Agri Business

How good governance can cement the success of agri cooperatives

Updated on: Dec 29, 2021
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Cooperatives must rehaul themselves to achieve sustainable competitiveness in today’s dynamic business environment

Good governance is essential to any business enterprise. It is all the more important for community-based agriculture cooperatives. The cooperative model took birth in 1904 to address the socio-economic, cultural and aspirational needs of members. Agricultural cooperatives have played a critical role in achieving food security, ending hunger and reducing poverty. However, in the 21st century, agricultural cooperatives have been facing secondary needs like value-addition, processing, organic production, technology usage and export, among others. With a new Ministry of Cooperation in place, there is renewed interest in the cooperative movement to ensure its competitiveness and sustainability in India.

Governance is a system and process concerned with ensuring the overall direction, supervision and accountability of an organisation. Good governance principles such as legitimacy, participation, professionalisation, accountability, transparency, honesty, integrity and fairness, which are typically associated with investor-owned organisations, are equally applicable in cooperatives. These unique institutions balance and negotiate relationships between members, communities, traders, and state. They have a separate legal existence and are governed by the board of directors elected by share members in the general assembly. The participation of cooperative unions in economic activities is affected by their management capacity, capabilities, experience and access to credit.

Social capital

Social capital facilitates these relationships in cooperatives. This includes members’ interests, caring for others, and the general welfare of the community. Social performance has, at its core, the idea that organisations should involve themselves in more than just an economic role in society and should accept a wider ethical responsibility for their impact on society and the environment in which they function.

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IAS officer Devendra Kumar Singh, in his address at the national conference on ‘Corporate governance and sustainable competitiveness in agricultural collectives (cooperatives and farmer producers’ organisations)’ on December 15-17 this year, pointed out that good governance is vital to bring prosperity through the cooperative model. At the meet, organised by the Vaikunth Mehta National Institute of Cooperative Management in association with the  Ministry of Corporate Affairs, he said that in order to develop cooperatives as a new economic model for the country’s growth, they must be strengthened to improve their competitiveness, regardless of the markets chosen. Competitiveness enables the efficient functioning of markets and forces organisations to improve their existing goods and services and innovate new ones. The complexity of the cooperative environment brings together sustainability and competitiveness. Yet, concepts like competitiveness or sustainability remain blurred, even if they are used on a daily basis, in a cooperative domain.

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Sustainable competitiveness is the ability to generate and sustain inclusive growth and improved business performance. All business units have to better understand the relationship between sustainability performance and business competitiveness, to effectively evaluate their current position, optimise resources allocation and integrate sustainability in their strategic planning.

Issues

The key stakeholders in agricultural cooperatives are members, the board of directors and management staff, while the key driving factors are access to and control over credit, infrastructure, and technology.

Cooperatives lack the professionalism and entrepreneurial spirit needed to manage their supply-chain and value chain. Like dairy, sugar and input sector, most of the weaker sectors of agricultural and/or producers’ cooperatives like fishery, handloom, handicraft, marketing, and so on, have failed to develop end-to-end value chain.

Given the current dynamic business and regulatory environment, cooperatives must rehaul themselves to achieve sustainable competitiveness. Some pertinent questions in this regards are:

How to bring corporate governance or work culture into agricultural cooperatives?

Is strategic diversification necessary to ensure performance of cooperatives at the grassroots? How can it guarantee competitive advantage?

How can the convergence of technology and resources help cooperatives achieve sustainable competitiveness?

What is the role of public-private partnership in infusing competitiveness in cooperatives?

Way forward

Nandita Mishra, Economic Advisor at Ministry of Corporate Affairs, said neglect of governance weakens the framework of accountability and carries multiple risks to the business and its strategy over time. Conversely, good governance supports the board of the cooperative in its task of creating and maintaining a strong and sustainable business with long-term competitive advantage, and answers key business questions, defines roles and responsibilities, establishes processes for setting targets and ensures accountability.

Despite the huge network of credit cooperatives (rural and urban) and other public and private financial institutions, access to credit has always been an issue. There is need for a national-level bank dedicated to agricultural cooperatives and FPOs.

Though India is progressing in the ease-of-doing-business ranking (currently 63rd), the registration process for agricultural cooperatives and applications for benefits under various schemes must be simplified.

Technology is changing day-by-day and there is a paradigm shift from physical to digital markets. Cooperatives must also change their marketing strategy and explore digital marketing tools like e-NAM, e-commerce platforms, e-kisan mandi and derivative commodity exchange, besides mobile application and web-based platforms.

Further, there is a need to build integrity among members to make them conscious users of their own cooperatives. It is not enough to have democratic representative governance systems in cooperatives. Members’ and non-members’ transactions with cooperatives would increase the level of participation while reinforcing the achievement of the cooperative’s purpose.

(Yadav is director, Paliwal is professor and Wadkar assistant professor of VAMNICOM)

Published on December 29, 2021

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