New ministry to spur cooperative reforms

The growth of the cooperative movement in the country has not been free from turbulence. Apart from disagreements within, financial irregularities and undue control and interference of the governments are identified as inhibitive factors. Though largely funded and managed as private members’ enterprises, the cooperatives are required to obtain too many approvals from the government for their business.

Substantial: There are about one million cooperatives in India. File photo

Suresh Kumar

Chief Principal Secretary to Punjab CM

THE Ministry of Cooperatives, created recently by the Government of India, is expected to give a fresh impetus to developing and promoting cooperatives in the country. In its vision, ‘Sahakar se Samriddhi’ (prosperity through cooperation), the government has stated that the new ministry will provide a separate administrative, legal and policy framework to strengthen the cooperative movement in the country.

The cooperatives are a vital plank of inclusive growth in rural areas, particularly food security, poverty alleviation, and employment creation. The International Cooperative Alliance has defined cooperatives as people-centred enterprises, owned, controlled and run by members to realise their economic, social and cultural needs and aspirations. They present a democratic business model wherein people come together with complete equality and equity. It is said to be the people’s capitalism to counter private capitalism that causes the concentration of wealth.

The socio-economic benefits of cooperative enterprises remain with the members and communities that establish them and steer their economic future. The cooperative system has the potential to neutralise the alleged adverse effects of globalisation and privatisation.

Cooperatives are self-financing, self-reliant and autonomous. These are voluntary organisations of members who unite to achieve their common objectives based on values and not just profit. The core values driving the cooperative movement are self-help, self-responsibility, democracy, equality, equity and solidarity. Based on these values, the principles of cooperation are voluntary and open membership; democratic member control; member economic participation; autonomy and independence; education, training and information; cooperation among cooperatives; and concern for community.

Over the years, the cooperatives have occupied a substantial space in the business world. There are about one million cooperatives in India. These are formed either under provisions of the Cooperative Societies Act, 1912, or the respective state laws; or the Central Multi-State Cooperative Societies Act.

British India enacted the first Cooperative Credit Societies Act, 1904. In 1919, cooperation became a State subject, and provinces were authorised to make their cooperative laws under the Montague-Chelmsford Reforms. In 1942, the British government enacted the Multi-Unit Cooperative Societies Act, intended to cover the societies whose operations extended to more than one state.

In 1958, the National Development Council (NDC) recommended a national policy on cooperatives. The Government of India enacted the Multi-State Cooperative Societies Act in 1984 and the National Policy on Cooperatives was adopted in 2002. The 1984 Act was replaced by a new Multi-State Cooperative Societies Act 2002 for the speedier promotion and development of cooperatives.

According to the RBI, the contribution of cooperative financing institutions to rural and agriculture credit increased from 3.1 per cent in 1951 to an impressive 27.3 per cent in 2002. Available data shows that the combined balance sheet of all state cooperative banks, as of March 31, 2018, stood at Rs 2.26 lakh crore and that of the district central cooperative banks at Rs 5.25 lakh crore, with their net profits being Rs 1,030 crore and Rs 850 crore, respectively.

The producers’ cooperatives, such as the Andhra Pradesh State Handloom Weavers Cooperative Society, and the consumers’ cooperative, such as Kendriya Bhandar, a welfare society for the Central government employees set up in 1963, Apna Bazar, one of the largest and oldest multi-state cooperatives, and Sahakari Bhandar, a cooperative chain of retail stores, are some of the other forms of successful cooperatives. The marketing cooperatives at the national level, such as Nafed and its affiliate cooperative marketing federations at the state level, play an important role in agriculture development and marketing. Amul, the country’s biggest food and dairy cooperative with an annual turnover of over Rs 38,000 crore, illustrates the singular success of the cooperative movement in the business world. Iffco is another major multi-functional cooperative organisation that has many offshore production and marketing facilities.

The National Cooperative Union of India and the National Cooperative Development Corporation worked for the promotion of the cooperative movement in India. Initially tasked with planning, promotion and financing of agricultural schemes, they were given a broader mandate to finance projects of rural cooperatives in sectors like water resource development and conservation, agri-insurance, rural credit, sanitation and animal husbandry.

The growth of the cooperative movement in the country has not been free from turbulence. Apart from disagreements within, financial irregularities and undue control and interference of the governments are identified as inhibitive factors. Though largely funded and managed as private members’ enterprises, the cooperatives are required to obtain too many approvals from the government for their business.

Ideally, there should be no interference of the government in the working of these entities, except autonomous regulatory mechanisms for free and fair elections to the managing committees and an effective quasi-judicial system for the redress of grievances of the members and persons who deal with these enterprises. The government facilitation, either through financial assistance or technical guidance, should not be intrusive to distort their autonomy.

However, honesty and transparency in business by the managing committees and members can only help prevent government interference.

The new Union Ministry of Cooperatives will spur meaningful reforms to strengthen cooperative movement in the country. It should be instrumental in remodelling both the Central and state laws to make cooperative enterprises more competitive and self-sustaining. The ministry will, of course, have the onerous task of ensuring the recognition of cooperatives under various financial, commercial and tax laws. These need to be harmonised with the Central and state cooperative laws.

Such an effort will induce administrative, financial and legal reforms in this sector to align it with global trade practices. It may also enable the solution of such hitherto ignored problems of the cooperative sector as lack of infrastructure, poor quality of management, over-indulgence of the government, stagnant membership, delay or non-conduct of elections, inadequate human resources, and absence of professionalism.

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