Introduction:
The Multi-State Cooperative Societies (Amendment) Bill, 2023, which seeks to strengthen cooperatives by making them transparent and introduces a system of regular elections was passed by the Lok Sabha.
Co-operatives:
- They are voluntary, democratic, and autonomous organisations controlled by their members who actively participate in its policies and decision-making.
- Even before formal co-operative societies were formed in India, there were instances of village communities collectively creating assets like village tanks and forests.
- After independence, the first five-year plan (1951-56), emphasised the adoption of co-operatives to cover various aspects of community development.
- Multi-state co-operative societies operate in more than one state. These operate in various sectors such as agriculture, textile, poultry, and marketing.
- As per the Constitution, states regulate the incorporation, regulation, and winding up of state co-operative societies.
- Parliament can legislate on matters related to incorporation, regulation, and winding up of multi-state co-operatives.
- The Multi-State Co-operative Societies Act, 2002 provides for the formation and functioning of multi-state co-operatives.
- In 2011, the Constitution was amended (adding Part IXB) to specify guidelines for running co-operative societies.
- These guidelines provide for: (i) composition of the boards of co-operatives, (ii) election of members of the board, (iii) audit of accounts of co-operative societies, and (iv) supersession of the board.
- The Supreme Court, in July 2021, held that Part IXB will only be applicable to multi-state co-operative societies, as states have the jurisdiction to legislate over state co-operative societies.
Shortcomings with respect to the functioning of co-operatives.
- These include:
- inadequacies in governance
- politicisation and excessive role of the government
- inability to ensure active membership
- lack of efforts for capital formation
- inability to attract and retain competent professionals.9 In addition, there have also been cases where elections to co-operative boards have been postponed indefinitely
Highlights of the Bill
- The 2022 Bill seeks to amend the Act in order to align its provisions with those provided under Part IXB of the Constitution and address concerns with the functioning and governance of co-operative societies. The Bill was referred to a Joint Committee on December 20, 2022.
- The Bill amends the Multi-State Co-operative Societies Act, 2002. It establishes the Co-operative Election Authority to conduct and supervise elections to the boards of multi-state co-operative societies.
- A multi-state co-operative society will require prior permission of government authorities before the redemption of their shareholding.
- A Co-operative Rehabilitation, Reconstruction and Development Fund will be established for the revival of sick multi-state co-operative societies. The Fund will be financed through contributions by profitable multi-state co-operative societies.
- The Bill allows state co-operative societies to merge into an existing multi-state co-operative society, subject to the respective state laws.
Constitutional Provisions regarding Cooperative Societies:
- 97th Constitutional Amendment Act 2011
- The right to form cooperative societies is a fundamental right (Article 19).
- New Directive Principle of State Policy on the Promotion of Cooperative Societies (Article 43-B).
- A new Part IX-B to the Constitution is titled “The Co-operative Societies” (Articles 243-ZH to 243-ZT).
- Creation of a new Ministry of Cooperation – which gave more acknowledgement to cooperative societies.
Importance of the Bill:
- By increasing their transparency and implementing a system of frequent elections, it will strengthen cooperatives.
- The Bill aims to address issues with the operation and governance of cooperative societies as well as match its provisions with those in Part IXB of the Constitution.
Key Issues as discussed:
- Sick multi-state co-operative societies will be revived by a Fund that will be financed through contributions by profitable multi-state co-operative societies. This effectively imposes a cost on well-functioning societies.
- Giving the government the power to restrict redemption of its shareholding in multi-state co-operative societies may go against the co-operative principles of autonomy and independence.
Conclusion:
- The Bill is aimed at overhauling the Multi-State Cooperative Societies Act, 2002, which was enacted 20 years ago which is a right step for overall improvement of the cooperatives.
- More than 1500 multi-State cooperative organizations exist in India, and they are a significant resource for advancing the economic and social well-being of their members.
