|2nd Five Year Plan||
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Economic development along democratic lines offers a vast field for the application of cooperation in its infinitely varying forms. Our socialist pattern'of society implies the creation of large numbers of decentralised units, both in agriculture and in industry. These small units can obtain the advantages of scale and organisation mainly by coming together. The character of economic development in India with its emphasis on social change, therefore, provides a great deal of scope for the organisation of cooperative activity. The building up of a co-operative sector as part of the scheme of planned development is, thus, one of the central aims of national policy.
2. The limit to the range of activities to which the principle of co-operation can be applied is set by the fact that a primary co-operative group should be reasonably small for its members to know and trust one another. For certain purposes a number of small groups may, and indeed must, combine into larger organisations, but, ir the last analysis, the strength of co-operation comes from relatively small and homogeneous groups which function actively. If strong primary units exist at the base, effective organisations can also be built up at higher levels. The structure as a whole can then undertake activities and provide services which require large resources and organisation. From this aspect the fields which mark themselves out as being specially appropriate for the co-operative method of organisation are agricultural credit, marketing and processing, all aspects of production in rural areas, consumers' co-operative stores, co-operatives of artisans and labour and construction co-operatives. In these fields the objective is to enable co-operative increasingly to become the principal basis for the organisation of economic activity.
3. In areas which offer special opportunities for its development, the co-operative form of organisation has advantages which neither the system of private enterprise nor that of State ownerhsip can match. In particuiar, it offers a means of achieving results valuable to the community by drawing equally upon incentives which are social and incentives which are individual. Where it succeeds, cooperation brings large gains to the community, but the human factors involved in it are complex and in some ways it is much more difficult for the co-operative form of organisation to succeed than it is for a completely socialised enterprise or for an individual enterpreneur. It is therefore necessary to take effective measures to enable cooperation to succeed, whenever possible, and specially in fields which are assigned to it in the^ scheme of national development.
4. This aspect has received careful consideration in the report of the Rural Credit Survey organised by the Reserve Bank of India. Programmes of co-operative development for the second live year plan have been drawn up broadly on the lines recommended in the Rural Credit Survey. These do not yet cover the entire field of co-operation. In some directions further programmes have to be worked out; in others targets and other details have to be determined carefully as the plan goes into action. Because ofhistori-cai circumstances in India agricultural credit accounts for the greater part of development in the field of co-operation during the past fifty-years. The provision of adequate credit on reasonable terms is undoubtedly a most important part of co-operation, but the movement has wider and more far-reaching aims. To a large extent, in rural co-operation the crucial unit is the village. In implementing the programme of rural co-operation, there are three aspects to which special auention has to be given. Firstly, credit is only the bags ning of co-operation. From credit, co-operation has *o extend to a number of other activities in the village, including co-operative farming. In cooperation hard and fast rules of developmen! cannot be made and every step is determined b.- the experience of the people. The second aspect is that every family in a village should be member of at least one co-operative society. The. third aspect is that the co-operaUve movement should aim at making every family in the village creditworthy. At present, even in areas in which the movement has spread most, only 30 to 40 per cent of families are able to satisfy the tests laid down. The primary co-operative society and the village panchayat have to work in unison if the needs of all the families in the village are to be met
5. The appropriate size of a primary rural society has to be considered both from the aspect of credit and from the point of view of co-operative development geperally. Ultimately, it is the aim, as stated above, that cooperation should extend to all activities in the village including cultivation. As has been explained in Chapter VII more than 380,000 villages have populations of 500 or less and the question of combining small villages into units with the population of about 1,000 deserves to be examined. It is necessary to have villages which are small enough to have a sense of solidarity and yet not so small that personnel cannot be provided for the essential services organised for their benefit. Considerations which bear on the organisation of convenient village units are also relevant to the consideration of the size of the primary cooperative society. Its area of jurisdiction should, on the one hand, be large enough to make it an efficient unit and, on the other, it should not be so large that it might become difficult to secure amongst members the knowledge, the sense of mutual obligation and concern for rehabilitation of the weaker sections of the community and the intimate contact between the committee of management and individual families without which cooperation cannot make a real impact on rural life. Cooperatives, like village panchayats, are institutional agencies for achieving social cohesion. In a country whose economic structure has its roots in the village, cooperation is something more than a series of activities organised on co-operative lines; basically, its purpose is to evolve a system of cooperative community organisation which touches upon all aspects of life. Within the village community there are sections of the populations who need special assistance. Cooperation should therefore mean an obligation towards all families in the village community and the development of land and other resources and of social services in the common interest of the village as a whole. This is the underlying approach in setting cooperative village management as the main direction of reorganisation in the rural economy.
6. With the rapid growth of towns and closer integration between the rural and the industrial economy there is a large and expanding Held for the development of co-operation in urban areas. In the past urban cooperation has received inadequate attention. In retail and wholesale trade, transport, small industry, banking, housing and construction, for instance, much can be achieved through efficient organisation along co-operative lines. When cooperation develops sufficiently, producer, marketing, consumer and other forms of co-operatives become parts of an inter-related and inter-dependent cooperative sector with close links also with other aspects of the economy and the distinction which now exists between rural and urban co-operation becomes less significant.
Review Of Progress
7. When cooperation was first introduced under the Cooperative Credit Societies Act, 1904, it was confined to the organisation of the cooperative credit societies in urban and rural areas with a view to relieving indebtedness and promoting thrift. The Cooperative Societies Act, 1912, permitted the registration of cooperative societies for promoting non-credit activities as well as federations of primary societies into organisations at higher levels. Both in the field of credit and of non-credit activities the cooperative strucuture consists of primary societies at the base in villages or towns, central organisations at the district level and apex organisations at the State level.
8. The development of agricultural credit organisations falls broadly into two parts, those concerned with short and medium-term finance and those which are intended to provide long-term finance. In the first group there were in June, 1954, 22 State co-operative banks, 499 cooperative central banks and 126,954 agricultural credit societies with a total membership of 5.8 million. These various organisations operated in 1953-54 with total owned funds amounting to about Rs. 39 crores, deposits of about Rs. 71 crores and working capital of about Rs. 161 crores. Fresh advances by agricultural credit societies were of the order of about Rs. 30 crores. Institutions for long-term agricultural finance were developed to a much smaller extent, being confined to 10 central and 304 primary land mortgage banks with a total working capital of about Rs. 24 crores. On the non-agricultural side the principal credit institutions were 716 urban banks with a total working capital of about Rs. 33 crores, 8389 coopertive credit societies with a membership of about 2.7 million and 3651 societies of salaried employees and wage earners.
9. In recent years greater attention has been given to the development of non-credit organisations, but it cannot be said that in non-credit activities, except at selected centres, cooperation has made any large impression. In the field of agricultural marketing there were in June, 1954, 16 State marketing societies, 2125 marketing unions and federations and 9240 primary marketing societies with a total annual turnover in 1953-54 of a'bout Rs. 52 crores. In some States during the first plan irrigation societies and milk supply societies have shown encouraging results. There were in 1953-54, 937 irrigation societies, 65 milk supply unions and 1473 primary milk supply societies. In 1953-54 there were also 234 land colonisation societies and 601 cooperative farming societies. In the non-agricultural field perhaps the largest measure of success has been achieved in the formation of handloom weavers' societies of which there were in 1953-54, 5748. The number of looms included "in these societies has increased during the first plan from 626,119 to about a million and is to be increased to about 1.45 million by the end of the second five year plan. In consumers' cooperation only a fraction of the ground has been covered so far, the number of primary stores being 8251 and of wholesale stores 86 with a total turnover of less than Rs. 40 crores. Other non-credit societies which have come into existence during recent years and a proportion of which are working fairly well are 2036 housing societies, 536 labour, contract societies, 124 forest labourers societies and 78 transport societies. There were also 4643 health and better living societies, almost entirely in rural areas.
Reorganisation Of Rural Credit And Marketing
10. The main proposals of the Committee of Direction of the Rural Credit Survey have been accepted in broad principle by the Central Government, by the Reserve Bank of India and by representatives of the cooperative movement. These form the general basis on which programmes of development for the second five year plan have been drawn up. The most important departure from earlier programmes which the Rural Credit Survey envisaged was that the State should enter into partnership with cooperative institutions at various levels. It was felt that such financial partnership would provide additional strength to cooperatives and make available to them in fuller measure assistance and guidance from the Government The principle of State partnership will apply specially at the apex and the central bank level and in a more flexible manner at the primary level. It has been made clear that the essential basis of State partnership is assistance and not interference or control.
11. With a view to facilitating the partnership of the State in cooperatives the Reserve Bank has established a National Agricultural Credit (long-term operations) Fund with an initial contribution of Rs. 10 crores. Contributions of Rs. 5 crores per annum will be made during the period of the second plan so that by 1960-61 the Fund will have a capital of Rs. 35 crores. From this Fund loans are to be advanced to States to enable them to subscribe to the share capital of cooperative credit institutions. A second Fund, known as the National Cooperative Development Fund is to be established by the Central Government. From this Fund States will be able to borrow for the purpose of subscribing to the share capital, of non credit cooperative institutions. Assistance towards the construction of godowns, staff for cooperative societies, and for strengthening the administration of cooperative departments will also be provided from this Fund.
12. Another feature of the scheme of reorganization proposed in the Rural Credit Survey is that credit and non-credit societies should be linked to one another so that the agriculturist can be provided with credit for seeds, manures, agricultural implements and essential consumer goods and is also helped in disposing of his produce. In view of the range of operations contemplated, the Rural Credit Survey recommended that large-sized credit societies serving groups of villages should be formed by amalgamation of the existing small societies and societies constituted for the first time should conform to the pattern recommended by the Survey. The general pattern of organisation for a larger cooperative society is that it would have a membership of about 500, the liability of each member being limited to five times the face value of the capital subscribed by him. The society would have a minimum share capital of about Rs. 15,000 and would serve an appropriate number of villages, grouped together for the purpose and together providing (wherever possible) a total annual business of about Rs. 1.5 lakhs. By 1960-61 it is proposed that 10,400 such larger sized credit societies, each with a trained manager, should be established.
13. Rural credit societies, whether already existing or established afresh, are to be affiliated to the primary marketing society serving a mandi area Agriculturists will receive loans for agricultural operations from credit societies. They will also obtain from them their requirements either for cash or against approved credit limits. Credit societies will collect the produce of their members for disposal through the marketing society. They will purchase the stocks required by them from marketing societies and distribute them to their members. Primary marketing societies are to be federated together in an apex marketing society serving the State as a whole.
14. In the development of rural credit perhaps the greatest difficulty in the past has been that a substantial proportion of agriculturists are non-credit worthy according to the rules and conditions for advancing loans which were generally prescribed. To meet this situation it is proposed that loans should be advanced by credit societies on the basis of production programmes and anticipated crops. A maximum credit limit will be fixed for each member and within this limit he will be permitted to obtain loans according to his requirements. To ensure proper yse of funds loans will be given as far as possible in kind, in the form of seed, fertilizer, etc. Where cash loans are given, the payment may be in instalments. Members o.f credit societies will be persuaded to agree .in advance to market their produce through the primary marketing society.
15. Warehousing will provide an important institutional link between the activities of credit and non-credit societies which have been described above. Primary marketing societies as well as the better organised credit societies will have to construct godowns on a large scale. As recommended by the Rural Credit Survey, it is proposed to establish a Central Warehousing Corporation and warehousing corporations for States. These corporations will function under the direction of the National Cooperative Development and Warehousing Board. The maximum authorised share capital of a State warehousing corporation is expected to be about Rs. 2 crores but the issue capital will vary according to the requirements of different States. It is proposed that the Central Warehousing Corporation should subscribe half the capital and the other half should be found by the State Government. It is anticipated that 16 warehousing corporations will be set up and in the course of the second five year plan they will establish about 250 warehouses at different centres with a total storage capacity of about a million tons. Suitable centres for setting 'up warehouses are being selected. The Central Warehousing Corporation is expected to have a total capital ofRs. 10 crores, of which the Central Government through the National Cooperative Development and Warehousing Board may subscribe Rs. 4 crores and the rest may be subscribed by the State Bank of India, scheduled banks, cooperative institutions, etc. The Central Warehousing Corporation is expected to set up large-sized warehouses at about 100 important centres. Warehouse receipts will be treated as negotiable instruments on the security of which banking institutions ran provide credit to those who deposit agricultural produce in warehouses.
16. In the second five year plan provision has been made for developing cooperative processing on a substantial scale, especially for producing sugar, ginning cotton, crushing oil and balling jute.
17. The principal targets for cooperative credit, marketing, processing and warehouses and storage to be achieved under the provisions of the second five y'far plan are set out below:
Marketing and Processing:
The targets for cooperative credit mentioned above are to be achieved both through existing and through new societies. It is hoped to raise the membership of cooperative credit societies nearly threefold, from less than 6 million to about 15 million.
18. As recommended in the Rural Credit Survey, the Imperial Bank of India was converted into State Bank of India. The State Bank of India has a statutory obligation to open 400 new branches during the first five years of its existence or such extended period as the Central Government may specify. As a first step 100 places have been selected. Besides, 31 branches will be opened in accordance with the expansion programme on which the Imperial Bank was engaged prior to nationalisation. In addition to the provision of banking and of credit facilities in rural areas, the State Bank will be able to provide better remittance facilities and larger amounts of market finance.
Producer And Other Co-Operatives
19. The measures outlined in the preceding section for the development of rural credit marketing and processing will assist the formation and development of producer co-operatives in agriculture. Strong cooperative financial institutions will find it possible to provide increasing assistance also to industrial cooperatives. It has been suggested in Chapter DC (Land Reform and Agrarian Reorganisation) that during the second five year plan such .essential steps should be taken as will provide sound foundations for the development of agrarian co-operatives, so that within a period of 10 years or so a substantial proportion of agricultural lands are cultivated on cooperative lines. The following action has been recommended:
In consultation with States, in the course of the next year, it is proposed to work out deailed targets for the second five year plan for developing agrarian producer co-operatives.
20. The problems of industrial co-operatives have been discussed in Chapter XXVillage and Small Industries. In village industries there is perhaps greater scope for producer co-operatives than, for instance, in small-scale industries and handicrafts, where supply and marketing cooperatives may play a larger role. In the handloom industry, broad targets for developing industrial co-operatives have been worked out. In other village and small industries also steps should be taken as early as may be possible to formulate programmes for developing cooperatives and providing staff to assist them.
21. Although there is considerable scope for it, a consumers' co-operative movement has so far failed to develop. During the war and the immediate post-war period, in respect of articles in short supply for which controls existed, co-operative distribution societies were formed both in urban and rural areas on a fairly extensive scale. With the removal of controls, however, a proportion" of these societies ceased to exist. In urban areas, except in a few States, cooperative departments have not operated to any great extent. A network of consumers' cooperative stores in urban areas will be a source of strength to the consumers' co-operative-movement in rural areas as well as to producer co-operatives. Although targets for developing the consumers' co-operative movement have not been worked out so far, it is recommended that problems in this field should receive closer study and programmes worked out After a period it may become possible to work out specific targets. Measures which are proposed to be undertaken for the development of co-operative marketing of agricultural produce will pave the way for the re-organisation of the rest of rural trade on co-operative lines. There is little doubt that if the bulk of rural trade is organised on business lines through co-operative agencies, it will become possible for villagers to organise schools, dispensaries and other amenities for themselves on a much larger scale than has been envisaged so far. Profits of rural trade derived both from marketing and processing and from the supply of consumer goods and other accessories to meet the needs of rural areas, will help develop agricultural production and promote the well-being of villagers. The close linking up of producer co-operatives and consumer cooperatives will be an important factor for increasing rural incomes and employment and for raising rural levels of living.
22. In an economy in which there are large unutilised sources of manpower in rural areas, in a period of development, there are increasing opportunities for organising labour and construction co-operatives. Suggestions on this subject have been made in Chapter VI(Administrative Tasks and Organisation) and in Chapter XVII(Irrigation and Power). It is suggested that in collaboration with other departments co-operative departments should investigate the directions in which labour co-operatives could by stages replace the existing contract system, so that each area derives the maximum possible benefit in teens of income and employment from works which are undertaken for its development. It should be an important aim in district and village planning to organise labour and construction co-operatives on sound lines and to provide them opportunities for work on reasonable terms and also to give them the necessary guidance and supervision.
23. The role of co-operative housing societies and measures which might be taken to assist their development in rural and urban areas have been touched upon in Chapter XXVI(Housing).
Training And Organisation
24. The personnel requirements of programmes of cooperative development described in this chapter and others to be formulated as the implementation of the second five year plan proceeds, call for extensive training programmes. It is estimated that more than 25,000 persons will be required to undertake the administrative, technical and other specialised duties arising from the programme of rural credit, marketing and processing. Larger numbers will be needed if all aspects of cooperative development are taken into account. The success of cooperation rests very largely on the ability to place it on a sound business basis so that, after an initial period, cooperative 'organisations can perform the functions entrusted to them without causing losses to the members or placing additional burdens on the State. It is, therefore, of the utmost importance that cooperative departments and all cooperative institutions .should be manned by persons who believe in the principles of co-operation and have the practical competence and experience to translate them into action. Equally, it is essential that in all States, the people generally should be educated in the principles of cooperation and leading members of each community should be given special opportunities of training, so that they can assume fuller responsibilities in the co-operative movement.
25. These considerations were also stressed in the First Five Year Plan. In 1953 the Government of India and the -Reserve Bank jointly constituted a Central Committee for Cooperation Training and entrusted to it the responsibility for establishing the necessary training facilities for cooperative personnel. Under the direction of the Central Committee the Cooperative College at Poona provides six-monthly courses for superior officers of cooperative departments and institutions. Five regional cooperative training centres have been established at Poona, Ranchi, Meerut, Madras and Indore for training personnel belonging to intermediate grades. Eight special centres have been established for training 4,000 block level cooperative officers needed by national extension and community project areas. For the training of subordinate staff. State Governments are establishing the necessary facilities and the Central Government shares the cost with them. Training classes for members and office bearers of cooperative organisations are to be organised by the All-India Cooperative Union and State cooperative unions or federations with subsidies provided by Government and in accordance with the programmes proposed by the Central Committee on Cooperative Training.
These aspects need to be pursued systematically and in detail. Since so much depends on the success of cooperation, it is recommended that, in addition to special institutions set up for cooperative training. State Governments and universities should consider steps to introduce Cooperation as a subject of instruction in educational courses at various levels.
26. The programme of reorganisation of rural credit and marketing described above has to be carried out in close cooperation between the cooperative and agriculture departments and the national extension service. With his intimate knowledge of every family, the village level worker can be an effective liaison between the staff of the cooperative department and the village. Among the administrative tasks assumed by Government in the second five year plan, some of the most difficult ones will fall to cooperative departments in the States. It is therefore necessary that these departments should be adequately staffed and organised. Until some years ago, it was customary to select senior and experienced officials with special interest in the rural people for appointment as Registrars of Cooperative Societies. There have been departures from this practice in recent years and persons selected are sometimes moved to other posts after short intervals, so that the requisite quality and experience are not developed. To make a success of co-operation requires on the part of officials at all levels and especially those who fill responsible positions administrative ability and experience, faith in the movement and a sense of identity with the people as well as a great deal of attention to practical detail. Much of the burden of developing cooperatives in each district will fall upon the district cooperative officer commonly known as the 'Assistant Registrar'. This officer should make himself fully familiar with the economy of the district and with the programmes of various departments included in the district plan. He should ascertain the directions in which there are special opportunities for developing the method of cooperation and, with the help of other departments functioning in the district, he should endeavour to extend its scope on a sound and lasting basis. His success will depend to a considerable extent on the manner in which he helps to organise and strengthen the cooperative credit system in the district. He should maintain the closest liaison with the various Government departments which provide assistance to agriculturists, artisans and others and with the central cooperative bank, the State Bank of India, and other institutions. It would be desirable, for instance, for the cooperative department in each district, in:collaboration with the agriculture department and the national extension service organisation, to prepare each year a detailed plan for the provision of short-term credit. Standard scales of loans for different crops could be laid down and loan applications could be prepared and sanctioned in advance of the season. so that credit for improved seeds, fertilisers, etc., is made available in good time. Finally, it should be added that for organising co-operatives in directions other than credit, such as farming, consumer stores, industrial societies, labour and construction cooperatives, housing, etc., district cooperative staff will need to be considerably stengthened.
Land Reform And Cooperative Credit
27. There is a close connection between the success of land reform and the success of cooperation which is not always appreciated. For cooperation to succeed fully it is essential that the reorganisation of the agrarian structure should be carried out speedily so as to eliminate features which reduce the productive capacity of the community and permit exploitation. Thus, land reform programmes should do much to stimulate the growth of the cooperative movement. In the nature of things, as a result of land reform the number of small cultivators increases, those with large holdings or considerable surpluses disappear and the new owners need a great deal of credit. Also, as the national extension net work is established and the rural people are ready and willing to participate in development programmes on an increasing scale, their requirements for credit and finance greatly increase. Cooperative institutions are the medium through which many activities in the village are to be reorganised and financed. It is therefore essential that in devising the land reform programme care should be taken to ensure that while its objectives are secured, cooperative credit institutions are not placed under handicaps which might affect their financial soundness.
28. The effects of land reform on cooperative credit institutions may be viewed from two ends, namely in relation to past debts and in relation to future debts. As regards past debts given on the security of land, payments due to cooperative financing institutions should be allowed a prior claim against compensation to which individual owners of land may be entitled. The liability for repaying loans should pass to individuals to whom rights in land are transferred. After allowing for the claims of cooperative financing institutions from these two sources, there may still be a possibility of cooperative institutions being put to loss, for instance, on account of decline in land values. In such an event State Governments should render the assistance needed for maintaining the financial solvency of cooperative institutions. These considerations arise specially in the case of land mortgage banks, part of whose advances to individuals were made for facilitating repayment of old debts.
29. As regards future operations three aspects may be mentioned. In the first place, it may be assumed that, save for exceptional reasons connected'with programmes of agricultural production, co-operative institutions will advance loans only with reference to areas held under personal cultivation. Secondly, to facilitate the grant of medium-term and long-term loans to tenants who are brought into direct relationship with the State as a result of land reform, rights of transfer in favour of cooperative financing institutions should be allowed. In the third place, in respect of lands which come into the possession of cooperative financing institutions in the course of their operations, restrictions relating to ceilings on agricultural holdings or to cultivation through tenants or leasees need not be applied. Cooperatives should be free to sell the land to any one at such price as may be obtainable, subject only to the conditions that in the transferee uses the land for personal cultivation and that as a result of the purchase -or transfer, the land held by him does not exceed the c and iling prescribed by law.
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