Proposal to Amend Multi-State Cooperative Societies (MSCS) Act, 2002

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• Recently, the Centre decided to amend the Multi-State Cooperative Societies (MSCS) Act, 2002 to plug the loopholes in the Act. 

About Multi-State Cooperative Societies(MSCS )and MSCS Act, 2002

• Cooperatives are a state subject, but there are many societies such as those for sugar and milk, banks, milk unions etc whose members and areas of operation are spread across more than one state. 
  • For example, most sugar mills along the districts on the Karnataka-Maharashtra border procure cane from both states.
    • Maharashtra has the highest number at 567, followed by Uttar Pradesh (147) and New Delhi (133). 
  • The MSCS Act was passed to govern such cooperatives.
• They draw their membership from both states, and they are thus registered under the MSCS Act. 
• Their board of directors has representation from all states they operate in.
• Administrative and financial control of these societies is with the central registrar, with the law making it clear that no state government official can wield any control on them.
• The act  facilitates the voluntary formation and democratic functioning of co-operatives as people’s institutions based on self-help and mutual aid.
  • It enables them to promote their economic and social betterment and to provide functional autonomy, which was felt necessary by the various cooperative societies, and federation of various cooperative societies as well as by the Government. 

Issues Highlighted with the  Act

• There is an apparent lack of day-to-day government control on such societies. 
• Unlike state cooperatives, which have to submit multiple reports to the state registrar, multistate cooperatives need not. 
• The central registrar can only allow inspection of the societies under special conditions — a written request has to be sent to the office of the registrar by not less than one-third of the members of the board, or not less than one-fifth of the number of members of the society. 
  • Inspections can happen only after prior intimation to societies.
• The system for state-registered societies includes checks and balances at multiple layers to ensure transparency in the process; these layers do not exist in the case of multi-state societies. 
• The on-ground infrastructure for the central registrar is thin — there are no officers or offices at the state level, with most work being carried out either online or through correspondence. 
  • For members of the societies, the only office where they can seek justice is in Delhi, with state authorities expressing their inability to do anything more than forwarding their complaints to the central registrar.

• There have been instances across the country when credit societies have launched Ponzi schemes taking advantage of these loopholes. 
  • Such schemes mostly target small and medium holders with the lure of high returns. Fly-by-night operators get people to invest and, after a few instalments, wind up their operations. 
    • In Maharashtra, the state commissioner used to get multiple complaints of this nature but could not take any action, given the lack of ground staff necessary for verifying the antecedents of such societies.

Expected Amendments 

• The Centre is holding extensive consultations with experts from various fields like bankers, sugar commissioners, cooperative commissioners, housing societies federations etc. 
  • Senior central government officials said they will also increase their manpower, first in Delhi and then in the states, to ensure better governance of the societies.
  • Technology will be used to bring in transparency.
  • It has been suggested that administrative control of such societies should be vested in the state commissioners. 
    • This way, day-to-day control can be wielded to ward off cases of fraud.

Source: IE