KOCHI: Even as the Union Government rolls out one of the most ambitious cooperative transformation programmes in India’s history – aiming to turn Primary Agricultural Credit Societies (PACS) into multipurpose rural economic engines -many of Kerala’s PACS remain caught in a spiral of financial stress, poor loan recovery, and waning public trust.
The Centre’s national plan, approved on February 15, 2023, includes the establishment of two lakh new multipurpose PACS, dairy, and fishery cooperatives over five years.
These are to be spread across all panchayats and villages, supported by schemes like the Dairy Infrastructure Development Fund, National Programme for Dairy Development, PM Matsya Sampada Yojana, and implemented with the help of National Bank for Agriculture and Rural Development (NABARD), National Dairy Development Board (NDDB), National Fisheries Development Board (NFDB), and State Governments.
In addition to creating new cooperatives, the government has also initiated a large-scale computerisation project for existing PACS, with a revised financial outlay of Rs2,925.39 crore. This project aims to bring all functional PACS in the country onto a common Enterprise Resource Planning (ERP)-based national software, linked with NABARD through State Cooperative Banks and District Central Cooperative Banks.
59,920 PACS on-boarded
According to government data, 59,920 PACS have already been on-boarded onto the ERP platform, with hardware procurement completed in 30 states and union territories.
The government’s vision is to diversify PACS beyond agricultural credit into areas like dairy, fisheries, LPG and fuel distributorships, food grain procurement, warehousing, retail outlets, Common Service Centres, fertilizer supply, solar energy, and even healthcare. Under this model, PACS are expected to evolve into one-stop rural business hubs.
So far, nearly 48,000 PACS have started functioning as Common Service Centres, delivering over 300 public and digital services to rural citizens.
Over 36,000 PACS have been upgraded into PM Kisan Samriddhi Kendras, supplying fertilizers and other agri inputs. Around 762 PACS have been approved as Jan Aushadhi Kendras to distribute generic medicines.
Additionally, PACS have been made eligible to operate petrol and diesel outlets, LPG distribution, and even manage operations and maintenance of piped water supply schemes.
Kerala story
While the national numbers are encouraging, Kerala tells a different story. On the ground, many PACS in the state are grappling with rising non-performing assets (NPAs), shrinking deposits, and falling public confidence.
A number of them are struggling to recover loans, especially in the agricultural sector, and are now dependent on state-level bailouts or grants to stay afloat. Several PACS have limited or no exposure to the diversification models being pushed from Delhi.
Kerala’s cooperative movement has deep historical roots, but the structure of its PACS today is increasingly seen as outdated and resistant to reform.
Many societies have yet to complete ERP onboarding, lack trained staff to deliver digital services, and operate with minimal transparency in their governance.
Political interference, leadership struggles, and the absence of professional management have also hampered their ability to respond to changing rural financial needs.
A senior official in Kerala’s Department of Cooperation, requesting anonymity told businessbenchmark.news that while central policies are well-intentioned, the readiness of PACS in Kerala to adopt them is still weak.
The official noted that without serious structural reforms and capacity-building, most PACS in the state would find it difficult to sustain diversified business models, let alone lead them.
Experts say Kerala’s PACS were once admired across India for their grassroots presence and cooperative values. However, they now face a critical moment. Dr V N Raghavan, a former NABARD official who has studied Kerala’s cooperative sector, observes that the cooperative system has not kept up with the digital and market-oriented transformation underway across the country.
According to him, the PACS in Kerala are still largely dependent on traditional short-term lending cycles and do not fully understand the potential of entering diversified service domains like fuel retail, healthcare, and e-governance.
Data from the Ministry of Cooperation shows that over 22,600 new PACS, dairy, and fishery societies have been formed nationally since the plan was launched in 2023.
However, Kerala’s contribution to that figure is minimal, raising concerns about whether the state is missing out on an important cooperative reform opportunity.
Some initiatives have found traction in a few parts of the state. In districts like Palakkad and Thrissur, pilot efforts involving solar irrigation through the PM-KUSUM scheme, and digital loan processing in partnership with Krishi Vigyan Kendras, are beginning to show promise.
A few PACS have also explored retail diversification, but these remain isolated examples rather than indicators of a statewide shift.
Kerala lags behind
The National Cooperative Development Corporation has also launched schemes such as Yuva Sahakar, Nandini Sahakar, and Swayamshakti Sahakar to support youth entrepreneurs, women’s cooperatives, and Self Help Groups through PACS. Yet awareness and utilization of these schemes in Kerala remain low, further limiting the potential for rejuvenation.
To close the gap between national vision and state-level execution, experts recommend a coordinated push involving NABARD, Kerala Bank, and the state’s Cooperative Department.
Recommendations include professionalising management, consolidating weak PACS, creating cluster models for shared services, and rolling out urgent training programmes in digital operations and diversified business planning.
The government’s vision to turn PACS into multi-sector rural economic hubs could significantly benefit small farmers, SHGs, and local entrepreneurs if implemented effectively.
For Kerala, this may be the last real opportunity to reboot a once-iconic cooperative model. Without timely reform and active participation, the state’s PACS risk being left behind in a rapidly transforming rural economy.
