Cooperative policy & Legislation in India

1. Cooperative policy & Legislation in India . . . . a new path in the good old world A presentation by Satish Chander, Joint Secretary, Govt. of India

2. Fundamental Belief • ·An isolated and powerless individual can, by association with others and by moral and mutual support, obtain in his own degree the material advantages to the extent of his natural abilities. • ·By the union of forces material advancement is secured and by united action self reliance is fostered. • -From the interaction of these influences, effective realization of the higher and more prosperous standard of life is attained.

3. Basic challenges facing the cooperatives • Restoration of undisrupted democratic management. • Developing competencies to face the market forces. • Involvement of the elected members with full authority and freedom. • Setting right the initial conditioning on which success of cooperative system is strategically dependent.

4. Impairment of Governance and Management • Lack of democracy • No elections for long periods in many States • Boards superseded in many States • Lack of autonomy and accountability • Boards perform routine functions • State Governments direct both financial and administrative matters • Poor human resources • Untrained officials occupying top positions • PACS’ secretaries in many States belong to a cadre and hence unaccountable to the PACS in which he is appointed • Poor housekeeping • Weak internal controls • Audits delayed and of poor quality

5. Policy approach towards cooperatives • Deregulation of cooperative law regime with adequate checks to safeguard the interest of members and public . • Providing financial and other form of assistance in needy and deserving cases. • Creation of appropriate policy & legislative framework for healthy and sound growth • Strengthen competencies of cooperatives to successfully face the market. • Persuading the states to amend their Acts to ensure democratic, autonomous, self-reliant and memeber driven functioning.

6. Current Legal Framework

7. National Policy on Cooperatives • Upholds the values and principles of cooperation. • Recognizes cooperatives as distinct economic character and an integral component of the socio-economic system. • Recognizes cooperatives as an effective tool of socio-economic development. • Limits the regulatory role of the Govt. to certain core functions like timely conduct of election & audit and initiation of measures for safeguarding the interest of members and other stakeholders.

8. Multi- State Cooperative Societies Act, 2002 Aims at addressing the operational, organizational and systemic aspects and giving a genuine character to cooperatives by:- - Minimizing government control, - Minimizing interference with decision making; - Help eliminate politicization; and - Meeting the norms of governance of a democratic autonomous enterprise.

9. Main features of MSCS Act, 2002 Autonomy • Supersession of Board of Directors and powers of Government to issue directives restricted to societies in which not less than 51% of the paid up share capital is held by the Government. • Nomination based on the equity held i.e. one nominee where equity holding is less than 26%, two nominees if the equity holding is 26% or more but less than 51%, and three nominees if the equity holding is 51% or more. • Election to be conducted by the societies themselves. Government to intervene only if the society fails to conduct elections within the stipulated period. • Audit to be conducted by the societies at their own out of the panel maintained by the Central Registrar or a panel maintained by the Society.

10. Main features…. Contd. Democratic management • Timely Conduct of Election - Incumbent board shall be responsible for conducting election within the stipulated period. Otherwise, the Central Registrar shall intervene for conducting election. In case of failure, the members of the board shall incur disqualification for being member for a period of five years. • Convening of Annual General Meetings within the stipulated period. Otherwise, the Central Registrar shall intervene to convene such meetings. • Representation of Societies

11. Main features… contd. Members’ rights For inspection of copies of the Act and rules, bye laws and members free of cost. The member may also inspect books of account and other papers. However, the most significant feature is to empower a member to file a complaint for prosecution of an offence for the offences committed. Depoliticisation   Prohibits a person to hold office of President or Vice-President or Chairperson or Vice-Chairperson who holds office of a Minister in a State or the Central Government. Professionalisation   Recruitment of staff including the Chief Executive by the society itself. Societies will provide for organizing the education programmes for employees by creating funds for the purpose.

12. Main features… contd. Members’ Awareness  The new Act provides for : • Organising education programmes for members and directors and to create funds for the purpose. • Duty of every member to promote and protect the interests and objects of the society. • A member may be complainant for instituting prosecution. • Access to the books and accounts. • Availing the minimum level of services and attending the general body meetings for remaining member of the society.

13. Main features… contd. Role of Federations • Compliance of the co-operative principles • Devise model bye-laws • Specialized training, education and data base information. • Help the members to settle disputes and promotion harmonious relations among themselves. • Evolving code of conduct. • Develop market information system, logo brand, quality control and technology upgradation etc.

14. Revitalization of Rural Credit Cooperatives • To restore health of credit cooperatives, Vaidyanathan Committee has recommended for a financial package of ~ Rs.15,000 crore, implementation of which is conditional to the State Government undertaking legal and institutional reforms to ensure: • Full membership rights to all users, including depositors • Wider access to all institutions for borrowing and investment • Ensuring elections before end of tenure of Boards • Co-option of professionals on Boards • Exit of State equity and consequent withdrawal from Boards • Reductions of State intervention in administrative and financial affairs • Limiting powers of State to supersede Boards • Empowering RBI to directly exercise full regulatory authority in financial matters • Introduction of Prudential norms and audit by CAs.

15. HRD and managerial issues • Any financial intervention should be subject to achievement of institutional development targets, including, inter alia, • Induction of professional management • Training of • Board members and CEOs • Staff of PACS and cooperative banks • Designing and implementing accounting and MIS for the entire structure • A common accounting system • A common accounting and MIS software

16. CONSTITUTIONAL AMENDMENT • Government also intends to bring forward Constitutional Amendment to, inter-alia, ensure that cooperatives are: • Accountable to members • Have democratic, autonomous & professional functioning • Conduct timely & professional audit • Conduct AGMs & elections in time • Maximum time limit for supersession of Board of Directors

17. Final words • The reform measures initiated by the Government is intended to facilitate creation of efficient, freely functioning cooperatives that will put the beneficiary members in the forefront - both ‘owning’ and ‘directing’ the institution and its management agenda with the government and other partners each defining their support for their respective plans. • Government intervention more as a facilitator and to correct deviation from the Act and Rules.

18. Thank You