Cooperatives in India

SYLLABUS:

GS 2 > Social justice  >   Development Processes & Industry   >   Cooperatives

REFERENCE NEWS:

• Cooperatives have the potential to tackle the personal issues of farmers with collective strength, the Prime Minister said recently while inaugurating multiple key initiatives for the cooperative sector. 

MORE ON NEWS:

• The Prime Minister inaugurated the pilot project of "the world’s largest grain storage plan” in the cooperative sector, which is being done in 11 primary agricultural credit societies (PACS) in 11 states. 
• The PM also laid the foundation stone for an additional 500 PACS across the country for the construction of warehouses and other agriculture-related infrastructure under this initiative.
• Also, the Union Home and Cooperation Minister recently launched the National Urban Co-operative Finance and Development Corporation Limited (NUCFDC). This umbrella body for urban cooperative banks aims to modernise and strengthen the urban cooperative banking sector. It will also function as a self-regulatory organisation for the sector.

COOPERATIVES:

• Cooperatives are people-centred enterprises jointly owned and democratically controlled by and for their members to realise their common economic, social and cultural needs and aspirations.
• Its aim is to serve the interest of the members, usually from poorer sections of society, through the principle of self-help and mutual help.
• In India, a cooperative society can be formed under provisions of the Co-operative Societies Act, 1912.

HISTORY OF COOPERATIVES IN INDIA:

Pre-Independence Era:

• The Cooperative Credit Societies Act was introduced in 1904, succeeded by the 1912 Cooperative Societies Act.
• The National Cooperative Union of India (NCUI) was founded in 1929 to bolster the cooperative movement.
• The Montague-Chelmsford Reforms of 1919 allowed provinces to enact their cooperative laws.
• Land Mortgage Cooperative Banks were established in 1938 for debt relief and land improvement efforts.
• Co-operative societies received support from Jawaharlal Nehru, India’s first Prime Minister.

Post-Independence Era:

• The Reserve Bank of India began refinancing State Cooperative Banks in 1948 to aid agricultural cooperatives.
• The National Cooperative Development Corporation (NCDC) was set up in 1963 under the Ministry of Agriculture & Farmers Welfare.
• The Multi-State Cooperative Societies Act was enacted in 1984 to streamline cooperative laws.
• In 2002, the National Policy on Cooperatives was introduced by the Atal Bihari Vajpayee Government.
• The 97th Constitutional Amendment Act of 2011 granted constitutional status and protection to cooperative societies.
• The 'Ministry of Cooperation’ was created by the Union Government in July 2021 to realise the vision of ‘Sahkar se Samriddhi’ (prosperity through cooperatives). 

FEATURES OF COOPERATIVES:

• Open Membership: Membership is open to all with a common interest, requiring a minimum of ten members to form a society.
• Voluntary Association: Membership is voluntary, with freedom to join, continue, or leave at will.
• State Control: Co-operative societies are covered under Entry 32 of the state list in the Seventh Schedule, leading to state-specific legislations. These societies must register, comply with member and business disclosures, and undergo government audits as regulated by state laws.
• Sources of Finance: Capital is raised from members, along with loans and grants from the government.
• Democratic Management: Managed by a member-elected Board of Directors, with one vote per member.
• Service Motive: Aimed at providing service over profit maximization, such as selling goods at reasonable prices to members.
• Separate Legal Entity: Registered under the Co-operative Societies Act, it has its own legal identity for agreements, property transactions, etc.
• Distribution of Surplus: Profits are shared based on participation in the society’s business, not shareholding.
• Self-help through Mutual Cooperation: A business model based on pooled resources for mutual benefit.

ADVANTAGES OF COOPERATIVES:

• Inclusiveness:
  • Co-operatives support inclusivity, mirroring India’s diverse society. For instance, Amul's model is inclusive, allowing thousands of small dairy farmers to join the cooperative, irrespective of their caste, religion, or socioeconomic status.
• Promotes participatory governance:
  • They encourage democratic participation. A good example is the Uralungal Labour Contract Co-operative Society (ULCCS) in Kerala, where members actively contribute to decision-making processes.
• Poverty eradication:
  • Co-ops boost community welfare by offering essential amenities, infrastructure, and collective bargaining, leading to better living standards. Profits are reinvested locally, enhancing community development. An example is Lijjat Papad, which provides sustainable employment, notably to women, contributing to poverty reduction.
• Employment generation:
  • Through its activities, cooperatives generate employment opportunities for the unskilled and the skilled.  According to the Ministry of Cooperation, there are around 8.5 lakh cooperatives in India, with about 1.3 crore people directly attached to them.
• Industrial growth:
  • Many cooperatives have emerged into major market players. Eg: Indian Farmers Fertilisers Cooperative (IFFCO) has around a third of the market share in fertilizers.
• Eliminates Middlemen:
  • Co-operatives allow direct control over supplies by members, cutting out middlemen to ensure fair pricing and better market access for producers, exemplified by Amul's direct purchasing from dairy farmers.
• Capacity building:
  • Co-operatives enhance their development through education and skill training for all involved, from members to managers. An example is Amul's introduction of micro-ATM services for its dairy farmers, improving banking access.

ISSUES SURROUNDING COOPERATIVES:

• Lack of Spontaneity: The cooperative movement in India often lacks grassroots initiation, predominantly initiated by government actions rather than from community members themselves. For example, government-initiated cooperatives in rural areas are seen more as top-down impositions rather than organic, community-led initiatives.
• Over-Reliance on Government Support: Indian cooperatives heavily depend on government subsidies and support, undermining their autonomy and making them prone to political manipulation. State interventions in share capital and financial aid exemplify this dependence, leading to political influence in cooperative operations.
• Functional Weakness: There's a significant gap in skilled personnel within cooperatives due to insufficient training facilities and the sector's inability to attract skilled youth. This has resulted in operational inefficiencies and a lack of innovation within the movement.
• Restricted Coverage: Many cooperatives are limited in scope, serving only a small number of members and covering minimal geographical areas, often just one or two villages. This limitation is more pronounced in Eastern and Northeast states compared to well-developed cooperatives in Maharashtra and Gujarat.
• Political Interference: Rural cooperatives have become arenas for political manoeuvring, with political considerations often influencing the selection of beneficiaries. The sugar cooperatives in Maharashtra are a prime example, where their significant political influence attracts keen interest from political parties.
• Influence of Money & Caste: Despite the cooperative movement's democratic ethos, it has been undermined by the dominance of wealthier and higher caste members who often secure top positions within these societies. This has distorted the equitable principle of cooperatives, concentrating power among the affluent and socially privileged.

CONCLUSION:

• To foster cooperative sector growth in India, efforts are focusing on grassroots participation, financial independence, operational efficiency, expansion, fair practices, and ecosystem enhancement. Strategies include promoting community-led initiatives, diversifying income, legislative reforms for limited government intervention, skill development training, technology adoption, expanding cooperative activities, encouraging inter-cooperative collaboration, implementing transparent governance, and fostering innovation. 
• Recent government initiatives, like the world's largest grain storage plan and new PACS foundations, aim to use cooperatives for agricultural development and economic empowerment, reflecting the vision of 'Sahkar se Samriddhi' or prosperity through cooperatives.

PRACTICE QUESTION:

Q. Critically examine the role of cooperatives in the development of the country.  (15 marks, 250 words)