India’s First Cooperative University (Tribhuvan Sahkari University)

Cooperative Movement in India

1. International Cooperative Alliance (ICA) defines a cooperative as an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.

2. Constitutional Provisions:

1. The Constitution (97th Amendment) Act, 2011 introduced Part IXB (Cooperatives) after Part IXA (Municipals) in the Constitution, providing cooperatives with recognition as a fundamental right under Article 19(1)(c). This allows citizens to form cooperatives as a constitutional right.
2. Article 43B was added to the Directive Principles of State Policy (Part IV) to promote cooperative societies.

3. Supreme Court Ruling (2021):

   1. The Supreme Court struck down certain provisions of the 97th Amendment Act for not being ratified by state legislatures as required under Article 368(2).
   2. It upheld Part IXB for Multi-State Cooperative Societies (MSCS), allowing the Union to legislate on MSCS whose objects are not confined to one state, reinforcing the importance of federalism in cooperative legislation.

3. Genesis of the Cooperative Movement in India:

1. Causes:

   1. The Industrial Revolution led to the collapse of traditional village industries and drove people into agriculture.
   2. The fragmentation of agricultural land made farming economically unfeasible.
   3. The rigidity of land revenue collection and uncertainty of rainfall worsened the plight of farmers, forcing them to borrow from money-lenders at high-interest rates.
   4. These socio-economic conditions highlighted the need for alternative, cheaper credit and cooperative efforts to alleviate economic distress.

2. Informal Cooperatives:

   1. Devarai, Vanarai, Chit Funds, Kuries, Phads, and Nidhis were informal cooperative systems that existed before formal legislation.
   2. In Punjab, a cooperative society in 1891 was formed for the management of common village lands.
   3. These efforts were voluntary and non-official.

4. Cooperative Movement in Pre-Independence Era:

1. Initial Stage (1904-1911):

   1. 1901 Indian Famine Commission recommended the introduction of cooperative societies as a solution for rural distress.
   2. 1904 Cooperative Credit Societies Act: The first legislation in India to encourage cooperative societies.
      • It allowed a group of 10 persons to form a cooperative credit society.
      • Rural and urban cooperatives were distinguished, with different rules for profit distribution.
      • Drawbacks:
        • No legal protection for non-credit societies.
        • Ineffective for financing agricultural operations in urban cooperatives.
        • Arbitrary classification of societies.

2. Modification Stage (1912-1918):

   1. Cooperative Societies Act of 1912:
      • Corrected many defects of the 1904 Act, allowing for a variety of cooperatives and federal societies.
      • Allowed non-credit societies to register, improving the scope of the movement.
   2. Maclagan Committee (1915): Addressed issues like illiteracy, mismanagement, and nepotism. It recommended better governance, such as:
      • Awareness of cooperative principles.
      • Adherence to the one member-one vote principle.
      • Careful scrutiny of loan applications.

3. Expansion Stage (1919-1929):

   1. Montague-Chelmsford Reforms (1919):
      • Made cooperatives a provincial subject, leading to state-level legislation on cooperatives.
   2. The membership of cooperatives expanded significantly during this period.
   3. 1929 Economic Depression:
      • Caused a sharp decline in agricultural commodity prices, which led to widespread defaults on loans and cooperative societies’ financial ruin.

4. Restructuring Stage (1930-1946):

   1. Committees in various states recommended restructuring cooperatives to improve their function.
   2. World War II led to:
      • A rise in agricultural prices.
      • Development of non-credit cooperatives like marketing, production, and consumer societies.
   3. The All India Cooperative Planning Committee (1945) contributed significantly to the further development of cooperatives.

5. Gandhian View on Cooperatives:

1. Gandhi’s Philosophy: Gandhi viewed cooperation as essential for a socialistic society and a means of decentralizing power.
   • Phoe tc., to ensure fair value for produce and empower producers.

6. Cooperative Movement After Independence:

1. Part of Mixed Economy:

   • Post-independence, India adopted a mixed economy with three sectors: Public, Private, and Cooperative.
   • Cooperatives were seen as a balancing force between the public and private sectors.

2. Five-Year Plans:

   • Cooperatives became integral to India’s Five-Year Plans, contributing to social and economic development.
   • Pandit Jawaharlal Nehru regarded cooperatives as one of the three pillars of democracy (along with Panchayats and Schools).

3. National Policy on Cooperatives:

   • The National Development Council (NDC) in 1958 recommended a national policy on cooperatives, focusing on training, marketing, and financial assistance.
   • The 2002 National Policy on Cooperatives aimed to further strengthen the cooperative sector.
   • The National Cooperative Development Corporation (NCDC) was established in 1962 to support cooperative development.

4. Committees for Cooperative Reforms:

   • Rural Credit Survey Committee (1954) emphasized state participation at all levels of cooperatives.
   • The S.T. Raja Committee suggested reforms in cooperative law to ensure better governance and management.

7. Successful Cooperatives in India:

1. Agriculture and Allied Sectors: AMUL (milk cooperative), IFFCO (fertilizer cooperative), NAFED (agricultural marketing), and CORDET (rural development).
2. Banking Sector: PMC Bank, Saraswat Cooperative Bank, and Bharat Cooperative Bank.

8. Issues Facing the Cooperative Sector:

1. Excessive Cooperative Legislations: Different states have varying cooperative laws, leading to inconsistencies and confusion.
2. Irresponsibility and Unaccountability: Poor governance due to inadequate training and nepotism in leadership positions.
3. Lack of Recognition: Cooperatives are not always recognized as key economic institutions by policymakers and the general public.
4. Inability to Attract and Retain Competent Professionals: The cooperative sector struggles with incompetence and high turnover of skilled professionals.
5. Lack of Capital Formation: Insufficient efforts to generate capital, especially through member equity.
6. Lack of Awareness: Many people remain unaware of the objectives, rules, and regulations governing cooperatives.