Ministry of Cooperation – Explained, pointwise

Introduction

In a recent move, a separate Ministry of Cooperation was created by the Government of India for realizing the vision of ‘Sahkar se Samriddhi’.

• As per the government, the Ministry of Cooperation would work towards strengthening the cooperative movement in India.
• Also, the creation of this ministry is in line with the Finance Minister’s announcement in her 2021 Budget speech. She had proposed to set up a separate administrative structure for cooperatives.

Key objectives

• Firstly, it will provide a separate administrative, legal, and policy framework for strengthening the cooperative movement in the country.
• Secondly, it will make the cooperative movement a true people-based movement by helping it reach the grassroots level.
• Thirdly, it will work to streamline processes for ease of doing business for cooperatives and enable the development of multi-state cooperatives (MSCS).

Need/Rationale

Following reasons are being cited behind the creation of a new Ministry of Cooperation:

• Spreading Cooperatives throughout India: It was necessary to restore the importance of the cooperative structure in the country. Various studies conducted by institutions like Vaikunt Mehta Institute of Cooperative Management have shown the cooperative structure has managed to flourish and leave its mark only in a handful of states like Maharashtra, Gujarat, Karnataka etc. Under the new Ministry, the cooperative movement would get the required financial and legal power needed to penetrate into other states also.
• Revitalizing the funding structure: Cooperative institutions get capital from the Centre, either as equity or as working capital, for which the state governments stand guarantee. This formula had seen most of the funds coming to a few states such as Maharashtra, Gujarat, Karnataka while other states failed to keep up. Over the years, the cooperative sector has witnessed drying out of funding. Under the new Ministry, the cooperative funding structure would be able to get a new lease of life.
• Correcting an administrative anomaly: India’s agriculture ministry already had a division to oversee cooperatives. Focusing on agriculture, however, the ministry has been poorly responsive to the needs of cooperatives. Cooperatives have changed as well. Most new registrations for co-operatives are not in the agriculture sector. They are now coming up in sectors like housing and labor. Hence, a separate ministry for cooperatives is a much better option.

What are cooperatives?

Cooperatives are enterprises which are owned, controlled and run by its members to realize their common economic, social, and cultural needs and aspirations. Cooperative societies function for a common benefit with a motive to help its members.

• Cooperatives are formed at the grassroots level by people to harness the power of collective bargaining towards a common goal.
• The Cooperatives were first started in Europe and the British Government replicated it in India to mitigate the miseries of the poor farmers, particularly harassment by moneylenders.
• In agriculture, cooperative dairies, sugar mills, spinning mills etc are formed with the pooled resources of farmers who wish to process their produce.
• Producer cooperatives seek to obtain the highest possible value for the goods and services supplied by farmers, fisherfolk, artisans or labourers. Consumer cooperatives, likewise, provide inputs (fertiliser, seed, credit, fuel, etc), groceries, housing, health and other services at the most economic rates to their members
• As per the National Dairy Development Board’s 2019-20 Annual Report, there are 1,94,195 cooperative dairy societies in the country.

• SCARDB = State Cooperative Agriculture and Rural Development Banks
• PCARDBs = Primary Cooperative Agriculture and Rural Development Banks

Constitutional provisions

• The word “cooperatives” was added after “unions and associations” in Article 19(1)(c) under Part III of the Constitution. This allows all the citizens to form cooperatives by giving elevating it to the status of a fundamental right.
• Article 43B was added in the Directive Principles of State Policy (Part IV) regarding the “promotion of cooperative societies”.
• The Constitution (97^th Amendment) Act, 2011 added a new Part IXB right after Part IXA (Municipals) regarding the cooperatives working in India.

Laws governing cooperatives

Cooperatives is a State subject under entry 32 of the State list under the Schedule 7 of the Constitution. A majority of the cooperative societies are governed by laws in their respective states, with a Cooperation Commissioner and the Registrar of Societies as their governing office.

• In 2002, the Centre passed a Multi-State Cooperative Societies Act that allowed for registration of societies with operations in more than one state. These are mostly banks, dairies and sugar mills whose area of operation spreads across states. The Central Registrar of Societies is their controlling authority, but on the ground the State Registrar takes actions on his behalf.
• The National Cooperative Development Corporation (NCDC) works for the promotion of the cooperative movement in India. It is tasked with planning, promoting, coordinating and financing cooperative development programs at the national level. Also, it provides financial, insurance and technical support to cooperative institutions of farmers and other weaker sections.

Significance of cooperatives

• Though not uniform across India, cooperatives have made significant contributions in poverty alleviation, food security, management of natural resources and the environment.
• Besides serving localities and segments that markets might ignore, cooperatives are also effective in mediating politics at the local level, outside of the parliamentary system
• Cooperative institutions elect their leaders democratically, with members voting for a board of directors. Thus, in states such as Maharashtra, cooperative institutions have served as schools for development of leadership. The movement has given the state multiple Chief Ministers as well as ministers, many of whom have gone on to make a mark at the national level too.

Who controls the Cooperatives in India?

• While the administrative control of the cooperatives are with the states, its banking functions are regulated by Reserve Bank of India under the Banking Regulation Act, 1949 (as applicable to Cooperatives).
• This dual control has led to a lot of irregularities in the functioning of the cooperative banks.
• In June 2020, the Centre promulgated an ordinance to bring all urban cooperative banks and multi-state cooperative banks under the supervision of the RBI in order to protect the interest of depositors.
• The Ordinance amended the Banking Regulation Act, 1949 as applicable to cooperative banks. However, it did not affect the existing powers of the state registrars of Co-operative Societies under state co-operative laws.

Criticism

Creation of a new Ministry of Cooperation has evoked criticism too.

• Critics fear that this Ministry is aimed to concentrate even more powers in the hands of the Centre.
• It is being seen as yet another instance by the Centre attempting to gain control over grassroots institutions, especially in Opposition-ruled states, and undermining the principles of federalism. 
• Some suspect that this move is aimed at weakening the grip of opposition parties on cooperatives in key states such as Maharashtra.

Way forward

• Ease of doing business: Ministry of Cooperation should make it easier for cooperatives to do business, right from registration to winding up. It should liberate multi-state cooperatives from government control and get all states to enact legislation compatible with the requirements of a modern market economy.
• No need for multiple regulators: Cooperatives can do without multiple regulators and thrive as truly member-owned businesses. India needs many more Amuls alongside the Ambanis, Adanis and Tatas.
• Identify opportunities: Ministry of Cooperation should identify the areas where cooperatives-based business enterprises can be made, provide the capital, technology and providing the ease of doing business.
• Focus on women: Should be a focus on women cooperatives because they are less than 3% of the 8 lakh cooperatives in the country.

Conclusion
The cooperative model is most suited for India given that small farmers, workers and traders it caters to and ensures equitable distribution of wealth and profits. Experts who have studied the cooperatives in India over the years, believe that the next steps now will matter more than the creation of this new ministry.