Context

Two weeks ago, the government created a new Ministry for Cooperation. India is, perhaps, the first country to have such a ministry. The Ministry can play an important role in the transformation of cooperatives in the country.

How 1991 economic reforms benefited agriculture

• On July 24, 1991, India decided to unshackle the spirit of private sector entrepreneurship through the move to de-license industry and reduce tariffs on a host of commodities.
• Trade policy changes improved the terms of trade for agriculture and benefitted millions of farmers.
• Agri-exports increased, but this led to higher domestic prices.

The success story of dairy sector in India

• In 1991, Manmohan Singh, then finance minister wanted to delicense the dairy sector as well, but there was stiff opposition from Verghese Kurien.
•  It was after 10 years in 2002 that the dairy sector was fully de-licensed.
• The competition between cooperatives and corporate dairy players has benefitted millions of farmers around the country.
• With the entry of the private sector, the growth of the dairy sector accelerated at double the speed.
• Today, both procure roughly the same quantities and growth in the organised private sector is faster than in cooperatives.

Performance of cooperative movement in India

• India’s experience with the cooperative movement has produced mixed results — few successes and many failures.
• There are cooperatives in the financial sector, be it rural or urban.
• But the performance of these agencies when measured in terms of their share in overall credit, achievements in technology upgradation, keeping NPAs low or curbing fraudulent deals has been poor to average.
• Sugar cooperatives of Maharashtra initially touted as exemplars of the movement, are in the doldrums now.
• Many are being sold to the private sector.

Performance of cooperatives in dairy sector

1) Amul

• The performance of the cooperative champion, Gujarat Cooperative Milk Marketing Federation (GCMMF) — with its poster brand, Amul — has been most successful.
• During Operation Flood, it received a lot of capital at highly concessional terms.
• But its success is also the result of professionalism, business and, therefore, keeping politics away.
• But despite the grand success of Gujarat’s milk cooperatives in Gujarat, the model did not spread to other states as successfully.

2) Karnataka Milk Federation

• In its eagerness to please milk farmers, the Karnataka Milk Federation (KMF), which sells its products under the brand name of Nandini, gives them Rs 5 to Rs 6 extra per litre.
• This subsidy, given by the state government, cost the exchequer Rs 1,260 crore till 2019-20.
• KMF procures a lot of milk and then dumps it at lower prices in the market for consumers.
• This depresses prices in adjoining states like Maharashtra, affecting the fortunes of Maharashtra milk farmers.
• If Maharashtra and Karnataka were two different countries, Maharashtra would be challenging Karnataka at the WTO.

Way forward

• The new Ministry of Cooperation can work towards ironing out distortions in state price policies due to subsidization such as in Maharastra and Karnatak milk prices.
• Cooperatives desperately need technological upgradation. 
• The Ministry of Cooperation can give them soft loans for innovation and technology upgradation.
• But such loans should also be extended to the private sector to ensure a level playing field.
• The Ministry of Cooperation needs to ensure the least political interference in the operation of cooperatives.

Conclusion

The new Ministry of Cooperation can work towards bringing in professionalism in cooperatives and make them more competitive.

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now