Reeling Under State Shackles

AFTER industry, it’s now the turn of cooperatives to join the freedom movement. Bypassed by the winds of liberalisation and stung by bureaucratic apathy, Indian cooperatives are demanding as important a role for themselves in the market economy as the private corporate sector. Says Verghese Kurien, chairman, National Dairy Development Board (NDDB), and the man behind the immensely successful and profitable dairy cooperatives in Gujarat: "We want freedom with responsibility. We want to be subject to the laws of the land. And we want to be relieved of state control and management."

 The Indian cooperative movement has always been marked by excessive state control. And, post-liberalisation, while the Government’s attention has moved from this sector to private and transnational enterprises, controls have stayed in place. Says Mohan Dharia, former Union minister and member of the Cooperative Initiative Project (CIP) panel: "Even the word ‘cooperative’ doesn’t find mention anywhere in the Eighth Plan." On the other hand, the Multi-State Cooperative Societies’ Act (MCSA) continues to grant near-blanket powers to Central and state governments to decide the fate of any cooperative. Now, the CIP panel, consisting of Kurien, Dharia and former Planning Commission member L.C. Jain, intends to change that by lobbying aggressively with the Government. And the panel plans to speak in an idiom politicians will tune in to immediately: votes. The country’s 3.4 lakh cooperatives with 16.4 crore members. They are all voters.

The cooperative sector boasts of giants like Indian Farmers’ Fertili-ser Cooperative (Iffco), the Krishak Bharati Cooperative Union (Krib-hco), Gujarat Cooperative Milk Marketing Federation (GCMMF) and the Kaira District Cooperative Milk Producers Union (KDCMPU). It commands a total investment of Rs 5,325 crore in share capital, Rs 71,672 crore in working capital and Rs 5,494 crore in credit advances. Sugar cooperatives of Maharashtra and milk cooperatives of Gujarat have been great successes. In 1993-94, the top three milk cooperatives in Gujarat—GCMMF, KDCMPU and the Mehsana District Cooperative Milk Producers’ Union—had a turnover of Rs 1,609 crore, seven times that of Nestle India which was at fourth place.

Sadly, that’s where the bright picture ends. Most cooperatives’ account books drip red. At the end of the ’80s, returns from cooperatives came to less than 20 paise for every rupee invested. Evaluating Indian cooperatives in 1989 (Who Shares), Donald Attwood wrote: "Some are empty shells, ignored by their supposed beneficiaries; others are simply arms of government bureaucracy; others are plundered by local elites, giving few benefits to those who need them most."

Why has the movement foundered? Especially since cooperatives, despite being a socialist idea, have ably served the capitalist West, including the US. Dairy industries in the US, the UK, New Zealand (which also has cooperative companies), Austria, Finland and Denmark are highly successful cooperatives. In the US, 85 per cent of fluid milk and 65 per cent of the cheese market are controlled by cooperatives.

The crux of the problem, says Kurien, is the excess of state control over cooperatives. Says Jain, author of In the Wake of Freedom: India’s tryst with cooperatives: "State sponsorship for the cooperative movement has killed the popular initiative. Instead of sahakari, it has become sarkari." Foremost among the CIP’s demands are:

Some specific examples. Section 47 of the MCSA allows the Centre to give direction in public interest. Sections 48 and 67 give the registrar the right to remove the elected board and appoint its own administrators as also auditors. Under Section 50, a central selection committee is allowed to appoint chief executives and senior managers to all national level cooperatives and make rules about recruitment. Section 77 allows the registrar to wind up a cooperative and Section 15 empowers the government to order liquidation or amalgamation of societies. And why not? Sections 19 and 59 allow the Centre/states to become members and subscribe directly to the share capital of the society.

THE Choudhary Brahm Perkash Committee—and other committees—had held that cooperative membership is for users, therefore equity must be restricted to owners. By the same argument, the State can’t acquire ownership because it can’t be a user.

Agriculture Minister Chaturanan Mishra admits that "instead of helping the movement, government intervention has destroyed it in large parts". Mishra has assured the CIP panel of including a chapter on cooperatives in the Ninth Plan and promised to bring up the MCSA Amendment Bill in the winter session of Parliament.

Some rays of hope are breaking through. Foremost among them is the Andhra Pradesh Mutually-Aided Cooperative Societies Act, 1995, passed unanimously by the state assembly in May, which incorporates the new concepts. Seven more states are reviewing their Acts. A committee chaired by R.N. Mirdha is going into the issue of bad debts and skewed capital distribution.

A recent study on the sector by IIM, Ahmedabad, says cooperatives can become a third alternative for the economy once they are freed from archaic laws.

 Also, the government-sponsored cooperative movement has wasted a lot of energy trying to replicate the Anand pattern. When the NDDB was set up in 1965, its main mandate was to execute Operation Flood, the world’s largest dairy development programme based on direct donation of milk products by the European Economic Community and World Bank aid. Beginning in 1970, Operation Flood ended its third phase with the last fiscal year. Says the latest NDDB annual report: "Operation Flood III would have been a greater success were it not for a number of external factors, none of which arose from any weakness in the philosophy of the cooperative movement itself." One lacuna in the programme was that its mandate to "blueprint" the Anand pattern ignored the fact that the Kaira cooperatives had a headstart in their milk-producing tradition and an assured market in Bombay, pointed out by an NCAER study in 1963. What the movement now needs is encouragement to "greenhouse cooperatives" (indigenous local initiatives). Perhaps the new Act can foster such an environment.