Thursday, May 28, 2015

Co-operative Farming: Making Funding Viable

India is an Agriculture based country, where 67% population is dependent on agriculture. But the share of agriculture in India's GDP is just 14%. A stark contradiction. This is true as many of these farmers do not own a farm land. There are almost 30% farmers who work as a laborer in the farm land and do not own a farm land. More over, agriculture in India is dependent on rain, many states do not have irrigation facility. Farmer suicide is a common problem. The reason for increasing suicide is more or less attributed to financing. Many states have come up with an option of opening the sector to private sector and many of the states such as Maharashtra, Gujarat, Karnataka, Rajasthan, Tamil Nadu have made changes in the policy to allow Corporate Farming.

Few large Corporate have also acquired land and were planning to start mass farming with other supporting infrastructural facilities. This is a good idea considering the fact that many farmers are only laborers and do not own farming land addition to this, corporate can provide agricultural infrastructure facility of warehouses, cold storage, transportation, silos etc.   Even financial institutions are willing to fund such large projects as there is a less possibility of a default. Banks and other financial institutions when lend funds, secures or at least require some assurance of their funding will be used effectively and will be returned back with interest. Financial institutions worries about return of their funding, and that is the reason why small farmers do not get funding from such financial institutions. Even micro finance institutions stay away from such uncertain sector where major dependence is on whether. The need of the hour suggests that there is need to create a structure under which finances can made available to these small farmers and also the interest of financial institutions needs to be maintained in the business.

Co-operative Farming is the solution. A group of farmers come together create a co-operative society, under which the assets of all member farmers will be collated and against which funding can be made available. Co-operative society's duty is to create required supporting agriculture infrastructure of storage, warehouses, transportation facility. Such infrastructure can be kept as a collateral with financial institutions. Financial institutions can keep a check on such facilities and other activities, time to time. Under this mechanism farmers can get funding for their farming needs and also for setting up supporting infrastructure. Peer pressure can force farmers to pay back the amount received from financial institution.

Co-operative farming is one step towards ensuring funding for small farmers as well as growth of agriculture in the country. With some modification and incentives, innovative farming can be encouraged in such farm lands.