Co-operative Societies

Cooperative societies play a pivotal role in fostering socio-economic development by promoting collective ownership, democratic control, and equitable distribution of resources. As an integral part of the global economy, cooperative societies encapsulate principles of solidarity, self-help, and mutual assistance.

A cooperative society is a voluntary organization formed by individuals with common economic interests, aimed at serving the needs of marginalized sections of society through mutual assistance and self-help. The cooperative movement in India has roots dating back to its independence. The 97th Constitutional Amendment Act of 2011 enshrined the right to establish cooperative societies as a fundamental right, introduced a new Directive Principle of State Policy to promote cooperative societies, and added a new section in the Constitution titled “The Cooperative Societies” to regulate their functioning. This amendment also empowered Parliament to enact laws governing multi-state cooperative societies, while state legislatures oversee other cooperative societies.

In the country, there exist two main types of cooperative structures: State Cooperative Societies and Multi-State Cooperative Societies (MSCS). Multi-State cooperatives operate across multiple states, such as farmer-producer organizations sourcing grains from farmers in different states. Their board of directors comprises representatives from all states where these collectives operate, overseeing financial and administrative matters. Multi-State Cooperative Societies fall under the jurisdiction of the Union Government, while State Cooperative Societies are regulated by respective State Governments.

Constitutional Provision

In 2011, the 97th Constitutional Amendment Act added a new part to the Constitution called Part IXB. This part deals with rules about Cooperative Societies, including how they are formed, how their elections work, how their audits are conducted, and their general operations.

The Act also introduced Article 43B, which says that the government should encourage the formation of Cooperative Societies that can function independently and are managed professionally.

The Act changed Article 19(1)(c) to include the right to form cooperative societies.

In July 2021, the Supreme Court made a ruling about the 97th Amendment Act. It said that some parts of the Act were not valid because they took away the power of State Legislatures over cooperative societies, which is supposed to be their responsibility. The Court also mentioned that the Parliament didn’t follow the right process when passing the Amendment Act.

However, the Supreme Court agreed with the parts of the Amendment Act that dealt with Multi-State Cooperative Societies.

In 1958, the National Development Council suggested a National Policy on Cooperatives. This policy was finally made in 2002.

The National Cooperative Development Corporation (NCDC) was formed by law in 2002, which supports India’s National Cooperative Policy.

In July 2021, the Ministry of Cooperation was established to help improve the Cooperative sector and achieve the goal of going “From Cooperation to Prosperity.”

Multi-State Cooperative Societies (Amendment) 2022

Proposals for Electoral Reforms and Financial Assistance:

• The Bill suggests changes to the Multi-State Co-operative Societies Act, 2002.
• It establishes a Co-operative Election Authority to oversee elections in multi-state co-operative societies.
• Multi-state co-operative societies need government permission before redeeming their shareholding.
• A Co-operative Rehabilitation, Reconstruction, and Development Fund will help revive struggling multi-state co-operative societies, funded by profitable ones.
• Companies under the Companies Act, 2013 are exempt from contributing to the revival of sick companies.
• State co-operative societies can merge into existing multi-state ones, following state laws.

Provisions for Board Composition and Transparency:

• Measures ensure representation of women and SC/ST members on cooperative society boards.
• Cooperative Ombudsmen and Information Officers will improve transparency and address grievances.
• Ombudsmen can enforce attendance and access documents.
• Timely resolution of grievances, with appeals to the Central Register of Cooperative Societies.
• Large multi-state co-operative societies will undergo concurrent audits for financial transparency.

Ease of Doing Business in the Cooperative Sector: Simplified registration and digital processes for efficiency. The Ministry of Cooperation aims to rejuvenate cooperatives to attract new entrepreneurs. Introduction of electronic filing for applications, returns, and documents.

National Cooperative Database (NCD): NCD maps primary agricultural, dairy, and fishery societies and other sectors. Accessible to stakeholders including federations and ministries.

Inclusivity in Decision-Making: The National Institute of Cooperative Management and Cooperative Education Fund cater to cooperative sector training and education needs.

Features of Co-operative Societies

1. Simple Formation: A cooperative society can be established with just ten members who hold the majority, requiring minimal legal formalities.
2. Equality and Transparency: Each member in a cooperative society has an equal vote, promoting fairness and transparency in decision-making. Surplus generated is distributed equally among members.
3. Limited Liability: Members’ liability in a cooperative society is limited to their capital contribution, ensuring financial security.
4. Middlemen Elimination: Consumer cooperative societies bypass middlemen by directly purchasing goods from producers and wholesalers, offering affordable prices to end-users. Farm Producer Organizations (FPOs) also connect farmers directly to buyers, enhancing profitability.
5. Access to Credit: Cooperative societies reduce reliance on private money lenders in rural areas by providing credit at low interest rates.
6. Support for Agriculture: Cooperative societies aid government initiatives to boost agricultural production by distributing resources like High-Yielding Variety (HYV) seeds and fertilizers to farmers.
7. Reserve Funds: Cooperative societies are mandated to allocate 25% of profits to a general reserve, reducing the need for external funding.
8. Encourages Savings: Cooperative societies promote a culture of saving among members, offering credit primarily for productive purposes.
9. Social Benefits: Cooperative societies contribute to social welfare by influencing customs positively and utilizing profits to enhance community amenities.

Issues of Co-operative Societies

1. Disputes and Conflicts: Internal conflicts may arise within Cooperative Societies due to members coming from diverse backgrounds. Some individuals may prioritize personal gain over the collective spirit of service.
2. Lack of Expertise: Many Cooperative Societies struggle to generate profits due to a lack of skilled and experienced members for effective management.
3. Government Control: Larger Cooperative Societies often face interference from government authorities. Stringent regulations and political involvement hinder their growth and operational efficiency.
4. Limited Resources: Cooperative Societies encounter challenges with limited capital contributions from members, particularly during the initial stages. Profit-making is often secondary to the society’s welfare objectives.
5. Other Issues: Misuse of funds, narrow self-interest pursuits, and political interference further impede the efficient functioning of Cooperative Societies.

Way Forward

Financial Support:

• Access to long-term, interest-free loans should be facilitated to address financial constraints.
• Credit facilities should be extended not only to small farmers, tenants, and sharecroppers but also to landless workers and artisans.
• Security requirements for obtaining credit should be relaxed, and the availability of loanable funds should be increased through rediscounting facilities.

Technical Guidance:

• Cooperative Societies should be provided with a comprehensive package of inputs and services, including marketing assistance and technical guidance, to ensure their sustainability.
• Over time, these societies can develop internal expertise and become self-reliant.

Utilization of Local Resources:

• Cooperative groups should consider local conditions when establishing themselves, maximizing the utilization of local resources.
• Farming and marketing societies should prioritize the use of local resources to enhance efficiency and sustainability.

Minimization of External Interference:

• Measures should be taken to eliminate bureaucratic hurdles, political interference, and administrative obstacles that hinder the functioning of Cooperative Societies.
• Influential village lobbying groups should not impede the operations of cooperative societies.

Awareness Generation:

• Women should be educated about programs aimed at improving child care, nutrition during pregnancy, and maintaining a balanced diet.
• Adult education and literacy initiatives should be implemented widely in rural areas.
• Utilization of social media, television, newspapers, and other platforms should be employed to raise awareness about the benefits and importance of Cooperative Societies.

Cooperatives have the potential to significantly impact rural development. With sufficient financial and technical support, they can effectively tackle rural challenges and contribute to India’s overall development. It is imperative for the government to actively promote and create a conducive environment for the growth of cooperatives.