Unit 2: Co-operative Development

Co-operative Development

Meaning of Co-operative Development

Co-operative Development means the growth, strengthening, and expansion of cooperative societies in all sectors of the economy.

In simple words: It is the process of improving cooperatives so they can provide better services to farmers, consumers, workers, women, and small businesses.

What Co-operative Development includes?

• Increasing the number of cooperative societies
• Improving the financial strength of cooperatives
• Providing training to members and staff
• Supporting cooperatives with laws, policies, and government help
• Ensuring democratic and transparent functioning
• Modernizing with IT and digital systems

Economic Planning and Cooperatives

What is Economic Planning?

Economic Planning means the government uses planned strategies to develop different sectors like agriculture, industry, rural development, finance, etc.

Role of Cooperatives in Economic Planning

In India, cooperatives have always been a part of national development plans because they:

• Reduce poverty
• Create employment
• Support farmers and rural people
• Encourage savings & credit
• Help in distribution of essential goods
• Strengthen rural economy

Cooperatives contribute to:

• Agricultural production
• Distribution of fertilizers, seeds
• Food processing
• Dairy (like AMUL)
• Marketing of farmer products
• Rural credit and banking (PACS, DCCBs)

In short: Cooperatives help the government achieve planning goals at the grassroots level.

Cooperatives in Five-Year Plans (FYPs)

Cooperatives have been included in all Five-Year Plans since independence. Their role grew over time.

Major Highlights of Each Phase

First Five-Year Plan (1951–56)

• Focus on agricultural development
• Strengthening PACS (village-level credit societies)
• Cooperative marketing and storage
• Community development programmes

Second Plan (1956–61)

• Emphasis on industrialization
• Formation of industrial cooperatives
• Promotion of consumer cooperatives in urban areas

Third Plan (1961–66)

• Integrated Cooperative Development
• Strengthening cooperative marketing and processing

Fourth & Fifth Plans (1969–79)

• Focus on Operation Flood (White Revolution)
• Rise of dairy cooperatives (like AMUL)

Sixth Plan (1980–85)

• Development of weaker PACS
• Expansion of cooperative banking

Seventh Plan (1985–90)

• Modernization of cooperatives
• Education and training institutions for cooperatives

Eighth Plan (1992–97)

• Diversification of cooperative activities
• Women's cooperatives
• Dairy & credit cooperatives strengthened

Ninth & Tenth Plans (1997–2007)

• IT adoption in cooperatives
• Strengthening NCDC, NABARD supports

Eleventh & Twelfth Plans (2007–2017)

• Focus on food security
• Digital cooperatives
• Strengthening cooperative credit reforms

Recommendations of Various Cooperative Committees

India has set up many committees to improve cooperatives. One of the most important committees is:

Mehta Committee (R.K. Mehta Committee / Cooperative Administration Committee, 1960)

Objective

To suggest reforms for better management, administration, and democratic functioning of cooperatives.

Major Recommendations 

1. Democratic Management

• Elections must be regular and fair
• Board should be strong and accountable

2. Managerial Improvement

• Appoint qualified and trained managers
• Reduce political interference

3. Three-tier structure should be strengthened

• SCB → DCCB → PACS
• Clear division of powers among them

4. Government Role Should Reduce

• Cooperatives must be autonomous
• Government should only give support, not control everything

5. Professional Training

• Establish training centers for cooperative employees

6. Financial Discipline

• Cooperatives must follow strict accounting and audit rules

7. Integrated Approach

• Credit, marketing, and processing cooperatives should work together

• Example: credit linked with marketing

✔ 8. Larger PACS

• Small PACS should be merged to create viable units

Summary Table

Topic	Key Points
Cooperative Development	Growth, improvement, financial strengthening, training
Economic Planning	Cooperatives help achieve rural & agricultural goals
Five-Year Plans	PACS, dairy cooperatives, credit reforms, modernization
Mehta Committee	Strengthening democratic management, training, reducing govt interference

Mirdha Committee (1960)

Chairman: Shri Balwantrai Mirdha
Purpose: To study the working of co-operative societies and suggest improvements.

Key Recommendations

• Cooperatives should be independent and democratic
• Government should not interfere in daily activities
• Strengthen PACS financially and administratively
• Promote multi-purpose cooperatives (credit + marketing + supplies)
• Improve cooperative leadership & training
• Strengthen the cooperative education system
• Encourage member participation and transparency

AIRCSC – All India Rural Credit Survey Committee (1951–54)

This is one of the most famous committees in cooperative history.

Objective

To evaluate rural credit conditions and find solutions to farmers’ loan problems.

Major Recommendations

• Rural credit must be provided through strong cooperatives
• “State partnership in cooperatives” – Government should become a member and support cooperatives
• Integrate credit + marketing + processing

Establish institutions to support rural credit:

• State Bank of India (SBI) strengthened
• Warehousing Corporations
• Reserve Bank’s Agricultural Credit Department
• Build viable PACS with high membership and financial stability

AIRCRC – All India Rural Credit Review Committee (1969)

Objective

To review the credit needs of rural India after the Green Revolution began.

Key Recommendations

• Increase institutional credit to reduce moneylender dependence
• Strengthen short-term and long-term cooperative credit
• PACS should become multi-purpose societies

Promote credit for:

• Irrigation
• Mechanization
• High-yielding seeds
• Fertilizers
• Improve loan recovery system

CRAFICARD – Committee to Review Arrangements for Institutional Credit for Agriculture & Rural Development (1981)

Chairman: B. Sivaraman

Purpose

To strengthen institutions that provide agricultural and rural credit.

Major Recommendations

• Establish a national-level bank for agriculture → Result: NABARD (1982)
• Integrate all rural credit institutions under one umbrella

More refinance support to:

• Cooperative Banks
• RRBs
• Land Development Banks
• Strengthen PACS as the base of rural credit

ACRC – Agricultural Credit Review Committee (1989)

Chairman: Dr. A.M. Khusro

Objective

To review agricultural credit performance in the 1980s.

Recommendations

• Increase agricultural credit to small and marginal farmers
• Strengthen short-term and long-term lending
• Improve recovery through linking credit with marketing

Promote credit for allied activities like:

• Dairy
• Poultry
• Fisheries

• Use a scientific loan appraisal system
• Encourage women and weaker sections through micro-credit

Vaidyanathan Committee (2004–2006)

Committee for Reforms in Cooperative Credit Structure

There were two committees:

A. Vaidyanathan Committee – Short-Term Cooperative Credit (STCCS)

Objective

To revive PACS → DCCB → SCB structure.

Recommendations

• Government should provide a Revival Package
• Clean the balance sheets of PACS (remove old losses)
• Improve training and professionalization
• Ensure regular elections
• Reduce government control; increase autonomy
• Computerization of PACS

B. Vaidyanathan Committee – Long-Term Cooperative Credit Structure (LTCCS)

Purpose

Reform Land Development Banks (LDBs) used for long-term loans.

Recommendations

• Strengthen long-term loan system for irrigation, land development
• Improve refinance support from NABARD
• Restructure weak LDBs
• Upgrade skills of employees

Narasimham Committee (Prudential Norms)

Committee on Banking Sector Reforms
Headed by M. Narasimham (1991 and 1998)

Why important for cooperatives?

Introduced the concept of prudential norms, which apply to cooperative banks also.

Prudential Norms Simply Mean

Rules to ensure banks remain safe and financially strong.

Major Recommendations

• Income Recognition Norms – Treat NPAs properly
• Asset Classification – Standard, Substandard, Doubtful, Loss
• Provisioning Norms – Set aside funds for bad loans
• Capital Adequacy (CRAR) – Banks must maintain minimum capital
• Reduce NPAs in cooperative banks
• Improve professional management in cooperative banking
• Autonomy and depoliticization of cooperative banks

Summary Table

Committee	Key Focus
Mirdha Committee	Democratic functioning, autonomy, member participation
AIRCSC	State partnership, cooperative credit, SBI/warehousing reforms
AIRCRC	Rural credit after Green Revolution, strengthening PACS
CRAFICARD	Led to formation of NABARD, institutional rural credit
ACRC	Increase agri credit, credit for livestock/fisheries, recovery
Vaidyanathan Committee (ST/LT)	Revival of PACS, DCCB, LDB; autonomy, computerization
Narasimham Committee	Prudential norms, NPA handling, capital adequacy