Multistate Cooperatives

• RAOS, Jaipur
• 28, Dec 2021

Why in the news?

The Union Minister of Cooperation has announced that the Centre has decided to amend the Multi State Cooperative Societies (MSCS) Act, 2002. This will be done to plug the loopholes in the Act.

What are Cooperatives?

• Cooperatives are people-centered enterprises owned, controlled and run by and for their members to realize their common economic, social, and cultural needs and aspirants.
• The aim of a cooperative is to work together with a goal in one direction with the fraternity. Successful cooperatives include Amul (dairy), Lijjat Papad and IFFCO (agriculture).
• The item "Cooperative Societies" is in the State List (Via entry 32). Hence, states has been empowered to enact legislations to regulate cooperative societies.
• However, Multi-State Cooperative Societies, which operate across multiple states, are regulated by the Multi-State Cooperative Societies (MSCS) Act, 2002. No state government official can exercise any control on multistate cooperative societies.

Why does the government plan to amend the act?

1. Absence of checks and balances at multiple layers.
2. Apparent lack of day-to-day government control.
3. Lack of infrastructure for central registrar: There are no officers or offices at state levels, with most work being carried out either online or through correspondence. For members of the societies, the only office where they can seek justice is in Delhi.
4. Loopholes of the act are being exploited: There have been instances across the country when credit societies have launched ponzi schemes taking the advantage of these loopholes. Such schemes mostly target small and medium holders with the lure of high returns. Some operators get people to invest and, after a few investments, wind up their operations.

What are Multi-State Cooperative Societies?

There are many societies whose members and areas of operation are spread across more than one state. For example, most sugar mills along the districts on the Karnataka-Maharashtra border procure cane from both states. These are known as Multi-State Cooperative Societies.

The Multi-State Cooperative Societies (MSCS) Act, 2002 was enacted to regulate such cooperatives.

• These societies draw their membership from different states, and they are thus registered under the MSCS Act. Their board of directors has representation fro all states they operate in.
• Administrative and financial control of these societies is with the central registrar. No state government official can wield any control on them.
• Since the law was enacted in 2002, 1479 societies have been registered.
• Maharashtra has the highest number at 567, followed by Uttar Pradesh (147) and New Delhi (133). There are 96 multistate cooperative dairies and 66 multistate cooperative banks.