Having worked closely with the agrarian economy for over two decades now, I found the conclusions of this research paper published by the Reserve Bank of India (RBI) to be an affirmation of my frequent observations and pre-suppositions about general practices in the country’s agriculture sector.
Creating essential market linkages and consolidating farmers under umbrella bodies should have helped solve much of that problem. While markets under Agricultural Produce Market Committees (APMCs) were set up in states with this intent, the actual outcome has not been as envisaged.
In fact, it only increased layers of middlemen, imposing fresh burdens on farmers. In many states, farmers have fared better without the APMC mechanism.
The ‘taste’ that India needs: At the same time, a cooperative society of farmers has worked well as an alternative model in India’s dairy sector, thanks to which we have a highly successful dairy-product marketing federation that is counted among the world’s largest in terms of volume and has a great national brand to be proud of.
Amul is ranked as the world’s strongest food-and-dairy brand by the UK’s Brand Finance. Amul clocked a turnover of ₹59,445 crore in 2023-24, with a group turnover of ₹80,000 crore. Its strength is drawn from the world’s largest farmer-owned dairy cooperative, with 3.6 million farmers across 18,600 villages of Gujarat who supply around 30 million litres of milk every day.
There have been similar success stories of farmer cooperatives and statutory export promotion bodies across various agriculture products in India.
The Central Arecanut and Cocoa Marketing and Processing Cooperative Ltd (Campco), set up to aid arecanut and cocoa growers in Karnataka and Kerala, the Totgars’ Cooperative Sale Society that looks after the interests of betel-nut farmers in Karnataka, and the spice board in Kerala that helps regulate production and prices, have all ensured better returns to the farmers.
These bodies have also helped create excellent social infrastructure that supports farmers through educational institutions, hospitals and local credit-cum-savings mechanisms.
Creating cooperatives needs vision: Success stories in this field have been getting fewer. Building a viable cooperative movement requires the efforts of visionaries with genuinely socialistic aims. Another key to success is the absence of any political intervention in their formative years.
As seen from the experience of sugar cooperatives, political interference could derail the main mandate of improving farmer livelihoods. Moreover, farmer cooperative initiatives have succeeded only for small-scale cash crops and not essential crops, perhaps because of government oversight of the latter.
Amul as the paragon: The success of the Amul cooperative model owes much to its visionary promoter Verghese Kurien (1921–2012). His initiatives improved farmer participation and efficiency across the value chain—something that is sorely missing today in other commodities.
Around 80–82% of the milk price goes back to the farmer who also owns a share in the cooperative. Moreover, the cooperative’s profits are returned to farmers in the form of an annual bonus and through other means. This ensures their loyalty.
Amul’s dairy farmers also get the benefit of bulk discounts on animal feed supplies and veterinary healthcare. The cooperative has also spawned a local district cooperative bank network that channels their savings and provides credit facilities at the village level.
The cooperative also ensures fair price discovery, apart from ensuring that their produce is procured at fair cost. Thus, it prevents product price escalation and profiteering.
The vision of ‘Sahakar se Samriddhi’: With India’s government having created a ministry of co-operation to nurture the cooperative movement across the country and RBI stepping up the oversight of cooperative banks, many traditional fields are expected to see ‘farmer cooperative’ models grow.
Institutions like Bhartiya Beej Sahakari Samiti, National Cooperative Organics and National Cooperative Export are expected to promote organic farming, farm exports and seed production under the vision of ‘Sahakar se Samriddhi’.
Banks see rural opportunity: The cooperative model is now also attracting commercial banks, some of which are enthused by local ecosystems created by the cooperative movement that can ensure up-scaling of operations and a corporate-linked banking model to offer farmers friendly financial products.
This has also reduced overall costs for both parties, as farmers can now get credit at much better rates with their creditworthiness assured by stable cash flows from their produce sold to a recognized cooperative union.
As one of the early movers into rural markets through tractor loans, and now with our dairy-loan model for farmers supplying milk to district dairy unions, we at Kotak Mahindra Bank have seen that the ‘phygital’ format is an ideal way to tap the rural hinterland, where people are getting technology savvy and consumption oriented.
Even globally, the farmer cooperative movement has created strong and economically viable business models over the years, whether it is Rabo Bank in the Netherlands or across the erstwhile Soviet Republics, where this model helped create fine agricultural economies in Ukraine and Russia, which today are among the largest producers of wheat, corn, sunflower and other crops.
Let me conclude with a quote from Verghese Kurien’s book, I Too Had a Dream: “I am one of those who firmly believe that our cities thrive at the expense of our villages; that our industries exploit agriculture.” It need not be that way anymore.
Today, the future of Indian agriculture is brighter, with farmers able to exercise reasonable bargaining power and much interest shown by governments in their welfare through supportive policies and financial schemes.
The author is divisional head, agri business group, Kotak Mahindra Bank
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