INDIAN SCENARIO
Cooperatives are self -help economic enterprises and play a vital role in uplifting the socio-economic conditions of its members and the local community amongst which it operates. Locally owned, people-centric cooperatives serve as catalysts for social organization and cohesion. Concern for their members and the community, Cooperatives have evolved into a unique model nurturing democratic functioning, human values, and respect for the environment. In India, the cooperative sector has always had a spiritual content and evolved on ethical values as it was led by towering leaders like Acharya Vinoba Bhave, Vaikunthbhai Mehta, and Dhananjayrao Gadgil.
India is a developing country facing a variety of challenges, viz., population explosion, low productivity, inequality, low living standards, etc. The agriculture sector remains the livelihood to two-third of India’s population and gives employment to about 57% of the work force. Moreover, as a result of misconstrued economic policies pursued for the past several years, weaker segments such as small farmers, workers, tribal, economically backward communities, etc. are facing severe hardships and deprivation, resulting in severe economic imbalances that have generated inequality and inequity. This situation has led to a strong and growing feeling of injustice and exclusion amongst the underprivileged.
Cooperatives have been playing a significant role in providing agricultural credit, distribution of agricultural inputs, providing market access, etc. The Indian cooperative movement is the biggest movement in the world, and has made tremendous progress in several sectors of the Indian economy. In the early period, the cooperative movement was limited to providing rural credit. Cooperatives cover 100 per cent of the villages and 75 per cent of rural households through a network of over 8.50 lakh cooperatives with membership of well over 28 crores. In fertilizer production and distribution, the fertilizer cooperatives command a major share of the market. In the production of sugar, the share of cooperatives s is about 50%. Way back in 2002, NABARD in its Annual Report had observed that cooperatives have contributed significantly to the growth of institutional infrastructure in rural areas and individual capital formation in the agricultural sector.
Present Status
In the last 2 decades, the performance of cooperatives in India has been lackluster due to dormant membership, lack of active participation of members in the management of Cooperatives, mounting overdues in credit institutions (as agriculture remains dependent on the vagaries of weather), inadequate mobilization of resources, over dependence on governmental and institutional support, lack of professional management, bureaucratic control, and political interference. These factors have adversely impacted the sector. Unfortunately, Central and State Governments have refused to recognize the salient characteristics of cooperatives and have failed to harness its potential to achieve growth through the participation of people.
The World Bank estimates that food demand will double by 2030 as the world’s population increases by another two billion. There is an urgent need for India to increase its output of food. The solution lies in encouraging the formation of farmer cooperatives (PACs in India) to improve productivity, processing of Agri- produce, and to provide access to markets. Farmer cooperatives to reach their full potential need to increasingly engage in agro- processing. To be successful, in the initial years, PACs will need both finance and technical support. These are the areas, which need to be attended to by suitable legislative and policy support for cooperatives. Farmer cooperatives also need assistance to improve the quality of their produce for export. At a time when small farmers are struggling to survive in tough market conditions such as falling prices and inadequate farm subsidies, Cooperatives need to be empowered to operate markets on behalf of farmer-producers and directly sell their products to the consumers.
Legal Framework
In India, the first cooperative Credit Societies Act was a Central Act enacted in 1904. Subsequently, under the Montague- Chelmsford Reforms of 1919, Cooperation became a provincial subject and provinces were authorized to enact their own Cooperation laws. Post- independence, ‘Cooperative Societies’ remained a State subject under entry No. 32 of the State List of the Constitution of India.
The International Cooperative Alliance (ICA) Identity Statement and Cooperative Principles, the United Nations Guidelines of 2001, and the ILO Recommendation No. 193 relating to Cooperatives have served to guide the formation of Cooperatives, as well as to limit the role of the State to one of providing an enabling legal and financial environment and level-playing field to enable Cooperatives to operate on a sustainable basis alongside other types of economic enterprises.
These institutions have recommended the State to provide support to Cooperatives in areas of human resource development, access to credit, services for marketing, etc. without infringing on their autonomy. These institutions have also recommended that there should be an ‘early and complete disengagement of governments from the internal affairs of Cooperatives’. While it does not advocate complete withdrawal of the State, it recommends an institutional framework by which the Government registers Cooperatives and regulates them in the same way as other forms of economic enterprises.
Looking to the recommendations of the UNO, in India, the 100 -year old State Cooperative Act needs to be radically redrafted in the context of changed economic, political, and social scenario, and create an enabling legal and financial environment to empower the Cooperatives.
World Scenario
The Cooperatives sector worldwide has about one billion members in over 100 countries. It is estimated that Cooperatives account for more than 100 million jobs around the world. Across different countries, the proportion of Cooperative membership to population varies, but is as high as 1 in 2 persons as in Finland and Singapore; 1 in 3 in Canada, New Zealand, Honduras, and Norway; and 1 in 4 in the USA, Malaysia, and Germany. Viewed in terms of households, Cooperative membership represents as much as 1 in 2 households in Finland and 1in 3 in Japan. In terms of percentage of a country’s GDP attributable to Cooperatives, the proportion is highest in Kenya at 45 per cent, and New Zealand with 22 per cent. Cooperatives account for over 80 per cent of milk production in Norway, New Zealand, and the USA. They account for 71 per cent of the fishery production in Korea, 40 per cent of agriculture in Brazil, 25 per cent of savings in Bolivia, 24 per cent of the health sector in Colombia, 55 per cent of the retail market in Singapore, 36 per cent in Denmark, and 14 per cent in Hungary.
Credit-Banking Cooperatives
The continued financial crisis, post 2008, is characterized by massive public bail-out of private and public sector financial institutions. At the same time, member/owned Cooperatives Financial and Banking Institutions, including Credit Unions, have remained primarily focused on the needs of their members and have prudently refrained from taking excessive risks that plagued many large global banks and financial institutions. Hence, Cooperatives Credit institutions are growing from strength- to- strength.
There are some 52,000 Cooperative Banks and Credit Unions serving 177 million members in 100 countries, with the World Council of Credit Unions being their umbrella organization. Rabo Bank, which is one of the largest Cooperative Banks in the world is a shining example of Cooperative Banking model. In rural areas, Savings and Credit Cooperatives not only provide access to financial services, but also play an important role in the promotion of small and micro businesses. They bring the kind of financial “deepening” that is necessary for the poor to attain sustainable growth.
Health Cooperatives
In developed countries, Cooperatives have developed without much government support. In many countries, “Friendly” or Mutual Health Societies have emerged that cover sickness and provide basic healthcare. In countries with a mixed system of State and Private funding, such as France, Germany, and the Netherlands, becoming a member of one of the health mutual is even today very common for people to gain access to healthcare. In the USA, some of the largest health providers are Consumer Cooperatives. In Japan, 120 Consumer Cooperatives provide healthcare to around three million members, who meet in small “han” groups to discuss preventive health issues. Brazil has the biggest cooperatives medical system in the world and is operating in over 80 per cent of Brazil’s by- counties. With thousands of doctors who are members, these Cooperatives cover over 12 million members. As the population ages, cooperatives are now providing personal services and social care for older people and people with disabilities.
Consumer Cooperatives
Consumer Cooperatives, which originated in Britain, are today market leaders in Italy, Switzerland, Singapore, and Japan. They are equally active in the Scandinavian countries and Atlantic Canada. Even in the UK, which has seen the emergence of large consumer chains, Consumer Cooperatives have all along maintained over 20% of market share and have remained pre-eminent in the small supermarket sector. Consumer Cooperatives have a strong record of providing decent work culture to their employees, while adhering to fair trade practices.
Housing Cooperatives
Even Housing Cooperatives play an important role in developed economies. Much of the housing built in Norway and Sweden, in the second half of the last century, has been cooperative. Housing Cooperatives in the USA have been popular amongst the retired people. They have been effective wherever private or public renting has failed. In New York, a large number of residential apartments, homes, etc., which were abandoned by private landlords have been taken over and renovated by Housing cooperatives for low income groups. In Britain, cooperatives have taken over unpopular ‘Council’ estates even as tenant-owned cooperatives are challenging conventional landlords.
Water Cooperatives
In Wales, when privatization of water to investor-owned businesses proved unpopular, the same was taken over by semi- Cooperatives whose members are stakeholders. As in Wales, in Bolivia too, Cooperatives emerged as serious alternative to privatization of water services for urban consumers.
Insurance Cooperatives
Some of the world’s biggest insurers are cooperatives. The International Cooperative and Mutual Insurance Federation (ICMIF) represent over 180 Insurance Cooperatives in 70 countries, with substantial accrual of premium. Behind the success of these insurance companies is the underpinning principle of pooling risks of large numbers of people without having to pay out large dividends to outside investors, thereby, providing insurance at affordable costs.
Workers’ Cooperatives
In 1970s and 1980s, Worker Cooperatives played a big role in preserving jobs by taking over failed businesses, particularly, in West Europe.
Electricity Cooperatives
Another important area of cooperative involvement is in utilities. The US Electricity Cooperative shows that the cooperative model successfully works in rural areas, where the private sector does not venture. In the USA, over 1000 Electricity Cooperatives supply power to around 12% of households, mainly in rural areas. Electricity Cooperatives are also growing in the Philippines and Bangladesh. Like in the US, Electricity Cooperatives in Bangladesh have a membership of about 28 million users. In Argentina, 58% of rural electricity is supplied by Cooperatives, and Cooperatives are also strong in Telecommunications.
Rural Cooperatives
There are primary producer cooperatives, which supply inputs and do processing and marketing of products of farmers, fishermen, and forestry workers. They include some of the world’s biggest businesses, including conglomeration of farmers, ranchers, and primary cooperatives, whose success has enabled it to be listed in Fortune 500. Small Dairy Cooperatives are growing rapidly in Eastern Europe, Latin America, and Africa. There has been a major resurgence of marketing cooperatives in Ethiopia, Zambia, and Honduras. In Bosnia and in Serbia, for example, agricultural and marketing cooperatives were formed in response to a growing supermarket sector. In Ethiopia, more than 85 per cent of Ethiopia’s total inputs in rural areas are distributed through cooperatives, and over 75 per cent of its coffee is exported by cooperatives.
In many countries, liberal laws have been enacted resulting in the formation of new cooperatives. In almost all developing economies, the cooperative movement continues to grow in areas of Credit, Agricultural, Marketing, Dairy, Fisheries, and even in a nascent sector like Tourism. The cooperative sector is experiencing a renaissance despite many difficulties. A study of 11 countries in Africa estimates that around seven per cent of Africans are members of cooperatives. Even in countries where apex cooperatives collapsed such as in Uganda and Rwanda, the cooperatives have continued to grow in large numbers.
Challenges
One of the biggest challenges to cooperatives is the lack of awareness of their economic potential amongst the government and the general public. In Europe, for example, the International Accounting Standards Board seeks to classify Members’ Share Capital in cooperatives as Liability, rather than Equity or Capital, resulting in members being considered as creditors of the cooperative rather than equity owners. International Cooperative Organizations have opposed this treatment, as it is contrary to cooperative principles.
Another concern is the treatment of cooperatives (that have large market share) as a monopoly. The Swiss Competition Commission is treating two Consumer Cooperatives as Monopolistic just because between them they have over 50 per cent of the market share, even though the consumers are themselves shareholders and own these cooperatives. Hence, these cooperatives are now seeking a review of the Monopoly Law. Some cooperatives are still held back by issues like over-regulation from governments and poor internal governance, which leads to trust deficit. Credit cooperatives need to be strengthened to manage risk.
Similarly, low level of participation by women is a challenge faced by many cooperatives, a problem that is worse in agricultural cooperatives. In addition, the challenge of low level of involvement of young people and the need for their greater participation cannot be ignored.
Healing Touch of Cooperatives
Civil wars and ethnic conflicts have caused major disruptions and destroyed economies and infrastructure. Yet there is evidence that even during these conflicts, cooperatives have survived. In Sri Lanka and Nepal, they have been the only independent organizations, allowed by both sides, to operate in the war zone. In post- conflict era, cooperatives have played a crucial role in the restoration of economy and rebuilding of civil society. In East Timor, a network of 20,000 farmers has been formed, processing one- third of the coffee for export. In Rwanda, a credit system was rebuilt with the support of the World Council of Credit Unions without regard to ethnicity. In Bosnia, Cheese Cooperatives, and in Montenegro Dairy Cooperatives have encouraged displaced refugees to return, while in El Salvador, Electricity Cooperatives have boosted the local economy enabling ex-combatants to find work. Similar stories can be told of Guatemala, Lebanon, Azerbaijan, Serbia, and Montenegro. There is also evidence of cooperatives bridging longstanding ethnic divides.
Conclusion
Today as the world faces unstable financial systems, insecurity of food supply, growing inequality, rapid climate change and increased environmental degradation, etc., the cooperative sector, especially in India, presents itself as an important tool to realize Sustainable Development Goals (SDGs). With a view to achieve rapid development and social harmony, we also need to promote new model cooperatives in services and in agri- processing sectors. Internationally, there is a growing consensus at all levels about the important role cooperatives play and can play. The World Bank recognizes the role of cooperatives in revitalizing the agricultural sector and the rural economy. An IMF survey, way back in 2007, noted that “cooperative Banks have become important parts of many financial systems, with attendant potential financial stability”. Cooperatives may not be the complete solution to the world’s problems, but they are certainly a significant part of the solution – growth through people’s participation.
