The Multi-State Cooperative Societies (Amendment) Bill, 2022

Context: Recently, the Multi-State Cooperative Societies (Amendment) Bill, 2022, was passed by the Lok Sabha to amend the Multi-State Cooperative Societies (MSCS) Act, 2002
Probable Question: Q.  Discuss the challenges faced by the cooperative sector. How does the Multi-State Cooperative Societies (Amendment) Bill, 2022 seek to address them?
About Multi-State Cooperatives:
  • Multi-State cooperatives are those which have operations in more than one State and are registered.
    • For example: Agriculture Development Cooperative Federation
  • They are registered under the Multi-State Cooperative Societies Act of 2002 with the Central Registrar.
  • The Board of Directors is from all the States these collectives operate in and controls all finances and administration functions.
Need of the Multi-State Cooperative Societies (Amendment) Bill, 2022 Bill:
  • In Sync with the Constitutional (Ninety-Seventh) (Amendment) Act, 2011: Amendment to the Multi-State Cooperative Societies Act, 2002 is necessary to be in consistency with the Constitutional (Ninety-Seventh) (Amendment) Act, 2011.
  • Plugging Loopholes:  It aims to plug loopholes in the existing legislation and to strengthen governance in the Multi State Cooperative Societies, in accordance with the following Cooperative Principles, namely:
    • Voluntary and Open Membership; Democratic Member Control; Member’s Economic Participation; Autonomy and Independence; Education, Training and Information; Cooperation among Cooperatives; and Concern for Community.
  • Ease of Doing business: The Bill would expedite the registration process and ensure ease of doing business.
Key Provisions of the Multi-State Cooperative Societies (Amendment) Bill, 2022 Bill:
Provision Multi-State Cooperative Societies Act of 2002 Multi-State Cooperative Societies (Amendment) Bill, 2022
Election of Board Members
  • Under the Act, elections to the board of a multi-state co-operative society are conducted by its existing board.
  • It establishes the Co-operative Election Authority to conduct and supervise elections to the boards of multi-state co-operative societies.
  • 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.  This can be done 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 with   at least two-thirds of the members consent
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 cooperative 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 to provide that any shares held by the central and state governments cannot be redeemed without their prior approval.
Redressal of Complaints
  • The central government will appoint one or more Cooperative Ombudsmen with territorial jurisdiction.
Concern related to Bill:
  • Reviving sick co-operative societies may burden profitable societies: The Bill is effectively imposing a cost on well-functioning co-operatives to bail out poorly functioning ones.

Advantages of cooperative society:

  • Democratic Management: A cooperative society is managed in a democratic manner. It is based on the principle of ‘one man one vote’. All members have equal rights and can have a voice in its management.
  • Limited Liability: The liability of the members of a co-operative society is limited to the extent of capital contributed by them. They do not have to bear personal liability for the debts of the society.
  • Stability: A co-operative society has a separate legal existence. It is not affected by the death, insolvency, lunacy or permanent incapacity of any of its members.
  • Easy to Form: A cooperative society is a voluntary association and may be formed with a minimum of ten adult members. Its registration is very simple and can be done without much legal formalities.
  • Open Membership: Membership in a cooperative organization is open to all people having a common interest. A person can become a member at any time he likes and can leave the society at any time by returning his shares, without affecting its continuity.
Issues with the Cooperative Sector:
  • Lax Corporate Governance: Poor standards of governance combined with political influence hinders their day-to-day functioning.
  • Competition from Private Businesses: Private businesses often have more resources and can offer products and services at lower prices, which can make it difficult for cooperatives to compete.
  • Lack of Skilled Management: Many cooperatives lack skilled management, which can hinder their effectiveness and efficiency.
  • Limited government support for the cooperative sector has hindered its growth and development.
  • Inadequate Professionalism:Often, cooperative societies lack skilled professionals who can handle financial and operational aspects effectively.
  • Inadequate Technology Adoption: Many cooperative societies still rely on manual processes and outdated technology.
  • Market Competition: The cooperative sector faces competition from private and public entities, which may offer similar services.
  • Rampant Corruption: Offering or accepting bribes to influence decisions or secure favourable treatment within the cooperative society is a common norm.
Constitutional Provisions:
  • The 97th constitutional amendmentPart IXB (The Co-Operative Societies) was inserted into the Constitution.
  • The right to form cooperative societies was included as the Right to Freedom under Article 19 (1).
  • Article 43-B (Promotion of Cooperation societies) was also inserted as one of the Directive Principles of State Policy.
  • The subject ‘cooperative societies’ is mentioned in entry 32 of the State List under the Seventh Schedule of the Constitution.
  • 2021: Ministry of Cooperation was created by the Government of India for realising the vision of ‘Sahkar se Samriddhi’.
Way Forward:
  • Local Factor: Cooperative societies should be formed while taking the local environment into account.
  • Abolition or Merger: The weak and inefficient cooperative societies should either be abolished or merged with strong and efficient ones
  • Financial and technical assistance: The government could provide more financial and technical assistance to cooperatives to help them grow and thrive.
  • More Access to financial resources: Cooperatives could be given greater access to financial resources, such as loans and grants, to help them grow and expand.
Additional Information: Magnitude of Cooperative Sector in India:
  • Currently, there are about 10 lakh cooperatives, of which 1.05 lakh are financial cooperatives.
  • India has 1,514 primary urban cooperative banks (UCBs), of which, 52 are scheduled and the rest unscheduled, some are multi-State UCBs.
  • Among the financial co-operatives, rural cooperatives have a three-tier system with around 1.02 lakh primary agricultural cooperative societies (PACS), 351 District Central Cooperative Banks (DCCBs), 34 State Cooperative Banks (SCBs), besides 616 rural cooperatives for long-term lending.
 News Source: The Hindu

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