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Poverty Reduction through Co-operatives:
Security Net for Small Farmers and Rural Entrepreneurs
Dr. Rajiv Mehta
Adviser
Department of Agriculture and Cooperation
Ministry of Agriculture
Govt. of India
Conference on Poverty Reduction and Advantage of
Cooperatives in Protecting Small Farmers and Rural Entrepreneurs
July, 13th , 2007
Bali, Indonesia
Indonesian Co-operative Council, The DEKOPIN and International Cooperative Alliance – Asia and Pacific
World has deep prevalence of Poverty
One fifth of the World’s Population is in
economic destitution
About 40% of the world’s poor are in South Asia
Addressing Poverty is a core development issue
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Poverty - an outcome of multiple deprivations
Deprivation of income
Deprivation of assets
o Human – Skill, Health, Labour
o Natural – Land
o Physical – Infrastructure and other means of production
o Financial – Savings, access to credit
o Social – Network of contacts and reciprocal obligations
Deprivation of access to basic amenities
Deprivation of safety net – vulnerability to adversities
Deprivation of voice and capacity to deal with institutions
of State and society
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(WDR -2001)
Common disadvantages to Primary Producers
Farmers, growers, dairymen, fishermen or rural craftsmen
– unorganized
– small operation
– isolated,
– market disconnect
– technology gap
– disparities in economic expansion and scale
– weak safety net
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Vulnerability in Agrarian Space
Large population dependence
o In India, 70% population rural
o Two third livelihood depends on agriculture and allied activities
o 120 Million farm holdings
o 127 million cultivators, 107 million agriculture labour
Weak asset base
o Average size of operational holdings : 1.32 Hectares
o 82% Holdings Small and marginal (2 or less than 2 hectares)
o Average livestock holding: 1.7 cattle-buffalo / operational holding
o Human asset - Skill, education, health, information
Vulnerability to adversities
o 60 percent agriculture rain dependent
o Diversity of climatic conditions
o Occurrence of floods, droughts
o Logistics and connectivity (600 thousand villages) 5
o Market vulnerability – disadvantage in price realisation
Profile of rural poverty in India
• Rural poverty is generally concentrated in the agricultural
labour and artisan households
• The geographical landscape of rural poverty has been
changing
• The occupational composition of rural poor varies across the
states.
• In developed states , high concentration among agricultural
labour households,
• In less developed states poverty extends to other
occupational groups including self employed in agriculture.
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Framework of Action Against Poverty
Multi pronged strategy to enhance entitlement and access
Opportunity
Complimentary and
Supplementary
actions to neutralize
the deprivations
Empowerment Security
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Enhance Income Capability
• Address Resource poor – small and marginal farmers
• Subsidized inputs ( seeds, irrigation), credit, institutional
support
• Focus on low productivity / rain fed regions
• Diversified agriculture : horticulture, animal husbandry,
poultry, fisheries
• On farm value addition :
– Grading, sorting, quality improvement, on farm primary processing,
adoption of good agricultural practices
• Rural Non Farm Employment
• Income Support and Supplementation 9
Cooperatives
The Development Catalyst
Cooperative : Little people’s chance in a world of bigness
(Rochdale Pioneers 1844)
• Institution of mutual sharing and caring
• Business development for poor, un-organised and un-skilled people
• Overcomes structural constraints in agriculture
• De-bureaucratize and de politicize
• Conducive environment fot value creation
• Defuses class conflict, reduces social gaps and promotes collective
responsibility
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Empowerment through Business Development
Imperfection in the market
o Input, production, processing, investment,
o Insulation against imperfection and uncertainties
Linkages for efficiency in transaction cost
o Input price, quality
o Interface with technology and extension
Competitiveness
o Low yield, high production variability
Special disadvantages conditions
o High perishables – opportunity cost
o High seasonality of inputs and output
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o Bulky material – Handling, movement, transportation
Village Cooperative Societies
Grass root Institutionalization of
Opportunity, Empowerment and Security
Diverse Activities Rural infrastructure and services
• Storage / Cold storage
• Strategic agricultural inputs • Rural roads
• Health
• Meeting consumer needs • Veterinary Services
• Transport
• Marketing societies to ensure • Irrigation
remunerative price
• Electricity
• processing and value addition • Market Intelligence
• Technology
• Resource needs • Skill, knowledge and information
– First Cooperative Society
Act of 1904 to enable
agriculture credit 12
cooperatives
Indian Co-operative Movement at a Glance
Number of Co-operatives (all) 583,580
– Primary agriculture co-operatives 160,826
– Primary non-credit co-operatives 419,764
Membership (all in million) 242.0
Share capital (Billion US $) 6.2
Government participation in primary
agriculture co-operatives (%) 5.4
Working capital (Billion US $) 108
Reserves (Billion US $) 10
Deposits (Billion US $) 60
Coverage of rural households (%) 71
Villages covered by co-operatives (%) 100
Source: NCUI: Indian Co-operative Movement – A Profile 2006. 1US$ = Rs. 45 13
Co-operatives in National Economy
(Per cent Share)
Indicators of Input supply
o Fertilizer Disbursed 35.0
o Fertilizer Production 26.5
Indicators of Input Service
o Agriculture Credit Disbursed by coop 66.0
o Retail Fair Price shop (Rural + Urban) 23.0
o Storage Facility (Village Level PACS) 64.0
Employment Generation (in millions)
o Direct 1.2
o Self Employment 15.4
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Co-operatives in National Economy
(Per cent Share)
Indicators of Commodity Production / Purchasing / Marketing
o Sugar Produced 46.2
o Wheat Procurement 33.5
o Procurement of oilseeds and pulses 100.0
o Procurement of rubber 18.5
o Milk Procurement to Total Production 7.4
o Milk Procurement to Marketable surplus 10.5
o Ice Cream manufacture 45.0
o Animal feed production / Supply 50.0
o Oil Marketing (Branded) 49.0
o Spindleadge in Coop 10.3
o Handlooms in Co-operatives 54.0
o Fishermen in Co-operatives (Active) 23.0
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Poverty reduction through Cooperatives
Furthering the process
Broadening the operation
o Expansion of service domain
o Strengthening economic viability of rural area
o Wider socio-economic perspective (SHG)
Focus on chronic poverty
o Asset strengthening
o Consolidation of business development
o Awareness – propagation of success stories
Commodity specific Cooperatives
o Active involvement of producer members
o Strengthening forward, backward and horizontal linkages
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o Evolving command area / cluster approach
Sugar Cooperatives
First Cooperative Sugar Factory: Parwara Maharashtra – 1948
(Late Vithal Rao Vikhe Patil)
• Number of Cooperative sugar mills : 316
• Membership Total (in Million) : 5.14
• Growers Membership : 92.5 %
(Millions US$)
• Share Capital : 716
• Turnover (Total) 2004-05 : 285
• Total cane crushed (Mill tns.) : 44
• Total Sugar Produced (Mill tns.) : 7.8
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Data Source: NCUI: Indian Co-operative Movement – A Profile 2006. 1US$ = Rs. 45
Dairy Cooperatives
First Milk Producers Cooperative Union: Kaira- Gujarat- 1946
(Late Tribhuvandas Kishibhai Patel)
• Number of Dairy Cooperatives : 121,180
• Membership Total (in Million) : 12.95
• Women Membership (in Million) : 2.96
(Millions US$)
• Share Capital : 83
• Working Capital : 465
• Assets : 413
• Turnover (Total) 2004-05 : 1206
• Total Milk Procured by Coops (Mill It.) : 7325
• Liquid Milk Marketed per day (Mill It.) : 15
• Balanced Cattle feed Production : 1.09 million tns
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Data Source: NCUI: Indian Co-operative Movement – A Profile 2006. 1US$ = Rs. 45
AMUL (Anand Milk Union Ltd – 1946)
A complete development model
Gujarat Cooperative Milk Marketing
Federation (GCMMF):
13 : District coop. milk producers' Union
India’s largest food products 2.6 million : Milk producing members
marketing organisation 12,792 : Village Societies
6.5 million liters : Daily(avg) milk collection
60 percent milk : Converted to value added
“Amul model has rightly
594 Mts. : Daily milk drying capacity
concluded that dairy cooperatives
have shifted dairying from a 2640 Tns/ day : Cattle feed manufecturing
sideline activity to a serious 1.05 Billion US$: Annual Turnover
economic enterprise, making it the
28 Million US$ : Exports
major source of farm income.
(Dairy) Cooperatives have done
more for the emancipation of Social and economic transformation
Indian women than centuries of
social reforms” of rural domain
(World Bank, 1998) 19
Impact of Operation Flood (OF)
Farmer controlled cooperative dairy programme
• Poverty: Sixty percent of beneficiaries were small and marginal farmers
– Payments for 7325 million litters of milk to dairy producers annually
• Nutrition: Increase in per capite milk consumption (107 gms / head in 1970 to 245 gms
/ head in 2005-06)
• Job Creation: Women's engagement, release of men labour for non farm employment
• Education: Income enhancement increased children enrolment in schools, also
encouraged adult literacy
• Women in development: formation of women's dairy cooperative societies
• Breed development, fodder supply, other inputs and consumer goods supply
• Elimination of risk
• Rural infrastructure (Physical, social, health)
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(Sourced and updated from World Bank Evaluation – 1996)
“A large proportion of rural livelihoods in India are at the
mercy of the law of diminishing marginal returns from land.
This has led to the bleak phenomena of rural-urban
migration, casualisation of urban labour and feminisation of
agricultural labour etc. with the net effect of extremely
insecure rural livelihoods. A successful rural development
programme must help rural people stay on voluntarily and
profitably in the villages.
Cooperative dairy development on the Amul Pattern has
been instrumental in securing rural livelihoods in many
parts of India through income generation, agricultural
diversification, risk distribution, female empowerment and
assured employment.”
Dr. V. Kurian,
Chairma’s Speech 31st AGM of GCMMF
23rd June 2005
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THANKS
email: rajivmehta2003@rediffmail.com
rajivmehta2@gmail.com
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