The Union Cabinet has approved the Multi-State Cooperative Societies (Amendment) Bill, 2022. The bill seeks to enhance transparency and accountability, as well as improve ease of doing business, among others.

 

What are the ‘multi-state cooperative societies’?

  • There are many societies whose members and areas of operation are spread across more than one state.
      • For example, most sugar mills along the districts on the Karnataka-Maharashtra border procure cane from both states.
        • These are known as multi-state cooperative society.
  • The Multi State Cooperative Societies (MSCS) Act, 2002 was enacted to regulate such cooperatives.
  • Regulation of multi-state cooperatives —
      • These societies draw their membership from different states, and they are thus registered under the MSCS Act.
      • Their board of directors has representation from all states they operate in.
      • Administrative and financial control of these societies is with the Central Registrar.
        • No state government official can wield any control on them.

 

What is the need of the amendment bill?

  • Absence of checks and balances at multiple layers —
    • The system for state-registered societies includes checks and balances at multiple layers to ensure transparency in the process.
    • For state-registered societies, financial and administrative control rests with state registrars who exercise it through district- and tehsil-level officers.
      • If a sugar mill wishes to buy new machinery or go for expansion, they would have to take permission from the sugar commissioner for both.
      • Post this, the proposal would go to the state-level committee that would float tenders and carry out the process.
    • These layers do not exist in the case of multi-state societies. For multi-state cooperatives, the 2022 act provides exclusive control to the Central Registrar, who is also the Central Cooperative Commissioner.
      • The annual report of these societies has to be submitted either online or offline to the Central Registrar before September every year.
  • Apparent lack of day-to-day government control —
    • Unlike state cooperatives, which have to submit multiple reports to the state registrar, multi-state cooperatives need not.
    • The central registrar can only allow inspection of the societies under special conditions.
  • Lack of infrastructure for Central Registrar —
    • There are no officers or offices at state level, with most work being carried out either online or through correspondence.
    • For members of the societies, the only office where they can seek justice is in Delhi.
  • Loopholes of the act are being exploited —
    • There have been instances across the country when credit societies have launched ponzi schemes taking advantage of these loopholes.
      • Such schemes mostly target small and medium holders with the lure of high returns.
      • Fly-by-night operators get people to invest and, after a few instalments, wind up their operations.

 

Key highlights of the bill

  • Incorporates the provisions of the 97th Constitutional Amendment —
      • The bill incorporates the provision of 97th Constitutional Amendment.
        • The 97th constitutional amendment was passed by Parliament in December 2011.
          • SC, in July 2021, quashed part of this act dealing with State cooperatives.
        • It dealt with issues related to effective management of co-operative societies in the country.
        • It had amended Article 19(1)(c) to give protection to the cooperatives and inserted Article 43 B and Part IX B, relating to them.
  • Focus on improving the governance of multi-State Cooperative societies —
      • The bill has provisions for setting up of Cooperative Election Authority, Cooperative Information Officer, and Cooperative Ombudsman.
        • The Election Authority will ensure that elections are held in a fair, free and timely manner.
          • Provision to debar electoral offenders for three years will bring in more electoral discipline.
        • Cooperative Ombudsman will provide for a mechanism for redressal of member grievances.
        • The provision of Cooperative Information Officer will enhance transparency by providing members timely access to information.
      • This will make the governance of multi-state cooperative societies more democratic, transparent, and accountable.
  • Promotes equity and inclusiveness — Provisions related to representation of women and SC/ST members on the board of multi-State co-operative societies, have been included.
  • Promotes professional management — Provisions have been included for bringing in co-opted directors with experience in the field of banking, management, cooperative management etc.
  • Enhances ease of doing business — The bill has provisions to reduce the time period for registration with a provision for the applicants to seek additional time of 2 months for rectification of mistakes.
  • Other provisions —
      • Provision for issuance of non-voting shares would provide multi-State co-operative societies with a tool to raise requisite capital.
      • Further, the newly proposed Rehabilitation, Reconstruction & Development Fund will help in revitalising sick multi-State co-operative societies.
      • The bill seeks to increase accountability of multi-state cooperatives by improving the auditing mechanism.