How India's Ministry of Cooperation is reshaping the cooperative sector

Despite legal setbacks, the Amit Shah-led ministry has moved rapidly forward and is expected to soon unveil a new set of regulations to further grow the cooperative sector

Last month, Oil Marketing Companies (OMCs) decided to give sugar cooperatives preference over private companies in supply of ethanol for their latest tender of 880 million litres in the 2024-25 supply year, which began in November. The decision has gladdened the hearts of the cooperative sugar mills, which produced 30 per cent of the 32 million tonnes of sugar (net) in the 2023-24 season, though private millers are less than delighted. 

Importantly, the OMCs’ decision is indicative of the growing clout of cooperatives. For this, experts credit the Ministry of Cooperation, which was created by a Union government’s gazette notification dated July 6, 20221. Till then, cooperatives were under the Cooperation Division of the erstwhile Department of Agriculture, Cooperation & Farmers Welfare in the Ministry of Agriculture and Farmer Welfare. 

Under Amit Shah, who has been at the helm since it was formed, the Cooperation Ministry has taken many steps to push the sector, despite apprehension in some quarters over the impact of an enlarged government role on the voluntary essence of cooperatives. In fact, 2025 has been declared the International Year of Cooperatives — a year which Shah has promised to make a landmark for India’s cooperative sector through more transpare­n­cy, and by expanding their reach. 

The country has 800,000 registered cooperatives, a large number of which are in rural and semi-urban areas and directly affect 400 million people. 

Though brands such as Amul, Indian Farmers Fertiliser Cooperative (Iffco), and Krishak Bharati Cooperative (Kribhco) have been the flag bearers of the cooperative movement, there have been many failures as well, which sometimes made economists sceptical of the sector’s viability. 

Some experts say that though the Ministry of Cooperation has brought cooperatives into the limelight, which eluded them earlier, the government should desist from dictating the agenda of cooperatives. 

“Cooperatives are by definition a voluntary association of people for common good and common agenda. They should not become government-controlled bodies, unless the spirit of cooperation is maintained. Any top-down approach could be detrimental,” said a senior executive of a leading association of cooperatives. 

Roles defined

  Within weeks of the Central government forming the Ministry of Cooperation, the Supreme Court struck down parts of the 97th amendment to the Constitution that sought to crimp state governments' powers over cooperative societies. It upheld the supremacy of state governments in governing cooperative societies in their jurisdiction and saved the implementation of amendments for multi-state cooperative societies (MSCS), which come under the Central government. 

The SC order effectively meant that the Ministry of Cooperation’s jurisdiction was only in respect of MSCS, or cooperatives with operations in more than one state. A few days later, Shah clarified that the Centre did not intend to interfere in the working of state cooperatives. 

A recent report by Primus Research estimates that India’s cooperative sector can generate around 55-56 million self-employment opportunities by 2030, up from about 30 million in 2018, if it manages to maintain a healthy growth rate of 5-6 per cent a year. It can contribute 3-5 per cent to the gross domestic product (GDP) by 2030 and go up to 10 per cent if both direct and self-employment potential is taken into account. 

However, critical interventions have to be made, such as strengthening the institutional capacity of cooperatives by advancing digital infrastructure and adopting new technologies, launching a new national cooperative mission, and onboarding cooperatives in the Open Network for Digital Commerce to expand market access. On access to finance, the report underlines the need to leverage the priority sector lending framework to direct funds to cooperatives, particularly Tier 1 cooperatives, through commercial banks. 

 

New policy

  A new policy on cooperatives is on the anvil. Its draft, according to reports, will recommend setting up an umbrella organisation under the Reserve Bank of India (RBI) and the National Bank for Agriculture and Rural Development (Nabard) for streamlining the credit structure and financing needs of co-ops and collectives. 

Work is on to increase the ambit of Primary Agriculture Cooperative Societies (PACS) to cover more economic activities, such as operating petrol pumps, ration shops, and medical stores. A project to computerise PACS has been undertaken, with rules laid down for their winding up. 

India has close to 105,000 PACS, of which only 65,000 are functional. As many as 200,000 new ones are expected to be formed in the next five years. Of these, Nabard will set up 22,750 in the first phase and 47,250 in the second. The National Dairy Development Board (NDDB) will set up 56,500 in the first phase and revitalise 46,500 others. Already, 10,000 new PACS have been formed. 

Tax dues of sugar mills, worth Rs 46,000 crore, have been cleared. Work is on to build the world’s largest network of grain godowns under the cooperative sector. Multiple tax tweaks have been made to benefit the cooperative sector, such as lowering the surcharge on income tax for cooperative societies with income between Rs 1 crore and Rs 10 crore from 12 per cent to 7 per cent — on a par with companies. 

Work is on to set up a National Cooperative University, give more power to urban cooperative banks, and enhance cooperation among cooperatives. The primary act for MSCS has been amended to give them more power.   

New multi-state coops

  The Cooperation Ministry has formed three new multi-state cooperatives: For exports, certified seeds, and organic products. NDDB, National Agricultural Cooperative Marketing Federation of India Ltd (Nafed), Amul, Iffco, Kribhco, and NCDC are among the major promoters of these cooperatives and will contribute to the paid-up capital of each one of the three new cooperatives. 

The national seeds cooperative, christened Bhartiya Beej Sahakari Samiti Limited (BBSSL), is an umbrella organisation for cultivation, production and distribution of improved seeds under a single brand name. Cooperative societies of states and Union territories can become its members. Already, according to data from the ministry, 16,775 applications from 32 states have been received for membership. 

NDDB, Amul, and Nafed are among the five promoters of the newly announced national-level cooperative society for organic food products, called the National Cooperative Organics Limited (NCOL). It is an umbrella organisation for production, distribution, and marketing of certified and authentic organic products. Various cooperative societies — state as well as MSCS — and farmer producer organisations (FPOs) can become its members. NCOL has already launched 11 products. Around 5,154 applications have come in for its membership. 

The third cooperative, which is the biggest of the three in financial terms, is on promotion of exports of products made by cooperative societies, called the National Cooperative Exports Ltd. It has already clocked revenues of Rs 4,000 crore through exports in the first few months of its inception through exports of rice, onion, sugar, and jeera.