[Burning Issue] Ministry of Cooperation

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The Union Government announced the formation of a separate Union Ministry of Cooperation, a subject that till date was looked after by the Ministry of Agriculture. This ‘historic move’ seeks to “provide a separate administrative, legal and policy framework for strengthening the cooperative movement,” apart from deepening a “true people-based movement,” an “economic development model” that will now have a ministry to streamline “ease of doing business” and enhance the multistate cooperative societies.

What defines a Cooperative?

  • 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 enterprise”.
  • Cooperatives are democratically owned by their members, with each member having one vote in electing the board of directors.

What will be the new Ministry’s objectives?

  • Ministry created to realize the vision of ‘sahkar se samriddhi’ (through cooperation to prosperity).
  • The Ministry of Cooperation will provide a separate administrative legal and policy framework for strengthening the cooperative movement in the country.
  • It will help deepen Co-operatives as a true people based movement reaching up to the grassroots.
  • In India, a Co-operative based economic development model is very relevant where each member works with a spirit of responsibility.
  • The Ministry will work to streamline processes for ‘Ease of doing business for co-operatives and enable development of Multi-State Co-operatives (MSCS).

What is the cooperative movement?

  • Cooperatives are organizations formed at the grassroots level by people to harness the power of collective bargaining towards a common goal.
  • 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.

Sectors in which Cooperative societies have outperformed

(1) Agriculture:

  • In agriculture, cooperative dairies, sugar mills, spinning mills etc are formed with the pooled resources of farmers who wish to process their produce.
  • The country has 1,94,195 cooperative dairy societies and 330 cooperative sugar mill operations.

(2) Dairy:

  • In 2019-20, dairy cooperatives had procured 4.80 crore litres of milk from 1.7 crore members and had sold 3.7 crore litres of liquid milk per day. (Annual Report, National Dairy Development Board, 2019-20).
  • In 1991, Manmohan Singh, then finance minister wanted to delicense the dairy sector as well, but there was stiff opposition from Verghese Kurien.
  • It was after 10 years in 2002 that the dairy sector was fully de-licensed. The competition between cooperatives and corporate dairy players has benefitted millions of farmers around the country.
  • With the entry of the private sector, the growth of the dairy sector accelerated at double the speed.
  • Today, both procure roughly the same quantities, and growth in the organised private sector is faster than in cooperatives.

(3) Sugar Industries: Cooperative sugar mills account for 35% of the sugar produced in the country.

(4) Banking and Finance: In banking and finance, cooperative institutions are spread across rural and urban areas.

Performance of cooperative movement in India

  • India’s experience with the cooperative movement has produced mixed results — few successes and many failures.
  • There are cooperatives in the financial sector, be it rural or urban.
  • But the performance of these agencies when measured in terms of their share in overall credit, achievements in technology upgradation, keeping NPAs low or curbing fraudulent deals has been poor to average.
  • Sugar cooperatives of Maharashtra initially touted as exemplars of the movement, are in the doldrums now.
  • Many are being sold to the private sector.

What laws govern cooperative societies?

  • Agriculture and cooperation are in the state list, which means state governments can govern them.
  • 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 Multistate 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.

Provisions of Indian Constitution related to Cooperatives

The Constitution (97th Amendment) Act, 2011 made following changes in Constitution

  • New Part IXB regarding the cooperatives working in India added. (Part IXA deals with Municipals)
  • In Art. 19(1)(c) the word “cooperatives” was added after “unions and associations”.  This enables all the citizens to form cooperatives by giving it the status of fundamental right of citizens.
  • A new Article 43B was added in the Directive Principles of State Policy (Part IV) regarding the “promotion of cooperative societies”.

Retaining the federal character of cooperatives

  • The Supreme Court in Union of India v Rajendra Shah and Others (2021), has partly struck down the 97 constitutional amendments that sought to provide a clear framework for the administration of cooperatives across the country.
  • The courts adjudicated that the amendment violated the powers of state legislatures with respect to items in the state list, by legislating on a matter specifically contained in Item 32 of the state list under Schedule 7.
  • In what is a fillip towards the federal character of cooperatives, the Court clearly stated that cooperatives and any form of legislation pertaining to them are strictly within the domain of the state government and legislatures, and only in matters of multistate cooperatives does Parliament have sanction to legislate.

Why Cooperatives are so important?

  • It provides agricultural credits and funds where state and private sectors have not been able to do very much.
  • It provides strategic inputs for the agricultural-sector; consumer societies meet their consumption requirements at concessional rates.
  • It is an organization for the poor who wish to solve their problems collectively.
  • It softens the class conflicts and reduces the social cleavages.
  • It reduces the bureaucratic evils and follies of political factions;
  • It overcomes the constraints of agricultural development;
  • It creates a conducive environment for small and cottage industries.

Why was the new Ministry necessary?

  • In our country, a Co-operative based economic development model is very relevant where each member works with a spirit of responsibility.
  • It was necessary to restore the importance of the cooperative structure in the country. 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.
  • 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 structure would be able to get a new lease of life.
  • This creation has signaled its deep commitment to community-based developmental partnerships.

To what extent do the cooperative structure influence state and national politics?

  • Cooperative institutions, be it the village-level PACS or the urban cooperative housing societies, 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.
  • In the present Maharashtra legislature, there are at least 150 legislators who have had some connection with the movement.
  • No matter which party is in power in a state like Maharashtra, the purse strings of the local economy always remain with the cooperative institution.


  • Mismanagement and Manipulation: A hugely large membership turns out to be mismanaged unless some secure methods are employed to manage such co-operatives. Money became such a powerful tool in the elections to the governing bodies that the top posts of chairman and vice-chairman usually went to the richest farmers who manipulated the organization for their benefits.
  • Lack of Awareness: People are not well informed about the objectives of the Movement, rules and regulations of co-operative institutions.
  • Restricted Coverage: Most of these societies are confined to a few members and their operations extended to only one or two villages.
  • Dearth of trained staff: The Co-operative Movement has suffered from inadequacy of trained personnel.

Way forward

  • The new Ministry of Cooperation can work towards ironing out distortions in state price policies due to subsidization such as in Maharashtra and Karnataka milk prices.
  • New areas are emerging with the advancement of technology and cooperative societies can play a huge role in making people familiar with those areas and technologies.
  • The Ministry of Cooperation can give them soft loans for innovation and technology upgradation.
  • But such loans should also be extended to the private sector to ensure a level playing field.
  • The Ministry of Cooperation needs to ensure the least political interference in the operation of cooperatives.
  • To strengthen the cooperatives there should be market linkages for agricultural farmers as well as cooperative societies.


Critics argue that the Creation of a new cooperation ministry is an infringement upon the federal rights of the state governments. This is an intrusion into the authority of the state governments. This amounts to challenging the federal system of our country. However, the principle of the cooperative movement is to unite everyone, even while remaining anonymous. The cooperative movement has the capacity to solve people’s problems. The new Ministry of Cooperation can work towards bringing in professionalism in cooperatives and make them more competitive.

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