That the co-op movement in India is not growing is quite clear. The share in agricultural credit, as well as in the marketing of produce is going down significantly. True the co-op movement still boasts of giants like Indian Farmers Fertiliser Cooperative Limited (IFFCO) and Amul, and it is still a formidable name in the milk, sugar, fertilizer and housing sectors, the fact is that co-operatives are not flourishing at the primary level. In fact, if one looks at data with regard to fresh registrations, the picture is quite dismal. Efforts at introducing liberal legislation like the self-reliant and/or mutually aided co-op societies have also not been very successful and many states are bringing in restrictive clauses through the backdoor for example by not allowing dairy or housing co-operatives under the self-reliant acts.
The reasons are not far to seek. The legal regime surrounding the co-ops became so complex, and elite groups captured the co-operatives, especially at the apex level because the viability of the structure was dependent on the monopoly power or patronage value granted by the ‘state’. Thus when the state supported procurement /price support/market intervention was vested exclusively in the co-operative, it became an ‘instrument’ of the government, and was treated like an attached or subordinate office. So much so, that over the years, co-operatives have become so used to state support and patronage that many of them are not able to think of viability without government support. The fallout was the complete disinterest, and also the inability of the apex to strengthen the primary society as the rules had become too prescriptive. Moreover, the primary society members felt completely disempowered, as they were not really able to articulate their issues and interests before the Annual General Meeting (AGM) or the Board. Even organisations like NDDB which had been very supportive of the co-operative movement felt that the labyrinth of rules and bye-laws had taken the spirit out of the co-op movement.
In fact, it was the NDDB which first raised the issue of a new type of farmers’ organisation which was less prescriptive. The feeling was that in a competitive environment, a business organisation required flexibility which was not possible in the ‘co-op sector’. Business organisations which were competing with co-ops in the same domain were able to take decisions much faster, and without having to refer everything to the government. The reference was to the Companies Act which acknowledged the fact that organisations incorporated under the Act were essentially business entities, entitled to take their own decisions.
Before going any further, the reader may well ask: what is the Farmer Producer Company (FPC) about which there is so much excitement—both in the government and the corporate world, besides the civil society and academia. Well, to put it briefly an FPC is a hybrid model which combines the features of both the Co-operative Societies Act and the Companies Act. A company is essentially an aggregation of capital, (shareholders coming together with their capital) as against a co-operative in which people come together because they have a common interest. True, a co-operative also raises share capital from its members but the purpose is not to get returns on capital, only to facilitate the conduct of business. It’s more in the nature of working capital. Every member of a co-operative must be a user of its services, and many co-operatives also prescribe ‘class of membership’ based on the transactions of a member with the co-operative. The objective of a co-operative is to ensure higher returns for the transactions of members, rather than an aggregate profit at the end of the year. In most countries, a co-operative is treated as an enterprise, but in India, the registrar took it upon himself, not only to register the co-ops, but also to micro-manage them, thereby dulling the entrepreneurial perspective completely.
The FPC brings together elements of both. It is an association of primary producers registered under the Companies Act, with a clear stipulation that non-users cannot be members. The main idea behind this is to prevent a ‘capture’ of the organisation. The second difference from a typical company is that the primary objective is not to seek a return on capital, but help the members integrate their business, and leverage their collective strength both as producers of commodities, and as consumers of inputs from fertilizers to technical services and credit. The third difference is that unlike a typical company, it seeks to engage with government , panchayats, NGOs and civil society to establish institutions, processes and infrastructure which help the producer improve her productivity, establish new markets and network with organisations having similar objectives. It is different from a co-operative because it is not dependent on the registrar or the government for the management of its business. It is also free to enter into partnerships, contracts, outsourcing arrangements and contract farming with corporate without any hassles. In short, like hybrid seeds, it is expected to demonstrate ‘hybrid vigour’.
One final word: It is noteworthy that the Department, which administers the Co-operative Societies Act, and also runs schemes for strengthening co-operatives is now willing to look at newer forms of organisation which are under the administrative domain of the Ministry of Corporate Affairs. It marks a new level of maturity and confidence, and a willingness to think ‘out-of-the-box’. It acknowledges the fact that farmers can, and should hone their entrepreneurial skills, and engage with the private sector to get the best possible returns. Together with the PPP-IAD (public private partnership for intensive agriculture development), these will be the harbingers of change in the transformation of rural India.
By Sanjeev Chopra
(An IAS Officer, the author is Joint Secretary & Mission Director, National Horticulture Mission, Government of India. The views expressed are personal.)
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