Context: The existing challenges in the agriculture sector and the resultant farmer protests have given calls for promoting cooperatives in agriculture sector to rejuvenate agriculture as a sustainable economic model.
Cooperatives:
Constitutional Provisions for Cooperatives
- The Constitution (97th Amendment) Act of 2011 created a new Part IXB (Cooperatives) following Part IXA (Municipalities) regarding cooperatives in India.
- In Part III of the Constitution, Article 19(1)(c), the word “cooperatives” was added after “unions and associations” which enabled citizens the right to form cooperative societies as their Fundamental Right.
- The Directive Principles of State Policy (Part IV) now include a new Article 43B on the “development of cooperative societies.”
- Article 243ZH to 243ZT in part IXB deals with cooperatives.
- Supreme Court in Rajendra N Shah case pronounced that only the new Part IXB dealing with cooperatives sector only applies to multi state cooperative societies. The Part IXB of the Constitution does not apply to Cooperatives registered with States.
Benefits of Cooperative society:
Challenges of Cooperative Society: (Shivaji Rao Patil Committee)
- Lack of Participatory character
- free rider problem as few members join only to get benefits.
- Legal loophole which enables even non-active members to vote and get elected.
- Dominated by few rich members and politicians.
- Restricted coverage and role
- Cooperatives are successful in only few states.
- Most of the PACS are single purpose societies leading to poor viability.
- Equity infusion by the government enables the government to appoint Board of Directors leading to poor autonomy.
- Restrictive State Cooperatives Act
- Government can issue directions.
- Government can postpone elections.
- Government can supersede Board of Directors.
- Governance related issues
- Poor regulation by Registrar of Cooperatives.
- Financial fraud, corruption, etc.
- Lack of adequate capital as cooperatives cannot raise money from the capital market.
- Lack of dedicated cadre of government officials for management of cooperatives.
Steps Taken
- Enactment of Multi-State Cooperative Societies Act, 2002 and its amendment in 2023 to ensure autonomy.
- Creation of the Ministry of Cooperation.
- Model bye-laws to enable PACS to undertake more than 25 business activities.
- National Cooperative database.
- Banking regulation Amendment act to strengthen regulation of urban cooperative banks.
- Cooperatives as buyers on GeM portal.
Way Forward
- Encourage States to adopt model cooperatives act proposed by Choudhary Brahm Perkash committee, which had provisions like- i) prohibiting cooperatives to accept funds in the form of equity from government; ii) prohibiting government officers from working in cooperatives; iii) limiting the role of government in issuing directions; iv) clear roles and responsibilities for Registrar of Cooperative societies, etc.
- Enhance participatory character of cooperatives by inserting provisions related to active members in the state cooperative societies act.
- Promote higher economies of scale through- i) doing away with restrictions on area of operations; ii) merger of cooperatives; iii) Encourage cooperatives to diversify their business.
- Strengthen access to the capital market by setting up an umbrella organization for cooperatives.
- Set up a dedicated fund for revival of sick cooperatives.
- Ministry of Cooperation to announce a “policy of assured procurement” at MSP of, say, 10 crops including pulses, oilseeds and TOP through Nafed/NCCF. Make this “assured procurement” applicable for all farmers who register on a procurement portal at the time of sowing itself along with land details. (Verification through digitised land records can be used to eliminate aggregators/traders from this process)
- Nafed/NCCF to plan and “capture” the entire value chain of the commodities under the guaranteed MSP items from procurement to primary processing to packaging to retail sales.
- Nafed/NCCF to set up retail outlets all over the country for “Bharat” brand agri commodities. These outlets will be a conduit for regular supply to consumers. Franchisee models can be worked out and bank funding may be available to entrepreneurs for setting up “Bharat” brand outlets.
- Plan, procure and hold appropriate buffer stocks of pulses, oilseeds and TOP utilising shared and decentralised infrastructure which can be built by member cooperatives of Nafed/NCCF
- Agriculture, which is a state subject, to be moved to the Concurrent List so that Central Government initiatives through Nafed/NCCF do not run into legal hurdles.