Context: Recently, Rajya Sabha passed the Multi-State Cooperative Societies (Amendment) Bill, 2023.

• The Bill had been approved by Lok Sabha recently, and was now passed in Rajya Sabha by voice vote.

Key highlights of the Bill

• Objective: The Bill seeks to establish a ‘Cooperative Election Authority’ with a view to introducing electoral reforms in the cooperative sector.

• Need of the Bill: There are about 6 lakh cooperatives in the country, out of which active Primary Agricultural Cooperatives (PACs) are around 63,000 which needs regulations.

• The Bill amends the Multi-State Co-operative Societies Act (MCSA), 2002. It establishes the Co-operative Election Authority to conduct and supervise elections to the boards of multi-state co-operative societies.

• A multi-state co-operative society will require prior permission of government authorities before the redemption of their shareholding.

• A Co-operative Rehabilitation, Reconstruction and Development Fund will be established for the revival of sick multi-state co-operative societies. The Fund will be financed through contributions by profitable multi-state co-operative societies.

• The Bill allows state co-operative societies to merge into an existing multi-state co-operative society, subject to the respective state laws.

What are Multi-state Cooperative societies?

• They are societies that have operations in more than one State, for instance, a farmer producers Organisation that procures grains from farmers from multiple states.

• At present, India has more than 1,500 multi-State cooperative societies, with the highest number being in Maharashtra.

• The MSCS Act 2002 was passed to govern such cooperatives whose members and areas of operation are spread across more than one state.

Why multistate cooperative societies are significant?

• The mission of the multi-state society is to facilitate the voluntary formation and democratic functioning of cooperatives as peoples institutions based on self-help and mutual aid and enable them to promote their economic and social betterment and to provide functional autonomy.

• Cooperative Society provides financial assistance to its members. The members are responsible for raising capital to help those in need.

• It mainly protects the weaker sections within rural communities from exploitation by wealthy individuals and companies.

Efforts to promote them

• After independence, the first five-year plan (1951-56) emphasised the adoption of co-operatives to cover various aspects of community development.

• 97th Amendment (2011): It inserted Article 43B in the DPSP of the Indian Constitution inserted,

• As per Article 43B. States shall endeavour to promote voluntary formation, autonomous functioning, democratic control and professional management of cooperative societies.

Laws governing Cooperative societies in India

• As per the Constitution, states regulate the incorporation, regulation, and winding up of state co-operative societies.

• Parliament can legislate on matters related to incorporation, regulation, and winding up of multi-state co-operatives.

• The Multi-State Co-operative Societies Act, 2002 provides for the formation and functioning of multi-state co-operatives.

• In 2011, the Constitution was amended (adding Part IXB) to specify guidelines for running co-operative societies.

• These guidelines provide for: (i) composition of the boards of co-operatives, (ii) election of members of the board, (iii) audit of accounts of co-operative societies, and (iv) supersession of the board.  

• The Supreme Court, in July 2021, held that Part IXB will only be applicable to multi-state co-operative societies, as states have the jurisdiction to legislate over state co-operative societies.

What are the present concerns in management of Cooperatives?

• Inadequacies in governance,

• Politicisation and excessive role of the government,

• Inability to ensure active membership,

• Lack of efforts for capital formation, and

• Inability to attract and retain competent professionals.