Rangarajan Committee suggests commodity cooperatives

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Mumbai, Feb 6 (UNI) The Rangarajan Committee on Financial Inclusion has suggested setting up of commodity cooperatives to help the small and marginal farmers enhance their credit demand, and contribute to the economic growth.

Drawing the success leaf out of the white revolution created by the milk cooperatives, the Committee in its final recommendations to the Union Government suggested that an agency such as the National Dairy Development Board along with NGOs could take up the exercise by organising producers together.

The cost could be defrayed either by the Government or by banks or through a combination thereof, it suggested, adding that the Financial Inclusion Fund with a corpus of Rs 500 crore could be a better vehicle to support such initiatives.

Such cooperatives could be formed for large cardamom in Sikkim, lac in areas of eastern Madhya Pradesh, Tasar in North Jharkhand and seaweed in coastal Andhra Pradesh, the Committee suggested stating that the commodity production was still a relatively private good.

Highlighting that small and marginal farmers should derive the benefit of future trade instead of depending on the local mandis where spot trade takes place, the Committee was of the view that such cooperatives could play a vital role in ushering in the required change in the mindset of the farmers.

A vast majority of small and marginal farmers, who were financially excluded, could aggregate their small surpluses through its cooperatives and derive the benefits of derivative exchanges, which in the last few years had registered a large turnover. The farmers could discover the future price and take decisions relating to crop selection, the recommendations said.

While making considerable recommendations on the supply side to enable financially excluded rural community brought into the banking net, the Committee said there was need for the Government to make concerted efforts to boost the demand side also, especially when 22 per cent of the population was below the poverty line.

It said, ''Unless some steps are taken on the demand side, or in the 'real sectors', mere supply side solutions from the financial sector will not help.'' Merely pumping a backward region with financial capital was not going to be enough in the absence of improvements on the side of human, social and physical capital in the rural areas. The recommendations laid emphasis on improving the human capital through better health and education facilities, better irrigation facilities in the backward regions and considerable improvement in infrastructure such as power, roads, bridges, canal, market yards and warehousing.

The absence of these requirements leads to a general malaise in the local economy and a disincentive for private investments in directly productive sectors.

It said in most of the states, where financial inclusion was low, a vast majority of the rural population was either landless or have less than one hectare of land. In Jharkhand, less than ten per cent of the cultivable land was irrigated. Similarly, in Vidharba, the extent of irrigation was only seven per cent of the gross cropped area.

For small farmers the access to land and water resources was a key precondition for using credit. For tribal communities, access to natural capital in terms of forest lands was severely restricted and this adversely affected their livelihoods and ability to use credit, the recommendations felt.


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