Cooperating for cooperatives

Proposed constitutional amendment deserves a try

The Central government’s proposal to amend the Constitution, during the winter session of Parliament, to make it obligatory for the states to ensure autonomy and democratic functioning of cooperatives is a welcome, if belated, move. However, there are limits to what even constitutional amendments can do in reviving institutions that have been deliberately subverted by rival political institutions at the state level. If a Constitution amendment was all that was required to revive panchayats, the 73rd amendment ought to have done it. Cynics would suggest that state-level politicians will do to this amendment on cooperatives what they did to the one on panchayats. Barring exceptions in a few sectors and states, the cooperative sector, particularly cooperative credit societies numbering over 120 million, has for a long time been in a shambles with all kinds of vested interests using them as personal fiefdoms and ladders to political power and means of personal aggrandisement. To be fair, the United Progressive Alliance government has tried hard to revive cooperative societies since 2004.

The proposed insertion of a new Article 43(B) in Part IV of the Constitution seeks to make it binding for the state governments to facilitate voluntary formation, independent decision-making and democratic control and functioning of the cooperatives. This is sought to be ensured by holding regular elections under the supervision of autonomous authorities, five-year term for functionaries and independent audit. Significantly, it will also mandate that in case the board is dissolved, the new one is constituted within six months. Such a constitutional provision is, indeed, urgently required as the woes of the cooperative sector are far too many, long-lasting and deep-rooted to be addressed under the present lax legal framework.

A fundamental flaw in the Indian cooperative system is that, unlike in other countries where the cooperatives are based on the concept of mutuality with thrift and credit functions going hand in hand, the Indian cooperatives are focused largely on credit alone. This makes the entire cooperative structure refinance-dependent and borrower-driven. Without the thrift feature, borrowers at all levels have little stake in ensuring smooth running or economic viability of these organisations. Besides, their solely credit-driven nature of functioning necessitates financial involvement of the government which allows politicians and bureaucrats to wrest control of the cooperatives and interfere in their day-to-day operations. Worse still, this has rendered the cooperatives virtually appendages of the government for implementing developmental and, more so, loss-making populist programmes which normally should be operated by the states themselves. What is really astonishing is that though several committees have, in the past, gone into the ills of the cooperative sector and have suggested suitable solutions, little remedial action has ensued all this while. The reforms proposed by committees headed by Chaudhry Brahm Prakash in the 1970s, by Jagdish Capoor, Vikhe Patil and VS Vyas in later years and, most recently, by A Vaidyanathan, are yet to be carried out in right earnest. The cooperative sector has played an important developmental role and deserves a second chance, which the proposed amendment may offer.