The Critical Path to Depoliticising Co-operatives for Unbiased Growth

Co-operatives in India were built on a simple promise – that people with shared economic interests could come together, pool resources, and govern themselves democratically. That promise, however, has repeatedly been tested by political interference. Board appointments driven by electoral considerations, indefinite postponement of elections, and co-operatives functioning as vote banks during polls – these have been persistent problems that undermine the very foundation of the co-operative movement. Depoliticisation is the legal effort to draw a firm boundary between political power and co-operative governance, so these institutions can serve their members rather than political agendas.

What does depoliticisation of co-operatives mean? 🔗

Depoliticisation does not mean that politicians cannot be members of co-operative societies. That would be discriminatory and would contradict the foundational co-operative principle of voluntary and open membership. A politician, as a citizen, retains the same right as anyone else to join a co-operative and participate in its activities.

What depoliticisation actually targets is political control – the use of political influence, party machinery, or government authority to dictate how a co-operative is managed, who sits on its board, and what decisions it takes. Experts have long noted that political leaders influencing co-operatives can have a deeply negative impact on their growth. The goal of depoliticisation is to ensure that the co-operative’s decision-making remains anchored to member interests and economic objectives rather than external political calculations.

How political interference historically crept in 🔗

India has over 550,000 co-operative societies functioning across urban and rural areas. Their sheer scale and membership base made them attractive to political interests. Over the last five decades, local sugar mill co-operatives, for instance, have served as significant platforms for political participation and stepping stones for aspiring politicians. While this reflects co-operatives’ democratic vitality, it also opened the door to their capture by political interests.

The most common forms of interference included government-nominated members dominating boards, Registrars (appointed by state governments) exercising excessive supervisory control, elections being deferred to keep politically convenient boards in place, and co-operative resources being directed toward electoral constituencies rather than member welfare. Politicisation and the excessive role of the government were formally identified as core problems in the functioning of multi-state co-operative societies, alongside poor governance and inability to retain professional talent.

The constitutional foundations of depoliticisation 🔗

The most significant legal step toward depoliticisation came with the Constitution (97th Amendment) Act, 2011, which gave co-operative societies formal constitutional standing for the first time. The amendment made three key changes. First, it added the words “co-operative societies” to Article 19(1)(c), making the right to form co-operative societies a fundamental right. Second, it inserted Article 43B into the Directive Principles of State Policy, directing the State to promote voluntary formation, autonomous functioning, democratic control, and professional management of co-operative societies. Third, it introduced Part IX-B (Articles 243ZH to 243ZT), which laid out a framework for co-operative governance – covering board composition, elections, audits, and oversight.

The intent was clear: to ensure that co-operatives function as genuine member-controlled institutions rather than as extensions of state or party machinery. The amendment was framed to curtail the broad discretionary powers that state governments previously exercised over co-operative societies, particularly around elections and board appointments.

The Supreme Court’s verdict and its significance 🔗

The 97th Amendment did not survive in full. In Union of India v. Rajendra N. Shah (2021), the Supreme Court held that Part IX-B was procedurally defective for state co-operative societies because the amendment had not been ratified by at least half of the state legislatures as required under Article 368(2) of the Constitution. Applying the doctrine of severability, the Court ruled that Part IX-B would remain operative only for multi-state co-operative societies. The amendments to Article 19(1)(c) and Article 43B, however, remained intact – meaning the fundamental right to form co-operatives and the state’s constitutional duty to promote their autonomous functioning still hold force.

This judgment also reinforced that the regulation of state co-operative societies rests with state legislatures, which means the responsibility for depoliticisation in the majority of co-operatives lies primarily at the state level.

Legal measures designed to limit political interference 🔗

Both central and state legislations have incorporated specific provisions to reduce the scope for political manipulation in co-operative governance.

Independent election authority 🔗

One of the most direct interventions is taking the conduct of elections out of the hands of the existing board – a setup that had historically allowed incumbents to delay or manipulate elections. The Multi-State Co-operative Societies (Amendment) Act, 2023 established a Co-operative Election Authority under the central government to conduct elections, supervise electoral rolls, and ensure regularity in the process. This removes a significant lever through which political interests could control co-operative leadership.

Restrictions on government nominees 🔗

The Multi-State Co-operative Societies Act, 2002 set limits on the number of government nominees who could sit on the boards of co-operatives receiving government assistance. This prevents the state from using its financial leverage to pack boards with politically aligned individuals. Article 243ZJ of the Constitution additionally caps the total number of board directors at 21, with mandated reservations for Scheduled Castes, Scheduled Tribes, and women – ensuring that board composition reflects member diversity rather than political convenience.

Curbing nepotism and conflict of interest 🔗

The 2023 MSCS Amendment Act introduced a provision that directors must not participate in discussions or votes on matters where they or their relatives have a personal interest. Additional grounds for disqualification of directors were also added. These measures are designed to prevent the kind of insider dealing that thrives when political connections, rather than member accountability, determine who holds office.

Rotational retirement and term limits 🔗

Co-operative law reform recommendations have called for rotational retirement of board members and restrictions on contributions to political and religious organisations by co-operative societies. Term limits for elected members – five years from the date of election as per the constitutional framework – prevent the entrenchment of any individual or faction for prolonged periods.

Co-operative Ombudsman and transparency mechanisms 🔗

The 2023 MSCS Amendment also introduced a Co-operative Ombudsman appointed by the central government, tasked with addressing member grievances within a three-month timeframe. Concurrent audits were mandated for larger multi-state co-operative societies with turnovers exceeding ₹500 crore. Audit reports of apex multi-state co-operative societies are now required to be placed before Parliament. These accountability mechanisms are intended to ensure early detection of fraud or irregularities and reduce the opacity that political interference often thrives on.

The delicate balance: politicians as members, not controllers 🔗

The legal framework carefully distinguishes between two categories. A politician who joins a co-operative as an ordinary member – contributing to its capital, using its services, voting in its elections – is exercising a legitimate democratic right. There is no bar on this, nor should there be, as excluding any category of citizens from membership would undermine the principle of open membership that defines co-operatives.

What the law targets is the leveraging of political position to influence co-operative outcomes. This distinction is enforced through conflict-of-interest provisions, independent election mechanisms, and restrictions on government nominee appointments. The line being drawn is not between politicians and non-politicians but between legitimate membership and the exercise of external political authority over co-operative institutions.

This balance also has constitutional grounding. Article 43B directs the state to promote voluntary formation and autonomous functioning of co-operatives, while Article 19(1)(c) guarantees the right to form them. Neither provision restricts who may be a member – but both support the principle that once formed, these institutions must be self-governing.

State-level responsibilities in depoliticisation 🔗

Since co-operation is a State List subject under Entry 32 of the Seventh Schedule, the bulk of depoliticisation work must happen at the state level. India has 29 state co-operative laws governing societies that operate within state boundaries, and there is wide variation in how liberal or restrictive these laws are. The Supreme Court’s 2021 ruling effectively returned the depoliticisation mandate for single-state co-operatives to state legislatures, making state-level legislative reform critical.

Many states have incorporated provisions such as term limits for office-bearers, independent audit systems, and mandatory holding of annual general body meetings within prescribed time frames. The Model Co-operative Law developed by the National Policy on Co-operatives 2002 provided a template for states to follow, though adoption has been uneven. The Ministry of Cooperation, established in July 2021 with the vision of “Sahkar se Samriddhi” (prosperity through co-operation), has focused on strengthening co-operative governance at the grassroots level and pushing for consistent reform across states.

Why depoliticisation matters for co-operative growth 🔗

When political interference dominates co-operative governance, the consequences are predictable. Resources get redirected toward electoral objectives. Professional management becomes secondary to political loyalty. Elections are deferred, leaving unrepresentative boards in place for years. Members – particularly smaller, rural members – find their interests subordinated to the interests of politically connected incumbents.

Depoliticisation creates the legal conditions under which co-operatives can attract professional management, hold timely and fair elections, maintain financial discipline, and make decisions that serve member interests. The 97th Amendment and subsequent legislative reforms were premised on the recognition that political interference and poor governance were structural problems requiring constitutional-level intervention. The Amul model – often cited as the gold standard of co-operative success – demonstrates that when professional management operates under member-accountable governance without undue political interference, co-operatives can achieve scale and efficiency that rivals private enterprises.

Depoliticisation is therefore not about removing democratic participation from co-operatives – it is about making that participation meaningful. It is about ensuring that the democratic processes within a co-operative serve its members, not external political actors.

What do you think? Given that co-operation is a State List subject and reform must happen at the state level, do you think the current constitutional framework gives the Centre enough tools to ensure genuine depoliticisation across all states? And considering that politicians cannot be barred from co-operative membership, where should the legal line be drawn between legitimate participation and undue political control?

References

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