The Bill allows co-operative societies (registered under state laws) to merge into an existing multi-state co-operative society.
According to the International Cooperative Alliance (ICA), cooperatives are people centered enterprises jointly owned and democratically controlled by and for their members to realize common economic, social and cultural needs and aspirations.
Multi--state cooperatives are societies that have operations in more than one State — for instance, a farmer producers organization which procures grains from farmers from multiple States.
The board of directors are from all the States these collectives operate in and control all the finances and administration. There are close to 1,500 MSCSs registered in India with the highest number being in Maharashtra.
97th Amendment Act: It added “cooperative societies” under Article 19(1)(c), elevating it to a fundamental right to form associations or unions or cooperative societies. The amendment introduced Article 43B (in Directive Principles of State Policy) which says that states shall endeavour to promote voluntary formation, autonomous functioning, democratic control and professional management of cooperative societies. It empowered Parliament to frame laws for cooperative societies that function across States (multi-State cooperative societies) and State legislatures to make laws for all other cooperative societies falling under their jurisdiction.
The Gujarat High Court struck down the amendment in 2013 because it had failed to comply with the requirements under Article 368(2) by not having been ratified by the States and had also given an additional finding that the 97th Amendment violated the basic structure of the Constitution. Supreme Court judges on the Bench that heard the Union government’s appeals agreed with the Gujarat High Court that the ratification by the State legislatures was required for Part IXB, and in the absence of such ratification, the Part had to be struck down. Since the states had not ratified the amendment, the Supreme Court struck down the provisions under Articles 243ZJ-243ZS, which prescribed the rules under which the state governments could regulate societies. The court thus held that cooperatives working within a State are the exclusive domain of the state governments.
Provisions of the Amendment Bill 2022: The central government will establish the Co-operative Election Authority to: (i) conduct elections of the multi state cooperatives (ii) supervise, direct and control the preparation of electoral rolls.
It will establish a Cooperative Rehabilitation, Reconstruction and Development Fund for the revival of sick multi--State co-operative societies. This fund shall be financed by existing profitable multi--State co-operative societies which will have to deposit either ₹1 crore or 1% of the net profit into the Fund. The central government will appoint one or more Co-operative Ombudsman with territorial jurisdiction. The Ombudsman shall inquire into complaints made by members of co-operative societies.
The Bill amends the composition of the board of directors to mandate the inclusion of: (i) one Scheduled Caste or Scheduled Tribe member, and (ii) two women members.
Issues with Cooperative Sector: The cooperative sector has become an avenue for dispensing patronage to the supporters of ruling political parties. The policy of State governments to contribute to the share capital of the cooperatives enabled governments, “in the name of public interest” to directly intervene in the working of cooperatives which are legally autonomous. Cooperatives have also become avenues for regulatory arbitrage, circumventing lending and anti-money laundering regulations. Cooperatives in India function in different sectors. Cooperatives is a State subject under the Constitution of India and State cooperative laws and their implementation vastly differ. Cooperative societies have shown weaknesses in safeguarding the interests of the members and fulfilment of objectives for which these institutions were organized.
Need to bring provisions in the law quantifying the minimum level of participation required by a member of a cooperative annually. Encouraging democratic participation by members, developing effective leadership who can even influence policy formulation by the government favourable to cooperatives. Infusing professionalism as it is a key requirement for conversion of ideas/policies into tangible outcomes. Ensuring effective human resources management practices in cooperatives such as recruitment, training, social security etc.