India's Cooperative Renaissance: Boosting Sugar Mills and Digitizing PACS for Prosperity
India's cooperative sector is embarking on a transformative journey with the launch of the New National Cooperative Policy. This ambitious initiative serves as a 20-year roadmap, aiming to revitalize and modernize cooperatives across the nation. The policy’s core focus includes providing crucial support to sugar mills and spearheading the comprehensive computerization of Primary Agricultural Credit Societies (PACS), ultimately driving rural prosperity and modernization, aligning with the vision of 'Sahkar-se-Samriddhi' (Cooperation to Prosperity).
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A New Era for Cooperatives: Policy Overview
The National Cooperative Policy 2025, launched on July 24, 2025, by Union Home and Cooperation Minister Amit Shah, is set to replace the two-decade-old framework from 2002. This comprehensive policy aims to foster a conducive environment for sustainable cooperative development, transforming cooperative enterprises into professionally managed, transparent, technology-enabled, vibrant, and responsive economic entities. The vision of 'Sahkar-se-Samriddhi'—prosperity through cooperation—guides the policy, intending to integrate people's aspirations and resources with the cooperative system to significantly contribute to India's Gross Domestic Product (GDP) and inclusive development.
Drafted by a 48-member National-level Committee formed in September 2022 and chaired by Shri Suresh Prabhu, the policy is the result of multi-level consultations and regional workshops with diverse stakeholders. It is structured around six strategic pillars, 16 objectives, and 83 recommendations, focusing on legal reforms, digitalization, financial empowerment, and good governance. A key objective is to establish 2 lakh new multipurpose Primary Agricultural Credit Societies (PACS), dairy, and fishery cooperatives by February 2026, aiming to cover all panchayats and villages.
Sweetening the Deal: Revitalizing Cooperative Sugar Mills
Cooperative sugar mills (CSMs) have historically played a crucial role in India's agricultural economy, supporting millions of sugarcane farmers. The New National Cooperative Policy, spearheaded by the Ministry of Cooperation, includes several initiatives to revive and modernize these mills, significantly boosting their morale and operational capacity.
Tax Relief and Financial Boost
- Income Tax Relief: The government has provided clarity that cooperative sugar mills will not face additional income tax for paying higher sugarcane prices to farmers, up to the Fair and Remunerative Price (FRP) or State Advised Price (SAP), effective from April 2016 onwards. Furthermore, the Union Budget 2023-24 allowed sugar cooperatives to claim payments made to sugarcane farmers before the assessment year 2016-17 as deductible expenditure, offering financial relief of over ₹46,000 crore.
- GST Reduction: The Goods and Services Tax (GST) on molasses, a key raw material for ethanol production, has been significantly reduced from 28% to 5%. This move has enhanced the liquidity of distilleries and improved profitability for mills.
- NCDC Loan Scheme: A substantial ₹10,000 crore loan scheme has been introduced through the National Cooperative Development Corporation (NCDC) to support the establishment of ethanol plants, co-generation plants, or to provide working capital for cooperative mills. The Ministry of Cooperation has allocated a ₹1,000 crore grant to NCDC (₹500 crore in FY 2022-23 and ₹500 crore in FY 2024-25) to facilitate these loans. As of March 10, 2026, NCDC has released ₹10,005 crore to 56 CSMs. Earlier, as of March 6, 2024, loans amounting to ₹5,333.13 crore had been disbursed, significantly aiding modernization efforts.
Ethanol Production and Diversification
To enhance the efficiency and sustainability of cooperative sugar mills, initiatives are underway to convert existing molasses-based ethanol plants into multi-feedstock facilities. These upgraded plants will be capable of processing diverse raw materials such as maize and damaged food grains, enabling year-round operation and creating new employment opportunities. Sixty-three cooperative sugar mills have been selected for these multi-feedstock plants. Additionally, cooperative sugar mills have been granted priority in ethanol procurement, being placed at par with private companies under the Ethanol Blending Programme (EBP).
Further diversifying their operations, Union Minister Amit Shah announced that 15 cooperative sugar mills would receive NCDC funding to establish Compressed Biogas (CBG) and potash production plants. The first cooperative multi-feed CBG plant at the Maharshi Shankarrao Kolhe Sahakari Sakhar Karkhana is serving as a model for this nationwide expansion. These initiatives aim to transform sugar cooperatives into multidimensional hubs, producing clean energy and fertilizers, fostering a circular economy, and reducing imports.
Efforts are also being made for the revival of closed cooperative sugar mills, with Indian Potash Limited (IPL) taking initiatives, including a "Bhoomi Pujan" ceremony on March 8, 2025, for the revival of Shri Bileshwar Khand Udyog Khedut Sahakari Mandali Ltd., Kodinar, and Shri Talala Taluka Sahakari Khand Udhyog Mandali Ltd., Talala.
The Digital Leap: Computerization of PACS
Primary Agricultural Credit Societies (PACS) form the bedrock of India's cooperative credit system, serving approximately 13 crore farmers. To address historical inefficiencies and a lack of transparency due to manual operations, the government approved a Centrally Sponsored Project for the Computerization of PACS (CSPCP) on June 29, 2022.
This ambitious project aims to digitize approximately 79,630 functional PACS across 30 states and union territories over a period of five years. The initial budget of ₹2,516 crore was later revised to ₹2,925.39 crore, jointly funded by the Centre, states, and NABARD. As of February 12, 2026, the Ministry of Cooperation has released ₹1,073.98 crore as central assistance for this project.
The initiative involves developing a single ERP (Enterprise Resource Planning) based common national software, providing necessary hardware, digitizing existing records, and offering comprehensive training to PACS personnel. This software is designed to capture data on all functionalities, both credit and non-credit, and is customizable for state-specific needs, linking PACS with District Central Cooperative Banks (DCCBs) and State Cooperative Banks (StCBs).
Implementation and Far-Reaching Impact
Significant progress has been made in PACS computerization. As of February 12, 2026, 61,478 PACS have been fully computerized and onboarded onto the ERP software. By December 2025, 59,261 PACS were actively using ERP software, with hardware supplied to 65,151 PACS (82% coverage), and 32,119 PACS had achieved e-PACS status. This digital transformation is expected to bring immense benefits, including increased efficiency, enhanced transparency, improved trustworthiness, speedy loan disposal, and reduced transaction costs.
Moreover, PACS are being transformed into multi-service delivery hubs, integrating with various national schemes such as Pradhan Mantri Kisan Samriddhi Kendras (PMKSK), Common Service Centres (CSCs), Pradhan Mantri Bhartiya Janaushadhi Kendras (PMBJK), and platforms for fertilizer and seed distribution. This integration aims to streamline agricultural credit and service delivery, ensuring financial inclusion and strengthening services for farmers, particularly small and marginal farmers.
Conclusion
The New National Cooperative Policy represents a holistic approach to strengthening India's cooperative movement. By strategically supporting cooperative sugar mills through significant tax relief, financial assistance for modernization, and diversification into ethanol and biogas production, the government is empowering these crucial entities. Simultaneously, the widespread computerization of PACS is laying the digital foundation for a more transparent, efficient, and accessible rural credit and service delivery system. These initiatives, driven by the vision of 'Sahkar-se-Samriddhi', are poised to usher in a new era of growth, sustainability, and prosperity for millions in rural India, contributing significantly to the nation's goal of becoming 'Viksit Bharat' by 2047.