YOJANA July 2023

Cooperatives

• The concept of Cooperation envisages a group of persons having one or more common economic needs, who voluntarily agree to pool their resources-both human and material, and use them for mutual benefit through an enterprise managed by them on democratic lines.
• Cooperation is a form of economic organization based on certain values of life. It is a voluntary and democratic association of human beings, based on equality of control, opportunity and equity of distribution.

Constitutional Provisions for a Cooperative Society

1. Article 19(1)(c) of the Constitution of India states that - All citizens shall have the right to form associations or unions or cooperative societies.
2. Directive Principles of State  Policy 43B- Promotion of cooperative societies — The State shall endeavour to promote voluntary formation, autonomous functioning, democratic control and professional management of cooperative societies.
3. Part IXB of the Constitution of India grants constitutional status to cooperative societies and contains provisions for their democratic functioning.

Types of Cooperative Societies

1. Consumer Cooperative Societies
2. Producer Cooperative Societies
3. Marketing Cooperative Societies
4. Credit Cooperative Societies
5. Cooperative Housing Societies
6. Farmers’ Cooperative Societies

 

National Cooperative Database-

It aims at-

• Taking the cooperatives movement in the country to a new level by strengthening grassroots-level reach and coordination of activities across sectors.
• Promoting cooperatives-based inclusive and sustainable model of economic development.
•  Easing operational processes

CHAPTER 1 - SAHKAAR SE SAMRIDDHI

• India has a rich history of cooperatives and is home to 854 lakh cooperatives of which 80% are non-credit cooperatives, and 20% are credit cooperatives.
• Today, cooperatives have a presence in 98% of villages, with 29 crore members.
• 

Commitment to Cooperative Movement

• Commitment to Cooperative Movement Government has prioritised and exploring new emerging areas for cooperatives and strive collectively by being members of a cooperative ‘SQUAD’ - where
  • S- Self-reliance (Atmanirbhar),
  • Q- Quality Performance;
  • U- Unshakable Cooperative Movement
  • A- Accountability in Governance
  • D-Development through Modern Technology.
• During July 2021 and May 2023, the Ministry successfully got approvals on eight important policy matters with the objective of giving a big push to cooperative development initiatives.
• Recent tireless initiatives and efforts that produced positive results for the growth of cooperatives are indicated as follows-
• 

• 

Model Bye-Laws: Making Primary Agricultural Credit Societies (PACS) vibrant

• Model bye-laws for PACS have been drawn and circulated to the States/UTs for appropriate adoption in order to create a vibrant and strong multi-purpose and multi-dimensional cooperative culture at the grassroots.
• So far, 22 States/UTs have adopted the model bye-laws to guarantee more than 25 business activities ranging from fisheries, dairy, storage, warehouses, Common Service Centres (CSCs) and other emerging areas.

Integrating PACS with FPO

• Cooperatives are ready to promote Farmer Producer Organisations (FPOs).
• The Government of India has decided to allot an additional 1,100 FPOs to NCDC under the existing FPOs Scheme of the Ministry of Agriculture and Farmers Welfare.
• Integration of the FPOs Scheme in cooperatives would help PACS extend their scope of activities in agriculture production, input management, agri-equipment, processing, packaging, storage and transportation, etc.
• The integration also enables PACS to take up high income enterprises like beekeeping, mushroom cultivation, etc.

Involving PACS in oil and Energy business-

• The PACS are now eligible to avail licenses for Petrol/ Diesel dealerships and LPG distributorships.
• Existing PACS have been granted relaxations to exercise a onetime option to convert their bulk consumer Petrol/Diesel status into retail outlets.
• The existing PMKUSUM Scheme of MNRE will enable the farmer members of PAC to ensure energy security and guarantee incremental income through the installation of photovoltaic modules on the periphery of their farmland.

Developing National Database

• MoC is developing a comprehensive cooperative database to capture systemic and organised information to catalogue sector-specific, diverse cooperatives.
• The database will store authentic and updated data on cooperatives of all sectors to help stakeholders carry out data analytics, find gaps and support policy formulation.

Consolidating Cooperative Credit

• There are about 13 crore farmers linked directly to the cooperatives through PACS.
• Their diverse credit needs require careful planning for effective financing and refinancing.
• The Government is committed to preserving the existing three-tier structure of the cooperative credit system, as any dilution in the structure could weaken the credit mobilization, distribution, financing, and refinancing system of cooperatives.
• Planned and adequate computerisation of PCARDBs and State Cooperative Agriculture and Rural Development Banks (SCARDBs) will remove issues, inadequacies, and inefficiencies in their operation and profitability.

Conclusion and Way Ahead

There is a need to identify and address various issues to ensure the smooth and sustainable progress of cooperatives. Some of the vital issues that require immediate attention are –

(a) reduction in regional and sectoral imbalances in cooperative spread;

(b) meeting regulatory complexities;

(c) improving governance, leadership and operational systems;

(d) ensuring professional management;

(e) initiating time-tested structural reform measures, etc.

 

CHAPTER 2- STRATEGIC DIVERSIFICATION OF COOPERATIVES AND BUSINESS COMPETITIVENESS

 

Need for Business Diversification

• Any business to remain commercially to look beyond its primary customers and markets.
• Without diversification, stagnation sets in, which impedes the business’s future growth.

Business Diversification by Cooperatives

• A cooperative being a legally incorporated structural entity, follows the in-built principles of cooperation and serves the interests of its members.

• Cooperatives as business entities, can be profit-sharing enterprises or non-profit entities. They serve their members by providing goods and services that may be unavailable or too costly to access as individuals.
• To make societies commercially viable and vibrant, strategic diversification is a must. ‘Strategy; in the context of corporate entities, refers to its stated ‘Visions' and ‘Missions
• Strategic decisions are usually in congruence with the visions and missions of the organisation, and they flow downward towards the base levels of the organisation.
• In order to remain relevant and competitive, cooperatives from the community level to the national level need to diversify their businesses.

Viable Cooperative Business Strategies

• Cooperatives carry out businesses in all sectors. They need to firm up their vision and mission statements and frame the objectives and purposes for which these entities are formed.
• Cooperative can diversify itself strategically by analysing five facets of strategic management as follows-
  1. Goal Setting- cooperative should decide the exact nature of the goal as it has and the various purposes behind which the goals will be outlined for their accomplishments.
  2. Goal Analysis- understanding of the local situation, followed by an internal and external environment assessment to conduct a Strength, Weakness, Opportunity, and Threat (SWOT) analysis.
  3. Formulation of Strategy- through which the goals can be achieved by means of reflection, prioritization, and development of options for decision-making purposes.
  4. Implementation of Strategy- to put the chosen plans into practice, marshal the resources, and identify tactics through which the strategy can be implemented successfully.
  5. Monitoring the strategy- against the agreed timeline/verification pattern to carry out a mid-term/periodic review.
• 

Conclusion

Thus, by leveraging the unique strengths and capabilities of cooperatives and aligning diversification opportunities with its mission and values, cooperatives can drive growth and competitive advantage in new markets and product lines.

CHAPTER 3- EMPOWERING AGRICULTURE CREDIT COOPERATIVES THROUGH DIGITISATION

• In rural areas, cooperative credit institutions play a vital role in credit mobilisation and agricultural production.
• The Short Term Rural Cooperative Credit Structure (STCCS) is a three-tier structure that comprises State Cooperative Banks (StCBs) at the state level, District Central Cooperative Banks (DCCBs) at the district level, and Primary Agriculture Credit Societies (PACS) at the village level.
• The objective of this model is to provide timely, adequate, and affordable credit to the farmer members, and to realize social, economic, and political objectives ranging from self-help and grassroot level community participation to production, distribution, and social control over resource allocation and mobilization.
• The farmers are members or owners of PACSS.
• PACS are linked to the nearest DCCBs, whereas DCCBs are members of StCBs.
• These member-driven and community-based institutions are expected to function in a cohesive manner for efficient doorstep delivery of financial services.
• These institutions fall under the regulatory purview of the Reserve Bank of India (RBI) and are supervised by the National Bank for Agriculture and Rural Development (NABARD).
• Presently, there are 34 StCBs with more than 2,000 branches, 351 DCCBs with around 14,000 branches, and around 95,000 PACS, out of which around 65,000 are functionally viable.

Issues with Cooperative Credit

• Apart from credit needs Farmers also need a range of services, including financial, advisory, and marketing.
• The cooperative credit institutions could not compete due to their inability to adopt technology enabled solutions.
• Lack of suitable technology-led digitization drive in cooperatives.
• Issues regarding office management systems, transparency, good governance and professionalization, product innovation speed, service delivery, etc.

Technology Adoption & Cooperative Credit

• The establishment of the Ministry of Cooperation at the Union level is a step in the right direction towards strengthening the cooperative movement.
• The digitisation aspect of cooperative banks can be understood in terms of two aspects— Digitisation of STCCS and technology adoption for customer interface, service delivery, and decision-making.

A. Digitisation of STCCS

• The StCBs and DCCBs fall under the regulatory purview of the RBI. These have been automated by the Centralised Online Real-time Exchange (CORE) based Banking Solution [CBS].
• This helps the banks maintain a single set of books of accounts in electronic form.
• CBS not only strengthens the regulatory and supervisory mechanisms for cooperative banks but also ensures anytime, anywhere banking for the member clients.
• A robust office management system or Enterprise Resource Planning (ERP) is crucial to managing day-to-day business activities such as accounting, internal audit, project management, service deliveries, human resource, and marketing functions, etc.
• Since most of the issues facing the rural cooperative credit system are common across cooperative banks, standardised technological solutions and office management systems should be adopted by STCCS.
• The PACS computerisation policy of the Government of India, under the active leadership of the Home and Cooperation Minister, envisages increasing efficiency of PACS in delivering credit and other financial services to the farmers.
• The Ministry of Cooperation implemented a Rs 2,516 crore project on the ‘Computerisation of PACS’, covering around 63,000 PACS over a period of 5 years and will enhance service delivery among small and marginal farmers.
• This will ensure speedy disposal of loans, a lower transition cost, faster audit, and reduction in imbalances in payments and accounting with StCBs and DCCBs.
• PACS account for 41 per cent (3.01 crore farmers) of the Kisan Credit Card (KCC) loans given by all entities in the country, and 95 per cent of these KCC loans (2.95 crore farmers) through PACS go to the small and marginal farmers.
• PACS will also function as nodal centres at panchayat level for the delivery of financial and non-financial services such as Direct Benefit Transfer (DBT), Interest Subvention Scheme (ISS), Crop Insurance Scheme (PMFBY), and inputs like fertilisers and seeds.

B. Technology adoption for customer interface, service delivery and decision-making

• Banking services need to be more cost-effective, efficient, faster, and secure.
• The sector needs infrastructure and logistics facilitation and calls for high-end value-chain financing.
• In rural areas it is desirable to have shared tech resources through a collaborative approach and strategic alliances.
• With the rapid penetration of smartphones in rural areas, there is a huge opportunity to deliver a better banking experience to the farming community.
• Also, using drones fields, which can improve the efficiency and accuracy of agri-insurance products.

Conclusion

Thus, with the right technology and digitalization, cooperative credit institutions are well poised to serve the changing needs of Indian agriculture. As India head towards a 5 trillion-dollar economy, the contribution of the rural economy will increase substantially.

Rural cooperative credit institutions can carve out profitable business propositions and contribute effectively to larger macroeconomic goals. Alongside policy support, technological upgradation can be a big game changer to reposition agriculture credit cooperatives as agents of rural prosperity.

CHAPTER 4 - USHERING DEVELOPMENT PATHWAYS FOR NON-CREDIT COOPERATIVES

• Around 8.54 lakh cooperative societies with a membership of 29 crore people are estimated to be operating in India.
• The evolution and growth of cooperatives in India vary across States. The difference across States arises due to the diverse focus areas and approaches adopted by the respective State administrative machinery to give an impetus to growth.

Cooperative Structure in India

• The Cooperatives Society Act, 1912; the Mutually Aided Cooperative Thrift Societies Act; and the Multi-State Cooperative Societies Act, 2002 form the legal framework of cooperatives in India.
• There are two types of cooperative structures in the country, i.e,, State Cooperative Societies and Multi-State Cooperative Societies.
• The Multi-State Cooperative Societies come under the Central Government and the State Cooperative Societies under the State Governments.

Development pathways of non-credit cooperatives-

Following steps need to be taken: -

1. Convergence- MSME Ministry allows cooperatives to register as MSMEs through online registration on Udyam portal. More than 16,000 cooperatives have registered as MSMEs on the portal.
   • • A number of schemes that have substantially benefited MSMEs are the Cluster-based programmes.
     • Such schemes provide funds for establishing Common Facility Centres, Display centres, Processing centres, Recycling/Resource recovery plants, Testing and Quality production centres, Infrastructure development, and soft interventions aiming at skill development.
     • MSMEs also benefit in terms of creating marketing linkages through the domestic Procurement & Marketing Scheme, and the International Cooperation Scheme.
2. Awareness, Training & Mentoring
   • • Awareness programmes about cooperatives are required across India for capacity building.
     • Cooperatives can also be linked through the Skill Development Programmes being run by various Ministries and Rural Self-Employment Training Institutes for the skill upgradation of their staff/ workers.
     • Government of India has announced the formation of

1. National-Level Multi-State Cooperative Seed Society, which would act as an apex organisation for production, procurement, processing, branding, labelling, packaging, storage, marketing, and distribution of quality seeds; strategic research & development; and
2. Multi-State Cooperative Organic Society to act as an umbrella organisation for aggregation, certification, testing, procurement, storage, processing, branding, labelling, packaging, logistic facilities, and marketing of organic products.

3. Technology & Digitalisation-
   • • Unless technology, production, and business models are upgraded and digitalisation of the processes is not pursued in earnest, Cooperatives may not be able to stay relevant and competitive.
     • The hard interventions, such as, creating physical infrastructure, may be made available by considering cooperatives as clusters and linking them with relevant cluster schemes.

Conclusion

A well-thought-out strategy envisaging an Action Plan through which more and more State cooperatives can be linked or integrated to form multi-state cooperatives in areas where there is ample scope for a large, proactive membership base will ensure sustainable growth.

CHAPTER 5- STRENGTHENING COOPERATIVE ENTERPRENEURSHIPS FOR ECONOMIC DEVELOPMENT

• Cooperative entrepreneurship is a form of collective or joint entrepreneurship.
• ‘Cooperative entrepreneur’ is nothing but a social leader with a vision to craft robust strategies for managing business affairs democratically, rather than purely for personal gain.
• Members of a cooperative are the owners of the business as well as the users of the goods and services.
• Cooperatives are governed on one- member, one-vote basis.
• Democratic governance by members is one of the cooperative model’s greatest strengths.
• Solving community problems, and observing sectoral trends are two effective methods for finding chances for the creation of cooperatives.
• Cooperative entrepreneurship focuses on quality employment generation, wealth creation, and optimum use of available resources at the community level.
• In India, cooperatives account for 19% of our agricultural financing, 35% of fertiliser distribution, 30% of fertiliser production, 40% of sugar production, 13% of wheat procurement, and 20% of paddy procurement (NCUI:2018).
• A cooperative society must have dynamic governing structures, qualified, competent, and committed human resources, and cutting-edge management systems in order to achieve the objectives of togetherness.

Conclusion

Cooperative entrepreneurship is the commercialization of a continuous stream of innovation in a network of connected enterprises by combining under-utilized resources with untapped market prospects. Young people and women need to be taught cooperative identity, values, and principles while developing strong business strategies and marketing their products and services.

CHAPTER 6- A BLUE OCEAN FOR ECONOMIC DEVELOPMENT

• India is the 3^rd largest fish-producing country in the world, contributing 7.93% towards global fish production, and is the second largest among the aquaculture fish-producing countries globally.
• It contributes to around one per cent of the national GDP.
• It provides livelihoods to more than 2.8 crore fishers and fish farmers.
• The country has annual export earnings of over Rs 50,000 crore from the fisheries sector.

Fishery Development: Government of India’s Thrust

• Pradhan Mantri Matsya Sampada Yojana (PMMSY) was launched in the year 2019-20 with a total project outlay of Rs 20,050 crore by union government.
• A dedicated Rs 7,522 crore Fisheries & Aquaculture Infrastructure Development Fund (FIDF) was created in the year 2018-19.
• Government also initiated the Blue Revolution in 2014, boosting not only fish production but also infrastructure development in the fisheries sector.
• The momentum for the fishery cooperative movement in the country picked up in 2021 with the establishment of the Ministry of Cooperation.

Role of Fishery Cooperative Federation-

• The National Federation of Fishers' Cooperatives Ltd. (FISHCOPFED) is the apex and national level cooperative organisation for the development of the fishery cooperative movement in India.
• FISHCOPFED is dedicated to the empowerment of fisheries cooperatives in the country.
• It is a member of the International Cooperative Alliance and also a member of the International Cooperative Fisheries Organisation (ICFO) and Network for Development of Agricultural Cooperatives in Asia and the Pacific (NEDAC).

• The National Fisheries Development Board (NFDB) and FISHCOPFED have been assigned to speed up the work in coordination with the concerned State/UT authorities.
• FISHCOPFED has provided social security to poor fishermen through accidental insurance during the period 1982-2020.

 

 

Way Forward

• There is an urgent need for the adoption of digital technology by fishery cooperatives to provide their services at the doorstep and play a key role in providing nutritious food to the people.
• Support is to be provided by the National Bank for Agriculture and Rural Development (NABARD), NCDC, and NFDB to strengthen the gap that has existed since independence.
• There is a need to insure over ten million fishermen under the Group Accident Insurance Scheme (GAIS) within the next 2 to 3 years.
• Fishery cooperative members should be provided with online awareness training about the PMMSY scheme and Cooperative Principles.
• Fisheries cooperative sector should be provided marketing support for sustainable business plan to excel in domestic marketing,
• Computerization of a primary fishery cooperative is also needed to accelerate the growth of this sector.

CHAPTER 7- ONE PACS ONE DRONE

• PACS can be strengthened by providing each with a Drone under the initiative of ‘One PACS One Drone (OPOD)’.
• It will strengthen the economic condition of PACS and promote the entry of new entrepreneurs in this field.

Drone Policy

• A drone is an unmanned aerial vehicle (UAV).
• It is an aircraft without any human pilot, crew, or passengers on board.
• The flight of UAVs may be operated under remote control by a human operator as a remotely piloted aircraft (RPA), or with various degrees of autonomy.
• The Drone Rules 2021 were announced with a vision to make India a global drone hub by 2030.
• It is expected that the drone component industry will attract $500 billion of investment in the next few years.
• The Farmer Producer Organizations (FPOs) would be eligible to receive a grant of up to 75% of the cost of the agriculture drone for its demonstration to the farmers.

Need of drones in Agriculture Sector

• Drones are one such technology that is gaining prominence in the agriculture sector.
• Land mapping, agrochemical and liquid fertilisers spraying (such as nano urea/nano DAP/ Sagarika etc), seeding, crop yield assessment, and drone-based are the most prominent uses of drone.
• Spraying of Agrochemicals & liquid fertilisers has the potential to be actively used as it saves the cost of inputs by 25-90% and improves crop yield.
• With the introduction of drones in the agriculture sector, it is possible to increase the productivity of crops while minimizing the input cost.

 

Conclusion

The implementation of drone technology in agriculture is still a big issue. Through this initiative of ONE PACS ONE DRONE, the benefits of the technology can reach even small and marginal farmers. This initiative will set an example in Transformation of Cooperative Sector through Technology.

Mains Practice Question

Q1.    What are the Cooperative Societies? Mention the constitutional provisions related to cooperatives.

Q2.    State the reasons behind the poor performance of cooperatives in India. Also, discuss the reforms undertaken by the government to overcome the shortcomings.

Q3.    Analyze the role of cooperatives in the economic development of the country.

Q4.    Cooperative sector has immense transformative potential, but it has not been optimally utilized so far. Suggest the measures to utilize the potential of this sector fully.