Introduction
The National Cooperative Policy, 2025 has triggered a sharp CentreāState tussle, with Kerala at the forefront of resistance. Beyond a policy dispute, it reflects deeper tensions around cooperative federalism, involving constitutional authority, political stakes, and nearly ā¹3 lakh crore in deposits, making the issue both high-stakes and nationally significant.
The Current Tussle between Centre and Kerala
- Policy provokes backlash: Kerala describes the National Cooperative Policy as āunconstitutionalā, asserting that it violates the Stateās exclusive authority over cooperatives.
- Political dimension: The Left Democratic Front (LDF) government accuses the BJP of attempting to capture Keralaās cooperative network for political consolidation.
- Financial stakes: Keralaās cooperatives manage deposits worth ā¹2.94 lakh crore, making them critical financial entities in the Stateās economy.
The Contentious Nature of the National Cooperative Policy
- Federalism at stake: Cooperative societies are a State List subject, yet the Centre is asserting influence, reviving concerns first raised during the Multi-State Cooperative Societies (Amendment) Act, 2023.
- Keralaās historical legacy: Cooperative institutions date back to early 20th century Travancore, Cochin, and Malabar, and evolved through the Kerala Cooperative Societies Act, 1969, making them central to socio-economic life.
- Grassroots importance: Primary Agricultural Cooperative Societies (PACS) serve as the credit backbone of Keralaās rural economy.
Keralaās Political and Institutional Response
- Political opposition: State Cooperation Minister V.N. Vasavan termed the policy āharmful to cooperatives.ā
- Organised resistance: The Kerala Primary Agricultural Cooperative Society association passed a resolution against the policy.
- Workersā unionsā concerns: The Kerala Cooperative Employees Union (KCEU) alleged that the Centre seeks to hand over the cooperative sector to corporates.
Existing Challenges in the Cooperative Sector
- Credibility crisis: Several cooperative banks face embezzlement scandals and non-refund of depositorsā money.
- Case in point: The Karuvannur Service Cooperative Bank scam in Thrissur dented public confidence and put the State government on the defensive.
- State reforms: In 2023, Kerala amended its Cooperative Societies Act to plug loopholes and strengthen safeguards.
Structural Reforms in Keralaās Cooperative System
- Bank consolidation: Merging of district cooperative banks into the Kerala State Cooperative Bank (Kerala Bank) reduced the traditional three-tier credit structure into a two-tier system.
- Policy rationale: Streamlining was aimed at improving efficiency and financial stability in the sector.
Future Trajectory of Keralaās Cooperatives
- New crossroads: Accelerated urbanisation, youth aspirations, and sectoral shifts in energy, shipping, technology, and health present opportunities for cooperative diversification.
- Future trajectory: The ability of cooperatives to adapt and modernise will shape Keralaās economic resilience in the coming decades.
Conclusion
Keralaās cooperative movement, historically a pillar of rural credit and grassroots empowerment, stands at a critical juncture. The National Cooperative Policy, 2025, while framed in the language of reform, has exposed fault lines in Indiaās federal structure and deepened CentreāState tensions. For Kerala, the challenge lies in balancing its rich cooperative legacy with the demands of modernisation and transparency. For the Union, respecting constitutional boundaries while ensuring financial discipline will be key to sustaining trust in the cooperative model.
Value Addition |
Overview of the National Cooperative Policy 2025The National Cooperative Policy, 2025āofficially unveiled on July 24, 2025 āreplaces the 2002 framework with a visionary 20-year roadmap (2025ā2045) centered on āSahkar se Policy Goals:
Core Pillars of the Policy: Outlined across six strategic pillars designed to transform cooperatives:
Institutional and Structural Measures:
Sectoral Diversification & Modernisation:
Why It Matters:
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PYQ Relevance
[UPSC 2014] āIn the villages itself no form of credit organisation will be suitable except the cooperative society.ā ā All India Rural Credit Survey. Discuss this statement in the background of agricultural finance in India. What constraints and challenges do financial institutions supplying agricultural finance face? How can technology be used to better reach and serve rural clients?ā
Linkage: The 2014 question emphasised cooperatives as the most suitable form of rural credit, highlighting their role in agricultural finance. The KeralaāCentre tussle over the 2025 policy shows how this very grassroots credit system, with PACS and cooperative banks at its core, remains vital yet contested. Thus, the article provides a contemporary case study of both the potential and challenges of cooperatives in Indiaās agricultural and financial landscape.



