Strengthening Cooperative Movement in India

• The formulation of a strategy to create functional grass-roots organizations in each untapped Panchayat has been given the Union Cabinet's approval as a way to enhance the cooperative movement in the nation.
• To promote the cooperative movement, the Centre authorized a plan to establish 2 lakh Primary Agricultural Credit Societies (PACS), dairy, and fishery cooperatives nationwide during the following five years.

More On the news:

• A plan to establish functional Primary Agricultural Credit Societies (PACS) in each untapped Panchayat has been approved by the Union Cabinet.
• Each uncovered Panchayat/village should have functional dairy cooperatives, and coastal Panchayat/village should have functional fishing cooperatives as well as Panchayat/village with substantial water bodies.
• The plan uses a "whole-of-Government" strategy to consolidate several Ministry of Fisheries, Animal Husbandry & Dairy initiatives in order to enhance the current PACS/dairy/fishery cooperatives.
• Aiming to increase openness and accountability, the Union Budget 2023 previously promised Rs 2,516 crore for the computerization of 63,000 PACS over the following five years.
• For real-time monitoring of the new cooperative societies, the Ministry of Cooperation is also creating a national cooperative database.

What is the Plan's Importance?

• Around 2 lakh panchayats still lack dairy cooperative societies, while there are still 1.6 lakh panchayats without PACS.
• 41% (3.01 crore farmers) of the country's total Kisan Credit Card (KCC) loans are granted to PACS.
• According to NABARD's annual report for 2021–22, small and marginal farmers received 59.6% of all loans.
• These societies also give storage services to farmers in order to preserve and store their food grains.

About Primary Agricultural Credit Societies (PACS):

• PACS are local cooperative credit companies that offer farmers short- and medium-term agricultural loans for a range of farming and agricultural endeavors.
• This form the final link in a three-tier cooperative credit framework that is overseen at the state level by the State Cooperative Banks (SCB). The District Central Cooperative Banks (DCCBs), which collaborate with PACS, receive credit from the SCBs.
• The primary retail sources of short- and medium-term lending for the rural sector are the PACS, which form the backbone of the cooperative banking system.
• They offer member farmers short- and medium-term financing as well as other input services.
• 13 crore people are members of the 98,995 PACS in the nation, which NABARD refinances through 352 District Central Cooperative Banks (DCCBs) and 34 State Cooperative Banks (StCBs).

Importance of PACS:

• PACS is important because it offers multifunctional services including input supply provision, marketing, and trade.
• Offer backward connections like warehousing services to help farmers realise higher prices.
• It is the backbone of the farmer credit system.
• 95% of the Kisan Credit Card (KCC) loans through PACS (to a total of 2.95 crore farmers) are granted to small and marginal farmers, making up 41% (3.01 crore farmers) of the country's total KCC loans.

Problems with PACS:

• Just about 50% of rural households are covered with PACS.
• Their resources are insufficient to meet the rural economy's short- and medium-term lending needs.
• The credit issued by PACS is constrained in size and scope.
• Ineffective management system.

Way Forward

• In addition to better coverage, PACS must be reorganised and have greater resource mobilization capabilities in order to strengthen their power to draw in additional deposits and loans from higher financing institutions.
• PACS digitalization for improved administration is need.
• Streamlining governance frameworks to improve resource management.
• The introduction of professional management with the goal of making them a one-stop shop for all of its members' demands.