Rs 280 crore needed to save Bengal co-op societies

Following the recommendations of the Vaidyanathan Committee report on rural credit, auditors appointed for appraisal of the nearly 5,194 co-operative societies in West Bengal have proposed a Rs 280 crore package for short term credit requirement of co-operative banks.

The assistance is a part of Rs 14,000 crore short term recapitalisation plan for state co-operatives recommended by the committee and accepted by the Centre for wiping out accumulated losses and dues of the co-operative banks and increasing their capital to a minimum specified level.

Out of the Rs 280 crore package, nearly Rs 247 crore is to come from the Centre, Rs 24.4 crore is to be provided by the state and Rs 22 crore by the co-operatives.

According to P Mohanaiah, chief general manager, West Bengal, NABARD (National Bank for Agriculture and Rural Development), the package will be available to the state co-operatives by March 2008, after the state amends its Co-operative Act.

The auditors found 3,236 co-operatives in West Bengal to be eligible for full recapitalisation with recovery rate of more than 50 per cent.

Another 636 co-operatives have been identified for partial assistance as their recovery rate was between 30-50 per cent.

These co-operatives will get assistance in three stages.

Nearly 1,332 co-operatives have been found ineligible for recapitalisation as their recovery rate was less than 30 per cent as on June 2004.

These co-operatives needed to reach the 50 per cent recovery mark before June 2007, to be eligible for Central or state assistance.

A fresh audit of these co-operatives is under way. The report was expected within the next 15 days, said Mohanaiah.

However, to avail the assistance of Rs 280 crore, the state needs to amend the State Co-operative Act before March 2008.

Among various measures for co-operative restructuring suggested by the committee is the suggestion of minimising the state's interference in the functioning of co-operatives and giving them maximum autonomy.

The share of the state government's equity has to brought down below 25 per cent of the total subscribed share capital within a period of three years.

According to information available from the NABARD website, West Bengal has not yet sent the draft amendments to NABARD for vetting.

"The state co-operative department has set up a group to suggest the provisions of the amendment," said Mohanaiah.

Meanwhile, the finance ministries at the Centre and West Bengal are yet to reach a consensus on the provisions of the long term credit financing for co-operatives.

According to the eligibility criteria for long term credit financing fixed by the Centre the recovery rate of the banks should be 50 per cent, whereas West Bengal wants it to bring it down to 30 per cent.