Cooperatives and Their Evolution in India | 11 Jul 2024

Source: PIB

Why in News?

Recently, the Union Home Minister and Minister of Cooperation addressed the 'Sahkar se Samriddhi' (Prosperity through Cooperation) program organised on the occasion of the 102nd International Day of Cooperatives in Gujarat.

How did Cooperatives Evolve in India?

• About Cooperatives:

  • These are people-centred enterprises owned, controlled, and run by and for their members to realise their common economic, social, and cultural needs and aspirations.

  • India has one of the world's largest cooperative networks, with over 800,000 cooperatives spread across various sectors like agriculture, credit, dairy, housing, and fisheries.

  • The cooperative sector's significant contributions include 20% in agricultural loans, 35% in fertilizer distribution, 31% in sugar production, 13% in wheat purchase, and 20% in paddy purchase.

• Cooperatives in Pre-Independence Era:

  • First Cooperative Act in India: Indian Famine Commission (1901) led to the enactment of the first Cooperative Credit Societies Act in 1904 followed by the (amended) Cooperative Societies Act, 1912.

  • Maclagan Committee: In 1915, a committee headed by Sir Edward Maclagan, was appointed to study and report whether the cooperative movement was proceeding on economically and financially sound lines.
  • Montague-Chelmsford Reforms: Through the Montague-Chelmsford Reforms of 1919, co-operation became a provincial subject which gave further impetus to the movement.
  • Post Economic Depression, 1929: Various committees were appointed in Madras, Bombay, Travancore, Mysore, Gwalior, and Punjab to examine the possibilities of restructuring the Cooperative societies.
  • Gandhian Socialist Philosophy: Cooperation according to Gandhiji was necessary for the creation of a socialistic society and complete decentralisation of power.

    • He was of the opinion that cooperation was one of the important means to empower people.

    • In South Africa, Mahatma Gandhi instituted the 'Phoenix Settlement' as a cooperative in a socialistic pattern.
    • He established the Tolstoy Farm as a rehabilitation cooperative settlement for the families affected by the South African freedom struggle during the period.
• Cooperatives in Post- Independence India:
  • First Five-Year Plan (1951-56): Highlighted the promotion of cooperatives for comprehensive community development.
  • Multi-State Co-operative Societies Act, 2002: Provides for the formation and functioning of multi-state co-operatives.
    • Multi-State Co-operative Societies (Amendment) Act, 2022 introduced the Co-operative Election Authority to oversee board elections in multi-state co-operative societies.
  • 97th Constitutional Amendment Act of 2011: Established the right to form cooperative societies as a fundamental right (Article 19).
    • Introduced a new Directive Principle of State Policy on Cooperative Societies (Article 43-B).
    • Added a new Part IX-B to the Constitution titled "The Co-operative Societies" (Articles 243-ZH to 243-ZT).
    • Empowered Parliament to enact laws governing multi-state cooperative societies (MSCS) and delegated authority to state legislatures for other cooperative societies.
  • Establishment of Union Ministry of Cooperation (2021): Assumed responsibility for cooperative affairs, previously overseen by the Ministry of Agriculture.
• Impact of Cooperatives: 

  • Empowering Marginalised Communities: The Amul Dairy Cooperative in Gujarat, with over 3.6 million milk producers (many from small & marginal farms), empowers rural communities by providing fair prices for milk and fostering economic independence, particularly for women.

  • Boosting Agricultural Productivity and Marketing: Indian Farmers Fertiliser Cooperative Limited (IFFCO) is the world's largest fertiliser producer. Cooperatives like IFFCO provide farmers with essential agricultural inputs like fertilisers, seeds, and credit at competitive prices, leading to increased productivity and farm incomes. 

  • Facilitating Access to Essential Services: Kerala State Milk Marketing Federation (Milma), a dairy cooperative, procures milk from farmers and supplies it to consumers in Kerala at affordable prices. This ensures market access for producers and provides essential dairy products to the population. 

  • Promoting Inclusive Growth and Job Creation: A NITI Aayog report highlights that sugar cooperatives in Maharashtra provide employment to over 5 lakh people (direct and indirect), contributing significantly to rural job creation and income generation.

What are the Challenges Faced by the Cooperatives?

• Governance Challenges: Cooperatives struggle from the challenges of lack of transparency, accountability, and democratic decision-making processes. 
  • Limited member participation, inadequate representation of marginalised communities, and concentration of power within a few individuals can undermine the inclusive nature of cooperative enterprises.
• Limited Access to Financial Resources: Many cooperatives, particularly those serving marginalised communities, face challenges in accessing financial resources. They often lack collateral or formal documentation required by traditional financial institutions, making it difficult to obtain loans.
• Socio-economic Disparities and Exclusion: Cooperatives often face issues related to lack of inclusivity, existence of structural inequalities etc.
• Infrastructural Constraints: Infrastructural constraints and lack of connectivity affects their efficiency and effectiveness leading to limited outreach.
• Lack of Technical and Managerial Capacities: Lack of training and skill development initiatives is another challenge that leads to outdated human resources.
• Social and Cultural Factors: Lack of awareness about the cooperative model and its benefits among potential members limits their participation.
  • In some cases, social hierarchies and caste-based divisions create barriers for equitable participation and representation within cooperatives.

Way Forward

• Implement digital platforms for financial reporting, conduct regular audits, and encourage member participation in decision-making processes.

• Establish cooperative development funds with flexible collateral requirements to cater to the needs of marginalised communities. Encourage cooperatives to explore crowdfunding, social impact bonds, and other innovative financing solutions.

• Design outreach programs to educate and attract members from marginalised communities, addressing specific needs and challenges.

• Advocate for government investment in rural infrastructure development, improving connectivity and access to markets for cooperatives. 

• Partner with government agencies and training institutions to offer skill-building workshops for cooperative members and managers.

• Launch targeted awareness campaigns in local languages to educate potential members about the benefits and principles of cooperatives.