History of co-operative land management and problems faced by modern India
The essentials of the co-operative village management according to the first 5 year plan
(pp 102-103) are:-
1.All the land of the village is treated as a single farm
2.Cultivation of entire village organized to secure maximum advantage to village
3.The village resources well organized and maximum employment provided to owners of
land, workers who are non-owners of land, receiving remuneration for work/services, while
artisans receive additional returns for rights of ownership of lands.
4.Village management body allots constituted blocks for cultivation purposes.
5.Adopted when at least 2/3rd of the owners of land or a permanent tenant holding not
less than ½ of the cultivated area of the village wants it .
According to the Planning commission(Second five year plan pp 206)the village lands
will be managed in three ways:-
1Individual farmers cultivating their own holdings
2.Groups of farmers cultivating their own holdings
.Groups of farmers who pool lands voluntarily on their own interest into co-operative
3.Some land belong to the village community as a whole-the common lands, the village
site, the uncultivated wastelands available for settlement of landless, the water resources
The main agencies for achieving co-operative village management:-
1.National extension service and programme for increasing agricultural production and
development of other allied activities.
3.steps taken to develop co-operative credit ,marketing,warehousing,processing
4.Programmes for developing village industry
5.For assisting voluntary co-operative farming society.
The reorientation and co-ordination of land policy was initiated in Nagpur congress
January 1959.Thus co-operation was visualized as the keystone of the third plan. The
development of panchayath-based joint co-operative farms ,preceded by development of
a network of service co-operatives to function as multipurpose co-operative societies and
arrange for credit and marketing facilities was born.
The highlights of Nagpur resolution on agrarian organizational pattern:-
1.village organization based on village panchayaths and village co-operation. Both with
adequate resources and powers to discharge functions allotted to them.
2.Future agrarian pattern on basis of co-operative joint farming
3.Prior to this joint farming, as a first step, service co-operatives to be organized
throughout the country.
4.Ceiling to be fixed on existing holdings and legislation to this effect completed in all
states by end of 1959.
5.Minimum on floor price should be fixed reasonably in advance of the sowing season
with respect to each crop, with a view to assuring a fair return to the tiller (uzhavar means
6.Introduction of state trading in wholesale trade in food grains
7.Every effort to bring the uncultivated land and wastelands to cultivation.
(It was based on these decisions ,the co-operative society ,one of the first of its kind was
formed by the Punnayurkulam village under the guidance of K.G.KarunakaraMenon,my
In page 463(Dr C.B.Mamoria) it is mentioned that in co-operative farming, management
assistance to cultivators combined with supervised credit ,and joint ownership of
equipments ,offers a way to obtain advantage of better management while still retaining
the incentive gained by individual operations. The Ford foundation agricultural production
team also emphasized the significance of combining rights and privileges with
responsibilities.Nanda committee(Land reform implementation committee 1963 Report
in 1964) under G.L Nanda highlighted the following:-
1.Administrative arrangements for enforcement and supervision –adequate
2.Records of tenants did not exist in several states and were incomplete, or out of date
even if existed
3.poor economic condition of the tenant
4.In several states the existing provisions for security of tenants were of interim nature
and comprehensive measures to bring them to direct relation with state had to be adopted.
5.The ejectments though said to be voluntary were actually forced
6.In several states the rents have to be brought down to 1/4th of the produce or even less.
7 Although legislation exist for ceiling ,the problem of benaami transfers still existed in
The fourth plan proposals for land reforms (draft outline pp128-132) :-
1.Records of tenancies to be prepared and kept upto date. Recorded tenant( each )issued a
certificate indicating right in the land and rent payable by him/her
2.Rights of resumption to be terminated and permanent and heritable rights conferred on
3.To improve economic condition of tenants it is necessary to confer on them the right to
make permanent improvements to land and to ensure adequate compensation in event of
eviction. Adequate and timely agricultural credit to be made available to them.
4.There should be a high level committee in each state to review the programme from
time to time (6 months )so that timely steps taken to fill gaps that come to notice.
5..Each state to appoint a special officer assisted by staff as may be necessary to
implement programme according to a fixed schedule to be drawn up by state
6.To lay down measures of adequate management .If the lands under cultivation of
private owners is not cultivated the state has the right to take over the management of
The land reforms programme moved slowly since the people of vested interest found
means to bypass legislation.Mhalanobis committee reported that no appreciable reduction
in inequality seen between 53-54 and 59-60 despite the land reforms of that period. The
land reforms touched only the fringes of the problem of land distribution.
HOUSEHOLDS 53-54 LAND HOLDINGS % 59-60 LAND HOLDINGS %
Top 1% 17 16
Top 5% 41 40
Top 10 % 58 56
Bottom 20 % No holding No holding
Report of the committee on distribution of income and levels of living(Pt 1. 1964.pp 20-
21) pointed out that among the causes of failure or only partial success of the programme
was that the landlords after the land reforms showed complete indifference to the
maintenance of capital works like wells,tanks,and improvements of the soil (which they
were doing before)Instead ,they directed the investments /funds in trade ,financial assets
,gold, and silver instead of on land and agriculture. These two were the twofold adverse
effects of land reforms which they had noticed even in 1964( and which continues till
date ,but now it is with Government help ).Both affected agricultural investment and
production adversely. American expert Shri Ladenjinsky who studied the
agrarian problems of India in five districts (Tanjore,Ludhiana,West Godaveri,Aligarh
and Shahabad)said that Tanjore was the worst Land tenure system in India.20 % tenants
had oral holdings with no legal records, and though the law was that more than 40 % of
produce should not be collected as rent, the landlords were taking more than 50-60
%.Eviction for repayment of rent was common.
16th National sample survey report No:122 said that 6.95 crores of households were in
rural India and 28 % of them do not own land.24 % has only less than one acre. That is
half of the rural household had either no land or below one acre. Their share only 1 % of
the land owned by all the rural households.
3/4th of households-no land or below 5 acres of land.
Their share is 1/6th of the total.
1/8th of the households =more than10 acres. Their total share 2/3rd of whole area.
1 % more than 50 acres. Their share 1/5th of whole area. Estimated average area owned
for all households would be 4.8 acres.
(Compare with the figures for Punnayurkulam )
It was during this time the Bhoodaan,gramdaan and Prakhandan(Block)movements were
started .Bhoo (earth/land)dhaana(donation) or voluntary contribution of land by the haves
to the have nots was its mission. In ancient India the practice was to give away land as gift
or charity for favor of God as a good deed and Vinoba bhave based his philosophy on
this.” Land is the mother of all and everyone has a right to serve her”Vinobha bhave
said. The free gift of the earth, its water, air and other natural resources for all to enjoy by
God was to create a nonviolent atmosphere and sharing with the poor the wealth of the
rich. It was an economic revolution by consent and not by coercion and a new chapter in
the socioeconomic reconstruction of the country. The philosophy was simple and
traditionally acceptable ,and people readily responded and this modeled the sarvodaya
Sarvodaya life style :-
1.Simple life style ,with contentment and happiness which every human being seek.
2.The ever-increasing wants of human greed can never be satisfied by the limited supply
of material goods. This leads to exploitation of others, and accumulation of wealth in
some people. Inequalities are due to this. When there is concentration of economic power
in some ,all evils attached to it also accumulate. To break the vicious circle one has to
reduce one’s wants. And know how to get satisfaction from the available material
resources and share them with others.
3.The all-round real progress is material,intellectual,and spiritual and all the three should
progress together. A harmonious combination of spiritualism and materialism with all the
advantages of socialism and without its side effects .It avoids economic power in the
hands of the few and it gives utmost freedom of thought to every one (Individualistic)
and is not having a control of intellectual thought as there is in present day cadre party
The chief problem of the world is agrarian and solved in different ways by different
countries. In Russia it was solved with force and bloodshed. China also followed the same
way. In Cashmere abolition of Zamindari was done without any compensation. In rest of
India it was done with compensation.
In India the problem of food production is linked to the economic sphere. The grow more
food campaigns in the first five 5 r plans were because of this recognition. The
rehabilitation of the landless agricultural laborers required early action and the
Governmental process was slow due to several red tapes. So for a noble end ,and as a
means for a fair and lofty ideal Bhave launched the movement. It tackled the problem in
1.Abolition of landlords
2.security of tenure
3.Land reform enactment
4.Ceiling on land holding
Vinobha bhave also introduced a fifth one .The spirit of renunciation based on love and
sacrifice started the campaign. Ironically it started in Telengana on April 18 ,1951 where
later on violent movements also started .The first donation was 100 acres by
V.Ramachandra Reddy and it was distributed to Harijans of Telengana.Vinobhaji also
advocated along with bhoodaan,sampathidaan(donate wealth),koopdaan(donate
well)Grihdaan(donate house)sharamdan(donate free service)Budhidhaan(donate
intelligence)grandhadaan( donate books)and jeevandhaan( donate own life for a right
cause).Vinobha bhave’s aim was 5 crore acres so that every rural family has a piece of
land to cultivate. What legislation could not do, his yagna could do. And it avoided feelings
of selfishness, hatred ,suspicion, and class conflicts between people and therefore was
most beneficial to the society. Its international implication was farreaching.The face of
nonviolence in solving social problems patiently and with perseverance was
demonstrated by his experiments.
As a child I had attended his camp in Punnayurkulam and feel proud to be part of that
movement in some way.
1.Keep away from power and create Janasakthy or self-reliant strength of the people.
2.Janasakthy is the moral might or force of love or Athmasakthy.The medium is love and
not mere empty lip-service. Love is accompanied by sacrifice for the loved one. Here it is
love of entire living things and sacrifice for them. What we call Nishkaamakarma in the
Bhagavad-Gita .He was interested in the Anaasakthiyoga of Geetha.
3.For the sacrifice the Bhoodevi (the five elements) which belongs to God and hence to
all alike and to the society as a whole is made a symbol.
4.On this basis one can bring about a peaceful agrarian revolution .
5.He did not beg for the gift. But for the share for all who are rightly entitled to it.
6.Propagate the right thought by which land ownership and economic maladjustments can
be corrected without serious conflicts.
There were Pradesh bhoodaan committees in respective regions and the land gift deeds
were prepared in duplication duly signed and attested by witnesses ,collected by Pradesh
committee and forwarded to sewasangha,sewagram for signature of Bhava before
redistribution. Pradesh committees had local committees who appointed individuals to
collect the land gift deeds .The representative of Bhoodaan committee, District magistrate
,chairman of village panjayath had to sign the deed and no fee was charged from the
recipient of the land. Within three years the recipient was expected to start cultivation and
he has to cultivate for a minimum of 10 years .At the spot donations also were made in
some cases. The bhoodaan land came under legislation in AP,Bihar,Gujrat,MP,Madras
presidency,Mysore,Orissa,Punjab,Rajasthan,UP,Delhi and Himachal.Gramdaan special
legislatives were in Assam and Rajasthan.
Upto end of October 1965 , 42 lakhs acres donated .Of this only 11 lacks could be
distributed. Highest % of land distribution was in Bihar More land was donated in Bihar
,followed by UP,MP,Andhra,Himachal,Orissa,Maharshtra,Gujarat and Rajasthan. In
AP,Assam,Kerala and Madras the Governments provided advancing loans for
development work in graamdaan villages and subsidizing special sarvodaya co-operative
societies in villages. Since Jan 1957,the emphasis shifted to Gramdan which started in
hamirpur dist in UP. The best organized was in Koraput dist in Orissa.Upto 1967,only
39672 villages received as gramdaan.It was superior to Bhoodaan movement since it
applied sarvodaya principle not only to land but to entire life of village community. It was
easier with that to achieve Bhave’s aim of sarvodaya samaj and to correlate bhoodan
movement with the economic policy of the nation. The second plan recognized the
practical success which is achieved with graamdaan villages will have great significance
for co-operative village movements.
Villages were covered as blocks called a prakhand.These later developed under a block
development officer and a project implementing committee officer under the supervision
of the district collector for community development work .
There had been several restraints for the success of the programme.For example, a land
which is fertile and with facilities of rain/or river irrigation about .78 acre(less than one
acre) is superior to a land holding of 7 acres which is desert area. And just by the area of
the land we cannot assess the equality. The person who receive the land was tested only
for landlessness, not for whether he wants the land ,or whether he is capable of doing
cultivation ,the capacity of him to till land and make produce etc.There were criticisms
but they were more related to implementation of redistribution which was the
responsibility of the respective state Governments and officers.
50 % land donated was having some litigation and 70 % of total collection was infertile
land .The movement had a negative effect. It created a land hunger ,instead of avoiding
greed for land it increased it among people .This was a burning fire which the nation
could never suppress because even now it continues .Suppressed fire when it burns is
dangerous to a nation.Vinobha Bhave thought that by this movement he can do away
with the violent communist movements.% of land collection in predominantly communist
areas(which are fertile lands of Bengal and kerala)was less or insignificant than in the
noncommunist areas. What it aimed at was never attained. Only 8 % of its expected land
was collected at the end of 1961 March.Eventhough such criticisms exist ,the experiment
showed the principles on which India was working for millennia and how it can be
recreated if people are made aware of the benefits of it and the state give proper support
The preindependent rural indebtedness summarized.:-
Deccan Ryots commission Year 1875
Rs 371 /occupant only Analysis of 12 villages in Ahmed nager district
Famine commission 1880.
(not specified) 1/3 landholders in deep debt. Another 1/3 in debt but with power to redeem the debt
Sir Fredrick 1895
45 crores Madras alone
Famine commission 1901 ¼ lost land in Bombay.Less than 1/5 free from debt
Sir Edward Mclagan 1911
300 crores For British India based on estimate of Nicholson for Madras
M ,L.Darling 1925.
600 crores Based on Punjab figure of 900 crores
Central banking enquiry committee 1929
900 crores Based on provincial banking enquiry committee report
Dr A.K.Mukerjee 1935
Agricultural credit department 1937
Mr E.V.S Menon 1938
The figures for the whole Indian union after independence :
Dr .S.N.Naidu 1100 crores
National income committee 913 crores
S.Thirumalai 1800 crores
Rural credit survey of RBI (1951-52):-
1.Proportion of borrowing families in India 51.5 %
2. 63 % rural families in debt. Average debt per family was Rs 283 only.
3.The higher burden was in cultivators with small holdings.
Rs 300 /small holdings on average
Rs 1000 for the large holdings on average
(Debt was more for the large holdings)
4.Average outstanding debts per family was Rs 29-Rs 1200
Rural credit follow up survey (56-57)found an increase in volume of doubt in this period.
1.65 % agrarian labor families indebted in 1956.as against 45 % in 1950.Average debt
increase from Rs 47 to Rs 88.
2.Average debt per indebted family rose from Rs 105 to Rs 133.
3.Total estimated volume of indebtedness of agrarian labor families Rs 143 crores in
1956 against 80 crores in 1950.
All India rural debt and investment survey of RBI(1961-62):-
1.Average debt per household Rs 654
More for cultivators (Rs 719 per house) Noncultivators Rs 429/house
2.Markedly high in Punjab,Rajasthan,Gujrat,Andhra,Madras and Mysore
Low in Bengal,Kerala,Orissa,Assam and J&K.(This is interesting. Because except JK al
other states with low debt rates are rice producing states and suppliers of staple food to
the country and yet they are comparatively free from debt .This point needs special
3.Examination of outstanding debt of cultivation in relation to their cultivating holdings
revealed that incidence of debt per acre was highest in Madras followed by Kerala
,Andhra and Bihar.(Note this point also. The debt of these rice producing places was
directly related to production cost whereas in the other states it was not.)The debts per
acre of cultivated holding exceeded Rs 100.The doubt in this category was very low in
MP,Rajasthan,Maharashtra ,Orissa and Assam.
4.The burden of land debt varied with land size and assets. Debt per acre showed a steady
increase in as the average size of the holding declined ,that is the smaller holding ,the
larger the debt per acre. The average debt formed 5 % of assets of the richer farmer ,9
% in the smaller farmer
The Banking Enquiry committee found that the debt was for productive as well as for
nonproductive activities. Rural credit survey committee(RCS) :- In a noncultivator family
the expenditure accounted for 70 % debts .Nonfarm business expenditure accounted for a
5th and other expenditures for balance of total borrowings. For a cultivator family, the
family expenditure was only 47 %.The capital expenditure on farm was 32 % of total
RCSC Report .Borrowings of cultivators classified according to purpose and duration
Purpose/Duration Government Co-operatives Others Total
Replacement of old debts 0.8 8.7 90.5 100
others 0.8 2.4 96.8 100
More than 80% of short term agricultural debts and more than 90 % of long term
agricultural debts were from private agencies. Half of the borrowed fund utilized for
unproductive family expenditure. A little less than 1/3 rd only on farm improvement
It is noteworthy here that the Reserve Bank of India had classified rural agrarian credit as
short term, medium and long term on basis of the return of credit as well as purpose of the
credit taken as below (Preliminary report in 1936) and the classification in the above
table does not show the term medium ,but actually the long term mentioned in it is the
medium credit .(The long term credit is mainly for making lasting improvements like
provision of drainage systems ,construction of wells ,embankments ,granaries and
storehouses etc and litigation and repayment of old debts and the duration is for 15-20
years and this was previously the duty of the zamindar or the local kings and the funds
came from peoples cooperatives as temple offerings and the emperor as trustee and the
Guru or Brahmin as the surety .)All these are needed in different stages of farming and
the RBI pointed out in 1936 that the long term credit is more important and if effective
steps are to be taken to make the agricultural credit worthy ,this is the first problem which
is to be tackled.
The purpose of borrowing as % of total borrowing is given in the following table.
Purpose of borrowing All India cultivators noncultivator
Capital expenditure on farm 27.8 31.5 6.0
Current expenditure on farm 9.3 10.6 1.1
Family expenditure 50.2 46.9 69.9
Nonfarm expenditure 6.6 2.5 18.5
Others 5.7 6.0 4.4
More than one purpose 0.4 0.5 0.1
Total 100 100 100
46.9 % of total debt was for consumption and not for productive expenditure The split up
of this was ,24 % for social purposes,19 % for productive purposes and 1 % for
miscellaneous items. Large part of debt was unproductive. In 56-57 about 92 % of debt
was for private agencies.
To other agriculturists 24.9 %
To professional money lenders 44.8
To relatives 14.2
Commission agents 5.5
Commercial banks 0.9
Needs to satisfy which the loans were needed by the agriculturists:-
1.Conduct of productive activity at normal levels of efficiency.
Seeds,manure,wages etc.Production needs like livestock,implements,payment of rent
,revenue, current consumption finance (food for family)
2.Development of conservation of resources
Ordinary long term development of long-term resources left unutilized in course of the
current productive activity-construction of wells ,tanks,embankments,trees ,orchard
3.Circumstances of calamity or distress occasioned by famines, floods etc.This would be
above all the requirements of for ordinary production needs and consumption needs.
Causes of debt:-
1Ancestral.As a pious obligation to the forefather’s debts
2.subdivision and fragmentation of holdings.Skill,industry and thrift are needed to
support a family upon a few acres .(The joint family system was doing this efficiently and
whole villages were managed by a few guilds of workers and families .It was to prevent
fragmentation of holdings as individual property ,and because of this co-operative
holdings only the whole village was prospering)
3.Vagaries of climatic condition and natural calamities
4.Ignorance and illiteracy of cultivation
5.failure to provide for deficiencies. Agriculture is subject to law of diminishing returns
(Manure,water,seeds,soil,methods of cultivation).Poverty, tiny plots, and ignorance of
cultivation and climatic peculiarities leads to a diminishing return.(The individual /co-
operative farming and its value as well as climatic conditions were well studied by all
cultivators before independence. They might be illiterate but they knew the crops, the
seasons and economy associated with them )
6.Low income and hand to mouth existence
7.Money lenders and the vicious system of debt
8.high rate of interest
9.Extravagant and improvident borrowing
Marriage ornaments, funeral rites, which are beyond their means. Long seasonal feasts
,kasha observances etc (These observations are not entirely correct as we will discuss in a
10.Maintainance of law and order
The king or Zamindar was the chief security to the land. The spare produce went for the
military expenditure and the agriculture suffered after the 18th century .
11.The litigations (vyavahaara)increased after the Foreign laws were enforced and
individual property right was recognized and this resulted in ruining of funds as well as
the social co-operation
12 Heavy burden was the land and irrigation tax. In 1901 the rigid revenue system forced
the people to borrow.R.C.Dattha(1901) said that it made people impoverished. Heavy tax
and rigid procedure of its collection increased peoples indebtedness.
13.All the marketing facilities which were existing in the previous system of guilds were
The legislation recognized “Debt of its people as a symptom of deep-rooted disease and
took some temporary measures to control and eliminate it .These were
1.Legislation for scaling down the debts
2.Restricting the activity of the moneylender
3.Fixation of rate of interest
4.system of registration and keeping compulsory accounts
But it also recognized that the long-lasting remedy is:-
1.Spread of education
2.Extention of co-operative and joint stock banking
3.Training the borrower in the habits of thrift and saving
4.Agriculture to be made more productive by consolidation of holdings
5.Establishment of subsidiary occupation when there is no agricultural activity
6 population control and reduction of family expenses
The rural credit survey of RBI in the early sixties described the co-operation as a failure
on the grounds that the rich cultivators were sulking away the bulk of the cheap co-
operative credit and releasing it privately to small cultivators at exacerbated rates.53 % of
small cultivators were getting only 11 % of co-0perative credit in comparison to the rich
ones (13 %).The asset of the former was Rs 2500 and asset of the latter 10000 Rs and
above who are taking 55 % of co-operative credit.
Small cultivators Large holding cultivators % increase
53 % 55 % 2 %
11 % 13 % 2 %
Asset value Rs 2500 or less Rs 10000 and above Difference Rs 7500
The question why this increase amount of credit to big farmers with more assets was
answered ,:They are able to raise a marketable surplus .The Government policy was thus
raising the surplus market .The production and income of the small scale farmer had to be
gradually raised and their natural output share had to be increased and that was the aim of
the co-operative (as it was from time immemorial in Rural India )and this did not happen
was the RBI report. The recommendations of the Rural credit summary committee was
followed by the recommendations of the committee on co-operative credit in 1963 .It
suggested organization of co-operatives on the basis of village community as primary
unit ,ensuring state participation in share capital of primary agricultural credit society ,co-
operative society membership to all classes of cultivators, short and medium credits
without mortgage of landed property and credit limits for central co-operative banks
liberalized to obtain larger funds from reserve bank. The Government /state agencies
provide finance indirectly or directly. Indirect credit was through the co-operative
society.(Reference :-K.Madhavadas.Governement financing in India. Agricultural co-
operative credit in S.E.Asia 1967. pp 174-175).It is worth stating that K.Madhavadas was
a native of Punnayurkulam ,a nephew of my father, and husband of my cousin late
The Government representative on board of Banks and societies was limited to 1/3rd of
board or three Government nominees whichever is less. Thus Government was playing
a complimentary role to RBI in the development of c0-operative credit. Direct financing
to farmers by Government had a very long history in India and this was called Taccavi
loans and based on it the British Government had Land improvement Act of 1883 (for
long term loan)and Agriculturists loan Act of 1884(for short term loans).The 1883 Act
was for construction of well, erecting embankments ,irrigation work, protection of land
from floods and erosions and was for 25 years or more and the landed property was
given as security at rate of 6 to 6 3/4th and loan repayable at equal installments
discharging by principal and interest. The 1884 Act was for current agricultural
expenditure including the rebuilding of houses lost in floods and had to be repaid after
In 1957-58 Government spent 258 million Rs with 0.06 %interest and in 60-61 Rs 421
million. In these years Govt loans throughco-operatives was limited to only three
states.The Government loan recovery was like the tax on land and yet there were
continuous overdue (since this was the rule in India even before British rule and the
rulers were very lenient in it ,before they were pressurized by the foreign regime to
collect it or evict )In 60-61 in the three states it was above 80 % and 50-80 % in another
6 states.The taccavvi loan had very long terms of repayment(which the people
considered as ancestral loan and continued to pay before and the rulers allowed overdue)
and very low credits .
In modern India the RCS committee noticed that Govt loans of taccavi nature was
tending to gravitate to the big and large landholders since their borrowing capacity was
four times that of the medium and ten times that of the small cultivators. Thus it was
taken by those who least need it. The RCS Committee general report directed the
government loan to periods of disasters like famine, food scarcity and floods and a co-
ordination between it and co-operative credit.(Report of the committee on Taccavi loans
and co-operative credit 1962 pp 83)
Its main suggestions were
1.Government loan to co-operative banks at interest rates which enable banks to keep
adequate margins between these rates and the rate at which they lend to the affiliated
primary credit societies
2.Before Government provide funds the question whether the co-operative credit
structure is able to undertake the responsibility should be examined ,because a weak co-
operative credit structure will find itself in a further mess if it takes itself this additional
3.The loan should be timely from February to May .
4.The financing should strengthen and not weaken the discipline of co-operative credit
structure. In federal co-operative structures the Govt loans are to apex banks and not
through central bank or a local society.
5.Terms and conditions of Govt loans were specific, clear and carefully considered by co-
operative banks before acceptance. For selection of area where the policy of distribution
of Govt loan to be done, the cooperative apex body was consulted. Full freedom given to
co-operative bank and society in dealing with individual loan application.
SBI and exchange banks had a commercial function and played little role in
Government loans(less than 1 %) and they financed the trade, to estate agriculture and to
areas where production is for market (just like the British period)and their indirect
finance of agriculturists was through merchants and dealers (as in the past Indian
history).Give loan to merchants ,commission agents on security of agricultural products
stored in a place approved by them at 6 to 9 % interest in the movement of the produce
from the Mandis to the consuming center /or different parts .Stocks so pledged were
insured against fire, and bank require insurance against additional risks like floods .It is
kept under lock and key by the bank subject to periodic inspection by a bank official.(All
these were done in the pre-British system by the erstwhile rulers and merchant class and
Brahmins and the entire people of the country and was not new. The system just changed
hands but survived with its own faults and advantages which we will discuss later).
The security of gold and silver and ornaments and other articles like produce of the
temple lands called Nidhi (treasures)by the old economists were existent and the British
saw such nidhi in Madras and Andhra and devised the law in their model.(Padmanidhi
,Samkhanidhi etc in relation to Vishnu temples ).The mutual loan societies (called
chittikkuri /changhathikkuri in the south. See Logan’s manual ) had gradually developed
into a semi banking institution for mutual help and this was to facilitate savings ,relieve
members from old debts, accumulate funds for loans for emergency purposes for all
members of community. There were several distinctive features of considerable value in
this system. It encouraged thrift, mobilized small savings, promoted co-operative
effort, inculcate in the members a habit for punctuality and planning for future
expenditure. It was based on associations, confidence and honest dealings and these were
existent in India for co-operative living and agriculture and this system ,though criticized
by the foreign merchants, administrators and military in initial stages were taken up by
them and used for improvement of their trade, administration and military shows its
utility value as well as strength.
All such systems were incorporated into the new nation in its initial economic and
agrarian policies. The rural credit survey found( 1951-52) certain salient points existing in
different regions of the country.
1.Proportion of dormant societies were more in West Bengal and Bihar
2.Proportion of rural population covered by cooperatives was very low in Bihar, West
Bengal and Rajasthan.
3,Resource position and level of advances was poor in these three states.
4.Proportion of co-operative borrowing to total borrowing was highest in Maharashtra
and Gujarat ,and followed by Madras presidency and AP and Punjab. Very low in Bihar
5.While advances were low ,proportion of overdue also was high in Bihar and West
These suggested that the co-operatives were well developed in Maharashtra ,Gujarat and
followed by Madras and Andhra(The western and southern India) and very low in Bihar
,Bengal (The Eastern India) and Rajasthan(this being not an agrarian state its condition
is different).Punjab and UP had an intermediary position.
When we assess the conditions of one region and apply or project the theory onto another
these factors are applicable. What situations prevailed in these states in preindependent
and independent India and at present should be seen in continuity ,not projecting
everything as a wastebasket theory of one or another type, is the lesson from this. If poor
conditions existed in Bengal and Bihar then, how it continued over the years and
perpetuated by whom and why is also another side of the coin to be considered which is
not in the scope of this book.
It was on the basis of recommendations of V.L.Mehta committee on co-operative credit
(1960) the agricultural refinance corporation of the second plan was formed .
RBI ADVANCES TO STATE CO-OPERATIVE BANKS IN CRORES OF RS
Year Advance Outstanding
1951-58 11.29 7.81
55-56 23.80 12.98
59-60 100.65 74.54
60-61 146.66 89.40
61-62 192-92 122.80
62-63 220.28 134.32
64-65 283.49 148.63
The launching of intensive agricultural production programme was launched in 1960-61.
The principles of co-operative movement was not new in India as we have seen. Since
ancient times it was practiced in various ways. The joint family system
(brotherhood, mutual help)the panchaayaths,(principle of community self help) nidhi in
temples (based on mutual association, confidence and honest dealings ) existed for
millennia (Mamoria C.B.and Saxena R.D Cooperation in India.1960. pp82-83).The
theory of co-operation in India meant better living for all and for moral upliftment of
all. The Mclagan committee report on co-operation in India (1915 . pp 2) observes:-“By
the union of forces material advancement is secured ,and by united action self-reliance is
fostered ,and it is from the interaction of these influences that it is hoped to attain the
effective realization of the higher and more prosperous standards of life which has been
characterized as better business, better farming and better living”. Basically the approach
touches upon all aspects of life. The means for raising productivity ,improving technology
,expanding employment and basic necessities of every member of the community. The
features of the ancient co-operative societies were
1.Organisation of free individuals in self-regulated action ,emphasizing the idea of self-
help ,act of association being both voluntary and a recognition of equality as Athman
/God’s children.(Swaathanthrya,karma,swadharma and samathwa as yoga).
2.Economic benefit was secured through trading and commerce in the widest sense as
3.It is not a seeker after a particular or sectarian privilege but one who conducts business
as dharma for the benefit of all in an unselfish spirit(Nishkaamakarma) who was
respected. The motto was each for all and all for each.
4.The co-operation was concerned with the user, his dharma and honesty ,not on his
wealth or asset ,for benefits to society are commensurate with the use made.
4.It decreased destructive competition among its members by this principle
5.It enabled the realization of advantages of large scale operations
6.Helped to pool the resources of people with small and limited assets and obtain the
benefits of strength through unity
7,Created the feeling of self-help and solidarity and enable its members to resist
exploitation not by social and political upheavals but by circumventing the channels
which lead to such exploitation
8.It combined the high aspirations of calm and strong decisions and strenuous actions. It
sets itself to develop the spontaneous energies of the individuals(based on their three
guna)while training them to collective actions by the aid of collective resources and for
attainment of collective needs.
Early phases in British India.
Here I just point out some attempts by the British legislature to understand the problems
of India and to give help if possible.
1.The recommendations of the famine committee 1901 .Sir Edward Law’s committee
which lead to Indian co-operative societies Act of 1904.
2.Co-operative society Act of 1912.
3.Committee under Sir Edward Maclagan 1914.Report submitted in 1915.It was an
important landmark in the co-operative movement and had made several observations on
the rural credit societies. The salient features he pointed out were
A. They know the co-operative principles and have proper selection of members
B.Honesty is their chief basis of credit
C.Dealings with members only
D.Loans are not given for speculative purposes
E.Scrutiny before advancing loans and vigilance afterwards exercised
F.Ultimate authority is in the hands of the members ,not in the hands of the office bearers
G.Encouragement of thrift and constitution of an adequate reserve fund aimed at
H.Only one vote for one member and maximum publicity in the society is allowed
I.Capital raised as far as possible from savings among the members and neighbors
J.Punctual payments of loans adhered to.
He also noticed the defects in some regions as follows:-
A. Illiteracy and ignorance of masses
B.Criminal negligence of the managerial committee and staff ,misappropriation of
C.Nepotism in advancing loans and punctuality being not enforced .(very lenient)
D.The delay caused in lending support drives people to moneylenders in agricultural
E.The working of society on mercenary grounds under a registrar of co-operative
societies have no humanitarian concerns.
(These are important features and to be compared with our own conditions still existing )
4.The Government of India Act of 1919.By this co-operation became a provincial
Followed by Co-operative society Act of Bombay 1925
Of Madras in 1932
Of Bihar and Orissa in 1935
Of Coorg in 1937
Of Bengal in 1941
Other provinces followed the central Act of 1912 .Rapid growth of movement occurred
between 1919-1930 and Mr Ramdas Pantulu called it the period of expansion (pp 555-
556 Mamoria 1969).
5.The period of depression and after (1928-35 to 1945):-
1929-33 saw the great depression. It was a rude shock to the movement .The prices fell
sharply. Heavy burden of debts on people and they lose interest in the movement .In 1937
a new Agricultural credit department of RBI was set up which stressed need for
multipurpose co-operative societies. With second world war ,the growth of consumer
stores and marketing societies ,milk supply unions ,motor transport societies ,fruit
growers and cane growers associations came up. There was large turn over, accelerated
payments ,shrinkages in overdue and societies gained strength and vigor once again. In
1945 the co-operative planning committee was appointed to bring 30 % rural population
and 50 % villages within the ambit of a reorganized society within a period of 10 years
(by 1955).This urged the RBI to provide greater assistance to the co-operative societies.
Therefore what we see as a post-independent process of co-operative movement is as old
as India itself and has a continuous history to trace.
POST INDEPENDENCE PERIOD
The 15th conference of registrars of the co-operative societies recommended the linking
of credits and marketing. Assistance for construction of godowns where the rat and damp
will not destroy the grain was asked for.(This is the old granary of Mohanjodaro,the ara
/pathayam etc of the kerala agricultural people ).They also recommended setting up of
processing plants by grant of liberal loans and subsidies and the necessity for training the
expert staff .
Rural banking committee(1949-50)suggested formation of rural co-operative banks and
expansion of urban banks, central banks and provincial banks to serve most of the needs
of the rural area. A major development was in 1951,the appointment by RBI of a rural
credit survey committee(RCSC) which submitted report in 1954.It noticed substantial
deviation from co-operative principles and policy .It concluded “co-operation has failed
but co-operation must succeed”.
The reasons for failure were functional and structural deficits ,administrative deficits and
dearth of suitable personnel to conduct the affairs of the society ,lack of training
,background of mass illiteracy ,and deficiency of communication networks in villages, and
also storage and other vital requirements. It recommended an integrated scheme with three
fundamental principles for rural credit.
1.State participation at various levels
2.Co-ordination of credit and other economic activities especially processing and
3.Trained and efficient personnel responsible to the needs of the rural population should
be in the administration.
It also recommended the nationalization of the Imperial bank of India to undertake
marketing and processing of co-operative societies. In March 1955 ,the recommendations
were approved first by the 2nd co-operative congress n Patina and later by the 1st
conference of ministers for co-operation in 1955 itself at New Delhi. These
recommendations were the basis for the second five year plan .(Also refer The Ministry
of community development .Panchayathi Raj and co-operation sahakaari samaaj 1962 pp
48-52) .In the second plan building up of a strong co-operative sector was one of the
central aims of National policy and pilot projects had to be undertaken on co-operative
farming and co-operative societies. It is here the earliest pilot projects done at
Punnayurkulam in these lines by the initiative of .K.G.Karunakara Menon is significant.
The National development council resolution(1959) said the basic objective of the co-
operative policy was rebuilding the rural economy and increasing agricultural
production. A working group was set up under its recommendations in 1958 for
implementing its resolutions. The policy letter of 1959 May states the salient features of
the policy as:-
1.Organisation of village community as primary unit
2.Societies to function as multipurpose societies
3.Organisation of the new and revitalization and reorganization of the old societies to be
Taken up immediately
4.Village panchayath and co-operative society should be co-terminus to their jurisdiction
5.Loans on basis of purpose ,not on basis of property
6.Membership made universal
7.Co-operative marketing,storage,processing accelerated and expanded
8.Staff of co-operative departments strengthened and adequate arrangements made for
9.Movement must be in hands of nonofficial
10.Takavi and loans channeled through co-operatives
The functions of village panchayaths and co-operatives were clearly demarcated with full
co-operation between the two. The board cannot nominate the chairman. The board
chairman should be an honorary worker and a popular leader with enthusiasm and
ability of integration .The interest was at uniform rates. The activities of the co-operative
was supervised by the supervising unions and state Governments and local defects
rectified by them .These gave proper timely support and help to rural population .
The Mysore conference of state ministers of co-operatives(1959 third conference)was
followed by setting up of an expert committee on co-operative credit under V.L.Mehta
(reported in May 1960)The 4th conference was in 1960 at Jaipur and working group of
Panchayath and co-operatives under chairmanship of S.D.Misra was formed in 1961 to
study the panchayathi raj and the co-operative movement in detail. In the 5th conference at
Luck now the committee for co-operative administration (1963)was set up. It was under
chairmanship of V.L.Mehta.
The 4th plan gave emphasis to consolidation ,elimination of existing weaknesses and a
viable co-operative credit system.Programmes for high yielding paddy and high fertilizer
responsive seed programmes were resorted to.It tried to strengthen the co-operative in
fisheries,diary and animal husbandry.And it studied the areas where the co-operative
movements were failure(Bengal and Bihar and Rajasthan).The people were still
considering the Government as the totally responsible body for whatever they go through
(Registrar as representative of Govt treated as Brahma, Vishnu ,Shiva of the society pp
578 ).They were too illiterate to understand that they too are responsible partners in the
movement. The problem of greedy moneylenders and intermediaries still persisted and the
needs of the agriculturists was not totally met with. The uneven development in different
states were due to the prior conditions of the development, the nonofficial leaderships
available, the presence or lack of official imagination and vision, flexibility of rules and
procedures, nature of economy ,level of thinking, savings and assets available, land
ownership patterns and distribution etc.
The co-operative credit system was reorganized in two parts .
1.The short and medium credit as a three tier system
2.The long term credit
The three tier system:-
1.The apex bank(in some the entire state is the apex )
2.The central bank(the district)
3.The primary agriculture /credit society at village level as the base
The long term credit:-
The central mortgage bank for each state at apex level
The primary level mortgage bank at Taluka /District level
In Kerala state in 1965-66 the movement was developed well but had still to make an
impact on rural economy but the foundation stone was laid very strongly.
There were 2104 societies ,and the membership was 1238000,share capital in Rs was
428 laks,deposits were 443 lakhs and loan advance during the year was 1197 lakhs and
percentage overdue was only 21 %.
The story of Punnayurkulam and its co-operative movement and farming experiments in
kol puncha in the period of 1947- 1969/70 is worth mentioning since it is the most rice
producing area in entire South Malabar and after this period this potential is neglected /or
not tapped properly by any of the subsequent state Governments .The laws are
implemented with machinelike accuracy and the results awaited ,but no sincere efforts to
revitalize the agrarian production has been undertaken after 1970.This is where the
present study is important.
Community development programmes and reconstruction of rural areas in
preindependent India were experimented in Bengal at Sriniketan (Ravindranath Tagore)
,Marthaandam project (in 1921 by the Travancore Rajah)in Baroda(19310and
Gurgaon.The Firka development in Madras presidency was based on Gramaswaraj
which merged with the National Extention Service(NES)in 53-54.It was a co-ordinated
project of agriculture ,food and nutrition related to public health and veterinary science
,industries and communication .The sarvodaya scheme started in Preindependent India in
Bombay. In post independent India The Etawah and Nilokdhari projects were also done as
Any big project needs great effort and very cautious and well thought out
procedures. The organizations should have skill to do it, ample finance to do it ,trained
personnel to help, and therefore the expansion programme can happen in a phased way
only. The need for honest and efficient organization and administration in survival and
success of any project cannot be underestimated. What we need is not new policies but
good leaders who have the knowledge and the will to serve the nation selflessly. There is
no dearth of laws .No dearth for policies in Indian constitution .The revitalization should
start at the base of the pyramid ,in each village by local leaders with sincere leaders at the
apex who know the needs as well as the regional peculiarities of land and its produce and
the variability of climatic conditions and the compassionate heart to rise up to occasions
of natural calamities.