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Posted at: Dec 24, 2018, 12:07 AM; last updated: Dec 24, 2018, 12:07 AM (IST)

Cooperative model the best bet

The time-tested model of dairy cooperatives looks suitable to boost the income of farming households. It ensures that the farmer is a shareholder in profit earned by the cooperative federation at the district, state and national levels. The model also protects the farmer from monopolistic practices of private companies and dealers, says Dr SS Chhina
Cooperative model the best bet

About 60 per cent of India’s population is dependent on agriculture for livelihood, but the sector contributes only 14 per cent to the country’s Gross Domestic Product, underlining the yawning gap between farm and non-farm income. Prime Minister Narendra Modi’s promise to double farm income within five years is a laudable step, but it’s more important to assess the efficacy of efforts to accomplish this big task. Land is the most crucial factor for agricultural production, for which the supply is invariable. Ostensibly, the yield of crops can be enhanced to some extent as the law of diminishing marginal returns is more applicable to agriculture, where the yield has already reached its saturation point.

The model of dairy cooperatives, already time-tested, looks suitable to boost the income of farming households. In this model, a milk seller in the village, after receiving the value of the produce, still remains a shareholder in profit earned by the cooperative federation at the district, state and national levels. He is also a shareholder in profits earned from the export of dairy products. The model also protects the farmer from the monopolistic practices of private companies and dealers of dairy products in the area. The government has been promoting this model for the dairy sector. It is inexplicable that such encouragement is not given in the case of other farm products.

The oft-quoted paradox of “poverty amidst plenty” is given with reference to agricultural business. When there is greater production, there is a glut in the market and prices fall. On the other hand, when there is a hike in the prices, there is a smaller quantity to sell because of less production. The volatility of prices of vegetables and fruits is frequent. At the same time, there is a big difference in the harvest and retail prices, particularly for vegetables and fruits. Sometimes, the retail prices get doubled. But what is the share of the farmer in those enhanced prices? None. The farmer’s share can be easily created through the cooperative model.

Basmati is a rice variety grown on the riverbanks. India and Pakistan hold monopoly of this product. India is exporting basmati worth thousands of crores of rupees, in which the contribution of Punjab is about 80 per cent. Suppose the farmer is selling basmati at Rs 2,000 per quintal. The exporter sells it at Rs 8,000 per quintal. Basmati needs storage, shelling, loading and transportation, etc. It is difficult for a farmer to perform all these tasks, irrespective of the size of the holding, but the cooperative society or the basmati producer’s company can easily do it all to create the farmer’s share in the profits. The Small Farmers’ Agriculture Business Consortium, a Central Government agency, has been making a pitch for farmer producer organisations, but no significant progress has been made.

If cooperative societies for such functions are encouraged and helped with guidance, a number of farmers can join these, as in the case of dairy cooperatives. Success of the processing unit depends on a concatenation of factors. What is required is business and professional acumen, which can easily be provided by this model.

There is a big potential for value addition in the agro products through agro-processing units, be it vegetables, fruits, pulses or oilseeds. A cooperative unit can be formed on the basis of the product to create a share of the farmers. Many products need long-term preservation through modern stores, equipped with requisite technology that is out of the individual farmer’s reach.

About 83 per cent of the farm holdings are below 5 acres in Punjab. The farmers concerned are keen on assured marketing of their produce. The yield of maize rose from 798 kg per hectare in 1960-61 to 3,892 kg in 2016-17, cotton from 260 kg to 756 kg, groundnut from 926 kg to 1,920 kg, mustard from 505 kg to 1,412 kg and sugarcane from 340 quintals per hectare to 813 quintals in the same period. However, the area under these crops has shrunk — maize (from 3.27 lakh hectares to 1.16 lakh), cotton from 4.47 lakh hectares to 2.85 lakh, sugarcane from 1.33 lakh hectares to 88,000 hectares, groundnut from 67,000 hectares to 12,000 hectares, and mustard from 1.09 lakh hectares to 31,000 hectares from 1960-61 to 2016-17.

The Union Government has announced a new policy of procurement in collaboration with state governments. Good results are expected on the crop diversification front. Lack of adequate raw material has been a major impediment to the installation of agro-processing units for value addition. Here again, this model is the best option to protect farmers from exploitation at the hands of traders in the value addition business for these crops. 

But it is equally important to shift the population from farm to non-farm sector, where the cooperative model can be very helpful in employment generation. The model can dovetail agricultural marketing with processing and help to enhance the income of the farm sector. 

Major co-op federations in Punjab

Milkfed: The Punjab State Cooperative Milk Producers’ Federation Limited came into being in 1973 with the aim of providing a lucrative market to the state milk producers by value addition and marketing of produce. Another of its objectives is to provide technical inputs for the enhancement of milk production. In 1983, milk plants of the former Punjab Dairy Development Corporation Limited were granted to the cooperative sector under Operation Flood to provide a better deal to the farmers and better products to the customers. Milkfed has a three-tier system: the federation is the apex body at the state level, milk unions at the district level and cooperative societies at the village level. 

Markfed: The Punjab State Cooperative Supply & Marketing Federation Limited was registered in 1954. It is one of Asia's largest marketing cooperative federations. Markfed has been awarded national productivity awards in fields such as cooperative marketing activities, food processing and cattle feed production. This federation of over 3,000 societies also contributes to research and development through Punjab Agricultural University (PAU), Ludhiana.

Sugarfed: The Punjab State Federation of Cooperative Sugar Mills Limited is an apex body of 15 cooperative sugar mills in the state. The mills are tasked with providing technical knowhow to farmers for cane development and introduction of improved sugarcane varieties with higher sugar content and yield in consultation with PAU and other institutions. Other services include providing disease-free seed to the farmers, timely purchase of their produce, and pest management.


The writer is Senior Fellow, Institute of Social Sciences, New Delhi


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