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Policy Issues, Initiatives and Innovations in Cooperative Movement of India
Policy
Issues, Initiatives and Innovations in
Cooperative
Movement of India
Dhananjay Kumar Singh
MEMBER
National Cooperative Developement
Corporation
Former Naional Convener
Cooperative Cell BJP
“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”.
Cooperatives as business enterprise possess some basic interests such as
ownership and control but these interests are directly vested in the hands of
the user. Therefore, they follow certain broad values other than those
associated purely with profit making. Need for profitability is balanced by the
needs of the members and the wider interest of the community. The values
universally recognized as cornerstones of cooperative behaviour are self-help,
democracy, equality, equity and solidarity. Voluntary and open membership,
democratic control, economic participation, autonomy, training and information
and concern for community are the overarching features by which the
cooperatives put their values into practice.
The Indian cooperative sector was formalized in a legislation enacted in
1904 entitled the “Cooperative Credit Societies Act, 1904”. During a century of
its existence, this sector has built a network consisting of more than 8 lakhs
individual cooperative organisations and over 3.25 million members. It is
numerically the largest movement of its kind in the world. With a presence in
practically all walks of rural life and a coverage spanning almost all villages
of the country, the cooperatives have come to be recognized as one of the most
important economic and social organisations in the nation’s life. It is
envisaged that a vibrant and robust cooperative movement can significantly
contribute in harnessing the positive potential of social capital for the greater
good of society.
At present Agriculture is emerging as the new industry sector in India.
Narendra Modi led NDA government has initiated the path of doubling the farmer’s income. Indian
agriculture suffers from low productivity, low quality awareness and rising
imports. Soil testing, drip irrigation, increased facility of
mechanization, new policies and innovations through cooperatives will counter the
problems of agriculture sector.
Post-Independence,
cooperatives were considered to be the part of the strategy of planned economic
development. In the early 1960s, cooperative legislation all over the country
underwent a major change on the basis of the findings of the All India Rural
Credit Survey Committee (1951-54) formed under the Chairmanship of Shri A.D. Gorwala.
The crux of the Committee’s recommendations was that the State should play an active
role in the spread of the cooperative movement. Based on these recommendations,
States enacted new laws / amended the existing ones under Entry No. 32 of List
II, Schedule 7 of the Constitution. The new legislations gave them a major role
in the functioning of the cooperative institutions. Parliament accordingly
enacted a Multi-State Cooperative Societies Act in 1984 under Entry No. 44, of
the List I of the Schedule 7 of the Constitution.
Over the years, there has been a growing realisation that undue
interference from the State, lack of autonomy and widespread politicisation has
severely impaired the functioning of these institutions and there is need to
introduce urgent reforms in the sector. During the last decades, a number of
Committees were appointed to go into various issues of cooperatives. Choudhary
Brahm Prakash Committee (which proposed a model law) (1990), Mirdha Ccommittee
(1996), Jagdish Kapoor Committee (2000), Vikhe Patil Committee (2001) and V. S.
Vyas Committee (2001 and 2004) went for a complete dissection of the sector and
made a number of valuable suggestions to turn cooperatives into self-reliant,
autonomous and democratised institutions.
As a consequence of these recommendations and on support of a sizable
section of the cooperative community, two major events took place on the
cooperative scene of the country.
(a) The
Government of Andhra Pradesh passed the A.P. Mutually Aided Cooperative Societies
Act 1995. This was followed by similar enactments in eight other States; Bihar,
Jharkhand, Madhya Pradesh, Chhattisgarh, Jammu and Kashmir, Karnataka, Orissa
and Uttarakhand.
(b) The Union
Government replaced the existing Multi-State Co-operative Law by a fresh
statute – the Multi-State Cooperative Societies (MSCS) Act, 2002.
Government of India announced a
National Policy on Co-operatives in 2002. The ultimate objective of the
National Policy is to provide support for promotion and development of
cooperatives as autonomous, independent and democratic organisations so that
they can play their due role in the socio-economic development of the country.
During the first few decades after
Independence, this sector played a pivotal role in the economy by making
significant contribution to our primary sector production. It had an important
role in bringing food sufficiency through the green revolution, in building up
a network for distribution of new varieties of seeds, fertilizers and cash credit
and in creating an environment of participation and hope among the people.
Beginning with Amul in Gujarat, it took extraordinary strides in the dairy
sector too.
The cooperative sector, as it exists today in most of
the States, is weak and inactive. In this regard, two areas of concern stand
out prominently:
(i)
The
Britishers officially brought the cooperatives to India, they created the post
of the “omnipotent” Registrar of Cooperative Societies, a position specially
designed by the government with a view to operating the final levers of control
over these institutions and not allowing the cooperative sector to blossom as a
people’s movement. The government of Independent India, not only retained this
key position but also further added a complex hierarchy of bureaucratic power
centres to the existing structure. such a government controlled cooperative
infrastructure has gone against the very logic of the cooperative movement.
(ii)
The
Boards of a majority of cooperative Bodies are dominated by politicians. Many of
them are in cooperatives because they want to use this position as a stepping
stone for their political ambitions. And there are some who join this sector
because their current political standing has gone down.
A cooperative endeavour
should necessarily depend on its own resources, however small they may be. Its
growth and expansion should be evolutionary.
Cooperatives are meant to serve the member community
unlike outward looking organisations such as the corporates which operate for
profits. Its business is to be developed around their needs, policies are to be
designed according to their views and administration is to be carried out
through member participation. In the context of the emerging global
integration, it is being felt that the pressures of globalisation in the
country will have to be addressed to a large extent through upscaling of
self-help / cooperative initiatives. The issue of social capital as an input
for development and self-help / cooperative groups as instruments of economic
growth are therefore now being widely discussed.
The prevailing perception is that the cooperative sector in its present
form, has neither values nor competence to accept this challenge. Therefore,
there is need to inculcate values of selfhelp and member centrality in our
cooperative organisations so that they not only function as ‘enterprises’ but
also as units of larger ‘cooperative communities’.
The circumstances and
situation that gave rise to the cooperative movement about hundred years ago
are still in existence in large parts of rural India. Eighty-four per cent of
our farmers fall in the category of landless, marginal and small landholders,
they do not have access to organised markets for their produce and the
availability of agriculture credit is far too inadequate. Non-agriculture
activities in rural areas are equally credit starved. The most
appropriate institutional structure which has the capacity to tackle these
problems is cooperatives. They can provide credit to the rural people at affordable
rates. They can also play a major role in other primary sector activities such
as livestock development, dairy production, fisheries and agro-forestry.
Cooperatives can establish linkages between credit and market and thus develop
into multipurpose rural institutions. There is need to comprehensively revive
and strengthen this sector by adopting a multi-dimensional reform agenda
covering all aspects of legal, institutional and policy changes.
Realising the vital importance of the credit cooperatives
in rural credit system despite their short comings and weakness, the Indian
Government felt a strong need to remove the structural, operational and
managerial deficiencies through revival and resitiligation plan to ensure an effective cooperative credit sturcture,
vide notification dated 05 August 2004 under the Chairmanship of Prof. A. Vaidyanathan, Professor Emiratus,
Madras Institute of Developement Studies, Chennai. The
Vaidyanathan Committee submitted its draft report on 30th December
2004 with its recomendations. Govt. of
India accepted the report and it was implemented by NABARD.
The Union Government has introduced The Constitutional (One Hundred and
Sixth Amendment) Bill, 2006 in the Parliament on 22nd May, 2006.
Later on (One hundred eleventh Amendment) Bill 2009 with some amendments was
introduced in Parliament which came into shape of 97th Constitution Amendment Act 2011 on 12th January 2012 which notified
in The Gazette of India on 13th
January 2012.
The Hon’ble High Court of
Gujrat vide its order dated
22.04.2013 in the matter of W.P.
(PIL) No. 166 of 2012 Rajendra N.
Shah Vs Union of India & Aur, has struck down part
IX B containing Article 243ZH to 243 ZT of the constitution of India. Therefore a special Leave
Petition Nos. 25266-67 of 2013 has been filed in the Hon’ble Supreme Court of India against the aforesaid order by the
Govt. of India and the same is pending
for hearing. Between 13th January 2012 to 22 april 2013 some states
amended their state acts according to
the provisions of 97th
constitution Amendment Act.
Mutually Aided/Self-Reliant Societies
Acts passed by the nine States namely Andhra Pradesh, Bihar, Jharkhand, Madhya
Pradesh, Chhattisgarh, Orissa, Uttarakhand, Karnataka and Jammu and Kashmir.
Other States are still contemplating over this issue and in the process are
losing precious time in reviving the cooperative sector. Even in these nine
States, the desired impact has not been felt. Most of the societies still
continue to be governed by the old Act. There has not been much effort to
encourage them to come under the umbrella of the new enactment. The related
issue is whether two parallel cooperative laws are necessary or can there be a
single combined legislation to govern both sets of institutions. However, the
cooperative structure has to be reformed in such a way that the government
control on this sector gradually fades away.
Economic liberalisation has opened up
co-operatives to global competition. When most of the Indian industries have
been deregulated and de-licensed, it undoubtedly makes sense to put
co-operatives on the same level playing field. One of the reasons why cooperatives
have not been able to meet the needs of their members is because, by and large,
they continue to be governed by restrictive cooperative laws. The members of
co-operatives in India, who are largely rural, are at a potential disadvantage
given their generally limited assets, resources, education and access to
advanced technology. If cooperative enterprises are to serve rural producers,
they require an alternative to the present institutional form.
Keeping this in view, Government of India constituted a Committee
consisting of experts led by Dr. Y.K. Alagh, an eminent economist and former
Union Minister, to examine and make recommendations with regard to (a) framing
a legislation which would enable incorporation of cooperatives as companies and
(b) ensuring that the proposed legislation accommodates the unique elements of
cooperative business within a
regulatory framework similar to that of companies. On the basis of
recommendations of the Committee, a new Part IXA was inserted in the Companies
Act, 1956 through “The Companies (Amendment) Act, 2002”. The legislation came
into force from 6th February, 2003.
International Scenario :-
The cooperatives operate within the same legal
framework as corporations, in
countries like Netherlands, United States, Switzerland, Italy, Denmark, Norway,
etc. In New Zealand, with one of the world’s most productive dairy industries,
most of the dairying is carried out by cooperatives, which, in turn, are
registered under the Co-operative Companies Act, 1996. The Act allows
cooperatives to serve producers while competing successfully in the
international market.
To ensure that the results for cooperatives would be
comparable to non-cooperatives priorities specific to cooperatives: renewing
relationships with members and fostering social innovation.
The field of
innovation is vast and of great importance. As part of this vast set of
priorities, cooperatives consider new services to be central over the next
three to five years.
Indeed, new services are the top
priority for cooperatives, followed by extension of existing services like
Dairy, Fishrey, Poultry, Banking, Sugar Industries etc. Energy sector and
innovations in various fields are need of the hour. Next come supporting
capabilities and technology platforms, along with speed of adopting new
technologies. Innovation in cooperatives has two main objectives: to meet unmet
needs and to respond to threats. Cooperatives seem to innovate in a proactive
way, both to anticipate new needs and to respond to a more competitive
environment. In
summary, cooperatives have to respond in a proactive way to new needs while
they face threats and the competition. In addition, this suggests that
cooperatives need to prepare themselves in order to review their business
models.
The three major obstacles listed
relate to the innovation process, (1) to business culture and specifically to
delays in development, (2) selecting the right ideas and (3) having a risk-averse culture. They
correspond to previously mentioned priorities. Indeed, effective innovation
capabilities and high performance technology platforms would greatly contribute
to shorter development periods and efficient selection processes of ideas. The
third obstacle mentioned, a risk-averse culture, points to a cultural issue
specific to cooperatives. The culture of cooperatives is usually focused on
proximity and service to members, but not necessarily on innovation and
risk-taking.
The major challenges highlighted by
cooperatives in driving innovation are prioritizing the right ideas, developing
ideas and funding the right ideas. The three major challenges relate to a
previously identified obstacle – prioritizing the right ideas. This underlines
the importance of having a rigorous innovation process – from generating ideas
to selecting the right ideas and funding them. Another challenge identified by
cooperatives is managing external collaborations. This can be explained by the
decentralized form of their organization. Therefore, in order to achieve
innovation, cooperatives rely on partnership, both internally and with external
partners. On the contrary the access to
senior leadership support seems to be a given.
In terms of innovation priorities in
line with all cooperatives, new services are also central to innovation for
financial cooperatives, viz Banks and
financial services and Insurance and Mutuals.
For financial cooperatives, additional priorities emerge, such as
technology platforms, distribution channels, extension of existing services,
mobile applications, data analysis and speed of adopting new technologies.
These results confirm the need to evolve many aspects of the financial
cooperatives.
The major future challenges for
financial cooperatives are prioritizing the right ideas and managing external
collaborations. Reducing time to market is also a specific challenge for
financial cooperatives. Indeed, this challenge is related to the priority of
the speed of adopting new technologies. Financial cooperatives have more sector specific
priorities than cooperatives. They also have more challenges to overcome. This
probably reflects the changing context of this sector, which is subject to the
emergence of new players, such as financial technology companies.
we compare the priorities of
cooperatives to non-cooperatives. Cooperatives rank innovation at a slightly
lower level of importance than non-cooperatives do. Cooperatives also have more
numerous and diversified innovation priorities than non-cooperatives.
Additional priorities of innovation for cooperatives are renewing relationships
with members and supporting the social economy or improving sustainability.
Cooperatives also set themselves apart when it comes to organizational
structure. For innovation, cooperatives typically rely more on decentralized
organizations.
Financial cooperatives and mutuals
play an important role, both in the cooperative movement and within the
financial industry. Many financial cooperatives fill the needs of the communities
they serve with a specific approach focused on member services. They are
focused on their local communities and take an active social role. This leads
to a number of practices that set them apart: equalization in favour of branches in remote regions, less focus on
customer selection based on financial capacity, and a local strategic
flexibility.
Financial cooperatives are not only
able to maintain and create employment, but also to strengthen economic, social
and regional cohesion. Credit unions help spread diversity in the banking
sector, in terms of business models and property structures, strongly
contributing to the resilience of the financial system. The contributions of
the cooperative financial sector are due, in great part, to its innovation capability,
enabling it to adapt to evolving economic and social environments, as well as
adjusting to various local situations.
An innovation can target the
transformation of the existing business model to better serve existing members,
or to expand the business model towards new members or new services. Indeed, cooperatives tend to focus innovation
primarily on launching new services and on adapting existing services. Indeed,
cooperatives tend to focus innovation primarily on launching new services and
on adapting existing services. From an organizational standpoint, an innovation
can be managed internally, relying on internal resources and structures. On the
other hand, some initiatives rely more on external mechanisms, such as
incubators and accelerators.
Four innovation logics :-
• Reinvention: Launching innovations
aimed at transforming the business model and based on internal organizational
structures.
• Extension: Development of products and services connected to the
existing business model. This category includes initiatives aimed at expanding
the business model, based
on internal
organizational structures.
• Seeding: Investment in external structures to support the
development of new initiatives. This category includes innovations aimed at the
development of the business model and based on external organizational
structures.At a later stage, some external structures may gradually be
integrated, especially through acquisition, due to their growing importance.
• Open Innovation: Participation in the development of technological
innovations likely to have a significant impact on existing business models.
This category encompasses innovation aimed at transforming the business
model,based on external organizational structures.
The priorities for cooperatives are the extension of
new services, the development of innovation capacities, the development of
technology platforms and the speed of adopting new technologies. They are
pursuing these innovations both to seize new opportunities and to counter
threats. However, they still face various challenges when it comes to their
innovation processes regarding the generation, selection and funding of ideas.
Financial cooperatives also face more challenges than cooperatives, in areas
such as the management of partnerships and reducing time to market.
Given their long-term perspective,
which facilitates longterm investment and their decentralized organization,
enabling them to stay close to the needs of their members and communities,
cooperatives are in a unique position to benefit from the current wave of
innovation.
A number of organizational issues are
associated with these innovation categories:
“Think local, act global”: innovations frequently emerge from local
initiatives, which correspond to the territorial roots of financial
cooperatives and mutuals. The challenge
for some
cooperatives is to identify innovations that are broadly relevant and to then
systematically roll them out. Moreover, certain innovations may need to be
adapted to the specific requirements of each territory, as they are rolled out
in a “glocalization” process.
Innovation that reaches out to members: some of the cooperative organisations look for
innovative approaches regarding the democratic aspects of their cooperatives
and their capacity to renew the involvement of members.
Reconciling agility, efficiency and proximity: cooperative organisations have frequently
consolidated their information systems within shared entities. Since innovation
requires a high degree of agility and proximity to users, innovation
departments are often faced with the challenge of mobilization between regional
entities, operations departments and shared IT departments.
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