Prime Minister of India - Dr. Manmohan Singh

PM announces Task Force to revive rural cooperatives

"It gives me immense pleasure to be here in your midst when you are celebrating the 100 years of the growth of co-operative movement in our country. Let me at the outset greet the winners of the NCDC Biennial Awards for Cooperative Excellence. Our country can make progress only if it remains committed to the twin pursuit of excellence and social equity. The co-operative movement in our country is a symbol of that twin commitment. Therefore, my congratulations to the societies selected as the best performing cooperatives. These societies have made efforts to prove that they are functioning on corporate principles of excellence while adhering to the co-operative spirit of helping the small man. The combination of co-operation and commerce, which they have shown, is possibly the way forward for the growth of co-operative movement in our country for the next hundred years. You have served our country well in the last 100 years. I pray that your next 100 years will be still more productive, more fruitful in the service of our people.

In India, the concept of co-operation is of course, not new. It was embedded in our past as an economic form of governance. It is visible in our philosophy and the Indian way of life. Kautilya's Arthashastra refers to co-operatives as guilds of workmen who carry on any co-operative work, prescribing that they should divide their earnings either equally, or as agreed upon among themselves. The Rig Veda enjoins us as follows:

"May you all have common purpose May your hearts be in unison May you all be of the same mind So that you can do work efficiently and well."

This fits very well with the objectives of the co-operative movement. The co-operative dream inspired our founding fathers, who then gave to cooperatives a prime place in crafting and guiding India's economic development after independence. Pandit Jawaharlal Nehru, envisioned an India vibrant, "with the cooperative movement to make it, broadly speaking, the basic activity of India in every village as well as elsewhere, and finally, indeed, to make the co-operative approach the common thinking of India. Therefore, the whole future of India really depends on the success of this approach of ours to these vast numbers of hundreds of millions of people". Jawaharlal Nehru visualized an India in which each village would have a panchayat, a co-operative and a school.

As agriculture continues to be an extremely important sector of our economy, the co-operative system, as one of its main pillars providing vital support services, is crucial for the transformation of our agriculture. It is visible at all stages of the agricultural production chain - production, processing, marketing and credit. It is active in the fields of banking, input provision, agro-processing, storage, marketing, dairy, fishery, housing and many other social and economic activities. With a reach of more than half a million co-operative societies covering almost every village of the country, the Indian co-operative movement is one of the largest people's movement in the world. With widespread spatial coverage, diversified business activities and ample success stories, I believe the Indian co-operatives provide immense possibilities for future development. The story of Amul is well known and our challenge is to have many more Amuls all over the country. Maharashtra's own example in sugar co-operatives is another example in the same league in its impact on social and economic transformation. And it is the country's real good fortune that one of our topmost leaders and a great believer in the virtues of co-operatives, Shri Sharad Pawar is guiding our destinies when it comes to dealing with agriculture.

In spite of the large coverage of the co-operative movement, there are many challenges that face this sector and these will have to be faced. There is, for example, a great degree of variability in the spread and depth of coverage of the co-operative movement. In some places and in some states, one notices an intense and active presence of cooperatives whereas in others, they have not even scratched the surface of their potential. Many places, unfortunately, have co-operatives only on paper, with a complete absence of the co-operative spirit. Even where they exist, their financial and business strength varies substantially. This leads one to wonder - and there is a need for everyone in this audience and outside to pose the same question - why do co-operatives not succeed and blossom in the climate and the soil of some of our states? Why is the performance of co-operatives so variable across activities, across sectors, and across regions? In the answer to these questions lie the seeds for future productive and creative action.

It goes without saying that we live in a globalised world where the winds of free trade blow stronger than ever before. Co-operatives cannot be insulated from these changes. They face tough competition from the private sector. To survive and grow amidst these fast changes our co-operatives are required and they must reorient themselves, by improving their efficiency, effectiveness and adaptability to fast-changing economic and social conditions. They will have to develop professionalism of a very high order, sharpen their core competencies and devise market driven business strategies appropriate to their circumstances. They need to meet the requirements of their core clients - farmers, growers, artisans, handloom weavers, producers and last but not least, our women, who need the support of the co-operative movement to become full and equal partners in all processes of economic development.

Some of the problems ailing co-operatives have been widely researched and written. They are unable to generate internal resources to a sufficient degree to sustain themselves. Over the years, they have developed a dependency, and an excessive dependency on the government. Unfortunately, government support on easier terms is also more difficult in view of the government's own resource constraints. Given then the need to raise resources as viable business enterprises, there is need for co-operatives to work on sound commercial and financial principles and take full advantage of the new technologies of financial engineering to mobilize additional resources which they must have if they are to remain viable entities.

Another area where co-operatives have been suffering is lack of autonomy. Over the years, the policy and legislative regime, driven by the imperative of financial dependence on government, has seemingly evolved against the cooperative spirit of autonomy, maximum possible self-reliance and transparency in functioning. Undue interference on the part of government is apt to hamper the fundamental initiative for collective endeavour and 'co-operative enterprise'. Independence and autonomy have to be granted to co-operatives to enable them to evolve into efficient, professional democratic organizations. We have to ensure that no distortions of these fundamental principles are allowed to occur. I would therefore urge that in the interest of healthy growth and existence and growth of co-operatives, democratic management should be restored, both in their management and business affairs. Our Government is committed to reform the co-operative system and restore to it its place of pride. We are seriously engaged in considering possible Constitutional amendments to ensure democratic, autonomous and professional functioning of our co-operatives.

In order to meet the changes taking place in the external environment, co-operatives also need to equip themselves internally so that they have the capacity for managing change. A critical area is therefore, leadership development, where substantial efforts are needed both by members and co-operative institutions. Leadership requires selfless service and dedication to the co-operative cause with a focus on the development of grassroots organization and grassroots compatibility. Another critical area is professionalism, which enables co-operatives to adapt quickly to fast changing economic and social situations. Leadership and professionalism both require high quality human resources. Unfortunately, this is the weakest and probably the most neglected area. Successful co-operatives world over are professional organizations run on sound managerial principles. I therefore, urge all co-operatives to invest adequately and appropriately, in human resources in a big way to generate the necessary capacities in the co-operative movement. Capacity building will be the heart of the processes of change, with which the co-operatives will have to deal with. In this context, I feel that the co-operative pyramid is weak partly on account of the multi-tier system. This is becoming increasingly unsustainable due to mounting transaction costs without any real value addition. This high cost structure is not only affecting resource availability for growth, but also leading to the problem of viability and solvency of the entire co-operative system. We should, therefore, need to have a serious look at the multi-tier structure of the co-operative sector as it has evolved over the past many decades.

Another weak link in the cooperative movement is corporate governance and internal and external accountability. In this respect, the recent sagas of failures of high profile urban co-operative banks is not exactly a shining example of governance. Never before has the need for restoring customer confidence in the co-operative sector been felt more acutely than at present. Co-operatives have to now devise a system of co-operative corporate governance for ensuring relevance as well as performance. In fact, the very definition of corporate governance implies conducting business in accordance with the well being of all the stakeholders' desires that generally leads to value generation, while keeping intact the basic rules of equity and participation.

In spite of the winds of economic change and the challenges that now on the horizon, co-operatives continue to have relevance. They are an alternate institutional mechanism for enlisting the participation of our people in economic processes of direct relevance to them and for ensuring equitable distribution of benefits. They continue to be important social and economic institutions, which give a voice to the voiceless millions. In order to continue to have this validity, they must therefore be seen to be performing the above functions with efficiency and dedication. They must succeed as they are the only viable way of reaching out into the vast hinterland of this country, where the poor and marginalized live and for whom the corporate world has few answers.

Our government is committed to the success of co-operatives. We have set up a Task Force, which will recommend an implementable action plan for reviving rural co-operative banking institutions with an appropriate regulatory framework. The Task Force will also recommend other measures required to improve efficiency and the viability of the co-operative banking sector. The report of the Task Force is expected very shortly. We have also taken several enabling steps in the recent past to safeguard the basic tenets of co-operative philosophy and my colleague, Shri Sharad Pawarji has listed these. The Constitutional amendment I mentioned earlier will ensure that the three key words for the empowerment of co-operatives - "voluntary" "democratic" & "autonomous" and the three rights - right to elections, right to autonomous management and right to independent professional audit are incorporated in the Constitution so that no state law can abrogate them.

The Central Government has already taken the initiative of laying a strong foundation for a member-centric co-operative movement by enacting the Multi-State Co-operative Societies Act, in which many restrictive provisions have been removed. State governments are being advised to amend their co-operative laws, on similar lines. All concerned, more so the State Governments, must come forward to do their bit to revitalize the vital co-operative movement.

As I stated earlier, co-operatives have to succeed, they must succeed, if the poor and particularly our farmers have to be prosperous. I hope that in years to come, co-operatives in India will grow not only in size, but also in the range and coverage of their activities. I can assure you that they will certainly find a favourable policy environment. This external support which we will provide, coupled with the internal changes that co-operatives need to and must make, will ensure that co-operatives continue to perform the historic and relevant role we all expect of them in social and economic transformation of this country of great complexity and great diversity that India is. In conclusion, I once again extend my hearty congratulations to the award winning co-operatives, and hope they will inspire others to perform better and strengthen the cooperative sector in years to come. You have served our country will in the last 100 years, but I venture to think that the best is yet to come. May therefore, your next 100 years be still more productive, still more creative, in the service of the people of this great country of ours. "