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Amit Shah’s new ministry is more of the same. Cooperatives must not depend on govt

Some argue that India must adopt a system like Israel, Netherlands and Japan, where the cooperative movement is strong but there is no ministry for it.

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Last July, the biggest news was the appointment of Amit Shah as India’s first Union Minister for Cooperation. The event received more coverage than the creation of the ministry itself, which was actually in the making after the passage of the 97th  Constitutional amendment in 2011. The amendment, steered by Sharad Pawar, then Union Minister for Agriculture and Cooperation, gave constitutional status and protection to cooperatives. The right to make a cooperative society was made a fundamental right under Article 19, and promoting them became a new Directive Principle (Article 43 B). Most significantly, and controversially, a new Part IX B (Articles 243ZH—ZT) was inserted in the Constitution to deal with issues like the incorporation, elections, governance and management of cooperative societies.

While supporters felt that this would give pan-India recognition to cooperatives and streamline their functioning, critics argued that this was yet another attempt at encroaching on the rights of state governments, as cooperations were placed in the State List by the founders of the Constitution. Moreover, it would give the Central Registrar the authority to issue directions even to cooperatives that were not registered under the Multi-State Cooperative Societies Act (MSCSA). What is interesting to note is that both the United Progressive Alliance and the National Democratic Alliance were on the same page with respect to the Union government’s salient role in the management of cooperatives.

However, the debate on the role of the Union government in cooperatives is not new. It has been around for eight decades and predates the enactment of our Constitution, from the time of the Montague-Chelmsford Reforms. Cooperation has always been on the state list. But with the enactment of the Multi-Unit Cooperative Societies Act, 1942 to regulate the operation of cooperatives whose business extended beyond the territorial jurisdiction of a single state, the states’ ‘monopoly’ over this portfolio was understandably diluted.


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Cooperation anchored in Agriculture

Historically, as cooperation was linked to agriculture credit and extension services, it was anchored in the agriculture ministry. In 1958, the National Development Council (which comprised all chief ministers and members of the Planning Commission) held a consultation on cooperatives and recommended the establishment of the National Cooperative Development Corporation (NCDC) and the National Agriculture Marketing Federation of India (NAFED)—the former to finance infrastructure for cooperatives, from warehousing to processing infrastructure, and the latter to address issues of price support to non-cereal crops like oilseed, pulses, copra, jute, cotton, and over the last two decades, onions and potatoes.

In 1984, Parliament enacted the Multi-State Cooperative Societies Act to declutter the different laws governing the same types of societies. In 2002, the NDA government, under Atal Bihari Vajpayee, announced a National Policy on Cooperatives to support the promotion and development of cooperatives.

Then came the 97th amendment in 2011, which was challenged almost immediately, and as per the directions of the Gujarat High Court in 2013, Part IX B was kept in abeyance. The high court held the view that this was an infringement of the rights of states, and therefore, required ratification by at least half the states. Even after the creation of the new ministry, this view was endorsed by the Supreme Court.


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More of the same

We have a new ministry. But for the sector, it is business as usual. Take, for instance, the regulatory function of the Central Registrar and the implementation of the MSCSA. For all practical purposes, it would not make much difference, except that the Central Registrar will now report to the Ministry of Cooperation, instead of the Ministry of Agriculture.

The Cooperative Development Funding Agencies also continue under their respective administrative ministries—the National Bank for Agriculture and Rural Development under the Ministry of Finance, the National Dairy Development Board under the Ministry of Dairying and NAFED under the Ministry of Agriculture. True, there is talk of a revamp of the 65,000 primary agricultural cooperative societies but that could have been undertaken by the extant disposition as well. Cooperatives have been allowed to access the Government e-Marketplace portal, funding has been enhanced, and new initiatives to support export from this sector have been announced but none of these is what one might consider ‘transformative’.

The last point is not about the ministry but about how the cooperative sector looks at itself. There are two very distinct views—the mainstream, which holds that cooperatives need nurturing and strengthening, and the minority, which holds that cooperatives’ should be treated at par with any other enterprise and that the long arm of the state actually does more harm than good. They cite the example of Israel, the Netherlands and Japan, where the cooperative movement is strong but there is no Ministry of Cooperation. They argue that the right to form an association is in any case a fundamental right, and that ‘a cooperative is an association of people’ coming together to fulfil their specific objectives. Not only that: even the right to carry on a trade or a profession is a fundamental right. As such, the amendment has not added any real value to the cooperative associations.

The median view, to which I subscribe, is that while facilitation and regulation may be necessary for cooperatives, in which the government is a major stakeholder, there must be space for those that require neither financial nor policy support from the government. These will be cooperatives that subscribe to the principles laid down by the International Cooperative Alliance (ICA)—which incidentally is silent on the government’s role in cooperatives.

So there is enough space and scope for all kinds of cooperative interventions—the more the merrier. In fine, the spirit of cooperation is more important than the establishment of a ministry to look after cooperatives.

Sanjeev Chopra is a former IAS officer and Festival Director of Valley of Words. Till recently, he was the Director of the Lal Bahadur Shastri National Academy of Administration. He tweets @ChopraSanjeev. Views are personal.

This article is part of the ‘State of the State‘ series that analyses policy, civil services, and governance in India.

(Edited by Srinjoy Dey)

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