COOPERATIVES IN INDIA

25th March, 2022 Economy

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Context

A parliamentary standing committee has advised the newly created Cooperation

Ministry, to “exercise utmost prudence” in chalking out activities and programmes at the
national level so that federal features of the country are not “impinged upon”.
Cooperatives come under the State List.

About Cooperatives

According to ILO, a cooperative is an autonomous association of persons united

voluntarily to meet their common economic, social and cultural needs and
aspirations through a jointly owned and democratically controlled enterprise.

Some selected definitions of co-operatives

 "A form of organization in which persons voluntarily associate together as human beings
on the basis of equality for the promotion of the economic interest of themselves" H Calvert.
"Co-operation is self-help as well as mutual help. It is a joint enterprise of those who are not
financially strong and cannot stand on their own legs and therefore come together not with
a view to getting profits but to overcome disability arising out of want of adequate financial
resources and thus better their economic conditions". K N Katju.
There are many types of cooperatives such as Consumer Cooperative Society, Producer
Cooperative Society, Credit Cooperative Society, Housing Cooperative Society and Marketing
Cooperative Society.
The United Nations General Assembly had declared the year 2012 as the International Year
of Cooperatives.

Cooperatives in India

India is an agricultural country and laid the foundation of World’s biggest cooperative
movement in the world.
In agriculture, cooperative dairies, sugar mills, spinning millsetc are formed with the
pooled resources of farmers who wish to process their produce.
The country has 1,94,195 cooperative dairy societies and 330 cooperative sugar mill
operations.
Cooperative sugar mills account for 35% of the sugar produced in the country.
In banking and finance, cooperative institutions are spread across rural and urban
areas.
Village-level primary agricultural credit societies(PACSs) formed by farmer
associations are the best example of grassroots-level credit flow.
These societies anticipate the credit demand of a village and make the demand to
the district central cooperative banks(DCCBs).
State cooperative bankssit at the apex of the rural cooperative lending structure.
Given that PACSs are a collective of farmers, they have much more bargaining powers
than an individual farmer pleading his case at a commercial bank.
There are also cooperative marketing societiesin rural areas and cooperative housing
societies in urban areas.
The various kinds of cooperatives in India include consumers’ cooperative societies,
which seek to protect the interest of general consumers by making goods available at
reasonable rates.
These cooperatives, of which Kendriya Bhandar, Apna Bazar and Sahkari Bhandar,
are prominent examples, buy goods directly from the producers or manufacturers, thus
removing middlemen from the process to deliver items at lower costs to consumers.
Then there are producers’ cooperative societiesthat protect the interest of small
producers by enabling access to raw materials, tools and equipment, machinery, etc.
Handloom societies like APPCO, Bayanika, Haryana Handloom, etc, are examples of
producers’ co-operative societies.
Among the most famous cooperative brands in the country, Amul developed out of the
Gujarat Co-operative Milk Marketing Federation, which is owned by 36 lakh milk
producers in Gujarat.
It is an example of a cooperative marketing society, formed by small producers and
manufacturers who find it difficult to sell their products individually.
HISTORY OF THE COOPERATIVE MOVEMENT IN INDIA:

Pre-Independence:

The Cooperatives were first started in Europe to serve the credit-starved people in
Europeas a self-reliant, self-managed people’s movement with no role for the
Government.
British India replicated the Raiffeisen-type cooperative movement in Indiato
mitigate the miseries of the poor farmers, particularly harassment by moneylenders.
The term Cooperative Societies came into existence when the farmers of Pune and
Ahmednagarspearheaded an agitation against the money lenders.
The first credit cooperative society was formed in Banking in the year 1903with the
support of Government of Bengal.
Cooperative Credit Societies Act of India was enacted in 1904.
In 1912, another Cooperative Societies Act was passedto rectify some of the drawbacks
of the earlier law.
Cooperation became a State subject in 1919.
Land Mortgage Cooperative Banks were established in 1938to provide loans initially
for debt relief and land improvement.
Reserve Bank of India started refinancing cooperatives for Seasonal Agricultural
Operations from 1939.
In 1942, the Government of British India enacted the Multi-Unit Cooperative Societies
Actto cover Cooperative Societies with membership from more than one province.

Post-Independence:

After independence, cooperatives became an integral part of Five-Year Plans.

Like agriculture, cooperation is in the concurrent list.
In 1958, the National Development Council (NDC) had recommended a national policy on
cooperatives and also for training of personnel and setting up of Co-operative Marketing
Societies.
National Cooperative Development Corporation (NCDC), a statutory corporation, was
set up under National Cooperative Development Corporation Act, 1962.
In 1984, Parliament of India enacted the Multi-State Cooperative Societies Actto
remove the plethora of different laws governing the same types of societies.
Government of India announced a National Policy on Co-operatives in 2002.
The Constitution (Ninety Seventh Amendment) Act 2011relating to the co-operatives is
aimed to encourage economic activities of cooperatives which in turn help progress of
rural India
In Part III of the constitution, after words "or unions" the words "Cooperative Societies"
was added.
In Part IV a new Article 43B was inserted, which says: The state shall endeavour to
promote voluntary formation, autonomous functioning, democratic control and
professional management of the co-operative societies".
After Part IXA of the constitution, a Part IXB was inserted to accommodate state vs centre
roles.
Union Agriculture Ministry launched NCDC’s youth-friendly scheme ‘Yuva Sahakar-
Cooperative Enterprise Support and Innovation Scheme’for attracting youth to
cooperative business ventures.
 NCDC recently started Mission Sahakar 22, which aims to double farmers’ income by
2022.

Role of Cooperatives in Socio-Economic Development

Cooperatives are community-based, voluntary in nature, rooted in democracy,

flexible, and have participatory involvement,which makes them well suited for
economic development
It is an association of persons and not of capital
It generates employment and eliminates all forms of exploitation.
It educates people the principles of equality, mutuality, and co-operation.
As cooperatives foster economies of scope and scale, they increase the bargaining
power of their members providing them, among others benefits, higher income and
social protection. Hence, cooperatives accord members opportunity, protection and
empowerment-essential elements in uplifting them from degradation and poverty
They promote the “fullest participation of all people” and facilitate a more equitable
distribution of the benefits of globalization.
They provide their employees with the opportunities to upgrade their skillsthrough
workshops and courses and offer youth in their base communities short and long-term
employment positions.
Cooperatives provide agricultural credits and fundswhere state and private sectors
have not been able to do very much.
They provide strategic inputs for the agricultural-sector; consumer societies meet
their consumption requirements at concessional rates.
It softens the class conflicts and reduces the social cleavages.
It reduces the bureaucratic evils and follies of political factions
It creates a conducive environment for small and cottage industries.

Ministry of Cooperation

Recently, a separate ‘Ministry of Co-operation’ was formed in July 2021’ for realizing
the vision of ‘Sahkar se Samriddhi’ (Prosperity through Cooperation) and to give a new
push to the cooperative movement.
The ministry provides a separate administrative, legal and policy framework for
strengthening the cooperative movement in the country.

Objectives

The ministry was created with objectives:

To realise the vision of "Sahkar se Samriddhi" (prosperity through cooperation).

To streamline processes for ‘'Ease of doing business’' for co-operatives and enable
development of Multi-State Co-operatives (MSCS)
To provide a separate administrative, legal and policy framework for strengthening the
cooperative movements in the country.
To deepen the cooperative as a true people-based movement reaching upto the grassroot
level.
Significance of Ministry Of Cooperation:

It seeks to provide a separate administrative, legal and policy frameworkfor

strengthening the cooperative movement in the country.
It is expected to deepen Co-operatives as a true people based movement reaching up to
the grassroots.
It will work to streamline processes for ‘Ease of doing business’for co-operatives and
enable development of Multi-State Co-operatives (MSCS).
Cooperative structure has managed to flourish and leave its mark only in a handful of
states like Maharashtra, Gujarat, and Karnataka etc. Under the new Ministry,
the cooperative movement would get the required financial and legal power needed
to penetrate into other states also.
Over the years, the cooperative sector has witnessed drying out of funding. Under the
new Ministry, the cooperative structure would be able to get a new lease of life.

CHALLENGES FACED BY COOPERTIVE SECTOR IN INDIA

Non-accountability:

The government gave too many benefits to cooperatives, but then there was no further
accountability which led to these cooperatives becoming more and more lethargic.
Besides as there was no competition they became more and more costly they were not at
all efficient and the worst part was that the government allowed them to function like
this and pass on the burden of costs to consumers.

Vested interest of some people:

A lot of times people who are in position in control of cooperatives are actually people
who have joined cooperatives for personal gains.

Lack of coordination:

Generally what happens in cooperatives is that different cooperatives at different level

don’t coordinate this makes the work of cooperatives difficult.

The Internal Free Rider Problem:

New members who provide very little capital enjoy the same benefits as long-standing or
founding members who have major investments in the cooperative
New members get a “free ride” on the investments and other efforts of existing members,
thereby diluting the returns to existing members.
Quantity over Quality:

Different cooperatives go in for quantity and this causes a major problem because they
think it’s a quick way to earn money so this basically affects the productivity.

No Balanced Growth:

The cooperatives in northeast areas and in areas like West Bengal, Bihar, Orissa are not
as well developed as the ones in Maharashtra and the ones in Gujarat.

Political Interference:

This is the biggest problem faced by Sugar cooperatives in Maharashtra.

Mismanagement and Manipulation:

A hugely large membership turns out to be mismanaged unless some secure methods are
employed to manage such co-operatives.
In the elections to the governing bodies, money became such a powerful tool that the top
posts of chairman and vice-chairman usually went to the richest farmers who
manipulated the organization for their benefits.

Lack of Awareness:

People are not well informed about the objectives of the Movement, rules and regulations
of co-operative institutions.

Restricted Coverage:

Most of these societies are confined to a few members and their operations extended to
only one or two villages.

Functional Weakness:

The Co-operative Movement has suffered from inadequacy of trained personnel.

WAY FORWARD

Training:
 cooperatives to take up the task of training farmersin the right use of fertilizers, and
also help them understand new technologies in farming.
cooperatives to take active part in skilling rural youth
Cooperative training must not only be imparted to employees in cooperatives, but also
extend beyond cooperatives, to children in schools, colleges, universities, technical
and professional institutions, and also for those who want to form cooperatives, but
who are not aware of the various modalities, and requirements.

More inclusive:

Increased participation of womenin cooperative movement.

Cooperative sector has a big role in bridging the urban-rural divideand creating
opportunities for income generation.

Use of technology

To have a transparent, accountable and efficient system, cooperatives should make

effective use of digital technology in their functioning, especially in governance,
banking and businesses.
New areas are emerging with the advancement of technology and cooperative societies
can play a huge role in making people familiar with those areas and technologies.
There are irregularities in cooperatives and to check them there have to be rules and
stricter implementation.

https://indianexpress.com/article/india/cooperatives-house-panel-govt-ensure-federal-features-
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