Multi-State Co-operative Societies (Amendment) Bill-2022

In News

• The Lok Sabha has recently referred the Multi-State Co-operative Societies (Amendment) Bill-2022 to a joint committee of Parliament.
  • The government had introduced the Bill that proposes merger of any cooperative society into an existing multi-state cooperative society.

History of India’s cooperative movement

• Meaning: cooperatives are people-centred enterprises jointly owned and democratically controlled by and for their members to realise their common economic, social and cultural needs and aspirations.
• German model: India’s cooperative movement was formalised at the end of the 19th century, inspired by the German model of agricultural credit banks. 
• Colonial Law: In 1904, the British government in India enacted the Cooperative Credit Societies Act. 
  • While this Act dealt solely with the extension of credit, the sector was opened to other activities in 1912. 
  • Administrative reforms in 1919 transferred cooperatives to provincial control.
• Post-Independence: the framers of the Constitution placed cooperatives in the State list. 
  • States made their own laws to regulate cooperatives within their jurisdiction.
  • In 1984, the Multi-State Co-operative Societies Act (amended in 2002) was enacted by Parliament to consolidate different laws at the central level.
• Prevention of exploitation: India’s cooperative movement originated in the agriculture and related sectors as a means for farmers to pool their resources to prevent exploitation by money lenders.
• Constitutional provision: Article 43B of the Constitution inserted by the 97th Amendment says that states shall endeavour to promote voluntary formation, autonomous functioning, democratic control and professional management of cooperative societies.

Provisions of the Multi-State Co-operative Societies (Amendment) Bill-2022

• Current Law: 
  • It was enacted 20 years ago which says that only multi-state cooperative societies can amalgamate themselves and form a new multi-state cooperative society. 
• New Law on Merger:
  • Any cooperative society may by a resolution passed by a majority of not less than two-thirds of the members present and voting at a general meeting of such society can decide to merge into an existing multi-state co-operative society.
  • Such resolution shall be subject to provisions of the respective State Cooperative Societies Act for the time being in force, under which such cooperative society is registered.
• Cooperative election authority: 
  • The Bill also seeks to establish a cooperative election authority to bring electoral reforms in the cooperative sector. 
  • The government has proposed to substitute Section 45 of the 2002 Act. 
  • As per the proposed amendment, the authority will consist of a chairperson, a vice-chairperson and a maximum of three members to be appointed by the Centre.
• Co-operative Rehabilitation, Reconstruction and Development Fund
  • The Bill seeks to insert a new Section 63A in the principal Act. 
  • This relates to establishment of the Cooperative Rehabilitation, Reconstruction and Development Fund for revival of sick multi-state cooperative societies.
• Section 70A: 
  • The bill proposes to insert a new Section 70A relating to concurrent audit for such multi-state societies with an annual turnover or deposit of more than the amount as determined by the Centre.
• Cooperative Information Officer and a Cooperative Ombudsman:
  • To make the governance of these societies more democratic, transparent and accountable, the Bill has provisions for appointing a Cooperative Information Officer and a Cooperative Ombudsman. 
  • To promote equity and inclusiveness, provisions relating to the representation of women and Scheduled Caste/Scheduled Tribe members on MSCS boards have been included.
• Penalty:
  • The Bill increases the penalty amount for violation of the law to Rs. 1 lakh and potential imprisonment from six months to a year.  

Major issues with the Bill 

• Against the federal structure: The bill seeks to take away state governments’ rights and is against the country’s federal structure.
  • The Bill seeks to amend Section 17 of the principal act to allow the merger of any State cooperative society with an existing MSCS. 
  • Opposition members argued that this was beyond the Centre’s legislative competency as State cooperatives are not its domain.
• Mismanagement and corruption: Government and legislative control of cooperatives increased over the years, there were increasing reports of mismanagement and corruption.
• Burden: The new fund will put an additional burden on MSCSs and affect their autonomy.

Major issues with the cooperative sector

• Multiple controls from the Centre: MSCSs were formed to ease the operation of collectives throughout the country. 
  • But MSCSs are facing issues regarding trust which is the very basis of cooperation. 
  • MSCSs were, therefore, brought under the Prevention of Money Laundering Act, 2002 in 2018 and all urban and MSCS banks were brought under the radar of the Reserve Bank of India in 2020. 
  • These developments have brought MSCSs under multiple controls from the Centre, giving rise to fears that monitoring would take a top-down approach as opposed to a grassroots one.
• Non application of recommendations: In 1991, the Choudhary Brahm Perkash Committee of the planning commission made far-reaching recommendations to reorganise MSCSs.
  • But the Act has not been modified as per the report. 
  • Andhra Pradesh was the first to apply the recommendations and form a new model of cooperative societies.

Significance of the Bill

• Transparency and accountability: The Bill seeks to bring transparency and accountability in the co-operative sector.
• Good Governance: It aims to strengthen governance, reform the electoral process, improve the monitoring mechanism, and ensure ease of doing business in multi-State co-operative societies.
• Financial discipline: The Bill also seeks to improve the composition of the board and ensure financial discipline, besides enabling the raising of funds in MCSCs.

Way Forward

• SC judgment: The constitutional domain of States in regulating cooperative societies was upheld by the Supreme Court last year when it struck down a part of the 97th Constitution Amendment.
  • The court held that the Centre required the ratification of the Amendment by 50% of the state legislatures as it sought to give a framework for State legislation on cooperative societies. 
  • SC upheld only the part of the amendment that related to MSCSs, for which Parliament was competent to enact laws.

Source: IE