The term ‘Multistate Cooperatives’ defines societies whose area of operations and members are spread across multiple states. For example, sugar mills along the Karnataka-Maharashtra border procure cane from both states; similarly, there are many milk unions, banks, and other cooperatives that operate in more than one state. The Constitution (97th Amendment) Act, 2011 introduced a new Part IXB regarding cooperatives working within India.
Loopholes in the Multi State Cooperative Societies (MSCS) Act, 2002
The MSCS Act, 2002 was passed to govern multistate cooperatives. However, the act has been deemed ineffective due to loopholes that allow administrative and financial control by the central registrar, without any checks and balances at state level. There exists weak institutional infrastructure for the central registrar, leading to poor grievance redressal mechanism. This has been leveraged by various credit societies to launch ponzi schemes.
The Union Cabinet’s Approval of the MSCS Amendment Bill, 2022
In a bid to improve the functioning of cooperatives, the Union Cabinet approved the MSCS Amendment Bill, 2022. The new Ministry of Cooperation was formed to invigorate the growth of this sector. The Bill proposes amendments to enhance governance, transparency, and ease of business.
Changes Proposed in the Bill
The amendment bill includes provisions for women’s representation and Scheduled Caste/Scheduled Tribe members on cooperative society boards. It aims to reform electoral processes, strengthen monitoring mechanisms, and increase accountability. Additionally, the Bill introduces specific provisions for setting up a Cooperative Election Authority, Cooperative Information Officer, and a Cooperative Ombudsman.
Fund Raising and Rehabilitating Sick Cooperative Societies
The MSCS Amendment Bill, 2022 allows the issuance of non-voting shares to raise funds. It also proposes a Rehabilitation, Reconstruction & Development Fund to rejuvenate ailing cooperative societies. Provisions for stipulating prudential norms will bring in financial discipline.
Key Points of MSCS Act, 2002
Despite being a state subject, some cooperatives operate in multiple states. The MSCS Act provides for their legal jurisdiction by including representatives from all states they operate in, on their board of directors. Maharashtra leads with the highest number of such cooperatives, trailed by Uttar Pradesh and New Delhi.
Concerns Over Lack of Checks and Balances
The central registrar only permits inspection under special conditions, leading to a lack of transparency. There is no physical infrastructure at state level which adds to the difficulty in grievance redressal.
Cooperatives in India Defined
Defined by the International Cooperative Alliance (ICA), a cooperative is a voluntary association of people working together to meet their shared economic, social, and cultural needs through a jointly-owned enterprise. India boasts successful cooperatives like NAFED, IFFCO, and AMUL.
Constitutional Provisions for Cooperatives
The Constitution (97th Amendment) Act, added a new Part IXB regarding the cooperatives functioning in India. A new Article 43B was introduced in the Directive Principles of State Policy regarding the promotion of cooperative societies.
Supreme Court Judgement on 97th Amendment Act, 2011
In July 2021, the Supreme Court struck down certain provisions of the 97th Amendment Act, 2011 due to its significant impact on state legislatures’ power over the cooperative sector. States have exclusive powers to legislate on topics exclusively assigned to them. Since ratification was not done in the case of the 97th amendment, it was deemed invalid.
Relevance of Cooperatives in UPSC Civil Services Examination
The topic of cooperatives is important for UPSC Civil Services Examination and is often seen in previous year questions related to agricultural finance in India. Topics such as the role of cooperatives in rural credit organisation and how technology can be utilized to better serve rural clients frequently appear.
