BANKING TRADE AND COMMERCE

CO-OPERATIVE MOVEMENT

The co-operative movement in India was an outcome of the economic distress caused to peasants, during the latter part of the 19th century. Formation of a co-operative society was first suggested by Frederik Nicholson as an antidote to rural indebtedness. The Famine Commission of 1901 also stressed the necessity of co-operative credit societies. A real beginning of the co-operative movement was, however, made when the Co-operative Credit Societies Act of 1904 was passed. It intended to encourage thrift, self-help and co-operation amongst agriculturists, artisans and persons of limited means. Societies formed under the Act were given legal status and were authorised to raise funds to carry on business in a corporate capacity. They were classified as rural and urban; the rural societies were bound to accept the principle of unlimited liability while urban societies were given a free choice of limited or unlimited liability. This Act, however, was deficient in many respects. The Act of 1912 was. there ore, passed. It regularised certain practices of doubtful legal validity and made way for further expansion under proper safeguards. It replaced the old classification of societies by a new and more scientific classification of societies based on the nature of the availability of members. Societies, other than credit societies, were allowed to be formed. Registration of unions and federal bodies like central banks was expressly legalised and a number of minor modifications were introduced. At the same time the simplicity and elasticity of the old Act were preserved and a wide rule-making power was left to Provincial Government to enable them to develop on their own lines.

The present Sangli district, which was known as South Satara district, till 1960. came into being in 1949 following the merger of the former state of Sangli. At that time the co-operative movement in the district was in a preliminary state. It recorded rapid expansion in different spheres only during subsequent years. The following table indicates the growth of the co-operative movement from 1949-50 to 1960-61.

TABLE No. 3

GROWTH OF CO-OPERATIVE MOVEMENT IN SANGLI DISTRICT FROM 1949-50 TO 1960-61

The co-operative movement, in the main, covers the growth of co-operative credit societies, multi-purpose societies, land development banks, non-agricultural societies and the central co-operative bank. The following is a description of the nature and growth of the co-operative societies in Sangli district.

Agricultural Co-operative Credit Societies.

These societies constitute the bulk of the co-operative credit societies. They raise funds through entrance fees, shares, deposits, loans and donations and supply to agriculturists short term finance for meeting expenses on seed, manure, weeding, etc. and intermediate finance for the purchase of bullock-carts, iron implements, or for ceremonial expenses and for payment of old debts and carrying out schemes of land improvement on the basis of personal security of the borrower, mortgage of immovable property or of crops as collateral security.

The main object of the agricultural credit and primary societies is to educate its members in the value and use of money and to dispense controlled credit to them. In practice, however, it was found difficult to achieve the object when credit is divorced from supply and sale. With a view, therefore, to broaden the basis of the primary co-operative unit, multi-purpose societies were formed. The multi-purpose societies serve the economy in many ways. Starting with credit for current needs, they may get the old debts of its good members liquidated through a land-mortgage bank, introduce better business and better monetary returns by inducing its members to sell their produce cooperatively, ensure their growing improved varieties of crops, save on purchases by arranging for the purchase of their other needs jointly and at economical rates on an indent system without incurring any risk or liability, save litigation expenses by effective arbitration, improve the outturn of crops by consolidation of holdings, supply pure seeds and implements, supplement the income of its members by inducing them to take to subsidiary industries, introduce better-living measures by adopting bye-laws by common consent which will curtail ceremonial expenditure and remove insanitary habits, provide medical relief and so on.

The liability of members in case of a multi-purpose society is limited. In calculating the total amount of liability that a society can incur in the case of a multi-purpose society specified in that behalf by the Registrar by general or special order, a sum equal to the amounts borrowed by such society from a Central Financing Agency for giving advances on the security of agricultural produce is deducted from the amount of the actual liability of such a society. In all other matters such as constitution, raising of funds, granting of loans and rates of interest, multipurpose societies follow the agricultural co-operative credit societies.

But in order to extend the scope of the agricultural credit or multi-purpose societies, they are being converted into what are known as seva societies, or service co-operatives. The latter are being organised since 1959-60 following the recommendations contained in the policy resolution of the National Development Council. Generally the service co-operatives were to be organised in villages having population of about 1,000 to 1,200. In cases where the villages are small, service co-operatives were organised for a group of 2 or 3 villages. The operational area of service co-operatives was generally to be identical with that of a Gram Panchayat. The membership of these societies was kept universal which might prominently include cultivators, artisans and labourers. The object of these societies was to provide credit for agricultural operations, purchase of raw materials, etc. Among other activities, these societies were to pool the agricultural produce of members and arrange to sell it through marketing societies to which they were affiliated. These service co-operatives were to cover all economic activities of the rural population so as to create a cohesive, self-reliant and prosperous village com-munitv. These societies were to undertake distribution of seeds, manures, insecticides, etc., and also cater to the domestic needs of the village community. They had a limited liability and admitted all eligible persons above the age of 18. During 1956-57 the multi-purpose societies catered to the agricultural needs of the members to the extent of Rs. 71,55,692. The following statement indicates the working of primary agricultural societies including the multi-purpose and the seva societies in Sangli district.

Working of Multi-purpose Societies in Sangli district in 1956-57.

Farming Societies.

Co-operative farming is advocated by Government as one of the means to reduce the pressure of increased agricultural population on land and to avoid fragmentation of land.

There are four types of farming societies: —

(1) co-operative better farming societies,

(2) tenant farming societies,

(3) joint farming societies, and

(4) collective farming societies.

Of these, the work of the first two types of societies can be undertaken through service co-operatives Established in every village and as such the present policy is not to encourage the organisation of these types of societies.

In case of joint farming societies the objective is to bring together small- pieces of land and to increase the production with joint efforts. In this type of society the ownership of the land is not disturbed. The valuation of the land given in pool by a particular member is done by the managing committee of the society and the member is paid income on the basis of the valuation of land.

As regards collective farming societies, persons who are not land owners come together and secure the land for cultivation in the name of the society on lease either from private landlord or from Government. All the members cultivate the land on a collective basis by bringing their labour and implements and get the return in proportion thereof.

By 1962, there were in Sangli district two better farming societies, ten collective farming societies and two joint farming societies. Besides, there were two crop protection societies at Ashta and Uran-Islampur, respectively. The working of each of these types of societies is given below:—

Better Farming Societies

As per the Government policy, these societies will not be continued under the farming group but will either be amalgamated with the seva societies or liquidated.

Co-operative Collective Farming Societies.

There were ten societies of this type in the district by 1962. Of these eight were formed by backward class people. The society at Digraj, although registered long back, could not function as it could not acquire suitable land for the purpose. The societies at Halli and Yednipani were formed on leased private lands while the rest of the societies were formed on Government waste land. During 1962, the society at Kharsing was given Rs. 10,058 as loan. In the case of many societies Government lands were made available on Eksali (one-year) or on short-term basis. The societies, therefore, could not undertake land development activities. Recently, however, the Government has instructed the Revenue Department to make the allotment of waste lands on permanent basis to these societies. This would enable them to increase their income and develop their lands by digging wells and by bunding or bringing more waste land under cultivation. The following table gives the working of these societies during 1960-61 and 1961-62.

TABLE No. 4

STATISTICS OF WORKING OF COLLECTIVE FARMING SOCIETIES, SANGLI DISTRICT

By 1962, there were two joint farming societies in the district with 35 members. The working of these societies is given in the following table: —

TABLE No. 5

STATISTICS OF WORKING OF THE JOINT FARMING SOCIETIES SANGLI DISTRICT

It may be observed that till recently most of the co-operative farming societies were organised by landless labourers on Government lands or by those who were already cultivating Government lands but not by persons who owned lands. The low fertility of these lands and the lack of financial resources and the necessary know-how on the part of the cultivators resulted in making the farms less productive. However, these waste lands arc now in a better condition with the organisation of cooperative societies.

Co-operative Marketing and Processing Societies.

These societies secure proper value for their members' produce and help the primary credit institutions by recovering their advances through the sale proceeds of the produce sold through them. Besides, these societies supply agricultural requisites such as fertilisers, improved seeds, farm implements and machinery required by the agriculturists. The co-operative purchase and sale institutions constitute the link between the primary credit societies and the central banks and these institutions are utilised for implementing the scheme of credit in kind and recovery of loans made to the agriculturists through the sale proceeds of their agricultural produce. Thus, there is the linking of agricultural credit with the marketing of the produce raised thereby. With a view to securing better price for the produce raised by the agriculturists, the processing societies process agricultural produce and earn better prices. For this it is necessary to have storage facilities and with this end in view the primary agricultural societies and purchase and sale unions have been given Government financial assistance in the form of loan and subsidy for construction of godowns of various types, viz., small, medium and large size. Among the various schemes of co-operative development implemented in the State of Maharashtra in the second five-year plan, development of co-operative market-ing is an important one. This scheme visualises organisation of new co-operative marketing societies and opening of branches of existing marketing societies in order to cover all the major and important minor market areas. Another important feature of the scheme is the construction of godowns by marketing and multipurpose societies for furthering their marketing activities and thus providing an effective link of co-operative credit with the marketing of agricultural produce.

By the close of 1962, there were one District Purchase and Sale Union and five Taluka Purchase and Sale Unions in Sangli district. These unions arranged for sale of agricultural produce of the members of agricultural societies and credited the earnings to the District Central Co-operative Bank for repayment of loan to the extent of Rs. 66,80,748.27. The total purchases made by the union during 1962 amounted to Rs. 1,68,46,467 and the sales effected to Rs. 1,10,03,746.

The working of the District Purchase and Sale Union is given in the following table: —

TABLE No. 6

DISTRICT PURCHASE AND SALE UNION

TABLE No. 7

WORKING OF THE TALUKA PURCHASE AND SALE UNION

Of these societies, the Varna Valley Co-operative Purchase and Sale Union Ltd., Islampur, is the biggest. It works as a stockholder of iron and steel, a wholesaler for distribution of fertilisers and other manures like groundnut cake, manure mixtures, etc., and, besides serving as a commission agent for the agricultural produce, also caters to the members as purchasers and sellers of agricultural commodities.

There were 16 milk feeder societies in the district by 1961-62. Of these 13 societies supply milk to the Government Milk Scheme and two to the old milk union, while one functions independently. These societies together had a membership of 1.100, and their share capital and reserve and other funds amounted to Rs. 11,700 and Rs. 7,807, respectively, during the same year.

Dairy Development Societies.

There is only one milk union working at Sangli. It had a membership of 13 societies and 205 individuals. During 1961-62, it had a share capital of Rs. 25,000 and a working capital of Rs. 56,536.

District Central Co-operative Bank, Sangli.

The Sangli District Central Co-operative Bank, Ltd. is the central financing agency of the district. It meets supplies all the primary and multi-purpose co-operative societies in the district, accepts surplus deposits from one society and transfers them to the other and thereby serves as a balancing centre. It collects funds by way of shares, reserves and other funds, deposits from societies and the general public and loans and overdrafts from banks. Share capital and reserve fund form the major portion of the owned capital on the basis of which deposits are tapped and loans are raised. The working funds of the bank are mostly derived from short-term deposits. Deposits from local bodies including municipalities are accepted on certain conditions. Besides deposits, the Central Bank can raise loans from the apex hank or the State Bank of India with whom it generally has overdraft arrangements.

The bank mainly finances the agricultural credit and other societies on the basis of the detailed statement of normal credits of members prepared by them. Members consist of both individuals and co-operative societies. The liability of the members of the bank is limited.

The District Central Co-operative Bank Ltd., Sangli has been continuously keeping pace with the developmental activities of the affiliated co-operative societies. The working and statistics of the banks are given in the following table:—

TABLE No. 8

STATISTICS AND WORKING OF THE DISTRICT CENTRAL CO-OPERATIVE BANK, SANGLI (1960)

TABLE No. 8—contd.

Co-operative Consumers' Societies.

In order to check fluctuations in prices, it is necessary to have an agency that would undertake distribution of consumers' goods at reasonable prices and serve the people. During the War time, due to scarcity of consumers' goods, these societies proved a boon to the consumers. They were entrusted with the work of distribution of commodities like foodgrains, sugar, etc. made available to them by Government. By 1962 there were 12 consumers' co-operative societies in Sangli district. They had a membership of 1952 individuals During the same year the societies effected purchases and sales worth Rs. 3,50,909 and Rs. 3,62,177, respectively, and earned a net profit of Rs. 2,700. Many of these societies, however, ceased to work after the lifting of controls.

Among the other consumers' societies, there are the electric supply societies at Vita and Tasgaon. The Vita Electric Supply Society also supplies electric power for irrigation purposes for which it was granted a loan of Rs. 1,19,671. The following table gives the working of these societies in 1961-62.

TABLE No. 9

WORKING OF ELECTRIC SUPPLY SOCIETIES

In view of the housing shortage the Government has been encouraging under its varied programmes the construction of new houses. For this purpose it also makes grants and subsidies to enable individuals and co-operatives to build new houses.

By 1961-62, there were three housing schemes in operation in this district—

(1) Low income-group housing scheme,

(2) General housing scheme, and

(3) Post-war reconstruction 219 schemes.

Under the low income group housing societies the loans for the construction of houses according to income groups were granted as given below:—

The loans made available were subject to a maximum of 70 per cent of the cost of construction.

Subsidies and loans are granted to the backward class housing societies, towards the cost of construction in the cases of—

(1) Vimukta Jatis and Scheduled Tribes at 37½ per cent each, of the cost of construction.

(2) Subsidy to Scheduled Castes up to 25 per cent of the constructional cost and loan up to 50 per cent of the cost of construction.

(3) Loans to other backward classes up to 75 per cent of the cost of construction. (Loan made available is free of interest)

Subsidies are also given for secretarial cost and for purchase of lands. The former is granted per tenement for the first two years at the rate of Rs. 10 and thereafter at a rate of Rs. 5 per tenement till the entire Government loan is repaid. The latter is equal to the cost of land.

By the end of 1962 there were 38 housing societies formed under the backward class scheme and 34 societies formed under the general scheme, in Sangli district. The backward class co-operative housing scheme had constructed 268 tenements, while Societies under the post-war reconstruction scheme had undertaken construction only recently.

During 1961-62, four societies were granted Government loan of Rs. 55,990 and five societies were granted a subsidy of Rs. 28,515 towards construction of tenements and for managerial expenses. Under the general housing scheme 109 tenements were constructed by the end of 1962.

The working of both the backward class and non-backward class co-operative housing societies during 1961-62 is given below: —

TABLE No. 10

WORKING OF HOUSING SOCIETIES IN SANGLI DISTRICT

Women's Co-operatives.

By 1961-62 there were three women's co-operatives in Sangli district. Together they had 242 members. Their share capital and reserve, and other funds stood at Rs. 5,115 and Rs. 712, respectively, whereas the net profits they earned came to about Rs. 1,324.

These societies were established with the object of meeting household requirements, conducting montessorie and training classes and so on.

Medical Aid Society.

This is an unique institution rendering medical assistance to the poor and needy. During 1961-62 it served 1,695 patients. It runs a maternity centre and participates in activities like family planning and training of midwives.

Paddy pilot Scheme.

This scheme was introduced in Shirala Peta in the district from 1st April 1959. It was extended to the paddy growing area of Walwa taluka during the subsequent year. In this area there are 18 fertiliser centres through which fertilisers and manures are distributed by the Varna Valley Purchase and Sale Union. During 1961-62 a target of 10,000 acres was set by the Paddy Pilot Scheme. The State Bank of India sanctioned all the applications and 68 societies financed loans to the extent of Rs. 3,29,534 to the agriculturists. The production, as a result, increased by 1½ times by resorting to the Japanese method of paddy cultivation.

Taluka Development Boards.

There were seven taluka development boards by the beginning of 1961-62 in the district. They were mainly concerned with the work of carrying on propaganda for the adoption of improved methods and tools by the agriculturists and supplying them better quality seeds. With the establishment of the C.D.B. and N.E.S. blocks and arrangement of imparting agricultural information and advice for adopting better methods through the agency of the agriculturists and the Gramsevaks, the necessity of these boards for making agricultural propaganda diminished considerably. The purchase and sale unions and the multipurpose and seva societies now do the work of supplying improved seeds, manures and implements to the agriculturists more efficiently. As a result a number of taluka boards have become almost defunct.

District Co-operative Board.

This board carries on the work of co-operative education and propaganda. By 1962, the board had a total membership of 406 consisting of 379 societies and 27 individual members. It conducted training classes for its members and secretaries and also held ' shibirs ' of co-operative workers, celebrated co-operative weeks and held conferences of field workers.

Land Development Board.

A primary land mortgage bank [This bank is now known as the Land Development Bank.] now functions in almost every district. The land mortgage bank provides for the long-term needs of the cultivators, such as debt redemption, investment on profitable improvements, etc. An ordinary co-operative society or commercial bank cannot perform these functions as it finds difficult to lock up its funds for a very long time. Besides, where land is the main security of a loan, as in the case of land mortgage banks, it requires the services of expert assessors of the value of land. Land mortgage banks are specially suited for this purpose.

In this district the Satara District Co-operative Land Mortgage Bank, Ltd., Karad, was for a very long time meeting the requirements of the people. The Sangli District Co-operative Land Mortgage Bank was registered in Sangli district in 1962. Since then a new era opened in regard to the financing of long time needs of the agriculturists. The old commitments of the Satara District Land Mortgage Bank were then transferred to the Sangli District Land Mortgage Bank. This bank has now two branches, one at Vita and the other at Jath, and the bank noted all-round progress in its activities. Thus during 1962, the bank advanced even tagai loans to the tune of Rs. 24,51,302 to agriculturists for digging of wells and purchase of engines and pumping sets.

The following table indicates the statistics of the working of the land mortgage bank in Sangli district:—

TABLE No. 11

STATISTICS AND WORKING OF THE DISTRICT CO-OPERATIVE LAND MORTGAGE BANK, SANGLI, FOR 1962-63

Members.

Individuals—6,162.

Societies—71

TABLE No. 11—contd.

Share capital—Rs. 25,00,000.

Paid up capital—Rs. 5,10,275.

Working capital—Rs. 1,10,75,000.

Loans—Rs. 49,79,150.

Recoveries—62 per cent.

Profit—Rs. 31,963.

Agricultural Debtors' Relief Act.

Agricultural Debtors' Relief Act.—After 1901 there was a rise in the hereditary indebtedness of the cultivators in the then Bombay Province. The indebtedness of the landholding classes was much greater in 1948 than it was before. The provisions of the Civil Code which was passed in 1877 had greatly facilitated the lender in recovering his debts and the Limitation Act of 1869, though it was passed in the interest of the debtors with the object of relieving them from the burden of old and ancestral debts, was turned by the lenders to their own advantage. The bitterness caused by the working of the Limitation Act was intensified by the decrease in the value of land which accompanied the fall of produce prices in 1873 and 1874. Creditors finding a fall in their security values pressed their debtors which resulted in harassment to them and the subsequent agrarian riots of 1873-74. Such riots took place in Tasgaon and Khanapur in Sangli district during the same year. But the agrarian riots of 1875 were not so common in the district as in Poona and Ahmednagar, perhaps due to the better conditions of the cultivators. There was only a single instance of it in the village Kokrud in the Shirala taluka.

On the report of the Deccan Riots Commission, Satara was included in the area to which the Deccan Agriculturists Relief Act (XVII of 1879) was applied. Under the provisions of the Act no land could be sold in execution of a decree unless specifically pledged, the registration of all lands was made compulsory, and every transaction was to be investigated independently of the bond. The courts had the power to relieve the debtor by decreasing payments by instalments, while arbitration was encouraged by the system of village munsifs and conciliators. The most striking result of the Act was the extraordinary check to litigation. The Act, in short, was intended to reduce the aggregate indebtedness of the farmers and restrict the transfer of land from cultivators to money-lenders. This Act was later repealed and replaced by the Bombay Agricultural Debtors' Relief Act (XVIII) of 1939. Compulsory scaling down of debts and subsequent arrangement for the repayment of the adjusted amounts in manageable instalments constitute the essence of the schema of this Act.

Certain other changes were also introduced by this Act. The term agriculturists' as defined in the Deccan Agriculturists Relief Act, 1879, was found to be actually bringing into its fold not only genuine agriculturists of the cultivating class but also pseudo-agriculturists who merely happened to own land but did not cultivate it.

As against this, the term ' debtor ' as defined in the Bombay Agricultural Debtors' Relief Act was more definite. Under this Act ' debtor ' meant an indebted person who was a holder of land and who cultivated land personally. Further, the income of the debtor from sources other than agriculture must not exceed 33 per cent of his total annual income or Rs. 500 whichever was greater. Income from land cultivated by tenants was regarded as non-agricultural income under the Act.

The Act was amended in 1945 and again in 1947 with a view to bringing relief to agricultural debtors and for remedying certain other defects which the working of the Act had brought to light. The Debt Adjustment Boards were dissolved and the administration of the Act was entrusted to civil courts. The latter, however, were not entitled to administer such cases where the total amount of debts due from the debtor was more than Rs. 15,000. In case of two or more applications for adjustment of debts it was decided to consolidate them. According to the provisions of clause (iv) of sub-section (2) of section 32, the rate of interest in case of awards was not to exceed 6 per cent per annum or such lower rate as might be notified in that behalf by the State Government or the rate agreed upon between the parties when the debt was originally incurred or the rate allowed by the decree in respect of such debts, whichever was lower. In 1948-49 Government fixed four per cent per annum as the rate of interest for purposes of awards made under section 32 (2) of the Act. In case of awards passed in favour of Land Mortgage Banks under section 33, the banks were entitled to recover the amount due to them from the debtor together with interest at such rate as the State Government might notify. Six per cent was the rate fixed by Government for the purposes of awards made under section 33 (3). However, this was raised to 7¼ per cent in 1953-54 by a Government notification, dated the 12th October 1953.

While making the adjustments the mode of taking accounts was also decided. Accordingly, separate accounts of principal and interest were to be taken. In the account of the principal only such money was to be debited to the debtor as would from time to time have been actually received by him or on his account from the creditor and the price of goods, if any, sold to him by the creditor. In the accounts of principal and interest the amounts, if any, due for principal (including costs) and interest, respectively under any decree or order passed by a competent court in respect of any debt was to be debited. The following statements show the administration of the Bombay Agricultural Debtors' Relief Act of 1947 in Sangli district.

TABLE No. 12

STATEMENT SHOWING THE ADMINISTRATION OF BOMBAY AGRICULTURAL DEBTORS' RELIEF ACT, 1947, IN SANGLI DISTRICT

TABLE No. 13.

STATEMENT SHOWING THE ADMINISTRATION OF BOMBAY AGRICULTURAL DEBTORS' RELIEF ACT, 1947, IN SANGLI DISTRICT

The main purpose underlying the enactment of the Act, viz., to bring down the inflated volume of the debts of the agriculturists reasonably within the limits of their repaying capacity and to make them entirely free from the burden of debts by making arrangements for payment of such debts in easy instalments, has been achieved to a considerable extent. The promulgation and the administration of this Act has relieved the heavy and long-standing burden of debt of the agriculturists in the district.

Crop Finance.

It was found that soon after the application of the debt relief legislation there was shortage of credit facilities. It was not surprising that the creditor chafing under present ' losses' took a gloomy view of future risks. A more specific problem was the adjusted debtor himself; for him it was not so much a case of contraction as of elimination of all private credit. The very process of adjustment involved so many restrictions on the alienability of his property that no lending agencies could be expected to be disposed favourably towards him. Meanwhile the adjusted debtor would have to raise crops and before that to raise money for the crops.

The Government realising these difficulties of the debtors instituted a system of crop or seasonal finance which was intended to fill in the vacuum in the credit facilities caused mainly by legislation regarding debt relief, money-lending and land tenure passed a few years back.

The provision for crop finance was initially made through the principal agencies of (1) co-operative societies, (2) Collector (tagai loans), (3) grain-depots, and (4) authorised money-lenders.

As far as possible, however, the crop or seasonal finance was being advanced through the co-operative societies to the persons, who were parties to the proceedings as awards under the Bombay Agricultural Debtors' Relief Act. The advances by way of crop or seasonal finance are secured by the crops grown by debtors. These advances are essentially short-term in character and their chief object is to finance at reasonable rates of interest agricultural operations connected with the raising of crops. The following table indicates the position as regards advances of crop or seasonal finance through co-operative societies in Sangli district during the years from 1950-51 to 1955-56 and 1958-59.

TABLE No. 14

STATEMENT SHOWING ADVANCES OF CROP OR SEASONAL FINANCE THROUGH CO-OPERATIVE SOCIETIES IN SANGLI DISTRICT

TABLE No. 14-contd.

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