DEVELOPMENT OF CO-OPERATION
CO-OPERATION AND NATIONAL PLANING 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 cooperative 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, it, 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 cooperative method of organisation are agricultural credit, marketing and processing, all aspects of pro- duction in rural areas, consumers co-operative stores. co-operatives of artisans and labour and construction cooperatives. In these fields the objective is to enable cooperative 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 organization has advantages which neither the system of private enterprise nor that of State ownerships can match. In particular, 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 type year plan have been drawn up broadly on the lines recommmended 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 car- efully as the plan goes into action. Because of historical circumstances in India agricultural credit, accounts, for the greater part of development in the head of 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 attention has to be given. Firstly credit is only the has to extend to number of other activities in the beginning of co-operation. From credit,co- operation village including co-operative farming.In cooperation hard and fast rules of development cannot be made and every step is determined by 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-operative 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 percent of families are able to satisfay the tests laid
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down. The primary co-operative society and the village panchayat have to work in union 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 generally. 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 economics 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 field 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 co- operative 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 tiny 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 about 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
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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 use 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 of credit
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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 bet- ter 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 of Rs. 10 crores, of which the Central Government through the National Coopera- tive 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 an 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 year plan are set out below:
Credit.
Number of larger-sized societies 10,400
Target for short-term credit Rs. 150 crores
Target for medium-term. credit Rs. 50 crores
Target for long-term credit Rs. 25 crores
Marketing and Processing:
Number of primary marketing
societies to be organised 1,800
Cooperative sugar factories 35
Cooperative cotton gins 48
Other cooperative processing
societies 118
Warehouses and Storage:
Warehouses of Central and
State Corporations 350
Godowns of marketing
societies 1,500
Godowns of larger-sized
societies 4,000
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.