Ministry of Cooperation causes disquiet among states

India's cooperatives sector isn't the paragon of virtue some eulogise it to be; neither is it a nest of corruption, as some others portray it. The truth lies somewhere in between.

The former finance minister, the late Arun Jaitley would often ask young politicians who they thought was the country's most corrupt political family. He chastised his interlocutors as undiscerning if they named one Maharashtra patriarch and his family.

Jaitley would suggest they visit the pocket borough of that family in Maharashtra and the country's most eminent political family in Uttar Pradesh and compare the two.

The work done in the two constituencies, according to him, was a better parameter of how one family ploughed back benefits to people through cooperatives, and the other didn't. The election results of those two Lok Sabha seats in 2019, one in Maharashtra and the other in UP, vindicated Jaitley's perceptive reading.

Any assessment of the efficiency of India's cooperative sector and the honesty of the politicians who run it is bound to be subjective. What is beyond doubt is Prime Minister Narendra Modi's intention to set up a new ministry of cooperation.

A statement by the Modi government on July 6 said that the new ministry will provide a separate administrative, legal and policy framework for the sector. It also said the new ministry would enable the development of multi-state cooperatives. Opposition leaders have since accused the Centre of trying to hijack the cooperatives sector, particularly cooperative banks.

Their argument is plausible if seen in conjunction with another move by the government last year. In September 2020, Parliament amended the Banking Regulation Act to bring cooperative banks under the direct supervision of the Reserve Bank of India. With the change in law, the RBI, in consultation with the respective state government, can supersede the board of directors of cooperative banks. Ostensibly, the trigger for this was the scams reported in cooperative banks.

Ministry of Cooperation | Why does the government want it and the opposition fear it?

The opposition says the twin moves lay bare the Modi government's ulterior motive to weaken federalism since the cooperatives sector is part of the State List of the Constitution. It is also revealing, they say, that the PM has entrusted the portfolio to Union home minister Amit Shah.

As Kerala's former finance minister, the CPM leader Thomas Isaac remarked, "What synergy is expected from placing the new ministry of cooperation under the home minister? Is the hidden agenda to repeat what Amit Shah did in the Gujarat cooperative sector across the country? Difficult, for it is the domain of the state. He must be expecting a helping hand from the RBI for the operation."

In Gujarat, the BJP struggled to spread its footprint among the rural electorate until it wrested control of much of the state's 81,000 cooperatives from the Congress over the last two decades. Interestingly, the cooperatives sector is more robust in states where the BJP still lacks the kind of sway it would want, particularly in rural areas. Maharashtra, Kerala, West Bengal, Andhra Pradesh, Telangana and Tamil Nadu are examples.

Opposition leaders allege the new ministry dovetails with the BJP's larger design to make the country not merely "Congress mukt" but "vipaksh mukt". For this, it needs to weaken the control of parties, or families which run these parties, over thousands of the country's cooperatives.

The BJP partially succeeded with this in Maharashtra in 2019.

The mathematics of Maharashtra

In the months leading up to the Lok Sabha polls and Maharashtra's Assembly elections a few months after that, several politicians with stakes in sugar cooperatives switched loyalties from the Congress and Sharad Pawar's Nationalist Congress Party (NCP) to the BJP. Prominent among them were Radhakrishna Vikhe-Patil of Ahmednagar, Vijaysinh Mohite-Patil of Solapur, Dhananjay Mahadik of Kolhapur and Harshavardhan Patil of Indapur.

Around the same time, the Enforcement Directorate, a central investigating agency, launched a probe against Sharad Pawar and nephew Ajit Pawar in the alleged Rs 25,000 crore Maharashtra State Co-operative Bank scam.

The Uddhav Thackeray-led Maha Vikas Aghadi government, which has kept the BJP out of power in Maharashtra, has as many as 16 ministers, nearly half its council of ministers, with stakes in the cooperative sector. In contrast, the previous Devendra Fadnavis-led BJP-Shiv Sena dispensation had only four such ministers.

To put it simply, the NCP and Congress politicians in Maharashtra draw their influence and patronage from their control of the cooperatives sector. Sharad Pawar has increasingly tried to rally non-BJP parties to come together. He draws his political strength from years of nurturing the cooperatives sector in his state but is now a thorn in the BJP's flesh.

After the Modi government announced the new ministry, Sharad Pawar said: "According to the Constitution, cooperative institutions registered in a state come under the (jurisdiction of that) state. The Central government's intention is yet to be clear, but they may have something in their minds. It will be known after the new legislations are introduced for the sector, just like the three contentious farm laws over which farmers are now protesting for the past eight months."

Cooperatives have played a vital role in ensuring farmers fairer prices for their produce, access to loans, and for developing rural infrastructure. In Maharashtra and elsewhere, cooperatives run educational institutions, including medical colleges. In Kerala, cooperatives run hospitals and even IT parks.

The BJP has made some inroads into Maharashtra cooperatives. However, in Kerala, another state where the party is trying to expand its footprint, its hold over the 15,892 cooperative societies is feeble, at best. Nearly 80 percent of the cooperative societies in Kerala are under the control of the CPM and its Left allies. The rest are with Congress and its partners.

'Hindu cooperative banks' in Kerala

The nerve centre of any significant cooperative is the cooperative bank. In Kerala, cooperative banks have faced allegations of unaccounted fund management for politicians. The cooperative banks were under scanner during demonetisation, prompting the Centre to impose restrictions on currency exchange by cooperative banks.

Apart from providing farmers loans on more accessible terms, these banks and other cooperative sector institutions are prominent job providers to the political cadre in Kerala, Tamil Nadu, and elsewhere.

In Kerala, as in other states, there are concerns about the move to bar cooperative societies from using the term 'bank' and bringing these financial institutions under the purview of the RBI as it would prevent cooperative banks from accepting deposits from the public.

The latest development in the state is the coming up of 'Hindu banks'. Already, 870 are registered in the state, several as multi-state cooperatives, with the objective of ensuring that the "money of Hindus (is for) for Hindus alone." Multi-state cooperatives are under the Centre's control. The Modi government has said the new ministry would encourage the setting up of more multi-state cooperatives.

Former state finance minister Isaac says the RBI restricting primary cooperative banks from using the term bank would help multi-state cooperative banks grow. The weakening of primary cooperative banks would have repercussions on the newly formed Kerala State Cooperative Bank, branded as Kerala Bank, and 16 urban cooperative banks that are part of the Kerala Bank.

Trinamool Congress Rajya Sabha leader Derek O'Brien underlines the importance of cooperative banks to state governments, especially those that regional parties run.

The Scheduled banks are unlikely to support several social welfare schemes of the state governments, and this is where cooperative banks are essential. The Mamata Banerjee-led West Bengal government's recent scheme offers students loans of up to Rs 10 lakh for higher studies at interest rates of four pecent or lower and without collateral. With a non-payment rate of 9-10 per cent, no big bank will support such a scheme, but cooperative banks would.

However, the ills of cooperatives, particularly the nexus between politicians and cooperatives, can be blatant. As the Assembly polls neared in Tamil Nadu recently, the AIADMK government waived off cash and gold loans availed from cooperative banks.

This did not enthuse the state's farmers. "A farmer without a political affiliation cannot avail cash or gold loan in a cooperative bank. Such waivers never help the common person," leader of a prominent farmers' association in the Cauvery Delta region told DH.

Gaining control

In Gujarat, the BJP moved heaven and earth to either eject Congress politicians from the state's cooperatives or persuaded them to join the BJP.

Take the example of ongoing litigation in the Gujarat High Court over elections to the post of chairperson and vice-chairperson of the managing committee of Kheda District Co-operative Milk Producers Union Limited, also known as Amul. It is the only dairy cooperative where Congress still has some hold, out of 18 such unions which form Gujarat Co-operative Milk Marketing Federation (GCMMF).

In August last year, nine candidates won in the election to the managing committee. They belonged to a panel supported by the incumbent chairman Ramsinh Parmar and vice-chairman Rejendrasinh Parmar. Interestingly, Ramsinh Parmar is an ex-Congress MLA who joined the BJP in 2017, while Rajendrasinh is a Congress MLA from Borsad. The result was hailed as a victory of the "BJP-Congress coalition."

Two months after the poll results and ten days before the elections to the chairperson and vice-chairperson, the Registrar of Cooperative Societies (read state government) issued notice to elected members. It asked them why three men — Bharat Patel, Prabhat Zala and Dinesh Patel — should not be appointed as government representatives in the managing committee of the union.

The shocked elected members, including two Congress MLAs — Rajendrasinh Parmar and Kanti Sodha Parmar (from Anand) — moved the high court, alleging that the ruling BJP was creating an "artificial majority" to win the posts.

They alleged that three members were affiliated to the BJP. The court allowed the election but ordered to place the result in a sealed cover before it. The result is yet to be formally declared, but no one opposed Ramsinh Parmar's candidature. It is the post of vice-chairman where the stalemate continues.

"This is what the BJP government has been doing all these years to gain control over cooperative societies. The government has been changing the board's composition by inserting its representatives, flouting all rules, to create an artificial majority," Rajendrasinh Parmar told DH.

Over the last two decades, the BJP captured cooperative societies across the state strategically, right from influential sectors such as milk, livestock, farming, bank to agriculture produce marketing or APMC. Modi and Shah helped the party expand its presence across the cooperative societies, say political leaders in the state. This included an exodus from the Congress into the BJP.

"Congress influenced 70 percent of cooperative societies, but in the last 15-odd years, it has been reduced considerably for various reasons," says

Ghanshyam Amin is one of the most well-known cooperative leaders of the state. Amin switched to the BJP in 2014 following in the footsteps of his younger brother Narhari Amin (currently a BJP Rajya Sabha MP).

The main reason behind Congress losing this particular sector, says senior advocate Babubhai Mangukia, also a Congress leader, is "changing by-laws and defection which started in the late 1990s when Congress had control."

"There are numerous instances where elections were sabotaged by disqualifications of Congress affiliated candidates for some or the other reasons. There are a number of cooperatives including dairy and banks where people are winning without even contesting." Some such cooperatives are Rajkot District Co-operative Bank, Amul, Panchamrut Dairy in Panchmahal, among others where chairmen were elected unopposed. Such "arrangements" are popularly known as "samaras" or consensus.

Gujarat's 81,000 cooperatives have deep roots and are part of its economic and social life. Ghanshyam Patel, chairman of Narmada Sugar Producers' Cooperative, said, "The cooperatives are doing good work. With Amitbhai Shah taking charge as its central minister, I believe the sector will develop in the coming days."

Gujarat has Assembly polls at the end of next year.

UP’s cooperatives

Another poll-bound state is Uttar Pradesh. Cooperatives are nerve centres of politics in the state. They will be pivotal to its politics with the ongoing farmers' agitation engulfing Punjab, Haryana, and western UP. There are even expectations in some sections that the Centre could use the new ministry to announce sops for farmers to persuade them to withdraw their agitation before the polls.

The process of cooperatives becoming important started in 1977, when Samajwadi Party patron Mulayam Singh Yadav took over as the minister of cooperatives in the state government. In the subsequent SP governments, his younger brother Shivpal Yadav held the portfolio.

The BJP broke the dominance of the SP after 2017. In the UP Cooperative Land Development Bank polls in 2020, the BJP captured 281 of the 311 seats for which elections were held. It plans to capture most of the 7500 cooperatives in the state, which count over a crore people as their members.

In conclusion, while there is a case for better oversight of cooperatives, the fears of centralisation of the sector are real. By trying to fix regulation, the Modi government's cure could be worse than the disease if it leads to a concentration of power in the hands of a few politicians and babus sitting in Delhi.

The larger question is if the promised centralised cooperative sector will further erode the opposition space. The top BJP leadership has its eyes on the 2024 Lok Sabha polls. It hopes to replicate the 'Gujarat model' of bringing opposition politicians to the heel and win states by controlling cooperatives.

If it does, it can have significant consequences for democratic dissent in a country as diverse as India.

(With inputs from Akram Mohammed in Bengaluru, Arjun Raghunath in Thiruvananthapuram, ETB Sivapriyan in Chennai and Sanjay Pandey in Lucknow)