Centre must tread lightly with co-operation ministry

Having a ministry to its name rather than merely a department will no doubt enhance the stature of the sector.

The creation of a ministry for the country’s co-operative sector, under the home minister, has fuelled apprehensions the Centre may be looking to assume some of the powers now with the states in a space that has some financial heft and offers room for political patronage. The Union government has said it would like to give wings to the co-operative movement by ensuring it has an ‘administrative, legal and policy framework’ of its own.

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Some leaders have voiced concern that the legislation would be tweaked to give the Centre disproportionate control over co-operatives. The concerns probably stem from the fact the BJP is not in power in states such as Maharashtra where the co-operative sector has a strong presence. NCP leader Sharad Pawar asserted unequivocally on Sunday the Centre has no powers to interfere in the laws made by the legislative assembly.

Co-operatives are owned by members—producers or consumers—and have, no doubt, benefited the stakeholders. However, governments and political parties have probably been better served by these entities; it is no secret they call the shots at most of the 80-lakh-odd registered co-operatives. Consequently, they are not the most efficiently-run enterprises and do not always fulfill the intended objective, which is to benefit from collective bargaining power.

Unfortunately, the sector—which, by one estimate, serves 400 million people directly and indirectly—does not attract much regulatory oversight and has seen virtually no reform over the years. So, there plenty of room for both. Apart from poster boy Amul and some other large players such as IFFCO, most of the other co-operatives are relatively small, and can be found primarily in agriculture and allied activity—fisheries dairy, sugar, cotton, edible oils—credit and housing. In some states, the movement has forayed into sectors such as IT parks.

But, co-operative banks have had a chequered history. While many have done well for themselves, at others, funds have often found their way to borrowers who were not necessarily the best customers, but accessed the credit thanks to their connections. Following the collapse of the fraud-hit Punjab and Maharashtra Co-operative Bank, the regulatory oversight was tightened to empower RBI to watch over these lenders. The problem with such failures is that the states concerned rarely come to their rescue.

The Centre’s objective in wanting to strengthen co-operatives and streamline processes so as to make it easier to do business is laudable. There is absolutely no doubt about the potential benefits that could accrue to members of state, and multi-state co-operatives, in new areas. But, if we are not to see mismanagement and misuse of power, we need to put in place a transparent operational structure, governance statutes and strong, independent regulatory mechanism.

To that extent, the Centre can make itself useful by ushering in regulatory changes, not only in the ownership but also in the operational structures. That might seem impossible today given the state of affairs: one cannot even imagine co-operatives run by professionally-run managements. Those that run the enterprises are likely to shun change of any kind, as would their masters.

However, a good administrative and legal framework can see new co-operatives spring up in both the existing and hitherto unexplored sectors. Having a ministry to its name rather than merely a department will no doubt enhance the stature of the sector. But, the Centre must tread lightly.