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Cooperatives 2.0

Cooperatives 2.0

The National Cooperative Policy, funding support and legislative measures to turn cooperatives more transparent and professional can boost growth in a big way

Illustration by Anirban Ghosh Illustration by Anirban Ghosh

We have 33 supermarkets at the moment. The target is 1,500 in five years.” S.B. Jayaraj, who is gung-ho about his organisation’s plans for Kerala, is not just another retailer. He is the general secretary of the Kerala chapter of Sahakar Bharati — a pan-India body that aims at strengthening the cooperative movement in India, and an affiliate of the RSS, the ideological parent of the ruling BJP. Jayaraj has just got Ernakulam-based Bharath Agro Processing and Marketing Cooperative (BAMCO) registered as a multi-state cooperative society. The first supermarket under the new entity has been opened recently. With over two dozen Grameen Samrudhi stores mentored by Sahakar Bharati since 2017 also being brought under the BAMCO umbrella, the society is all set to have its presence felt in the state.

In fact, Sahakar Bharati’s plans for the state are more holistic. “We have almost 25 farmer producer organisations (FPOs) sanctioned, and some are already functional in various districts of Kerala. Each FPO has 350-750 farmers registered as shareholders. The farmers will be harvesting, procuring, value-adding their produce through their FPOs. We expect farmers’ income to double,” says Jayaraj. BAMCO will eventually market the products sourced from Sahakar Bharati-mentored FPOs and cooperatives that will be established not only in Kerala, but in Karnataka, Tamil Nadu and even Lakshadweep. In the long run, the organisation wants to mentor cooperative societies that go beyond the agri-rural sector and run hospitals, schools and production units, adds Jayaraj.

BAMCO’s growth plans represent the spirit behind Prime Minister Narendra Modi’s decision to announce a new Ministry of Cooperation on July 6 with Amit Shah as the minister-in-charge. Stating that the new ministry will provide a separate administrative, legal and policy framework for strengthening the cooperative movement in the country, the government termed the decision as a step towards realising the vision of ‘Sahakar se Samriddhi’, or economic prosperity through cooperatives.

Cooperatives are not new to India. There are 8.54 lakh cooperatives with 29 crore members in the country. They cover 98 per cent of India’s Rs 100-lakh-crore rural economy. The world’s two leading cooperatives (based on ratio of turnover over Gross Domestic Product per capita) are the Indian Farmers Fertiliser Cooperative Ltd (IFFCO) and the Gujarat Cooperative Milk Marketing Federation (GCMMF). Even Sahakar Bharati was formed in 1978. The government says its plan is to deepen this existing structure “as a true people-based movement reaching up to the grassroots” by streamlining processes for ease of doing business for cooperatives and encouraging development of Multi-State Cooperatives (MSCS). “A comprehensive, uniform national cooperative policy is required. The law is very complicated when it comes to taxation of cooperatives. It is hampering (their) growth. These things have to be reconciled. Political interference should be reduced and cooperatives should not become a platform for political activity. Reforms of the registrar of cooperatives are required. The (new ministry's) mandate is to empower people, financially,” says Gopal Krishna Agarwal, National Spokesperson, Economic Affairs, BJP.

The response to Modi’s plans are mixed. While no one objects to the idea behind the move, there are some who say the objective is political and aimed at unseating political opponents from highly powerful cooperatives they control. Others feel a dedicated ministry will strengthen the cooperative movement for the larger good. The initial moves of the current government and a Supreme Court verdict on July 20 over a Constitutional Amendment that was carried out to reform cooperatives by the previous Congress-led government a decade ago suggests the formation of the ministry has come at a crucial time. It will have an impact on India’s well-entrenched cooperative movement.

Cooperation Ministry

Immediately after Finance Minister Nirmala Sitharaman announced in her Budget speech the government’s plan to set up a separate administrative structure for multi-state cooperatives, Parshottam Rupala, the then Union minister of state for agriculture, swung into action. The ‘Credit Division’ under his ministry was in charge of multi-state cooperatives then. The joint secretary (co-operation) in the agriculture ministry was doubling up as the ‘central registrar’, in charge of MSCS. A separate structure meant hiving off the division for a bigger role. “He (Rupala) spoke to us, and we organised national- and state-level consultations to have stakeholder views on changes they expect and things that need to be in place for a smooth sail and ease of doing business in the cooperative sector,” says Sudhir Mahajan, Chief Executive, National Cooperative Union of India (NCUI). With 268 national cooperative societies, state cooperative unions, state-level cooperative federations and multi-state cooperative societies as its members, NCUI represents cooperative societies across dairy, sugarcane, textiles, fisheries, marketing, banking, consumer services, etc. “We got responses from 14-15 states. The decentralisation of the Central Registrar’s Office is one demand. The second is the compatibility of various state and Central legislations,” Mahajan says.

Priorities of the ‘Credit Division’ will change now. If there was too much focus on agriculture produce, credit and marketing cooperatives earlier, the ministry could have separate departments or administrative divisions for different sectors. Amit Shah has been dropping ample hints, during his initial stakeholder meetings, in this direction.

“He (Amit Shah) spoke to us for almost one and a half hours on July 15. We have submitted a 14-point agenda. He agreed, in-principle, on most issues,” says Uday Vasudev Joshi, National General Secretary, Sahakar Bharati. “We want the government to extend the ease of doing business norms to all cooperative societies, including primary societies. We believe cooperative is a distinct form of ownership and should have operational freedom. Normally, in 95 per cent of societies, there is not a single rupee investment from the government. So, why should each and every matter be brought up for permission to the government? This was highlighted by us. The minister’s response was encouraging,” Joshi says, adding that Shah has assured the government will try to strengthen primary agricultural cooperative societies. Having linkages with more than 80,000 cooperatives in over 480 districts of 27 states, Sahakar Bharati is no pushover. But Central intervention in primary societies is trickier than it seems for one specific reason: state-level cooperatives are exclusively under the administration of states. The Centre’s role is currently limited to framing rules for multi-state cooperative societies, a hurdle the government will have to overcome.

The Hurdle

In 2011, the Manmohan Singh government passed an amendment to the Indian Constitution (the Constitution 97th Amendment Act) to give the Centre more powers to ensure democratic, autonomous and professional functioning of cooperatives. The amendment was meant to empower cooperatives by giving them more autonomy, democratic control and professional management. Regular conduct of elections, general body meetings and professional audits were also expected as the outcomes of the amendment. The amendment became necessary as cooperative societies came under the State List of the Constitution, giving exclusive legislation-making powers to state governments. While the Centre had discussed this matter with the respective state cooperation ministers, they passed the legislation without getting it approved in at least 50 per cent of state legislative assemblies. The Act got struck down by the Gujarat High Court for precisely the same reason (that cooperative societies is a ‘state’ subject) the next year. An appeal has been pending in the Supreme Court (SC) on the subject and it was expected that a reversal of the High Court (HC) judgment will provide more teeth to the new cooperation ministry. The SC, however, upheld portions of the HC verdict that pertained to state cooperative societies and only permitted the Act to be applicable to Multi-State Cooperative Societies. The verdict, in a way, lists out the first task before the new ministry: to get the 97th Constitutional Amendment ratified by legislatures of not less than half of the states before it is made a law.

“Let the government follow the procedural matter, which has been insisted by the Supreme Court. Once we obtain the permission from more than half the state assemblies, the court will have no objection. If the 97th Constitutional Amendment gets sanctioned, the government will give autonomy to the cooperatives sector. It will bring in uniformity in the Cooperative Societies Acts of different states. It will also see the process of registration of cooperative societies becoming smooth, leaving minimum discretionary powers to the registrar,” says Mahajan.

With most states being ruled by BJP and its allies, getting a sanction for powers to enact model laws for state cooperatives may not be difficult. But the government will have to face Opposition charges that the whole attempt is meant to overthrow the control political parties opposed to BJP have in powerful cooperatives in the sugarcane sector (particularly in Maharashtra), the banking sector in Kerala, among others. “Except Gujarat, cooperatives are strong in non-BJP ruled states. Hence, the objective of creating this ministry seems to be doubtful as cooperatives currently come under the direct control of state governments. Now the government will come out with a Bill or an Ordinance, and take this (controlling power) out. And what is the motive? It is to control these cooperatives,” alleges Gourav Vallabh, Spokesperson of the Indian National Congress. “In Maharashtra alone, there are two lakh-plus cooperatives. The total number of members are five-crore plus, which is about half the population of Maharashtra. BJP wants to have a control over those societies,” adds Vallabh. According to him, there cannot be a single policy for cooperatives as issues of cooperatives are not similar across the country. “I agree we require better regulation for cooperatives. But the solution BJP is suggesting is going to create a bigger problem.” The All India Kisan Sabha (AIKS), a farmer organisation affiliated to the Left parties, also says “the Union government will use its legislative and financial powers and try to facilitate BJP’s control over cooperatives and take them away from Opposition parties.”

The Way Ahead

There are, however, many who find great promise in the government’s plans. R.S. Sodhi, Managing Director of GCMMF, the cooperative that owns the Amul brand, says the formation of the ministry shows the government has recognised the importance of the cooperative way of doing business in India where the economy consists of small traders and entrepreneurs. “In the corporate way of doing business, a few people own and pocket profits. In cooperatives, ownership is with ordinary people and profits are shared by lakhs of people. When you say cooperative, what comes to our mind is agri-cooperative, dairy cooperative, banking cooperative and housing cooperative. No, that is not the purpose (of the ministry). Small producers, small entrepreneurs, small traders can all be part of a cooperative system,” says Sodhi. “The cooperative sector touches lakhs of lives, but there was no ministry. Today, there is not only a separate ministry, but also the most important person in the Cabinet as its minister. The government is very serious that wealth should be shared by more people.”

U.S. Awasthi, Managing Director, IFFCO, agrees. “At one time, the cooperative way of doing business was part of the planning process and there used to be a separate budget for cooperatives. The new ministry is going to be quite helpful to cooperatives. It can bring qualitative changes for the rural population.” He says IFFCO’s proposal to set up a cooperative bank has been pending with the government for long. “Maybe the government will clear that and create a central bank for cooperatives. I see a lot of opportunities.”

The diversification of the cooperative sector into non-traditional areas may be a game changer. In fact, the government had taken the first steps in this direction even before a new ministry was announced. Ayushman Sahakar, a scheme of National Cooperative Development Corporation (NCDC) for financial assistance to cooperatives on holistic healthcare infrastructure, education and services, is one such initiative which will find tremendous interest among cooperatives in the coming years.

“We have decided, particularly in the backdrop of the pandemic, to focus on the health sector. These will be cooperative hospitals or establishments offering healthcare services approved by NCDC under Ayushman Sahakar,” says Sahakar Bharati’s Joshi.

All eyes are on to the next step the government takes to get the new ministry functional at the earliest.

@joecmathew