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Approach :

  1. Intro – on MSCS.
  2. Mention the main drawbacks of MSCS Act 2002, that necessitated the amendment.

Cooperatives are a state subject, but there are many societies such as those for sugar and milk, banks, milk unions etc whose members and areas of operation are spread across more than one state. These are called Multi-State Cooperative Societies. The MSCS Act, 2002  was passed to govern such cooperatives. The government has decided to amend the Multi State Cooperative Societies (MSCS) Act, 2002 to plug the loopholes therein.

Multi-state cooperatives draw their membership from more than one states, and they are thus registered under the MSCS Act. Maharashtra has the highest number of multistate cooperative societies at 567, followed by Uttar Pradesh (147) and New Delhi (133). Credit societies constitute the bulk of the registered societies, followed by agro-based.

Concerns with the current MSCS Act :

  • The exclusive control of the central registrar, who is also the Central Cooperative Commissioner, was meant to allow smooth functioning of multistate cooperatives. The central Act cushions them from the interference of state authorities so that these societies are able to function in multiple states. However, this has created obstacles as the societies have to seek approvals for new proposals from officials of all states that they are operating in.
  • For state-registered societies, financial and administrative control rests with state registrars, who exercise it through district- and tehsil-level officers. There are enough checks and balances to ensure transparency in their functioning. But, in case of multistate cooperatives, these layers do not exist. Instead, the board of directors has control of all finances and administration.
  • There is an apparent lack of day-to-day government control on multistate cooperatives.
  • State cooperatives have to submit multiple reports to the state registrar. However there is no such requirement for the multistate cooperatives.
  • The central registrar can only allow inspection of the societies under special conditions. A written request has to be sent to the office of the registrar by not less than 1/3rd of the members of the board, or not less than 1/5th of the number of members of the society. Inspections can happen only after prior intimation to societies.
  • Central Registrar doesn’t have enough on-ground infrastructure.
  • There are no officers or offices at the state level, with most work being carried out either online or through correspondence. Further, in cases of complaints of Ponzi schemes run by many credit societies, there is a lack of ground staff necessary for verifying their antecedents.
  • For members of the multistate cooperative societies, the only office where they can seek justice is in Delhi. The State authorities are unable to do much apart from forwarding complaints to the central registrar.
  • Sugar cooperative mills registered under the central Act are being privatised in some states like Maharashtra. Taking advantage of the multi-state status, mills declared itself as a sick unit before being auctioned off.
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