National Cooperation Policy


    In News

    • A parliamentary standing committee has advised the newly created Cooperation Ministry to exercise utmost prudence in chalking out activities and programmes at the national level so that federal features of the country are not impinged upon.

    Proposed Actions

    • ‘Cooperative Societies’ is a State subject in the Seventh Schedule of the Constitution.
    • The ministry has prepared the Multi State Cooperative Societies (Amendment) Bill, 2022, to amend the Multi State Cooperative Societies Act, 2002, and it is expected to be cleared soon.
    • Multiple Governance: There are many societies such as those for sugar and milk, banks, milk unions etc whose members and areas of operation are spread across more than one state. The Act was passed to govern such cooperatives.
      • For example, most sugar mills along the districts on the Karnataka-Maharashtra border procure cane from both states.
      • They draw their membership from both states, and they are thus registered under the MSCS Act.
      • Their board of directors has representation from all states they operate in.
    • Administrative and financial control of these societies is with the central registrar, with the law making it clear that no state government official can wield any control on them.
    • The Cooperative Societies registered under the State Cooperation Societies Acts are governed by the concerned Registrars of Cooperative Societies.
    • Many Cooperative Institutions have also been set up under the State Cooperative Laws for the promotion of Cooperative Societies.

    Statistics and Data

    • Since the law was enacted, 1,479 such societies have been registered, of which 9 have been deregistered since.
      • Maharashtra has the highest number at 567, followed by Uttar Pradesh (147) and New Delhi (133).
    • Credit societies constitute the bulk of registered societies at 610, followed by agro-based ones (which include sugar mills, spinning mills etc) at 244.
    • There are 96 multistate cooperative dairies and 66 multi state cooperative banks.  


    Challenges Associated

    • The exclusive control of the central registrar, who is also the Central Cooperative Commissioner, was meant to allow smooth functioning of these societies.
      • The central Act cushions them from the interference of state authorities so that these societies are able to function in multiple states.
      • What was supposed to facilitate smooth functioning, however, has created obstacles.
    • For state-registered societies, financial and administrative control rests with state registrars who exercise it through district- and tehsil-level officers.
      • Thus if a sugar mill wishes to buy new machinery or go for expansion, they would first have to take permission from the sugar commissioner for both.
      • Post this, the proposal would go to the state-level committee that would float tenders and carry out the process.
    • While the system for state-registered societies includes checks and balances at multiple layers to ensure transparency in the process, these layers do not exist in the case of multi state societies.
      • Instead, the board of directors has control of all finances and administration.
    • For expenditure above a certain level, the annual general body meeting of the society has to be called: The annual report of these societies has to be submitted either online or offline to the central registrar.
    • There is an apparent lack of day-to-day government control on such societies: Unlike state cooperatives, which have to submit multiple reports to the state registrar, multistate cooperatives need not.
    • Inspection: The central registrar can only allow inspection of the societies under special conditions; a written request has to be sent to the office of the registrar by not less than one-third of the members of the board, or not less than one-fifth of the number of members of the society.
      • Inspections can happen only after prior intimation to societies.
    • The on-ground infrastructure for central registrar is thin: there are no officers or offices at state level, with most work being carried out either online or through correspondence.
      • For members of the societies, the only office where they can seek justice is in Delhi, with state authorities expressing their inability to do anything more than forwarding their complaints to the central registrar.
    • There have been instances across the country when credit societies have launched ponzi schemes taking advantage of these loopholes: Such schemes mostly target small and medium holders with the lure of high returns. Fly-by-night operators get people to invest and, after a few installments, wind up their operations.



    • It will ensure better governance of the societies.
    • Technology will be used to bring in transparency.
    • It has been suggested that administrative control of such societies should be vested in the state commissioners. 
      • This way, day-to-day control can be wielded to ward off cases of fraud.

    Ministry of Cooperation

    • The Union Ministry of Cooperation is a ministry under the Government of India which was formed in 2021.
    • Before the creation of this ministry, the objectives of this ministry were looked after by the Ministry of Agriculture.
    • The ministry was created with objectives of:
      • To realise the vision of “Sahkar se Samriddhi” (prosperity through cooperation).
      • To streamline processes for ‘’Ease of doing business’‘ for co-operatives and enable development of Multi-State Co-operatives (MSCS)
      • To provide a separate administrative, legal and policy framework for strengthening the cooperative movements in the country.
      • To deepen the cooperative as a true people-based movement reaching upto the grassroot level.

    Cooperative Societies

    • A co-operative society 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. 
    • Part IX B of the Constitution, inter alia, seeks to empower the Parliament in respect of multi-State co-operative societies and the State Legislatures in case of other co-operative societies to make appropriate law, laying down the following matters, namely:-
      • provisions for incorporation, regulation arid winding up of co-operative societies based on the principles of democratic member-control, member-economic participation and autonomous functioning;
      • specifying the maximum number of directors of a cooperative society to be not exceeding twenty-one members;
      • providing for a fixed term of five years from the date of election in respect of the elected members of the board and its office bearers;
      • providing for a maximum time limit of six months during which a board of directors of co-operative society could be kept under supersession or suspension;
      • providing for independent professional audit;
      • providing for right of information to the members of the co-operative societies;
      • empowering the State Governments to obtain periodic reports of activities and accounts of cooperative societies;
      • providing for the reservation of one seat for the Scheduled Castes or the Scheduled Tribes and two seats for women on the board of every co-operative society, which have individuals as members from such categories;
      • providing for offences relating to co-operative societies and penalties in respect of such offences.

    Issues, Objections and Reforms needed

    • Interests of members not safeguarded: Cooperative societies have shown weaknesses in safeguarding the interests of the members and fulfillment of objects for which these institutions were organized. 
    • 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: This reduces 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. 
    • Fundamental reforms are needed: Co-operatives need to run on well established democratic principles and elections held on time and in a free and fair manner. 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 to serve the interests of members and public at large and also to ensure their autonomy, democratic functioning and professional management.
    • Qualitative performance is lacking for a long time: 
      • The “co-operative societies” is a subject enumerated in Entry 32 of the State List of the Seventh Schedule of the Constitution and the State Legislatures have accordingly enacted legislations on co-operative societies. 
      • Within the framework of State Acts, growth of co-operatives on a large scale was envisaged as part of the efforts for securing social and economic justice and equitable distribution of the fruits of development. 
      • It has, however, been experienced that in spite of considerable expansion of co-operatives, their performance in qualitative terms has not been up to the desired level. 
    • Free the cooperatives from outside interference and make them independent: A strong need has been felt for amending the Constitution so as to keep the co-operatives free from unnecessary outside interferences and also to ensure their autonomous organizational set up and their democratic functioning.

    Latest Developments with regard to Cooperatives

    • The government announced the formation of a separate Union Ministry of Cooperation
    • It 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 upto the grassroots. 
    • In our country, 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).

    Source: IE