Sahakar Se Samriddhi: From Cooperation to Prosperity (UPSC Economy)

Cooperatives are autonomous, member-owned enterprises that meet economic, social, and cultural needs through joint ownership and democratic control. The vision of "Sahakar Se Samriddhi" — Prosperity through Cooperation — was given institutional shape by the creation of the Ministry of Cooperation in July 2021 under Amit Shah. The cooperative model is central to India's strategy of inclusive growth: it delivers credit, insurance, fertilisers, dairy, sugar, handlooms, housing, and consumer goods at the grassroots.

Background: Scale of the Cooperative Sector in India

• 8.5 lakh registered cooperatives with over 30 crore members — roughly one in every four Indians.
• Cooperatives cover 99% of Indian villages and 71% of rural households.
• 19% of agricultural finance is routed through cooperative societies.
• 1,528 registered societies under the Multi-State Cooperative Societies Act, 2002, including 66 Multi-State Cooperative Banks with deposits of approximately Rs 2.6 lakh crore.
• Flagship cooperatives: IFFCO, KRIBHCO, AMUL, NAFED, NDDB, NCCF.

Key Institutions and Instruments

• Multi-State Cooperative Societies Act, 2002 — governs inter-state cooperatives.
• State Cooperative Societies Acts — govern single-state cooperatives.
• Primary Agricultural Credit Societies (PACS) — village-level credit delivery.
• District Central Cooperative Banks (DCCBs) and State Cooperative Banks (SCBs).
• Urban Cooperative Banks (UCBs) — regulated jointly by RBI and Registrar of Cooperatives.
• NCDC (National Cooperative Development Corporation) — apex finance institution.

Challenges in the Cooperative Sector

Drawing from the Shivajirao Patil Committee on Cooperatives (2019) and RBI reviews:

Lack of participatory character: Free-rider problem, non-active members voting, elite capture, politicisation.

Restricted coverage: Many societies operate in one or two villages, limiting economies of scale.

Single-purpose design: PACS mostly provide credit; do not aggregate inputs, marketing, storage, or processing.

Politicisation: Government share capital and directions compromise autonomy. Sugar cooperatives in Maharashtra are a classic example of political domination.

Restrictive state Acts: Provisions like "directions in public interest", nomination on Boards, postponement of elections, and supersession of committees reduce autonomy.

Governance deficits: Poor regulation by Registrars, election disputes, frauds, and NPAs in UCBs (e.g., PMC Bank collapse).

Lack of professional management: No dedicated cadre; state officials rotated frequently.

Inadequate capital: Unlike corporates, cooperatives cannot easily raise equity or tap capital markets.

Sick cooperatives: Particularly in sugar, textiles, and vegetable oil sectors.

Initiatives Taken

• Multi-State Cooperative Societies Act, 2002 and Amendment, 2023 — strengthened governance, introduced Cooperative Election Authority, Cooperative Information Officer, and Cooperative Ombudsman.
• Ministry of Cooperation (2021) — dedicated ministry for coordination.
• Computerisation of 63,000 functional PACS with Rs 2,516 crore outlay (completion expected by 2025-26).
• Model Bye-laws for PACS to expand roles into 25+ business activities (DBT, fertilisers, CSC services, PM-KUSUM, LPG, water, petrol pumps).
• Reduction in Minimum Alternate Tax (MAT) for cooperative societies from 18.5% to 15%.
• GeM platform access for cooperatives as buyers.
• National Cooperative Database launched in 2023.
• Three new multi-state cooperatives in 2023: for exports (NECL), organics (NCOL), and seeds (BBSSL).

Strategies Needed

Adopt the Model Cooperatives Act proposed by the Choudhary Brahm Prakash Committee: prohibit government equity infusion, restrict officer deputation, clarify registrar's role, and ensure free elections.

Enhance participation by inserting "active member" clauses in state Acts.

Tap new service opportunities: Post-LPG, cooperatives can deliver education, health, transport, water, cold chain, FPO services.

Promote economies of scale: Lift area restrictions, encourage mergers, and promote diversification (IFFCO's diversification into microfinance, agri-insurance, food processing is a model).

Strengthen capital access: Set up umbrella organisations (such as the proposed Umbrella Organisation for UCBs) and allow issuance of perpetual non-cumulative preference shares.

Revival fund for sick cooperatives in sugar, textiles, and processing.

Professional cadre: Dedicated cooperative service cadres in states, with fixed tenure and performance-linked pay.

Latest Developments (2024-26)

Updated context: The Multi-State Cooperative Societies (Amendment) Act, 2023 established the Cooperative Election Authority, Cooperative Ombudsman, and a Cooperative Rehabilitation, Reconstruction and Development Fund. It also mandated regular election cycles and strengthened governance safeguards.

PACS computerisation: By early 2025, over 50,000 PACS had been onboarded to the National Software with Common Accounting System and ERP. PACS are being expanded into Common Service Centres (CSCs), Jan Aushadhi Kendras, PM-KUSUM agents, and LPG distributors.

The Union Budget 2024-25 and 2025-26 emphasised:

• Establishment of "world's largest decentralised storage capacity" with 2 lakh primary cooperatives handling grain storage.
• Setting up of 2 lakh new multipurpose PACS, dairy and fishery cooperatives.
• Revival of cooperative banks through infusion and resolution framework.
• Cooperative export vertical through NCEL, NCOL, and BBSSL.

GST relief for multi-state cooperatives on specific inputs, tax parity with MSMEs, and 3% interest subvention for cooperative dairies have also been extended.

UPSC Relevance

GS Paper III topics directly connected: inclusive growth; agricultural marketing; food processing; storage and cold chain; rural development.

GS Paper II links: functioning of Centre-State institutions on cooperation (State List under Seventh Schedule).

Possible questions:

• "Cooperatives are the bedrock of inclusive rural growth." Discuss with reference to recent reforms under the Ministry of Cooperation.
• Examine the challenges faced by PACS in India. How is computerisation expected to transform them?
• Evaluate the Multi-State Cooperative Societies (Amendment) Act, 2023 in strengthening cooperative governance.

Essay and interview angles include cooperative federalism, Gandhian economics, gig-to-group scaling, and the AMUL model as global precedent. Aspirants should note PACS numbers, Ministry of Cooperation initiatives, and flagship cooperative organisations.

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