1945.The Committee found cooperative societies to be the most suitable medium for
•democratization of economic planning and examined each area of economic development.
•Pre-Independence Development
•In 1946, inspired by Sardar Vallabh Bhai Patel and led by Shri Morarji Desai and Shri Tribhuvan
•Das Patel, the milk producers of Khera Distric t of Gujarat went on a fifteen day strike. Their
•refusal to supply milk forced the Bombay Government to withdraw its order granting monopoly
•procurement rights to Polson, a private dairy. History was made when two Primary Village Milk
•Producer Societies we re registered in October 1946. Soon after on 14th December 1946, the
•Khera District Cooperative Milk Producers Milk Union known as Amul was registered.
•-
•organized to give greater assistance to primary societies through Central Banks. For the first time
•an effective linking of credit with marketing, and providing assistance by way of liberal loans
•36
•and subsidies for establishment of a large number of godowns and processing plants was
considered.
•It would be appropriate to mention here some developments in Bombay vis -à-vis cooperatives,
•which had an impact on the cooperative sector. Shri Vaikunth Bhai Mehta took over as Minister,
•In-charge of Cooperation in the Bombay Government after which the cooperative movement in
•the province r eceived a boost. A Committee on Cooperative Education and Training under the
•chairmanship of Sir Janardan Madan, made recommendations for cooperative education
•programmes and the setting up of an Education Fund. The Agricultural Credit Organization
•Committee, with Sir Manilal Nanavati as Chairman recommended State assistance in agricultural
•finance and conversion of all credit cooperatives into multi-purpose cooperatives. It also
•recommended a three-tier cooperative credit banking system, and various subsidies etc.
•Developments in the Post-Independence Era
•After India attained Independence in 1947, cooperative development received a boost, with
•cooperatives being given a vital role in the various plans formulated by the Planning
Commission.
•The First Five Year Plan (1951-56), outlined in detail the vision of the cooperative movement in
•India and the rationale for emphasizing cooperatives and panchayats as preferred organizations
•for economic and political development. The Plan emphasized the adoption of the cooperative
•method of organization to cover all aspects of community development. It provided for setting
•up of urban cooperative banks, industrial cooperatives of workers, consumer cooperatives,
•housing cooperatives, diffusion of knowledge through cooper ative training and education and
•recommended that every government department follow the policy of building up cooperatives.
•All India Rural Credit Survey Committee (1951)
•A major watershed initiative at this time was the appointment by Government of the Gorwala
•Committee, popularly known as the All India Rural Credit Survey Committee. The Committee
•was appointed in 1951 and submitted its report in 1954. It observed that large parts of the
•country were not covered by cooperatives and in such areas where it had been covered, a large
•segment of the agricultural population remained outside its membership. Even where
•membership did exist, the bulk of the credit requirement (75.2%) was met from other sources.
•37
•The Committee recommended introducing an integrated system of rural credit, partnership of the
•government in the share capital of the cooperatives and also appointment of government
•nominees on their boards, thus participating in their management. The Committee emphasized
•the importance of training. The creation of the State Bank of India was also a major
recommendation.
•The Government and the elected representatives accepted the basic approach and the major
•recommendations of the Gorwala Committee. The Union Government acquired a major interest
•in the Imperial Bank which was converted into the State Bank of India. A National Cooperative
•Development and Warehousing Board was set up. The Reserve Bank of India Act was amended
•to enable it to play an active role in building up of cooperative credit institutions.
•The All India Cooperative Congress, held at Patna in 1956, accepted the principle of state
•participation and government representation on the Board of Directors of cooperatives. It
•resolved that the number of such nominees should not exceed one -third of the total number of
•Directors or three, whichever is less and applicable even to cooperatives having government
•share capital in excess of 50% of total share capital. This recommendation was accepted by the
•Central Government.
•In 1953, the Government of India and the Reserve Bank jointly constituted a Central Committee
•for Cooperative Training to establish necessary training facilities for cooperative personnel. The
•All India Cooperative Union and the State Cooperative Unions were entrusted with training of
•members and office bearers of cooperative organizations.
•The Second Five-Year Plan (1956-
•aimed at enabling cooperatives to increasingly become the principal basis for organization of
•economic activity. The Plan drew up programmes of cooperative development based on the
•recommendations of the All India Rural Credit Survey Committee (AIRCS). It was envisaged
•that every family in a village should be a member of at least one cooperative society. Li nking of
•credit and non -credit societies to provide better services to the farmers was also targeted. State
•partnership with cooperative institutions at various levels, the essential basis of which was to be
•assistance and not interference or control, was recommended and for facilitating State
•partnership in cooperatives, the Plan also recommended the establishment of a National
•38
•Agricultural Credit Long -term Operations Fund. The National Cooperative Development Fund
•was also established by the Central Government, during this period, to enable states to borrow
•for the purpose of subscribing share capital of non-credit cooperative institutions in the country.
•The Industrial Policy Resolution of 1956 emphasized the need for State assistance to enterprises,
•The Committee on Cooperative Law under the chairmanship of Shri S.T.Raja in 1956
•recommended a Model Bill for consideration of State Governments. Another important
•development, at this time, which affected the cooperative sector, was the National Development
•Council Resolution (1958). The Resolution on Cooperative Policy stressed that cooperatives
•should be organized on the basis of the village community as the primary unit and that there
•should be close coordination between the villag e cooperative and the Panchayat. The Resolution
•also recommended that the restrictive features of existing cooperative legislation should be
removed.Many State Governments amended their Acts, as a result of the recommendations of
•the Model Bill.
•Cooperative marketing and processing of agricultural produce formed an important part of the
•Integrated Scheme of Cooperative Development in the Second Plan. About 1900 primary
•marketing societies were set up and State Marketing Federations were established in all the
•States, as well as the National Cooperative Marketing Federation at the Centre. Marketing
•cooperatives along with the agricultural cooperatives played a major role in promoting the Green
•Revolution by providing credit and inputs to farmers as well as processing their increased
outputs.
•The Third Five Year Plan (1961-
•the principal basis of organization in branches of economic life, notably agriculture, minor
•irrigation, small industries and processing, marketing, distribution, rural electrificatio n, housing
•and construction and provision of essential amenities for local communities. Even the medium
•and large industries and in transport an increasing range of activities can be undertaken on
•39
•From the mid-sixties onwards agro processing cooperatives, particularly in the sugar and
•encouraging large scale industries in the cooperative sector and term loan assistance from
•financial institutions.
•With the setting up of NDDB to replicate the Anand pattern of cooperatives in milk, the Indian
•dairy cooperative movement received a spurt. Later on NDDB also ventured into the field of
•edible oils.
•After the Indo -China war in 1962, both the Consumer Cooperative Structure and the Public
•Distribution System (PDS) was strengthened. The gove rnment as a matter of policy decided to
•give preference to consumer or other cooperatives in the allotment of fair price shops and certain
•States allotted new fair price shops only to cooperatives.
•With the growth of public deposits in Urban Cooperative Credit Societies, it was felt necessary
•to insure these under the Deposit Insurance Scheme of Reserve Bank of India. Selective
•provisions of the RBI Act 1934 and later Banking Regulation Act 1949 were made applicable to
•Cooperative Banks w.e.f. March 1, 1966 to regulate their banking business and facilitate
•insurance coverage of deposits. Thus, they became an integral part of the banking system of the
country.
•Some National Institutions which came into existence in the 1960s
•The Agricultural Refinance Corporation was set up in 1962 by the Government of India to
•provide long-term loans to cooperatives, through Central Land Mortgage Banks.
•In 1963, the National Cooperative Development Corporation (NCDC) was established as a
•statutory corporation by an Act of Parliament. The establishment of the NCDC gave a great
•boost to the growth of cooperative marketing and processing societies.
•While on a visit to Anand in October 1964, impressed by the socio -economic transformation
•brought about by milk cooperatives, Shri Lal Bahadur Shastri, the then Prime Minister of India,
•spoke of the desirability of setting up a national level organization, the National Dairy
•Development Board (NDDB), to replicate the Anand pattern of cooperatives in milk throughout
•the country.
•40
•Several other significant organizational developments also took place during this period such as
•the setting up of various National Cooperative Federations and re -organization of the National
•Cooperative Union of India (NCUI). In 1967, the Vaikunth Mehta National Institute of
•Cooperative Management was set up in Pune. Growth of consumer cooperatives was also an
•important development of this period. Simultaneously, the growth of Land Development Banks
•also accelerated and rural electric co operatives and programmes for dairy, poultry, fishery and
•labour cooperatives were set up.
•The Fourth Five Year Plan (1969 -1974) gave high priority to the re -organization of cooperatives
•to make cooperative short-term and medium-term structure viable. It also made necessary
•provisions to provide cooperatives with management subsidy and share capital contribution, as
•well as for the rehabilitation of Central Cooperative Banks. It also emphasized the need to orient
•policies in favour of small cultivators.
•The Mirdha Committee in 1965 laid down standards to determine the genuineness of cooperative
•societies and suggest measures to weed out non genuine societies; to review the existing
•cooperative laws and practices to eliminate vested interest. The recommendations of the
•Committee resulted in amendments in the cooperative legislation in most states, which destroyed
•the autonomous and democratic character of cooperatives.
•The Fifth Five Year Plan (1974-1979) took note of the high level of over-dues. In its
•recommended strategy for cooperative development, the correction of regional imbalances and
•reorienting the cooperatives towards the under -privileged was to receive special attention. Based
•on the recommendations of an Expert Group appointed by the Plannin g Commission in 1972,
•structural reform of the cooperative set-up was envisaged. The Plan recommended the
•nal
•Commission on Agriculture and stressed the need for professional management of cooperatives.
•The Sixth Five Year Plan (1979 -1985) also emphasized the importance of cooperative efforts
•being more systematically directed towards ameliorating the economic conditions of the rural
poor.The Plan recommended steps for re -organizing Primary Agricultural Credit Societies into
•strong and viable multi-purpose units. It also suggested strengthening the linkages between
•consumer and marketing cooperatives. Consolidation of the role of Cooperative Federal
•Organizations, strengthening development of dairy, fishery and minor irrigation cooperatives,
•41
•manpower development in small and medium cooperatives were some of the planned
programmes.
•NABARD Act, 1981
•The National Bank for Agriculture and Rural Development (NABARD) Act was passed in 1981
•and NABARD was set up to provide re-finance support to Cooperative Banks and to supplement
•the resources of Commercial Banks and Regional Rural Banks to enhance credit flow to the
•agriculture and rural sector.
•Multi-State Cooperative Societies Act, 1984
•With the objective of introducing a comprehensive central legislation to facilitate the
•organization and functioning of genuine multi -state societies and to bring uniformity in their
•administration and management, the MSCS Act of 1984 was enacted. The earlier Multi -Unit
•Cooperative Societies Act of 1942 was repealed.
•The Seventh Five Year Plan (1985 -1990) pointed out that while there had been all round
•progress in credit, poor recovery of loans and high level of overdues were matters of concern.
•The Plan recommended amongst others development of Primary Agricultural Credit Societies as
•multiple viable units; realignment of policies and procedures to expand flow of credit and ensure
•inputs and services particularly to weaker sections; special programmes for the North Eastern
•Region; strengthening of consumer cooperative movement in urban as well as rural areas and
•promoting professional management.
•With increasing demand from proponents of an autonomous cooperative movement and reforms
•in the Cooperative laws, the Government constitut ed a Committee on Cooperative Law for
•Democratization and Professionalization of Management in Cooperatives in 1985, headed by
•Shri K. N. Ardhanareeswaran. The Committee recommended the deletion of those legal
•provisions in State Cooperative Acts, which militate against the democratic character and
•autonomy of cooperatives, and also recommended incorporation of several provisions which
•could activize democratic processes for infusing professional management into cooperatives.
•Similarly, in 1989 the Agricultural Credit Review Committee under the chairmanship of Prof.
A.M. Khusro examined the problems of agricultural and rural credit and recommended a major
•42
•systemic improvement. The Committee recommended that the Eighth Plan should become the
•plan for revival of weak agricultural credit societies.
•Model Cooperatives Act, 1990
•In 1990, an Expert Committee, under the chairmanship of Choudhary Brahm Perkash, was
•appointed by the Planning Commission to make a rapid review of the broad status of the
•cooperative movement, suggest future directions and finalize a Model Cooperatives Act. The
•Committee submitted its report in 1991. Since cooperation is a State subject and each State has
•its own cooperative legislation covering cooperatives whose membership is confined to the State,
•the report of the Committee, along with a draft Model Cooperative Law, was circulated to all
•State Governments for their consideration and adoption at State level.
•The opening up of the economy in 1990, and the liberalized economic policies followed by the
•government since then, led to increasing pressures for various governments, state and central, to
•bring about changes that would provide cooperatives a level playing field to compete with the
•private sector. The Eighth Five Year Plan (1992-1997) laid emphasis on building up the
•cooperative movement as a self -managed, self-regulated and self -reliant institutional set -up, by
•giving it more autonomy and democratizing the movement. It also spoke of enhancing the
•capability of cooperatives for improving economic activity and creating employment
•opportunities for small farmers, labourers, artisans, scheduled castes, scheduled tribes and
•women and emphasized development and training of cooperative functionaries in professional
management.
•Parallel Cooperative Legislation
•From the Ninth Plan (1997-2002) onwards, there has been no specific mention about
•cooperatives as a part of the Plan. Since Cooperation is a State subject and recognizing the
•difficulties in having the existing State Cooperative Acts amended on the lines of the Model
•Cooperatives Act, a section of cooperators and civil society initiated action to put in place
•Parallel Cooperative Legislation for self-reliant cooperatives. Self- reliant cooperatives are
•generally defined as those which have not received any assistance from the Government in the
•form of equity contribution, loans and guarantees. These Acts are largely based on the
•recommendations of the Choudhary Brahm Perkash Committee. Ten States namely Andhra
•43
•Pradesh & Telangana (1995), MP (1999), Bihar (1996), J&K (1999), Orissa (2001), Karnataka
(1997), Jharkhand (1996)), Chhattisgarh (1999) and Uttaranchal (2003), have so far enacted
•Parallel Cooperative Acts which are enabling and ensure autonomous and democratic
•functioning of cooperatives.
•Multi-State Cooperative Societies Act, 2002
•The Multi-State Cooperative Societies (MSCS) Act, enacted in 1984, was modified in 2002, in
•keeping with the spirit of the Model Cooperatives Act. Unlike the State Laws, which remained as
•a parallel legislation to co -exist with the earlier laws, the MSCS Act, 2002 replaced the earlier
•Act of 1984.
•National Cooperative Policy (2002)
•In 2002, the Government of India enunciated a National Cooperative Policy. The objective of the
•Policy is to facilitate an all -round development of cooperatives in the country. The policy
•promises to provide cooperatives with the necessary support, encouragement and assistance, to
•ensure their functioning as a utonomous, self -reliant and democratically managed institutions,
•accountable to their members, and making a significant contribution to the national economy.
•Based on the recommendations made at a Conference of State Ministers for Cooperation, the
•Government of India in 2002 constituted a Ministerial Task Force to formulate a plan of action
•for implementation of National Cooperative Policy. The Task Force suggested that a single law
•instead of parallel laws should be introduced in the States. It als o recommended, among others,
•that in order to depoliticize cooperatives, Members of Parliament or Members of Legislative
•Assemblies should not be allowed to hold office of any cooperative society.
•The Companies Amendment Act, 2002
•A Committee under the ch airmanship of Dr. Y. K. Alagh recommended the amendment of the
•Companies Act, 1956. On the basis of the recommendations of the Committee, the Producer
•Companies Bill was introduced in the Parliament and became law on 6th February, 2003 as Part
•IXA - Producer Companies in the Companies Act, 1956. Based on the cooperative principles of
•mutual assistance, it provides an alternative to the institutional form that is presently available to
•cooperative enterprises.
•44
•NCDC Amendment Act, 2002
•Recognizing the need to improve its scope of lending and to bring about changes in its funding,
•the NCDC Act was amended in 2002, which has enabled it to cover notified services, livestock
•and industrial activities and more importantly to directly fund coopera tives against suitable
security.
•Task Force on Revival of Cooperative Credit Institutions
•To nurse the rural cooperative credit system back to health, to ensure that the rural credit doubled
•over three years and that the coverage of small and marginal farmers by institutional lending was
•expanded substantially, the Government of India in August 2004 set up a Task Force to suggest
•an action plan for reviving rural cooperative credit institutions and legal measures necessary for
•facilitating this process. The Task Force, chaired by Prof. A. Vaidyanathan, recommended that
•any financial restructuring which did not address the root causes of the weaknesses of the system
•would not result in its sustained revival and would require legal measures. The recommenda tions
•of the Task Force in accordance with its Terms of Reference are basically confined to revival of
•credit cooperatives for which it suggests a financial package. The Vaidyanathan Committee has
•also suggested a model cooperative law that can be enacted by the State Governments.
•Recommendations of the Task Force are being currently implemented. The Vaidyanathan
•Committee has also given its report on the long-term cooperative credit structure.
