Cooperatives

Supreme Court annulled part of the 97th Amendment Act and Part IX B of the Constitution which governs the “Cooperative Societies” in the country.

• Cooperatives’ is a ‘State’ subject. However, 97th Amendment Act was passed by the Parliament without getting them ratified by State legislatures as required by the Constitution.
• The Court declared that Part IXB of the Constitution is operative only insofar as it concerns Multi-State cooperative societies both within the various States and in the Union Territories.
• The SC has held that co-operative societies come under the “exclusive legislative power” of State legislatures.
• Co-Operatives
• voluntary association of individuals having common needs, who join hands for attainment of common economic goals and interests.
• Co-operative societies, Primary Agricultural Credit Societies, Co-operative Banks, etc.
• help in enhancing social cohesion, financial inclusion and elevate the bargaining power of the poor by organizing them into a group.
• help in reducing income inequalities by facilitating equitable distribution of wealth and gaining access to formal loans at affordable rates of interest.
• Eg. Indian Coffee House, Self Employed Women’s Association etc.
• Recent Steps taken to promote co-operative culture
• Ministry of Co-operation to streamline the co-operative movement in India.
• The Banking Regulation (Amendment) Act, 2020 
• 97th Amendment Act: amended Article 19(1)(c) to give protection to the cooperatives and inserted Article 43 B and Part IX B, relating to them.

 

• The cooperative movement first began in 1844 in Britain by 28 weavers.
• first cooperative society was initiated by Robert Owen in 184 A.D. named “Rochdale Society of Equitable Pioneers”.
• to save poor people by providing goods at a lower price from the market price, eliminate the middleman and supply better services to its members
• In India Sir Frederic Nicholson, who studied the problems of farmers after Madras famine, published a report in 1895 which led to establishment of cooperative agricultural credit societies and cooperative banks in India and paved the way for the ‘Cooperative movement’. Therefore, Sir Frederic Nicholson is known as ‘Father of the Cooperative Movement’ in the country.

Significance of cooperatives in socioeconomic milieu of the country

• Enhancing social cohesion: makes cooperation, in the cooperative, an alternative approach to social cohesion. For example, Housing cooperatives intermediate level between residents and urban housing policy, thus providing opportunity structures for bottom-linked citizen participation.
• Social empowerment: Establishing equal rights: function under the mutual cooperation of all the members, all are equal and free for their rights. Therefore “one-person-one- vote” system prevails here.
• Enhancing the bargaining power of poor: harness the power of collective bargaining towards a common goal.
• Promoting leadership: elect their leaders democratically, with members voting for a board of directors.
• Promoting moral principles: like unity, trust, honesty, order, cooperation etc. to its members, which ensure social order.
• Reducing inequality of wealth
• Promoting financial inclusion

Challenges faced by cooperatives in India

• Lack of Democratic Spirit: following factors impinge upon the democratic
• Government Interference: Government major source of finances has the power to regulate the functioning by various rules. Therefore, over the time government has put restrictions on borrowing, restrictions on other transactions with non-members, restriction on investment of funds which may hamper the efficient performance of cooperatives.
• Politicization of Cooperatives: dominated by locally powerful members of the society, with strong political affiliations.
• Internal quarrel and rivalries: cease to take any interest in the working of the organization.
• Skewed geographical penetration
• Regional imbalance in growth: northeastern areas and in areas like West Bengal, Bihar, Odisha are not as well developed as the ones in Maharashtra and Gujarat
• Limited Coverage:
• Small size of societies: confined to a few members and their operations extend to only one or two villages. As a result, their resources remain limited, which make it difficult for them to expand their means and extend their area of operations
• Dominance of single purpose societies: unable to take a total view of the people seeking help, nor can they analyze and solve problems from different angles.
• Operational challenges: Lack of fair audit mechanism; Lack of coordination among cooperatives existing at different levels.
• Functional Weakness: Absence of Economics of Scale; Shortage of skilled workforce; Lack of Professionalism etc.

Way forward

• Structural reforms:
• Weaker and inefficient societies should be winded and merged with strong and efficient societies.
• Promoting Multipurpose societies
• Legislative Reforms for improving functioning of cooperative banks: Narasimham committee legal framework that clearly defines the rights and liabilities of the parties to contracts and speedy resolution of disputes are the essential bedrocks for the process of financial intermediation and cooperative banking.
• Complete Transparency in working: brought under the purview of the Right to Information Act.
• eligibility criteria for becoming the director may include mandatory declaration of assets every year.
• All the documents along with the remarks/notes etc. of the persons dealing with any financial matter being uploaded on the website of the society.

Therefore, it is necessary to ensure the autonomous and democratic functioning of co-operatives, by ensuring the accountability of management to the members and other stakeholders and enhancing deterrence for violation of the provisions of the law