Cooperative Societies in India

Table of contents

Context (PIB): Policy reforms emphasize the role of cooperatives in India’s socio-economic growth.

What are Cooperatives?

Cooperatives are voluntary, democratic, and autonomous organisations controlled by their members.
Multi-state co-operative societies (MSCS) operate in more than one state in various sectors such as agriculture, textile, poultry, and marketing.
States regulate state cooperative societies’ incorporation, regulation, and winding up.
Parliament can legislate on matters related to the incorporation, regulation, and winding up of MSCS.
The MSCS Act 2002 provides for the functioning of MSCS under the Ministry of Cooperation.

Part IXB of the IC grants constitutional status to cooperative societies and contains provisions for their democratic functioning. It was inserted by the Constitution (97^th Amendment) Act, 2011.
The SC, in 2021, held that Part IXB of IC would only apply to MSCS, as states have the jurisdiction to legislate over state cooperative societies (SCS).

Early Beginnings: Informal cooperative structures like ‘Nidhis’ (Madras) and similar rural associations existed before formal laws.
Cooperative Credit Societies Act (1904): Passed based on the Indian Famine Commission’s recommendations to address rural debt.
Cooperative Societies Act (1912): Expanded cooperative scope, included federal societies, provided tax exemptions.
Maclagan Committee (1915): Suggested improvements in transparency and member participation.
Montague-Chelmsford Reforms (1919): Allowed provinces to govern cooperatives, boosting growth.
Great Depression Impact: Cooperatives weakened by high loan defaults.
Gandhian Influence: Advocated for cooperative principles to empower rural India, modeled through the Phoenix Settlement and Tolstoy Farm.

Five-Year Plans: First Plan emphasized cooperative role in community development.
Multi-State Cooperative Societies Act (2002) and 2022 Amendment improved election processes within cooperative boards.
97th Constitutional Amendment (2011): Granted right to form cooperatives, added Article 43-B and Part IX-B for cooperative governance.

Ministry of Cooperation (2021): Established to focus on cooperative sector, policies, and governance.
Key Policies: Digitalization initiatives for efficiency; Multi-State Cooperative Society promotion; ‘Sahakar se Samriddhi’ scheme to benefit rural communities.

Consumers’ Cooperative Society: Offers goods at reasonable prices (e.g., Kendriya Bhandar).
Producers’ Cooperative Society: Supports production (e.g., Haryana Handloom).
Cooperative Marketing Society: Aids in marketing member products (e.g., AMUL).
Credit Cooperative Society: Provides fair-interest loans (e.g., Urban Cooperative Banks).
Farming Cooperative Society: Facilitates benefits of large-scale farming.
Housing Cooperative Society: Ensures affordable housing (Metropolitan Housing Cooperative Society).

Governance Issues: Inadequate transparency and democratic decision-making.
Financial Constraints: Limited financing access, especially for low-value cooperatives.
Socio-Economic Barriers: Caste-based divisions limit inclusivity.
Infrastructural Gaps: Poor connectivity restricts rural outreach.
Technical Skills Deficit: Outdated managerial skills hinder operational efficiency.

Over 800,000 cooperatives: Spanning agriculture, dairy, housing, fisheries, and credit sectors.
Significant contributions: 20% of agricultural loans, 35% of fertilizer distribution, 31% of sugar production, and notable shares in wheat and paddy procurement.
Rural Development: Fosters economic growth in underserved areas, reducing income inequality.
Empowerment of Marginalized Groups: Enhances access to essential services and market opportunities for disadvantaged communities.
Economic Inclusivity: Integrates marginalized sectors into the formal economy, fostering self-reliance.
Economic Empowerment: Amul Dairy Cooperative empowers 3.6 million small and marginal milk producers, improving livelihoods.
Agricultural Productivity: IFFCO supports farmers with affordable inputs, increasing crop yields and profitability.
Essential Services: Kerala’s Milma cooperative ensures affordable dairy products, benefiting consumers and producers alike.
Employment Generation: Sugar cooperatives in Maharashtra provide jobs to over 5 lakh individuals, bolstering rural employment.

RBI Umbrella Support: An RBI-approved Umbrella Organization (Registrar of Co-operative Societies in each state) aids urban cooperative banks (UCBs), enhancing their financial resilience.
Rural Storage Expansion: Under the Decentralized Grain Storage Plan, 2,000 Primary Agricultural Credit Societies (PACS) now provide rural storage facilities.
PACS Digitization: A ₹2,516 crore project digitized over 15,000 PACS, improving transparency and functionality, supported by a National Cooperative Database for record-keeping.
PACS Retail Expansion: PACS are expanding into fuel and LPG distribution, further diversifying services available to rural areas.
NCDC Bonds and E-Services: The National Cooperative Development Corporation issued ₹2,000 crore in bonds, while PACS as Common Service Centers now offer 300+ e-services for rural communities.
Organic Agriculture Support: National Cooperative Organic Limited (NCOL) was set up to promote organic farming, reinforcing sustainable agriculture practices.
Multi-State Cooperative Societies Amendment Act 2023

Policy Strengthening: Enhance governance policies for accountability.
Digital Transformation: Prioritize tech adoption across cooperatives.
Capacity Building: Improve training programs for cooperative members.
Financial Flexibility: Establish cooperative development funds with flexible collateral and financing.
Inclusion Programs: Design outreach initiatives to involve marginalized groups.
Infrastructure Development: Collaborate with agencies to improve rural infrastructure.
Awareness Campaigns: Educate potential members about cooperative benefits in local languages.