Co-operative Societies in India

Co-operative Societies (Art. 243 ZH-243 ZT – Part IX B): Key Insights for IAS Exam

To prepare for INDIAN POLITY for any competitive exam, aspirants have to know about Co-operative Societies. It gives an idea of all the important topics for the IAS Exam and the polity syllabus (GS-II.). Important Co-operative Societies. terms are important from the polity and governance perspectives in the UPSC exam. IAS aspirants should thoroughly understand their meaning and application, as questions can be asked from this static portion of the IAS Syllabus in both the UPSC Prelims and the UPSC Mains exams.

In this article, you can read about the Basics, Background, Objectives, Composition, tenure, Functions etc about the Co-operative Societies for the UPSC and SPSC.

Co-operative Societies: Autonomy, Unity and Economic Empowerment

• A cooperative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly-owned and democratically controlled
• The need for profitability is balanced by the needs of the members and the wider interest of the community.
• The Co-operative Society is formed for the mutual benefit of all the members.
• When they work together they will have better bargaining power for buying and selling raw materials and agricultural output respectively.
• There have been many success stories of Cooperatives in India, the two most important being the Green Revolution and White Revolution. 

Evolution of Cooperative Movements in Pre-Independence India

• The term cooperative society came into existence when the farmers of Pune and Ahmednagar spearheaded an agitation against the money lenders who were charging exorbitant rates of interest.
• Hence, the British government came forward and passed three acts: the Deccan Agricultural Relief Act (1879), the Land Improvement Loan Act (1883) and the Agriculturists Loan Act (1884).
• But the Cooperative move came with structure and shape with the British enactment of the Cooperative Credit Societies Act, 1904.
• In 1919, cooperation became a provincial subject and the provinces were authorised to make their own cooperative laws under the Montague-Chelmsford Reforms.
• This categorization carried on to the Government of India Act, 1935.
• In 1942, the Government of British India enacted the Multi-Unit Cooperative Societies Act to cover Cooperative Societies with membership from more than one province.

Co-operative Societies: Post-Independence Integration and Success Stories

• After independence, cooperatives became an integral part of Five-Year Plans.
• In 1958, the National Development Council (NDC) had recommended a National Policy on Cooperatives and also for training of personnel and setting up of Co-operative Marketing Societies.
• In 1984, the PARLIAMENT of India enacted the Multi-State Cooperative Societies Act to remove the plethora of different laws governing the same types of societies.
• The most important success stories lays behind the success of White Revolution which made the country the world’s largest producer of milk and milk products; and the Green Revolution and the conversion of villages into model villages have assumed great importance in the wake of the Green Revolution.

Constitutional Evolution: Empowering Co-operative Societies through the 97th Amendment Act 

• Part IX: Art 243 – 243 (0) (Panchayats)
• Part IX A: Art 243P – 243ZG (Municipalities)
• Part IX B: Art 243ZH – 243ZT (Cooperatives) 

Composition and Governance of Co-operative Societies

• Incorporation and Regulation of Co-operative Societies:
  • The state legislature may make provisions for the incorporation, regulation and winding-up of co-operative societies based on the principles of voluntary formation, democratic member control, member economic participation and autonomous functioning.
• Board Formation in Co-operative Societies: Legislative Framework and Directorial Boundaries:
  • The board shall consist of such a number of directors as may be provided by the state legislature. But, the a maximum number of directors of a co-operative society shall not exceed twenty-one.
• Reservations and Co-option in Co-operative Societies Board:
  • The state legislature shall provide for the reservation of one seat for the Scheduled Castes or the Scheduled Tribes and two seats for women on the board of every co-operative society having members from such a category of persons.
  • The term of office of elected members of the board and its office bearers shall be five years from the date of election
  • The state legislature shall make provisions for co-option of persons having experience in the field of banking, management, finance or specialisation in any other related field, as members of the board.
  • The co-opted members shall not have the right to vote in any election of the co-operative society or be eligible to be elected as office bearers of the board

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• Board Member Elections in Co-operative Societies
  • The election of a board shall be conducted before the expiry of the term of the board.
  • The superintendence, direction and control of the preparation of electoral rolls and the conduct of elections to a co-operative society shall vest in such a body, as may be provided by the state legislature.
• Supercession and Suspension in Co-operative Societies
  • Board can be superseded or kept under suspension for a period not more than six months
    • Of its persistent default
    • Of negligence in the performance of its duties
    • Of committing any act prejudicial to the interests of the cooperative society or its members
    • Of there being a stalemate in the constitution or functions of the board
    • Of the election body having failed to conduct elections in accordance with the provisions of the State Act

• Auditing Co-operative Societies Accounts:
  • The state legislature may make provisions for the maintenance of accounts by the co-operative societies and the auditing of such accounts at least once in each financial year.
  • The audit report of the accounts of an apex co-operative society shall be laid before the state legislature

• Annual General Body Meetings in Co-operative Societies: 
  • The STATE LEGISLATURE may provide that the annual general body meeting of every cooperative society shall be convened within a period of six months of the close of the financial year. 
• Filing Returns in Co-operative Societies: 
  • Every co-operative society shall file returns, within six months of the close of every financial year, to the authority designated by the State Government. 
• Offences and Penalties in Co-operative Societies:
  • The STATE LEGISLATURE may make provisions for the offences relating to the co-operative societies and penalties for such offences. 

Features of Cooperative Societies 

• Voluntary And Open Participation In Cooperative Societies
• Democratic Member Control
• Member’s Economic Participation
• Concerns For Community
• Education-Information-Training
• Autonomy And Independence 

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Why did India enact the 97th Amendment Act, bringing changes to Cooperative Societies?

• Cooperative sector has shown weaknesses in safeguarding the interests of the members and fulfilment of objects for which these institutions were
• For securing social and economic justice and equitable distribution of the fruits of development.
• It has been experienced that, in spite of considerable expansion of co-operatives, their performance in qualitative terms has not been up to the desired level.
• The Central Government was committed to ensuring that the co-operative societies in the country function in a democratic, professional, autonomous and economically sound manner.
• On many instances, elections have been postponed indefinitely and nominated office bearers or administrators have remained in-charge of these institutions for a long time. This dilutes accountability.
• Inadequate professionalism in management in many of the co-operative institutions has led to poor services and low productivity.
• To keep the co-operatives free from unnecessary outside interferences and also to ensure their autonomous organisational set up and their democratic functioning.

Significance of Cooperative Societies in India’s Socioeconomic environment

• Cooperative Society plays a vital role in ensuring the nation’s progress by helping the poor, illiterate and unskilled people to form a union with the principle of mutual assistance to achieve their common socio economic goal.
• Penetrating into remote places where state and private sectors could face trouble to do much.
• It provides strategic inputs for the agricultural-sector; consumer societies meet their consumption requirements at concessional rates.
• It provides agricultural credits and funds where state and private sectors have not been able to do very much.
• Agricultural marketing societies enable farmers to benefit from increased bargaining strength. By removing intermediaries they help farmers to have a direct interaction with the consumer. E.g., NAFED
• Co-operative societies are helping in building up infrastructure like storage godowns, including cold storage and rural roads, and in providing facilities like irrigation, electricity, transport and health.
• It reduces the bureaucratic intricacies of political factions and ensures a conducive environment for flourishing agriculture and allied activities.
• Co-operative movements help promote unity and cohesion among the members. It is an institution of mutual help and sharing.
• In a country divided on social basis, cooperative Society also helps in blurring the gap between various social cleavages of the country.
• Encourage the values and spirit of self-help, democracy, equality, and solidarity.
• Cooperative members believe in the ethical values of honesty, openness, and social responsibility and caring for others.

Role of Cooperative Societies in the 2002 National Policy

• Provide support for promotion and development of cooperatives
• Reduction of regional imbalances
• Strengthening of cooperative education, training and human resource development
• Various committees such as S. Vyas Committee (2001 and 2004) have strongly advocated the need to replace the existing government dominated cooperative laws by a new people centric legislation.

Challenges Facing Cooperative Societies in India

• Co-operative movement in India lacks spontaneity in the sense that it has not been emanated from the people themselves.
• Inability to ensure active membership, speedy exit of non-user members, lack of member communication and awareness-building measures.
• Serious inadequacies in governance, including that related to boards’ roles and responsibilities.
• Lack of efforts for capital formation, particularly concerning enhancing member equity and thus member stake.
• Lack of cost competitiveness arising out of issues such as overstaffing, and overall competitiveness due to entry of MNCs in the Indian market.
• Politicization and excessive role of the government chiefly arising out of the loopholes and restrictive provisions in the Cooperative Acts.
• The vital link in the cooperative finance system, e.g., cooperative banks themselves, remains very poor. They are too small to operate properly and some of them exist only on paper.
• The NPAs of the cooperative banks are higher than those of commercial banks, i.e. in NPAs to asset ratios (PMC crisis).
• Along with lesser than expected shareholders participation in working, these banks are facing infrastructural weaknesses, thereby hindering the overall working of the Cooperatives.
• Regional variations in cooperative movement—the limited success of cooperatives in some of the most fertile and populous regions points towards the link with demographic and cultural factors.

Key Committees Shaping Cooperative Movements in India

• All-India Rural Credit Survey Committee Report (1954)
• Chaudhary Brahm Prakash Committee (1990)
• Mirdha Committee (1996)
• Jagdish Kapoor Committee (2000)
• Vikhe Patil Committee (2001)
• S. Vyas Committee (2001 and 2004)

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WAY FORWARD

To secure the autonomy, independence and progress of the cooperatives, the following steps should be taken-

• It is necessary to incorporate provisions in the law quantifying the minimum level of participation required by a member of a cooperative annually.
• Encouraging democratic participation by members, developing effective leadership who can even influence policy formulation by government favourable to cooperatives.
• Infusing professionalism is a key requirement for conversion of ideas/policies into tangible outcomes.
• Strengthening arrangements for ensuring sound human resources management practices in cooperatives, such as recruitment, training, social security, etc.

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