Govt directs dairy firms to open accounts

The Union government has directed that all of India’s estimated 1.6 crore milk producers should open bank accounts by January 30, 2017, in an effort to change payment practices in a sector that has thrived on cash transactions.

The agriculture ministry said today that it had instructed the National Dairy Development Board, Mother Dairy, state dairy cooperative federations and other milk procurement agencies to ensure direct payment to milk producers through bank accounts at the earliest.

The agencies and other milk cooperatives “have been directed to ensure the opening of 100 per cent accounts of milk producers or farmers by January 30, 2017,” the ministry said.

India has an estimated 1.7 lakh dairy cooperatives across the country linked to about 1.6 crore milk producers or dairy farmers and procuring about 850 lakh litres of milk each day. The milk sector has operated mainly through cash transactions, partly because of low penetration of nationalised banks in rural areas.

The agriculture ministry said the government’s decision on demonetisation has had “unintended impacts,” in sectors thriving upon “sheer cash transactions”.

The government has noted that funds are not available with cooperative banks for making payments to milk producers by dairy cooperatives against the milk supplied to them, the ministry said.

The Gujarat Cooperative Milk Marketing Federation, or Amul, has been asked to ensure that 100 per cent of milk producers have bank accounts by December 30, 2016, and other cooperatives have been given an additional month.

In a series of meetings with representatives of cooperatives, Devendra Chaudhry, secretary, animal husbandry, dairying and fisheries, has discussed ways to streamline the payment system to milk producers and even the sale of milk to consumers through cashless transactions, the ministry said.

“The movement towards cheque and cashless transactions had already begun in the dairy sector – the new directives will only accelerate the process that began several years ago,” K. Shyju Siddharthan, secretary of the western zone branch of the Indian Dairy Association, told The Telegraph.

But many milk producers may need to travel long distances to open bank accounts.

A January 2016 report on banking from the India Brand Equity Foundation had said only five per cent of the 6 lakh village habitations across India have a commercial bank branch. The report also said about 51 per cent of nearly 89 million farm households do not have access to credit either from institutional or non-institutional sources.

The Reserve Bank of India had in December 2015 asked the State Level Bankers’ Committee Convenor Banks to identify villages with populations greater than 5,000 without a bank branch of a scheduled commercial bank to open branches there by March 31, 2017.