[Kurukshetra January 2023 Summary] Cooperative Entrepreneurship – Explained, pointwise

Introduction

To achieve the objective of inclusive development, many different approaches to community development have been advocated by development planners and policy makers. Many of these approaches have been put into practise by State Governments and Union Administrations. Among these, one powerful strategy has been to tap the potential of cooperatives and to promote cooperative entrepreneurship in order to run community businesses that are efficient and profitable. Cooperatives are based on triple tenets of democracy, economic development and social mobilization. Based of this basis of tenets, the Cooperatives are able to successfully and independently mobilise resources and utilize them productively. Even though cooperatives all share similar qualities, there are many different ways in which they can be organised and run.

The broad classifications of cooperatives include: (a) Short-term credit cooperatives like State Cooperative Banks (SCBs), District Central Cooperative Banks (DCCBs) and Primary Agricultural Cooperative Societies (PACS); (b) Long-term credit cooperatives like Primary Cooperative Agriculture and Rural Development Banks (PCARDBs) and State Cooperative Agriculture and Rural Development Banks (SCARDBs); (c) Commodity cooperatives in different products like dairy, oil, sugar, textiles ,etc. and service cooperatives like housing, transport, tourism, hospital cooperatives,

In India, one of the first examples of financial inclusion was the adoption of Cooperative Societies Act, 1904. Since then a long way has been traversed and with the setting up of the new Ministry of Cooperation by the Union Government in July, 2021, the continued significance of the cooperative movement has been underscored.

The 4-fold guiding principles of this movement are: (a) Sahkar se Samriddhi; (b) Inclusive Growth; (c) Aatma Nirbharta through community entrepreneurship; (d) Cooperation: Beyond Cooperatives.

Cooperative Entrepreneurship

Entrepreneurship is defined as the creation of an innovative economic organization for the purpose of gain or growth under conditions of risk or uncertainty. In this context, cooperatives can be called community enterprises being managed by diverse member entrepreneurships. Studies have indicated that local participation in development activities has positive impact on shaping communities. Local Participation also ensures progression of low-income communities into the mainstream.

Legal Framework

The legal framework of cooperatives is governed by Cooperatives Society Act, 1912; Mutually Aided Cooperative Thrift Society Act; and Multi-State Cooperative Societies Act, 2002. Cooperative societies with members from one State are registered under the provisions of State Cooperative Societies Act concerned and are regulated by the State Registrars of the Cooperative Societies concerned.

Cooperative societies with members from more than one State are registered by the Central Registrar of Cooperative Societies under the Multi State Cooperative Societies (MSCS).

It is estimated that there are 54 lakh cooperative societies with a membership of 29 crore people. As many as 1,509 Multi-State Cooperative Societies are registered in the country under the provisions of MSCS Act, 2002.

Strengthening the Cooperative Structure

Multiple initiatives have been launched to strengthen the cooperative sector.

First, A pan-India project for computerisation of 63,000 PACS has been launched. The estimated total cost is INR 2,516 crore. Digitalisation of PACS will ensure efficiency of their operations, speedy disbursal of loans, lower transition costs, faster audits, reduction in imbalances in payments and accounting with SCBs and DCCBs, enhanced transparency and trustworthiness, and a positive and emphatic transition towards financial inclusion and providing digital literacy to farmers.

Second, Draft model bye-laws are being prepared. These bye-laws will help transform the PACS into multipurpose and multidimensional vibrant economic entities.

Third, Formulation of scheme ‘Cooperation to Prosperity‘ will map the growth catalysts in the economy and encourage rolling out of a coordinated approach of cooperative development to enhance income and growth.

Fourth, Formulation of a scheme for modernising and professionalising the cooperative education and training will take care of capacity building needs of the sector and will ensure that the cooperative sector attains required competitiveness in the changed economic scenario.

Fifth, A new National Cooperative Policy is being formulated and the 2-decade old policy is being reviewed. New and sustainable growth pathways through cooperation is being explored.

Sixth, A National Cooperative Database is being created. It will help in identifying the areas where cooperative movement could be expanded. Accordingly, it will facilitate the framing of appropriate policy.

Steps Which May Be Taken Going Ahead

There are some more steps which may be taken to strengthen the cooperatives.

Awareness and Access to Information

A major awareness programme entailing all forms of media is required. School children and fresh graduates need to be made aware that entrepreneurship, especially in the cooperative sector, is a full-fledged career option available to them.

In this context, some universities have started running undergraduate entrepreneurship programmes. The National Cooperative Development Corporation (NCDC) under the Ministry of Cooperation is implementing Yuva Sahakar– Cooperative Enterprise Support and Innovation Scheme. At present, a proposal to set up a National Level University dedicated for the cooperative sector is under the consideration of the Ministry of Cooperation.

A common interactive portal with all information for cooperatives, including potential employee-employer mapping, access to information, credit etc. should be created.

Training and Skill Development

Training is an integral part of upgradation of skills and for forming the basis of entrepreneurship. Such trainings are conducted by various institutes including NCDC, Bankers Institute of Rural Development, National Council for Cooperative Training (NCCT)’s Regional Institutes of Cooperative Management, Institutes of Cooperative Management, National Institute of Cooperative Management, National Cooperative Union of India, etc.

For capacity building, customised special schemes may be explored. In this context, entrepreneurs among cooperatives and aspiring entrepreneurs can avail benefits of Ministry of MSME’s Entrepreneurship and Skill Development Programme.

Technological Upgradation

In the fast changing world today keeping abreast of technological developments has become an absolute necessity and a reiteration of Schumpeter’s theory that new innovations replace existing ones which become obsolete with time. Accordingly, special schemes for cooperatives, with a focus on digitalisation may be required.

Finance

Cooperatives can develop new business concepts and expand existing units. They need timely, sufficient, and affordable financing and services to use it. Collateral-free loans must be accessible, affordable, and timely. Cooperatives may also need a dedicated fund.

Procurement and Marketing

Marketing of products and services have remained a challenge for the cooperatives. Recently, in June 2022, cooperatives have been allowed to register on Government e-Marketplace (GeM) as “buyers’. The objective of this initiative is to enable cooperatives to procure goods and services from 40 lakh vendors on the GeM portal, thereby improving transparency in the procurement system and helping cooperatives to make some savings.

A preference policy for cooperatives as ‘sellers’ may ensure the much needed boost to them.

Subsidized participation in fairs may help them in showcasing their products and forging business tie-ups. In this context, a holistic approach helping cooperatives in overcoming tariff, non-tariff and other trade barriers will help them in gaining market access overseas and become competitive.

Mentoring

Cooperation among Cooperatives is one of the 7 Principles of Cooperation as defined by the International Cooperative Alliance. Effective cooperative cooperation and coordination would benefit cooperatives business initiatives and maximise community development by expanding member-driven cooperative activities. Thus, larger cooperatives should mentor smaller ones to keep them competitive in the market.

Coping up with the Repercussions of the Pandemic

Cooperatives need policy and financial support from the Government. While the Ministry of Cooperation designs policies and procedures to spread cooperatives through enterprise and entrepreneurship development, NCDC finances sectoral cooperatives through loan and subsidy assistance to reduce their financial burden and risk. NCDC disbursed INR 28,272.51 crore in loans and subsidies in 2018-19, INR 27,703.43 crore in 2019-20, and INR 24,733.24 crore in 2020-21.

In 2021-22, NCDC increased financial assistance by 38% to INR 32,221.08 crore and restructured loans worth INR 203.78 crore and INR 369.68 crore for Sugar and Textiles Cooperatives respectively.

Budget 2022-23 has reduced the Minimum Alternate Tax rate for cooperatives from 18.5% to 15% and the surcharge on cooperative societies with a total income of more than INR 1 crore and up to INR 10 crores from 12% to 7%.

More such financial incentives need to be provided to further strengthen the Cooperatives.

Recommendations

The cooperative movement in India is not uniform across the nation. As per the information available, Goa, Gujarat, Maharashtra, Karnataka, Kerala and Tamil Nadu witness larger spread of cooperatives (National Cooperative Union of India, (2018). There is a need to work towards deepening  the cooperative movement in Northern, North-eastern and Eastern States where the cooperative spread is low.

For cooperative entrepreneurship to effectively contribute to community development, the following are some recommendations:

First, Efforts are needed to ensure convergence of schemes, to facilitate the ease of doing business and to actually go beyond cooperatives, as envisaged in the term cooperation’ vis-à-vis ‘cooperatives’.

Second, There is an urgent need to smoothen registration processes of cooperatives in diverse areas. Udyam certification of MSME for smaller cooperatives may be considered for them to avail benefits of programmes for cooperatives instead of any additional documentation.

Third, The possible tenets of the National Policy for Cooperatives which is being drafted may stress on universal coverage and providing a single unique identity to each cooperative; on being technology-driven; a single portal and identity number for registration and all other business affairs; integration/convergence with other Ministries’ programmes, portals and efforts; and promoting and setting up of sector-specific export-oriented Multi-State and State Cooperatives.

Fourth, An all-pervasive awareness programme about the cooperative movement and related model of socio-economic growth may be undertaken through a pan-India network of cooperative capacity building institutions.

Fifth, For capacity building of those working in the cooperative sector, sector-specific customised and specialised programmes may be developed.

Sixth, Special schemes for cooperative, with a focus on digitalisation may be adopted.

Seventh, An exclusive fund for cooperatives may be explored to not only finance credit risks but to support brand development, technology adoption, marketing, advertisement and marketing research etc.

Eighth, A preference policy for cooperatives as ‘sellers’ on GeM may be considered to attract more cooperatives as sellers.

Ninth, Subsidised participation in National, Regional and State fairs may be considered.

Tenth, Bigger cooperatives may mentor the weaker and smaller ones.

Source: Kurukshetra January 2023