In the recent expansion of the Modi Government, a new Ministry of Cooperation headed by Home Minister Amit Shah was created, purportedly to ensure greater efficiency in co-operative societies in India. A cooperative is a different form of organisation — it is neither a private company nor a public company; it is also not a capitalist or socialist set-up.

The capitalist system often demonstrates its success through the economic development that has been achieved in some parts of the world. From a historical perspective, it can be seen that cooperation provided a spirit of hope, faith and action for the poor and those who cannot go it alone.

Cooperation is a win-win, providing new life to the desperate and vitality for the development of society. The true value of cooperation is “bilateral”, and if this human impulse is nurtured with integrity, energy, and dedication, a new social order will be created for the well-being of all people.

Prior to India’s Independence, the distinction between ‘haves’ and ‘have-nots’, like in other nations, was more prominent in rural India. The situation was most apparent at the turn of the 20th century, when colonialism was at its peak and demands for autonomy were rapidly gaining momentum.

Historically, India has been an agricultural country with bulk of its population relying on farming and allied activities for survival

The 97th Constitutional Amendment, which was passed in 2011, categorically dealt with issues related to the effective management of co-operative societies.

It added a new provision in the Constitution under Article 19(1)(c) to provide protection to cooperatives. Article 43B of Part IV states that it is the duty of the State to promote self-reliance, democratic management, voluntary training and professional management of cooperatives in order to improve the economic activity of India.

Vaidyanathan Committee

To get a better understanding of the sector, reference needs to be made to the Vaidyanathan Committee report, which made the following observations:

There is need to have a broad roadmap for revival of the short-term cooperative credit structure

Equal importance be assigned to all the components — as an inter-related and integrated package — to ensure synergetic impact in improving the health and viability of the short-term cooperative credit structure, through the following revival package: (i) special financial assistance to bring the short term cooperative credit structure to an acceptable level of health; (ii) introduce legal and institutional reforms necessary for their democratic, self-reliant and efficient functioning; and (iii) qualitative improvement in personnel in all tires through capacity building.

The Union Government accepted the recommendations of the committee and after extensive discussion with the States implemented the same across the country in January 2006

The committee proposed a unified national model to incorporate the old state law into the new law. The key reforms proposed by the CAS include: a bank can grant full voting rights to all users; reducing the State government’s participation in cooperative actions to 25 per cent; and restricting the power of States to replace the board of directors,

The real effects of the Cooperation Ministry can be construed more clearly if one takes into account recent occurrences such as the farmers’ protests. In order to remove the deadlock and ensure a more comprehensive approach, the government will ensure that the farming and livestock cooperative movements in other parts of the country following the new agricultural law are successful, increasing thereby farmers' incomes and land productivity.

After the formation of the Cooperation Ministry, many opposition leaders contended that the move will countermand cooperative societies, which form a part of the State List under Entry 32 of Schedule 7 of the Constitution, and will go against the basic contours of cooperative federalism. The Centre, however, cited the objective as streamlining the whole process and easing the doing of business.

Way forward

In the Rajendra N Shah Vs. Union Of India & Anr . (2013) case, an appeal from Gujrat High Court is sub-judice at the Supreme Court, where the Bench comprising Justices RF Nariman, KM Joseph and BR Gavai is hearing the matter with respect to striking down certain provisions of the 97th Constitutional Amendment relating to cooperative societies.

The High Court had held that certain provisions of the amendment violated the basic structure of federalism. However, the Attorney General of India contended that amendment was enacted to bring uniformity in the management of cooperative societies and it does not take away the powers of the State to enact laws with regard to them.

This case will decide the broad contours of the Ministry of Cooperation in the years to come.

The writer is a Delhi-based law and policy expert. Views are personal