IAS Gyan

Daily News Analysis


22nd December, 2022 Polity and Governance

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In News

  • The Union Government introduced the Multi-State Cooperative Societies (Amendment) Bill, 2022 in the lok sabha.
    • The amendment bill aims to make the governance of multi-State cooperative societies more democratic, transparent and accountable.
  • The Lok Sabha referred the Multi-State Co-operative Societies (Amendment) Bill-2022 to a joint committee of Parliament comprising 21 members from the Lok Sabha and 10 from the Rajya Sabha.
    • Lok Sabha Speaker will appoint one of the members of the committee as its chairperson.

Key provisions of the Bill

  • Election of board members: Under the original Act, elections to the board of a multi-state co-operative society are conducted by its existing board members. The new Bill amended the provision and added that the Union government will establish the Co-operative Election Authority to conduct elections and other prescribed functions.
    • The Authority will consist of a chairperson, vice-chairperson, and up to three members appointed by the Union government on the recommendations of a selection committee.
  • Only active members will be eligible to be elected as board members or office bearers of the cooperative society.
    • Active members are those who are attending at least three consecutive general meetings.
  • Redressal of complaints: The Union government will appoint one or more Cooperative Ombudsmen with territorial jurisdiction. The Ombudsman shall inquire into complaints made by members of cooperative societies.
    • The Ombudsman shall complete the process of inquiry and adjudication within three months from the receipt of the complaint.
    • Appeals against the directions of the Ombudsman may be filed with the Central Registrar (who is appointed by the Union government) within a month.
  • The amalgamation of co-operative societies: The Bill allows co-operative societies (registered under state laws) to merge into an existing multi-state co-operative society.
    • To allow such a merger, at least two-thirds of the members of the cooperative society must be present and vote at a general meeting to must pass a resolution.
  • Fund for sick co-operative societies: The Bill has a provision to establish the Co-operative Rehabilitation, Reconstruction and Development Fund for the revival of sick multi-state co-operative societies. A sick multi-state co-operative society has accumulated losses equal to or exceeding the total of its paid-up capital, free reserves, and surpluses, and has suffered cash losses in the past two years. 
    • The Fund will be financed by multi-state co-operative societies that are in profit for the last 3 financial years. They will deposit either one crore rupees or 1% of the net profit into the Fund, whichever is less.
  • Specified co-operative societies: According to the original Act, the Union government may give directions and supersede the boards of specified multi-state co-operative societies where the Union government has a shareholding of at least 51%.
    • The new Bill amends this provision and added that the Union government may give directions and supersede the boards of any multi-state co-operative society where the government has any shareholding or has extended any loan, financial assistance, or guarantee.
  • Composition of board of directors: Under the original Act, the board of a multi-state co-operative society has a maximum of 21 directors. The board may co-opt two additional directors. 
    • The Bill amends the composition of the board of directors to mandate the inclusion of; one Scheduled Caste or Scheduled Tribe member, and 2 women members.
    • The co-opted members must have experience in the field of banking, financing, co-operative management or specialisation fields related to the functioning of the multi-state co-operative society.
  • Increasing penalties: Under the original Act, certain offences by a multi-state co-operative society or its officer or member including making false returns, furnishing false information, or disobeying any summons are offences. The fine for such offences extends from Rs 2,000 to Rs 10,000. 
    • The Bill adds that the failure to file any return or information will also be an offence.
    • The fine for all these offences will extend from Rs 5,000 to one lakh rupees.


Cooperative Societies in India

  • A Cooperative Society can be defined as a voluntary association of individuals united voluntarily to meet their common economic, social, and cultural Interests.
    • It aims to serve the interest of society through the principle of self-help and mutual help.
  • The roots of cooperative Societies in India were sown when the first Cooperative Societies Act was passed in 1904.
  • The Government Passed the Co-operative Societies Act of 1912.
  • In 1958, the National Development Council (NDC) recommended a national policy on cooperatives and the setting up of Cooperative Marketing Societies.
  • National Cooperative Development Corporation (NCDC) was set up under the National Cooperative Development Corporation Act, of 1962.
  • Union Government announced a National Policy on Cooperatives in 2002.
  • The 97th Constitutional Amendment Act of 2011 granted constitutional status and protection to cooperative societies. This Amendment introduced 3 changes in the constitution:
    • It made the right to form cooperative societies a fundamental right (Article 19 ).
    • It included a new Directive Principle of State Policy on the promotion of cooperative societies (Article 43B).
    • It added Part IX-B in the Constitution “The Co-operative Societies” (Articles 243-ZH to 243-ZT).
  • Provisions under the Indian Constitution
    • Indian Constitution under Part IX-B contains various provisions related to cooperative societies.
    • The state legislature may make provisions for the incorporation, election, regulation and winding-up of cooperative societies.
  • Organisation Structure
    • The board shall consist of some directors as may be provided by the state legislature, but, the maximum number of directors of a cooperative society shall not exceed 21.
    • The state legislature shall provide for the reservation of one seat for the Scheduled Castes or the Scheduled Tribes and two seats for women on the board of every cooperative society having members from such a category of persons.
  • The functional directors of a cooperative society shall also be the members of the board and such members shall be excluded to count the total number of directors (21).
  • The term of office of elected members of the board and its office bearers shall be 5 years from the date of the election.

Significance of Cooperative Societies

  • The village cooperative societies provide important inputs for the agricultural sector.
  • Consumer societies meet their consumption requirements at concessional rates.
  • Marketing societies help the farmer to get remunerative prices.
  • The Cooperative processing units help in value additions to the raw products.
  • They also help in building up storage, warehouse, cold storage, rural roads and in providing facilities like irrigation, electricity, transport, education and health.
  • They play the role of a balancing factor between the public and private sectors and also supplement the work of the government and its agencies.
  • Many Cooperative societies have Successfully promoted rural development
    • National Cooperative Development Corporation (NCDC)
    • National Agricultural Cooperative Marketing Federation of India (NAFED)
    • AMUL and Co-operative Rural Development Trust (CORDET)
  • They play an important role in poverty reduction, promoting women's empowerment, and improving literacy rate and skill development.



  • Cooperative Societies usually do not come forward to organise cooperatives of their consensus, many times it is done by the government or local administration.
  • The cooperatives have limited resources.
  • They grant loans only for agricultural operations. Farmers approach the money lenders to meet their other requirements.
  • Lack of co-operation, as the people rarely understand the importance of cooperation in their lives. The absence of willing cooperation on their part hinders the growth of the cooperative movement.
  • Political interference acts as a barrier to the growth of cooperative societies. The selection of beneficiaries is mostly done on political relations.
  • The cooperative credit structure is criticized on the ground that it is mostly managed by landlords and large farmers.
  • Poor performance, increasing debt and overdue, inefficient administration and management of Cooperative societies.

Way Forward

  • Need to ensure transparency in the processes and independence in the functioning of Boards.
  • Good Cooperative management includes setting up clear objectives, accountability, sound planning, and establishing performance evaluation measures.
  • The objectives of the cooperative societies must be recognized in their long-term strategy.
  • Increase access to competitive and affordable external financing.
  • Better operational and financial performance through improved strategic decision-making.
  • Take a comprehensive approach including working with the government, other institutions, and the public.
  • Take a practical, ground-level approach.
  • Improve the decision-making process, and introduce specialists at the board meeting.
  • Put the right people in the right place, and don't let internal organizational structures be politically influenced.