Cooperatives in India

– Sahakar se Samriddhi (Prosperity through Cooperation)

In governance and development, cooperatives represent a middle path between the State and the Market.
They are people-owned, people-managed, and people-oriented institutions, rooted deeply in India’s rural and agrarian society.

According to the International Cooperative Alliance, a cooperative is:

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.

In simple words:
👉 Cooperatives are democracy in economic life.

📜 Historical Evolution of Cooperatives in India

🌾 Agrarian Roots

The cooperative movement in India emerged as a response to rural distress, especially:

• Chronic indebtedness
• Exploitative moneylenders
• Lack of institutional credit

By the late 19th century, farmers began forming cooperative credit societies and chit funds to pool resources and share risks.

⚖️ Legislative Foundations (Colonial Period)

Several legal and institutional milestones shaped Indian cooperatives:

• Cooperative Credit Societies Act, 1904 & 1912
• Constitutional Reforms, 1919
• Royal Commission on Agriculture (1928)
• Committee on Cooperative Planning (1945)

These measures provided the organizational backbone of cooperatives in India.

🏛️ National Policy on Cooperatives, 2002

The National Policy on Cooperatives (2002) marked a shift from control to empowerment.

Key Objectives:

• Promoting cooperatives as people’s institutions
• Reducing government interference
• Strengthening autonomy, democracy, and professionalism
• Ensuring inclusion of women and marginalized groups

👉 The focus moved from state-controlled cooperatives to member-driven cooperatives.

⚖️ Constitutional Provisions Related to Cooperatives

🔹 Fundamental Right

• Article 19(1)(c): Right to form cooperative societies

🔹 97th Constitutional Amendment Act, 2011

• Inserted “Cooperative Societies” in Part III
• Added Article 43B (DPSP):
  State shall promote voluntary formation, autonomous functioning, democratic control, and professional management
• Inserted Part IXB (Cooperatives)

⚠️ Later clarified by the Supreme Court

⚖️ Supreme Court on Cooperatives

• Struck down parts of 97th Constitutional Amendment
• Held:
  • Cooperatives are a State Subject
  • Part IXB applies only to Multi-State Cooperatives
• Reaffirmed federal balance

📈 Contribution of Cooperatives to India’s Growth Story

🌾 Boost to Rural Economy

• Cooperatives cover ~97% of Indian villages
• Disburse ~19% of agricultural credit

📦 Economies of Scale

• India has ~30% of the world’s cooperatives
• Dairy sector:
  • 45,000+ cooperatives
  • 60 lakh members

🌱 Inclusive Growth & Employment

• Prevent concentration of economic power
• Potential to generate:
  • 5.5 crore direct jobs
  • 5.6 crore self-employment opportunities by 2030 (Primus Partners)

🧪 Fertilizer Sector

• Indian Farmers Fertiliser Cooperative Limited (IFFCO)
  • Network of 40,000+ cooperatives
  • Reaches 5.5 crore farmers

🌿 Organic Farming

• Sittilingi Organic Farmers Association
  • Promotes millets like ragi and bajra
  • Pays farmers ₹2–3/kg above market price

⚠️ Challenges in the Cooperative Sector

1️⃣ Regional Imbalance

• Strong in western & southern India
• Weak in eastern & north-eastern states

Example:

• Amul (Gujarat) vs weak dairy cooperatives in Odisha & Bihar

2️⃣ Absence of Timely Elections

• Democratic deficit in management
• Money power influences elections
• Supreme Court of India (2013)
  Thalappalam Service Cooperative Bank Ltd. case stressed regular elections after the 97th Amendment.

3️⃣ Dual Regulation of Cooperative Banks

• Regulated by RBI + State Governments
• Leads to accountability gaps

Example:

• PMC Bank crisis (2019)—poor coordination delayed action

4️⃣ Defective Management

• Dominance of landlords and big farmers
• Marginal farmers sidelined

5️⃣ Political Interference

• As noted by Sujata Patel and Daniel Thorner, cooperatives often become political battlegrounds
• Benefits distributed on political lines

🌾 Issues in Agricultural Cooperatives

• Focus only on credit, not demand
• Failure to become multipurpose institutions
• Poor market access
• Free-rider problem—benefits without contribution

🏛️ Steps Taken by the Government

🧭 Ministry of Cooperation (2021)

• Vision: Sahakar se Samriddhi

📜 Draft National Cooperation Policy, 2025

• Holistic development of cooperatives
• Focus on women & youth participation

🏦 Banking Regulation (Amendment) Act, 2020

• RBI empowered to → Supersede boards, Allow capital raising

🌾 Institutional Support

• National Agricultural Cooperative Marketing Federation (NAFED)
• National Cooperative Development Corporation (NCDC)

🛒 GeM Platform

• Cooperative societies registered as buyers

⚖️ Multi-State Cooperative Societies (Amendment) Bill, 2022

• Independent Election Authority
• Cooperative Ombudsman
• Revival Fund for sick MSCSs
• Mandatory inclusion → 1 SC/ST, 2 women on Boards
• Stricter penalties (up to ₹1 lakh)

💰 Union Budget 2025–26 Highlights

• PM Dhan-Dhaanya Krishi Yojana
• Rural Prosperity Program
• Pulses Mission via NAFED/NCCF
• KCC limit raised to ₹5 lakh
• MSME support for women, SC/ST entrepreneurs

🔮 Way Forward for Revitalising Cooperatives

• Expand credit portfolio (housing, consumer loans)
• Digitalisation & computerisation
• Professional management & depoliticisation
• Visionary leadership → Tribhuvandas Patel (Amul), Vithalrao Vikhe Patil
• Merge or dissolve weak cooperatives
• Expand institutional credit to landless workers & artisans

🌟 Success Stories of Cooperatives in India

🥛 Amul Dairy Cooperative

• Apex body: Gujarat Co-operative Milk Marketing Federation
• Founder: Verghese Kurien
• Led India’s White Revolution

🫓 Lijjat Papad

• Shri Mahila Griha Udyog Lijjat Papad
• Started in 1959 by 7 women with ₹80
• Today: 45,000+ women members
• Model of dignity, decentralisation & quality

🌸 Nandini Sahakar Yojana

• Women cooperative support via NCDC
• Interest subsidy + capacity building

🎯 Concluding Insight

Cooperatives embody economic democracy—empowering farmers, women, and workers through collective ownership—but their revival demands autonomy, professionalism, digitalisation, and insulation from politics.