Gist of NCUI expectations from Budget 2020

The apex co-op body in the country NCUI was called for its input in the pre-budget consultations presided over by Mrs Nirmala Sitharaman, Union Finance Minister recently. NCUI’s Chief Executive N.Satyanaryana presented his case.

Excerpts

Smt. Nirmala Sitharaman

Honourable Finance Minister

Government of India

North Block

New Delhi-110001

Sub: – Important suggestions for being incorporated in the Finance Bill, 2020 – reg

Respected Madam,

The genesis of cooperative has been in the concept of mutual help among those who do not have the resources to go alone and succeed.  The present level of food security achieved by India is due to an effective role played by cooperatives.  Green and White Revolutions have taken place due to the efforts of the cooperatives in 70s and 80s.   Similarly, housing cooperatives have also made significant contribution to the housing stock of the nation by providing affordable shelter mainly to the middle and lower income families across the country. Whereas, the malpractices indulged in by the private housing sector has added much agony to the buyers.

With more than 8.54 lakh cooperative societies and 290 million members, the cooperatives have diversified in various activities.  The cooperatives have covered 96% of villages and disbursed more than 19.3% agricultural credit, produced more than 30.60% of sugar, distributed more than 36% of fertilizers, etc. And also in employment it has its own role and in fisheries alone 28.28 lakhs (approx.) fishermen have found direct employment in cooperatives as on today.  They provide strength to the common man to become self-reliant following the democratic principles and self-help, which are the ethos of Indian Culture.

Madam, the priority of the current government may be to ensure remunerative price to the farmers while ensuring that the consumers are able to purchase the commodity of daily use at affordable price.  To achieve the above, the new government should take effective measures to strengthen Primary Agriculture Cooperatives. No other institutional set up can match with the network and reach of these Cooperative Societies which is so vast.

Hon’ble Prime Minister Shri Narendra Modi, while addressing a cooperative event at Amul in Gujarat, had expressed faith in the immense potentialities of cooperatives. He further added that cooperatives can play a greater role in scaling up honey production in the country. For increasing the income of the farmers, there is a need to identify various sources of income like animal husbandry, poultry, bee keeping, etc. in addition to agriculture. These activities are inter-dependent and provide synergy for generating more income for the farmers eg. animal waste is the best source of manure as it contains more than 18 nutrients which are required by the crops.

Most importantly, primary agriculture cooperative societies (PACS) for which NCUI has always been making regular representations to the government are the important means through which farmers can be approached as the said system has vast network throughout the country. Almost 94% of the villages are covered under PACS system. The government has identified approximately 68,000 PACS as viable for computerization of operations, out of which, at least 20% of PACS have very sound financial credentials.

These PACS may be identified to act as nodal agencies for providing all necessary inputs to the farmers like loans, high-tech seeds, fertilizers, pesticides, agriculture implements on hire and other materials etc. and purchase of their outputs on right time and at right price.

Moreover, the government’s existing schemes like NREGA and other subsidy schemes of NCDC, NABARD, etc. need to be aligned with these PACS so that they get the required labour as well as finances to create infrastructure like warehousing, etc at affordable cost. These PACS should act as agents of the government while dealing with the farmers. These PACS should procure the crops of the farmers by paying the farmers immediately through Banks. In case the MSP is not finalised at particular time, when crops arrive, the PACS should pay to its members at Market Price as applicable on that day and the balance minimum support price, if any be transferred to the farmers through these PACS after declaration of MSP and receipt of the same from the government by PACS. Through these PACS, GoI can incentivise farmers. Already in the year 2016, NCUI conducted a national seminar on natural farming system where eminent experts like Dr. Subhash Palekar explained the process and importance of natural farming to sustain agricultural activities. IFFCO and KRIBHCO are already in the business of producing & distributing organic farming.

In this connection, we are to submit that one of the elements for strengthening of the PACS is storage capacity.

The requirement of storage capacity in different setups as on 31st march, 2018 is as follows –

Name of the organisationStorage capacity ( in million metric tonne)

Food Corporation of India 9FCI)         12.84

Central Warehousing Corporation (CWC)      10.14

State Warehousing Corporations (SWCs) and State Agencies           39.31*

Cooperative Sector NCDC sanctioned            16.51**

NABARD Sanctioned under ISAM(AMI) Schemes of GOI       60.32***

Others 19.40

Total    158.53

During the year 2018-19, the country is estimated to have produced 283.37 million tonnes of food-grains and 314 million tonnes of oilseeds, vegetables etc. To meet out the above required capacity, on the basis of at least 4 months’ storage requirement, we require a storage capacity of at least 200 MMT. During the last 4 years, the storage capacity in cooperatives remains the same and hence it is necessary to build an additional storage capacity as per requirement.  This storage capacity is to be created near the production sites for eg. at Tehsil Level/ Mandal Level to help the farmers effectively than traders and wherever necessary, upgradation of old warehouses with new infrastructure with latest technology. The creation of storage capacity at Tehsil/Mandal level reduces the cost of transportation for redistribution of the agriculture products to fair price shops. To achieve the above, it may be necessary to provide incentives to the viable (20%) cooperatives for augmentation of their storage capacity.

As stated above, giving better services to the farmers, accreditation of cooperative warehouses enables cooperatives to issue negotiable warehouse receipts. To achieve the overall objective, the members of cooperatives need to be provided awareness on various activities of PACS including negotiable warehouse receipts. NCUI, amongst others, provide education and training to cooperative personnel and embers of the farming community. Hence, Government of India may provide a small budgetary support for conducting these awareness programmes.

In addition to the above, we are to submit before your Honour certain important points which we feel need to be considered in the Finance Bill 2020 for promotion of cooperative movement in the country –

1.Abolition of Sec.80(P)(4) of the Income Tax Act, 1961:-

Prior to 01.04.2007, the Urban Cooperative Banks were entitled to deduction u/s 80P of the Income Tax Act, 1961 as available to other cooperatives since last 100 or more years. However insertion of Section sub-section (4) to section 80(P) has led to doing away with this earlier deduction available to UCBs. This resulted in UCBs suffering in terms of huge increase in their tax liability which leads to erosion in their capital base apart from constrained liquidity. As the UCBs cater to needs of class of society which has no access to commercial banks and have undertaken important social task of relieving poor people from clutches of local moneylenders in rural and urban areas during last more than 100 years, withdrawal of income tax deduction u/s 80P(4) is highly unjustified. As such this is requested that the said sub-section (4) of section 80P be abolished so as to support the UCBs to serve these sections of the population with added strength.

2.Higher Income Tax Rate for Cooperatives:-

In case of domestic company, the rate of income-tax for the AY 2020-21 shall be 25% if the total turnover or gross receipts of the previous year 2017-18 does not exceed Rs. 400 Crores. Almost more than 90% Cooperatives have total turnover of less than Rs. 400 Crores but since being a cooperative, higher rate of income tax of 30% is being levied (as applicable to cooperative society-assessees) which is slowing the pace of increase in capital base of cooperatives. It is requested that cooperatives shall also be extended lower tax rate of 25% to enable them to be more viable and competitive vis-a-vis domestic companies.

3. Extension of jurisdiction of Debt Recovery Tribunals to hear the cases of recoveries of cooperative banks debts

At present the Debt Recovering Tribunals do not accept the recovery cases of non multistate cooperative banks as the Debts Due to Banks and Financial Institutions Act 1993 is not applicable to the cooperative banks.  The number of loan accounts of over Rs.10 lacs have increased manifold even in the cooperative banks, over a period of 10 years.

It is submitted that the cooperative banks may also be kindly brought under the purview of the Debts Due to Banks and Financial Institutions Act 1993, so that they become eligible to approach DRTs for recovery of their dues.

We request the Hon’ble Finance Minister to kindly include the amendment to the Act to make cooperative banks eligible to take advantage of DRT.

To sum up, the Hon’ble Ministry may,

1. Extend the benefits of various schemes to strengthen the PACS for providing all necessary inputs to the farmers like loans, high-tech seeds, fertilizers, pesticides, agriculture implements on hire and other materials etc. and purchase of their outputs on right time and at right price.
2. Provide a small budgetary support for conducting awareness programmes for the cooperative personnel and farmers.
3. Extend the benefits of section 80P of the Income Tax Act, 1961 to all primary cooperatives including Multi-State cooperatives.
4. Reduce the effective Income Tax rates for cooperative societies from 30% to 25% in line with the domestic companies.
5. Extend jurisdiction of Debt Recovery Tribunals to hear the cases of recoveries of cooperative banks debts
6. Enhance the DICGC coverage limit from Rs. 1 lakh to Rs. 5 lakh per depositor.
7. Allow Agriculture & Rural Development Banks (ARDBs) to accept deposits like other banks so that they can serve the farmers better.

Thanking you,

Yours faithfully,

(N.Satyanaryana)

Chief Executive