- December 21, 2021
- Posted by: OptimizeIAS Team
- Category: DPN Topics
Subject – Governance
Context – Union Home and Cooperation Minister Amit Shah announced that the Centre has decided to amend the Multi State Cooperative Societies (MSCS) Act, 2002 to “plug the loopholes in the Act”.
- Cooperatives are a state subject, but there are many societies such as those for sugar and milk, banks, milk unions etc whose members and areas of operation are spread across more than one state.
- The Multi State Cooperative Societies (MSCS) Act, 2002 was passed to govern such cooperatives.
- They draw their membership from both 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, with the law making it clear that no state government official can wield any control on them.
- Maharashtra has the highest number at 567, followed by Uttar Pradesh (147) and New Delhi (133).
- Credit societies constitute the bulk of registered societies at 610, followed by agro-based ones (which include sugar mills, spinning mills etc) at 244.
- There are 96 multistate cooperative dairies and 66 multistate cooperative banks.
- The board of directors has control of all finances and administration. For expenditure above a certain level, the annual general body meeting of the society has to be called. The annual report of these societies has to be submitted either online or offline to the central registrar before September every year.
- For state-registered societies, financial and administrative control rests with state registrars who exercise it through district- and tehsil-level officers.
Issues with the Act –
- While the system for state-registered societies includes checks and balances at multiple layers to ensure transparency in the process, these layers do not exist in the case of multistate societies.
- Unlike state cooperatives, which have to submit multiple reports to the state registrar, multistate cooperatives need not.
- The central registrar can only allow inspection of the societies under special conditions — a written request has to be sent to the office of the registrar by not less than one-third of the members of the board, or not less than one-fifth of the number of members of the society. Inspections can happen only after prior intimation to societies.
- The on-ground infrastructure for central registrar is thin — 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, with state authorities expressing their inability to do anything more than forwarding their complaints to the central registrar.
- There have been instances across the country when credit societies have launched ponzi schemes taking advantage of these loopholes.
To know about Cooperative banks, please refer November 2021 DPN.
To know about Urban Co-operative Banks, please refer August 2021 DPN.