Blocked artery

Kerala is worried about the demonetisation drive’s impact on its cooperative banks and societies which form the backbone of the State’s rural economy.

At a primary milk cooperative society in Thiruvananthapuram, a file picture. The acute scarcity of cash has affected small-scale dairy farmers the most.

Among the States that have been hit severely by the demonetisation drive of the Union government, Kerala stands apart as one where protests were mainly focussed on the curbs imposed as part of it on cooperative banks and primary cooperative societies.

The State Assembly passed a near-unanimous resolution against the restrictions imposed on the cooperatives to accept old notes or receive deposits, the entire Cabinet sat in a dharna outside the gates of the Reserve Bank of India’s State headquarters, and a hartal called by the ruling Left Democratic Front in protest against what Kerala saw as an assault, above all, on its cooperative sector institutions curtailed normal life for a whole day.

Those unfamiliar with the history of the cooperative movement in Kerala will find it hard to understand what the fuss is all about or fathom the dependence of ordinary people of the State on the cooperative sector.

“Cooperative banks are our friendly neighbourhood banks that are easily accessible for all our daily needs; but now we are worried.” This response by Saleena, convener of a neighbourhood group (NHG) of women at Vennakode, a little-known village in Malappuram district, is now the common refrain in Kerala.

Since the mid 1990s, such NHGs, part of “Kudumbasree”—the women’s collective with a membership of nearly 40 lakh women, representing over 50 per cent of the households in the State, established for spreading micro-credit groups, promoting entrepreneurship, and empowering less-privileged women—have been an inseparable part of Kerala’s social and political landscape. The movement is known for the way it seeks to provide a dignified life for its members and a better future for their families and to involve them in democratic decision-making.

But the cash crunch that followed Prime Minister Narendra Modi’s “surgical strike” on black money seems to have affected the functioning of even these grass-roots groups which also have close links with the cooperative sector banks and societies.

“The weekly meetings that we organise are meant to collect thrift from among NHG members and disburse loans based on the priority needs of members. But with the availability of hard cash curtailed, the members are finding it difficult to pay the thrift amount or repay loans, and we are unable to access our NHG’s deposits from the local branch of the cooperative bank,” Saleena said.

“We often arrange linkage loans from the cooperative bank, and in the past weeks loans already sanctioned for weddings or construction of houses have been denied by the bank at the last minute,” another NHG leader, Suma, convener of the Aiswarya NHG at Kurava panchayat near Manjeri in Malappuram district, told Frontline .

“Hard cash has become useless. The situation seems to have affected most of the NHG groups and other Kudumbasree activities in Kozhikode district. We are worried about salary payments to staff and informal labourers engaged by us,” Saheed, Kudumbasree District Mission coordinator, said.

“Shortage of currency is very likely to affect the functioning of the NHGs. Such groups are not permitted to keep the money they collect as thrift with themselves. Most of it is deposited in cooperative banks. But now they cannot withdraw their deposits according to their needs. Each NHG will need Rs.30,000 to Rs.50,000 a week to give loans to its members. The government has not yet made an assessment of the new situation,” T.K. Jose, Principal Secretary, Local Self Government Department, told Frontline .

Kerala accounts for 53 per cent of the total deposits in the cooperative sector in India, and the network of cooperative institutions with their presence in every nook and corner is today the lifeline of Kerala’s economy, especially in rural and semi-urban areas. District cooperative banks and primary societies have 4,800 branches and account for Rs.1.8 lakh crore in deposits as against 6,213 branches of all the nationalised banks that have Rs.3.8 lakh crore in deposits.

In addition, the cooperative movement has presence today in a variety of productive and service sectors, including dairying; fair-price shops; hospitals; industries such as coir, cashew, handloom and beedi; IT parks; and educational institutions. Its beneficiaries include farmers, fishermen and tribal people, labourers and other workers, and government employees.

Though the poor and the lower middle classes, especially those employed in all the traditional sectors of the Kerala economy, middle-income farmers and farm labourers, migrant labourers, small entrepreneurs and so on have all been affected by the current crisis as in other States, their misery has been made worse if they are linked in some way to the cooperative sector in the State for employment or banking and credit facilities.

Milk cooperatives

S. Gireesh Kumar, who runs one of the over 3,200 Anand-model primary milk cooperatives affiliated to the Kerala Cooperative Milk Marketing Federation (MILMA), told Frontline that the dairy sector in Kerala, for example, had been pushed into the worst crisis in recent years because of the cash shortage. “Our society is located in Neyyattinkara taluk [near Thiruvananthapuram], a region that has registered the largest milk production in south Kerala. I require at least Rs.5.2 lakh every week to pay our 220 member-farmers for the milk they supply every day. At least Rs.30,000 to Rs.75,000 would be distributed as small loans to farmers every week. In addition, we supply farming inputs. But we can withdraw only Rs.24,000 a week from the society’s bank account. Farmers are under severe stress because MILMA has asked us to issue cheques instead of making cash payments that they need. At least two of our members have resorted to distress sale of cows.”

T.P. Markose, president of the Kozhippally Dairy Farmers Cooperative Society, near Kothamangalam in Ernakulam district, also said that the crisis had affected small-scale dairy farmers in Kerala the most. “We are now being asked by MILMA to transfer the money to individual bank accounts of our 240 member-farmers. But they have to travel 4 km to the nearest bank. And most people cannot afford to spend an entire day in the queue. There is an acute scarcity of cash for daily needs. There were a few emergencies, when a couple of farmers had to take family members to hospital. We try to help them by writing letters to the hospital authorities guaranteeing payment.” Sale of other perishables, such as fish, has also come down dramatically. Demand and price of fish have dropped, and fishers are reluctant to go fishing, T. Peter, secretary of the National Fishworkers’ Forum, said. The shortage of hard currency has affected the trade and after the ban on use of old notes at petrol stations came into effect, kerosene and diesel sales too dropped, indicating that fishing trips were coming down.

Plywood industry

In the Aluva-Perumbavoor belt in central Kerala, a major haunt of migrant labourers from north-eastern States, the thriving plywood industrial units have all been thrown out of gear. “Sales have dropped to around 20 to 30 per cent,” Mujeeb Rehman, president of the State Plywood Owners Association, told Frontline on November 28. “There are around 750 to 800 plywood units in Kerala in addition to other wood-based industrial units. We are unable to give away old notes, and business is dull in the construction sector. But the media are asking us only about the welfare of migrant labourers.” From the previous day, amidst reports that a large number of these labourers employed in the unorganised sectors were leaving Kerala, the State government had launched an awareness campaign in all districts asking migrant workers to open zero-balance bank accounts. “The campaign was launched on the instruction of the RBI and will continue for a while,” State Labour Officer K. Biju said.

Mohammed Ziyad, Ernakulam District Labour Officer (Enforcement), said the cash crunch had affected the migrant labour population badly. Sixty to 70 per cent of these workers, part of a huge floating population that find sundry work here and there, do not have bank accounts. With daily wages ranging around Rs.500 and with the shortage of lower denomination notes, people are not willing to employ them. “We have found that many of them are returning home as they cannot survive here. However, in the more organised construction sector, contractors arrange for food and other needs and the rules insist that their wages are deposited in individual bank accounts. But even in their case, the workers are finding it difficult to access their banks or ATMs because they can only do it after work hours and there is a general mistrust in society that makes life hard for them in these difficult times.”

However, Mujeeb Rehman said that a trend of migrant labourers leaving plywood units is not visible as “the cash crunch is applicable throughout the country and the poverty and unemployment in their home States are far worse than what they experience in Kerala”.

Rural economy affected

In the farming districts of Kerala, already facing severe drought conditions and fall in prices, especially of crops such as pepper, rubber, cardamom and coffee and other hill produce, the cash crunch has led to severe drop in sales and accumulation of farm products in the market. “There is a 40 per cent or more job loss in the rubber tracts of Kanjirappally, especially as a result of the withdrawal of high-denomination notes and restrictions imposed on the cooperative sector. There are cooperative societies with deposits of Rs.100 crore to Rs.200 crore or more in the district banks but which are allowed to withdraw only a meagre amount every week. This and the shortage of hard cash have affected the entire rural economy of the State,” P.M. Thomas, former managing director of the Pala Marketing Cooperative Society, said.

Demonetisation and the curbs on money transactions have affected Wayanad, a purely agricultural district, very badly, said Gopakumar, general manager of the District Cooperative Bank. Wayanad District Cooperative Bank is the main financier in the cooperative sector for 27 primary agriculture credit societies and over 250 other cooperative societies catering to various sections of society, including a large tribal population, plantation labour and small farmers, in the northern district. “Last year we disbursed over Rs.120 crore as loans in the district and today all transactions, including repayments, have been severely affected,” he said.

Wayanad has the largest population of the Scheduled Tribes in Kerala. In many tribal hamlets, the majority of the people depend on employment guarantee programmes, farming operations, cattle rearing and collection of forest produce. A day in the bank means loss of daily wages, which many of them cannot afford. There is a large section of the tribal population that does not have bank accounts but depends on daily wages and the little savings in hand.

“Almost all agricultural activities in Wayanad have come to a standstill, even though it is the key season for paddy, areca nut and coffee crops. There is a severe shortage of cash to pay the labourers, 80 per cent of whom belong to the Scheduled Tribe communities. People have stopped engaging labour, and the fear of starvation has become a reality for many,” Suresh Master, district president of State Agriculture Cooperative Societies Association, said.

Kerala’s cooperative sector also runs hospitals and these are witnessing a drop in the number of patients, K. Ravi, manager of the Pariyaram Super Speciality Medical College Hospital, told Frontline . He said the hospital had not refused treatment to any patient so far if they could not pay for their treatment. “We have installed facilities for them to pay by credit or debit cards, by cheque or have even offered treatment on the guarantee of hospital employees. But we are totally in the dark on how to go about it from now on,” he said.

The liquidity crisis has also hit the largest labour contract cooperative in Asia, the Vatakara-based Uralungal Labour Contract Society (ULCS), which employs 4,500 workers, 400 to 500 engineers and 200 office staff and is often considered a role model for cooperatives worldwide. “An institution such as ours known for liberal welfare schemes for its workers and cooperation among members and participatory management by workers should have received special consideration from the government. But we too are forced to make do with Rs.24,000 every week. How can we pay the workers numbering 4,000 in addition to about a 1,000 other labourers that we employ at our various projects? We are anxious about what the situation will be by the end of the month,” Paleri Ramesan, the president of ULCS, told Frontline .

A similar situation prevails in one of the largest industrial cooperatives in India established in 1969, the Kerala Dinesh Beedi Workers’ Central Cooperative Society, which now employs over 6,000 workers. Secretary K. Prabhakaran said the management had decided to transfer the wages into individual bank accounts. But most of the workers are women from low-income families, often the only breadwinners, and in the first week at least they had to go without wages.

Traditional sectors

In many traditional sectors, the idea of transferring meagre daily wages to bank accounts or writing cheques has created its own unique problems. Kollam’s cashew workers are an example.

“Receiving a wage cheque creates its own problems for workers here,” R. Rajesh, managing director of CAPEX, the cashew workers’ apex cooperative society, said. “Most of the cashew workers are women who have to depend on male members of their family for such needs. They are from the lowest strata of society and the majority of them have limited education. Giving cheques to these women is a recipe for disaster as then they will have to depend on male family members who will spend a large share of it on liquor and other non-essentials. Eventually, the women themselves will get only a small part of their meagre earnings in hand.”