The Government of India has placed a new focus on Primary Agricultural Credit Societies (PACS) as key players in rural development, particularly in fostering the vision of “Sahkar Se Samridhi”. PACS are village-level cooperative credit societies that essentially serve as the final link in a three-tier cooperative credit structure. Extant since 1904, they provide short-term and medium-term agricultural loans to farmers for various farming activities and play a significant role in achieving financial inclusion in rural areas. As of December 2022, there were approximately 1.02 lakh PACS in India.
Five New Initiatives for Strengthening PACS
In a bid to increase income and job opportunities in rural areas, the Government recently announced five pivotal decisions. Firstly, PACS not operating as fertilizer retailers will be identified and encouraged to work as such based on feasibility. Secondly, PACS not currently functioning as Pradhan Mantri Kisan Samridhi Kendras (PMKSK) will be included under the PMKSK umbrella to provide a variety of services to farmers.
Thirdly, PACS will be linked with the marketing of organic fertilizers, notably Fermented Organic Manure (FoM), Liquid Fermented Organic Manure (LFOM), and Phosphate Enriched Organic Manure (PROM). Fourthly, PACS will be incorporated into the supply and marketing chain of bio-organic fertilizers as wholesalers or retailers, with fertilizer companies acting as aggregators for small producers under the Market Development Assistance scheme.
Lastly, PACS are slated to function as drone entrepreneurs for spraying fertilizers and pesticides and for property surveys.
The Value Proposition of PACS
PACS offer immense benefits. They give small farmers access to credit to purchase vital farm inputs, thereby increasing their production and income. Furthermore, they advance financial inclusion in rural regions and provide banking services like savings and loans to farmers who are often excluded from formal banking.
With their location in rural areas, PACS offer convenient services to farmers, including credit access with minimal paperwork within short periods. They also foster a savings culture among farmers, enhancing credit discipline by requiring timely loan repayments.
Challenges facing PACS
Despite the critical role of PACS, they face several challenges. Though they cover roughly 90% of villages geographically, their coverage in certain parts of the country, especially in the north-east, is extremely low. Their resources are also inadequate to meet the credit needs of the rural economy.
Overdues and Non-Performing Assets (NPAs) pose significant problems. For instance, the RBI reported in 2022 that PACS had an outstanding lending of Rs 1,43,044 crore and NPAs of Rs 72,550 crore. PACS must curb overdues to improve their lending ability and to avoid building a negative image.
Future Direction for PACS
Given their centrality in India’s rural financial sector, PACS can considerably contribute towards ‘Atmanirbhar Bharat’ (self-reliant India) and the Vocal for Local campaign. To exploit their potential fully, however, they must be made more efficient, financially sustainable, and accessible.
This demands improvements in their mode of operation and management. Furthermore, the regulatory framework governing PACS ought to be strengthened to guarantee effective governance and the capacity to meet farmers’ needs.
