like
the SIDBI and NABARD. We have more than 5lac villages and around 97000 PACS
craving for reforms and crying for assistance both financial and managerial.
There is a broad realization that value addition to agriculture would take place only
through agro industries and agribusinesses. The UPA Government has announced

12

incentives for setting up agri-enterprises with support from the banks and financial
institutions. All these efforts are still in embryonic stages. Failures of earlier institutional
mechanisms and the tardy progress in the new initiatives, the jobless growth in
agriculture and industry wherever growth occurred, reflect the need for modern
management and promotional ability as essential managerial inputs to the creation and
utilization of infrastructure under Bharat Nirman that provides knowledge connectivity to
rural India. This programme of rural infrastructure centres around irrigation, rural roads,
rural water supply, rural housing, rural electrification and rural telephone connectivity.
Development practitioners have long recognized the need for building physical and
knowledge connectivity in parallel that forms the essence of Provision of Urban
Amenities in Rural Areas (PURA).
Dr. A P J Abdul Kalam, in his inaugural address to the Second Mission 2007 Convention
and at the 93rd Indian Science Congress (2006) opined that, The physical connectivity of
the village clusters through quality roads and transport; electronic connectivity through
tele-communication with high bandwidth fiber optic cables reaching the rural areas from
urban cities and through Internet kiosks; knowledge connectivity through education, skill
training for farmers, artisans and craftsmen and entrepreneurship programmes. These
three connectives will lead to economic connectivity through starting of enterprises with
the help of Primary Agricultural Cooperative Societies, commercial and rural banks,
MFIs and marketing of the products.
The VKCs will assist various schemes reinforced by the Government such as the
MNREGA, National Rural Health Mission, Anthyodaya Anna Yojana, the
universalisation of the Integrated Child Development Services, Sarva Siksha Abhiyan,
Rajiv Gandhi National Drinking Water Mission and others. The VKCs will also
contribute towards the upliftment of the marginalized including scheduled castes, the
scheduled tribes, children, women and other minorities. Further, the VKCs will act as the
last-mile windows for disseminating government information to citizens mandated under
the Right to Information Act (RTI) 2005. M.S. Swaminathan Foundation has successfully
created such centres in the earlier Tsunami-affected villages.
The New Deal for India would require integration of various schemes with their
implementation overseen by a responsible institution with a sense of commitment.
Linkages of traditional village producers to the outside world are performed by traders
whose interests generally run counter to the interests of the producers.
One approach that occurred to us was the development of hitherto neglected PACS in the
rural hinterlands where all the existing schemes of assistance by both the farm and small
and rural industry departments have a scope to converge. Briefly, the nucleus Society
approach involves the development of a processing and marketing centre linked to a
number of satellite producers. Basically, the idea is to provide a linkage between the
traditional producers, such as rice-growers to rural domestic food product manufacturers
like the rice-flakes, rice condiments, priums, etc.

13

PACS can be effective vehicles of PURA if the big IF the cooperative societies could
overcome managerial and governance deficiencies. This should be also viewed from the
context of the scams in large companies in several sectors from Retail to Software to
Telecom to Banks both within the country and the globe. The advantage of a cooperative
form of organization is that it has checks and balances built into the structure, with
member-participation and member-control. The present malaise of these cooperative
structures is poor management compounded by inefficient and even maleficent
governance. These two defects can be overcome with certain amendments to the statutes
by both the State and Central Governments. Although 97 th Amendment to Constitution
Act 2011 was passed, it went into legal problems as the States were not consulted on a
subject that falls within the domain of Federal Structure of our economy. The right to
form a Cooperative Society has now been added to the list of Fundamental Rights of the
Constitution and this has been upheld by the Courts. But the other critical sections
dealing with governance, elections and the role of the Registrar, Information System have
been held up. It is time that the new Government resolves the tangle by taking a VISION
document for Rural Cooperative Credit Structure (RCCS) as part of Financial Inclusion
effort.
It is also imperative for the entire RCCS to become technology savvy. This requires that
funding technology at the PACS level with speed, transparency, and accountability
brooks no delay. The best way to do it is draw a cut-off line for the balance sheets of all
PACS to get reconciled over some rational deadline monitorable by the State
Governments as a first step. Simultaneously draw up a HR policy for manning these
PACS. The State Cooperative Banks have to take the bite as a long term funding project
with a gestation period of five to seven years with external funding like the World Bank
or ADB on a project basis. The conditions for such transformation impinge on bringing
lending and management discipline to the front stage. All the political parties interested in
promoting agriculture and rural development should come up with a clear policy in this
regard so that Agriculture would not be at the mercy of the sharks and disinterested
commercial banks whose eyes are more on profit than on development or inclusive
agenda per se.
If Milk and Sugar cooperatives, Fertilisers and Retail can succeed in cooperatives, why
should we not replicate the successes with depoliticisation of PACS in credit?
Further technological innovations that have costs going beyond the small and marginal
farmers can reach them through agri-clinics under the fold of PACS where the sharing
mechanism reduces per capita investment on technology.
SECTION - 4
Project Concept
Economic empowerment of the vulnerable groups in rural areas would depend upon the
provision of necessary wherewithal within their existing domestic environs instead of

14

shifting them to common work places.

importance in this regard.

Agro-processing therefore assumes critical

Agro-processing
Agro-processing industry is critically placed in the economy as its development
contributes significantly not only to the value chain but also achieves a number of
development objectives such as promoting rural-urban linkages and speeding up rural
industrialization, raising farmers incomes and increasing exports.
There are several agricultural products that can serve as raw material for the food
processing industry as a wide variety of processed products can be made with their input.
Rice, wheat, maize, sugarcane, soybean, maize etc., are some of the products that can
enter into the value addition chain. Several types of Fruits and vegetables have immense
potential to be processed for domestic and global markets. Growth in demand is projected
for frozen/dehydrated/canned fruits and vegetables, Fruit juices/concentrates/pulps,
Pickles, Jams, Jellies, Squashes, etc. apart from ready to eat vegetables. A significant
share of consumption in developed markets almost 60 per cent in the
US/Canada/Europe/South East Asia - is for fruits and vegetables in processed form. In
Philippines, Indonesia, and Thailand and even in mainland China, it is the SHGs that are
engaged in these activities most successfully.
The constraints that the farmer faces in the agro-processing link of the supply/value chain
are related to lack of adequate information about the possibilities of processing
agricultural products, the importance of price and quality. The financial constraint can be
overcome if the PACS can be directly financed by the State Cooperative Bank with
70percent refinance from NABARD as participation in this sector requires considerable
amounts of investment. The volumes would eventually make the PACS the most viable
entity in the financial sector.
Proposed Intervention
As mentioned above, several by-products of agricultural crops get processed into either
intermediary products or ready-to-eat products in the small farmers households. Women
produce most such items. These household production centers in the food processing
industry broadly classified as Self-employed Non-farm Enterprises do not generally
follow hygienic ways of producing, mostly because of lack of awareness. They do not
have what can be called a working platform in the household.
a) In each PACS-compass of a product cluster of, say, 20-30 villages, the
block/mandal level Industries Extension Officers should be able to locate 20
promising households willing to go in for hygienic production given certain basic
resources and training. With as little an investment as Rs.10,000/- per household,
a working platform can be built within the house and hand-gloves can be supplied
at regular prescribed intervals to these households. Within a short period of 3-6
months of intensive supervision and extension, such units can be houses of quality
production.

15

b) For this cluster of 20-30 villages, a packaging unit can be established with very
little investment of less than Rs.100lakhs. Depending upon the quantum of
production per day, a self-employed person can be commissioned for transporting
the products to the nearby markets (either through a Tempo or parcel van). The
same person can bring in the raw materials and packaging materials.
c) Such clusters, if they get developed in a block/mandal, say 20 to 30 then, a Brand
supervisor can be employed to ensure that the standards of health and hygiene
(HACCP) are appropriately taken care of. There can also be another small-scale
unit for printing, labeling and computer coding. Thus, the whole food processing
activity generated out of the farm produce closer to the farmstead can attain
standards of excellence.
d) Since the investments required for such interventions are very minimal, it is
worthwhile to consider giving them by way of subsidy, mainly because such cost
cannot be recovered through price by these tiny units. The village enterprises
have the potential to become global players under such a scenario.
e) Packing of fruits and vegetables can be done manually or by machines. Packaging
material can consist of plastic/polythene material or aluminum foils, fiber boards
or cardboard material of durable quality. The objective is ease of handling in
loading and transit to the destination as well as minimizing loss or damage to the
horticultural produce through appropriate coordination with the Regional office of
the Indian Institute of Packaging.
f) Labeling of several products is being made mandatory with growing concern over
genetically modified organisms in the food chain and concerns about threats to the
environment through certain practices (marine food production, for example). A
specific WTO Agreement the Agreement on Technical Barriers to Trade (TBT) deals with these issues and failure to meet the requirements set could have an
adverse impact on exports of farm produce. Suitable interventions in this area of
Packaging & Labeling can enable household producers to cater to the needs of the
market in a better way. In short, the project empowers the rural poor not through
just grants or subsidies but through establishing commercial viability of their
household enterprises and through capacity building. This is clearly illustrated in
the charts appended.
Funding Pattern
The project envisages utilization of existing funding mechanisms under SGSY, PMRY,
CMEY, MNREGS dovetailed with the credit institutions programmes. In effect, we are
aiming at convergence of all the existing schemes for delivering through a single
window- not as eleventh window but as one.

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THE CYCLE OF EMPOWERMENT OF RURAL POOR

HELPING THE RURAL POOR

Step 1: Identification
Vulnerable rural communities, based
on

their

skills

and

resources,

experience. Identify and agree on

Step 7: Move Forward
Communities progress to
next and more complex
initiatives
of
selfsustenance

Step
6:
Review
&
Learning
The process and project
outcomes are reviewed
against their goals

Step 2: Establish

State
Cooperative
Bank
Empowerment
Process
Facilitated by
PACS

Step 5: Monitor
Monitor
progress
by
communities
against
their
goals
and
objectives.
Problems
identified and solved

Set
up
development
centres (PURAs) and bring
about convergence of all
the
agencies
providing
financial and non-financial
services

Step 3: Create
A one-stop-shop
for

capacity

Step 4: Assist
Provide escort services
to

set

up

micro

HELP THEMSELVES
17

The Business Development Plan of PACS (BDP) should take into account the
specific, inherent inadequacies and problems faced by the individuals societies. It should
provide a road map for the revival of the society within a specific time frame clearly
standardizing the approach to be followed and schemes or programmes to be
implemented. It should clearly state the amount of financial, infrastructure and human
resources assistance required. The BDP should be tailor made to the requirements of the
society.
However, the BDP for the revival of the PACS should include the following
features in general:
1. Immediate provision of crop loan to the members directly without adjusting it
against their dues to the society or liability of the society to the DCCBs.

Crop loans should be made available in this manner continuously at

least for three years to re-establish the snapped link between the
society and the farmer.

2. Exploring the opportunities for the non-credit business like seeds, fertilizers,
agricultural implements, pesticides, gold loans, and credit for non-farm
activities under the project approach etc. in the form of services to its
members.
3. Exploring the business opportunities prevailing in the society area, targeting
non-members as well.
Ex: LPG Cylinder distribution, running a petrol bunk, Grocery stores, Milk
supply, News Paper supply, Operating Cable TV dish and Garbage collection
& disposal etc. All these activities can again have linkages with the agroprocessing value addition cycle mentioned above.
4. Exploring the opportunities of Agro-processing, storage and marketing. Ex:
Storage godown, marketing agricultural produce on commission basis,
processing of pulses, oil seeds and horticultural products under the project
approach when accountability and transparency can be fixed on the project
manager.
5. Providing support and extension services to the farmers, village artisans and
self help groups of all hues:
Ex: Repair, Service & maintenance facilities to agricultural implements,
electrical motors, diesel engines, sale of consumers goods etc.
6. Furnishing information about schemes, programmes and projects being
implemented by government in agricultural and allied sectors.
7. Providing information about minimum support prices (MSPs), market prices
etc.

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8. Providing other financial services of contemporary nature like health

insurance and educational loans
9. Conducting Member Education Programme and Professional Training to the
Chief Executive Officer of the society and other staff of the PACS.
10. Important covenants for the project to take off:
Appointment of the project manager for each PACS should be on
criteria decided by the HR Committee and NABARD. The autonomy
enshrined in the Vaidyanathan Package should have well-defined
boundaries.
The salary and allowances of the project staff for a period of 3 years
should be given as interest-free loan repayable from the project returns
in the following 7years.
Capacity building of project staff should be the responsibility of the
State Cooperative Bank or the National Federation of State
Cooperative Banks
Financial Support where unlikely to be met by the State Cooperative
Bank for any reason, should be met by a consortium led by the State
Cooperative Bank and the lead bank of the district.
The Divisional Cooperative Officer should have a monitoring team set
up as directed by NABARD that should include the Lead Bank Officer
and the Dy.General Manager, NABARD at the District level. This
team should be accountable for results. The Annual Appraisal Reports
of these officials should be linked to the performance of the projects
they are expected to monitor.
Each project has to be separately audited as in a project area there
could be more than one PACS.
Each PACS should be also audited by a Chartered Accountant.
Social Audit of the project should be done once in six months.
Every six months, General Body of the PACS should meet and review
the monitoring reports put up by the official agencies mentioned
above.
Unlike in the limited companies, in the cooperative society, if functioning
on the lines suggested above, the governing body consisting of elected
representatives of the General Body would develop better checks and
balances for healthy growth of the financial system at the micro level.
External Consultants can be engaged by the State Cooperative Banks for proper
appraisal, monitoring and evaluation of such project, if needed. Brand could
evolve out of the project as it progresses.

19

DEVELOPMENT OF THE VALUE CHAIN

FARM GATE TO MARKET GATE
TO CONSUMER

MARKETING

SIZE OF
HOLDING

CHOICE OF
CROP

TRANSPORT
NETWORK

ACCESS TO
CREDIT

PACKING AND
LABELING

INPUT SUPPLY

QUALITY
STANDARDS

RESEARCH
AND
EXTENSION

POST
HARVEST
TECHNOLOGIE
S

AGRO
PROCESSING

COLD
STORAGE
CHAIN

Yerram Raju This paper has been written for discussion at the Board of Farmers and Rural Science Foundation and with the farmers at the
Farmers Meet on 20032014.

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