UPSChub Polity

Evolution of the Cooperative Movement

Pre-Independence Era:

The term cooperative society came into existence when the farmers of Pune and Ahmednagar spearheaded an agitation against money lenders charging exorbitant interest rates. Consequently, the British government passed three acts: the Deccan Agricultural Relief Act (1879), the Land Improvement Loan Act (1883), and the Agriculturists Loan Act (1884).

• Cooperative Credit Societies Act, 1904: Gave a definitive structure and shape to the movement.
• Montague-Chelmsford Reforms (1919): Cooperation became a provincial subject, allowing provinces to make their own laws. This categorization carried over to the Government of India Act, 1935.
• Multi-Unit Cooperative Societies Act, 1942: Enacted to cover societies with membership extending across more than one province.

Post-Independence Integration & Successes:

After independence, cooperatives became an integral part of the Five-Year Plans. In 1958, the National Development Council (NDC) recommended a National Policy on Cooperatives, personnel training, and setting up Co-operative Marketing Societies. Parliament later enacted the Multi-State Cooperative Societies Act, 1984 to remove the plethora of varying laws.

The two most iconic success milestones in India include:

Constitutional Evolution: The 97th Amendment Act (2011)

The 97th Constitutional Amendment Act of 2011 granted constitutional status and protection to co-operative societies by making the following changes:

Composition, Governance, and Board Operations

• Incorporation & Regulation: The state legislature makes provisions for incorporation, regulation, and winding-up based on voluntary formation, democratic member control, economic participation, and autonomous functioning.
• Board Size Limits: The board shall consist of directors as provided by the state legislature, but the maximum number of directors shall not exceed twenty-one (21).
• Reservations: Mandatory reservation of one seat for SC/ST and two seats for women on the board of every society where such categories exist among members.
• Tenure: The term of office for elected members of the board and its office bearers is fixed at five years from the date of election.
• Co-option Matrix: Provision for co-opting persons with banking, management, finance, or specialisation experience. However, co-opted members do not have the right to vote in any election of the society or be eligible to be elected as office bearers.

Elections, Suspensions, and Maintenance of Accounts

• Elections: Must be conducted before the expiry of the term of the current board. The superintendence, direction, and control of electoral rolls vest in a body provided by state legislation.
• Supersession & Suspension: The board can be superseded or kept under suspension for a maximum period of six months on grounds of persistent default, negligence of duties, acts prejudicial to the society, stalemates, or election failures.
• Auditing & General Body: Accounts must be audited at least once each financial year. The audit report of apex societies must be laid before the state legislature. The Annual General Body meeting must be convened within six months of the close of the financial year.
• Filing Returns: Societies must file returns within six months of the close of every financial year to the designated State authority. Penalties for offenses are provided by state laws.

Core Features of Co-operative Societies

Need for the 97th Amendment & Challenges

Why the Amendment was Enacted:

The cooperative sector had shown structural weaknesses in safeguarding member interests. Performance in qualitative terms was not up to desired levels despite expansion.Indefinite postponement of elections and management by nominated administrators diluted accountability. Furthermore, a lack of professionalism led to low productivity. The amendment secures social and economic justice, promoting autonomous and economically sound functioning away from outside interference.

Socioeconomic Significance:

• Unionization: Helps poor, illiterate, and unskilled people combine through mutual assistance to achieve socioeconomic goals.
• Remote Penetration: Enters far-flung rural areas where private and state sectors face operational limits.
• Market Strength: Eliminates intermediaries through agricultural marketing societies, establishing direct producer-consumer links (e.g., NAFED). Provides credit, storage godowns, cold storages, rural roads, irrigation, and power.
• Social Capital: Blurs structural gaps between deep-seated social cleavages, promoting solidarity, self-help, democracy, and ethical responsibility.

National Policy Framework & Major Bottlenecks

National Policy of 2002:

Focused on promotion, development, reduction of regional imbalances, and HR training. Eminent groups like the S. Vyas Committee (2001 and 2004) strongly advocated replacing government-dominated legal frameworks with people-centric legislation.

Challenges Facing the Sector:

• Lack of Spontaneity: The movement hasn't consistently emanated natively from the grassroots people themselves.
• Member Issues: Failure to ensure active participation, lack of measures to exit non-user members, and low awareness profiles.
• Capital Strains: Inadequate emphasis on capital formation and expanding member equity stakes. Faced with cost competitiveness threats due to overstaffing and entry of MNCs.
• Banking Weaknesses: The financial links (cooperative banks) face heavy overpoliticization. Many operate strictly on paper with high Non-Performing Asset (NPA) asset ratios (e.g., the PMC crisis), exacerbated by minimal shareholder participation.
• Regional Disparities: Striking regional success variations across demographic and cultural clusters.

Key Committees Matrix: