Board of political control

Reforming the cooperative sector needed Central action.

India’s 6,00,000 or so cooperative enterprises have reason to be pleased at the passage of the Constitution (111th Amendment) Bill by Parliament in the last week of its winter session. The Bill holds out hope that cooperatives can rid themselves of government interference and political exploitation — addressing some of their other ills in the process. The Bill provides for restoring the supremacy of the general bodies of the cooperatives; currently, over-large boards have a substantial, though wholly needless, representation of bureaucrats and politicians as directors. This increases the chance that cooperatives will be run professionally and in a wholly transparent manner, and be more accountable to their members. The amendment caps the number of directors that a cooperative society can have, makes it difficult to supersede duly elected cooperative bodies, and mandates timely conduct of elections. Equally noteworthy is the provision to subject cooperatives to independent and professional audits, and bring banking cooperatives under the Banking Regulations Act — which, till now, did not apply to them.

It is worth mentioning that some of the cooperative societies, especially those in the sugar sector, can have more than 70 directors at present; most of these have no professional skills – or, indeed, any other perceivable expertise – that could justify their appointments. Worse, state governments often park unwanted officials in the cooperatives, mostly as directors or managing directors. As such, the cooperatives have become virtual appendages of the government, rather than being autonomous institutions. This has led to the downfall of many cooperatives; Nafed being a striking example. Naturally, several cooperative banks, too, have sunk following the disbursal of bad credit to politicians or their nominees.

The Centre’s intervention to set things right has, indeed, been necessitated chiefly because of the states’ unwillingness to allow control of cooperatives to slip from their grasp. And since the regulation of cooperatives is a state subject under the Constitution, reform of the sector necessitated a constitutional amendment. Indeed, some earlier bids by the Centre to regulate and reform this sector fell thanks to opposition from states. States will now feel the pressure to align their cooperative laws with the guidelines originally built into the Constitution. The cooperative sector was envisaged as the “third sector” of the Indian economy, distinct from the private and public sectors. Parliament may have intervened, but the effectiveness of even reformed regulations still depends on the sincerity with which these are enforced. Political will in the states, thus, will continue to be critical.