Only an integrated approach can lead to the development of cooperatives: Satish Marathe

Satish Marathe, a Reserve Bank of India (RBI) Director and Sahakar Bharati founder member, said that cooperatives had to be in all three sectors — agriculture, manufacturing and services. Only an integrated approach can lead to their development. Marathe suggested studying the cooperative movements of France, Germany and the Netherlands from the Indian viewpoint. The models of France and the Netherlands can be studied for agriculture and that of Germany for manufacturing. International experiences can thus be used for the development of cooperatives in India.

Marathe was speaking at a session of the Dialogue on “Sahakar se Samriddhi: Many pathways” organized by Rural Voice in association with Sahakar Bharati. The topic for the session was “Global experience in cooperation: How India can benefit”.

The cooperative sector received two major shocks, said Marathe. The first one was in 1967 when the Planning Commission added the words “if possible” to “cooperatives should be promoted”. The second one was in 1991 when the cooperative sector was completely ignored. The country needed economic reforms and liberalization. The public sector Ratna companies and the private sector were promoted in this process, but the largest sector of cooperatives was totally ignored.

Marathe said that cooperatives across the countries have been recognized as “a distinct form of ownership”. Secondly, they are considered to be “economic enterprises” or “business enterprises” in developed countries but this is not so in India. Thirdly, cooperatives are profitable but not institutions for profit. Marathe said that we know that the maximum social capital formation has been achieved through cooperatives. Yet governments across all parties have not considered these issues, which is a big hurdle. There is a need to build a national consensus on these issues. Marathe also said that cooperatives are recognized in other countries like any other form of organization, like corporate, LLP (Limited Liability Partnership) etc. India, too, could do something similar.  

There is a need for more “engagement” between cooperatives and banking, said Marathe. Developed countries have such a mechanism. India will have to change its investment rules in order to do so. Marathe said that in India, development was dependent on credit availability. While investment is required in all sectors, any individual has limited capital. Cooperatives need to be linked to banks and financial institutions for the purpose of capital. SEBI should also allow them to enter the capital market. In France, cooperatives can raise funds from the capital market while maintaining the “one person, one vote” norm. Developed countries have several routes through which cooperatives can raise capital but India lacks these. Marathe said that without interest-free funding, cooperatives could not make an impact in the long term.

He also said that the ownership of a cooperative should be separate from its management that focuses on day-to-day affairs. The Indonesian model can be studied for this. The cooperatives should also be allowed to form companies with 100 per cent ownership. Marathe suggested to the government that it should regulate the cooperatives, but not micro-manage them. Cooperatives should get support from the government as partners. When the cooperative is able to stand on its own, the government should exit.

Marathe said that the aim of the laws made by the central and state governments should be to make the business atmosphere for the cooperatives better and not to control them. All countries have strong regulation and supervision mechanisms for cooperatives. But these institutions are not micro-managed. They have full liberty of functioning.

According to Marathe, several sectors need to take cooperative initiatives. Consumer cooperatives are one of these. Cooperatives should also enter the insurance and financial sector. He said that going by the pace at which e-commerce was spreading, consumer cooperatives need to be strengthened.