Centre aims for digital push in revamp plan for cooperatives

The ministry will focus on building cooperative societies as the pivot of a whole gamut of economic activities, from financial services to production of finished goods, according to officials.
Home Minister Amit Shah heads the ministry of cooperation.
Home Minister Amit Shah heads the ministry of cooperation.
Updated on Jan 05, 2022 02:32 AM IST
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By, Hindustan Times, New Delhi

India will soon have a digital database of cooperatives being worked on by the new ministry of cooperation, which will help overhaul a sector the government hopes will propel the economy’s size to $5 trillion, a senior official aware of developments said.

The move is aimed to help reposition cooperatives as business entities with an online presence. A national database is also necessary to formulate an upcoming new policy for cooperatives, the official added, requesting anonymity.

Prime Minister Narendra Modi shuffled his cabinet in July, carving out a new ministry of cooperation, which was earlier a department under the agriculture ministry. Home minister Amit Shah heads the new ministry.

The ministry will focus on building cooperative societies as the pivot of a whole gamut of economic activities, from financial services to production of finished goods.

Cooperatives are essentially collectives of small producers who pool their resources to achieve scale and collective bargaining power in markets. While there are some iconic cooperative businesses in the country, such as dairy giant Amul, seasoned flatbread-maker Lijjat Papad and fertiliser major IFFCO (Indian Farmers Fertiliser Cooperative), the sector in many areas is hobbled by inefficiencies and opaque patronage systems.

Financial cooperatives, a key segment within cooperatives, play a key role in lending and saving operations. State cooperative banks, according to Nabard’s annual report of 2019-20, had a total paid-up capital of 6,104 crore and deposits of 1,35,393 crore.

Primary agricultural credit societies (PACS) will be a key thrust area of the digitisation push, officials said. PACS are village or district-level last-mile institutions that deliver agricultural credit to millions of farmers.

A national software platform, which will be available in local languages, will link PACS, district cooperative banks, and the National Bank for Agriculture and Rural Development (NABARD), potentially creating an integrated financial grid. The digital database is aimed at boosting their reach and transparency.

India’s cooperative sector is the world’s largest, and covers almost 98% of the countryside, with over 900,000 societies with a membership of about 290 million people, according to data from the National Cooperative Union of India.

Along with the technical framework, the government is also likely to bring statutory changes in the cooperatives sector. Addressing a cooperatives’ meet in January last year, Shah said that the government will bring changes to laws governing the sector to “smoothen processes in areas such as multisector cooperatives”. The minister added that this would a “big step in our march towards development”.

The cooperatives sector policy was last revised by the Atal Bihari Vajpayee government in 2002. “Now, the current government is looking to update the policy in step with newer economic realities,” the official cited in the first instance said

Cooperatives are governed by two main pieces of legislation, the Cooperative Societies Act, 2012, and the Multi-state Cooperatives Act, 2002.

Cooperative banks, both urban and rural, are lending institutions registered under the Cooperative Societies Act,1912. They are usually run by an elected committee.

In March 2021, Parliament passed a law to bring them under the oversight of the Reserve Bank of India.

“We welcome the government’s move to re-energise cooperatives. Cooperatives are the only way to ensure inclusive growth,” said Rattanlal Malik, the president of Saharanpur Gramin Sehekarita Bank.

“I think the government will need to hold consultations with states before it can finalise a new cooperative policy for the country because the majority of cooperatives fall in the domain of the states,” said Amrit Pritam, director of the Navinttam, a development NGO that works with rural collectives.


    Zia Haq reports on public policy, economy and agriculture. Particularly interested in development economics and growth theories.

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Tuesday, May 17, 2022