Cooperatives asked to cut capital cost

Agriculture Minister Sharad Pawar has asked co-operative banks to find ways and means to reduce the cost of capital to be able to lend money at cheap rates.

At present, the cooperative banks were unable to provide credit at interest rates at par with that charged by the commercial banks (around 8-9 per cent) because of their higher cost of raising capital.

This had forced good borrowers to shift to commercial banks, Pawar said while addressing the 58th general council meeting of the National Co-operative Development Corporation (NCDC).

He said this had also affected the working of co-operatives in the textile and sugar sectors, which were obliged to meet their working capital requirements by borrowing at higher interest rates from the co-operative banks.

Of around 310 installed co-operative sugar factories, 111 fell in the sick category. He informed the meeting that he had asked the food department and the NCDC to work together for rehabilitation of the sick sugar mills.

In the case of sick growers' cooperative spinning mills, the government and the NCDC had already launched a rehabilitation scheme involving 20 per cent subsidy on plant and machinery, subject to a ceiling of Rs 5 crore per unit, the minister pointed out.

Pawar welcomed the Planning Commission's suggestion to make the NCDC an equity-based organisation to help it leverage funds and grow. This would facilitate the NCDC to overcome the financial constraints.

The NCDC managing director Dinesh Rai informed the meeting that perspective cooperative development plans had been prepared for all states.

This would allow them to avail of the NCDC assistance worth Rs 5928 crores. Besides, the NCDC had reduced the lending rate of interest to nine per cent, one of the lowest in the country for long-term loans.

Three states""Uttaranchal, Jharkhand and Chhatisgarh""had been categorised at cooperatively underdeveloped states to enable them avail of concessional finance from the NCDC, Rai said.

The programme of activities proposed by the NCDC for 2004-05 involved an outlay of Rs 735 crores. It laid special emphasis on weaker section cooperatives and modernisation and rehabilitation of existing sick agro-processing cooperative units.

An outlay of Rs 288.92 crores had been earmarked for agro-processing. About Rs 108.6 crores had been provided for the development of marketing infrastructure and integrated cooperative development projects.