MULTI-STATE COOPERATIVE SOCIETIES BILL – POLITY
News:
Rajya Sabha passes the
Multi-State Cooperative Societies Bill
What's
in the news?
●
The Rajya Sabha passed the Multi-State
Cooperative Societies (Amendment) Bill, 2023, as INDIA members walked out.
Key
takeaways:
●
Minister of State Cooperation B.L. Verma
said that the Bill provides norms for appointing employees, ensuring no
nepotism practices exist.
●
The Bill seeks to establish a 'Cooperative
Elec- tion Authority' with a view to introducing electoral reforms in the
cooperative sector.
What
are Multi-State Cooperatives?
●
According to the International Cooperative
Alliance (ICA), cooperatives are
people-centered enterprises jointly owned and democratically controlled by and
for their members to realize common economic, social and cultural needs and
aspirations.
●
Multi-State cooperatives are societies
that have operations in more than one state. For instance, a farmer-producers
organization which procures grains from farmers from multiple states.
●
The board of directors are from all the
states these collectives operate in and control all the finances and
administration.
●
There are close to 1,500 MSCSS registered
in India with the highest number being in Maharashtra.
Issues
with the cooperative sector:
●
The independent
and autonomous character of cooperative societies was to be crucial in
their functioning. However, the inclusion of cooperatives in the planning
process as development instruments made the sector an avenue for dispensing
patronage to the supporters of ruling political parties.
●
The policy of state governments to contribute to the share capital of the
cooperatives enabled governments, "in the name of public interest" to
directly intervene in the working of cooperatives which are legally autonomous.
●
Notably, the potency of cooperatives as an
apparatus of political control can
be seen in states such as Maharashtra, Kerala, Gujarat, parts of Karnataka,
Tamil Nadu, Madhya Pradesh and West Bengal.
●
The MSCSS were formed to ease the
operation of collectives throughout the country. On the contrary, MSCSS are facing issues regarding trust, which is the
very basis of cooperation.
●
Lack
of autonomy and multiple controls from the central
government leads to ineffective functioning of MSCSS.
Key
features of the Amendment Bill:
●
To plug the loopholes in the MSCSS Act,
2002, the Centre introduced a Bill seeking to amend the 2002 law for more "transparency" and "ease of
doing business".
●
The amendment
also seeks
○
to improve governance
○
reform the electoral process
○
strengthen monitoring mechanisms
○
improve the composition of the board and
ensure financial discipline
○
enabling the raising of funds and
○
enhance transparency and accountability.
●
The Bill provides for the creation of a Central Co-operative Election
Authority to supervise the electoral functions of MSCSS.
○
The Authority will have a chairperson,
vice-chairperson, and up to three members appointed by the Centre.
●
It also envisages the creation of a Co-operative Rehabilitation, Reconstruction and
Development Fund for the revival of sick Multi-State Co-operatives
Societies.
○
This fund shall be financed by existing
profitable Multi-State Co-operative Societies which will have to deposit either
1 crore or 1% of the net profit into the Fund.
●
In order to make the governance of
Multi-State Cooperative Societies more democratic, the Bill has provisions for
appointing a Cooperative Information
Officer and a Cooperative Ombudsman.
●
To promote equity and facilitate
inclusiveness, provisions relating to the representation
of Women and Scheduled Caste/Tribe members on the boards of multi-State
cooperative societies have also been included.
Issues:
●
The Bill may lead to "the concentration of power of the center", which could
impact the "autonomy" of MSCSS and create potential for
"misuse".
●
Contradiction
with the SC Judgement:
○
The constitutional domain of states in
regulating cooperative societies was upheld by the Supreme Court last year when
it struck down a part of the 97th Constitution Amendment.
●
Additional
burden on the MSCSS:
○
The deposit of either 1 crore or 1% of the
net profit by the existing profitable MSCSS into the Co-operative
Rehabilitation, Reconstruction and Development Fund will hamper their finances
and functions.
Go
back to basics:
97th
Constitution Amendment Act, 2011:
●
The Constitution (97th Amendment) Act,
2011 relates to the cooperative societies working in India.
●
It aims to overcome all the problems faced
by these societies and bring about an efficient way to manage them.
●
The 97th Constitution Amendment Act, 2011
provided for amendment of following things:
○
It amended
Article 19(I) c by inserting, after the words ‘or unions’ the words ‘or
Co-operative Societies’.
○
It also inserted Article 43B in Part IV of the Constitution as “The State
Shall endeavour to promote Voluntary formation, autonomous functioning,
democratic Control and professional management of the Co-operative societies”
and
○
After Part IX-A of the Constitution, Part IX-B was inserted. Part IX-B
extended from Article 243ZH to Article 243ZT.
Key
features:
The Major features of the
Act are as follows.
●
Incorporation, regulation and winding up
of cooperative Societies based on the principles of Voluntary formation,
democratic member Control, member economic participation and autonomous
functioning;
●
Maximum number of directors of a
Co-operatives Society to be not
exceeding twenty-one members;
●
A fixed
term of five years from the date of election in respect of the elected
members of the board and its office bearers; and an authority or body for the
Conduct of elections to a Cooperative Society;
●
A maximum time limit of Six months during
which board of directors of a Co-operative Society Could be kept under
Supersession or suspension;
●
Independent
professional audit;
●
Right
of information to the members of the Co-operative
Societies;
●
Empowering the State Governments to obtain
periodic reports of activities and accounts of Co-operatives Societies;
●
Reservation
of one seat for the Scheduled Castes or the Scheduled Tribes and two Seats for
women on the board of every Cooperative Society,
which have individuals as members from such categories; and
●
Penalties in respect of offences relating
to Co-Operatives Societies.
Recent
SC Judgement:
●
The
Supreme Court in a 2:1 majority verdict upheld the validity of the 97th
constitutional amendment (Part IX B) that deals with issues related to
effective management of cooperative societies but struck down a part inserted
by it which relates to the Constitution and working of cooperative societies.
○
The Amendment introduced clauses dealing
with the working of cooperative societies working within a state. It was struck
down stating that the subject matter fell in the state list and “belongs wholly
and exclusively to the State legislatures to legislate upon” and any change
would require the ratification by at least one-half of the state legislatures
as per Article 368(2) of the Constitution.
○
It is declared that Part IXB of the
Constitution of India is operative only in so far as it concerns multi-State
co-operative societies both within the various States and in the Union
territories of India
○
The top court had said if the Centre
wanted to achieve uniformity (the reason for Amendment, as quoted by Centre)
then the only way available was to take the recourse under Article 252 of the
Constitution which deals with the power of Parliament to legislate for two or
more states by consent.
○
Certain provisions of the amendment
pertaining to cooperative societies violated the basic structure of federalism.