Odisha urges Centre to revive long-term corporate credit

The Odisha government has urged the Government of India to implement the recommendations of the Vaidyanathan Committee-II report to help revive long-term cooperative credit.

"The Government of India appointed the Vaidyanathan committee-II for revival of the long-term cooperative credit structure. Although the recommendations of the Vaidyanathan committee-I were implemented and short-term cooperative credit structure was revived with financial assistance from the Union Government and the state government, the recommendations of the Vaidyanathan committee-II has not yet been implemented", the state government stated in its pre-Budget memorandum note submitted to the Centre.

In Odisha, the state cooperative agriculture and rural development (CARD) bank and the primary CARD banks are almost defunct as the National Bank for Agriculture & Rural Development (Nabard) has stopped providing refinance support with effect from 2002-03. Had the recommendations of the Vaidyanathan committee-II been implemented, the long- term structure in the state would have got financial assistance of Rs 165.04 crore, the state argued. The Odisha government has agreed in principle to implement the recommendations by providing the state share. Besides this, the state has suggested creation of a corpus fund of Rs 1,000 crore at the level of Nabard.
 

The proposed corpus fund would provide financial assistance to the weak banks for a turnaround within a specific time-frame.

The government pointed out that availability of adequate resources for development of infrastructure and cooperative enterprises is critical to the furtherance of the cooperative movement and a cooperative development fund is required to be created to augment the capacities of the cooperatives.

The fund will also help provide incentive for formation and development of cooperatives for women, unemployed youth, landless labourers, artisans, scheduled castes and scheduled tribes.

The state government has also demanded that central and state cooperative banks be exempted from payment of income tax. The state argued that is not fair to treat the cooperative banks at par with commercial banks or with urban cooperative banks, as these banks are actually cooperative societies whose core activity is to provide cheap credit to farmer members.

The state and central cooperative banks were allowed exemption from income tax under section 80P (2)(a)(I) of the Income Tax Act, 1961. However, the Finance Act, 2006, introduced Explanation 4 to this section, which took away the admissible deductions for the cooperative banks.