Context: Multi-State Cooperative Bill passed by Lok Sabha
Multi-State Cooperative Societies (Amendment) Bill, 2023 (MSCS Bill)
Objective
- To strengthen cooperatives by making them transparent and introduces a system of regular elections.
- To facilitate the voluntary formation and democratic functioning of co-operatives as people’s institutions based on self-help and mutual aid
- To consolidate and amend the law relating to co-operative societies, with objects not confined to one State and serving the interests of members in more than one State
- To enable them to promote their economic and social betterment
- To provide functional autonomy as being felt necessary by the various cooperative societies, and federation of various cooperative societies as well as by the Government.
Comparison
| Provision | MSCS Act, 2002 | MSCS (Amendment) Bill, 2023 |
| Election of board members | Elections to the board of a MSC are conducted by its existing board. | The bill provides for a Co-operative Election Authority to Conduct such electionsSupervise, direct, and control the preparation of electoral rollsPerform other prescribed functions |
| Amalgamation of co-operative societies | By passing a resolution at a general meeting with at least two-thirds of the members, present and voting MSCs can amalgamate. | The Bill allows state co-operative societies to merge into an existing multi-state co-operative society, subject to the respective state laws. |
| Sick Cooperative Societies | NO Provision | The Bill establishes the Co-operative Rehabilitation, Reconstruction and Development Fund for revival of sick multi-state co-operative societies. |
| Restriction on redemption of government shareholding | The Act provides that the shares held in a multi-state co-operative society by certain government authorities can be redeemed based on the byelaws of the society. | The Bill amends this to provide that any shares held by the central and state governments cannot be redeemed without their prior approval. |
| Redressal of complaints | NO Provision | As per the Bill, the central government will appoint one or more Co-operative Ombudsman with territorial jurisdiction. |
Issue with the Amendment Bill
- The Bill is imposing a cost on well-functioning co-operatives to bail out poorly functioning ones.
- Revival of a Sick multi-state co-operative societies will be done by a Fund that will be financed through contributions by profitable multi-state co-operative societies.
- Co-operative principles of autonomy and independence may be compromised as the shareholding of governments cannot be redeemed without the consent of government.
- Appointment of the election authority by the central government may put the question on the independence of the authority.
Constitutional Provision with Respect to Co-operatives
Schedule 7
Entry 43 of Union list states thatIncorporation, regulation and winding up of trading corporations, including banking, insurance and financial corporations, but not including co-operative societies.
Entry 32 of State List states that Incorporation, regulation and winding up of corporations, other than those specified in List I, and universities; unincorporated trading, literary, scientific, religious and other societies and associations; co-operative societies.
In 2011, by 97th Constitutional Amendment Act, the Constitution was amended adding
- Co-operative societies to fundamental right to form association under Article 19(1)(c)
- Article 43 in Part IV which put a duty on state for Promotion of co-operative societies
- Part IXB
And specify guidelines for running co-operative societies.
These guidelines provide for:
- Composition of the boards of co-operatives
- Election of members of the board
- Audit of accounts of co-operative societies
- Supersession of the board
The Ministry of Cooperation was created by transferring the existing entries related to cooperation and cooperative in the business of the erstwhile Ministry of Agriculture, Cooperation and Farmers Welfare vide Cabinet Secretariat’s Gazette Notification.
In Union of India versus Rajendra N Shah and Anr.
The Supreme Court held that Part IXB will only be applicable to multi-state co-operative societies, as states have the jurisdiction to legislate over state co-operative societies.
Issues with the functioning of the Co-operative societies
- Inadequacies in governance
- Politicisation and excessive role of the government
- Inability to ensure active membership
- Lack of speedy exit of non-user members
- Lack of member communication and awareness building measures
- Lack of recognition of cooperatives as economic institutions both amongst the policy makers and public at large
- Lack of efforts for capital formation
- Inability to attract and retain competent professionals
- Elections to co-operative boards have been postponed indefinitely
- Lack of cost competitiveness arising out of issues such as overstaffing a general top-down approach in forming cooperatives
Suggestions
- For enhancing member participation: Definition of ‘Active members’ should be introduced in cooperative legislations, right to vote and contest should be given only to active members and enabling provision for speedy exit of nonuser members.
- Effectiveness of Boards: Cooperative legislations should clearly define the role and responsibilities of cooperative board vis-à-vis that of paid executives/managers.
- Enhancing Professionalism: Cooperatives should be enabled for co-option of experts, subject matter experts. Also, any person elected as a Director on the Board should undergo a set of prescribed training programs.
- Checking Politicization: Cooperatives law should provide for rotational retirement of Board members and restriction on contribution to political and religious organizations. form joint ventures, partnerships etc. with cooperatives and other corporates and have flexibility in business decisions, mobilizing funds etc.
- State Governments should put in place a policy framework for facilitating the functioning of cooperatives with free and fair means. States should refrain from deputing officers to occupy key positions in cooperatives.
- The office of registrar of cooperatives should be restructured as a developmental office which handholds and guides cooperatives.
