Tuesday, November 6, 2012

An Approach to Model Cooperative Act 2012

An approach to The Model Cooperative Act, 2012*

When cooperatives seek ‘Autonomy’ the policy makers ask what about ‘Accountability’? For long, a deliberative negative public opinion has been created about the cooperatives has been created about the cooperatives that they are inefficient, corrupt and maleficent etc. It’s time that the sector asserts itself and puts things in the right perspective. It is an affront to the cooperators’ sense of propriety that this opinion prevails even when huge scandals like Bofors, Bank Scams, 2-G spectrum telecom scandal, urea import scandal, mining scandal etc.etc., involving crores of rupees of public money and where the involvement in the equal measures of the private sector, the politicians and the bureaucrats, has been established. So much for accountability!

That the cooperatives have always been made to be accountable to the State rather than its members has in a way been their drawback – to be answerable to a system which has only an adverse vested interest in it.

Since the start of cooperative movement, Governments – both colonial and of independent India have been making cooperative laws to withhold justice from the people rather than to provide justice; to prevent people from cooperating rather than enabling them. ‘Control’ and not ‘Autonomy’ has been the catch word.

However, the present UPA Government, in its recent public utterances has committed to reverse this trend of priority. The UPA Government has emphasized and even legalized its commitment to liberalise and democratize the cooperatives through the Constitution 97th Amendment Act 2012. There would appear to be a broad realization that ‘the only cure to the ills of democracy is more democracy.’

A cooperative business believes that it came into existence, not because there was capital to invest, but because people had certain common needs – as producers, as considers, as workers, as residents, as savers, as borrowers – which, they felt, they could themselves fulfill through joint effort and investment, A cooperative’s aim is to service its members and provide them financial gain in their role as users of the services, while other forms of business aim at providing financial gain to their owners in their role as investors. Therefore, while most businesses tend to organize decision-making rights on the basis of and in proportion to investments made, a cooperative gives every member who uses its services an equal say in its affairs. So too, while owners of other businesses share profits in proportion to the investments made, members of a cooperative share profits and losses (surplus and deficit in some cooperatives’ parlance) in proportion to the utilization (or non-utilisation) of the cooperative’s services by each member.

Today, cooperative laws in most States and at Union levels can prevent a group of people from conducting their business as a cooperative, by denying them registration on irrelevant and unreasonable grounds. The voluntary nature of a cooperative is violated by law resulting in forced admission of persons as members and in compulsory amalgamations/division/merger of cooperatives leading to involuntary change in membership. Staff recruitment, pay service conditions are as decided, not by the cooperative, but by the registrar or government. Responsibility for conduct of elections, by law, the responsibility of the registrar and between him/her and the government, elections get postponed for reasons as obtuse as the Gulf war; cooperatives are denied elected boards for years on end, and even when elections are conducted, supersession of boards on the flimsiest of ground is common enough, with government officers taking over as persons-in-charge of the management of cooperatives.

Audit, the responsibility of owners of any business, is the responsibility of the Registrar, and the auditor reports, not to the general body, but to the registrar, and audit is in arrears in most cooperatives, for years on end. The right to decide what activities a cooperative may undertake, and what it may give up, too, is interfered with by the registrar, through the compulsory amendment and standardization of bylaws. Investment in the cooperative’s own business requires the registrar’s permission. As all these restrictions have their origin in cooperative law, they apply equally to the small number of cooperatives which have the government share capital, as to the large number which do not, and are owned completely by their members. It is for this reason that it has become necessary and urgent to revise cooperative laws across the country.

Cooperative law, anywhere in the world, (and therefore, in India) should respect definition, values and principles adopted across the world by cooperators, through the International Cooperative Alliance. Legal provisions should be supportive and not violative of these. Unreasonable restrictions in existing cooperative law must go and the cooperative law should be one with fewer provisions but with such provisions as, with least external intervention, promote the effective practice of cooperative principles.

Cooperative law should facilitate and not obstruct the registration of new cooperatives, so that the right of groups of people seeking to engage in cooperative businesses is protected and people’s initiatives allowed to flower. The voluntary nature of cooperatives should not be violated. Cooperative law should ensure that the cooperatives are managed democratically, and that managements are accountable to members. Measures such as nominations to boards by governments should not be permitted by law.

Both government policy and law should recognize a cooperative as an instrument of its members for their social and economic betterment, and should not perceive it as an instrument of the government for meetings various other goals of the government or as an instrument of any other external entity. The law, should, therefore, not permit government the right to give directives to the cooperatives. Government policy should require of cooperatives only such contribution to larger social objectives as are required of any other form of business.

The Law should respect the freedom of cooperatives to run their businesses, and may place on them only such restrictions as are applied to other forms of business. Cooperative should ensure that cooperatives have a level playing field in which to compete on equal terms with other forms of business.

Cooperative Law should recognize only genuine cooperatives and parastatal or other forms of business should not be governed by cooperative law.

The Constitution 97th Amendment Act 2012 provided for rationalization of the State Cooperative Laws providing for most of the liberalized provisions to ensure member-centric, member-driven, member-governed and democratic form of business organizations in cooperative sector. The new Act insists that the States amend their Laws in line with the amendments suggested within one year from date of its gazette notification. The States’ processes seem to be way behind such dateline.

*Adapted from the Link Vol.2 (4), July-August 1996, IRMA, Ahmedabad appropriate to the present situation.