Home > 2021 > Invigorating Agriculture Cooperatives | Atul Sarma and Shyam (...)

Mainstream, VOL LIX No 46, New Delhi, October 30, 2021

Invigorating Agriculture Cooperatives | Atul Sarma and Shyam Sunder

Friday 29 October 2021

by Atul Sarma and Shyam Sunder *

After curving out a separate ministry for cooperation out of the ministry of agriculture, the minister for home and cooperation announced in the first national cooperative conference held on September 25, 2021 that the centre together with states will expand the number of primary agriculture cooperatives from the existing 60,000 to three lakh in the next five years. Explaining that the new “ministry has been created to bring transparency and strengthen, modernise, computerise and create competitive cooperatives.” He also stated that the Modi government will bring back the same cooperative policy that former prime minister Atal Bihari Vajpayee introduced in 2002.

 In a country where 65% of its population lives in rural areas, 70% of these rural household depend on agriculture and allied activities for their livelihood even in 2020, and, the average size of operational holdings is falling, to 1.08 hectares in 2015-16 from 1.15 hectares in 2010-11while 86% of farmers are small and marginal as per 2015-16 agricultural census, the relevance of institutional change in the form of cooperative farming is unquestionable.

India has a long history of cooperatives. In a nutshell, it began with the Indian Famine Commission (1901) that recommended setting up a committee under the presidency of Sir Edward Law to examine the issue of introducing cooperative societies in India. Based on its recommendation the first Cooperative Credit Societies Act was passed in 1904. The Cooperative Societies Act, 1912 was enacted to remedy the shortcomings of the 1904 Act. In 1915, Sir Edward Maclagan committee was appointed to study and report whether the cooperative movement was proceeding on economically and financially sound lines. The committee observed that illiteracy and ignorance of the masses, misappropriation of funds, rampant nepotism, inordinate delay in granting loans and viewing the cooperative movement as a Government movement were some of the glaring defects of the cooperative movement.

Through the Montague - Chelmsford Reforms of 1919,co-operation became a provincial subject following which states passed their own Acts to make the Cooperative Movement a successful one. The All-India Cooperative Planning Committee in 1945 also gave a fillip to the growth of the Cooperative Movement. Mahatma Gandhi believed that cooperation was one of the important means to empower people. The Indian Constitution placed “Cooperative Societies” as state subject in the Seventh Schedule (Entry 32). However, the 97th amendment introduced part IX B (December 2011 and came into effect from February 15, 2012) giving the power to the Central Government to regulate the governing of Multi State Cooperative Societies (MSCS) i.e., where the objects not confined to one state. But the Supreme Court quashed Part IXB of the Constitution on July 22, 2021 on the ground that that states have exclusive power to legislate on topics reserved exclusively to them and further that the provisions in the 97th Amendment were passed by Parliament without getting them ratified by State legislatures as required by the Constitution.

Following the adoption of mixed economy framework in the post-independence India, cooperation was envisioned as a balancing institution between public and private sectors as also an institution to bring about agrarian reforms. It became an integral part of five-year plans.

Way back in November 1958 the National Development Council in which all state chief ministers were members apart from a few central ministers and Planning Commission members, gave formal approval for a new and expanded programme of cooperative development to organize multipurpose cooperative societies. Subsequently on January 6, 1959, the All-India Congress Committee at Nagpur took a resolution, its core being to organise “the villages based on village panchayats and village cooperatives”. These two institutions should be the “spearheads of all developmental activities in the village”

Even though, the Congress party unanimously endorsed the agrarian policies in deference to Nehru who had propounded it, there had been widespread opposition due to the apprehension that this new programme could be a prelude to collectivization. In view of widespread opposition across the country, the President’s address to the Lok Sabha on February 9, 1959 stated that “the government would seek to promote agrarian reform, cooperation, and devolution of responsibility to village panchayats in order to increase production.” In short, political considerations led the state leaders to be reluctant to accept an accelerated pace of agrarian reorganization. On the contrary, they made their case for greater concessions for landed classes.  In essence, the pace of agrarian reforms in terms of the spread of cooperatives was impeded by the contradiction between the economic ends and strategies based on political expediencies.

Starting with the Meclagen Committee on Cooperation in 1914 as many as 33 committees/commissions/task forces were set up to review cooperative societies and recommend measures for making cooperation an effective institution of agrarian reforms. In 1958, the National Development Council (NDC) had recommended a national policy on cooperatives. Indeed, a national policy on cooperatives (NPoC) was announced by the Government of India in 2002.

The NPoC has explicitly noted the constraints that have plagued the cooperative sector. They are: legislative and policy support; resource availability; infrastructure-development; institutional inadequacies; lack of awareness among members; erosion of the democratic content in movement; excessive bureaucratic and government control and political interferences in the operation of the societies. Even the High-Powered Committee constituted subsequently in 2009 has also observed that the root causes of the challenges and constraints of cooperatives converge on governance which is essentially determined by the laws that govern cooperatives.

The new Ministry is created “to provide a separate administrative, legal and policy framework for strengthening the cooperative movement in the country” and “envisages deepening Co-operatives as a true people-based movement reaching up to the grassroots”. The Ministry will further work to streamline processes for ‘Ease of Doing Businesses for co-operatives and enable development of Multi-State Co-operatives (MSCS)

This raises several issues. First, cooperative is a state subject as per the verdict of the Supreme Court. How any prototype administrative, legal and policy framework could be enforced in states with ruling party of different ideologies? Even if, states could be persuaded, would “One size fits all” approach address the heterogeneous economic, social, and political challenges that different states encounter? Where are the strategies and instruments that would address the challenges and constraints that various committees and even the NPoC have highlighted? The larger issue is: could any homogeneous administrative, legal and policy framework superimposed from above, in other words, any officially sponsored policy unleash a real grass-root level cooperative movement? It did not do in the past nor could it do in future.

What is needed is a grass root level movement. Panchayats are better suited to mobilise farmers towards it provided (a) Panchayats are empowered by way of providing funds and functionaries together with states’ full support after transferring agricultural cooperatives to its domain; (b) hurdles that various committees have highlighted are removed and (c) an imaginatively designed incentive scheme is put in place. The latter is needed because agricultural cooperatives are highly relevant for 86 % small and marginal farmers, majority of whom earn mixed income- from farm and wage. An incentive scheme is needed as an enabling condition for these farmers to engage themselves under cooperative mode of production.

(Authors: Atul Sarma (sarmaatul[at] is Distinguished Professor at CSD, New Delhi and Shyam Sunder ([at] is working with an Indian Corporate. Views are personal.)

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