The Cooperatives can be defined as "Autonomous and economic institutions of user members united voluntarily to meet their common economic, social, cultural needs and aspirations through a jointly owned and democratically controlled enterprise".
The Cooperative Sector plays a significant role in the overall economic development of the country through bottom-led and grassroots movement. It has the potential to boost GDP growth while ensuring that poor and vulnerable sections contribute to the process of growth itself. Hence, the sector is an integral part of our strategy to promote inclusive growth and development.
FACTS ABOUT COOPERATIVES
- 8.5 lakh registered cooperatives with 30 crore members.
- Cooperatives cover 99% of Indian villages and 71% of rural households.
- 19% of agriculture finance is through cooperative societies.
- 1528 registered societies under the Multi-State Cooperative Societies Act 2002 which include 66 Multi-State Cooperative Banks with deposits of approx. Rs 2.6 lakh crore.
CHALLENGES IN COOPERATIVE SECTOR (SHIVAJI RAO PATIL COMMITTEE ON COOPERATIVES (2019)
- Lack of Participatory character: The success of cooperatives hinges on the active and sustained participation of all the members. However, it has been compromised due to:
- Free rider problem as people usually join cooperatives to obtain benefits such as financial support from government.
- Legal loophole: State cooperative acts allows even the non-active members to participate in meetings, exercise voting rights and to be elected on the Board.Dominated by few rich and powerful members and thus goes against the democratic nature of such institutions. For example, sugarcane cooperatives in Maharashtra are dominated by rich politicians. Restricted Coverage to only one or two villages. As a result, their resources remain limited and hence remain unviable. Restricted role: Most of the societies are single purpose societies with limited roles. For example, Primary agricultural credit cooperative societies (PACS) are involved mainly in giving loans to members and do not take up other roles such as facilitating adoption of mechanisation, buying of inputs in bulk etc. Politicization of cooperatives: Infusion of share capital by the Government enable it to have control over cooperatives. Further, there have been instances of a political party in power assuming control over large sized cooperatives through methods such as appointing an active member of the party to the position of Chairman, nominating persons, issuing directions to board.
- Restrictive state cooperative societies actshave affected functional autonomy and democratic character of the cooperatives. Some of these provisions include Giving directions to co-operatives "in public interest"; Nomination of persons on the management committee/Board; Postpone elections; Supersede committees/boards, disqualify members Governance related issues such as Poor Regulation and audit by Registrar of cooperative societies, delay and disputes regarding holding elections, financial frauds, corruption. For example, poor governance of Primary Urban Cooperative Banks (UCBS) has led to increase in NPAS.
- Absence of skilled professionals: Most of the states do not have dedicated cadre of officials for management of cooperatives. Quite often, the State Government officials who do not have expertise in management of cooperatives get deputed to the such institutions. Further, these officials changed too frequently resulting in a lack of accountability and thus affecting the business of the cooperatives.
- Lack of Adequate Capital: The amount of capital raised by cooperatives from members if quite low. Further, while corporate entities can raise equity as well as borrow from the market, cooperatives do not have access to capital markets. The poor financial position of rural credit cooperatives has led to its lower share in agricultural finance (19%). Increase in number of sick cooperatives particularly in the processing sector such as sugar, textiles and vegetable oil.
INITIATIVES TAKEN
Enactment of Multi-State Cooperative Societies Act, 2002. Establishment of Ministry of Cooperation in 2021Computerisation of 63,000 functional PACSPreparation of by-laws for enabling PACS to expand their activities.Reduction in Minimum Alternate Tax (MAT) rate for cooperative societies from 18.5% to 15%Cooperative societies to be allowed to register as buyers on the GeM platform. Preparation of National Co-operative DatabaseMulti-State Co-operative Societies (Amendment) Bill, 2022 to improve governance.
STRATEGIES NEEDED
- Encourage states to adopt Model Cooperatives Act proposed by the Choudhary Brahm Perkash Committee. Some of the provisions include prohibiting cooperatives to accept funds in the form of equity from Govt, prohibiting Government officers from working in cooperatives, limiting the role of Government in issuing directions, clear roles and responsibilities for registrar of cooperative societies etc.
- Enhance participatory character of cooperatives by inserting provision related to active members in the state cooperative societies acts.
- Tap enhanced opportunities: Due to LPG reforms, the role of the Government has substantially reduced. This void can be filled by the cooperatives wherein they can be involved in delivery of services such as Education, Health, Transportation, water, storage of food grains etc.
- Promote higher economies of scale through (a) Doing away with restrictions on area of operations (b) merger of cooperatives (c) Encourage cooperatives to diversify their business. For example, IFFCO has diversified towards microfinance, agri-insurance, food processing, skill development etc. which has enabled it to become world's largest cooperative.
- Strengthen access to capital market by setting up an umbrella organization. For example, Umbrella Organisation is being proposed to be set up for Primary UCBS. The same model can be replicated for other cooperatives as well.
- Set up Dedicated fund for the revival of sick cooperative societies.