The Multi-State Cooperative Societies (Amendment) Bill 2023

What’s in today’s article?

• Why in News?
• Cooperatives in India
• What are Multi-state Co-operative Societies?
• Shortcomings with respect to the Functioning of Co-operatives
• Key Features of the Multi-State Cooperative Societies (Amendment) Bill 2023
• Significance of the Bill
• Concerns regarding the Provisions of the Bill

Why in News?

• The Multi-State Cooperative Societies (Amendment) Bill 2023, which seeks to amend the Multi-State Co-operative Societies Act 2002, was passed by the Lok Sabha.

Cooperatives in India:

• Co-operatives are voluntary, democratic, and autonomous organisations controlled by their members who actively participate in its policies and decision-making. 
• After independence, the first five-year plan (1951-56), emphasised the adoption of co-operatives to cover various aspects of community development.
• According to the Article 43B (DPSP) of the Indian Constitution inserted by the 97th Amendment (2011), states shall endeavour to promote –
  • Voluntary formation,
  • Autonomous functioning,
  • Democratic control and
  • Professional management of cooperative societies.

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What are Multi-state Co-operative Societies?

• These are societies that have operations in more than one state. For example, a farmer-producers organisation (FPO) which procures grains from farmers from multiple States.
• The Multi-State Co-operative Societies Act 2002 provides for the formation and functioning of multi-state co-operatives.
• According to the Supreme Court of India, Part IXB – The Co-operative Societies (also inserted by the 97th Amendment), will only be applicable to multi-state co-operative societies, as states have the jurisdiction to legislate over state co-operative societies.

Shortcomings with respect to the Functioning of Co-operatives:

• Inadequacies in governance.
• Politicisation and excessive role of the government.
• Inability to ensure active membership.
• Lack of efforts for capital formation.
• Inability to attract and retain competent professionals.
• There have also been cases where elections to co-operative boards have been postponed indefinitely.

Key Features of the Multi-State Cooperative Societies (Amendment) Bill 2023:

• Election of board members:
  • Under the Act, elections to the board of a multi-state co-operative society are conducted by its existing board. 
  • The Bill amends this to specify that the central government will establish the Co-operative Election Authority to conduct such elections.
  • The Authority will consist of a chairperson, vice-chairperson, and up to three members appointed by the central government on the recommendations of a selection committee.
• Amalgamation of co-operative societies:
  • The Act provides for the amalgamation and division of multi-state co-operative societies by passing a resolution at a general meeting with at least two-thirds of the members present and voting. 
  • The Bill allows state co-operative societies to merge into an existing multi-state co-operative society, subject to the respective state laws. 
• Fund for sick co-operative societies:
  • The Bill establishes the Co-operative Rehabilitation, Reconstruction and Development Fund for revival of sick multi-state co-operative societies.
  • Multi-state co-operative societies that are in profit for the preceding three financial years shall finance the Fund. 
• Restriction on redemption of government shareholding:
  • The Act provides that the shares held in a multi-state co-operative society by certain government authorities can be redeemed based on the bye-laws of the society.  
  • The Bill amends this to provide that any shares held by the central and state governments cannot be redeemed without their prior approval.
• Redressal of complaints:
  • As per the Bill, the central government will appoint one or more Co-operative Ombudsman with territorial jurisdiction.  
  • The Ombudsman shall complete the process of inquiry and adjudication within 3 months from the receipt of the complaint. 
  • Appeals against the directions of the Ombudsman may be filed with the Central Registrar (who is appointed by the central government) within a month.

Significance of the Bill:

• It will strengthen cooperatives by making them transparent and introducing a system of regular elections.
• The Bill seeks to align its provisions with those provided under Part IXB of the Constitution and address concerns with the functioning and governance of co-operative societies.

Concerns regarding the Provisions of the Bill:

• Effectively imposes a cost on well-functioning societies: Sick multi-state co-operative societies will be revived by a Fund that will be financed through contributions by profitable multi-state co-operative societies. 
• Against the co-operative principles of autonomy and independence: Giving the government the power to restrict redemption of its shareholding in multi-state co-operative societies.

 Q1) What is a farmer-producers organisation (FPO)?

The concept behind FPOs is that farmers, who are the producers of agricultural products, can form groups. To facilitate this process, the Small Farmers’ Agribusiness Consortium (SFAC) was mandated by the Department of Agriculture and Cooperation, Ministry of Agriculture.

Q2) What is the objective of the 1st Five Year Plan (1951-1956)?

The first five-year plan was launched in 1951 with the objective to uplift the economic condition of India by mainly focusing on improving the standard of the primary sector.

Source: Multi-State Cooperative Bill passed by Lok Sabha | LM