Agricultural Credit and Cooperative Financing - DOC by qtd19172

VIEWS: 138 PAGES: 13

More Info
									      Reforms Initiative - Vision for Autonomous
           and Competitive Cooperatives
                                      B.D. Sharma
                         Sr. Consultant, ICA–ROAP, New Delhi
                                        PART - I
                     A CHRONOLOGY OF REFORMS INITIATIVE
Introduction:
      Cooperation as a socio-economic organization for the well-being of the people has
been inherent in Indian cultural ethos. For centuries together, life of Indian people was
driven by the principles and practices of cooperative system wherein community based
management of means of production and economic resources was the essence.
However, with the plunders and aggressions by foreign people, the self-help mutuality
based economic system was broken and subjugated to the feudalism and stark
individualism. The last decade of 19th Century witnessed an intense political and
economic exploitation by the colonial rulers to such an extent that people, particularly
farmers of South India rose in revolt against the then British Government. Alarmed with
this situation, the Government, on the recommendation of a civil servant Mr. Frederick
Nicholson, transplanted cooperative system as a palliative to the problems of peasantry.
However, taking a very limited view of the crisis, the Government ushered in cooperative
system in the form of credit cooperatives patterned on Raiffeisen Model of Germany.
The Government created required legal and administrative system by enacting
Cooperative Credit Societies Act of 1904. Thereafter, a number of reforms were initiated
to reshape cooperative system to meet the emerging situations. A century old history of
Indian cooperative movement reflects a chronology of reforms showing that the
cooperative system has been evolving and reinventing itself with the passage of time.
Even today, it is evolving and reinventing.
Early Reform Initiatives:
        Early reform initiatives started from 1912 when the 1904 Cooperative Credit
Societies Act was replaced by the Cooperative Societies Act of 1912 for widening the
scope of legal framework for cooperatives both in rural and urban areas. This Act also
visualized incorporation of non-credit societies such as workers cooperatives, consumer
cooperatives, marketing cooperatives, etc. Here it is important to mention that even
prior to the enactment of first Act, 1904, some committed and enthusiastic Indian
cooperators had taken initiative to form cooperative societies. Notable of these were the
establishment of Anyonya Sahakari Mandli of Baroda in 1897, Railwaymen Consumer
Cooperative in 1867 in Bhusawal, Triplicane Urban Consumer Cooperative in Tamil
Nadu, etc.
        Next important reform initiative was the implementation of the recommendation of
Imperial Committee on Cooperation, popularly known as Maclagan Committee. After
examining the working and the status of the then cooperatives in various parts of the
country, the Committee emphasized on the essentiality of a well knit organizational
structure of cooperatives from grass-root to the tertiary levels in the interests of common
man. Therefore, it recommended an organizational structure of cooperatives comprising
with primary cooperatives, cooperative unions at secondary level and apex societies at
provincial level. By 1919, the cooperative system had been accepted all over the
country and had become an important institutional framework both for the Government
for taking development assistance to the people and the members to meet their common
economic interests through mutual help.
         The constitutional reforms initiated by the then Government made cooperation
as a provincial subject, thereby, empowering the provincial Governments to enact their
own laws for cooperatives. Establishment of Reserve Bank of India with Agricultural
Credit Department was another milestone in the process of the reforms of cooperative
system. The Agricultural Credit Department (ACD) of Reserve Bank of India provided
much needed systemic and institutional support to cooperative agricultural credit
structure for enhancing investment in agriculture. This step was, therefore, a very
significant initiative for reforming cooperative system particularly the cooperative
agricultural credit system. The Government, as a policy, also decided to channel the
investment in the agriculture by providing refinance through ACD of Reserve Bank of
India on a concessional rate of interest to the cooperative financing agencies. However,
in view of the slow progress of cooperative credit system, Gadgil Committee on
Agricultural Finance in 1937 recommended the establishment of a parallel agricultural
finance system through the creation of agricultural finance corporations from national to
provincial level. The Committee felt that the proposed system would supplement the
efforts of cooperatives. However, by and large, this system could not deliver desired
results and, therefore, Government continued to promote and strengthen cooperative
agricultural finance system. Apart from this, Government was of the opinion that
cooperation, as an economic system, should also be applied in other areas of economy.
Therefore, in 1944, Government appointed an Expert Committee known as Cooperative
Planning Committee under the Chairmanship of R.G. Saraiyya. The Committee went
into the depth of the status, progress and problems of cooperatives and drew out a
comprehensive plan of action for cooperative development. The most important
recommendation of the Committee was the establishment of Multi-purpose cooperative
societies at the village level to take care of social, economic and cultural aspects of the
life of rural people. Committee also emphasized on the promotion of cooperatives in the
activities allied to agriculture e.g. animal husbandry, fishery, besides promotion of
industrial cooperatives, cooperatives for weaker sections such as women, forest
workers, landless agricultural labourers, etc. and thus, to pave the way for diversification
of cooperatives as a distinct sector in the economy of the nation. “Better farming, better
business and better living” was recommended guide-post for the functioning of
cooperatives. According to Committee, better farming connoted improved productivity;
better business, implied competitiveness and capital formation and better living meant
better quality of life of the members of cooperatives”.
        Implementation of the guidelines formulated by the Cooperative Planning
Committee resulted into great deal of diversification of cooperative movement in the
country. At the time of Independence, India had a vast network of cooperatives of
different kinds both in rural as well as in urban areas.
Post Independence Reforms Initiatives
          While on the one hand the Independence brought the self-rule, it also brought
difficulties and new challenges such as partition, shattered economy, deficit in the
availability of the food and poverty. Our founding fathers took a pledge to wipe tears
from every eye and to strengthen democracy. The visualization was involvement of
people in the governance and developmental process by strengthening people based
institutions. Cooperatives, schools and panchayats were recognized as three pillars of
democracy.
Visualisations of Indian Constitution
         Adoption of constitution bestowed fundamental rights upon the people and
placed constitutional obligations on the Government to safeguard these rights.
Important of these are right to form association; right to carry profession, occupation,
trade or business and right to own property. The constitution also specified directives
addressed to the State in regard to its policy towards the people. One of the most
important directive principle enshrined in Article 39-C mentioned, “the State shall, in
particular, direct its policy towards securing - that the operation of economic system
does not result in the concentration of wealth and means of production to the common
detriment”. Article-43 stated that the State shall endeavour to secure by suitable
legislation or economic organization or in any other way to all workers, agricultural,
industrial or otherwise, work, a living wage, conditions of work, ensuring decent
standards of life and full enjoyment of leisure and social and cultural opportunities and,
in particular, the State shall endeavour to promote cottage industries on an individual or
cooperative basis in rural areas. The Article-246 provides for the subject matter of laws
made by Parliament and by the State Legislature. Article-32 in List-II (State List) of the
7th Schedule to the Constitution defines the powers of the State Legislature to make
laws relating to incorporation, regulation and winding up of cooperative society.
Development Challenge
        Thus, constitutional visualizations and the obligations placed on the State formed
the basis for chartering the course of cooperative development in India. Cooperatives
were regarded as an important instrument for ushering in decentralised economic order,
which would not result in the concentration of economic means in the hands of a few.
Another significant factor influencing the cooperative reforms during post Independence
period was need for establishing an effective people based institutional system capable
of meeting development challenge which called for ensuring better incomes and quality
of life for our people by generating more employment specially in rural areas, by
enabling everybody to afford quality food, to access reasonable housing facilities, health
care, education, gender equity to strengthen social cohesion. The development
challenge was met with the adoption of economic planning for establishment of a mixed
economy, consisting of three sectors namely; public, private and cooperatives with
commanding heights of public sector. Cooperatives were visualized to play a role of
balancing factor between public and private sectors. In other words, important
expectations from cooperatives were to facilitate self-sufficiency in foodgrain production,
creation of better employment opportunities for rural people, workers and artisans and to
provide organizational strength to the persons of the limited means for their sustenance
and insulation from the exploitative tendencies.

       The State found cooperatives as an appropriate instrument and institutional
framework. Therefore, a comprehensive plan of action as recommended by All-India
Rural Credit Survey Committee was formulated to implement the concept of State
sponsorship/partnership in cooperatives at all levels.       The plan visualized a
comprehensive package of support of the State to cooperatives in various forms such as
support in the shape of equity capital, management subsidy and infrastructure
development. Besides, technical and managerial support was also provided by sending
Government officials on deputation to manage cooperatives and to formulate rules and
regulations for personnel of cooperatives. The responsibility for further expansion and
development of cooperatives was also assumed by the State. Most important policy
support was reservation of certain economic activities particularly in regard to agriculture
and agricultural finance for cooperatives only.

Cooperative Legislation Reforms

       The above mentioned policy choice of the Government to implement a State
sponsored and partnered cooperative system influenced the cooperative legal system.
The Model Law formulated by the Cooperative Law Committee (S.T. Raja Committee in
1955) provided parameters of legal framework to implement the state aid to cooperative
movement. More and more powers were given to the Government to control the affairs
of cooperatives.

         While the State support to cooperatives led to diversification and expansion of
cooperative movement, enabling it to achieve commanding heights in rural economy
particularly in the spheres of agricultural finance, marketing, infrastructure development,
processing, distribution of agricultural inputs, generation of employment opportunities,
etc., it also had a negative impact on the concept of cooperative enterprise and led to
alienation of the members. The cooperative ideology was overshadowed by all
pervasive Government involvement in and control of cooperatives. Therefore, Planning
Commission's approach paper to 9th Five Year Plan emphasized on the need for
liberation of cooperatives from tight bureaucratic control. It states, “from the early days
of planning, cooperatives have been perceived as the most important form of people’s
institution for promotion of equity, social justice and economic development. Every effort
will be made to make the cooperatives work. They need to be liberated from tight
bureaucratic control”.
Exposing Cooperatives to Competition: Introduction of Multi Agency Approach
        1969 witnessed another reform initiative in the shape of implementation of multi
agency approach. The reservations which were made for cooperatives exclusively in
certain segments of economy were replaced by multi agency approach permitting other
sectors to operate also in those areas. Multi agency approach was introduced due to
two reasons: one, inadequacy of cooperative system to fulfill the stipulations of
Government policy particularly in the sphere of agricultural finance and agricultural
marketing, and another being recognition of importance of exposing cooperatives to the
competition from other agencies. Although, in the beginning a lot of apprehensions were
raised by cooperatives against this policy of the Government, in long run it motivated
cooperatives to change their approach and mind-set to grow as independent and
autonomous business institutions to effectively compete in the market. The growth and
diversification of many cooperatives in different sectors, since 1969, is the testimony of
the fact that cooperatives can withstand the competition, if they are professionally
managed. However, the implementation of multi agency approach was not supported
with required autonomy and freedom of enterprise of cooperatives. Government
continued to treat them as instruments of economic development, thereby, to exercise its
control on their affairs. Autonomy and voluntary character of cooperative movement,
obviously, was casualty in such a situation. This also led to creation of dependency
syndrome among cooperatives, alienation of membership and politicization of
cooperative leadership.
Economic Reforms of 1991 and thereafter

        In 1991, India embarked upon economic reforms by implementing a
comprehensive package of deregulation of economy through structural adjustments
programme at macro level. The objective was to transform national economy from a
closed and controlled one to an open, liberalized and globalised competitive market
economy. The planned economic system was, therefore, visualized to be reformed to
gradually disengage the Government from the economic and business activities by
privatizing public sector and expanding private sector. Another important visualization
under economic reforms was encouragement to foreign direct involvement and multi
national corporations for linking Indian economy with the world economy.

        While the process of deregulation of private sector and restructuring of public
sector was given momentum through a number of legal and policy reforms, the
deregulation and decontrol process of cooperatives still remained very slow. It was an
irony that the majority of components of the package of an economic reforms as
contained in the first policy statement by the then Finance Minister in Parliament did not
make any mention of cooperative sector. That put a great pressure on cooperatives
from two opposite directions - (i) the pressures from free, liberal and competitive market
and (ii) pressures of restrictive cooperative legislation acting as a drag on cooperatives
to march ahead.

       In the meantime, the Agricultural Credit Review Committee (Khusro Committee)
had submitted its Report in 1989 recommending a package of reforms in cooperative
sector on following lines:
(a)    Need for formulation of a national cooperative policy

(b)    Need for comprehensive cooperative legislation reforms

(c)    Role of federations in strengthening their constituents

(d)    Establishment of National Cooperative Bank of India to remove the systemic gap
       in the organisational structure of cooperative financing system.

(e)    Bringing more rural poor within the ambit or primary agricultural   cooperatives.

(f)    Increased involvement of women in the membership, management and
       leadership positions in cooperatives.

       These recommendations were examined by the Central Government and
accepted for implementation. Taking cue from Khusro Committee, the cooperative
movement through its spokesmen organizations demanded for greater autonomy and
disengagement of the Government from coops. Important components of such demand
were:

      Strengthening coop. identity at market place.
      Specific public policy on cooperative development.
      Liberal and facilitating cooperative law.
      Strengthening value based professional management of cooperatives.
      Increased use of information technology.
      Steps to ensure gender equity.
        The efforts of ICA at global and regional level through the adoption of
cooperative identify statement during its Congress in 1995, formulation of U.N.
guidelines on cooperative legislation and policy reforms and recommendations of Asia
Pacific Cooperative Ministers Conferences, that set out the parameters of Government -
Cooperative relationships in the context of globalization, further added strength to the
demand of cooperative movement for greater autonomy and competitive strength.
Adopted in 2002 the ILO recommendation No.193 on promotion of cooperatives, while
recommending the promotion and strengthening of identity of cooperatives at market
place on the basis of ICA Cooperative Identity Statement, has also clearly emphasized
on a policy framework and role of Government in relation to encourage and develop
cooperatives as autonomous and self-managed enterprises particularly in the areas
where cooperatives have an important role to play.
Strengths and weaknesses of cooperatives
         The above referred chronology of reforms and initiatives for cooperative
development shows that most of the reform initiatives aim at strengthening cooperatives
as autonomous member based enterprises. However, the slow progress in their
implementation has been the basic limitation in converting such reform initiatives into
concrete gains. In the context of globalization the paradigms of cooperative business
management have to be appropriately changed to usher in transformation of State-
supported and sponsored cooperatives into member based and member-controlled
enterprises. The transformation process needs to be carefully programmed after a
critical appraisal of strengths and weaknesses of cooperatives. Most visible strengths of
Indian cooperatives, are - (a) wide range of coverage of the population (cent percent
coverage of the villages and 71 per cent of the rural households); (b) a strong network of
cooperative institutional framework from village level to tertiary level comprising with
more than 500 thousand cooperatives of different kinds with a membership of nearly 230
million; (c) commanding presence in the segments of credit and banking, fertilizer
production and distribution, sugar production, dairy, agricultural marketing and housing;
and (d) establishment of strong network of training and educational institutions.
Although these strengths denote the positive component of Indian cooperatives,
prevalence of following weaknesses come in their way to emerge as autonomous and
competitive member based enterprises :-
(a)    Absence of professional management;

(b)    Weak infrastructure facilities;

(c)    Draconian cooperative legislation and excessive control of the Government;

(d)    Slow pace of technology application;

(e)    Weak management information system;

(f)    High cost of management and transactions.
                                          PART-II
                               COOPERATIVE POLICY AND
                                LEGISLATIVE REFORMS

         Recognising the importance of development of autonomous and competitive
cooperatives, the Government has been pursuing important cooperative policy and
legislation reforms since 1991. The National Cooperative Policy, 2002 adopted by the
Government highlights the guide points for adaptation of cooperatives with the changes
brought out by market orientation of national economy.            The intensification of
competition at market place for cooperatives is forcing them to change the paradigms of
their working and management. They are realizing that while there is no substitute for
efficiency, their nature of being a community-based organization driven by values and
principles and user centeredness provide them comparative advantage over their
competitors. However, this calls for formulation and implementation of a pragmatic
strategy for restructuring and remodeling cooperative system to harness the strength of
their organizational spread and their proximity to their user members.

        Important parameters of such strategy as evolved by the National Cooperative
Policy, 2002, are as follows:-

(i)      Recognising cooperatives as autonomous enterprises as defined in ICA
         Cooperative Identity Statement;

(ii)     Cooperatives to remain the preferred instrument of execution of public policy
         specially in rural areas;

(iii)    Government role to be restricted to - (a) conduct of timely election; (b) audit; and
         (c) to protect and safeguard the interests of members and stake holders and; (d)
         incorporation;

(iv)     Enabling cooperatives to set up holding companies, subsidiaries and enter into
         strategic partnership with other sectors;

(v)      Urging Government to provide level playing field to cooperatives vis-a-vis private
         sector;

(vi)     Enhancing member participation and activitating of idle membership;

(vii)    Formulation and implementation of an action plan to phase out Government
         equity in cooperatives;

(viii)   Support of Government in regard to development of human resources in
         cooperatives; appropriate technologies and adequate infrastructure facilities to
         promote professional management.

       The Government of India has constituted a ministerial Task Force to prepare
action plan for implementation of the National Cooperative Policy, 2002. Cooperative
Legislative Reforms:

       Even before economic reforms of 1991, the Government of India had initiated
some steps for cooperative legislative reforms. In 1987, the Government of India
appointed a Committee on Cooperative Law for democratization and professionalisation
of management. The Committee outlined restrictive provisions in the State Cooperative
Societies Acts and recommended for amendments in the State Acts to activate the
democratic and professional management in cooperatives. Thereafter the Planning
Commission constituted a Committee (Brahma Perkash Committee) to draft a Model
Cooperative Law based on which the State Laws could be amended.

        Defining the objective of Model Act for cooperatives, the Committee
recommended, “the main objective of this Act is to promote voluntary formulation and
democratic functioning of cooperatives as people’s institution based on self-help and
mutual aid to enable people to promote their economic and social betterment”. The
Model Act visualized that the cooperative law should facilitate the autonomy and
independence of cooperatives that are essential for better business efficiency and
competitiveness of cooperatives. The Government role was confined only to
incorporation and liquidation of cooperatives. Model law also specified the role and
functions of cooperative unions and federations to build organizational solidarity in the
cooperative sector from local to national levels of their structure.

Salient features of Model Cooperative Act recommended by Ch. Brahm Perkash
Committee:

(i)     Incorporation of State policy on cooperatives and cooperative values and
        principles;

(ii)    Simplification of registration procedures by removing restrictions in the form of
        area of operation, economic viability, etc;

(iii)   Removal of power of the Government/Registrar regarding supersession of the
        Board; compulsory restructuring; veto/annul the resolutions of management of
        cooperatives; issue of directives;

(iv)    Greater role and responsibility to federations and cooperative unions;

(v)     No provision for equity participation by the Government and appointment of its
        nominees on the management of cooperative;

(vi)    Cooperative laws to promote subsidiary organization for the furtherance of their
        objectives.

       The Model Act was deliberated in a Conference of State Cooperative Ministers
convened by the Government of India, in 1992. The State Cooperative Ministers, while
accepting the recommendations contained in the Model Cooperative Law, called upon
the Government of India to first amend the Multi State Cooperative Societies Act, 1984
that contained a number of restrictive provisions.       Thereafter, the process of
amendments of State cooperative laws could be initiated. However, it took nearly 10
years for the Central Government to amend the Multi State Cooperative Societies Act,
1984 on the basis of Model Cooperative Act.

Impact of Model Act:

       The progress of amending State cooperative laws based on Model Act has been
rather slow. So far, Orissa, Madhya Pradesh, Karnataka and Kerala have amended
their cooperative law with reference to Model Act. In the meantime, important
development in the sphere of cooperative legislative reforms has been enactment of
parallel cooperative laws on the lines of Model Act with the sole purpose to provide
complete freedom and autonomy to those cooperatives that do not take Government
assistance and at the same time to retain the already existing cooperative laws. Eight
States, Andhra Pradesh, Bihar, Jammu & Kashmir, Madhya Pradesh, Karnataka,
Rajasthan, Orissa and Uttrakhand, have enacted parallel law.

Multi State Cooperative Societies Act, 2002:

      In the year 2002, the Government of India brought out a comprehensive
amendment of Multi Cooperative Societies Act with the twin objective of enabling
cooperatives to promote economic and social betterment of their members and to
ensure their democratic functioning as people’s institutions to provide them functional
autonomy and freedom of enterprise.
         Important changes in the 2002 law are as follows:-
(i)      Simplification of registration procedure by providing for deemed     registration;
(ii)     Provision for deemed amendment of bye-laws;
(iii)    Provision for promotion of subsidiary organizations;
(iv)     Codification of duties and functions of federal cooperatives;
(v)      Conferment of affirmative duty upon cooperative for organizing cooperative
         education programmes for its members, directors and employees;
(vi)     Restriction on the Ministers to hold any position of office-bearers in cooperatives;
(vii)    Responsibility to hold election placed on the cooperative society itself;
(viii)   Nomination of Central or State Government on the Board of Cooperative
         restricted to a minimum of one where the share of capital of the Government is
         less than 26 per cent and to a maximum of 3 where the same is 51 per cent or
         more;
 (ix)    Powers and functions of the Board and Chief Executive elaborated and clearly
         demarcated;
(x)      Investment of funds of cooperative in other cooperatives is allowed;
(xi)     The cooperative society vested with the power to appoint auditors to ensure
         timely conduct of audit.
(xii)    Provision for settlement of disputes by arbitrators introduced.
(xiii)   The Government vested with the power to supersede the elected Board of
         Management only of the cooperatives having 50% or more share capital
              contribution by the Government.
        An objective analysis of these reforms would indicate that their focus is to
ensure functional autonomy to the cooperatives and to strengthen their competitiveness
and entrepreneurship. For example, the entitlement of cooperatives to make investment
in other cooperatives is expected to strengthen cooperative solidarity. Provision to allow
cooperatives to establish their holding companies in furtherance of their objectives and
interests of their members, if implemented in the right spirit, will help cooperatives to
strengthen their competitiveness. Similarly, provisions relating to deemed registration
and deemed amendment of bye-laws, codification of the duties and functions of the
federal cooperatives, organization of cooperative education programmes for members,
directors and employees of cooperatives and assigning the responsibility to conduct
election to cooperatives and specific mention of promotion of functional autonomy in the
preamble of the Act, are a few provisions that aim at strengthening autonomous
character of cooperative institutions.
                                          PART - III
         VISION FOR AUTONOMOUS AND COMPETITIVE COOPERATIVES
Meaning of Autonomy:
        Cooperatives, as enterprise, are owned and controlled by their members. Any
external form of control or interference negate the basic philosophy of member based
cooperative. A member of cooperatives has two personalities - one that of equity holder
which entitles him or her the right of ownership and at the same time he is also customer
of his cooperative enterprise. Any interference from any source that militate against the
status of members both as owners and customers will destroy the autonomous character
of cooperative enterprise. This is clearly manifested in the fourth cooperative principle,
i.e. autonomy and independence as follows:-

      “Cooperatives are autonomous, self-help organizations, controlled by their
members.     If they enter into agreements with other organizations, including
Governments, or raise capital from external sources, they do so on terms that ensure
democratic control by their members and maintain their cooperative autonomy”.

        The issue of autonomy is also directly associated with the corporate governance
of cooperatives. There are three important aspects of corporate governance: political,
supervisory and regulatory. The political aspect emphasizes on the right of membership
to elect their representatives to conduct the management of their cooperative enterprise.
Supervisory aspect of governance deals with the accountability of professional
executives, employed by cooperatives, to conduct efficiently the operations of enterprise.
The autonomous character of cooperatives visualise clear and visible accountability of
the professional management to the Board through the Chief Executive. Regulatory
aspects relate to legal provisions that regulate cooperative institutions to ensure
preservation and protection of their nature and functions set out in bye-laws to
materialize the expectations of their members.

Important Aspects of Autonomous Cooperatives:
       Based on the above interpretation of autonomy in a cooperative, the important
aspects of autonomous cooperative enterprises may be as follows:-
(a)    Visibility and quality of self-regulation;
(b)    Absence of external control and interference;

(c)    Compliance of regulatory frame work such as law and bye-laws;

(d)    Prevalence of a code of conduct for elected directors;
(e)    Mapping out the accountability linkages within the management - Board to be
       accountable to the members and CEO to the Board;

(f)    Board to be fully empowered to formulate policy duly endorsed by the General
       Body;

(g)    CEO to be fully empowered to formulate and implement operational plan of
       action to implement the policy decisions of the Board.

(h)    Accountability of a federation to their constituent members.

(i)    Working of entire organizational structure in unison and thereby reflecting
             cooperative solidarity.

(j)    Continuous communication with members to ensure flow of information to
              them from the cooperative and to obtain their feed back.
Competitive Cooperatives:
        With the introduction of market economy and globalization, issue of
competitiveness of cooperatives has come in sharp focus.            Therefore, proper
interpretation of meaning of competitiveness of cooperatives has become very
important. Conceptually speaking, competitiveness means ability of a business
enterprise to acquire commanding market share for its services or products vis-a-vis its
counterpart enterprises. The private sector builds up its competitiveness through a
package of measures that attract greater patronage of its customers and ensures its
growth and sustainability at market place.
        Thus, competitiveness denotes business efficiency which is reflected through the
performance of enterprise at market place. This aspect of competitiveness is very aptly
summarized in the statement of Mr. Herald Green, former CEO of International
Telephone and Telegraph Company, “I think it is an immutable law in business that
words are words, explanations are explanations, promises are promises, but only
performance is reality”. The business efficiency of an enterprise at market place has to
be witnessed by a flexible operational structure which is quick to adjust with the market
changes; effective and speedy decision taking process and systems. This would ensure
increased acceptability and patronage of customers and better positioning of an
enterprise within community, leading to a larger market share of its services and
products and ultimately its sustenability in long run. However, to achieve this, strong
micro level capability of business enterprise is an essential precondition. In case of
cooperatives, these include the dispensation of cost effective services to the members;
technology upgradation and creation of new products through production process
sophistication and addressing the issues relating to the community and overall members
satisfaction, apart from the active role of professional management and coop.
leadership.

                                       PART - IV
       STEPS REQUIRED TO TRANSLATE VISION INTO CONCRETE SHAPE
        Autonomy and independence of cooperatives and competitiveness are
interrelated issues. Both complement and supplement each other. However, there may
also be a situation where autonomy alone cannot ensure competitiveness of
cooperatives at market place. So far, the discussions and debates within the
cooperatives have been focusing on the macro level issues such as political, legal and
social dimensions of cooperatives. There has been a clamour for legislation and policy
reforms, which are important, but not enough. There are many cooperatives which have
flourished even within the restrictive legislation framework through innovation and
persistence; and there are also examples of cooperatives which have not succeeded at
market place inspite of liberal cooperative legislation. Therefore, the focus has to be on
strengthening capabilities of cooperatives at micro level. Gains of enabling legislation
and policy framework can be best capitalized only if the entrepreneurial capabilities of
cooperatives at micro level are improved and strengthened.
       Viewed in this context, the steps required to translate vision for autonomous and
competitive cooperatives should be of an integrated nature having a balanced admixture
of cooperative ideology and business efficiency.
(a)    For autonomy of cooperatives:
      Developing a system of intensive education programme for the members and
       employees within cooperative enterprise itself;
      Developing effective system for continuous member communication with the
       cooperatives;
      Incorporation of interpretation of cooperative values and principles in cooperative
       law and bye-laws;
      Orienting the operations of cooperative enterprises based on the needs of the
       membership and driven by cooperative values and principles;
      Creation of appropriate parity between members rights and obligations vis_vis
       utilization of services of cooperatives - introduce the system of membership
       contracts defining clearly the obligations of both cooperatives  as well as
       their members relating to the business transactions between them;
      Formulation of a code of business based on coop. values and principles;
      Implementation of Government programmes based on clearly defined mutually
       agreed terms and conditions between Government and Cooperatives.
      Redemption of Government capital, if any.

(b)    For building up competitiveness of cooperatives

      Formulate clear vision and mission;

      Undertake proper assessment of needs based on market situation;

      Establish workable balance between members needs and expectations and
       market situation;

      Introduce need based business planning;

      Establish and clearly define key performance indicators of an enterprise for
       constant review of its business;

      Focuss on mobilization of financial resources from members and financial
       institutions rather than the Government;
     Introduce appropriate technology for -
      (a) effective decision taking process; and
      (b) production process sophistication;
     Emphasize on quality of product and their cost effectiveness;
      Evolve and implement specific market strategy keeping in view the position
              of competitors; and
      Formulate and implement appropriate HR policies for continuous development of
professional management capable of responding to the emerging needs of the market.
                                                                             n

								
To top