UPSC Express

Co-operatives:

• Cooperatives are organizations formed at the grassroots level by people to harness the power of collective bargaining towards a common goal.
  
• The main aim of Cooperative societies is to provide tangible benefit to all people who face similar problems.
  
• Co-operatives are owned by members—producers or consumers—and have in many ways resulted in benefits to the stakeholders.
  
• By some estimates, the cooperative sector serves 400 million people directly and indirectly in India. 
  

Examples:

• The word ‘co-operative’ mostly reminds people of the most popular and successful one – Amul.
  
• • Amul impacts the lives of millions of dairy farmers in Gujarat and is a favourite of consumers all over India.
    
  
  
• Sugar co-operatives and housing cooperatives are also frequently in news, along with primary agriculture credit co-ops (PACS).
  
•  On the other hand, large, efficient multi state co-ops like IFFCO or KRIBHCO are not often in news.
  

 An effort since 2003 was made to promote hybrid ‘Producer Companies’:

• Since 2003, a concerted effort to promote another form of ‘co-operative’ organisation, namely, Producer Companies, has been made.
  
• • Producer Companies are a hybrid between a private limited company and a co-operative society.
    
  • The aim is to combine the goodness of a co-operative enterprise and the vibrancy and efficiency of a company—with a regulatory framework similar to that of a private limited company.
    
  
  
• This movement has picked up momentum during the last decade.
  
• Many farmers see producer companies as functional and better-governed institutions, free from interference by state governments.
  

97th constitutional amendment in 2011 to further enable and boost co-operatives:

• The 97th constitutional amendment in 2011 made three important changes:
  
• • It introduced the right to form co-operatives as a fundamental right under Article 19.
    
  • It amended Article 43 by introducing Article 43B (DPSP) which enjoined upon the state to promote voluntary formation, autonomous functioning, democratic control and professional management of cooperatives.
    
  • It introduced articles 243 ZH to ZT containing provisions with regard to the objectives above.
    
  
  

But the High Court judgement had slowed down the reforms:

• The 97th amendment attempted to provide a similar ecosystem to that of ‘Producer Companies’ to the co-operatives.
  
• Unfortunately, the Gujarat High Court struck down Part IX B containing Article 243ZH to 243 ZT in 2013.
  
• The appeal by the Centre in the Supreme Court only came up for hearing in July, 2021.
  

Co-ops had some success but now limited to few states:

• The cooperatives did succeed initially, but fell into disuse in many states.
  
• Only a few states can now claim to have a significant co-operative base.
  
• There was a time when primary agricultural credit societies (PACS) had the major share of agricultural lending.
  
• Today, it is less than 10% (confined to a few states), with commercial banks cornering the major share.
  

Mis-management of Co-ops:

• Most state co-operative institutions have become quasi-PSUs.
  
• These need government approval for almost every single decision, be it price or personnel.
  
• Governments have used their funds for their own needs resulting in loss of income to members.
  

In 2021, Co-op banks were brought under greater RBI regulation:

• The Banking Regulation Amendment Act 2020 placed some regulation of co-operative banks under RBI.
  
• • Earlier exemptions enjoyed by the co-operative banks are no longer available to them.
    
  
  
• These changes have more to do with security of depositors’ money and core-banking facilities.
  
• RBI decides the conditions and qualifications for the chairman, and examines the quality of directors on the Board; it can also supersede the Board.
  

Creation of the Union Ministry of Cooperation:

• In mid 2021, the Government of India created a new and separate Union Ministry of Cooperation i.e. for a Ministry for the Cooperative sector in India.
  
• The government said that it would like to give wings to the co-operative movement by ensuring it has an ‘administrative, legal and policy framework’ of its own.
  
• Those in favour of the new ministry has hailed it as a step towards “sahakarita se samriddhi” (cooperation to prosperity).
  
• On the other hand, those opposing it have called it an encroachment on the powers of the states, specifically, entry 32 in the State List.
  

Objectives:

• The new ministry has, inter alia, the following objectives:
  
• • General policy in the field of co-operation and co-ordination of co-operation activities in all sectors
    
  • Realisation of sahakarita se samriddhi
    
  
  
• It will also deal with the NCDC and multi-state cooperatives (IFFCO, KRIBHCO, etc)
  
• As of now, it seems that the new ministry will have an expanded development function and not a regulatory role.
  

How the ministry can help:

• The new ministry can help by:
  
• • Enabling members of co-operatives to become effective owners
    
  • Ensuring members’ financial interests are not taken away without their consent
    
  • Giving freedom to co-operatives to take all commercial and personnel decisions
    
  • Encouraging formation of co-operatives in many areas of economic activity (workers, artisans, farmers, employees, etc)
    
  • Promoting women’s co-operatives
    
  • Making co-operatives truly autonomous and member managed, and
    
  • Creating a co-operative of co-operatives.
    
  
  

Way ahead:

• For co-operatives to become vibrant business organisations, they need to be decontrolled and de-bureaucratised.
  
• The new focus on the cooperative sector makes it the right time to go back to the basics and create many cooperatives like Amuls that deliver prosperity to a large number of stakeholders.
  

Importance:

GS Paper III: Economy