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"Education is a liberating force, -and in
our age it is also a democratising force,
..
cutting across the barriers of caste tJnd
class, smoothing out inequalities imposed
by birth and other circumstances. "
- Indira Gandhi
Indira Gandhi MNR-OOl
t@J
,
National Open University
School of Agriculture Indian Agricultural
Development

Block

3
INSTITUTIONAL INFRASTRUCTURES:
PUBLIC, PRIVATE AND PUBLIC-PRIVATE
PARTNERSHIPS
UNIT 9
Agricultural Credit, Insurance, Warehouses
, and Corporations 5
UNIT 10
Public Distribution System 34
UNIT 11
Cooperatives; Farmers Organization and
,~on-Governri1ent Organizations 46
UNIT 12
. Agricultural Research, Education and Extension in India 65
PROGRAMME. DESIGN COMMITTEE
Prof Panjab Singh ' Dr. T. Haque, Former Chairman
Former Vice Chancellor, Banaras Hindu University Commissi0l}"t\gricultural Costs and Prices .
Banaras (UP) Ministry ifii'Agriclllture, Shastri Bhawan
New Delhi-I 10 001
Prof. D. Jha, Former Director
National Centre for Agri. Eco. & Policy Research Dr. Suresh Babu
Library Avenue, !'usa, New Delhi-I 10 012 International Food Policy Research Institute
(IFPRI), 1033 K Street, NW Washington
Dr. R.P. Singh, Former Head
DC 20006, US
Division of Agricultural Economics
Indian Agricultural Research Institute (lARI) Dr. V Balaji
Pusa, New Delhi-I 10 012 Head, Information Resource Management
Dr. P.N. Mathur , International Crop Research Institute 'for
Former Deputy Director Generalifixt.), ICAR Semi-Arid Tropics (ICRISAT)
16B, Pocket-AN, DDA Flats, Shalimar Bagh Patancheru-502 324 (AP)
New Delhi-I 10 088
Dr. Mruthyunjaya, National Director
Dr. lp. Mishra National Agriculture Innovation Project
Assistant Director General (P&ESM), ICAR Pusa, New Delhi-I 10 012
Ministry of Agriculture, Krishi Bhawan
New Delhi-I 10 001 Dr. VP.S. Arora
Centre for. Business Management
Dr. Prem Vashishtha GB Pant University of Agriculture & Technology'
Agro Economic Research Centre Pantnagar-263 145 (Uttaranchal)
Delhi University, Delhi-110 007
Dr. Pramod Kumar
Dr. Praduman Kumar, Professor (Retd.)
Division of Agricultural Economics
Division of Agricultural Economics
IARI, Pusa, New Delhi-I 10 012
fARI, Pus a, New Delhi-1I0 012
Prof. Madhulika Kaushik
Dr. M.S. Bhatia, Member
Commission for Agricultural Costs and Prices School of Management Studies
New Delhi- 110 00 I IGNOU, New Delhi-I 10 068

Dr. Alka Singh Faculty Members (SoA. IGNOU)


Division of Agricultural Economics Dr. M. K. Salooja, Professor
IARI, Pusa, New Delhi-I 10 012 Dr. M.C,. Nair, DY. 'Director (Co-coordinator up
to April. 2006)
Dr. Ranjit Kurnar
Dr.' Indrani Lahiri, Asstt. Director (Coordinator
Division of Agricultural Economics
up to April, 2006)
IARI, Pusa, New Delhi-I 10 012
Dr. D.S. Khurdiya, Sr. Consultant
Dr. K. Barik Dr. P.L. Yadav, Sr. Consultant
School of Social Science Shri Jaya Raj, Sr. Consultant
IGNOU, New Delhi-I 10 068 Shri Rajesh Singh, Consultant

Programme Coordinators: Prof. B.S. Hansra. Prof. M.K. Salooja and Dr. Praveen Kumar Jain

BLOCK PREPARATION TEAM


. lInit Writer Mrs. Mythili Jagannathan (Unit 12)
Dr. Prarnod Kumar (Units 9 & 11) 6A, DDAFlat, Masjid Moth
Division of Agricultural Economics Near Chirag Delhi,' New Delhi-I 10 068
IARI, New Delhi-1I0 012
Editors
Dr. Ashok Kumar (Unit 10) Dr. Praveen Kumar Jain, Lecturer
Dy. Director (TFC) SOA, IGNOU, New Delhi-I I 0 068
Department of Food and Public Distribution
Krishi Bhawan, New Delhi-I 10 001 Dr. K.N. Rai, Senior Consultant
SOA, IGNOU, New Delhi~IIO 068

MATERIAL PRODUCTION
Mr. Rajiv Girdhar Ms. Rajshree Saini Sh. Ramesh Nath
Section Officer (Publications) (Proof Reader) (Word Processing)
SOA-, IGNOU, New Delhi SOA, IGNOU, New Delhi SOA, IGNOU, New Delhi

Feb.,.2012 (Reprint),
© Indira Gandhi National upen University. 2008,
l~n~:f78~81-266-3617-4 .' . ,
All rights 'reserved:N.<ipart (jf this work may be reproduced in any form, by mimeograph or any other
means, without permission in, writing from the Copyright holder.
Further information on the lndira Gandhi National Open University courses may be obtained from the
University's office at Maidan Gorhi, New Delhi-Ilt) 068 or the official website of IGNOU at www.ignou.ac.in.
Printed and published on behalf of Indira Gandhi National Open University, New Delhi by the Director,
School of Agriculture.
Laser typeset by: Rajshree Computers, V-166A, Bhag~ati Vihar, (Ne~'l ec.-2, Dwarka). N.Delhi-II0059

Printed at :- Berry ari Press A-9,Mayapuri e-I New lIelhi-11 006.,


BLOCK 3 INSTITUTIONAL
INFRASTRUCTURES: PUBLIC,
PRIVATE AND PUBLIC-
PRIVATE PARTNERSHIPS
Indian agriculture is characterised by pre-dominance of small and margirial farmers.
Further, globalization, privatization and technological advancements in agriculture
'poses new challenges as well as opportunities in agriculture. The present era of
globalization requires application of scientific knowledge for agriculture
development. To make this possible a set of institutional infrastructure is needed.
Agricultural credit, insurance, warehouses and corporation, public distribution
system, cooperative and farmers organization, education, research and extension
are the important area for which strong institutional infrastructure are indispensable.
Knowledge and awareness of different institutional agencies are important in
order to formulate appropriate farm plans and take relevant decisions.

Unit 9 deals with the institutional infrastructure for agricultural credit, insurance,
warehouses and corporations. Both institutional and non-institutional sources are
working to meet the credit need of the agriculture sector.Agriculture production is
subjected to risk and uncertainty due to biological nature of agriculture, natural
calamities and price fluctuations. To protect the farmers from risk and uncertainty,
insurance programmes have been started. Warehouses and storage infrastructure
have been created to protect the quality and quantity of stored agricultural products.

Unit 10 explains the background of public distribution system in India. An efficient


public distribution is required to ensure the food and nutritional security of the
people. Public distribution system aims to provide cheaper foodgrains to the'
larger number of population living in different part of the country particularly tribal,
remote, hilly and inaccessible areas .
.
In India, there are large numbers of small and marginal farmers. They are technically
and financially so weak that unless they are organised into cooperatives there is
less hope for their socio-economic development. Cooperatives acted in India as
an instnunent of economic development particularly in the rural areas. Unit 11
explains the importance and structure of cooperatives in the country. The unit will
also emphasize the importance and organization of various farmers and non-
government organizations for agriculture and rural development.

Unit 12 deals with the agricultural research, education and extension system in '
. India. Institutional development for agricultural research,education and extension
has made spectacular growthafter independence. The unit will define the roles
and importance of agricultural research, education and extension for Indian'
agricultural development.

The material provided in this block is supplemented with various examples and
activities which will make the learning process simple and interesting. A list of
reference books has been provided at the end of each unit for further detailed
reading.
UNIT 9" AGRICULTURAL CREDIT,
INSURANCE, WAREHOUSES
AND CORPORATIONS
Structure
9.0 Objectives

9.1 Introduction
9.2 Agricultural Credit Structure
9.2.1 Sources of Agricultural Finance

9.2.2 Cooperative Credit Societies

9.2.3 Social Control and Nationalization of Banks

9.2.4 Regional Rural Banks

9.2.5 Large-Sized Adivasi Multipurpose Cooperative Societies (LAMP)'

9.2.6 Fanners Service Societies (FSS)

• 9.2.7 Deposit Insurance and Credit Guarantee Corporation ofIndia (DICGC)

9.2.8 Micro-Finance

9.2.9 Higher Financing Agencies

9.3. Insurance Infrastructure


9.3.1 Pilot Scheme on Crop Insurance

9.3.2 Comprehensive Crop Insurance Scheme

9.3.3 National Agricultural Insurance Scheme

9.3.4 Farm Income Insurance Scheme (FIIS)

9.3.5 Rainfall Insurance

9.4 Infrastructure for Warehousing and Corporations


9.4.1 National Cooperative Development and Warehousing Board

9.4.2 Central Warehousing Corporation (CWC)

9.4.3 State Warehousing Corporations (SWC)

9.4.4 Food Corporation of India

9.4.5 Cooperative Sector

9.4.6 Rural Godowns

9.4.7 Cold Storage

9.5 Let Us Sum Up

9.6 KeyWords

9.7 Some Useful BooksIReferences

9.8 AnswerslHints to Check Your Progress


5
I
Institutional Infrastructures:
Public, Private and Public- 9.0 OBJECTIVES
Private Partnerships
After going through this unit, you will be able to:

• describe the institutional infrastructure development for agricultural credit,


insurance, warehousing and corporations;

•• analyse the performance of financial institutions along with progress in agricultural


insurance sector;

• discuss the development of warehousing facilities in the country; and

• outline the role of cooperatives and corporations in the development of


agriculture in the country.

9.1 INTRODUCTION
Fann finance plays a vital role in the agro-socio-economic development ofthe country
both at micro-level/fanners and at macro level. A number of institutions have been
promoted to provide farm finance. Knowledge and aware~ess of different institutional
agencies are important for the farmers to formulate appropriate farm plans and take
relevant decisions. Insurance is an instrument to protect the farmers income from
crop losses, induce them to adopt latest technology and take up commercial
agriculture. A number of steps have been taken by the govemment to set up a sound
system to be able to efficiently and substantially undertake crop insurance. In addition
to field losses, the country also losses in large quantity of agricultural produce in the
absence of proper storage system. Storage of farm produce adds to farmers income,
stabilizes prices, reduces losses of produce which has the potential to meet food
security. Recognizing the importance of storage, the Govemment 0 I Indiainitiated
creation of storage structures and is also promoting private participation to set up
storage structures especially cold storages. The unitwould.appraise you about the
r
credit, insurance and storage facilities available in the country.

9.2 AGRICULTURAL CREDIT STRUCTURE


The Indian farmers in general are poor and require outside financial help. In order to
meet their cash requirement for performing fanning operations, they requires fmancial
help. The various sources of agricultural finance in India can be grouped into
institutional and non-institutional sources.

9.2.1 Sources of A-gricuItural Finance


Sources of agricultural finance can be divided into two categories:
1) Non-institutional sources

0 Money lenders
ii) Relatives
ill) Traders
iv) Commission agents
v) Landlords
6
2). Institutional sources Agricultural Credit, Insurance,
Warehouses and Corporations

o Cooperatives

ii) Scheduled Commercial Banks.

ill) Regional Rural Banks (RRB)

It is observed from the Table 9.1 that the share of non-institutional sources of finance
has reduced from 93 per cent in the year 1951 to 31 per cent in 1991. This has
mainly been possible because of the conscious and concerted efforts of the
government and policy makers leading to increased accessibility of institutional
sources offinance.

Table 9.1: Relative Share of Borrowing of Cultivator Households from


Different Sources

(Percent)

Sources of Credit 1951 1961 1971 1981 1991

A Non-Institutional 92.7 81.3 68.3 36.8 30.6

I) Money lenders 69.7 492 36.1 16.1 17.5


!
2) Traders 5.5 8.8 8.4 32 22

3) Relatives/fri!£: . 142 8.8 13.1 8.7 4.6

4) Landlords and others 3.3 14.5 10.7 8.8 6.3

B. Institutional 7.3 18.7 31.7 63.2 66.3

1) Government, etc. 3.1 15.5 7.1 3.9 5.7

2) Cooperative societies 3.3 2.6 22.0 29.8 23.6

3) Commercial Banks 0.9 0.6 2.4 28.8 352

Others - - 02 0.7 1.8

C. Unspecified - - - - 3.1

Total 100.0 100.0 100.0· 100.0 100.0

Source: All India Debt and Investment Survey and REI Bulletin, February 2000

Table 9.2 presents the flow of credit to agriculture sector by various institutional.
sources. You can see that the amount of credit that has been disbursed stands at
Rs ..62;046 crores in 20011-02 to Rs 2,00,000 crores in year 2006-07. It is
projected that the amount of credit that would be purveyed through various
institutional sources would stand at Rs 5,75,427 crores by the year 201 1-12. This
would demand that the health and performance of the financial institutions be
continuously monitored and supported.

7
Institutional Infrastructures: Table 9.2: Actual and Estimated Flow of Agricultural Credit by Institutional
Public, Private and Public-
Private Partnerships
Sources in India

(Rs. crore)

Particulars/ Commercial Short Long Total Regional Other Grand


Agency Banks Term Term Coop. Rural Agencies Total
Coop. Coop. Banks Banks
Banks Banks

2001-02 33587 20818 2707 23525 4854 80 62046

2002-03 39774 20940 2696 23636 (:JJ70 80 69560

2003-04 52441 23721 3154 26875 7581 84 86981

- 2004-05 81481 28821 2410 31231 12404 193 125309

2005-06 116447 35084 2168 37252 14076 - 167775

2()()M)7 141000 40800 2200 43000 16000 - 20‫סס‬00

2007-08 176250 46512 2420 48932 2‫סס‬00 - 245182

2008-09 220313 53489 2662 56151 25000 - 301463

2009-10 275391 64IS7 2928 67115 31250 - 373755

2010-11 344238 77024 3367 S0391 39063 - 463692

2011-12 430298 92429 3873 96302 48828 - 575427

Source: Working report ofthe Eleventh Five tear Plan Document, Government of India

Keeping in mind the increasing importance of institutional sources in agriculture credit


in the country, it will be better to discuss more on institutional sources of credit. The
structure and progress of various institutional sources of agricultural credit are
discussed in following sections.

9.2.2 Cooperative Credit Societies

The cooperative movement was initiated in 1904 through the establishment of


cooperative credit societies. The societies were organized to relieve the indebtedness
of rural people and promote thrift. The structure cooperative credit institutions in
.India are shown in the Fig. 9.1. . .

Cooperatives in India are organized in two systems i.e., CA) Three tier and (B)
two tier structures. Both cooperative credit societies and non-credit
cooperative societies have three-tier structure and two-tier structure in all the states
except Bihar, Jammu and Kashmir, Maharashtra and Uttar Pradesh, where the
structure is unitary.

8
Cooperative Credit Institutions Agricultural Credit, Insurance.
Warehouses and Corporations

Urban Cooperative Banks Rural Cooperative Credit


(UCB)(1853) Institutions (109924)

Scheduled UCBs
(55)
-.
Operating in State Cooperati ve District Central Primary
single state (31) Banks (31) Cooperative Agricultural
Bunks (367) Credit Societies
( 108779)

Operating in
Single State
(1788)

Fig. 9.1: Structure of cooperative credit institution in India

Note: Figures in brackets indicate the number of institutions at end-March 2006foJ' UCBs
and at end-March 2005 for rural Cooperative credit institutions.

A. Three Tier Structure

In this system at the lowest tier is the Primary Agricultural Credit Societies (PACS) .
that are organized at the village level, the second tier is the District Central Cooperative
Banks (DCCB) organized at the district level and the third and uppermost tier is the
State Cooperative Banks (SCB) organized at the State Level.

a) Primary Agricultural Cooperative Credit Societies (PACS)

Consequent to the enactment of Cooperative Societies Act of 1904, PACS came


into operation following the guidelines of the Raiffesien model. The area of operation
of these societies is a village and is meant for provision of requisite short-term and
medium term loans to the fanners. PACS undertake following roles.

1) Borrow adequate and timely funds from DCCBs and help the members in
financial ~natters.

2) Attract local savings in the form of share capital and deposits from villagers,
thereby inculcating the habit of thrift,

3) Supervise the end use of credit.

4) Distribute fertilizers, insecticides and seed to the needy fanners.

5) Provide machinery on hire basis to the farmers,

6) Associate with the programmes and plans meant for the socio-economic
development of the village.

7) Involvement in the marketing of farm produce on behalf ofthe fanner-borrower.

8) Provide storage facilities and marketing finance.

9) Supply certain consumer goods like rice, wheat, sugar, kerosene, cloth, etc., at
fair prices.
9
'.-
Institutional Infrastructures: PACS were mostly concentrated in the Western and Eastern regions of the country,
Public, Private and Public-
Private Partnerships
The North-Eastern region is relatively underserved. On an average, a pAc~served
seven villages for the country as a whole at end-March 2005. However, PACS in
Southern and Eastern regions operated with a higher membership and borrowing
members. The number of profit-making PACS was more than the n~nber ofloss
making PACS in Northern, Eastern and Central Regions. Out-of 1,08,779 PACS
as oh march 31,2005,66,756 (61.4 per cent) were viable, 32,614 (30.0 per-cent)
potentially viable, 4,741 (4.4 per cent) dormant, 2,033 (1.9 percentjdefunct and
2,635 (2.4 per cent) others. Problem of viability was most acute in the North-
Eastern region with nearly 33.4 per cent PACS being dormant. The Western Region
had highest share of viable PACS (viable/potentially viable). ~

b) District Central Cooperative Banks (DC CB)


These banks form the link between State Cooperative Banks arid PACS. They are
meant to meet the credit requirements ofPACS. They also undertake banking business
such as accepting deposits from public, collecting bills, cheques, drafts, etc., and
~'providing credit to the needy person. The area of operation of the banks varies from
the taluk to the district, but in most of the States fueir operations are confined to the
taluk level. Membership is open to individuals and societies, working in its area of
operation. Marketing societies, consumer societies, farming societies, urban banks
and PACS are usually enrolled as members of the banks. The specific functions of
the banks are as follows:

1) Supervise and inspect the activities ofPACS and help the credit societies run
smoothly.

2) . Maintain close and continuous contact and gulde the primary societies and
provide leadership to them.

3) They undertake non-credit activities like supply of seeds, fertilizers besides


sugar, kerosene and other consumer goods.

4) They provide requisite funds to the societies under their control.

5) They accept deposits from the member societies as well as from public.

c) State Cooperative Banks (SCB)


These are the cooperative credit organizations present at the state capitals. DCCBs
and PACS are the members ofthese banks. These institutions supervise activities or
the member banks and mobilize the financial resources deploy them among the
member banks. They serve as a link between the RBI and thePACS. The specific
functions ofthe State Cooperative Banks are..

1) They help the State Governments in formulating development plans wi th regard


to cooperative institutions.

2) They co-ordinate the policies of the cooperatives with the Government.

3) They formulate and implement uniform credit policies regarding cooperative


development in the State.

4) They act as banker's bank in DCCBs, supervise, control and guide the activities
ofDCCBs.
\
5). They grant subsidies to DCCBs for the smooth functioning of cooperatives.

10
6) Similar to any commercial bank, they also perform normal banking operations.
B. Two Tier Structure Agricultural Credit, Insurance,
Warehouses and Corporations
Under the two tier structure of cooperative credit, there are two tier one is state
level and the other is at the districtltaluka levels. The state level organization is called
State Cooperative Agriculture and Rural Development Banks (SCARDB). The
.district ltaluka level organization is called Primary Cooperati ve Agriculture and Rural
Development Banks (PCARDB).

As at the end-March 2005, the long term cooperative credit structure consisted of
20 State Cooperative Agriculture and Rural Development Banks (SCARDB) and
727 Primary Cooperati ve Agriculture and Rural Development Banks (PCARDB).
Ofthe 20 SCARDBs, eight were with U1~tarystructure with branches, while twelve
were federal/mixed in nature. In those States that were not served by the long-term
structure, separate sectionsofthc state cooperative banks looks after the long-term
credit needs. In the North' Eastern region, only three States (Assam, Manipur and
Tripura) had long-term structure.

a) Primary Cooperative Agr'iculture and Rural Development Banks


(PCARDBs)
The Land Mortgage Ban ..ks (LMBs) were estab-lished in the year 1920 in Punjab.
Later during the period 1920-29 many Land Mortgage I3anks were established in
Punjab, Madras, Mysore, Assam and Bengal. In the year 1974, LMBs were renamed
as LOBs in Andhra Pradesh Primary LDBs are generally organized to serve the
farmers at taluk level. The specific functions are:

1) They provide long term finance to the needy farmers for the development of_
land, increasing agricultural production and productivity ofland.

2) They provide loans for minor irrigation and for redemption of old debts and
purchase ofland.

3) Farmers interested in purchasing tractors, machinery and equipment are


financed.

4) The banks also provide finance for construction onium structure.

5) They mobilize rural savings.

The LOBs are now being termed as Primary Cooperative Agricultural andRural
Development Banks (PCARDB). Out of727 PCARDBs operating in 11 States,
only 262 PCI}RDBs made profits. PCARDBs operating in only six States (Himachal
Pradcsh, Punjab, Orissa, Rajasthan, Maharasbtra and Kerala) eamed net profits.
PCARDBs in other States (Chhattisgarb, Haryana, West Bengal, Karnataka, Madhya
Pradesh ana Tamil Nadu) incurred net losses.

b) State Cooperative Agriculture and Rural Development Banks


(SCARDB)

As an apex bank in the two tier Cooperative credit structure, it provides long-term
finance to PCARDBs and also to its affiliated branches working in the stateS.
Branches ofSCARDBs. PCARDBs and individual entrepreneurs are the members
of the SCARDBs. NABARD and Life Insurance Corporation (UC) subscribe for
its debentures in large amounts. NABARD is also the refinancing agency to the
SCARDBs.1t acts as a link between NABARD and the Government in the long-
term banking transactions. It supervises, inspects and guides the PCARDBs in their
..... ...
,
11
Institutional Infrastructures: banking operations. It floats debentures for raising necessary funds. It inculcates the
Public. Private and Public-
spirit and practices ofthrift among the member banks by mobilizing savings and
Private Partnerships
stimulating capital formation. The SCARDBs generally purveys loans to member
banks for the redemption of old debts, improvement, reclamation and developments
of land, purchase of agricultural machinery and equipment and development of minor
irrigation.

9.2.3, Social Control and Nationalization of Banks


The private sector banks were predominantly urban-oriented and controlled by a
few large industrialists and were not properly equipped to help achieve the basic
socio-economic objectives ofthe nation. The credit needs of agriculture, small-
scale industries and also weaker sections such as small traders and artisans continued
to be ignored. This becomes more evident from the fact that the total bank credit
advanced to agriculture sector was barely one per cent as on June 1967. This
compelled the imposition of social control over banks in 1968 with the main objectives
of achieving a wider spread of bank credit, directing a larger volume of credit flow
to priority sectors. The social control too did not yield desired result and it was felt
that the nationalization was the only alternative. Accordingly on )9th July 1969, the
Government of India promulgated an ordinance called the Banking Companies
(Acquisition and Transfer of Undertakings) Ordinance 1969, under which 14
commercial banks which had deposits of not less than Rs. 50 crore were nationalized.
The 14 banks were:

1) Central Bank ofIndia,

2) Bank ofIndia.

3) Punjab National Bank,


4) Bank of Ba rod a,

5) United Commercial Bank,

6) Canara Bank,

7} United Commercial Bank,


8)' DenaBank,

9) Union Bank ofIndia,


10) Allahabad Bank,
11) Syndicate Bank,

12) Indian Bank,


13) Bank of Maharashtra, and

14) Indian Overseas Bank.

Credit was no longer to be provided only to those who could furnish security in the
form of property and projects. Spurred by the success of first spell of nationalization
of 14 commercial banks six more banks in the private sector, having deposits not
less than Rs. 200 crore were nationalized on 15 April, 1980. The six banks were:

1) Punjab and Sind bank,

2) .Andhra Bank,
12
3) New Bank ofIndia, Agricultural Credit. Insurance.
Warehouses and Corporations
4) VijayaBank,

5) Oriental Bank of Commerce, and


.
6) Corporation Bank.

Branch expansion received a further spurt between January, 1979 and March, 1984.
Over this period, the public sector banks opened 7,612 new offices, of which 5,384
offices were in unbanked centres.

The total number of branches of schedule commercial banks at the end-June 2006
was 69,417 comprising ono, 77 6 rural branches, 15,370 semi-urban branches and
23,271 urban and metropolitan branches (Table 9.3). The Southern region continued
to account for the highest percentage of existing bank branches, followed by the
Central, the Eastern, the Northern and the Western regions. The share of North-
Eastern region remained low at 2.8 per cent at end-March 2006. During 2005-06,
most of the new branches were opened in the Northern (286) and Southern (252)
regions (Table 9.4).

Table 9.3: Ruraland Urban Distribution ofCommerciaIBank Branches in India

Number of Branches As on June 30, 2005 As on June 30, 2006

Rural 307551, 30776


(44.9) (44.3)

Semi-urban 15174 15370


(22.1) (22.1)

Urban 11678 12008


. (17.0) (17.3)

Metropolitan 10942. 11263


- .---
(16.0) (16.2)

Total 68549 69417


(100.0) (100.0)

.Table 9.4: Region-wise Distribution of Commercial Bank Branches

Region Number of Number of Branches Average Population


• Branches as Opened During (in '000) per Bank
on June30 Branch as at end-June

2005 2006 - July 2004 July 2005 to 2005 2006


to June 2005 June 2006
Northern Region 11359 11634 310 286 13 13

North-Eastern Region. 1897 1913 14 18 22 22


Eastern Region 11984 12074 139 94 20 20
Central Region 13765 13879 196 138 20 20
-.
I Western Region 10606 10738 232 145 15 15

Southern Region 18938 19179 392 .. 252 12 12

All India . 68549 69417 1250 93l· 16 16

13
Institutional Infrastructures:
9.2.4 -
Regional Rural Banks
Public, Private and Public-
Private Partnerships
The Regional Rural Banks (RRB) were set up in 1975 to supplement the efforts of
the commercial banks and the cooperatives in extending credit to weaker sections
of the rural community-small and marginal farmers, landless labourers, artisans and
other rural residents of the small means. The intention in having these new banks
was that there should be an institutional device which combined the local feel and
familiarity with the rural problems which the cooperatives possessed and the degree
of business organization and modernized outlook which the commercial banks had,
with a view to reaching the rural poor more extensively. Consequent upon the
recommendations of the Working Group, 5 RRBs were initially set up in 1975 that
increased to 196.

In the wake of introduction of financial sectorreforms in 1991-92, the viability of


RRBs emerged as the most crucial factor in deciding about their desired role under
the new economic scenario. The fmancial health ofRRBs turned weak mainly due to
..•.
its limited business flexibility with hardly any scope of expansion/diversification, smaller
size ofloans with higher exposure to risk-prone advances and professional in-
efficiency in financial deployment. To strengthen RRBs and improve their performance,
the RBI allowed RRBs to lend to non-target groups, deregulated their deposit and
lending rates and permitted investment of their surplus funds in profitable avenues.
These measures were supported with well-defined business plan preparation from
the branches, time bound implementation for attaining profitability, human resource
development programmes and organizational development initiatives as an integrated
tool for turn around. The productivity ofRRBs, both in terms of per branch and per
employee, increased significantly during last 10 years. An improvement in the
performance ofRRBs from 2000-01 onwards is particularly significant (Table 9.5).

Table 9.5: Evolution ofRRBs: Selected Indicators


(Rs. crore)
Parameter 1980 1985 1990 1995 2000 2001 2002 2003 2004
No.ofRRBs 85 188 196 196 196 196 196 196 196
Capital 21 46 91 166 1959 2143 2143 2141 2221
.Deposits 222 1315 4023 11141 32226 44539 44539 49582 56295
Investments 20 164 eo 1348 77(J.) 9471 947] 17139 21286
Advances 262 1405 3384 5987 12427 17710 17710 20934 25038
Total Assets 426 2320 (J.)81 14886 42236 56802 56802 62500 70195
Interest Earned NA NA 480 1158 3938 5191 5191 5391 5535
Other Income NA NA 113 72 207 370 370 430 697
Total Income NA NA 593 1230 4145 5561 5561 5821 .6231
Interest expended NA NA 326 851 2565 3329 3329 3440 3363
Operating expenses NA NA 254 657 1056 1459 1459 1667 1825
Provisions and NA NA - 120 96 163 163 132 289
contingencies
Tot'}l expenses NA NA 581 1509 3621 4787 4787 5107 5187
Operating profits NA NA 12 -279 524 774 774 714 1044
Note: Total expenses are excluding provisions and contingencies.
Source: Reserve Bank of India
9.2.5 Large-Sized Adivasi Multipurpose Cooperative Agricultural Credit, Insurance.
Warehouses and Corporations
Societies (LAM?)
LAMPs were established in December, 1971. These societies were expected to
. provide through single window, all types of credit including consumption credit.
Intensification and modernization of agriculture with appropriate technical guidance
and improving the marketing of agricultural and forest products in the tribal areas,
are their other objectives. -~.
.,
All tribes can become members of the society on voluntary basis. The area of
operation is a block and sometimes covering an area, as big as a taluka.

9.2.6 Farmers Service Societies (FSS)


, .
Farmers Service Societies are well organized registered cooperative bodies, based
on the principles of cooperation and governed by cooperative bye-laws. The FSS
were organized in the year 1971, on the lines of cooperatives to provide integrated
credit service to the weaker sections of the rural areas, viz., small farmers, marginal
farmers, agricultural labourer and rural artisans. Thefunctions of the FSS are:

1) To supply all types ofloans to weaker sections, viz., crop loans, medium-term
loans and long-term loans.

2) To provide adequate supplies of requisite inputs and technical guidance for the'
development of agriculture on timely and regular basis.

3) To encourage dairy, poultry, fisheries, farm forestry and other subsidiary


occupations in rural areas.

4) To make arrangementsfor bringing about improvements in agricultural markets.

5) To mobilize deposits and small savings from weaker sections through incentives.
\
. '
These societies have been launched in district having Small Farmers Development
Agency (SFDA) and Marginal Farmers and Agricultural Labourers Development \

Agency (MF AL) schemes. Each society has a jurisdiction of a,block or a portion
thereof. A district union of these societies suggest ways and means of improving and
organizing the societies for executing specificactivities, The membership of the
societies is open to those who are eligible to receive assistance under SFDAI MF AL
programmes. Others may be associate members but they will not have any voting
rights. The lead bank ofthe district generally sponsors the fSS in financial matters.
, ,

9.2.7 Deposit Insurance and Credit Guarantee Corporation


of India (DICGC)
The failure of two scheduled banks, viz., PalaiCentral Bank Limited (Kerala) and
Laxmi Bank Ltd. (Maharashtra) in 1960 gave a rude shock to the stability of the '
banking system in the country. Thisfolrced RBIto frame legislative measures so as
. to arrestbank mortality and create confidence in depositors. The Deposit Insurance
Corporation Bill was passed and the Corporation came into existence on January 1,
,I I ' ..:. "

1962:-- ..

.Role of the DI CGC: (1) The Corporation gives protection to depositors particularly' '
the small depositors; from loss of their savings in the event of bank's failure; such 15
Institutional Infrastructures: protection increases the confidence of the depositors in the individual banks and
Public, Private and Public-
Private Partnerships
reduces the occurrence of panicky withdrawals of deposits; (2) the Corporation,
contributes to the stability and orderly growth of individual banks as well as collectively
of the banking system; and (3) itplays an active role in developing the banking
habits ofthe people and ensures a largermobilization of their savings.

9.2.8 Micro-Finance
Micro-Finance initiatives are now recognized as a cost effective and sustainable
way of expanding outreach of the banking system to the rural poor. The guiding
spirit behind microfinance initiatives is under.

1) To offer cost effective approach to formal institutions for expanding outreach


to poor;

2) To develop collateral substitutes;

3) To focus on the rural and the urban poor, especially women;

4) To pilot test other micro-credit delivery mechanisms as alternative channels to


the formal banks; and

5) To effectively pursue the objectives of macro-economio growth.

There are two major models under micro-finance, i.e., Self-help Group (SHG)-
Bank Linkage and Micro-Finance Institutions (MFI)-Bank Linkage being operated
in the country.

The SHG-Bank Linkage programme Was launched in 1992 as a Pilot Project for
linking 500 SHGs and supported by the Reserve Bank ofIndia through its policy
support. The Programme envisaged organization of the rural poor into SHGs, building
their capacities to manage their own finances and then negotiating bank credit on
commercial terms. The poorwereencouraged to voluntarily come.together.to save ~
small amounts regularly and extend micro loans among themselves. Once the group
attained the required maturity for handling larger resources, bank credit could follow.
The focus of ~icro- finance initiatives is largely on those rural poor who have 1).0
access to the formal banking system. The target group broadly comprises small and
marginal fanners, landless agricultural and non-agricultural labourers, artisans and
craftsman and other rural poor engaged in small businesses such as vending and
hawking.

The main advantages of the programme are on-time repayment; door-step savings
and credit facilities to the poor and exploitation of the untapped business potential in
rural India. The programme, which started as an outreach programme, has, in fact,
achieved more than mere provision of thrift and credit facilities to·the poor women.
It has set in motion an irreversible process of socio-economic empowerment of
rural women. The programme continues to be the world's largest micro- finance
programme.

The numbers of SHGs have grown to 2.2 million as on March 31,2006. Banks
have extended loans of Rs 4,499 crore during 2005-06. The average per SHG
bank loan was Rs. 50,915 in 2005-06. The number of poor families benefiting
from this programme is 32.9 million as on March 31,2006 (Table 9.6). Out of the
16 three models that have emerged under the SHG-Bank Linkage Programme about
!

80.7 per cent ofthe SHGs were financed by banks under Model II involving NGOs Agricultural Credit, Insurance,
and Government agencies (Table 9.7). Warehouses and Corporations

Table'9.6: SHG-Bank Linkage Programme

(Amount in Rs. Crore)


1:6tal SHGs Financed by
Year Banks (Nos in '000) Bank Loans Refinance

During Cumulative During Cumulative During Cumulative


the year the year the year

1998-99 33 33 57 57 52 52

1999-00 82 \15 136 193 98 150

2000-01 149 264 288 481 245 395

2001-02 198 461 545 1026 395 79IJ

2002-03 256 717 1022 2049 622 • 1413

2003-04 362 1079 1856 3904 705 2118


I

I 2004-05 539 1618 2994 6898 968 3086

2005-06 620 2239 4499 11398 1068 4154


Source: Reserve Bank of India

Table 9.7: Linkage Position: Model-wise (As at March 31,2006)


.
Model Model Type NO.Qf -
Banl.
SHGs Loans
('000) (Rs. Crore)

I SHGs promoted, guided and financed 343 1013


by banks

11 SHGs promoted by NGOs/Govemment 1158 5529


agencies and financed by banks
.:
1II SHGs promoted byNGOs and financed 117 356
by banks using NGOs/formal agencies as
financial intermediaries

Total 1618 6898


Source: Reserve Bank of India

'9.2.9 Higher Financing Agencies


The National and International agencies deal with the refinancing arrangement to
strengthen the resource base of state and regional level financing agencies. They
also undertake the job of monitoring and needed improvement in agricultural financing
mechanism, This section deals with the role and importance of these agencies in
agricultural finance.

17
Institutional Infrastructures: a) World Bank
Public, Private and trublic-
Private Partnerships It is officially known as International Bank for Reconstruction and Development
'(IBRD). It is a specialized agency of the United Nations. Its affiliate bodies are
Internati~nal Monetary Fund (IMF, 1945), International Finance Corporation (IFC,
1956) and International Development Association (IDA, 1960). Its main focus is
, laid on loans and advances and technical assistance to promote the balanced growth
of'international trade and economic development.

Member c~untries can avail loan facilities and loans can be made to private firms, if
member. Governments will guarantee repayment to bank. Projects like agriculture,
mining, Irrigation, communications, transportation and general industrial development
are being considered by the World Bank for grant of loans, The repayment period
ranges from 10 to 35 years. Interest rates for the poorest countries are almost
negligible or zero but a service charge of 0.5 to 1 per cent is included. For private
firms and industrial developmentprojects interest rates are nearer to commercial
lending rates. Regarding technical assistance the bank's technical mission along with
personnel of FAO (Food and Agriculture Organization) assist in surveying, evaluation
and setting up of projects in the member countries. The headquarter of World Bank
is in Washington, D.C., USA. The quantum ofloans is decided based on the voting
of loans which is related to subscription of capital paid by member countries

b) 'International Monetary Fund (IMF)

It was established on 27 December, 1945 as an independent international organization


with headquarters in Washington D.e. The capital resources of the IMF come from
Special Drawing Rights (SDRs) and currencies that the members pay under quotas
calculated for l1tt:mwhen they join the IMF. The Fund is authorized to supplement
its resources by borrowing. T~e purpose of the IMF is as follows.

1.) To promote international monetary cooperation, the expansion of international


trade and exchange rate stability.

2) To assist in the removal of exchange restrictions and the establishment of a


multi-lateral system of payments.
. .
3). To alleviate any serious disequilibrium in members and irjtemal balance of
'):saY!llents by making the fInanc~al resources of the fund available to them.

Activities: Each member ofthe IMF undertakes a broad obligation to collaborate


with the IMF and other members to endure the existence of orderly 'exchange
arrangements and promote a system of stable exchange rate. In addition, members
are subject to certain obligations relating to domestic and external policies that can
affect the balance of payments and the exchange rates. The IMF makes its resources
available, under proper safeguards to its members to meet short-term or medium
term payment difficulties.

c) International Finance Corporation

The international Finance Corporation (IFC) is a specialized agency ofthe United


Nation that is closely associated with the World Bank. It was established in July
1956 to provide capital for private enterprise in its member-conntnes, particularly
less developed countries. The IFC invests in private enterprises when sufficient private
capital is notavailable. It is authorized to bOlTOW from the World Bank and to sell its
18
own bonds to the public. The Corporation helps finance new ventures, and it also Agricultural Credit, Insurance,
. assists established enterprises to expand, improve or diversify their operations. Warehouses and Corporations

d) International Development Association (IDA)

The IDA was instituted in September 1960 and.is an affiliated organization ofthe
International Bank for 'Reconstruction and Development (World Bank). It
concentrates its assistance in those countries with an annual per capita gross national
product of less than $ 790 (at 1983 rate). Its resources consist mostly of
subscriptions, general replenishments from its.more industrialized and developed
members and special contributions and transfers from the net earning of the bank.

Its members must also be the members of the World Bank (total membership of the
countries stands at 120). The IDA extends credit to developing nations on terms
that are easier and more flexible than those of the Word Bank. IDA borrowers may
repay their loans over a period of 50 years with a service charge of lessthan one per
cent instead of interest. Loans are for the purpose of stimulating investment and
economic development and,encouraging foreign trade.

e) - Reserve Bank of India

The Reserve Bank of India (RHI) was established in the year 1935. The Bank was
set up to regulate issue of bank notes and keeping up resources with a view to
securing monetary stability in the country and operating the currency and credit
system to its advantage. Three departments were created to look into the credit
needs of agricultural sector. The Agricultural Credit Department (ACD) was set up
to look into the activities of rural sector: The primary functions ofACP were to
coordinate the functions ofRBI with regard to agricultural credit and other banks
and State Cooperative Banks, to maintain expert staff to study all questions of
agricultural creditand be available for consultation by Central Government, State
.Governments, Scheduled Commercial Banks and State Cooperative Banks and to
provide legislation to check private money lending and checking malpractices. Two
funds were established (i) the National Agricultural Credit (Long Term Operations)
Fund and (ii) the National Agricultural Credit (Stabilization) FUnd.

The National Agricultural Credit (Long Term operations) Fund was set up in 1955.
This Fund was meant to provide long-term loans to various State Goveinments with
a view to enabling them to contribute to the share capital of different types of
cooperative societies including Land Mortgage Banks. Loans and advances out of
this fund are made to State Governments for period not exceeding 20 years, for
purchasing debentures of State Land Development Banks and for providing funds
to-the Agricultural Refinance and Development Corporation for period not exceeding
20 years. In the creation ofthisfund, medium-term loans-are provided by the RBI
only out of this fund.

The second fund, viz., National Agricultural Credit (Stabilisation) Fund was
established in June 1956. The fund is utilized for the purpose of granting medium-
term loans to State Cooperative Banks, especially during the times of famine, drought
or other calamities, when they arc not able to repay their short-tern loans to RBI.
This fund is used for converting short term loans which are due to RBI from the
Central Cooper~tive Banks in areas affected by natural calamities. The State and
Central Cooperative Banks and Primary Agricultural Cooperative Credit Societies
in turn provide a similar facility to the farmer-borrowers regarding Sh011 term
I~
Institutional Infrastructures: .. ••
production loans taken for the crops affected by natural calamities. This makes
Public, Private and Public-
Private Partnerships
them eligible for further agricultural finance at the same time reducing their burden of
repaying the loans. .

f) National Bank of Agricultural and Rural Development (NABARD)

NABARD came into existence in July 1982 to provide all types of production and
investment credit for agriculture and rural development. The national level institutions
such as Agricultural Refinance' and Development Corporation (ARDC), Agricultural
Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) ofRBI
were merged with NABARD.
NABARD was established to perform the following functions :

,0 to serve as an apex firiancing agency for the institutions providing investment


and production credit for promoting various developmental activities in rural
areas,
ii) to take measures towards institution building for improving absorptive capacity
of the credit delivery system, including monitoring, formulation of rehabilitation
schemes, restructuring of credit institutions and training ofpersonnel,

iii) to co-ordinate the rural financing activities of all institutions engaged in


developmental work at the field level and maintain liaison with the Government
ofIndia, the State Governments, the Reserve Bank and other national level
institutions concerned with policy formulation, and

iv) to undertake monitoring and evaluation of projects refinanced by it.

NABARD's refinance is available to SCARDBs, SCBs, RRBs, commercial banks


and other financial institutions approved by the Reserve Bank. While the ultimate
beneficiaries of investment credit can be individuals, partnership concerns, companies,
State owned corporations or cooperative societies, production credit is generally
extended to individuals. .

_.g) Agricultural Finance Corporation (AFC)

It came into being on 1o April 1968: It is a consortium of commercial banks and


consultancy agency of member banks in the formulation of projects of agricultural
and rural development. The corporation has two distinct roles, viz., financing the
individuals / institutions / organization involving agricultural development and promoting
comniercial banks advances for agricultural development.

Check YourProgress 1

Note: a) Use the spaces given below for writing your answers.
b) .. Check your answer with those given at the end of the unit.

1) Give a brief account of the cooperative credit structure prevailing in the


country .

••••••••••••••• ••••••••••••••• 0 •• 0 •••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••

.
••••••••••••••••••••••••••••••••••••••••• ! ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••
. '10 •••••••••••
2) Explain the micro-finance programme of the country. Agricultural Credit, Insurance,
Warehouses and Corporatio~s

••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• 0 •••••••••••••••••••••••••• "I" •••••••••••••••••••••••

•••••••••••••••••••••••••••••••••••••••••••••••••••••••• 1•••••••••••••••••••...••••••••••••••••••••••.•••••••••••

9.3 INSURANCE INFRASTRUCTURE


Agricultural production is faced with risk and uncertainty conditions. Production'
and price variability is the major risk affecting agriculture. Risk is also due to natural
hazards like, flood, drought.hail, cyclones, hurricanes, earthquakes, etc. Risk that
are associated with the weather aberrations such as the change in the rainfall
distribution, quantum of rainfall, floods, droughts, etc., result in heavy losses of crop
and livestock products. Minimizing the impact of natural disaster -related crop losses,
particularly from drought is therefore a major public policy objective for the
government. An effective crop insurance system is a critical policy strategy to cushion
income losses for farmers.

The crop insurance in the country has been managed by the General Insurance
Corporation (GIC), delivered through rural financial institutions, usually tied to crop
loans, and subsidized by the Central and State governments. The Agricultural
Insurance Company with capital participation by GIC, the four public sector general
insurance companies and NABARD has been set up. The agricultural insurance
sector has been evolving over time, through consistent monitoring and policy
interventions. Herein, let us understand the various agricultural insurance schemes,
their advantages and lacunae.

9.3.1 Pilot Scheme on Crop Insurance


At the instance of Government ofIndia, General Insurance .Company (GIC) first
introduced the crop insurance scheme in 1973 on experimental basis as a Pilot
scheme in selected centres of Gujarat. Only H4 cotton was considered for
implementation of the scheme. Later, the same was extended to West Bengal, Tamil
N adu and Andhra Pradesh for the cotton crop and the scheme was in operation till
1979 except the year 1977.

Area based crop insurance scheme was subsequently introduced from 1979 by
GIC on a pilot basis in selected areas. If the actual average yield of the crop in the
.selected area were less than the guaranteed yield ofthe crop, the indemnity would
then become payable to all the farmer borrowers.

Sum assured was 100 per cent of the crop loan but a ceiling was imposed with
regard to payment of indemnityi.e., Rs. 5000 per farmer-borrower in the case of
dryland and Rs. 10,000 per farmer-borrower in the case of irrigated areas. This
scheme was implemented by 12 states in India up to 1984. The scheme has benefited
6.271akh farmers covering 6.921akh hectares, with a mean claims topremiurn ratio
of 0.82 (Table 9.8). Seeing the success ofthe Pilot Crop Insurance Scheme.the
Government of India decided to launch a Comprehensive Crop Insurance Scheme
(CClS) during the Seventh Five Year Plan period in the. year 1985, replacing the
hitherto Piiot Crop Insurance Scheme. . 21
Institutional Infrastructures:
Public, Private and Public-
9.3.2 Comprehensive 'Crop Insurance Scheme
Private Partnerships
The Comprehensive Crop Insurance Scheme (CCIS) was a built-in crop insurance
cover to crop loanees only. The basic objectives of the CCIS are: ...

1) to provide a measure of.financial support to the farmers in the event of crop


failure due to natural calamities;

2) torestore the credit eligibility of farmers after a crop failure for the next crop
season; and

3) to support and stimulate production of cereals, pulses and oilseeds.

All crop loans by the commercial banks, cooperatives and the regional rural banks
. were covered by the scheme. The amount of insurance premium was included in the
scale offinance for the crop loan and the insurance charge was deducted at the time
ofloan disbursement. The scheme was operative in defined areas. The major crops
covered under this scheme were: Paddy, wheat, maize,jowar, bajra, ragi, greengram,
blackgram, red gram, Bengal gram, peas, soyabean, groundnut, mustard, sunflower,
safflowers, sesamumand castor.

The sum insured was 150 per cent of the amount of crop loan disbursed for the
eligible crops. The insurance premium was one per cent for rice, wheat and millets,
and two per cent for oilseeds and pulses. In the case of small-and marginal farmers,
the insurance premium was subsidized to the extent of 50 per cent, the su~sidy
being shared equally by the Central and State Governments.

The indemnification was on area basis with the tehsil / taluka being kept as the unit.
If there was a shortfall in actual average yield per hectare of the insured crop as a
result of crop failure, (below 50 per cent of the normal) each of the insured fahners
growing that crop in the defmed area was eligible for indemnity. The paid out claims
was Rs. 2,304 crore against a premium income ofRs. 404 crore. The claims to
premium ratio of this year worked out to 5.71 (Table 9.8). Seeing the performance
of the CClS the sum assured was reduced to 100 per cent from 1St) per cent ofthe
crop loan and its maximum limit was fixed as Rs 10,000 per farmer (revised upwards
to Rs. 25,000 per families).
Table 9.8: Progress of Crop Insurance Programmes in India
,
Period No. of Area Sum Total Claims Premium
Farmers Covered Insured Insurance Paid Ratio
Covered Per Year (Rs. crores) Collected (Rs.
(No. in (Iakh ha) Charges crores)
lakh) (Rs. Crores)
Pilot Crop Insurance Scheme
1979-80 to 1984-85 627 6.92 1.97 1.59 0.82
(\.04) (J.l5) (32.5) (26.50)

Comprehensive Crop Insurance Programme


1985'-86to 1998-99 762.65 1275.70 24949 403.56 2303.45 5.71
(50.84) (85.05) (1663.27) (26.90) (153.56)
National Agricultural Insurance Programme
.
1999-00 to 2005 751 1219 7065 . 2223 5917 2.66
(125.17) .'
(203.,1.7) (I 177.5) (370.5) (986.17)
i
I

Note: Figures in parenthesis are values on per annum basis


22
Limitations of,C,mprehensive CropInsurance Scheme Agricultural Credit, Insurance,
. -:1 . . Warehouses and Corporations
The major shortcomings.of the CCIS were that by restricting the eligibility of insurance
coverage to borrowers of crop loans fromCommercial Banks, RRBs and the
Cooperatives, it looked more like a "crop loan insurance scheme", instead of a
"cr6p'insunince scheme". The CCIS instead of covering all the crops grown by a
farmer, considered only specified crops. lfcrop insurance covers all the crops taken
together, it will nlvolve the calculation and collection of asingle premiumand assessing
a single indemnity on the basis of the insurable value of crops actually raised per
operational holding per year.

9.3.3 National Agricultural Insurance Scheme:


National Agricultural Insurance Scheme (NAlS) was introduced in the country from
19Q9-2000 Rabi season, replacing Comprehensive Crop Insurance Scheme (CCIS).
The scheme is being implemented by General Insurance Corporation (GIC) on behalf
of the Ministry of Agriculture. The main objectives of the scheme are: (i) to provide
insurance coverage and financial support to the farmers inthe event ef failure of any
of the notified crop as a result of natural calamities, pests and diseases; (ii) to encourage
the fanners to adopt progressive farming practices; high value inputs and higher
technology in agriculture; and (iii) to help in stabilize farm incomes, particularly in
disaster years.
TIns scheme is available to all farmers regardless of their land holding or indebtedness.
It is compulsory for loanee farmers and is optional for non-loanee farmers. Iterrvisages
coverage of all food crops (cereals, millets and pulses); oil seeds and annual
horticultural/commercial crops, in respect of which past yield data is available fQr
adequate number of years. Among the annual commercial/horticultural Crops- eleVen'
crops, namely sugarcane, potato, cotton, ginger, onion, turmeric, chillies, jute, tapi~~
annual banana and pineapple are presently covered ..
The scheme operates on the basis of an area approach i.e., defined areas for each
..
notified Crops for widespread calamities and on an individual basis. for localized
calamities, such as, hailstorm, landslide, cyclone and flood. Individual based
assessment in area oflocalized calamities would be implemented in limited areas, on
an ex~erime~tal basis initially, and shall be extended in.the light of operational
.
expenence gained.
,
-; '" .
'. \ . "

The premium rates are 3.5 per cent (of sum insured or actuarial rate which e"er is
less) for bajra & oilseed, 2.5 percent for other Kharif crops, 1.5 per cent for;wheat
and 2 percent for other Rabi crops: In the case of annual commercial/horticultural
crops, actuarial rates are being charged. A 50 per cent subsidy in the premiw'm~~
given to small and marginal farmers. Thcsubsidy is shared equallybystates/U'Is
and Central Government. .
~ . .,1 '/

9.3.4 Farm Income Insurance Schem~(FIIS)/


, •. • " . -- i •
'_. .~i _.1 _

The scheme was conceived to provid~incOxneprotection-tQth~ farmers by integrating.


the mechanism of insuring production as well as market ri~.TIte farmersincome
would be protected by ensuring minimum guaranteed income.The scheme was . \
implementedon
.
a pilot.-. basis during Rabi 2003-:04 in 18 selected
/
districts of12 .
statesforwheat and paddy. During the season, l.Slakh farmers Were covered over
the area of 1.91akh hectare. Premium amounting to Rs 14,1 crorewas generated as .
Institutional Infrastructures:
Public, Private and Public-
against the sum insured ofRs 239 crore, Claims to the tune of about Rs 1.5 crore
Private Partnerships were paid for the season. The scheme was also implemented in selected districts of
four states on pilot basis during kharif2004 season (Table 9.9).

The scheme is strictly' crop' income insurance and not 'farm' income insurance as it
is designed to protect the income from a particular crop. Under the FITSthe indemnity
calculation is modified to account for income shortfall, not just yield shortfall. In this
case the farmer will be paid the difference between the guaranteed income and the
actual income per hectare.

Table 9.9: States Implementing FIIS during Kharif2004 Season

Sr. No. States Districts

l. Jharkhand West- Singhbhum, East Singhbhum, Ranchi, Hajaribagh


and Gumla

2. Gujarat Ahmedabad, Panchmahal, Surat, Baroda and Bulsad


3. Maharashtra Bhandra, Chandrapur, Gadchiroli, Raigarh and Thane

4. West Bengal Birbhum, North 24 Pargnas, Murshidabad, and Jalpaiguri

Source: Economic Survey, 2004-05, Ministry of Finance, GOl

Indemnity = (Guaranteed income - Actual income)


Where,
Guaranteed income threshold yield x minimum support price (MSP)
Actual income actual yield x current market price
(Market price maximum of 120 per cent ofMSP and a minimum of80
per cent ofMSP)

9.3.5 Rainfall Insurance


ICICI Lombard initiated a pilot project on rainfall insurance in the Mahboobnagar
district of Andhra Pradesh and Raichur and Gulbarga in Kamataka. The pilot scheme
was launched in June 2003 and for the Kharif season 2003-04 in Mahboobnagar
district. The Krishna Bhima Samruddhi (KBS) Bank through which the programme
was launched, sold policies to 154 groundnut farmers and 76 castor farmers. The
policy is limited to crop loans given by KBS to these farmers. The indemnity is
payable if the cumulative rainfall during the season falls below the historical average.
This is implemented through a rainfall index, which assigns different weights to rainfall
during different periods. The weights are based on the relative importance of rainfall
during the various periods and are designed to maximize tlie'c~~'elation between the
index and yield. It is assumed that the progressive rainfall deficiency the severity of
losses increases. This makes the policy cumbersome and difficult for the farmers to
understand. The programme has to depend on the Indian Metrological Department
for the rainfall data, which has surface observations about one in each district. To
boost the programme the governments role could be to set up the basic infrastructure
facility, that may include (a) the research costs ofidentifying key catastrophic rainfall
events that con-elate strongly with agricultural production and income in different
types of rainfed agricultural regions; (b) educating rural people about the value of
rainfall insurance; (c) ensuring secure rainfall stations; and (d) establishing an Agricultural Credit, Insurance,
Warehouses and Corporations
appropriate legal and regulatory framework for rainfall insurance.

The programme paves the way for coexistence of public and private insurance agencies
working in the field of agricultural insurance. On one hand, the provision of subsidies
by the public agencies poses hindrance to the entry of private sector into the agriculture
insurance business. On the other hand, the poor coverage by the public agencies
and their lack of incentive to extend the coverage serves as sufficient bait for the
private sector.

Check Your Progress 2

Note: a) Use the spaces given below for writing your answers.
b) Check your answer with those given at the end of the unit.

1) Enlist the various crop insurance programmes initiated in the country.

2) What is farm income insurance, how it is different from crop insurance?

............................................................................................................ ; .....

9.4 INFRASTRUCTURE FOR WAREHOUSING


AND CORPOlu\TIONS
Warehouses are scientific storage structures constructed for the protection of the
quantity and quality of stored products. It protects the produce stored against rodents,
insects and pests and against the ill effect of moisture and dampness. The important
functions of warehouses are:

1) Scientific storage: A large hulk of agricultural commodities is stored and the


product is protected against quantitative and qualitative losses by the use of
_scientific methods of preservation. .

2) Financing: Warehouses meet the financial needs of the person who stores the.
product. Nationalized banks advance credit on the security of the warehouse
receipt issued for-the stored products to the extent of7 5 to 80 per cent of their
value.

25
Institutional Infrastructures: 3) Price Stabilization: Warehouses help in price stabilization of agricultural
Public, Private and Public-
commodities by preventing the post harvest sale by the fanners when the prices
Private Partnerships
are low because of the glut in the market. They also help-in stabilization of
agricultural prices by staggering the supplies.

4) Market Intelligence: Warehouses also provide information about market


prices to people who hold their produce in them and advise them when to
market their produce.

9.4.1 National Cooperative Development and Warehousing


Board
This was setup on 1SI September 1956 to perform the following functions:

• to advance loans and grants to State Governments for financing cooperative


societies engaged in the marketing, processing or storage of agricultural produce
including contributions to the share capital of these institutions;

• provide funds to warehousing corporations and the State Governments for


financing cooperative societies for the purchase of agricultural produce on behalf
ofthe Central Govemment;

• subscribe to the share capital of the Central Warehousing Corporation and


advance loans to State Warehousing Corporations and the' Central Warehousing
Corporations;

• plan and promote programmes through cooperative societies for the supply of
inputs for the development of agriculture; and

• to administer the National Warehousing Development Fund.

In March 1963, the Board was converted into the National Cooperative Development
Corporation (NCDC), and its functions were limited to cooperative development.

9.4.2 Central Warehousing Corporation (CWe)


This Corporation was established as a statutory body in New Delhi on 2nd March,
1957 and was re-established on March 18, 1963. The Central Warehousing
Corporation provides safe and reliable storage facil ities for about 120 agricultural
and industrial commodities. The areas of operations of these central warehouses
include centres of all-India and inter-state importance.

The functions of the Central Warehousing Corporation are:

D To acquire and build godowns and warehouses at suitable places in India.

ii) To run warehouses for the storage of agricultural produce, seeds, fertilizers
and certified commodities for individuals, cooperatives and other institutions.

ill) To act as an agent of the government for the purchase, sale, storage and
distributions of the above commodities.

iv) To arrange facilities for the transport of above commodi ties.

v) To subscribe to the share capital of State Warehousing Corporations.


26
While foodgrains and fertilizers occupy 45 per cent ofthe total utilized storage Agricultural Credit. Insurance,
. .
Warehouses and Corporations,
capacity, in the remaining 55 per cent ar~ other commodities (Table 9.10). Besides
the conventional storage godowns, the Central Warehousing Corporation is running
air-conditioned godowns at Calcutta, Bombay and Delhi, and provides cold storage
facilities at Hyderabad. Special storage facilities have been provided by the Central
Warehousing Corporation for the preservation of hygroscopic and fragile
commodities. The Corporation has been able to evolve a technique for the proper
and scientific preservation ofjaggery during the hot and rainy seasons by selective
aeration and controlled conditions. It has set up special warehouses at some centres
for the storage ofjaggery. The jaggery stored in warehouses fetches a premium
price in the market. The Corporation has also evolved techniques for the storage of
spices, coffee, seeds and other commodities. The Corporation is operating a number
of customs bonded warehouses at important centres in Delhi, Amritsar, Ludhiana,
Calcultta, Kandla, Ahmedabad, Baroda, Surat, Bhopal, Cochin, Ernakulam and
Bombay to enable the exporters/importers to keep their commodities in a good
condition, pending their shipment. It has also undertaken the storage and handling of
export and import cargo at the International Airport at Palam, New Delhi. At this
complex, all the facilities, including inspection and clearance by customs, the payment
of duty into the bank, and space for clearing agents, have been provided by the
corporation. It has put up a similar air cargo complex at Amritsar for the export/
import of goods. It has been expanding its capacity at the port towns to serve the
industry and Cooperative bodies.

Table 9.10: Year-wise Commodity-wise Average Gross Utilization ofthe


Warehouses under ewc (1984-85 to 2004-05)

(Quantity in 000, tonnes)

Year Commodities

Foodgrains Per Fertilizers Per Others Per All


cent cent cent

1985-86 2592 49 1272 24 1393 Tl 5194

1990-91 2383 46 912 17 1921 37 5216

1995-96 2710 48 647 11 2300 41 5657

2000-2001 3404 51 709 \0 2591 39 6704

2004-2005 2500 41 266 4 3392 55 6158

. 9.4.3 State Warehousing Corporations (SWC)


Separate warehousing corporations were set up in different States of the Indian
Union. The first warehouse was set up in Bihar in 1956. At the end of March 1994,
State Warehousing Corporations were operating 1364 warehouses with a total
capacity of over 98 lakh.tonnes. The concerned State Governments and the Central
Warehousing Corporation contribute the total share capital of the State Warehousing
Corporations equally. The SWCs are under the dual control of the State
Government and the Central Warehousing Corporation. The number and capacity
of warehousing ofCWC and SWC in the country at different points oftime have
been given in Table 9.11. Considerable efforts were made to increase the storage 27
Institutional Infrastructures: capacity in the country. The numbers of warehouses have increased from seven
Public, Private and Public-
Private Partnerships -during 1957-58 to 2083 during the year 2005. The total capacity of warehouses
which was almost negligible during 1957-58 went up to 298 lakh tonnes by the year
2005. Out of the total storage capacity of298 lakh tonnes, nearly 102 lakh tonnes
was with the Central Warehousing Corporations and remaining 195 lakh tonnes
with 16 State Warehousing Corporations. The number of commodities stored inthe
warehouse has steadily increased. These include foodgrains, fibre crops, fertilizers,
cement, rubber, cotton yarn, textiles, pepper and leather.

Table 9. I I: Number and Capacity of Warehousing in India (including hired)

Year Number Capacity in Lakh tonnes

CWC SW Cs Total CWC SWCs Total

1957-58 7 - 7 0.07 - 0.07

1960-61 40 266 306 0.79 2.78 3.57

1970-71 102 601 703 8.36 18.11 26.47

1980-81 330 1050 1380 37.89 50.00 87.89

1990-91 495 1331 1826 66.48 93.54 160.02

2005 484 1599 2083 101.86 195.20 297.06

Source: a) Central Warehousing Corporation -of India; quoted in Fertilizer statistics,


various issues, Fertilizer Association of India, New Delhi, December, 1994,
p. fIf-64.

b) Government of India, Annual Report, 1995-96, and Foodgrains - Monthly


Bulletin, July 1996, Ministry of Food, Government of India, New Delhi.

9.4.4 Food Corporation of India


Apart from CWC and SWCs, the Food Corporation India has also created storage
facilities. The Food Corporation oflndia is the single largest agency which has a
capacity of260 lakh tonnes. Most of the capacity (78 %) is of covered type which
include conventional but scientifically designed godowns and silo complexes but a
part of the storage capacity is of covered and plinth (CAP) type. The CAP storage
capacity consists of cemented floor as the base and tarpaulin and other similar sheets
as the cover (Table 9,12).
Table 9;12: Storage Capacity of Food Corporation of India
(Iakh tonnes)

Year Covered Cover and Plinth (CAP) Total

Owned Hired Total Owned Hired Total


,
1990-91 119.97 75.95 195.92 10.42 14.74 25.16 . 22~.08

1995-96 168.24 40.29 208.53 57.66 00.00 57.66 266.19

2000 125.78 82.76 208.54 21.74 45.54 45.54 254.08

2005 129.09 104.61 233.70 22.48 04.13 26.61 260.31

Source: Food Corporation of lndia, New Delhi and Ministry of Food, Government of India,
New Delhi.
28
9.4.5 Cooperative Sector . Agricultural Credit, Insurance,
Warehouses and Corporations
The Cooperative sector has also built a storage capacity of 13.55 million tonnes up
to March 1996. The Cooperatives have also constructed 175 cold storage
warehouses with a total capacity of2.141akh tonnes. The National Cooperative
Development Corporation had helped in constructing 54898 rural godowns and
9363 marketing godowns by the end of March 1996. These Cooperative godowns
are used by the Food Corporation of India in times of need, and provide a readily
available cushion when the procurement of foodgrains is at peak.

9.4.6 Rural Godowns


The Government of India launched a scheme for the establishment of National Grid
of Rural Godowns (NGRG) in July, 1979. The scheme aims at the creation of a
networking of rural godowns in the States and Union Territories primarily to take
care of the storage requirements of the small and marginal farmers. The cost of
construction of rural godowns is subsidized to the extent of 50 per cent to be shared
equally by Central and State Governments. The remaining 50 per cent capital is
arranged by the implementing agency such as cooperative marketing society in the
form of a loan from the commercial banks. The godowns are constructed according
to the specifications and designs approved by the State Warehousing Corporation.
The sizes of the godowns vary from a capacity of 200 tonnes to 1000 tonnes
depending upon the produce expected for storage in the village. The godowns are
constructed and managed by cooperative marketing societies, market committees
and State Warehousing Corporations. The State Warehousing Corporations provide
technical guidance and supervision to the implementing agencies in the maintenance
and management of rural godowns. The receipts issued by the managers of rural
godowns on the basis of stocks are negotiable instrument. On the basis of the receipt,
farmers can get loan up to 80 per cent of the value of the produce stored from the
commercial bank. Up to March 1991,50555 rural godowns have been constructed.
Apart of this, there are 8710 godowns of marketing societies. Total storage capacity
of these godowns is 12.07 million tonnes.
,
The scheme is intended to achieve the following specific objectives:

l) Prevention of distress sale of foodgrains and other agricultural commodities


immediately after harvest;

2) Reduction in quantity and quality losses arising at present by storage in sub-


standard places;

3) Reduction in pressure on transport system in the post-harvest period;

4) Creation of employment opportunities in rural areas;

5) Helping the farmers in getting loans against the stored products; and

6) Helping in easy procurement of food grains by Food Corporation of India.

9.4.7 Cold Storage


The term cold storage refers to a refrigerated chamber for the storage of such perishable
commodities as fruits, vegetables, fish, eggs, meat, dairy products etc. In these storage
structures, the temperature is controlled and maintained so that the stored perishable
products may not deteriorate in quality. In a cold storage, the temperature is maintained 29
Institutional Infrastructure1s: in the range of -1.1 to 10.0 C (30 to 50 F). The other form of cold storage is the
0 0 0 0

Public, Private and Public-


Private Partnerships
freezer storage, in which the temperature is kept below -1.10 C (300 F), and the
product remains in a frozen state. It helps in the price stabilization of perishable
commodities by removing the gluts occurring in the production season. It helps in
widening the market for the products, lowering marketing costs, raising the price
realized by the producerandiuwering the price for consumers and ensures that
products are available throughout the year. Cold storage facilities have made it
possible for consumer to live in greater comfort.
Till recently, the establishment of cold storage industry remained under regulation.
The Central Government issued Cold Storage Order in 1964 and later in 1980.
However, some State Governments like that in West Bengal, Uttar Pradesh, Punjab
_and Haryana were permitted to promulgate their own orders. The Cold Storage
Order was promulgated by the Government of India under Section 3 of the Essential
Commodities Act, 1955. Cold Storage Order, 1964 and also of 1980 is applicable
all over the country except in the States ofUttar Pradesh, West Bengal, Punjab and
Haryana, where the State Governments have enacted their own Cold Storage Acts:
West Bengal and UttarPradesh sought permission to enact their own Acts in 1960
and 1975. Punjab and Haryana governments were permitted to promulgate their
own State orders for regulating the cold storage industry in 1979.
The available capacity of cold storage is much less than the country's requirements.
It is barely sufficient for 15 per cent of potato production and for less than one per
cent of fruits, vegetables and fish production. The cold storage requirement has
further increased in view of the need to promote exports of processed foods. There
is a considerable scope for expansion of the cold storage industry in India However,
due to large capital requirement, lack of proper technical guidance, inadequate and
fluctuating power supply and lack of appreciation for stored products, the
entrepreneurs are not attracted to establish cold storage units. The lack of cold
storage facilities is leading to heavy losses and violent fluctuations in prices of fruits
and vegetables. There is a need to encourage cold storage industry in several regions
of the producing areas as well as in large urban centres. The growth of cold storage
facility in India is given in Table 9.13.

Table 9.13: Growth of Cold Storage Facility in India

- .--
Year Number of'Cotd-Storage Storage Capacity
Units in Operation (Lakh tonnes)

1955 N.A. 0.771

1965 615 6.820

1975 1615 20.530


-
1985 2522 50.991

1995 3167 85.800

1996 3253 87.300

2003 4541 182.09

2006 5101 216.94

Source: (i)Economic Survey: Various Issues. Ministry 0/ Finance, Government of India, New Delhi.
(2) Directorate 0/ Marketing and Inspection. '~igUSlry0/ 'Agriculture and Rural Development, Government
of India, Faridabad. (3) Rajyasabha Unstarred Question No. 749, dated 20. 08.20m.
JU
Agricultural Credit, Insurance,
Check Your Progress 3 Warehouses and Corporations

Note: a) Use the spaces given below for writing your answer.
b) Check your answer with the given at the end of the unit.

1) Explain the status of warehousing in India?

..................................................................................... , , .

9.5 LET US SUM UP


. We have seen that a nwnber of credit institutions are operational to extend credit
support to the rural sector. The nature of financial institutions in the country has been
that of evolving one. The policy makers and the government have been periodically
assessing the functioning of the financial sector and have been bringing the changes
to make it more effective. The cooperative credit institutions flourished during the
post liberalization period following the support from the government. However it
was felt that they alone are not sufficient to meet the credit needs of the rural sector
and therefore the nationalization of banks was done in the year 1969. This was
followed by setting up of various specialized financial institutions for catering to the
credit needs of rural sector. Crop insurance is a method to provide stability to the
farm income. It also induces the farmers to adopt improved package of practices.
. Therefore, a number of programmes have been launched to extend the crop insurance
programme to large number of farmers and to make it more effective and efficient. It
was started with Pilot crop insurance programme in the year 1972 and latest being
the National crop insurance programme. There is a vast scope for the private
institutions to extend insurance to the rural sector. A very large proportion of country's
produce is lost due to poor post harvest facilities. One of the important components
of it is the availability of efficient and sufficient amount of storage structures in the
country. The country has taken steps to create a wide network of storage facilities in
the country in the form ofCWC, SWC, FCI, Rural Godowns and Cold Storage
structures. However, there still exists a wide gap in the availability and the need for
the storage structures paving the way for the entry of private institutions to' create
storage infrastructure in the country.

9.6 KEY WORDS


FSS Farmers Service Societies are well organized registered·
Cooperative bodies, based on the principles of cooperation
. and governed by cooperative bye-laws.

Micro-finance The micro fmance is a system in which financial services are


provided to the low-income clients, including the self-
employed.
31
• Institutional Infrastructures: NABARD 'N ati~mal Bank for Agricultural and Rural Development'
Public, Private and Public-
Private Partnerships
was created in the year 1982 as an apex bank for agricultural
sector.

NAIS National Agricultural Insurance Scheme (NAIS) to protect


the farmers from risk and uncertainties in agriculture
production.

RRB Regional Rural Banks. These were created in the year


1975 with the sole aim to provide credit to rural artisans,
agricultural labourers, etc.

9.6 SOME USEFUL BOOKSIREFERENCES


Babu, K.S. &R.P. Singh(1997). Crop Insurance-Time for Reappraisal, Yojana,

Economic Survey (Various issues), Ministry of Finance, Government of India ..


htqj:llaicofindianic.in

Reddy, S.S. & P.R. Ram (1996). Agricultural Finance and Management. Oxford
& IBH Publishing Co. Pvt. Ltd., New Delhi.

Report of Currency and Finance ~ Volume I (Various issues), Reserve Bank of


India, Murnbai, India.

Report on Trend and Progress of Banking in India (2005-06). Reserve Bank of


India, Murnbai, India.

Sinha, S, (2004). Agricultural Insurance in India - Scope for Participation of


Private Insurers. Economic and Political Weekly, June 19, Vol. 39

9.7 'ANSWERSIHINTSTOCHECKYOUR
PROGRESS
Check Your Progress 1
1) The cooperative credit is mainly of two types one providing short term
loans and the other providing the long term loans. For details go through
Section 9.2.

2) Micro-Finance initiatives are now recognized as a cost effective and sustainable


way of expanding outreach ofthe banking system to the rural poor. The guiding
spirit behind microfinance initiatives is: (1) to offer cost effective approach to
formal institutions for expanding outreach to poor; (ii) to develop collateral
substitutes; (iii) to focus on the rural and the urban poor, especially women; (iv)
to pilot test other micro-credit delivery mechanisms as alternative channels to
the' formal banks; and (v) to effectively pursue the objectives of macro-economic
growth. There are two major models under micro-finance, i.e., Self-help Group
(SHG)-Bank Linkage and Micro-Finance Institutions (MFI)-Bank Linkage
being operated in the country. Further details go through Section 9.2.

Check Your Progress 2


1) The various crop insurance programmes initiated in the country are Pilot Crop
Insurance Programme, Comprehensive crop Insurance Programme, National
Agricultural Insurance Programmes, Farm Income Insurance Programme, etc. Agricultural Credit, Insurance,
For details on each of the programmes go through Section 9.3. Warehouses and Corporations

2) Farm income insurance refers to covering total income of the fanner obtainable
from the farm as against this the crop insurance refers to protecting the income
of the fanners as a result of specific crop loss. For further details go through
Section 9.3.

Check Your Progress 3


1) Warehousing Corporation was established as a statutory body in New Delhi
on 2nd March, 1957 and was re-established on March 18, 1963. This
Corporation that made a modest start with seven warehouses, with 7,000
tonnes capacity, in December 1957, had set up 458 warehouses in different
places in the country, with a total storage capacity of65.921akh tonnes at the
end of March 1991. Of this, the present utilization is nearly 85 per cent of the
total available capacity. The Central Warehousing Corporation provides safe
and reliable storage facilities for about 120 agricultural and industrial
commodities. The areas of operations of these central warehouses include
centres of all-India and inter-state importance.

33
UNIT 10 PUBLIC DISTRIBUTION
SYSTEM
Structure
10.0 Objectives

10.1 Introduction

10.2 Background of Public Distribution System (PDS)

10.3 Central Issue Price for Rice and Wheat

10.4 AntyodayaAnna Yojana

10.5 Quantity of Food grains Issued under Targeted Public Distribution System
(TPDS)
10.6 Implementation Related Shortcomings ofTPDS
10.7 Measures Taken to Strengthen TPDS and Check Diversion of Food grains

10.8 LetUsSumUp

10.9 Key Words

10.10 Some Useful Books/References

10.11 AnswerslHints to Check Your Progress

10.0 OBJECTIVES
After going through this unit, you should be in a position to:

• define the Public Distribution System (PDS) and discuss how an efficient PDS
ensures food security;

• learn about the Central Issue Price (CIP) offoodgrains;

• discuss the Targeted Public Distribution System (TPDS), shortcomings of


TPDS and measures taken to strengthen TPDS; and

• explain how to check diversion of foodgrains.

10.1 INTRODUCTION
India's, food security policy has an important objective to ensure availability of
foodgrains to common and poor people at an affordable price. The policy has been
successful in the sense that foodgrains have been made available to the poor .
consumers living in remote and inaccessible areas. The efficient Public Distribution
System (PDS) introduced in the country has ensured the food securityand nutritional
requirements of the people. The PDS was introduced by the Government of India .
with the assistance of State Governments asa system of management of scarcity
and for"distribution of foodgrains and other items at cheaper prices to a large number
of population living in the different parts of the country.
34
Over the years, PDS has become important part of Government of India's food Public Distribution System

policy and economy. It is important to clarify that PDS is only supplemental in nature
and is not intended to provide the entire requirements of foodgrains or other
commodities distributed under this programme to a household or a section of society.

As mentioned above, PDS is operated jointly by the Central Govenunent and State
Governments. The Central Government, through its nodal agency, the Food
Corporation of India, established under Act of Parliament in 1965, has assumed the
responsibility of'procurement, storage and transportation of foodgrains to the State
Governments. The operational responsibility of Central Government includes
allocation of monthly quota of foodgrains to the State Governments and issue of the
same to the States' Food Supply Departments. On the other hand, lifting of foodgrains
from FCI's godowns, distribution tu Fair Price Shops (PPS) and further distribution
of foodgrains through FPS to consumers is the responsibility of the State Governments.

In addition to this, identification of families below poverty line and very poor families,
issue of ration cards to different categories of beneficiaries and supervision and
monitoring the function of fair price shops is also being done by the State
Governments. Under the Public Distribution System, this has now been designated
as Targeted Public Distribution System (TPDS), the commodities viz., wheat, rice,
sugar and kerosene are being allocated to the State GovernmentslUnion Territories
for distribution. Some of the State Governments and Union Territories also distribute
salt and match boxes etc., under TPDS.

10.2 BACKGROUND OF PUBLIC DISTRIBUTION


SYSTEM (PDS)
The Public distribution of essential commodities particularly foodgrains was introduced
in India during the inter-war period. In 1960, there was acute food scarcity in the
country and it was decided that essential cornmodities should be made available at
cheaper prices to the consumers in urban- areas. Since then, the system has
substantially contributed to check the rising prices of foodgrains and ensured the
availability of foodgrains particularly in urban and semi-urban areas. Due to increase
of foodgrains production as a result of green revolution, the area ofPDS was extended
to villages, particularly, in tribal areas in 1970s and 1980s.

Up to 1992, Public Distribution System (PDS) was a general scheme for all consumers
without any specific target. However, in June, 1992, Revamped Public Distribution
System (RPDS) was launched in 1775 blocks of the country. From June, 1997, the
Targeted Public Distribution System (TPDS) was introduced with a view to serve
the population below poverty line living in rural and urban areas. The consumers
were divided in two categories below poverty line and above poverty line based on
certain norms prescribed by the Planning Commission.

The RPDS was launched to strengthen and streamline the PDS as well as to make
available foodgrains to consumers living in far-flung, hilly, remote and inaccessible
areas. The areas where Drought Prone Area Programme (DPAP), Integrated Tribal
Development Project (ITDP) and Desert Development Programme were running
were included in revamped PDS. The prices of foodgrains in RPDS were kept Rs.
50 paise per kg below the Central Issue Price(CIP) and foodgrains up to 20 kgs
per month per ration card were issued.
35
Institutional Infrastructures: In June, 1997, the Government ofIndia decided to focus on the poor of the
Public, Private and Public-
Private Partnerships
country and they were supposed to be the main target for making available
foodgrains at cheaper prices. Therefore, the scheme was named as Targeted
Public Distribution System (TPDS). Under this programme, the States were
required to identify the below poverty line population and make foolproof
arrangement for distribution of foodgrains to them through fair price shops at
affordable cheaper prices.

Initially, the scheme was formulated for the benefit of about 6 crores ~00r family
for whom a quantity of 72 lakh metric tonnes of foodgrains was allocated
annually. The identification ofBPL population was done by the State Governments
as per the State-wise poverty estimate of the Planning Commission for 1993-94
based on the methodology of the "Expert Group on Estimation of Proportion and
Number of Poor" headed by Late Prof. Lakdawala. The allocation offoodgrains
to the State Governments/UTs was made on the basis of average consumption in
the past, i.e., average annual offtake offoodgrains under the PDS during the past
10 years at the time of introduction ofTPDS.

In addition to this, transitory allocation to the tune of 103 lakh metric tonne
annually was also made to States for distribution of foodgrains at subsidized
prices to the Above Poverty Line (APL) population as it was considered that this
segment of population should not be suddenly deprived from cheaper foodgrains
being distributed through fair price shops by the State Governments.

Later on, it was requested by the State Governments that allocation of foodgrains
to Below Poverty Line (BPL) families should be increased. Therefore, the
Government of India increased the allocation to BPL families from 10 kg to 20 kg
of foodgrains per family per month at 50 per cent of the economic cost. The
allocation to APL families was made at economic cost with effect from 1st April,
2000. The quantity of allocation to APL family was retained at the same level as
at the time of introduction ofTPDS.

The number ofBPL families has been increased with effect from 1st December,
2000 by shifting the base to the population projections of the Registrar General
as on 1st March, 2000 instead of the earlier population projection of 1995.
With this increase, the total number of 13PL families are .652.03 lakh as
against 596.23 lakh families originally estimated when TPDS was introduced
1997.

Under these PDS schemes, the end retail price is fixed by the State Governmentsl
UTs after taking into considerationthe margins of wholesalers/retailers,transportation
charges, levies, local taxes, etc.

Under the TPDS, the States are requested to issue foodgrains at a difference of
not more than 50 paise per kg over and above the CIP for BPL families. Flexibilities
..::,lteGovernmentslUTs have been given in the matter of fixing the retail prices
h· •.
by removing the restrictions of 50 paise per kg over and above the CIP for
distribution of foodgrains under TPDS, except with respect to Antyodaya Anna
Yojana where the end retail prices is to be retained at Rs.2/- per kg for wheat
and at Rs.3/- per kg for rice.
36
Public Distribution System
10.3 CENTRAL ISSUE PRICES FOR RICE AND
WHEAT
Wheat and rice are issued by the Central Government from its Central Pool Stock
to State Governments/U'Is at uniform Central Issue Price (CIP) for TPDS. The
CIPs offoodgrains for TPDS are generally fixed below the economic cost. The
Central Government incurs a huge expenditure in the form of food subsidy on this
account. It is important to mention that as a social obligation the foodgrains are
supplied to Below Poverty Line (BPL) families and Antyodaya Anna Yojana
beneficiaries at highly subsidized rates.

After streamlining and restructuring the Public Distribution System (PDS) with focus
on poor (Targetted PDS), two different CIPs.have been fixed, one for the BPL
families and another for the APL families.

The CIPs of Rice and wheat issued under TPDS for various categories of
beneficiaries are given in Tables 10.1 and 10.2.

Table 10.1: Central Issue Prices of Common and Grade 'A' Rice for TPDS

,(Rs. per quintal)


,
With effect from Rice APL BPL
t.

1.12.97 Common 550 350


1.12.97 Grade 'A' 700 350

29.01.99 Common 700 350


29.01.99 Grade 'A' 905 35il

1.04.2000 Common II35 590


1.04.2000 Grade 'A' II80 590

25.07.2000 Common . 1087 565


25.07.2000 Grade 'A' 1130 565

12.07.2001, Common 795 565


12.07.2001 Grade 'A' 830 -

1.4.2002 , Common 695 565


Grade 'A' 730 -

1.7.2002 Common 795 565


Grade'iI.' 830 -

Source: Department of Food & Public Distribution, Govt. of India.

The CIP of common rice to APL families is applicable to J&K., H.P., North Eastern
States, Sikkim and Uttaranchal. From the Table 10.1, it is known that the CIPs of
common and Grade' A' rice for BPL families are much less than that for the APL
families. From the year 2000 till date, there is not much change in the CIP of common
rice and the price hag sUrdy been reducec:..
37
Institutional Infrastructures:
Table 10.2: Central Issue Price of Wheat
Public, Private and Public-
Private Partnerships (Rs. perquintal)

Effective from BPL APL

1.6.97 250 450

29.1.99 250 650

1.4.99 250 682

1.4.2000 450 900

25.7.2000 415 830

12.7.2001 415 610

1.4.2002 415 510

1.7.2002 415 610

Source: Department of Food & Public Distribution, Govt. of India.

From the Table of CIP of wheat,it is clear that price for BPL families are much less
- than the price for APL families. Further, the BPL price of wheat has not been increased
from the year 2000 to till date.

Check Your Progress 1

"Note: a) Use the spaces given below for writing your answers.
b) Check your answer with those given at the end of the unit.
1) . What are the main aims and objectives of food policy of India?

- ••••••••••• 0 ••••••••••••••••••••• 0 •••••••••••••••• 0 •••••••••••••••••••••••••••••••••••••••••••••••• 0 ••••••••••••••

2) What is the Targeted Public Distribution System?

.- .

~8
3) What are the central issue prices of wheat and rice for BPL families? Public Distribution System

10.4 ANTYODA¥A-ANNA YOJANA


Since the introduction of Targeted Public Distribution System (TPDS) in 1997, it
was felt that there are some poorest and destitute people in the country who are not
able to purchase the foodgrains even at BPL rate. They have very poor purchasing
capacity as they have no fixed income and are not able to get employment for most
of the period of the year. It was revealed that there is a segment of poorest among
the BPL population in some hunger prone areas of the country.

ANational Sample Survey (NSS) pointed out that about 5 per cent of the total
population in the country is not able to get two square meals a day. It was felt that a
scheme for the most destitute population to make available foodgrains at highly
subsidized rate is needed and, therefore, a new scheme known as AntyodayaAnna
Yojana (AAY) was launched in December, 2000 for one crore poorest ofthe poor
families of the country.

It was planned that about one crore people who are poorest among the below
poverty line (BPL) families covered under TPDS within the states should be identified
and foodgrains at highly subsidized rate should be supplied to them through Fair
Price Shops.

Under this scheme, wheat and rice was made available to these people at highly.
subsidized rate of Rs. 2/- per kg and Rs. 3/- per kg respectively. The State
Governments and UTs were requested to bear the distribution cost including the
margin ofF air Price Shops dealers as well as the transportation cost. Initially, 25 kgs
foodgrains per family per month was issued, which was increased to 35 kg w.e.f.
1st April, 2002.

• First Expansion of AAY


From 2003-2004, the AAY Scheme was further expanded by adding another
50 lakhs BPL households which are headed bywidows, terminally ill people, disabled
persons and persons of 60 years age or more with no assured means for their
support. With this increase, 1.5 crores families were covered under AA Y.

• Second Expansion ofAAY


In the Union Budget of2004-05, it was announced that AA Y was further expanded
for another 50 lakhs families whp are at the risk of hunger. Order to this effect was
issued on 1st August, 2004. The followingclass of population was covered under
AAY.

• Land-less agricultural labourers, marginal farmers, rural artisans/craftsmen, such


as potters, tanners, weavers, blacksmith, carpenters, slum dwellers and persons
39
Institutional Infrastructures: earning their livelihood on daily basis in informal sector like porters, coolies,
Public, Private and Public-
Private Partnerships
rickshaw pullers, hand cart pullers, etc.

• Families headed by widows terminally ill people, disabled persons, persons


aged 60 years or more with no assured means for their support.

• Third Expansion of AAY

In the Union Budget of2005-06, further expansion of AAY to cover another 50


lakhs BPL households was announced. Thus, the total coverage of household
families under AntyodayaAnna Yojana increased upto 2.5 crores.

10.5 QUANTITY OF FOOD GRAINS ISSUED


UNDER TARGETED PUBLIC DISTRIBUTION
SYSTEM (TPDS)
Since 1997, the quantity of foodgrains issued to BPL families has been gradually
increased from 10 kg to 35 kg per family per month. The first increase was made
from 1.4.2000 wherein quantity was enhanced up to 20 kg per family per month.
This was further increased from 20 kg to 25 kg per family per month with effect
from July, 2001.

Initially, the Antyodaya families were provided 25 kg of foodgrains per family per.
month at the time oflaunching of the scheme. The quantity of the foodgrains issued
under APL, BPL and AAY has been increased upto 35 kg per month per family
w.e.f. 1st April, 2002 with a view to enhance the food security at the household level
and to increase the nutritional requirement. It is important to mention here that
59 per cent of calories (in terms of kilo calories per day per person), 58 per cent of
total protein and 13 per cent of total fat are derived from cereals intake.
I

• Achievements of TPDS

After June, 1997, the PDS has now become a major food security scheme for the
poor families living in different parts of the country, particularly in remote hilly rural
areas.

i) The TPDS scheme fulfills about 50 per cent of the cereals requirement of the
poor family every month.

ii) The offtake offoodgrains under BPL scheme has considerably increased and
during 2003-04, it was 1991akh metric tonnes which is about 83 per cent of
the total PDS offtake.

ill) The Central Issue Prices (CIPs) of foodgrains for BPL and Antyodaya families
have not been increased much since the year 2000.

iv) The total offtake offoodgrains under TPDS was around 2391akh metric
tonne in 2003-04, which is the highest level achieved so far.

v) The CIf>for AAY category is kept lowest, i.e. Rs.2/- per kg for wheat
an.l r~<. 3/- per kg for rice. This is much below the economic cost of these
40 grams.
• Allocation and OffTake of Food grains underTPDS Public Distribution System

The details of allocation made under TPDS and off take of food grains are as
under:

\ Table 10.3: Allocation made underTPDS, OffTake and Percentage Off Take

(LakhMTs)
,
Year Total TPDS \
Total TPDS Percentage
, Allocation Off Take Off Take
..
1997-98 180.88 l31.53 72.72

1998-99 226.77 184.45 81.34

1999-2000 239.00 168.07 70.32

2~1 274.59 117.89 42.93

2001-02 300.08 l35.65 4521

2002'{)3 , 74328 198.56 26.71

2003.{)4 71232 239.31 33.60


".

2004-05 417.99 157.96 37.79

On carefully examination of the allocation offoodgrains and their offtake, it is


revealed that off take was maximum during 1998-99 and it is continuously showing
the declining trend. The reasons for less off take needs to be examined, Whether
this is due the lack of purchasing capacity of the poorest in rural areas or due to .
poor management of the TPDS in some states needs-to be looked on. Sometimes
the FPS owners are not able to lift the allocated stocks due to lack of fmance. N on-
issue of ration cards to the needy people in villages in a number of States is also one
of the reasons of poor off take under TPDS. There may also be some implementation
related problems, which should be removed.

10.6 lMPLEMENTATION RELATED


SHORTCOMINGS OF TPDS
Some of the major deficiencies observed in the functioning ofTPDS in various
States are as follows:

• Incorrect Identification ofBPL Families

There has been large number of complaints that the identification of BPL
beneficiaries was not correct and many eligible families have been left out ortne
BPL purview. There was a pre-condition of possession of the BPL card' for
identification under Antodaya Anna Yojana and a large number of very poor
people coming in the category of AAY who were not having BPL cards could,not
get the AAY cards. Requirement of permanent address and delay in verification
of antecedents made it very difficult for home less and urban destitute to get a
BPL I AAY ration cards.
41
Institutional Infrastructures: • Non Issue of Ration Cards
Public, Private and Public-
Private Partnerships In some of the States I UTs like Goa, Himachal Pradesh, Manipur, Rajasthan, A&N
ISlands, Chandigarh, Dadra& Nagar Haveli and Lakshdweep, the identification of
BPL and AAY families have not been completed and ration cards to all beneficiaries
have not been issued.

• Non-availability of Adequate Foodgrains in the Fair Price Shops (FPSs)

Due to shortage of resources, some of the states as well as FPSs dealers are not
able to lift the adequate quantity of foodgrains as a result the beneficiaries/consumers
particularly in the rural areas are not able to get their foodgrains from FPSs. There
are also reports that some quantity of foodgrains meant for TPDS and other welfare
schemes are diverted to open market. This needs to be checked by the State
Governments.

10.7 MEASURES TAKEN TO STRENGTHE~ TPDS


AND CHECK DIVERSION OF FOOD GRAINS
It has frequently argued that the PDS system has failed to deliver the desired result
for which it was planned due to several shortcoming as discussed above. The following
are the some of measures taken to overcome various shortcomings in the PDS
system in order to make system effective and target oriented.

1) Citizen Charter

This charter contains, inter alia, the basic relevant information for the consumers
and a model procedure and time schedule for various services to be provided by the
State ICentral Governments.

2) Involvement ofPanchayati Raj Institution

Under the guidelines for implementation of the TPDS, the State Governments are
supposed to involve Gram Panchayats and Gram Sabha in the identification ofBPL,
AAY families.

3) Area Officers Scheme

From February, 2000 the Department of Food and Public Distribution, Ministry of
Consumer Affairs, Food & Public Distribution had appointed Area Officers for
different States/U'Is to coordinate with the State Governments for regular and effecti ve
monitoring ofTPDS. The observations/discrepancies reported by these Area Officers
are communicated to the State Governments for taking remedial measures. .

4) Constitution of Task Force

Task Force team with senior officers of the Department of Food & PublicDistribution,
FCI and Central Warehousing Corporation (CWC) had been constituted to check
irregularities, if any, in the distribution of foodgrains under TPDS and AAY

5) Monitoring the Quality of Foodgrains

Officers of the Quality Control Cell of the Department of Food & Public Distribution
aswell as State Government officers regularly inspect the Fair Price Shops and
42
collect the samples of foodgrains for analysis purposes. Incidences of supply of Public Distribution System

poor quality of foodgrains are brought to the notice of concerned Organisation for.
taking remedial measures. Sealed samples of foodgrains issued from FCI or State
Governments' depots are displayed on the fair price shops for the benefit of
consumers.

Check Your Progress 2

Note: a) Use the spaces given below for writing your answers.
b) Check your answer with those given at the end of the unit.

1) Whatis AntyodayaAnna Yojana(AAY)?

........................................................................................ :- .

2) What are the issue prices of wheat and rice under AntyodayaAnna Yojana?

.................................................... ; .

......................•............................................................................................ . .

3) How many families are covered under this scheme at present?

..................................................................................................................
. .

4) What are the short comings ofTPDS?

•••••••••••••••••••••••••••••••••••••••••••••••• ""."." ~ •• ·o •• 0 o •• 0.0 ••••••• 0 •••••• o ••• 0.' ••••••••••••••• o •••••••••••••• " ••••••••••••••••••••

...................................................................................................................
. .

...................................................................................................................

....................................................................................................................

10.8 LET US SUM UP


In this Unit we have discussed the basic objective of the food policy of the
Government of India,which aims at providing cheaper foodgrains to the largenumber
of population living in different parts of the country particularly in the tribal, remote,
.hilly and inaccessible areas. The Public distribution system was introduced in 1960.
43
Institutional Infrastructures: This was further strengthened and focused on the targeted group, i.e., poor people
Public, Private and Public-
in 1997 and known.as Targeted Public Distribution System.
Private Partnerships

It was felt that the benefit ofTPDS is not reaching to the poorest and destitute
people of the country and a scheme for making available foodgrains at highly
subsidized rate to these people was needed. Therefore, a new scheme in addition to
TPDS, known as, AntyodayaAnna Yojana was launched in December, 2000 for
One crore poorest of the poor families of the country.

The scheme has been expanded 3 times and now about 2.5 crores people are
covered under this scheme. The Central Issue Prices on which the foodgrains
under various public distribution schemes are issued are fixed by the Government
of India and these prices are much below than the economic cost of the
foodgrains. Under AntyodayaAnna Yojana, wheat at the rate ofRs.2/- per kg and
rice at Rs.3/- per kg in the scale of35 kg foodgrains per month per family are
issued.

There are some implementation related shortcomings in TPDS. Due to financial


constraints, sometimes State Governments as well as FPS dealers are not able to lift
the allocated stocks of foodgrains. The possibility ofleakage and diversion of some
foodgrains to open market is not ruled out. Government of India and State
Governments have taken a number of measures to remove these shortcomings.
Area officers, members of the Task Force Teams constituted by the Government of
India regularlymonitor the TPDS and other schemes of the Government and wherever
shortcomings are observed, these are brought to the notice of the concerned
authorities for ~g the remedial measures.

10.9 KEYWORDS
Allocation The quantity of foodgrains (quota) which is issued
to the state Governments' .

Antyodaya Anna The scheme of distribution of foodgrains amongst


Yojana (AAY) poorest of poor people at highly subsidized prices.

APL Above poverty line population.

BPL Below poverty line population.

Offtake The quantity of foodgrains (quota) which is actually


lifted by state Governments.

Targeted Public The scheme of distribution of foodgrains at cheaper.

Distribution System prices focused on the targeted group, i.e., poor is


known as Targeted Public Distribution System.

10.10 SOME USEFUL BOOKSIREFERENCES


Anonymous (2000). Report ofthe High Level Committee on Long-Term Grain
Policy. Published by Department of Food & Public Distribution, Krishi Bhavan,
New Delhi.
44
Anonymous (2006). Annual Report 2005-2006 of the Department of Food & Public Distribution System

Public Distribution, Ministry of Consumer Affairs, Published by Department of


Food & PD, Krishi Bhavan, New Delhi.

Chopra, R.N. (198'8). Food. Policy in India -A Survey. Intellectual Publishing


House, 23 Daryaganj.Ansari.Road, New Delhi "

Bhandari, I.K. (2002). Public Distribution System: RBSA Publishers. SMS


Highway, Jaipur (India); ,

Kumar, Ashok (1988). FoodgrainProduction in India -Impact of Techno


Environment Factors. Criterion Publications, 136 Raja Garden, New Delhi-
110015.
.
Sharma, P.K. (1997). Foodgrain Economy of India. Shipra Publication, 115A,
Vikas Marg, Shakarpur, Delhi-l l 0092.

10.11 ANSWERSIHINTS TO CHECK YOUR


PROGRESS
Check Your Progress 1 ,

'1) The main aim and objectives of the food policy of the Government of India are
I

to provide cheaper foodgrains to large number of poor population living in


differentparts of the country particularly in tribal, hilly,remote and inaccessible
areas. Stabilizingthe market price of foodgrains by making procurement, storage
and distribution of foodgrains through various schemes is also an objective of
food policy.

2) The targeted public distribution system introduced in 1997 focused on poor


people and beneficiaries were categorized in below poverty line and above
poverty line segments. The emphasis was to make available foodgrains to below
poverty line population.

3) The Central Issue Price of wheat and rice for BPL families are Rs.4 .15 per kg
aad Rs.5.65 per kg, respectively.

Check Your Progress 2

1) The AntyodayaAnna Yojana is meant for poorest among poor (BPL) families
wherein wheat and rice are supplied at highly subsidized rates.

2) The issue prices of wheat and rice under AntyodayaAnna Yojana are Rs.2
and Rs.3per kg, respectively.

3) About 2.5 crores families are covered under Antyodaya Anna Yojana.

4) The important shortcomings ofTPDS are that most of the poor people have
not been issued proper ration cards to get the benefit of subsidized foodgrains
being issued under these schemes. Besides, some quantity of the TPDS appears
to be diverted to open market.

45
UNIT 11 COOPERATIVES, FARMERS
ORGANIZATION AND NON-
GOVERNMENT OT:lGANIZATIONS
Structure

11.0 Objectives

11.1 Introduction

11.2 Cooperatives
11.2.1 Benefits of Cooperative Movement
11.2.2 Cooperati ve Marketing
11.2.3 Cooperative Processing

11.2.4 Apex Level Cooperative Institutions

11.3 Farmers Organization


11.3.1 Common Lands
11.3.2 Joint Forest Management
11.3.3 Water Resource Management
11.3.4 Farmers' Participation in Sub-Surface Drainage
11.3.5 Watershed Programme

11.3.6 Fishery Resources


11.3.7 Extension
11.3.8 Farmers Associations (like MAHAGRAPES)
11.3.9 Apni Mandi
11.3.10 Microfinance/SHGs

11.3.11 Farmers Club

11.4 Non-Governmental Organisations (NGO)

11.5 LetUsSumUp

11.6 Key Words

11.7 Some Useful Books/References

11.8 Answers/Hints to Check Your Progress

11.0 OBJECTIVES
After going through this unit, you will be able to:

• outline the cooperatives movements in India;

• explain the structure of farmers organization; and

• discuss the role of non-governmental organization in strengthening rural


infrastructure.
l6
Cooperatives, Farmers
11.1 INTRODUCTION Organization and Non-
Government Organizations

Globalisation, privatization and scientific advancements pose new challenges and


opportunities for the development ofIndian agriculture. The emerging paradigm
shifts focus to creation and application of new knowledge for agricultural development
and global competitiveness. To facilitate this shift and realize greater economic
efficiency, a new set of responsive institutions should emerge. This unit discusses the
changing institutional structure i.e., cooperatives, fanners organizations and NOOs
in Indian agriculture.

11.2 COOPERATIVES
Cooperatives started as a defensive mechanism against moneylenders, and received
considerable emphasis as an instrument .of economic development of the
disadvantaged particularly in the rural areas that embraced a large gamut of activities
to serve the interests of the producers and consumers. "The non-exploitative character
of cooperatives, voluntary nature of the membership, the principle of ' one man one
vote', decentralized decision making and self-imposed curbs on profits eminently
qualified them as an instrument of development combining the advantages of private
ownership with public good".

11.2.1 Benefits of Cooperative Movement

The important benefits of cooperative rnovemeut are discussed as under:

i) Supply of Cheap Credit: The movement has freed the cultivators from the
clutches of the money lenders. The interest rate charged by private agencies
has fallen owing to competition offered by ~thecooperatives.

ii) Spread of Banking Habits: With the establishment of the cooperative banks
with network of branches in rural areas. have induced a sense of banking habit
among people of small means.

ill) Benefits to Agriculture: The cooperative societies have played an important


role in popularizing improved seeds, good cattle breeds, fertilizers, implements
and pesticides. The cooperatives provided a whole package of credit, input
supplies and services and have thus significantly contributed in the modernization
of agriculture and increase of agricultural production in the country.

iv) Better Prices to Cultivators: The cooperative marketing and processing


societies have helped cultivators in getting better prices for the produce, and
have saved them from the exploitation by the middlemen.

v) More Employment: The industrial cooperatives have safeguarded the interest


of the poor artisans against exploitation of the middlemen. They have also helped
in creation of new employment opportunities, increase in competitive strength
and efficiency of the artisans.

vi) Distribution of Essential Commodities: The consumer stores have been


supplying commodities of good quality and unadulterated merchandise at
reasonable prices, both to the rural and urban areas.
47
Institutional Infrastructures: vii) Encouragement of Thrift and Savings: Many cooperative societies, through
Public, Private and Public-
Private Partnerships
restrictions on wasteful expenditures by their members, have inculcated the
habit of savings among them.

11.2.2 Cooperative Marketing


The need for strengthening cooperative organization was felt for marketing ofprodqce
of farmers and for making inputs available to them at right price and time. These
organizations pool the produce of the small farmers having small surplus to market
and improve their bargaining power. They have also helped government agencies in
the execution of the policy decisions having bearing on the procurement and
distribution of foodgrains and other essential commodities.

• Meaning of Cooperative Marketing

Cooperative marketing organizations are associations of producers for the collective


marketing of their produce and for securing for the members the advantages that
result from large-scale business which an individual cultivator cannot secure because
of his small marketable surplus.

In a cooperative marketing society,the control of the organization is in the hands of


the farmers, and each member has one vote irrespective of the number of shares
purchased by him. The profit eamed by the society is distributed among the members
on the basis of the quantity of the produce marketed by him. In other words,
Cooperative marketing societies are established for the purpose of collectively
marketing the products of the member farmers. Its economic motives and character
distinguishes it from other associations. These societies resemble private business
organization in the method oftheir operations; but they differ from the capitalistic
system chiefly in their motives and organizations.

• Types of Cooperative Marketing Societies

On the basis of the commodities dealt in by them, the cooperative marketing societies
may be grouped into the following types:

1) Single Commodity Cooperative Marketing Societies

They deal in the marketing of only one agricultural commodity. They get sufficient
business from the farmers producing that single commodity. The examples are
Sugarcane Cooperative Marketing Society, Cotton Cooperative Marketing
Society and Oilseed Growers Cooperative Marketing Society.

2) Multi-Commodity Cooperative Marketing Societies

They deal in the marketing of a large number of commodities produced by the


members, such as foodgrains, oilseeds and cotton. Most of the Cooperative
marketing societies in India are of this type.

3) Multi-Purpose, Multi-Commodity Cooperative Marketing Societies

These societies market a large number of commodities and perform such other
functions as providing creditto members, arranging for the supply of the inputs
required by them, and meeting their requirements of essential domestic
consumption goods.
48
• Structure of Cooperative Marketing Societies Cooperatives, Farmers
Organization and Non-
The cooperative marketing societies have both two-tier and three-tier structure. In Government Organizations

the states of Assam, Bihar, Kerala.Madhya Pradesh, Kamataka, Orissa, Rajasthan


and West Bengal, there is a two-tier pattem with primary marketing societies at the
taluka level and state marketing federation as an apex body at the state level. In
other states, there is three-tier system with district marketing society in the middle.
At the national level, National Agricultural Cooperative Marketing Federation
(N AFED) serves as the apex institution. The pattem of the three-tier structure has
b.een discussed in the paragraphs that follow:

1) Base Level: At the base level, there are primary cooperative marketing
societies. These societies market the produce of the farmer members in that
area. They may be single commodity or multi-commodity societies, depending
upon the production of the crops in the area. They are located in the primary
wholesale market, and their field of operations extends to the area from which
the produce comes for sale, which may cover one or two Tehsils, Panchayat
Samitis or development blocks.

2) CentrallDistrict Level: At the district level, there are central cooperative


marketing unions or federations. Their main job is to market the produce brought
for sale by the primary cooperative marketing societies of the area. These are
located in the secondary wholesale markets and generally offer a better price
for the produce. The primary cooperative marketing societies are members of
these unions in addition to the individual farmer members. In the two-tier
structure, the State societies perform the functions of district level societies by
opening branches in the district. .>

3) State Level: At the state level, there are apex (State) cooperative marketing
societies. These state level institutions serve the state as a whole. Their members
are both the primary cooperative marketing societies and the central cooperative
unions-of the state. The basic functions of these societies is to co-ordinate the
activities ofthe affiliated societies and conduct such activities as inter-state
traae, export-import, procurement, distribution of inputs and essential consumer
goods, dissemination of market information and rendering expert advice.

The cooperative marketing network of the COW1tryinclude 29 state level marketing


federations, 173 district Iregional marketing cooperative societies, 2478 general
purpose primary marketing societies and 5028 special commodity societies.

11.2.3 Cooperative Processing


Cooperative processing is also making good progress in addition to cooperative
marketing. The structure of processing units established in the cooperative sector is
of two distinct pattems, i.e., those which are set up by independent processing
societies, such as cooperative sugar factories and spinning mills and those which are
established as adjuncts of cooperative marketing societies, e.g., small and medium
cooperative processing units.

In India, the work o~ processing is done largely by the middlemen for want of
adequate cooperative processing facilities. The result is that the producers are at
loss to enjoy the benefits of processing as there is a wide price spread between the
producer and consumer as a good chunk of the ultimate price mid by the consumer
goes to these middlemen. 49
Institutional Infrastructures: • Need and Importance of Cooperative Processing
Public, Private and Public-
Private Partnerships Cooperative processing is essential for the development of cooperative marketing,
and consumer cooperative. Well-established cooperative processing units can •
effectively undertake to recover the loans paid by cooperative credit societies 'for
agricultural production provided they are also linked with credit societies. Cooperative
~rocessing, besides strengthening the functions of agricultural credit and marketing
system, provide a wide base and become focal point for development of agro-
industrial complexes in the rural areas.

The pattern of organization differs in different cases. In some cases, the cooperatives
engaged in marketing agricultural produce themselves take the processing work. In
others, separate societies of agricultural producers are organized for processing. In
large units, independent processing units are organized. In smaller units, not needing
substantial capital outlay, processing is undertaken by the cooperative marketing
societies.

• Business Practices of Cooperative Processing Societies


The Cooperative processing units follow varied type of business practices. In some.
cases, the processing societies undertake processing on behalf of the producer
members. In other cases, the societies pool produce, grade it, carry out processing
and sell the produce and pay the members an average pooled price.

In order to build up proper relations with the grower-producers, Cooperative


processing units provide certain essential services to their members.F or example,
cooperative sugar factories make arrangements for the harvesting of sugarcane crops
their carting and transportation to the factory and also arrange for distribution of
manures, seeds, etc. They also appoint agricultural experts to advise the growers on
/'

various aspects of raising sugarcane crop. Such facilities create a spirit ofloyalty
among members and ensure successful working of the societies.

The State and the Central Government also provide necessary facilities for the
development of cooperative processing. The state governments directly participate
in the share capital of the processing units; guaranties to the financing agencies for
giving loans to cooperative processing units and give them preference in licensing
and provides technical guidance.

11.2.4 Apex Level Cooperative Institutions


The different apex level organizations which monitor and administer the functioning
of the cooperative system in the country are discussed as follows.

• National Agricultural Cooperative Marketing Federation


The National Agricultural Cooperative Marketing Federation (NAFED) was
established in October 1958 as an apex organization of marketing cooperatives in
the country. The State Level Marketing Federations and the National Cooperative
Development Corporation are its members. The head office ofNAFED is at Delhi,
and its branch offices are located at Bombay, Calcutta and Chennai. It has established
branches in all the maj or port towns and capital cities in the country. NAFED's area
of operation extends to the whole country. It deals in procurement, processing,
distribution, export and import of selected agricultural commodities. NAFED is also
the central nodal agency for undertaking price support operations for pulses and
oilseeds and market intervention operations for other agricultural commodities. The
,
main objectives ofNAFED are:
50
• to coordinate and promote the marketing and trading activities of its affiliated Cooperatives, Farmers
Organization and Non-
cooperative institutions;
Government Organizations

• to make arrangements for the supply of the agricultural inputs required by


member institutions;

• to promote inter-state and international trade in agricultural and other


commodities; and

• to act as an agent of the government for the purchase, sale, storage and
distribution of agricultural products an<iinputs.

• National Cooperative Development Corporation (NCDC)

It was established in 1973 with a prime aim of planning and promoting programmes
for production, processing and marketing of agricultural produce through cooperative
societies. The corporation supports various marketing programmes for which financial
assistance comes from the respective state governments. Cooperative marketing
and processing activities are being developed under the supervision ofNCDC with
a provision of requisite financial assistance and expertise and training. NCDC is
now extending its activities to various areas of cooperative dairies, fisheries, minor
forest produce, etc., which are basically aimed ateconomic development of the
rural poor. Since its inception i.e., from 1963 up to 1996, it has provided financial
assistance to the tune ofRs 2,800 crore besides striving hard for the development of
cooperative marketing, storage, processing and distribution of consumer goods viz.,
foodgrains, sugar, edible oils, kerosene, salt, soft drinks, etc., through service
cooperatives.

• OtherOrganizations

Other Organizations working in Cooperative sector are: (1) National Cooperative


Tobacco Growers Federation (NCTGF), (2) National Consumers Cooperative
Federation (NCCF) and, (3) Tribal Cooperative Marketing Development Federation
oflndiaLtd. (TRIFED).

Check Your Progress 1

Note: a) Use the spaces given below for writing your answers.

b) Check your answer with those given at the end of the unit.

1) Write three benefits of cooperatives in Indian agriculture?

2) State the institutional set up of the cooperative marketing institutions?

51
Institutional Infrastructures: 3) What are the various national level cooperative institutions?
Public, Private and Public-
Private Partnerships

11.3 FARMERS ORGANIZATION


The budgetary constraints have forced the COW1tryto adopt the role of facilitator of
economic development. Hence, more emphasis is being laid now on people's
participation and collective management of resources. It is however, evidential that
there are both success and failure of collective actions. This is due to the fact that
communities themselves are dynamic, inducing dynamism in institutions through which
they got control over resources. Therefore, for sustainable management of resources,
institution should lay attention to:

i) Asymmetry in perceptions of different stakeholders,

ii) Transaction costs issue by means of property rights,

iii) Shaping and stabilizing expectations (i.e., reduction in uncertainty) to influence


investment in (conservation and improvement of resources) long-term growth,

iv) Poverty and low income issues,

v) Interregional and intergenerational externalities,

vi) Imperfections in other markets, and finally, and

vii) Catching up with dynamism in ecology and demography.

Evolving institutions of watershed management, participatory irrigation management,


and joint forest management, etc., are some examples of application of institutional
role in sustainable resource management.

Community participation is gaining acceptance among policy makers in India as an


essential aspect of managing natural resources. This belated recognition is reflected
in the government of India's (Gol) initiatives to facilitate community management of
forests, and consider a larger role for users in the management of irrigation systems.
, Participatory approaches are recommended even for agricultural research, hitherto
considered exclusive domain of scientists. Fundamental changes have been made to
increase community part icipation in watershed development. Let us discuss, how
farmers organization play role in diff~rent types ofresour~es.

11.3.1 Common Lands

The Common Property Land Resources (CPLR) provide livelihood support to the
rural poor, apart from performing several useful ecological functions. Reduction in
CPLRs is observed due to breaking down of institutional arrangements. The use of
CPLR under traditional institutional arrangements was regulated through the
measures like grazing tax, livestock lives payable during ceremonies, and penalties
for unauthorized use. It is now being felt that in order to regenerate the degraded
52
CPLRs the resources have to be put W1dercommunity'scontrol and by reducing the Cooperatives, Farmers
Organization and Non-
role ofthe formal institutions. The productivity of CPLRs has improved in several Government Organizations
parts of the COW1trythrough innovative experiments undertaken by the non-
governmental organizations (NGO), Tree Growers Cooperative Societies (TGCS)
and other organizations (Singh 1994). For example, regulated access to the fodder
and fuel biomass under the joint management of CPLRs has successfully created
participatory management institutions, facilitating equitable distribution of permanent
assets and more activities for women to enhance their socio-economic status.

11.3.2 Joint Forest Management


Joint Forest Management (JFM) as a part ofthe National Forest Policy in India was
introduced in the form of guidelines issued by Ministry ofEnvironment and Forests
(MoEF), on June 1, 1990. This was preceded by success stories of participatory
forest management in West Bengal (Arabari area), Haryana (Sukhomajari project)
and Gujarat (South Gujarat initiatives by AKRSP and others). The guidelines
envisaged the involvement ofNGOs, village communities and state governments in
management, protection and regeneration of degraded forests. After 10 years the
quantitative achievements include: 22 state govermnents having adopted JFM; 10.24
million hectares offorest land manage by 36,075 JFM committees. JFM has led to
increased forest cover in many areas as indicated by remote sensing imageries. It
has helped in improving livelihood conditions of the forest communities specially in
Madhya Pradesh and Andhra Pradesh Jodha (2000) has recommended following
points for improving the role of JFM.

D Providing legal identity and status to JFM committees including their registration
under the Societies Registration Act 1860, to equip and strengthen them to
adapt to the increasingly formalized and commercialized enviromnent (including
formal credit market), and to protect them against the whims of forest officials
prone to misuse their discretionary powers.

ii) More powers and decision-making role to JFM conunittee as a step towards
greater decentralized and devolution, an issue frequently raised by both
supporters and critics of JFM movement though in different contexts.

More explicit and equitable sharing mechanism to ensure benefits of JFM to tribal,
landless labourers (particularly women) who have been deprived of their traditional
earnings options following the induction of JFM in many areas.

11.3.3 Water Resource Management

Various farmers and other organizations dealing with management and development
of water resources are discussed herewith.

• Rainwater Harvesting and Community Institutions

Rainwater harvesting can meet people's basic water needs as well as improve food
and livelihood security. The community participation is essential for the transformation
process from a state of ecological poverty to a state of sustainable economic growth.
The success stories ofSukhomajri, Ralegaon Siddhi and TarW1Bharat Sangh revealed
that village-level organizations played a crucial role in developing institutional
arrangements and enforcing them for equitable distri hution and sustainable use of
53
Institutional Infrastructures: water resources. Thus to manage Common Property Resources (CPR) it is imperative
Public, Private and Public-
Private Partnerships
to design integrated village ecosystem with high order of democracy in decision
making, create appropriate conununity-based property rights, provide fmancial grants
to village institutions and induce village institutions to raise fund by organizing the
CPRs.

• Canal Irrigation and Institutions

Many success stories of irrigation cooperative societies and Water User Associations
(WUA) working in the command area of river basins have been observed. The
State Department of Irrigation facilitates the formation of cooperatives at the outlet
level and still maintaining the main water courses in the command areas of the rivers
ofTapti, Vkaikakrapur, Mala, Thindal and Paliganj distributaries ofTamil Nadu and
Mahanadi ofBihar. However, designing and enforcing the internal institutional
arrangements by the members of the societies for equitable and efficient water
distribution, recovery of irrigation fee and maintenance and repairs are pre-requisites
for successful management of canal irrigation system beyond outlets.

• Irrigation Tank

For several centuries, tanks have been central to irrigated agriculture in the states of
Andhra Pradesh, Karnataka, Tamil Nadu and Chhatisgarh. Tanks are, however,
disappearing fast because of decades of siltation, poor organization and management,
decline ofcompulsory labour contribution (Kudimaramat) for the maintenance work,
inadequate operation and maintenance budget from government, meager revenue
from tank-based activities (social forestry, fisheries, duck and goat rearing, grazing
leases), poor collection of irrigation fee and growth of wells in tank command area.
Most of the tanks in Tamil Nadu and elsewhere have degraded into open access
due to weak institutional arrangements, property rights and breakdown oflocal
authority system. Three strategic elements are essential for rehabilitation of irrigation
tartks. Firstly, creation of a WU A at the tank level with strong common property
interests in the conservation of irrigation tank with clarity of management rights,
responsibilities and rewards. Secondly, creation of new sources of resource generation
for sustained investment in maintenance and repair of the tank complex through
giving the rights to WUA over plantations in water-spread area and tank bunds.
And third, creation of upper tier organization as co-ordinating structure which can
lobby with government agencies for resources and favourable policies.

• Technical and Institutional Arrangements for Groundwater

Groundwater accounts for over half of the total irrigated area in India. The expansion
of groundwater irrigation was largely due to improved drilling and lifting technologies,
lower per unit cost of water pumping, massive rural electricity programmes, liberal
credit for exploring groundwater and subsidized supply of electricity. The productivity
. of irrigation in conjunction with chemical fertilizers and high-yielding varieties (HYV)
is much higher for groundwater as compared to canal, mainly due to wastage of
water and flexibility to adjust the timeliness and quantity of water distribution to
crops. Until recently, the government policies of supporting and promoting private
ground water development were widely acclaimed time and again. However, there
is now a growing concern that the existing policies, if continued, may lead to over-
exploitation of groundwater, particularly in the arid, semi-arid and hard rock regions
of peninsular India. Further, under the private property regime, water markets have
54
emerged in many parts of the country. The individual farmers are more concemwith
their private gains and costs, while completely ignoring the social cost of over- Cooperatives, Farmers
Organization and Non-
exploitation of ground water resources. Efficient, equitable and sustainable use of Government Organizations
.groundwater can be achieved through developing institutional arrangements like rights
over water, land tenure, users' relationship, and financial incentives etc.

11.3.4 Farmers Participation in Sub-Surface Drainage


Significant portion of land under command areas of Punjab, Haryana and Uttar
Pradesh are now facing the problem of salinity. One way to overcome this is by
adopting Sub-Surface Drainage (SS})). Reconciliation of diverse interest groups is
essential for reclamation of the degraded lands. It has been realized that mere planning
and executing the drainage system by a government agency may not yield the desired
results unless there is a positive attitude and active participation of the beneficiaries
in the programmes. Higher the participation of the affected population, the greater
will be success. It is found that persuasion and education of potential beneficiaries
and demonstration of benefits are crucial for the successful operation and management
ofland reclamation programs. Differential resource endowments mainly created the
incompatibility of actions of rational individuals. To resolve this problem, any kind of
formal or informal group approach must assure each individual participant that decisions
of other individuals will not cause any negative externality for him.
For the management ofSSD, focus on bottom-up approach, sensitization of decision-
makers and local potential beneficiaries and identification and incorporation of
traditional practices into design and implementation ofSSD should be encouraged.
The state should play a promotional role and self-governance based on the values
like freedom, autonomy and dignity, besides material well being, should be
encouraged. The task of organizing farmers maybe taken-up by the government as
well as non-governmental agencies. Another alternative is the promotion of drainage
cooperative on the pattern ofthe 'Saline Land Agricultural Development Cooperative'
in Gujarat which was established in 1989,-90 under the Societies Registration Act of
1860. The main activity of this Cooperative is to bear the operation and maintenance
(O&M) cost.

11.3.5 Watershed Programme


It is how clear in the minds of policy makers, donors and researchers that people's
participation is a key ingredient of successful watershed development and lack of it
is one of the primary reasons for poor outcomes of watershed development in India ..
Community participation is defined here as people acting in groups to influence
the direction and outcome of development programmes that affect them. Participation
requires community organizations. Wherever needed, implementing organization need
to work with communities to initiate collective process. This process, which we
refer to as social organization, is critical in watershed development because it
distributes benefits and costs unevenly and calls for shared sacrifice to manage
common lands.

Social Organisation
The aim of social organization is to develop community organizations through which
members of communities can articulate their needs, participate in planning,
implementation and evaluation of projects, and to develop the necessary institutions
to take up collective activities such as village pasture development. They establish
what are usually referred to as watershed committees for implementing the projects. 55
Institutional Infrastructures: Several projects, including some that employ NGOs, use selected community
Public, Private and Public-
members to assist in social organization. These selected members are designated as
Private Partnerships
kisanmitra or friendly fanners who are given training on technologies promoted through
the project. The kisanmitra are held responsible for insuring participation of other
members of their communities.

Watershed program has been reported as one of the most important strategies to
bring socio-economic change in the rainfed system. In some of the regions, it has
silently revolutionized the agriculture and allied sector through various technological
interventions, particularly soil and water conservation and crop diversification.
However, lack of appropriate institutional arrangement is the major obstacle in
attaining potential benefits of watershed programs. The benefits of watershed
programs have been more where people's participation was higher. It has been
found that people's participation is important not only during the phase of
implementation of watershed development activities but also beyond the actual
investment phase. It has been argued that earnest efforts to enthuse stakeholders for
their voluntary participation would sustain watershed development and bring
prosperity in the rainfed areas.

11.3.6 Fishery Resources


Inland water fishery is managed under different property and management regimes
having direct bearing on socio-econornic conditions of fisherman. Some institutional
arrangements are required to regulate the efforts and limit the fish harvesting to
maximum sustainable level in the estuarine fisheries, which are presently under an
open access regime. The same holds true for the fisheries in floodplain wetlands,
which are under either cooperative or private management regime. These
arrangements should be strengthened through re-examination of the lease-policy
and revitalization of the cooperatives. The need for innovative institutional arrangements
is felt for shrimp farming, which has spatial and temporal environmental externalities,
as well as adverse socio-economic impact within coastal ecosystem. Pumping of
brackish water and indiscriminate use of sub-terrain fresh water for hatcheries of
shrimp farms cause salinity, making fresh water unfit for irrigation and human
consumption. Coastal mangrove forests are also depleting in shrimp farming and
promote inefficient use of coastal resources, policy for coastal CPRs, market
interventions and institutional structures are called for.

11.3.7 Extension
There is an increasing realization that "public extension by itself cannot meet the
specific needs of various regions and different classes of farmers. Policy environment
would promote private and community-driven extension to operate competitively in
roles that complement, supplement, work in partnership and even substitute for
public extension" (DAC 2000).

Though private sector participation in agricultural extension in India is limited to a


few crops and geographical areas, the increasing number of private entities, such
as NGOs, farmers associations, producers cooperatives, input agencies, agro-
processors (especially contract farming) private consultants and media offers much
scope for complementing public sector extension. As farmers are also willing to pay
for high value services the challenge is in creating pay worthy services (by all
concerned), so that some cost of providing extension could be recovered by the
56
public sector or these could be left to the private sector to pursue. Still there is a Cooperatives, Farmers
Organization and Non-
need for a strong and vibrant public sector extension to exist. A number of diverse Government Organizations
extension approaches have been adopted by a number of states giving emphasis to
farmers' association/participation.

Kerala decentralized the functioning of Department of Agriculture (DoA) in


1987 by creating agricultural offices (Krishi Bhavans) under each panchayat. In
1989, the state initiated the "group approach for extension' in rice farming, which
was subsequently extended to other crops. Rajasthan adopted the 'group approach'
to extension and presently the village extension workers operate mainly through
kisan mandals (groups of20 farmers).
\

Different approaches are also being tried in several project-specific districts. The
most ambitious among them is the Agricultural Technology Management
Agency (ATMA) model. The project envisages testing of several new institutional
arrangements such as creation of ATMA, a registered society at the district level for
integrating the activities of all organizations involved in the transfer of technology,
decentralization of decision making at the district level, an increase in farmers
participation in planning and implementation of extension interventions. The program
is based on the Strategic Research and Extension Plan (SREP) developed through
a participatory approach.

In Uttar Pradesh, two major programmes are presently under implementation, namely
the Uttar Pradesh Sodic Land Reclamation Project (upSLRP) and the Uttar Pradesh
DiversifiedAgricultural Support Project (OPDASP). Both these programs are funded
by the World Bank and have a separate component for technology dissemination.
Under UPSLR, the system of farmer-led extension approach is being tried (kisan .
mitra, majhliakisanrnitra, group leaders, master trainers, etc.). Commodity-based
Farmer Interest Groups (FIGs) are formed, and the field activities are implemented
through user groups. The programme is being implemented by the Uttar Pradesh
Bhoomi Sudhar Nigam, a government undertaking set up for this project. UPDASP
envisages capacity building of the line department functionaries, decentralization of
the technical and managerial decision making (SREP,PRA, ATMA, etc), increasing
the role of the private sector, enhancing the participation of farming community, self-
help groups (SHG) and Farmers Interest Groups (FIG), etc., and support for Human
Resource Development and enhanced communication capacity. Interventions for
agricultural development under this project are implemented by the field functionaries
of Do A.

The private sector has also been exhibiting a lot of diverse approaches in agricultural
extension. The prominent ones include the activities of the farmers associations (e.g.,
Grape Growers Association ofMaharashtra); producers cooperatives (e.g., Kerala
Cooperative Milk Marketing Federation, sugar cooperatives in Maharashtra);
NGOs(BAIF); input industries (fertilizer and seed companies); agro-processors
through contract farming (Pepsico and Hindustan Lever in Punjab, VST Natural
Products inAndhra Pradesh); mass media (ETV inAndhra Pradesh and Maharashtra,
news papers and magazines in Kerala) and individual consultants and consultancy
fums.

11.3.8 Farmers Associations (like MAHAGRAPES)


The farmers associations are similar to those of cooperatives but are not under the
purview of cooperative laws. There are a number of problems in marketing under
57
Institutional Infrastructures: the umbrella of cooperati ve legislation. These farmers associations are registered
Public; Private and Public-
Private Partnerships
organizations enjoying a lot of flexibility in the enrolment of members, raising funds,
and carrying out the chartered activities following plural management process. There
is less scope for government intervention in their functioning. The accounts of
associations are audited by any chartered accountant and not by the cooperative
audit department. The experience of Maharashtra Grape Grower's Association
selling grapes under the banner of MA HAG RAPES has achieved great success
with active participation of the members. This model is being copied in other states
like Karnataka and Andhra Pradesh. If right types of incentives are provided, fanners
association will succeed in a big way because of the cohesiveness in the group. In
the wake of the withdrawal ofthe state from the scene, the producers associations
are considered to be an alternative to the public sector undertakings engaged in
agri-business.

11.3.9 Apni Mandi


Apni Mandi or Kisan Mandi is different from the traditional mandi or market yard as
the produce directly moves from farmer-producer to the buyer who is generally
consumer. The system does away with the middlemen. The price spread is generally
low and is fimctioning very well in some of the states.

11.3.10 Microfinance/SHGs
The failure of formal financial institutions to serve the rural poor effectively led to a
review and a look at the informal financial systems and lending groups. This led to
the development of informal financial groups. In India, a number of efforts have
been made to link formal and informal fmancial systems. In April 1996, RBI advised
the bankers that lending to the SHGs should be considered as an additional segment
under priority sector advances and integrates with mainstream credit operation. The
SHGs have thus become a regular component of the Indian financial system since
1996. The SHGs are small, informal and homogeneous groups of not more than 20
members each. These groups are expected to foster true (direct) democratic culture
where all the members participate actively by taking part in the debate and decision
making process which is possible only in small groups. These groups are considered
to improve the repayment, reduce transactions cost and improve the access to credit
for the people of small means.

·11.3.11 Farmers Club


Farmers Club is an informal forum in the villages. It can be promoted in a village
cluster of villages, generally in the Operational Area of a Bank. The Farmers Club
should have minimum of1 0 members. All villagers except wilful defaulters can become
members of the club. The club must make endeavour to raise their own resources
by way of contribution from members, undertaking certain business services such as
bulk procurement of inputs and collective marketing of agricultural produce, etc.

National Bank for Agriculture and Rural Development (NABARD) would provide
financial support for the first three years and for the next two years the bank
sponsoring the club may provide the support, if necessary. The club is expected to
attain self sustainability in a period of3-5 years.

Any bank operating in rural area, including Commercial Banks (CB), Regional Rural
Banks (RRB), & Cooperative Banks (SCB, SCARDB, PCARDB, DC CB and
58
PACS) can sponsor and organize Farmers Clubs. They can hire services ofNGOs/ Cooperatives, Farmers
Organization and Non-
KVKs /Agriculture Universities, if required, for promotion of the clubs. All the clubs Government Organizations
should haveseving Dank accounts with the bank.

The broad functions of the Farmers Clubs would be to:

• Coordinate with banks to ensure credit flow among its members and forge
better bank borrower relationship,

• Organise minimum one meeting per month and depending upon the need, there
would be 2-3 meetings per month. Non-members can also be invited to attend
the meetings,

• Interface with subject matter specialists in the various fields of agriculture and
allied activities etc., extension personnel of Agriculture Universities, Development
Departments and other related agencies for technical know how upgradation.
For guest lectures, even experienced farmers who are non members from the
village/ neighbouring villages could be invited,

• Liaison with corporate input suppliers to purchase bulk inputs on behalf of


members,

• Organize/facilitate joint activities like value addition, processing, collective farm


produce marketing, etc., for the benefit of members. They can also sponsor /
organize SHGs,

• Undertake socio-economic developmental activities like community works,


education, health, environment and natural resource management etc.

Check Your Progress 2

Note: a) Use the spaces given below for writing your answers.
b) Check your answer with those given at the end of the unit.

1) State the role of farmers organizations in the micro finance programme of the
country?

2) State the significance of the farmers organization in watershed programme?

............................•.....................................................................................

...................................................................................................................

59
Institutional Infrastructures:
Public, Private and Public- 11.4 NON-GOVERNMENTAL ORGANISATIONS
Private Partnerships
(NGO)
Many scholars have debated the role and relevance ofNGOs in a developing country
like India. It is fairly well recognized that the state cannot succeed completely in
alleviating the status of disadvantaged groups. In fact, even when the state assumed
almost total control over the economy during the planning era, it could not effectively
deal with poverty and unemployment problems. Social problems and tensions also
could not be resolved to anyone's complete satisfaction. Since 1991, the country
has made a major decision to shift to market-derived growth and development. The
shift mayor may not help the poorest of the poor in the society. There are problems
such as lack of purchasing power, lack of opportunities to improve purchasing power,
lack of requisite skills to utilise opportunities that may become available as a result
of the operation of market forces and lack of proper educational facilities in remote
rural areas, where most of the poor live, to acquire changing skills required in the
market.

The philosophy of the market economy basically gives rise to the top-down approach.
For instance, some people argue that the major problem with the people in resource
poor regions is that they have no skills or access to new production technologies.
Their recommendation is for improving the skills. The grass roots assessment may
reveal that the critical issue is the control over natural resources. It is here that
NGOs have a crucial role. NGO initiatives in the area of awareness, mass mobilisation
and organisation around critical issues are likely to lead towards better problem
identification and solutions that involve the active participation of the local population.
Such initiatives are likely to make a desirable impact on policy formulation and
problem designs. This must be followed by a professional approach to implementation,
which would ensure quality delivery. It has already been argued that the state and
the bureaucracy by their nature are not able to design and deliver for the
disadvantaged sections of the population. Hence, the state should give recognition
and encouragement to NGO initiatives.

NGOs vary in munerous ways including their (1) composition, (2) size, (3) mission
or purpose, (4) sources of funding, (5) histories, (5) whether or not they focus on a
particular arena such as agriculture or craft production, (6) whether they provide
innovative models in "technology, research methods, or institutional arrangements"
which can potentially be scaled up, and (7) their manner of day-to-day functioning,
including decision-making.

Most NGOs see their main functions as offering help in one form or another.
Now-a-days, many are involved in trying to provide loan schemes for self-
employment, medical services, funding for smaller NGOs, etc. However, there
are other ways of looking at NGO organizations and how they function.

• Source of Funding

Some small NGOs work only with volunteers, use participant donated space and
equipment and do not need (or sometimes want) any funding for their activities.
However, most NGOs, whether in a developed or developing country, need to
raise funds for their very existence (to pay full-time staff, for rent, etc), and for
projects or activities. Some try to manage with very limited funding, but most require
60
some degree of outside funding. The NGOs can be classified based the source of Cooperatives. Farmers
Organization and Non-
funding in the following ways:
Government Organizations

1) NGOs receiving foreign funds from the developed world, including bilateral
funds, international agencies, NGOs in the developed world such as OXFAM,
or various church groups, marketing organisations such as Pueblo to People;
or from individuals, foundations, special funds, etc;

2) NGOs only or also receiving partial funding from their respective national .
governments;

3) In the case of South Asia, NGOs receiving funds from state governments or
even local district governments; and

4) NGOs using only or primarily funds raised through group members' donations
or small monthly fees, etc.

• Outreach to the Poor


NGOs in Bangladesh tend to place their branch offices within better-developed
rural areas with lower costs of access to roads, telecommunications, and banking
infrastructure. Moreover, NGO schemes seem to shy away from areas that are
known to be at high risk of being affected by floods and other distress factors. On
the other hand, within these somewhat more advantaged rural areas, NGO branch
offices seek out and are successful in penetrating poorer villages with their financial
services, and within these villages, in reaching out to very poor people, mostly
women. In this way NGOs have achieved remarkable progress in reaching large
numbers of very poor people in rural Bangladesh. This is particularly noteworthy
when compared with the dismal record of other rural banking,schemes that simply
have not been able to service this clientele even when armed with significant levels of
government subsidy.

• "Financial Sustainability
The NGO schemes, on the other hand, charge interest rates that are 10-20 per cent
above.the inflation rate and achieve repayment rates in excess of95 per cent and as
high as an average of98 per cent over the years. With respect to the criteria of
financial sustainability then, the NGO-supported group-based institutions far
outperform the traditional rural banking approach. With respect to overall indicators
of financial sustainability, these Micro Finance Institutions are, without any doubt,
among the most advanced and efficient worldwide.

• Use of NGOs in Watershed Projects

It is widely recognized that NGOs could be more effective at working with


communities, they are used only in a few watershed projects because of resource
limitations and the reluctance of government organizations to involve NGOs. However,
the responsibility ofNGOs in these projects is restricted to organizing the communities.

• NGOs in Agricultural Marketing

NGOs have close contact with farming community and are well aware of their
problems. In the recent times, some ~~GOs have entered into marketing of farm
produce, especialfy organic food. The Eco-net, an NGO in Kamataka, is directly
involved in the marketing of organically produced foodgrains, fruits and vegetables.
61
Institutional Infrastructures: NGOs can be encouraged in other states to help the farmers in marketing their
Public, Private and Public-
Private Partnerships
produce in a better way.

• NGOs in Agricultural Extension

NGOs can play a great role in transfer of technology to farmers due to the good
rapport they have with them. Rajasthan has been encouraging NGOs to participate
in the extension activities and has contracted out some extension activities to NGOs,
including transfer of entire extension responsibility to NGOs in a few blocks/districts.

Check Your Progress 3

Note: a) Use the spaces given below for writing your answers.

b)· Check your answer with those given at the end of the unit.

1) Describe the nature and type ofNGOs?

2) Discuss the role played by NGOs in socio-economic development?

.............................................................................................................. ;-;-;-.

11.5 LET US SUM UP


Cooperative institutions in the country have a history dating back to 1904. These
institutions have evolved over a period oftime and a very well nit structure has been
created till now. There are now two-types of credit institutions one providing credit
and the other called as non-credit institutions. The credit institutions have been dealt
in detail in Unit 9 of Block 3. The cooperatives have played a major role in the
development of Indian agriculture. It has played a great role in providing apart from
credit, efficient marketing and processing facilities. This was possible through the
setting up of cooperative marketing and processing societies.

Farmers association is an important institution that has been active in managing the
resources from time immemorial. Tli.e decline in the role of these institutions led to
the deterioration of common property resources. This fact has been realized oflate
and there is now increasing concern to strengthen the farmers institutions and to
provide them with wider powers.

The NGOs are playing a great role in mobilizing the people into.taking action. There
rapport with the rural community is being used to serve as an agent for mobilizing
the rural inhabitants, forming SHGs/WUAs in many of the watershed prograrnmes.
62
Their role is also recognized in forming/training the SBGs for widespread development Cooperatives, Farmers
Organization and Non-
of the microfinance programme in the country. Government Organizations

With the changing role of the government to that of facilitator of development greater
hope is laid on the cooperatives, the farmers organizations and the NGOs in building
and maintaining the common property resources, reaching the unreached, generating
employment opportunities, etc.

11.6 KEYWORDS
ApniMandi It is different from traditional mandi or market
yard. Under this arrangement, producer sale this
produce directly to the consumer.

Cooperatives These are the organisations ofthe people for the


people and by the people.

Multi-purpose, Multi- These societies market a ICVgenumber of


Commodity Cooperative commodities and perform such other functions as
Marketing Societies providing credit to members.

NAFED The National Agricultural Cooperative Marketing


Federation was established in Oct. 1950 as an
apex organisation of marketing Cooperatives in
the country.

Sub-surface Drainage Arrangement for drainage of water below the


surface of the land.
,
11.7 SOME USEFUL BOOKS/REFERENCES
Bhatt, Anil (1989). Development and Social Justice: Micro-action by Weaker
Sections, Sage Publications, New Delhi.

Dasgupta, K.G. Maler (1994). Poverty, Institutions,


P. and and the
Environmental Resource Base. Environmental Paper No. 9. Washington, D.C.,
World Bank. '

Dhawan, B.D. (1995). Groundwater Depletion, LandDegradation and Irrigated


Agriculture in India. Commonwealth Publishers. New Delhi.

Farrington, John and David Lewis with S Satish and A Michat- Teves
(1995). Non-Governmental Organizations and the State in Asia: Rethinking
Roles in Sustainable Agricultural Development, Routledge, London and
New York.

Hirway, Indira (1995).'Selective Development and Widening Disparities in


Gujarat', Economic and Political Weekly, Vol XXX, Nos 41 and 42.

Iyengar, S (J 998). 'Voluntary Initiatives for Tribal Development in Gujarat ',


The Journal of Entrepreneurship, Vol 7, no. 2.

Jodha, NS. (2000). Joint Forest Management of Forests: Small Gains, Economic
and Political Weekly, Vol. 35(50).
63
..
Institutional Infrastructures: Korten ..•David C. (1989). Getting to the 21" Century: Voluntary Action and the
Public, Private and Public-
Private Partnerships
Global Agenda, Oxford and IBH Publishing, New Delhi.

Singh, K. (1994). Managing Common Pool Resources: Principles and Case


Studies. Oxford University Press. Delhi.

Vaidyanathan, A. (1997). Tanks and Tanks Irrigation. In the Challenges of the


Balance. Anil Agrawal (ed.), CSE, New Delhi

11.8 ANSWERS/HINTS TO CHECK YOUR


PROGRESS
Check Your Progress 1

1) Supply of cheap credit, better prices to cullivators and distribution of inputs.

2) The cooperative marketing institutions are classified as (i) single commodity


Cooperative marketing societies; (ii) multi-commodity cooperative marketing
societies; and (iii) multipurpose, multi-commodity cooperative marketing
societies. The structure of the societies is two tier and three tier systems, based
on the hierarchical set up of the marketing institutions.

3) The various national level cooperative institutions are National Agricultural


Cooperative Marketing Federation (NAFED), National Cooperative·
Development Corporation (NCDC), etc.

Check Your Progress 2

1) The micro finance progranune seeks participation of people of small means. A


group of about 20 people with similar purpose or aims is formed. They are
expected to save a small amount of money regularly, which is used for lending
among the members. They also borrow money for onward lending to the
members from the banks/cooperatives with which they are attached. The peer
pressure helps in timely payment of the credit.

2) The people participation is sought right from the planning, implementation and
monitoring of the watershed programme. The SHGs are formed to manage the
resources/assets created under the programme.

Check Your Progress 3

1) The NGOs can be classified in a number of ways i.e., (1) composition,


(2) size, (3) mission or purpose, (4) sources of funding, etc., for details go
through Section 11.4.

2) NGOs play a greater role in reaching the outreached, in mobilizing the people
in watershed development programme, in the microfinance programme, in
developing efficient marketing system, in extension of the farm technology, etc.
For details please go through Section 11.4.

64
UNIT 12 AGRICULTURAL RESEARCH,
EDUCATION AND EXTENSION
IN INDIA
Structure
12.0 Objectives
12.1 Introduction
12.2 Agricultural Research
12.2.l Planting the Roots

12.2.2 Early Research Work in Royal Botanical Gardens


I
12.2.3 Impact of Famines: A National Strategy for Agriculture

12.2.4 Agricultural Development and 1.A. Voe1cker's Enquiry

12.2.5 Lord Curzon, Henry Phipps and the LA.R.1.

12.2.6 Early Research and Study Centres

12.2.7 Pioneers of Research

12.2.8 The Royal Commission on Agriculture

12.2.9 The Imperial Council of Agricultural Research

12.2.10 LA.R.I. Shifts to Delhi

12.2.l1 Need for Rural Universities

12.2.l2 Growth of Agriculture Universities

12.2.l3 Agricultural Research Institutes

12.2.l4 Research Projects/Schemes ofthe ICAR

12.2.l5 Research by Agriculture Universities/Agriculture Colleges/Government


Research Centres

12.2.16 Research Leading to the Green Revolution

12.2.17 Research by Private AgenciesINGOs

12.3 AgriculturalEducation

12.3~ Agricultural Education before 1947

12.3.2 The Gandhian and other Movements for Rural Education

12.3.3 Start of Higher Education in Agriculture

. 12.3.4 Post-Graduate Education

12.3.5 University EducationComrnissions

12.3.6 Growth of Universities, lCAR as the Apex Body for Education

12.3.7
,,').Krishi Vigyan Kendras (KVK)

12.3.8 ,\T".\RM, MANAGE, NIAM

12.3.9 Education through the Private SectorlNGOs

12.3.10 Present Educational Infrastructure


65
- Institutional Infrastructures: 12.4 Agricultural Extension _
Public, Private an~-
Private Partnerships 12.4:1 Agricultural Extension before 1947
12.4.2 - Early Experiments in Knowledge Transfer to Farmers
12.4.3 .Extension by Early Research Centres
12.4.4 Extension during the First Three Five Year Plans
--r2.4.5 The ICAR System
12.4.6 Four Tran~fer of Technology Projects of the lCAR
12.4.7 ExtensionCo-ordination of Universities with Government Departments
12.4.8 Extension through Government Agencies
12.4.9 New Development Strategies and Changes in the Extension System
12.4.10 Special Schemesand Extension Support
12.4.11 Integrated Rural Development Programme and Extension Support
12.4.12· Re-organised Agriculture Extension (T &V pr0ftfamme)
12.4.13 NGOs as Extension Partners
12.4.14 National Agricultural Technology Project (NATP)

12.4.15 Kisan Call Centres - Electronic Extension

12.5 Let Us Sum Up

12.6 -Key Words

1i.7 _ Some Useful Books/References

i2.8 Answers/Hints to Check Your Progress

12.0 OBJ-eCTIVES
After going through this unit, you will be in a position to:

• describe the structural growth of agricultural research, education, and extension;

• assess their impact on the country's economy at different periods in recent


history;

• define their role and importance within the broad infrastructure of institutions
and development systems described; and

• work out ways and means bywhich the system can function more effectively
as the engine of growth.

12.1 INTRODUCTION
India, like other Third World countries was a late entrant in the development race.
From the nineteenth century onwards, developed countries had unlocked nature's
secrets one by one. The evolutionary process, the factors causing growth and decay,
the causes of diseases, were discovered by vigorous pursuit of scientific enquiry.
Techniques were found by which nature could be harnessed to human needs. Raised
to optimum levels.farm production easily overtook the requirements. Food shortages
became a dim memory of the past. ..
66
In stark contrast, Indian agriculture suffered from continued neglect, the farmer Agricultural Research,
Education and Extension
burdened ,byunjust land tenures, was exploited and deprived of even human dignity. in India

Agriculture policy which over a century, was to meet the basic requirement of food
for the population, now includes strategies for a variety of rural infrastructure, trade
and'services.investment, credit management, value-addition services, and import /
export strategies.

The lessons of our development programmes help us to understand the nuances of


planning for agricultural growth so that it not only raises production but ensures the
nutritional security and wellbeing of millions of people subsisting on the land.

Scientific breakthroughs backed by administrative measures have already shown


the potential of our agriculture for round the year production, agri-business ventures,
diversification, exports for earning foreign exchange and providing stability in the
economy.

Both the successes and failures of the past help to plan and organise for the future.
Balanced economic growth at macro and micro levels will be determined by scientific
breakthroughs as well as infrastructural / administrative changes.

12.2 AGRICULTURAL RESEARCH


The different component of agriculture research which contributed in the agriculture
development of the country is discussed briefly in this section.
, ,
12.2.1 Planting the Roots

The tfuy roots of agricultural research in India which grew into a mighty tree were
laid in the nineteenth century by Allan Octavian Hume. An agriculturist and social
reformer, he was appointed by the Viceroy Lord Mayo, as the first Secretary of the
Department of Revenue, Agriculture and Commerce in 1871. Hume (who founded
the Indian National Congress in 1883), proposed a separate department of agriculture
with eminent scientists who would start research and development in farms, where
scientific experiments could be seen by farmers, because "For many generations to
come, the progress of India in wealth and civilization, must be directly dependants
on the progress in agriculture"

An admirer of the methods which transformed German agriculture, he proposed a


new type of University in which research would be oriented to practical use.
"Knowledge is empirical" he wrote" It must be put to use in soil testing, improving
soil fertility, prolonged experiments with seeds and plant materials by which cereals,
pulses, oilseeds and fibres can be improved".

He closely studied and worked with farmers because he believed that true
development could take place only by improving on the indigenous knowledge and
experience of farmers.

12.2.2 Early Research Work in Royal Botanical Garden


The Royal Botanical Garden at Sibpur, near Calcutta, was established in 1787. The
.Ionorary Superintendent, Colonel Robert Kyd developed a collection of seeds,
67
Institutional Infrastructures: plants, bulbs, birds and animals from all parts of the country, for study, classification,
Public, Private and Public-
Private Partnerships
naming; and numbering by scientists. A 'mini-zoo and aviary were set up at
Barrackpore where teams of scientists studied the ~pecies. Artists were engaged to
sketch each of the flora and fauna. 2660 folios ofthese sketches can be seen in the
India Office Library at London.
Botanical expeditions were sent abroad for collecting plants which were acclimatized
to Indian conditions and propagated commercially. The Royal Agri-Horticulture
Society was established at Calcutta in 1820. Organised on the pattem of the British
Agri-Horticulture Society, it had branches and Expert Committees to collect and
study flora and fauna. The famous collection of Himalayan medicinal plants in the
Saharanpur Botanical Garden was a centre of research in medicinal plants. Standard
text -books on Botany and Zoology were written.
Some of the plants which were imported and commercialized by the Gardens and
the Society in the eighteenth and nineteenth century were: Mahogany from Jamaica,
Nutmeg from the Molucca islands, Camphor from the Dutch colonies in Southem
Africa, and Cinnamon from Ceylon. Other notable additions to Indian horticulture
were rubber, cotton, flax and hemp, coffee, wheat, maize and numerous fruits,
vegetables, and flowers.

12.2.3 Impact of Faminesr A National Strategy for


Agriculture
More than 5 million people had died in the famines of 1876-78. The recommendations
of the Famine Enquiry Commission of 1880 laid the cornerstone ofadministrative
reforms in agriculture. Departments of Agriculture were formed in the centre and in
the provinces. Their duties were to pursue scientific research; improve agricultural
production, and prevent recurrence of famine. The British administration was forced
to take measures to reconstruct the collapsing agrarian sector. The Punjab Tenancy
Act was passed in 1869 to prot;ect tenant farmers from exploitation by land-owners.
A Cattle Commission was set-up in 1869 under a distinguished scientist to save and
improve indigenous breeds and control cattle diseases and epidemics.
The Lord Mayo, who became Governor-General and Viceroy ofIndia in 1869 had
practical experience in farming in Ireland. He believed that famine should not be
dealt within an ad hoc manner, but should be prevented by continuous and effective
action by the govemment. In a famous noting, he said "We have in our power .... to
render impossible the return of those periodical famines which have disgraced our
administration and cost an incredible amount of suffering ..... ". The means for saving
lives in vast rural areas were applying science to agriculture, constructing canals,
roads, and railways.
12.2.4 Agricultural Development and J.A. Voelcker's
Enquiry -
lA. Voelcker's Enquiry's was to institute a Department of Knowledge and Statistics
in the centre. The first census ofIndia was done by this department. Settlement
officers went far and wid~Jor research into all aspects of rural life. Detailed maps of
physical and geological resources were prepared. Distinguished botanists, chemists
and agricultural scientists mapped out the natural resources of each district for
promoting production offood crops, commercial crops, animal products, and products
for export.
68
In 1882, a Veterinary college was started at Lahore. The Pasteur method of Agricultural Research,
Education and Extension
vaccination against deadly anthrax disease of cattle was successfully adopted. In in India
1895, the Imperial Bacteriological Laboratory was established at Poona, later it
was shifted to Mukteswar. Pioneering work was done to control both cattle and
human diseases, like rinderpest, cholera, malaria, and blackwater fever. Veterinary
colleges were started in 1893 in Madras and Calcutta, for research and teaching.

An Imperial Chemist lA Voelcker was called to India in 1889 to make a thorough


enquiry into agriculture. His book "Improvement of Indian Agriculture" written after
travels throughout the country contains useful suggestions forreclaiming saline soils,
and sequence of crops for maintaining soilfertility. He urged the government to set
up an expert agency for organized scientific enquiry into agricultural resources and
requirements, which alone could lead to improvement.

12.2.5 Lord Curzon, Henry Phipps and the I.A.R.I.


When Lord Curzon became the Viceroy of India in 1899 he launched a
comprehensive movement for the application of scientific enquiry and education in
agriculture. The Imperial Agricultural Research Institute (I.AR.I.) was set up at
Pusa, Bihar in 1905. He said that "Our real reform has been to endeavour for the
first time to apply science on a large scale to study and practice of Indian agriculture".
His friend Mr. Henry Phipps, an American philanthropist, (after whom a laboratory
is named in the I.AR.I.), gave a generous grant 0[30,000 British pounds. A research
institute, experimental farm, and agriculture college were set up. Distinguished scientists
headed the I.AR.I. and worked towards the goal of solving fundamental problems
of tropical agriculture. Indian scientists were trained and achieved distinction in their
specializations.

Agricultural research was done by dividing each Province into circles on the basis of
differences in soil and climate. Funds were provided for setting up an experimental
farm and a depot for sale of seed, implements and manures to farmers in each circle.

12.2.6 Early Research and Study Centres


In 1902 a cattle breeding farm was set up at Incharodi, Gujarat to save the magnificent
Kankrej cattle which had been decimated by famine. A horse breeding farm was set
up in 1904 under the army.

In 1907, agriculture.colleges were set up at Poona, Sabour, Nagpur, Lyallpur, and


Coimbatore, for research and teaching.

12.2.7 Pioneers of Research


Some of the achievements by the scientists ofthe time were:

SirAlbert Howard: Pioneering work on the root systems of all plants, discovery of
the needs of growing plants from soil, water and air, selection and breeding of
improved wheat varieties, and promotion of compcsting of farm and animal waste
by farmers.

Sir E.J. Butler: Discoveries in taxonomy and plant pathology, study of


fungi, identification of nematode diseases in paddy, book on 200 diseases of plants
(a classic reference even today).
69
Institutional Infrastructures: Dr.IC.A. Barber and SirT.S. V~nkataraman: Evolving high-yielding hybrid canes
Public, Private and Public-
Private Partnerships
which led to self-Sufficiency in sugar.

Dr. Ramdhan Singh: Evolution of Punjab wheat strains.

Dr. RP. Pal: Discovery of wheat varieties resistant to rust disease.

12.2.8 The Royal Commission on Agriculture


A fresh impetus for agricultural research came in 1926, when the Royal Commission
on Agriculture was set up to revive the rural economy shattered by drought and
famine, observed "However efficient an organization for demonstration and
propaganda, unless it is built on the solid foundations of science, it is but a house
built on sand". The detailed recommendations included assisting the small land-
holder through scientific research, education and training which would be within his
reach, and administrative steps like setting up of institutions e.g., regulated markets,
land-mortgage banks, and cooperative banks.

12.2.9 The Imperial Council of Agricultural Research

On 23rd May, 1929 the Imperial Council for Agricultural Research was set up. Its
primary function was to promote, guide and co-ordinate agricultural research
throughout India, A non-lapsing fund of Rs.5 million was provided. Its mandate
also included training of researchers and acting as a clearing house for scientific
information for all matters related to agriculture. Later, education and development
work was added. The organizational set up was of a Chairman, two eminent scientists,
one each for agriculture and animal husbandry and thirty six members representing
central and provincial agriculture departments, Indian Universities, and.the planter
community.

From 1926 to 1931, the activities were widened to include market


. intelligence. reports,
organising crop planning conferences for provincial agriculture departments, and
development of export trade. Commodity Committees,were set up with panels of
experts to research into mainly cash crops. '. :'

The available infrastructure was used for systematic study of productivity so that
scientific crop planning could be initiated.

As a result, a large area was brought under linseed an oilseed crop and uneconomic
cultivation of wheat and rice was reduced. All research findings were examined and
finalised by the ICAR and then sent to provincial departments for demonstration to
farmers.

12.2.10 I.A.R.I Shifts to Delhi


The economic depression of 1929 hit India as it did in other countries of the world.
Prices of wheat already low fell further. Wages and earnings of farm families dropped
below subsistence level. By 1931, driven by debt, thousands of farmers had sold
their land and became landless and assetless labourers.

. In 1934, when the Bihar earthquake destroyed a big portion of the Pusa, the President
of the ICAR, Mian Fazl-i-Husain, proposed shifting the IAR! toanewcampus in
70
Delhi, where the soil and climate allowed research on a great variety of crops. He Agricultural Research,
Education and Extension
succeeded, and the Viceroy, Lord Willing don laid the foundation stone in February in India
1935.

12.2.11 Need for Rural Universities

The research infrastructure grew rapidly after the first University Education
Commission of 1948 in which the former President Sir S. Radhakrishnan and a'
panel of eminent Indian and foreign experts gave its recommendations. Paying special
attention to the weak infrastructure for education in rural areas, it was proposed to
set up rural universities which would provide scientific and practical knowledge to
the farm community. The Indo-US Technical Cooperation team and experts of
subsequent Review Committees endorsed the view and a blueprint for an agricultural
university, was drawn up. The model of the Land- Grant Universities of the United
State was suggested. .

12.2.12 Growth of Agriculture Universities

In 1960, the first Agriculture University named after the veteran national leader
Govind Ballabh Pant was set up at Pantnagar on 16,000 acres of reclaimed forest
land in the Terai Region. The second University Education Commission headed by
the eminent educationist Dr. D .S. Kothari recommended setting up of one Agriculture
University in each state which would deal with all the agricultural concerns of the
region. One of the main elements for agricultural improvement suggested by the
Commission was research for developing appropriate technology. Other Review
teams including the Indo-US Technical Co-operation Team prepared blue-prints
for setting up rural universities. During the 5tJl and 6th Five Year Plans, 21 Universities
were set up in 16 major states. Some Universities like the Haryana Agriculture
University at Hissar, the Punjab Agriculture University at Ludhiana, and the Himachal
Pradesh University at Palampur, were set up by expanding and upgrading agriculture
colleges. A Central Agricultural University for the North-east region was set up at
Imphal in Manipur in 1993. Now there are 44 agricultural universities in the country
catering to the teaching, research and extension requirements of rural economy.

12.2.13 Agricultural Research Institutes

The Various Agricultural Research Institutes established up to 1987 are given in the
Tables i2.1, 12.2 and 12.3. The Institutes function under the Indian Council of
Agricultural Research (ICAR) and have research stations and sub-stations with
research facilities. Research in specialized areas is also done at government research
centres. Thus there-is a strong research base for developing the scientific capability
for dealing with complex issues and problems of the farm economy.

Table 12.1:AgricuIture Research Institutes/Laboratories with their


-Controlling Authority in Pre-independence India
.
. ,

Sr. Insti.t.!!~/4aboratory
-, t-
Year of ' Controlli~g
No. Establishment Authority

I. Imperial Bacteriological Laboratory, 1889 Civil Veterinary


Pune (Indian Veterinary Department, Research
Institute.Jzatnagar) , Government of India
7i
Institutional Infrastructures:
2. Imperial Agricultural Research Institute, 1905 Department of
Public, Private and Public-
Private Partnerships Pusa Agriculture,
Government oflndia

3. Sugarcane Breeding Institute, 1912 Directorate of


Coimbatore Agriculture, Madras

4. Cotton Technological Research 1924 Indian Central


Laboratory, Matunga Cotton Committee

5. Imperial Lac Research Institute, 1925 Indian Lac Cess


Namkum (Ranchi) Committee

6. Jute Technological Research 1938 Indian Central Jute


Laboratory, Calcutta . Committee

7. Central Rice Research Institute, 1946 Imperial Council of


Cuttack Agricultural Research

8. Central Inland Fisheries Research 1947 Imperial Council of


Institute, Barrackpore Agricultural Research

Table 12.2: Agricultural Research Institutes Established during 1947-1966, before


Reorganization ofICAR

Sr. Institute Year of Controlling


No. Establishment Authority

1. Indian Institute of Sugarcane 1952 Indian Central


Research, Lucknow Sugarcane Committee

2. Jute Research Institute, 1953 Indian Central


Barrackpore Jute Committee

3. National Dairy Research Institute, 1955 Indian Council of


Karnal Agricultural Research

4. Central Potato Research Institute, 1956 Indian Council of


Shimla Agricultural Research

"
5. Central Institute of Fisheries 1957 Department of
Technology, Cochin Agriculture,
·Government of India
0

6. Indian Agricultural Statistics 1959 Indian Council of


Research Institute, New Delhi Agricultural Research

7. Central Arid Zone Research 1959 - do-


Institute, Jodhpur

8. Indian Grassland and Fodder - do- - do-


Research Institute, Jhansi

9. Central Sheep and Wool 1962 - do-


Research Institute, Avikanagar

JO. Central Tuber Crops Research 1%3 - do-


Institute, Trivandrum

72
Table 12.3: Agricultural Research Institutes/Bureaus Established During Agricultural Research,
Education and Extension
1967-1987 under Reorganized ICAR
in India

Sr. No. Institute/ Bureau Place


J

I. Indian Institute of Horticultural Research Banglore

2. Central Soil Salinity Research Institute Karnal

3. Central Plantation Crops Research Institute Kasargutta

4. Central Soil and Water Conservation Research and Dehradun


Training Institute

5. Vivekananda Parvatiya Krishi Anusandhan Shala Almora

6. ICAR Research Cornplexfor North-Eastern Shillong


Hills Region

7. Central Institute of Agricultural Engineering Bhopal

8. Central Agricultural Research Institute for PortBlair


Andamanand Nicobar Group ofIslands

9. National Bureau of Soil Survey and Land-Use Planning Nagpur

10. National Bureau of Plant Genetic Resources New Delhi

11. National Bureau of Animal Genetic Resources Karnal

12. National Bureau of Fishery Genetic Resources AlIahabad

13. Central Institute for Cotton Research Nagpur

14. Central Institute of Horticulture for Northern Plains Lucknow

15. Central Research Institute for Dryland Agriculture Hyderabad

16. Central Institute for Research on Buffaloes Hisar

17. Central Institute for Research on Goats Makhdoom

18. Central Avian Research Institute Izatnagar

19. Central Institute for Brackish water Aquaculture Madras

20. Central Marine Fisheries Research Institute Cochin

21. Central Institute of Freshwater Aquaculture Dhauli

22. Central Institute of Fisheries Education Bombay

23. Central Institute of Animal Genetics Karnal

24. Indian Institute of Soil Sciences Bhopal

25. Indian Institute of Agricultural Economics New Delhi

26. National Academy of Agricultural Research Hyderabad


Management

73
.Institutional Infrastructures: 12.2.14 . Research Projects/Schemes of the ICAR
Public, Private and Public-
, Private Partnerships
In order to strengthen the research base of different crops/productive resources,
ICAR has started a number of research projects/schemes. Some of the schemes
are of continuous nature and some are adhoc schemes. Let discus!" some of the
research project operating at the National level.

i~ .All India Co-ordinated Research Projects: The first All India Co-ordinated
Project on Maize was set up with the assistance of the Rockefeller Foundation
of the USA in 1957. Now there are 9 Project Directorates and 69 All India
Co-ordinated Projects covering various disciplines and conunodities such as
soils, crops, livestock, fisheries, home science and agricultural engineering. These
projects coordinate the research done on the subject by various scientists in
different institutes and disciplines.

The co-ordinated approach enables economical and effective use of research


facilities for solving local, regional and national problems. It has led to break-
through in varietals improvement, control of diseases through screening of germ-
plasm and multi-discipline and multi-location tested foundation seeds for crops
which can be successfully grown by farmers under different agro-climatic
conditions.

ii) The National Agricultural Research Project (NARP): It was launched in


1979, with the help ofthe World Bank. It covers 120 agro-climatic regions of
the country through 343 zonal research stations and sub-stations. The project
has helped in developing manpower and infrastructural facilities for research
and development in Agricultural Universities and Research Centres all over the
country. In the beginning, the focus of the project was in raising the production
of cereals, pulses, and oilseeds under irrigated conditions. Now the scope has
been widened to cover other ar~~s like unirrigated farming, horticulture, farm
implements, commercial crops and agro- forestry, food and nutrition, animal
health and other subjects which contribute to the well-being of the farm
community in the region.

12.2.15 Research by Agriculture Universities/Agriculture


Colleges/Government Research Centres
Agriculture Universities have had a significant role in developing location-based
technologies and varieties. Research in experimental farms and laboratories is tested
for several years in farmers' fields before being finalised and released to farmers,
agriculture departments and field functionaries. Agronomic practices and package
of practices have been developed for all the major crops in the region and conveyed.
to farmers through seasonal crop demonstrations and Krishi Melas. Some, notable
achievements were the development of high-yielding varieties of grains Ijke sorghum
(jowar), pearl millet (bajra) which are the staple food for poor communities as well
as developing wheat and maize which give best results in the region. Research has
helped fanners to overcome constraints like saline or alkaline soil conditions, and
adopt water conservation methods in low rainfall areas.

The content of academic progranunes has changed over the years. Courses in Home
Science, Horticulture, Fishery, Banking, Cooperatives, Marketing and other disciplines
have been added to meet the demand. Agriculture colleges in several general universities
74 also do pioneering research work relevant to the needs of the region.
12.2.16 ResearchLeading to the Green Revolution Agricultural, Research,
Education and Extension
in Inriia
In the sixties, a break-through in wheat cultivation came with the successful
introduction of the dwarf variety of Mexican wheat in farmers' fields. Since then 122
disease resistant wheat varieties have been evolved resulting in sustainable, high
quality wheat crops. In rice, the introduction of the dwarf, Taichung Native and
release of High Yielding IR 8 in 1966, was followed by the release of over 260
varieties which responded to low-cost inputs and were resistant to numerous pests
and diseases. The boost in the production of cereals enabled the country to withstand
severe drought, and maintain a buffer stock of food-grains. The break -through in
the cultivation of oil seeds and pulses have enabled these high-value crops to be
cultivated in non- traditional areas, and raised their production in poor resource
areas.

12.2.17 Research by Private Agcncies/NGOs


The research infrastructure has gained in strength due to the entry of a large number
of input agencies like fertiliser cooperatives and research foundations, industrial
houses, private firms and NGOs. Apart from research in agriculture, horticulture,
and dairy production, the development of processing, grading, quality control, storage,
and packaging of products have helped to develop numerous services which add to
the value of the produce and domestic and export marketing potential.

-Agricultural research in India has stood the test oftime. For over a hundred years
the objective of research was the growing of adequate foodgrains. Now research
scientists must also find the answer to rural poverty and unemployment. Apart from
crop technology, other areas needing scientific inputs are dry land agriculture,
packages for diversified farming, production of adequate quality seeds, post-harvest
technology and the adaptation ofbio-technology. Scientists have to find ways of
raising production without adding to the pollution and depletion of natural resources
in the interests of the future ofIndian agriculture.

Check Your Progress 1

Note: a) Use the spaces given below for writing your answers.
b) Check your answer with those given at the end of the unit.

1) State the early research and study centres.

2) Give the name of researchers who did pioneering work in research .


-
.

75
Institutional Infrastructures:
Public, Private and Public- 12.3 AGRICULTURAL, EDUCATION
Private Partnerships
Agricultural education covers a broad spectrum from formal education in schools,
colleges and universities to informal education given by public and private agencies
and individuals to all those engaged in agriculture and allied occupations, industries,
and services. Agricultural education scenerio in India is discussed as under:

12.3.1 Agricultural Education before 1947


Duringthe nineteenth century, Ashram schools were set up in rural areas by social
reformers, educationists and philanthropists in many parts ofthe country. They
followed the traditional pattern ofteaching, training and character-building. Ashram
schools in rural areas gave free non- formal education and practical skills in agriculture,
rural crafts and trades.

In 1811, the efforts of distinguished British administrators like Viceroy Lord Mayo
led to the setting up of Departments like Revenue, Agriculture, and Commerce at
the Centre and in the Provinces. Guidelines were drawn up for teaching agriculture
sciences in rural areas to improve the competence of those working in farming and
farm-based occupations. A number of agricultural schools were set up to give formal
education in agriculture. Gradually, theseschools were either upgraded to agriculture
training institutes or merged into the general school system.

12.3.2 The Gandhian and Other Movements for Rural


Education
The Gandhian movement led to the opening of several schools which gave "Nai
Talim", or new education. Junior schools, basic education schools, higher Secondary ,
schools, and multi-purpose schools provide combined teaching of core subjects in
science and arts with training in crafts and trades. Composite education generally
followed a pattern of a six week course in agriculture, three months course in a
specialised subj ect like poultry farming or dairy farming, and a six month to one year
technical training in a trade or a skill like maintenance of farm machinery.

In 1947, the first school giving vocational training to rural youth was set up at Manjri,
near Poona. An Industrial Training Institute was set up a! Rudrapur (now in
Uttarkhand State), where courses were organized in all kinds of trades including
barbering and cooking.

12.3.3 Start of Higher Education in Agriculture


In the earlier part of this Unit, you learnt about the setting up of the frrst five agriculture
colleges in the country from 1907 onwards. Research and higher education were
given priority by the British government in order to accelerate scientific research /
and train Indian scientists to carry forward the work in all sectors of agriculture. The
objective was to revive the agrarian economy from the ravages of drought and
famine.

Distinguished British scientists and veterinarians headed these colleges, conducted


research, education and development works, set priorities for works in different
sectors and pursued these vigorously. Premier central government research institutes,
like the IndianAgricultural Research Institute, Delhi and the Indian Veterinary Research
76
Institute, ~zatnagar did path-breaking research and also provided specialised Agricultural Research,
Education and Extension
education in their respective subjects. . in India

12.3.4 Post-Graduate Education


-In 1947, there were 17 agricultural colleges and four veterinary colleges affiliated to
the Universities in the country.

12.3.5 University Education Commissions


A transformation in the agriculture education came as a result of the first University
Education Commission headed by the former President Sir S. Radhakrishnan in
1948, which urged that only Rural Universities could meet the educational needs of
the vast rural community and help to raise the agricultural production. The second
University Education Commission headed by the eminent educationist Dr. D.S.
Kothari proposed at least one University in each state with the ICAR as the apex
body for planning and coordinating agricultural studies and providing funds to
universities.

12.3.6 Growth of Universities, ICAR as the Apex Body for


Education
A senior post of Deputy-Director General was created in the ICAR to co-ordinate
planning of study courses and to implement a plan for integrated research, education,
and extension in each region. During the 5th and 6th Five Year Plans, many universities
were set up. The academic courses in Agriculture Universities have been widened
by addition of subjects like Agriculture Marketing, Banking and Cooperation, Food
, Science and Technology, Home Science, Fishery, Sericulture, Agro- forestry etc.
, Several general universities have full-fledged Agriculture colleges for research and
I teaching. IRMA, an Institute for Rural Management (IRMA) was set up at Anand,
by the National Dairy Development Board in 1979. The Institute offers a two year
diploma course.

12.3.7 Krishi Vigyan Kendras (KVK)


These are farm science centres started by the ICAR in 1974. They are polytechnics
which impart education in a variety of subjects to post-matriculates. They give short
courses in various subjects through classroom and correspondence methods, and
training to farmers and extension workers. The training design is of=Teaching by
Doing" and "Learning by Doing". The objective is to provide scientific know-how
to development workers, farmers, rural youth and women. Now there are around
541 KVKs giving innovative vocational training.

12.3.8 NARM, MANAGE, NIAM


N:ARM: Agriculture has entered in an era of competition in domestic and global
markets. The need for integrating technology with management practices was met
by starting three national level institutes. The National Academy for Research
Management (NARM) was started in 1976 at Hyderabad. It provides management
skills to Agricultural Scientists.

MANAGE: The National Institute of Agricultural Extension Management


(MANAGE) was started in 1987 at Hyderabad. It has a two year course in
77
Institutional Infrastructures: Agri-business for agricultural graduates. A number of short courses are also a~ailable
- Public, Private and Public-
Private Partnerships
. for in-service training on selected subjects like management of input services for
input suppliers, agri-clinic and agri-business scheme for unemployed graduates, and
small farmers.

NIAM: The National Institute of Agricultural Marketing (NIAM) established at


Jaipur in 1988, coordinates with MANAGE, NABARD (the National Bank for
Agriculture and Rural Development) and marketing agencies to meet the demand
for trained personnel in various sectors like warehousing, cold storage and market •.
information services.

12.3.9 .Education through the Private Sector/NGOs


There is now a network of public, private and co-operative agencies which provide
knowledge of technologies and skills. Over a thousand NGOs, information
technology companies and·industrial corporations have come forward to enable the
farm sector to meet future challenges. These efforts are supplemented by Ail India
Radio and Television channels educating fanners in a wide spectrum of agricultural
technologies and skills.

12.3.10 Present Educational Infrastructure


You can get an idea about the growth of agricultural education by a comparison with
the situation in 1947. Agriculture universities have grown to 44. There are three
horticulture universities, the number of veterinary colleges rose from 4 to 22.
In addition these, there are 10 agriculture engineering, 7 Dairy Management,
5 Fishery, 13 Home Science and 2 Marketing and Banking, 1 in Food Science
Technology, 1 in Sericulture, and 14 in Forestry colleges.

Agriculture Universities and Research Centres produce 11,000 graduates in a year.


Add to this, the qualified personnel of agriculture departments of all the states and of
research institutions, KVKs'andfreld staff of development agencies such as banks,
and input agencies. You will find that we have the second largest agriculture-technology
manpower in the world of about half a million persons. .

Check Your Progress 2

Note: a)' Use the spaces given below for writing your answers.
b) Check your answer with those given ~t the end of the unit.

1) Who gave the idea for establishment of Rural Universities?

••••••••••••.• ~••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• 0.0 ••••••••••••••••••

..................................................................................................................
r

•••••••••••••••••••••••••••••••••• • -•••••••••••••••.•••••••• (~ •••••••••••••• 0 •• 0 •••••••••• 0.0 ••••• 0 ••••••• 0 •••••• ~ •••••

2) The frrstAgricultural University in India was established at : .

3) There are 44 agricultural universities in the country. (TruelFalse)


78
Agricultural Research,
12.4 AGRICULTURAL EXTENSION Education and Extension
in India
Any scientific innovation has no meaning unless it reaches to the ultimate users.
Extension plays an important role in transfer and diffusion of innovations of practical
importance at grass root level. The extension system in the country has been changing
over time depending upon the changes in information and communication technology.
The developments in extension system of the country are discussed as follows.

12.4.1 Agricultural Extension before 1947


Agriculture technology is continuously growing. New challenges lead to the addition
of new dimensions in research and management. Agriculture extension is a means
by which technologies are continuously transferred from scientific institutions to the
farmers. The objective is to encourage farmers to individually or collectively adopt
,scientific methods and reap the benefits. The effectiveness of an extension service is
assessed by the promptness with which farmers adopt new practices.

Provincial Agriculture Departments had the dual role oflocation-based research


and development. The Departments had model farms for crops, livestock, and
horticulture crops. Farmers days were organized in each season when best crops
and best practices were shown to farmers. Seeds, compost, implements and other
inputs were sold. Improved cattle breeds were exhibited and sold from government
livestock farms.

In every region, publicity (then known as "propaganda") of improved agriculture


'was generally done in traditional fairs and exhibitions through folk- plays and songs.
Annual vegetable, fruit, flower, and livestock shows and competitions were held
where the best produce from both departmental farms and farmers fields could be
seen. On these occasions, farmers-growers and livestock owners could interact
with experts and buy their requirements from the counters where seeds and other
inputs were sold. There was no infrastructure for follow-up at the field level; hence
there was no lasting impact.

12.4.2 Early Experiments in Knowledge Transfer to Farmers


Experiments in a systematic transfer of knowledge to farmers were done in different
ways in many parts of the country from the start of the twentieth century. These
were pioneered by eminent personalities, spiritual leaders or social reformers. Some
examples are: (a) the application of social sciences and extension techniques by the
American architect Albert Mayer in 64 villages in Etawah district (1948), which
transformed the rural scene, (b) Gandhian Rural Reconstruction Projects in the 1920s
like the Vedchi project in 6 tribal talukas of Sur at district, (c) Rabindranath Tagore's
Integrated Development Programme (1921) in the predominantly tribal area at
Sriniketan in Birbhum district of Bengal, (d) the Whole Village/Whole District
Development of Gurgaon by the Deputy Commissioner EL. Brayne (1920-1927),
.(~) the Bareda Rural Reconstruction Movement (1932) of Maharaja Sayaji Rao
Gaekwad in which the school teacher was the pivot of community education and
village institutions were geared up for development, and (f) the Firka Development
Project (1946}in which comprehensive scheme was prepared for each Firka (the
administrative-unit smaller than-a Tehsilj.It was managed by a Firka Development
Committee havingboth official and non-official members, and was successfully
implemented in villages near Madras.
79
Institutional Infrastructures: These programmes were taken up in limited areas; they were initiated by dedicated
Public, Private and Public-
Private Partnerships .
leaders helped by devoted volunteers. They gave valuable guidelines on motivating
self-help and an integrated approach, which are relevant even today. You will find
some of their ideas replicated in rural development programmes oflater years.

12.4.3 Extension by. Early Research Centres


Transfer oftechnology was one of the duties of scientists in research institutes and
centres. Following the extension model of the American Land-Grant Universities,
they did experimental research in farmers' fields and addressed critical agricultural
issues of the region. An example is the scheme of the IAR! in 1947, called the Delhi
Intensive Cultivation Scheme. The success of the scheme led to its extension
throughout the state.

12.4.4 Extension during the First Three Five Year Plans


The first three Five Year Plan periods from 1950 to 1965 were eventful for agricultural
extension. A broad frame work was prepared for nation-wide extension work.
Several models with both short -term and long-term objectives were implemented
and operational strategies were tested and modified.

12.4.5 The ICAR System


The first-line extension system is the part of the nation-wide research, education and
extension system of the ICAR. It promotes farm demonstrations, testing technologies
in farm conditions, re-orienting research to solve problems, training scientists and
development workers and studies in appropriate extension methods. As you can
see the system is linked to the main extension system of the Departments of
Agriculture, Rural Development and Non-Government Organizations (NGO)
working in the region.

In the ICAR, one out of8 Divisions deals with transfer of technology. There is a
Deputy Director-General assisted by Assistant Director-General, scientists I
specialists in relevant disciplines. There are 8 Zonal Co-ordination units, each
functioning under a specialist Zonal Co-ordinator for decentralized planning and
monitoring.

12.4.6 Four Transfer of Technology Projects of the ICAR


There are four main Transfer of Technology (TOT) Projects:

i) National Demonstration Projects: These were started in 1965 and are now
being implemented in selected districts by Agricultural Universities. Under this
scheme about 5,000 demonstrations mostly of food crops are arranged annually
in selected districts at the rate of about 100 demonstrations per annum per
district. After every two years the project shifts to another group offarmers.
Farmers are invited on the field where they can see the results of best cultivation
practices. Training is given to farmers and extension workers. The potential
yields of many varieties have been established through these demonstrations,
which help in preparing relevant agriculture production plans for the area.

ii) Operational Research Projects (ORP): These Projects were started in 1972
with the objective of testing and identifying appropriate technologies for specific
problems. ORPs are also operating for special groups like tribal communities
80
and scheduled caste fanners. Some achievements of the scheme are conservation Agricultural Research,
Education and Extension
of water for agriculture in dry areas through watershed management in India
programmes, increasing rice yield in water-logged areas by changing varieties
and practices, sustained record yields of oil seeds in dry areas, raising socio-
economic status of poor fanners by introducing mixed farming e.g., by combining
cereal and horticulture crops with animal husbandry and fishery.

ill) Krishi Vigyan Kendras and Trainers' Training Centres: The Education
Commission of 1964-66 had recommended setting up of a large number of
agricultural poly-technique institutes to improve the knowledge of vast numbers
of illiterate farmers, women and youth, and to train post-matriculates for
extension work. The first KVK was established in Pondicherry in 1974 under
the Tamil NaduAgriculture University. Over 541 KVKs are now established.
Several research sub-stations and centres have been converted into KVKs.
Each has 10 to 12 specialists, supporting staff, laboratory and a 50 acre farm
where demonstrations are held-and skill practice is given. Promotion of agricultural
science at the grass-roots and innovative training methods have been a feature
ofKVKs. A target of one KVK per district is to be achieved .

. iv) Lab-to-Land Project: The project started by the ICAR in 1979. The focus is
on resource poor farmers and landless labourers who have been by-passed in
many development programmes. The programme is implemented by existing
institutions and staff. A team of scientists works with adopted families in their
own locations for a two year period. Knowledge and facilities are provided to
create economic opportunities and skills which will lead to sustainable livelihood.
The project brought benefits to neglected farm communities and valuable
information to scientists on adoption of technology to meet the constraints of
fanners.

12.4.7 Extension Co-ordination of Universities with


Government Departments
Research Institutes and Agriculture Universities are all engaged in extension and
transfer oftechnologyprogrammes in co-ordination with Departments of Agriculture.
The research institutes is more in giving training and maintaining Farm Advisory
Services, while the Departments of Agriculture take up field work up to the village
level through their extension personnel.

12.4.8 . Extension through Government Agencies


The setting up of a structure for field level agriculture work by the government was
mainly due to the Grow More Food Enquiry Report of 1952 which proposed one
multi-purpose worker for 5 to 10 villages who would function as a joint agent for all
development work and work under the District Collector.

Community Development (C.D.) Programme: On October 2nd 1952, Prime


Minister lawaharlal Nehru launched the ambitious and historic Community
Development Programme to transform Indian farming. Fifty five projects were started.
Each project covered about 300 villages with a total population of about 2,00,000
persons and an area of about 1,50,000 acres. Each project area was divided into
three blocks each of about ten villages. You can see from the organisation chart
below that administration at the district level was done by the Development
81
Institutional Infrastructures: Commissioner who co-ordinated the work of all the development departments. At
Pubiic, Private and Public-
the project level there was a Project Officer, assisted by three Block Development
Private Partnerships
Officers, Extension Officers (EO) and Village Level Workers (VLW).·

Additional EOs and VLWs were appointed depending on the size of the farm
population and requirement. The same structure was followed in the National
Extension Service launched on October 2nd, 1953, by which the scheme was
gradually extended to the entire country.

Organisation of the C.D. Programme

Development Commissioner
Directors, District Development Departments
Project Officers for every 3 Blocks
Block Development Officers, one Block for ten villages
4-5 Extension officers in each Project officelBlock

7-8 Village level-Workers in each Block


.Farmers

The Community Development Programme was based on the principle that all aspects
. of rural life are inter-related. Hence, it had multi-purpose workers trained to help
farmers in all socio-economic aspects and motivate self-help and leadership. The
National Institute for Community Development (NICD) was set up at Hyderabad
to train batches of supervisory and field functionaries, farm radio and television
personnel and others.

12.4.9 New Development Strategies and Changes in the


Extension System
Two important development projects started in the early sixties to increase agriculture
production in order to meet out the foodgrains shortages are discussed below ..

i) Intensive AgricuIture District Programme (IADP): In the 1950's, a series


of droughts led to the lowest ever foodgrain production of 66 million tonnes in
1961. Wheat had to be imported under the PL 480 scheme from the US. It
was a time when the common saying was that India lived from ship to mouth.
Scientists felt that the only way to deal with the serious situation of rising population
and chronic food shortages was to approach high potential areas and
systematically raise productivity. They found an ideal method in the form of
package of practices method which had been a great success in the maize
growing areas of the US. In this method, a full set of cultivation practices were
worked out for a crop in a particular region, knowledge and inputs supplied to
farmers. .

Assisted by scientists of the Ford Foundation, the scheme ofIADP (Intensive


Agriculture District Programme) was launched in I 961 in seven irrigated
districts and was later extended to 9 more irrigated districts. In this scheme, the
extension agency tested the soil of each farm, prepared a package of the best
.
inputs and provided these through a subsidy scheme. Electric power and irrigation
were assured. The work required the appointment of additional extension
workers at each Block office .
.82
ii) Intensive Agriculture Areas Programme (IAAP): When there was another Agrlcultnral Research,
Education and Extension
period of drought and food shortages, the IAAP (Intensive Agriculture Areas in India
Programme) was launched in 114 blocks in 1964. The Programme kept in
rllind the entire crop cycle of the farmer but the emphasis was on rapidly raising
productivity of selected food crops like wheat, rice, millets and pulses through .
the package approach and timely provision of subsidised inputs.

The extension structure included five additional village level workers, one additional
Agriculture Extension Officer (AEO) and a Project Officer at the Block level. The
extension staffs were free from the control of the Block Development Officer (BDO).
A single line of command up to the Collector or Deputy Commissioner was
established.

For the first time, it was considered essential to have a systematic media support to
convey timely information to farmers. A Farm Information Bureau was established
in the Directorate of Extension in the Ministry of Agriculture. State development
departments appointed staff in new area of Information and Communication. Farm
Radio Services were launched through the Farm Radio Unit in All India Radio, in
which agriculture graduates were appointed as Farm Radio Officers. Thus there
was an infrastructure for extension through media.

12.4.10 Special Schemes and Extension Support :

Resource poor areas of the country did not come within the scope of the intensive
agriculture development programmes. Hence, special sector schemes came into
being in the seventies. The Small Farmers Development Agency (SFDA) and Marginal
Farmers and Landless Labour Development Agency (MFAL) were initiated in
which extension personnel were appointed for transfer of technology to poor farmers .
and also arrange for supply of subsidised inputs.

12.4.11 Integrated Rural Development Programme and


Extension Support

The growth pattern in the early sixties revealed that 100 districts in the
country remained backward with the greatest number of the poor and landless.
C. Subramaniam, Ministry of Agriculture from 1964-67 launched a prestigious
scheme, the Integrated Rural Development Programme (IRDP). Adopting the
Gandhian vision of "Wiping every tear from every eye", it involved micro-level
planning at Block level, optimum use of the natural resources and integrated
growth of village level institutions, rural trades and crafts, roads, minor irrigation,
.Cooperative credit. Extension staff like village level workers and panchayat officers
worked under the key functionary, the BDO, to, implement the scheme.

The operation of these schemes showed that small farmers were as responsive
as big farmers to new ideas and quickly adopted practices. It was found that
in addition to the practices, the "package" provided by extension services
should include such essentials as credit, marketing and an efficient administration .
..This led to the recognition of management services as an essential part of extension
services.
83
lnstitutiona'l Infrastructures: 12.4.12 Re-organised Agriculture Extension (T & V
Public, Private and Public-
Private Partnerships Programme)
Agriculture extension in India took a fresh turn in 1970. The re-organised agriculture
er
extension scheme also called the Training and Visit &V) scheme combined intensive
training of extension workers with regular visits for transferring their knowledge to
farmers.

Extension workers were assigned only the work of crop development under a single
line of command of Agriculture Departments. At the district level, the District
Agriculture Officer coordinated the tight schedule of training and visits. He was
helped by a team of Subject Matter Specialists (SMS).

The schedule ofT &V which was rigorously followed and monitored by World Bank
and Ministry of Agriculture was:

Training of district level SMS by specialists in nearby once in a month


Agriculture Universities or Research Centres

Training of about 40 Village Extension Workers (YEW) once in afortnight


by SMS in selected centres like TalukAgriculture office

Visits by SMS and University scientist to fields Periodic

Visits by VEW s to 10 or 12 contact farmers 8 days every fortnight

During the training, VEWs were given point-wise


.
scientific inputs'cto convey to farmers
.
in the next fortnight, as well as posters and charts to explain these points. In addition.
they learnt about critical non-priced inputs which they conveyed to 10- i2 selected
farmers who were to pass on the messages to others. He also relayed their problems
to the scientists at the monthly training.

The T& V programme was adopted under the VI and VII Five Year Plans. By the
middle of the VII Plan it had been extended to 17 states under World Bank funding
which was gradually phased out.

The weakest link in the transfer oftechnology chain proved to be the contact farmers
who did not make adequate efforts to pass on the messages to others. The T&V
system also by-passed rural women, youth and poor farmers.

12.4.13 NGOs as Extension Partners

The severe drought of 1966-67, costly imports of food, fertilisers artdoilled to


inflation. The cost of inputs rose to high levels. Voluntary organisations also called
non-government organisations (NOOs) who had already been working in rural areas,
were brought into development effort in their respective regions to work in co-
ordination with the government machinery.

Over thousand NOOs coupled up with Agriculture and Rural Development


Departments. A variety of extension efforts were made to deal with all the constraints
faced by farmers in the region. According to the priorities of the region, special
schemes were launched for raising productivity in agriculture, agro-based products
like sericulture, bee-keeping, fisheries and poultry.
84
In two priority areas, water conservation and forest conservation, the implementation Agricultural Research,
Education and Extension
was through community participation. For example, in the forestry project in Hirnachal in India
Pradesh, users groups in villages were trained to manage the nearby forest area for
their fuel needs and do replanting. In watershed management projects, farmer groups
were trained to create small water collection systems for their needs. Round the
year cultivation became possible in hitherto dry areas.

In the interesting PURA(Providing Urban Facilities in Rural Areas) project, a leading


NGO has given the infrastructure of credit, storage, farm machinery, marketing,
water and power management and electronic connectivity to agriculture markets
(mandis). Self- help groups in villages avail these facilities at a low cost. Extension
workers help the groups to work out farm plans and regulate the use of resources.
As a result thousands of poor farmers in scarcity regions ofGujarat and Tamil Nadu
are practising diversified farming, agriculture business and services. Village youth
have found profitable employment in managing the water, power, inputs and marketing
agencies.

12.4.14 National Agricultural Technology Project (NATP)


The Project was launched in 1998 in 28 districts in 7 states. In this system, an
autonomous district level Agricultural Technology ManagementAgency, popularly
known asATMAcoordinates with farmers groups, Block Technology Teams (BITs)
and Farmers Information and Advisory Committees (FIACs). The development
plan combines production and marketing strategies. Training for the functionaries
and farmers is done at the State Agriculture and Management Training Institute
(SAMETI), set up in all the states. Team-building, marketing management and use
of information technology are important features of ATMA. The VL W who was
earlier the key functionary in transfer of technology has been replaced by specialists
and farmers trained in business management.

12.4.15 Kisan Call Centres - Electronic Extension


The Ministry of Agriculture and private agencies launched a network of Call Centres
on 21 st January, 2004. Farmers make free telephone calls to 1551 and get replies to
their queries in the local language from an agriculture graduate or expert at the Call
centre. For complex problems, there are three levels of experts who are located at
the nearby research centre, KVK, Agriculture Department or Agriculture University.
The reply is given to the fanner by phone or fax within 72 hours. The speedy electronic
media can help in to an important part of extension services.

Check Your Progress 3

Note: a) Use the spaces given below for writing your answers.
b) Check your answer with those given at the end of the unit.

1) Name the special scheme and extension support.

85
Institutional Infrastructures: 2) Explain tlie main features ofT &V programme.
Public, Private and Public-
Private Partnerships

12.5 LET US SUM UP


After going through this Unit, you can see how the hardwork of farmers, scientists
and administrators changed the face ofIndian Agriculture. Once it was despised as
a low-grade economic activity practiced by poor, illiterate farmers. Many facts of
Indian agriculture now haye the potential engines of growth and prosperity. The
nation-wide system of research, education and extension is preparing to face the
task of raising the rate of growth of agricultural production from 2 per cent per
annum to 4 per cent per annum which will meet our needs of food, rural employment
and poverty alleviation.

12.6 KEY WORDS


Kisan Call Centres Farmers make free telephone caps to 1551, and
get replies to their queries in the local language.

Krishi Vigyan Kendras These are farm science centres started by IeAR
in 1974.

MANGE The National Institute of Extension Management


was started in 1987 at Hyderabad. It has a two
year course in Agri-business for agricultural
graduated.

NIAM The National Institute of Agricultural Marketing


was established at Jaipur in 1988, co-ordinates
with MANAGE, NABARD and marketing
agencies to meet the demand for trained personnel
in various sectors.

ORP Operational Research Project was started in 1972


with the objective of testing and identifying
appropriate technologies for specific problems.

T & V Programme Scheme combined intensive training of extension


workers, with regular visits for transferring their
knowledge to farmers.

12.7 SOME USEFUL BOOKS/REFERENCES


Agriculture Summit, 2005 Ministry of Agriculture.
Annual Report, Department of Agricultural Research and Education, 2002-03 ..
Annual Report,' Department of Animal Husbandry and Dairying 2004-05.
86
Annual Report, Ministry of Agriculture and Cooperation, 200.1-02, 2003-04, Agricultural Research,
Education and Extension
2004-05. in India

National Commission of Agriculture Report. Vol.1.

Randhawa M.S. (1980). A History of Agriculture in India. Vol. 3 and.4.

State of Indian Farmer- Millennium Reports. Vol. I.•6, 7

12.8 ANSWERSIHINTS TO CHECK YOUR


PROGRESS
Check Your Progress 1

1) Establishment of Cattle Breeding Farm at Incharodi (Gujarat) and Agriculture


Colleges at Poona, Sabour, Nagpur, Lyallpur and Coimbatore.

2) SirAlbertHoward, SirE.T. Batier,Dr. C.A. Barber and Sir T.S.Venkataraman,


Dr.Ramdhan Singh and Dr. B.P. Pal.

Check Your Progress 2

1) Sir S. Radhakrishnan, the former president.

2) Pant Nagar, District Udhampur, Uttaranchal.

3) True.

Check Your Progress 3

1) Small Farmers Development Agency (SFDA) and Marginal Farmers


and Landless Labour Development Agency (MFAL).

2) The T &V programme combined intensive training of extension workers with


regular visits for transferring their knowledge to farmers.

87
NOTES
MPDD-IGNOU/P.O.5.HIFch,2012(Reprint)

.•.
ISBN-978-8t -266-3617-4

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