Budget mum on co-operative farm credits

The union budget has completely overlooked the aspect ofrestructuring the co-operative credit system. It has allotted a meagre Rs 0.05 crore for the rehabilitation package and for the revamping of co-operative credit structure. Similarly for credit co-operative institutions in underdeveloped states a sum of Rs 7 crore has been allotted in the budget as against Rs 6 crore in the revised estimate of 1997-98. The assistance to the weaker sections and co-operatives is of the order of Rs 1.45 crore as against Rs 1.60 crore in the revised estimate of 1997-98. Moreover, the total allocation for co-operative sector is only Rs 333 crore as against Rs 259.50 crore in the revised estimate of 1997-98.

It seems that the finance minister has just done some lip service to the co-operatives by announcing that a model multi-state co-operative law will soon be promulgated and the states should follow suit and amend the state laws relating to co-operatives to ensure more autonomy.

Strangely too, the total allocation to the National Co-operative Development Corporation (NCDC) isat a low of Rs 150.45 crore as against Rs 105.65 crore in the revised estimate of 1997-98. It is to be noted in context, that an amendment to the NCDC Act is also on the anvil to expand its area of operation to all other cooperatives.

Though the finance minister has announced the scheme for community-based rural water supply system, he has not thought of improving the co-operative credit structure which ensures people’s involvement. Also the National Co-operatives Union of India (NCUI) has urged the government to allow them to enter into irrigation, water supply, rural electrification and rural telecom services.

Moreover, the involvement of co-operatives in credit disbursement is all the more required at a stage when priority sector lending by commercial banks stands at a mere 15 per cent as against the targeted 18 per cent. There is no reason for the commercial banks to fall short of target especially when the recovery position of agricultural advances by commercial banks has risen to 61.9 per cent in1996.

The remittances of shortfalls in priority sector lending by commercial banks to Rural Infrastructure Development Fund (RIDF) has resulted in diversion of credit meant for agricultural production and limited investment.

The access to formal credit has not been very extensive with about 25 per cent of rural household getting short-term crop finance and only 3 per cent availing long-term credit annually. The credit disbursement has been uneven in different parts of the country.

The government without taking up the programme of restructuring of co-operative banks on priority basis has continued the scheme of recapitalising the RRBs with a proposed fund of Rs 265 crore in the current year. This has added insult to injury for cooperatives which are faced with severe competition from the RRBs, commercial banks, state agricultural development finance corporations and some local area banks set up with Rs 5 crore authorised capital and Rs 2 crore subscribed capital.

Though in his budget speech, thefinance minister had announced the introduction of a new crop insurance scheme, adequate provision has not been made in the current budget. Total allocation for payment to GIC under both the existing comprehensive crop insurance scheme (CCIS) and experimental crop insurance scheme (ECIS) is only Rs 144 crore as against Rs 110 crore in the revised estimate of 1997-98.

The union agriculture ministry has proposed to replace both comprehensive crop insurance scheme and experimental crop insurance scheme by the modified crop insurance scheme (MCIS) for implementation in the ensuing rabi season. In the new MCIS it is proposed that both the borrowing and non-borrowing farmers, irrespective of the size of their holdings, and some cash crops in addition to foodgrains will be covered. Though the participation of non-borrowing farmer would be voluntary, the scheme has worked out an appropriate reward for participation and disincentive system for non-participation in the scheme.

In a bid to remove the lacunae inimplementation of the previous schemes, the new scheme has suggested setting up of a separate subsidiary company of General Insurance Company for making the scheme administratively viable. However, the upper limit for sum insured and indemnity levels remain the same in the beginning. An appropriate safeguard mechanism has also been worked out to avoid misuse of the scheme particularly in respect of those crops which are of a multi-picking nature.