Areas of competition and cooperation

Context: The new Cooperation ministry should try to ensure professionalism in cooperatives, minimise political interference.

Evolution of cooperatives in India since 1991

• Partial delicensing: In 1991, Manmohan Singh wanted to delicense the dairy sector as well, but there was stiff opposition from Verghese Kurien, the champion of cooperatives and the “milkman of India”.
• As a compromise, Narasimha Rao partially de-licensed the sector through the Milk and Milk Products Order of 1992.
• Complete delicensing: It was after 10 years in 2002 that the dairy sector was fully delicensed.

• The developments in the dairy sector thereafter are proof enough that competition between cooperatives and corporate dairy players has benefitted.

Positive achievements of cooperatives in India:

• In the dairy sector: It is here that the performance of the cooperative champion, Gujarat Cooperative Milk Marketing Federation (GCMMF) — with its poster brand, Amul — has been most successful.
• Initially, during Operation Flood, it received a lot of capital in highly concessional terms. But its success also owed a lot to Kurien, who believed in professionalism and business and, therefore, kept politics away.

Failures of cooperatives in India:

• In the Financial sector: 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 up-gradation, keeping NPAs low or curbing fraudulent deals, has been poor.
  • It is often believed that urban cooperative banks had huge transactions during the demonetisation phase and, in fact, were one of the main factors responsible for the failure of demonetisation.
• In the Sugar sector: Sugar cooperatives of Maharashtra, initially touted as exemplars of the movement, are in the doldrums now. Many of them are sold to the private sector.
• In the Dairy sector: Despite the grand success of Gujarat’s milk cooperatives in Gujarat, the model did not spread to other states as successfully.
  • In UP, the biggest producer of milk, cooperatives, are nowhere in the scheme of things.
  • Almost 60% of milk procured from cooperatives comes from two states, Gujarat and Karnataka.
• Responsible for market distortions: 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.
  • If Maharashtra and Karnataka were two different countries, Maharashtra would be challenging Karnataka at the WTO.

Way Forward:

• Cooperatives desperately need technological up-gradation: The Ministry of Cooperation can give them soft loans for innovation and technology upgradation.
• Creating a level playing field: A level-playing field is critical to see which model suits India the best; extend the same terms to the private sector. No model is perfect, but the government’s endeavour should be to support the one that relies the least on taxpayers’ money.
• Ensure the least political interference in the operation of cooperatives.