The Hindu Business Line : Why cooperatives do not work

BY ANY RECKONING, India would seem a natural home for the cooperative movement. It could have been the path-breaking model of voluntary, grassroots, self-help. A user-producer association is an ideal antidote to underdeveloped markets, poor capital formation, and low purchasing power. Yet, the movement, part of the Nehruvian humanist-socialist agenda, lies in disarray. Much has been said recently about reviving cooperatives, in itself a recognition of their moribund state. The Vaidyanathan Committee recommends converting producer cooperatives to companies and strengthening them to face competition. They will also presumably be subject to regulation similar to the corporate sector. In the case of the successful dairy co-op movement, the pioneer Dr Varghese Kurien himself opposes corporatisation per se as being contrary to its spirit. Further exposure to bureaucracy or politics will be the kiss of death. The Committee openly states that many cooperatives today are anachronisms, plagued by politicisation and, therefore, unable and unfit to compete or serve their members' interests.

Co-operative credit is complicated by the dual control, of the State government and the Reserve Bank of India, with no one quite ready to grasp the nettle. The estimated Rs 15,000-crore cost of restructuring announced by the Finance Minister amounts to throwing money at a problem that has its roots elsewhere. He also wants democratisation, corporatisation and professionalism. These virtues are even more urgently needed in the vastly more valuable public sector. Yet, the government's record of making this happen in a free market mode is dismal. Repeating similar pious hopes and motherhood statements does not make them any more achievable where cooperative credit is concerned.

Take political interference. In some places, boards of Urban Cooperative Banks have been superseded and the organisations are run by government-appointed special officers. The public has not been told why these banks continue to be treated thus or how long this situation will continue. Some would argue that political control is inevitable as co-operatives in India have always been funded by government, and used as vehicles for its programmes. A further infusion of funds on the scale envisaged can only increase the dependence.

Democratisation is not any easier. Village communities, where ancient social strictures rule, do not readily adopt egalitarianism. Co-operation between the rich and the poor is, therefore, very difficult to achieve. Given the low savings and deposits, credit is inaccessible to those in greatest need of it. Lastly, professionalism can never be ensured without abolishing dual control and clarifying the norms for managing the societies and banks. Where power gets into the wrong hands, mismanagement and dishonesty flourishes. Elected directors feather their own nests and the small depositor, the primary reason for the co-operative, is ignored. Power gravitates towards money, status and political connections. Along with the power-sharing needed to implement Panchayat Raj, a democratic cooperative movement could remain a pipedream.

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