The Government of India on July 12, 2021, announced the formation of a separate Union Ministry of Cooperation under the charge of Home Minister Amit Shah. Till date, the subject was looked after by the Ministry of Agriculture.
Objectives of the Ministry
The Ministry of Cooperation will provide a separate administrative legal and policy framework for strengthening the cooperative movement in the country by realising the vision of ‘Sahakar se Samriddhi’ (prosperity through cooperation). The ministry will help deepen co-operatives as a true people-based movement reaching up to the grassroots. A co-operative-based economic development model is very relevant in India where each member works with a spirit of responsibility. The process for ‘ease of doing business’ for co-operatives will be streamlined for the development of multi-state co-operatives (MSCs). These objectives were announced by the finance minister in the Union Budget 2021.
Cooperatives
Cooperatives can be defined as organisations formed at the grassroots level by people to harness the power of collective bargaining towards a common goal. They are voluntary organisations of individual organised under joint management. These organisations are set up on democratic basis to serve their members. All cooperative institutions elect their leaders democratically, with members voting for a board of directors. In agriculture, cooperative dairies, sugar mills, spinning mills, etc., are formed with the pooled resources of farmers who wish to process their produce.
Cooperative Movement
The country has 1,94,195 cooperative dairy societies and 330 cooperative sugar mill operations. As per Annual Report, National Dairy Development Board, 2019–20, dairy cooperatives procured 4.80 crore litres of milk from 1.7 crore members and had sold 3.7 crore litres of liquid milk per day.
Cooperative sugar mills account for 35 per cent of the sugar produced in the country. Similarly, in banking and finance, cooperative institutions are spread across rural and urban areas. Village-level primary agricultural credit societies (PACSs), formed by farmer associations, are the best example of grassroots-level credit flow. These societies anticipate the credit demand of a village and make the demand to the district central cooperative banks (DCCBs). State cooperative banks sit at the apex of the rural cooperative lending structure. Given that PACSs are a collective of farmers, they have much more bargaining powers than an individual farmer pleading his case at a commercial bank. There are also cooperative marketing societies in rural areas and cooperative housing societies in urban areas.
Need for a New Ministry
Capital to cooperative institutions is provided by the Centre, either as equity or as working capital, for which the state governments stand guarantee. But it is seen that most of the funds go to a few states like Maharashtra, Gujarat, Karnataka while other states lag. There is also the problem of funding in the cooperative sector. The new ministry is expected to revive the cooperative structure in the country.
According to the former Managing Director of Maharashtra State Federation of Cooperative Sugar Mills, Sanjiv Babar, the cooperation ministry was necessary to restore the importance of the cooperative structure in the country. Various studies show that the cooperative structure has managed to flourish and leave its mark only in a handful of states like Maharashtra, Gujarat, Karnataka, etc. Now, the cooperative movement would get the required financial and legal power needed to penetrate other states as well.
Vaidyanath Committee
The central government constituted a Task Force on Revival of Cooperative Credit Structure (popularly called the Vaidyanath Committee) in August 2004 under the chairmanship of Professor A. Vaidyanath. The committee was tasked with suggesting measures to remove the structural, operational, and managerial deficiencies so as to revive and revitalise aspects related to cooperative credit structure. The recommendations of the committee were accepted by the central government and were implemented throughout the country in January 2006, after consulting with the states.
The committee observed that there is a need to have a comprehensive plan for revival of the short-term cooperative credit structure. It realised that equal importance needs to be assigned to all the component to ensure that there is a collective impact in improving the health and viability of the short-term cooperative credit structure.
The committee proposed a unified national model to incorporate the old state law into the new law. Its main reforms are: a bank to allow full voting rights to all users; reducing the state government’s participation in cooperative actions to 25 per cent; and restricting the power of States to replace the board of directors.
Governing Authority of Cooperative Societies
Since agriculture and cooperation are the subjects in the State List, state governments have the authority to govern them. Most of the cooperative societies are governed by state governments, with a cooperation commissioner and the registrar of societies as their governing office. In 2002, Multi-State Cooperative Societies Act was passed by the Centre, allowing for registration of societies with operations in more than one state. These societies are mostly banks, dairies, and sugar mills with area of operation spreading across states. The central registrar of societies controls them, whereas the state registrar takes actions on his behalf.
Judgement on 97th Amendment
The 97th Constitutional Amendment, which was passed in 2011, categorically dealt with issues related to the effective management of co-operative societies. According to Article 43B of Part IV, it is the duty of the State to promote self-reliance, democratic management, voluntary training, and professional management of cooperatives in order to improve the economic activity of India.
In the Rajendra N Shah Vs Union of India & Anr. (2013) case, an appeal from high court of Gujrat was made to the Supreme Court. The high court held that certain provisions of the amendment violated the basic structure of federalism. However, the Attorney General of India contended that the amendment was enacted to bring uniformity in the management of cooperative societies, not to take away the powers of the states to enact laws with respect to them. The Supreme Court bench, comprising Justices R.F. Nariman, K.M. Joseph, and B.R. Gavai struck down certain provisions of the 97th Constitutional Amendment.
The Supreme Court judgement is seen as significant in the context of apprehensions raised by states that the new ministry would disempower them.
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