yet this simple constitutional principle eluded the nimble
minds of our politicians and bureaucrats over the past 50
years of our republic's existence.
restrictive and regressive laws have been enacted and enforced
for partisan advantage over the years. The central laws
of 1904 and 1912, the provincial laws before 1947, and the
laws enacted in States since then have all conformed to
this pattern of state control, rigid uniformity, and stultification
of members' initiative. Even courts have failed to apply
the constitutional principles under the mistaken notion
that cooperatives are 'creatures of the state'. The results
of this are there for all to see.
claim that there are over 300,000 cooperatives with over
100 million members! In reality, only about 10% of the societies
are viable, and 20% of the members are served by them. Cooperatives
have been relegated to a departmental status, and their
control became a matter of normal political activity. Elections
to cooperatives are fought almost like a general election,
with the same level of politicization, ignorance of stakes
involved, and malpractices. In AP for instance, the membership
was suddenly expanded in the 80's, and the rural credit
coops claim a membership of over 10 million in the state!
For all practical purposes coops are run as government bodies.
tiered cooperatives following the federal structure, the
control by the apex bodies has been as oppressive and debilitating
as that of the government. 'Common cadres' of centrally
controlled managers, fattening federal organisations at
the cost of primary units, arbitrary fixation of exorbitant
wages, overstaffing at federal level, and mismanagement
and corruption weakened the member-based primary organizations.
yet, we cannot ignore the importance of cooperatives in
mobilizing resources and promoting growth. Rural credit
cooperatives alone have a deposit base of Rs.77,000 crore,
and their total resources are nearly Rs.150,000 crore. The
2000 urban cooperative banks have a deposit base of over
Rs.70,000 crore. Dairy cooperatives influence the lives
of tens of millions in rural India. Sugar factories and
other processing units in cooperative sector have a dominant
role in these sectors. The gross capital formation in agriculture
is stagnant at 1.5% of GDP, and public capital is actually
declining at fixed prices. Obviously we need more capital
infusion in villages if we have to promote productivity,
growth, value addition and employment. Cooperatives are
the answer. But a thorough overhauling of the structure
is needed if we are to replicate the success of a few good
government should keep its hands off the cooperatives. Except
registration and a few minimal functions, the bureaucrats
should have no role. Member-control should be enforced.
But that means only legitimate stake-holders should have
a role. The large spurious membership should be disenfranchised.
Only those who avail services above a threshold, and those
who deposit a minimum amount should have voting rights.
Defaulters should be disenfranchised. Byelaws, elections,
policies and management should all be decided by the cooperative.
Elections should be ideally staggered, so that a third or
half the members retire every year or two. The 1995 cooperative
law in AP, which is emulated by Bihar, J&K, MP, Chattisgarh,
Jarkhand and Karnataka since then, should serve as a model.
Equally, the federal control in credit cooperatives must
give way to member control.
credit institutions are on a different footing, and require
to be firmly regulated by RBI /NABARD. Right now the central
bank control is very tenuous. Knee-jerk responses when scams
take place or after banks fail is no substitute to effective
regulation. Credit societies should primarily depend on
thrift from members, and lending should not exceed 3 or
4 times the thrift of a member. Also in credit cooperatives,
the members should elect only half the members of the board,
and the other half should be experts and depositors' representatives.
A few members with minimal stakes cannot be allowed to control
huge deposits of others.
financial package to rehabilitate weak cooperative banks
should be implemented, subject to specific milestones including
a liberal cooperative law, better recovery, and improved
management. Where such conditions are not met, swift liquidation
is the answer. New, genuine cooperatives will spring up
in no time if only an enabling law is in place. Finally,
at least a few corrupt managers who swindled funds and cheated
depositors should be jailed for long terms. Nick Leeson,
whose mischief caused the collapse of Bearings Bank, was
swiftly arrested, tried, and sentenced to 8 years, and has
been released only recently. Is it too much to ask for exemplary
prison terms to a few rogues who misappropriated from thousands