The Centre intends to amend the Multi State Cooperative Societies (MSCS) Act, 2002 to address certain loopholes. This decision follows the founding of a new Ministry of Cooperation.
Understanding Multi-State Cooperative Societies (MSCS)
Certain cooperatives, such as those for sugar and milk, banks, and milk unions, operate across state lines, despite cooperatives being technically considered a state subject. Examples include sugar mills near the Karnataka-Maharashtra border that source cane from both states. Maharashtra tops the list with 567 such society affiliations, followed by Uttar Pradesh (147) and New Delhi (133). The MSCS Act was enacted to supervise these cooperatives.
Legal Jurisdiction of MSCS
The board of directors of these societies comprise representatives from all states they operate in. Administrative and financial supervision falls under the central registrar with no state government official having control over them. This design was implemented to allow smooth functioning of the societies, free from state authorities’ interference.
Associated Concerns with the MSCS Act, 2002
Unlike state-registered societies, multistate societies lack checks and balances to maintain transparency in the process. The central registrar can only permit inspection of the societies under certain conditions after notifying the societies in advance.
Furthermore, the institutional infrastructure of the central registrar is weak, with no officers or offices at the state level. Most work is done online or through correspondence. Consequently, the procedure for lodging grievances is inefficient, leading to instances of credit societies exploiting these gaps by launching Ponzi schemes.
Potential Reforms/Amendments
The Centre should collaborate with stakeholders to strengthen institutional infrastructures to facilitate better governance. This could include increasing manpower or utilizing technology to improve transparency. Administrative control of such societies could also be assigned to the state commissioners.
Cooperatives in India
The International Cooperative Alliance defines a cooperative as an autonomous group of voluntary individuals coming together to address their economic, social, and cultural needs via a democratically-controlled jointly-owned enterprise. Some successful examples in India include the National Agricultural Cooperative Marketing Federation of India (NAFED), Indian Farmers Fertilisers Cooperative Limited (IFFCO), and AMUL.
Constitutional Provisions
The Constitution (97th Amendment) Act, 2011 added a new Part IXB on cooperatives operating in India. Article 19(1)(c) was modified to include “cooperatives”, giving citizens the fundamental right to form cooperatives. A new Article 43B was also added concerning the promotion of cooperative societies.
Recent Supreme Court Judgement
In July 2021, the Supreme Court nullified certain provisions of the 97th Amendment Act, 2011. The court ruled that these provisions substantially impacted the exclusive legislative power of state legislatures over the cooperative sector. The 97th Amendment passed without ratification by state legislatures, violating the requirement specified in the Constitution. Therefore, states maintain exclusive rights to legislate topics reserved for them. Since the amendment wasn’t ratified accordingly, the Supreme Court struck it down while upholding the validity of provisions related to Multi State Cooperative Societies (MSCS).
Last Modified: February 14, 2024