Revitalizing Cooperative Societies in India

Context

The Government of India is focusing on cooperative societies to drive socio-economic growth through reforms and policies. Cooperatives are member-owned organizations that address shared economic, social, and cultural needs through democratic decision-making (as defined by the International Cooperative Alliance).

 

Evolution of Cooperatives in India

Pre-Independence Developments

1. Early Beginnings: Informal cooperative systems like ‘Nidhis’ (in Madras) existed before formal legislation.
2. Cooperative Credit Societies Act (1904): Enacted to reduce rural debt based on recommendations of the Indian Famine Commission.
3. Cooperative Societies Act (1912): Expanded cooperatives to include federal societies and offered tax exemptions.
4. Maclagan Committee (1915): Suggested improving transparency and member participation.
5. Montague-Chelmsford Reforms (1919): Transferred cooperative governance to provinces, encouraging growth.
6. Great Depression: Weaknesses surfaced due to loan defaults.
7. Gandhian Influence: Gandhi advocated cooperatives for rural empowerment through examples like the Phoenix Settlement and Tolstoy Farm.

Post-Independence Era

1. Five-Year Plans: The First Plan emphasized cooperatives for community development.
2. Multi-State Cooperative Societies Act (2002): Improved governance by refining election processes.
3. 97th Constitutional Amendment (2011):
   • Added Article 43-B, recognizing the right to form cooperatives.
   • Introduced Part IX-B, focusing on cooperative governance.
4. Ministry of Cooperation (2021): Dedicated ministry to support cooperative development.

 

Types of Cooperatives

1. Consumers’ Cooperative Society: Sells goods at fair prices (e.g., Kendriya Bhandar).
2. Producers’ Cooperative Society: Assists in production (e.g., Haryana Handloom).
3. Marketing Cooperative Society: Markets member products (e.g., AMUL).
4. Credit Cooperative Society: Provides loans at fair interest rates (e.g., Urban Cooperative Banks).
5. Farming Cooperative Society: Promotes large-scale farming benefits.
6. Housing Cooperative Society: Ensures affordable housing (e.g., Metropolitan Housing Cooperative Society).

 

Challenges Faced by Cooperatives

1. Governance Issues: Lack of transparency and democratic decision-making.
2. Financial Constraints: Limited access to funding.
3. Social Barriers: Caste-based divisions hinder inclusivity.
4. Infrastructure Gaps: Poor rural connectivity affects outreach.
5. Skill Deficit: Outdated management practices reduce efficiency.

 

Contributions of the Cooperative Sector

• Scale: Over 800,000 cooperatives across agriculture, dairy, housing, fisheries, and credit sectors.
• Economic Contributions:
  • 20% of agricultural loans.
  • 35% of fertilizer distribution.
  • 31% of sugar production.
  • Significant shares in wheat and paddy procurement.
• Rural Development: Reduces income inequality and fosters economic growth in underserved areas.
• Empowerment:
  • Supports marginalized groups with essential services and market access.
  • Example: Amul Dairy Cooperative empowers 3.6 million milk producers.
• Employment: Sugar cooperatives in Maharashtra employ over 5 lakh people.

 

Government Initiatives

1. RBI Umbrella Support: Supports Urban Cooperative Banks to improve financial resilience.
2. Rural Storage Expansion: 2,000 PACS now provide grain storage under the Decentralized Grain Storage Plan.
3. PACS Digitization: A ₹2,516 crore project digitized 15,000 PACS, boosting transparency and services.
4. PACS Retail Expansion: Diversified into fuel and LPG distribution.
5. NCDC Bonds: The National Cooperative Development Corporation issued ₹2,000 crore in bonds.
6. Organic Agriculture Support: National Cooperative Organic Limited (NCOL) promotes sustainable farming.
7. Multi-State Cooperative Societies Amendment Bill 2023: Strengthens governance and expands multi-state cooperative roles.

 

Way Forward

1. Strengthen Policies: Ensure accountability through better governance.
2. Digital Transformation: Adopt technology for operational efficiency.
3. Skill Building: Provide training for cooperative members to modernize practices.
4. Flexible Financing: Create development funds with easier access to credit.
5. Inclusivity Programs: Involve marginalized groups through targeted outreach.
6. Infrastructure: Collaborate with agencies to improve rural connectivity.
7. Awareness Campaigns: Educate communities about cooperative benefits in local languages.