December 18, 2022

Bill to Capture Cooperatives in States

THE tendency to centralise administration and power – and thereby weaken the federal structure of the constitution – is a hallmark of the Narendra Modi government’s policy. One of the important ways in which the Modi government attempted to violate the constitutional powers of the states was by forming a ministry of cooperation and installing none other than Amit Shah as its minister.

Soon after the formation of the ministry, the Supreme Court of India gave a judgement that partly limited the adventurism of the BJP government. In 2011, the 97th constitutional amendment had inserted Part IXB into the constitution and specified several conditions for state-level laws related to cooperative societies. In October 2022, the court ruled that the 97th amendment would not be applicable to local cooperative societies but only multi-state cooperative societies. The judgement was a setback to the government, which was planning to use the 2011 amendment to intrude into local cooperative societies registered under state cooperative laws.

It was then that the Modi government decided to use the multi-state cooperative society route to intervene in the states. Using the same 2011 constitutional amendment, it has now introduced the Multi-State Cooperative Societies (Amendment) Bill, 2022 to amend the Multi-State Co-operative Societies Act, 2002.

The proposed 2022 Bill is a dangerous legislation. It is a blatant attempt to thrust the decisions of the central government on to cooperatives societies functioning under state laws. As per the amended Clause 6, any cooperative society may, empowered by a resolution passed by majority of not less than two-thirds of the members present and voting at the society’s general meeting, decide to merge into an existing multi-state cooperative society. As per the amended Clause 13, any redemption of shares of multi-state cooperative societies cannot be undertaken without the centre's approval. As per the amended Clause 17, a Central Election Authority will be appointed by the central government. As per the amended Clause 45, the central government can override a board of directors and appoint an administrator.

All these amendments are explicitly intended to insert multi-state cooperative societies into the cooperative structures of states. This will allow the central government to strain and strangle local cooperatives and take control of the whole cooperative structure in states through penal actions, mergers, board takeovers, and interventions in elections.

The “logic” offered to amend the 2002 Act is, purportedly, to enhance transparency and accountability, and improve the ease of doing business in cooperatives. However, this “logic” is quite illogical; there is no assurance that if a cooperative society moves from state control to central control, its transparency, accountability, and performance will improve. In fact, multi-state cooperative societies are in a crisis all over India. In December 2021, Amit Shah informed the parliament that 44 multi-state cooperative societies in nine states and UTs are being wound up due to financial mismanagement or inefficiency. Evidence also shows that many state-level cooperatives, such as in Kerala, function more efficiently and profitably than many multi-state cooperative societies.

There is more. Under the central government’s directions, AMUL is either joining hands, or being merged, with five local cooperatives to form a multi-state cooperative society. This society would be engaged in certification of products of “natural farming” and export of milk. Such politically motivated steps will only weaken state-level dairy cooperatives as well as a professionally run cooperative like AMUL.

In what makes its intentions further clear, the Modi government is also infusing money into defunct multi-state cooperative societies based in Gujarat and Maharashtra and sending them to establish new bases in faraway states like Kerala. The intent is to weaken the operations of local cooperative societies in Kerala, takeover their business, and expand the political capital of BJP in the state.

The very spirit of cooperation in India is premised on regional diversity. Neoliberal policies in the banking sector have already pushed cooperative societies in states into a crisis. With centralisation, as attempted in the proposed 2022 Bill, the objective appears to be to undermine and destroy them. States must join hands – both politically and legally – to rebuff this unconstitutional step.


(December 14, 2022)