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Ramesh Chand, Member, NITI Aayog speaks to Richa Mishra and Surabhi
-The Hindu Business Line

The decline in share of cooperatives in total farm credit is a cause for concern and needs to be corrected, says Ramesh Chand, Member, NITI Aayog . An agriculture expert and a full-time member of the Aayog, Chand believes that financial inclusion in the sector has three dimensions – geographical distribution of farm credit, more long-term credit, and larger role of cooperatives.

In an interaction with BusinessLine, Chand shares his views on financial inclusion for agriculture sector, whether minimum support price is needed, and why cooperatives could play a vital role vis-à-vis commercial banks for farm credits as well as distribution of food subsidy. Excerpts:

* A lot is being spoken about financial inclusion. How different is ‘financial inclusion’ for agriculture sector?

Financial inclusion in agriculture sector needs to be viewed in a slightly different way than what is the general perception. In this sector there is a strong geographic disparity even in distribution of institutional credit.

If you look at inter-state distribution of institutional credit, you find that in some states we are giving more short-term credit than what is being spent on inputs, while in some we are not even giving 10 per cent of the cost of inputs.

I would look at financial inclusion not only from social perspective, but also from the geographical angle. We need to bring states like Jharkhand, Assam and even West Bengal into the fold of institutions. In South India, lot of agriculture credit is going for jewellery and investment in gold. But, in Eastern India their input and cost of hired labour in proportion of institutional credit, in some cases is as low as 10 per cent.

* How do you deal with it – commercial banks versus co-operatives?

Yes, inclusion should also be seen from different types of credit -- short, medium and long-term. Medium and long-term credit is important from investment point of view. Over time, the share of long-term credit in the total institutional credit has declined. To see credit distribution is also properly balanced is a component of financial inclusion.

The second concern in terms of institutional agricultural credit is that the share of medium and long-term credit has been declining. I would like to add a third dimension to financial inclusion --scheduled commercial banks and co-operatives.

The share of cooperatives in farm credit is quite low. We may have better inclusion in terms of social classes if co-operatives play their role properly. This is becoming a serious issue and at some point we are likely to enter into some problems because scheduled commercial banks, after you remove the priority sector lending limits, have a tendency not to give more. Co-operatives are the natural partner for the farmers. We need to see that the institutional co-operative, which is getting weakened, is strengthened.

* So there is a differentiation among various farmer categories …

States with high concentration of institutional credit normally don’t see much discrimination between high and low class farmers. But, for those who have tenants, who are leasing the land, something needs to be done for them. We are debating it in NITI Aayog. A Working Group has been constituted.

* Can co-operatives be used for direct benefit of cash transfer for food?

I do not think there is any restriction that DBT can be done only through commercial banks. The only issue to be sorted out before we assign this responsibility to cooperatives is they need to be computerised. I discussed this matter with NABARD -- to go for computerisation. Commercial banks are much more advanced here. If DBT is to be linked to Aadhar, then you require computerisation. If co-operatives are to be involved then their level needs to be raised. Co-operatives are better candidates (for DBT) as they are at the village level and have intimate knowledge of people.

* The volatility in pulses prices raised debate on the entire concept of minimum support price. There has also been issues raised at WTO, some countries want India to do away with MSP. What according to you should be the right approach?

I don’t think WTO requires India to do away with MSP. What they want is that whatever support we are giving is compliant with our commitment and should not exceed de minimis level of 10 per cent. Only if it exceeds this can they may say that we are crossing it and therefore, other countries may take some retaliatory measure.

Without price incentive, farmer will not go for adopting new technology and investments will not come into farming. Unfortunately, our markets have not evolved over time.

Today, there is a vertical disconnect between retail, wholesale, and farm harvest level prices. Prices of Arhar and other pulses goes up abnormally high in lean periods but that increase seldom gets passed on to the farmer. If your markets are not mature, they are not competitive, then state intervention in prices is a must.

The option we have is to create a competitive environment and allow big investments to come in. But, at this stage, where we are right now, I think we cannot do away with price intervention. MSP will have to continue till we make the markets competent.

* The price volatility seen in onion and some other produce has raised the issue of cartels. How does one tackle them?

Liberalise agriculture markets. Unless you do not do that, these kinds of things will keep happening and happen more frequently. These incidents will become more severe.

You have to see whether APMC and Essential Commodities Act are serving the right purpose or causing an adverse effect.

* Questions are being raised at India’s sugar scheme also at the WTO compelling the government to rework the subsidy. Do you feel that some of the Western countries are intervening too much?

An agreement has its advantage as well as disadvantage. Once you reach an agreement, you cannot blame others on individual items.

We are able to do something which may be harming the agriculture of other countries.

India is the largest exporter of rice and exports 10 million tonnes. We are also giving huge subsidies on rice. So, then those countries can object that their rice farmers are suffering. When we negotiate any agreement, we should be careful.

But, once it is done, at that time we cannot wake up and say that this is favourable to you therefore it is harmful to us. Then we should play smart. We also do certain things that other countries may find objectionable.
 
The Hindu Business Line, 23 November, 2015, please click here to access
 
Image Courtesy: The Hindu Business Line