Strengthening Cooperative Movement


    In News

    • The Union Cabinet has approved strengthening cooperative movement in the country by  formulating a plan to establish viable grass roots societies in each uncovered Panchayat.


    • The Union Cabinet has approved a plan to establish 
      • viable Primary Agricultural Credit Societies (PACS) in each uncovered Panchayat
      • viable dairy cooperatives in each uncovered Panchayat/village
      • viable fishery cooperatives in each coastal Panchayat/village as well as Panchayat/village having large water bodies.
    • The plan aims to strengthen the existing PACS/dairy/fishery cooperatives through convergence of various schemes of Ministry of Fisheries, Animal Husbandry & Dairying by leveraging the ‘whole-of-Government’ approach.
    • It also aims to set up 2 lakh PACS/ Dairy/ Fishery cooperatives in next five years with the help of action plan prepared by NABARD, National Dairy Development Board (NDDB) and National Fishery Development Board (NFDB).
    • A national cooperative database is also being prepared by Ministry of Cooperation for real time monitoring of the new cooperative societies.
    • Significance :
      • provides the farmers with forward and backward linkages to market their produce, enhance their income, obtain credit facilities and other services at village level itself.
      • establishing new cooperative societies would generate employment opportunities in rural areas, which would have multiplier effect for the rural economy.
      • enable farmers to realize better prices for their products, expand the size of their markets and integrate them into the supply chain.

    Primary Agricultural Credit Societies (PACS)

    • Primary Agricultural Credit Societies (PACS) serve as the last link in a three-tier cooperative credit structure headed by the State Cooperative Banks (SCB) at the state level.
    • They provide short and medium-term credit and other input services to member farmers. 
    • There are  98,995 PACS in the country with a member base of 13 crore,
    • These are refinanced by NABARD through 352 District Central Cooperative Banks (DCCBs) and 34 State Cooperative Banks (StCBs).
    • Significance of PACS :
      • provide multi-functional services such as providing input supplies, marketing and trading .
      • Provide backward linkages like warehousing services for better price realisation by farmers.
      • Forms the core of credit system for farmers.
        • PACS account for 41% (3.01 crore farmers) of the Kisan Credit Card (KCC) loans given by all entities in the country, and 95% of these KCC loans (2.95 crore farmers) through PACS are to small and marginal farmers.
    • Issues with PACS:
      • PACS cover only around half of rural households.
      • Their funds are inadequate to process the short-and medium-term credit needs of the rural economy.
      • Credit given by PACS is limited in both scale and function.
      • Inefficient management structure.
    • Way forward:
      • Digitisation of PACS for better management
      • Streamlining of governance structures for better control of resources.
      • Introduction of professional management with an aim to develop them as One Stop Shop for meeting all the needs of its members.


    • It is a voluntary association of individuals having common needs who join hands for the achievement of common economic interest. 
    • Its aim is to serve the interest of the poorer sections of society through the principle of self-help and mutual help
    • Evolution Post Independence :
      • After independence,  the framers of the Constitution placed cooperatives in the State list. They came to be considered instruments of socio-economic development and became an essential focus of the initial Five-Year Plans
      • In 1958, the National Development Council (NDC) had recommended a national policy on cooperatives and setting up of Co-operative Marketing Societies.
      • National Cooperative Development Corporation (NCDC), a statutory corporation, was set up under National Cooperative Development Corporation Act, 1962.
      • States made their own laws to regulate cooperatives within their jurisdiction, but in 1984, the Multi-State Co-operative Societies Act was enacted by Parliament to consolidate different laws at the central level.
      • In 2002, Government  of India enacted the Multi-State Cooperative Societies Act 2002 to replace the 1984 act.
      • Government of India also announced a National Policy on Co-operatives in 2002.
      • To consolidate the gains made in co-operative sector ,Government amended the constitution via 97th Constitutional Amendment Act 2011. The act produced following changes
        • Addition of a new Part IX-B to the Constitution titled “The Co-operative Societies” (Articles 243-ZH to 243-ZT). 
        • The right to form cooperative societies was included as Right to Freedom (Article 19 (1)).
        • Promotion of Cooperation societies was inserted as one of the DPSPs (Article 43-B).
      • Formation of a separate ‘Ministry of Co-operation’ in 2021 for realizing the vision of ‘Sahkar se Samriddhi’ (Prosperity through Cooperation) and to give a new push to the cooperative movement.
      • To plug the “loopholes” in the MSCS Act , to improve transparency and ease of doing business the government  introduced a Bill seeking to amend the 2002 act.
        • The Lok Sabha has recently referred the Multi-State Co-operative Societies (Amendment) Bill-2022 to a joint committee of Parliament in December 2022.
    • Significance of Cooperatives
      • Cooperatives are rooted in democracy and are flexible which makes them well suited for economic development.
      • It Instills in  people a sense of equality, mutuality, and co-operation.
      • They facilitate a more equitable distribution of the benefits of economy.
      • Cooperatives provide agricultural credit in places where state and private sector are unable to reach.
    • Issues
      • Indefinite Postponement of elections: There have been instances where elections have been postponed indefinitely and nominated office bearers or administrators remaining in charge of these institutions for a long time. 
      • Reduced accountability:Trends like politicisation of boards,irregular elections have  reduced the accountability of the management of co-operative societies to their members. 
      • Unprofessional behavior: Inadequate professionalism in management in many of the co-operative institutions has led to poor services and low productivity. 
    • Reforms
      • Foreign Direct Investment (FDI): Allow Foreign Direct Investment (FDI) in the cooperative sector, particularly in Primary Agricultural Cooperative Societies (PACS) for augmentation of resources and infrastructure.
      • Technology upgradation: Creation of a technology upgradation fund for the sector to update and improve infrastructure.
      • Making use of Land available with PACS: PACS have more land than the Railways.It can be leveraged for expanding the resource base of cooperative societies.
    • Way Forward: Co-operatives need to run on well-established democratic principles. Therefore, there is a need to initiate fundamental reforms to revitalize these institutions in order to ensure their contribution in the economic development of the country and also to ensure their autonomy, democratic functioning and professional management.

    Source: PIB