Co-operative Sector Recommendations in India’s Tenth Five Year Plan (2002-2007)

India’s Tenth Five Year Plan (2002-2007) came at a defining moment for the country’s cooperative sector. After decades of state patronage, political interference, and mounting financial stress, the cooperative structure – particularly credit cooperatives – was clearly in need of structural reform. The Planning Commission responded by constituting a dedicated Working Group on Agricultural Credit, Cooperation and Crop Insurance to formulate targeted recommendations for the Tenth Plan period. What emerged was a comprehensive policy framework covering agricultural credit projections, institutional reforms, revitalization of non-credit cooperatives, and human resource development – all aimed at making cooperatives genuinely autonomous, member-driven, and financially viable.

Context: why the Tenth Plan needed a fresh approach for cooperatives 🔗

By the time the Tenth Plan was being drafted, cooperative credit institutions were under visible strain. The market share of cooperatives in agricultural credit had declined steadily – from 43% in 1998-99 to 31% in 2003-04 – even as the overall agricultural credit flow was rising. Recovery rates were worrying: District Central Cooperative Banks (DCCBs) showed a recovery percentage of only around 61%, and Primary Agricultural Credit Societies (PACS) were at 67% as of mid-2003. Meanwhile, state governments continued to dominate cooperative management, combining the roles of dominant shareholder, supervisor, and auditor – a concentration that created accountability gaps and eroded member confidence.

The broader plan itself was ambitious. The Tenth Five Year Plan, as approved by the National Development Council, envisaged an average annual growth rate of 8 per cent and set monitorable targets for key human development indicators , including reducing the poverty ratio and increasing the literacy rate to 75% by 2007. Agriculture was declared the prime mover of the economy, and cooperative institutions were seen as indispensable to delivering credit and services to rural India. Strengthening cooperatives was therefore not an isolated sectoral goal – it was central to the Plan’s inclusive growth agenda.

Structure of the working group 🔗

To ensure systematic and detailed analysis, the Working Group constituted five Task Forces covering institutional development of credit cooperatives, revitalization of non-credit cooperatives, crop insurance, and human resource development of cooperatives . Each Task Force brought in domain experts and submitted specialized reports that fed into the Working Group’s final recommendations. This multi-task-force approach allowed the Plan to address credit and non-credit cooperatives separately, recognizing that their problems and reform requirements were quite different from each other.

Agricultural credit projections for the Tenth Plan 🔗

One of the first tasks was to estimate how much agricultural credit the country would actually need during 2002-2007. The Working Group noted that agricultural credit flow had risen from Rs. 26,411 crores in 1996-97 to Rs. 44,612 crores in 1999-2000, and was projected to reach approximately Rs. 53,504 crores by 2000-01 . Despite this growth in volume, the demand for capital formation in agriculture continued to outpace supply – particularly for small and marginal farmers.

The Task Force on Agricultural Credit prepared state-wise projections of ground-level credit for the Tenth Plan period, accounting for crop-wise and sector-wise requirements. The projections factored in the National Agricultural Policy’s objective of achieving a growth rate of over 4% in agriculture annually. The Working Group recommended significantly ramping up the compound annual growth rate in agricultural credit over the plan period, with a proportionate increase in the role of cooperative institutions. NABARD’s Potential Linked Credit Plans (PLPs) were used as a key planning tool to arrive at realistic, area-specific credit targets.

Institutional development of credit cooperatives 🔗

The heart of the Tenth Plan’s cooperative agenda was reforming the credit cooperative structure. The three-tier system – PACS at the village level, DCCBs at the district level, and State Cooperative Banks (SCBs) at the apex – was recognized as structurally sound in design but deeply impaired in practice.

The call for autonomy and legal reform 🔗

A recurring theme across all task force reports was that cooperatives had to be freed from excessive state control to function as genuine member-driven institutions. The government set up a Task Force in August 2004 to suggest an action plan for reviving rural cooperative credit institutions and the legal measures necessary for facilitating this process. This eventually materialized as the landmark Vaidyanathan Committee, constituted under Professor A. Vaidyanathan of the Madras Institute of Development Studies.

The Task Force’s core observations were that governance and regulatory strengthening must precede financial assistance, that cooperative credit societies must be made autonomous and member-driven, and that revival must begin from PACS upwards. This bottom-up approach was significant – it recognized that without healthy primary societies, no amount of reform at the SCB or DCCB level would deliver results at the farm gate.

The Tenth Plan recommendations pushed states to amend their cooperative acts to reduce government interference in elections, management, and audit. Andhra Pradesh’s reform of its Cooperative Societies Act in 1995 had been a significant step, and eight other states had passed similar legislation – but implementation remained uneven. The plan called for a uniform push toward model cooperative legislation that would limit state equity to a maximum of 25% and ensure that elected boards, not government nominees, drove institutional decisions.

Strengthening PACS infrastructure 🔗

The Working Group made specific recommendations for strengthening PACS – the frontline interface between the formal credit system and millions of rural farmers. Recommendations included computerization of PACS records, improvement of management information systems, and the development of Business Development Plans (BDPs) for each PACS. The idea was to transform PACS from passive credit disbursing entities into multipurpose service providers that could handle input supply, marketing, and storage – essentially one-stop shops for the rural economy.

Credit cooperative banks were also urged to adopt prudential norms aligned with those applicable to commercial banks. NABARD’s role as a refinancing and supervisory body was to be strengthened, enabling District Central Cooperative Banks to access funds directly from financial institutions regulated by the RBI. This would reduce DCCBs’ overdependence on state government support and open them to market-based funding.

Revitalization of non-credit cooperatives 🔗

While credit cooperatives received the most attention, the Tenth Plan also addressed the pressing need to revitalize non-credit cooperatives – those operating in sectors like marketing, processing, housing, handloom weaving, dairy, and consumer services. These institutions had long suffered from neglect, lack of working capital, and an inability to compete with private sector players in a post-liberalization market.

The Working Group recommended that non-credit cooperatives be enabled to function as independent business organizations, driven by market logic rather than government mandate. Achieving a high-targeted annual agricultural growth rate and export required massive expansion and upgradation of agricultural marketing, storage, and distribution infrastructure – and cooperative marketing and processing societies were positioned as key vehicles for this expansion.

Sector-specific recommendations were made for dairy, fisheries, housing, and consumer cooperatives. For housing cooperatives, the Working Group estimated specific financial requirements during the Tenth Plan and recommended that SIDBI be involved in supporting their funding requirements. For consumer cooperatives and marketing federations like NAFED, the emphasis was on professionalizing management, reducing losses, and building linkages with agro-processing units. The National Cooperative Development Corporation (NCDC) was tasked with supporting rehabilitation of weak cooperatives and setting up new cooperative processing units in sectors like cotton ginning and pressing.

Training and human resource development 🔗

No institutional reform works without the people to carry it out. The Working Group devoted a full chapter to training and human resource development (HRD) for cooperatives, recognizing that one of the sector’s most persistent weaknesses was a shortage of professionally trained managers, secretaries, and board members.

The National Council for Cooperative Training (NCCT) and the Vaikunth Mehta National Institute of Cooperative Management (VAMNICOM) were identified as the primary institutions for scaling up cooperative training during the plan period. The Group recommended setting up a Corpus Fund of Rs. 300 crores to make NCCT self-reliant over time. This was a significant shift from dependence on annual government grants to a more sustainable, institution-led financing model.

The recommendations also called for expanding the network of Agricultural Cooperative Staff Training Institutes (ACSTIs) at the state level and increasing the number of cooperative education field projects implemented through the National Cooperative Union of India (NCUI). The Working Group recommended establishing 30 additional cooperative education field projects during the Tenth Plan period – six per year – at a total proposed outlay of Rs. 2,660 lakhs.

A particularly important HRD recommendation concerned the boards of Regional Rural Banks (RRBs). The Group recommended that RRB boards be evolved into empowered bodies with greater decision-making authority, rather than functioning as passive conduits for state and sponsor bank directives. Similarly, PACS secretaries and elected board members were to be given structured, multi-day training programmes – a recommendation that was later operationalized during the Vaidyanathan revival package, which trained over 86,000 PACS secretaries across 24 states.

The Vaidyanathan Committee: the plan’s most lasting outcome 🔗

Many of the Tenth Plan’s cooperative sector recommendations found their most concrete expression in the Vaidyanathan Committee, set up mid-plan in August 2004. The Committee proposed a comprehensive financial revival package worth approximately Rs. 14,839 crores for the Short-Term Cooperative Credit Structure (STCCS). Based on the Committee’s recommendations, the government implemented a revival package for STCCS encompassing legal and institutional reforms, measures to improve the quality of management, and financial assistance for their democratic, self-reliant, and efficient functioning.

NABARD was designated as the implementing agency for the revival package in all states and provided dedicated manpower at the national, state, and district levels. States were required to sign Memoranda of Understanding (MOUs) with the central government, committing to legal and governance reforms before financial assistance was released. This conditionality-based approach was a marked departure from earlier unconditional grant models and ensured greater accountability in fund utilization.

The revival package also mandated special audits for all PACS, recapitalization of eligible institutions, and phased write-off of accumulated losses. The implementation of the package involved writing off accumulated losses, infusing fresh capital, and mandating professional management and special audits – completed for over 96% of PACS by the early 2010s – though the pace and effectiveness varied significantly across states depending on political will and administrative capacity.

Legal reform: the 2002 Multi-State Cooperative Societies Act 🔗

Alongside plan-level recommendations, the Tenth Plan period also saw an important legislative development. In 2002, the Government of India enacted the Multi-State Cooperative Societies Act to replace the 1984 Act, and also announced a National Policy on Co-operatives in 2002. This legislation provided a more contemporary legal framework for cooperatives operating across multiple states, addressing gaps in governance, audit, and member rights that the older law had failed to cover. These legal changes complemented the plan’s broader push to create an enabling environment for autonomous cooperative functioning.

Significance and long-term impact 🔗

The Tenth Plan’s cooperative sector framework represented a turning point in how Indian policy treated these institutions. For the first time, there was an explicit acknowledgment that state patronage – while well-intentioned – had become a structural liability. The plan’s emphasis on autonomy, professional management, legal reform, and member-driven governance laid the groundwork for reforms that continued well into the Eleventh and Twelfth Plan periods. The revitalization approach of NABARD – combining legal reform with institutional strengthening and technology upgradation – can trace its intellectual roots directly to the Working Group and Task Force deliberations of the Tenth Plan era.

The plan also made a strong case for cooperative training as an investment rather than an afterthought. By proposing self-sustaining training institutions, expanding field education projects, and professionalizing board management, it recognized that institutional reform without human capacity building is incomplete. These ideas remain relevant today, as India continues to expand its cooperative footprint through new PACS, dairy, and fishery cooperatives under the National Cooperation Policy 2025.

What do you think? Given that the Tenth Plan identified state interference as a key obstacle to cooperative autonomy over two decades ago, how effectively has the legal and institutional landscape changed for cooperatives since then? And with the government now pushing for 2 lakh new multipurpose PACS by 2026, does India risk repeating the same pitfalls of top-down cooperative expansion that earlier plans tried to move away from?

References

1. https://pmfby.gov.in/compendium/General/2002%20-%20Agricultural,%20Credit,%20Cooperation%20and%20Crop%20Insurance.pdf
2. https://www.nabard.org/demo/auth/writereaddata/File/DCRR%20-%20Task%20Force.pdf
3. https://www.nextias.com/ca/current-affairs/16-02-2023/strengthening-cooperative-movement
4. https://www.researchgate.net/publication/265167607_Revival_of_Cooperative_Credit_Institutions_-_Recommendations_of_the_Vaidyanathan_Committee
5. https://www.sagepublisher.com/article/revitalizing-rural-credit-cooperatives-in-india-challenges-opportunities-and-the-role-of-nabard
6. https://padhai.ai/blogs-padhai/national-cooperation-policy-2025-upsc