The recent establishment of a dedicated Ministry of Cooperation, led by the Union Home Minister, reflects the government’s commitment to achieving “Sahkar se Samriddhi” or “Prosperity through Cooperation.”

The cooperative sector in India has been vital to the country’s development, but it has faced challenges leading to poor performance. This article examines the reasons behind the suboptimal functioning of cooperatives and discusses the governmental reforms aimed at addressing these shortcomings.

Reasons for Poor Performance of Cooperatives:

Lack of Democratic Spirit:

  • Government Interference: Over time, the government has imposed restrictions on borrowings, transactions with non-members, and investment of funds, which hampers cooperative efficiency.
  • Politicization of Cooperatives: Many cooperatives are dominated by politically influential members, leading to non-transparent decision-making.

Lack of Awareness:

  • Majority of members and directors lack adequate awareness about cooperative activities due to limited education or indifferent attitudes.

Skewed Geographical Penetration:

  • Uneven development of cooperatives in different states, with states like Maharashtra and Gujarat having better-developed cooperatives compared to North-Eastern states and states like West Bengal and Bihar.
  • Friction due to competition between states affects cooperative functioning.

Operational Challenges:

  • Lack of Fair Audit Mechanism: Audits are often conducted by department officials, leading to delays and inefficiencies.
  • Lack of Coordination among Cooperatives: Insufficient coordination adversely impacts cooperative operations.

Government Initiatives to Address the Challenges:

Establishment of Key Institutions:

  • The National Cooperative Union of India (NCUI): Represents the entire cooperative sector in the country.
  • The National Agricultural Cooperative Marketing Federation (NAFED): Aims to assist marketing cooperatives in the states and improve services to members.
  • The National Co-operative Development Corporation (NCDC): Formulated to plan and promote agricultural produce and commodities through cooperative societies.

97th Amendment Act:

  • Amended Article 19(1)(c) to provide protection to cooperatives and inserted Article 43 B and Part IX B relating to cooperative management.
  • The Supreme Court’s partial annulment notwithstanding, multi-state cooperatives still fall under its purview.

The Banking Regulation (Amendment) Act, 2020:

  • Grants RBI the power to supersede cooperative bank boards for effective management.
  • Allows cooperative banks to raise capital through public and private issuance of equity or preference shares and unsecured debentures, subject to RBI permission.

The success of cooperatives is essential for the progress of marginalized sections, particularly rural India. To achieve this, the government must ensure autonomous and democratic functioning, with accountability to members and stakeholders. Strengthening deterrence for violations of cooperative laws will foster a thriving cooperative sector, contributing significantly to India’s development.

Legacy Editor Changed status to publish March 7, 2024