Facing the Future: Addressing Key Issues and Challenges in the Co-operative Movement

India’s co-operative movement has existed for over 120 years, dating back to the Co-operative Credit Societies Act of 1904. Today, it encompasses dairy, credit, housing, fisheries, and agriculture – touching millions of lives, especially in rural India. Yet despite this enormous reach, the movement finds itself at a crossroads. Growing competition from private enterprises, structural inefficiencies, and a rapidly changing economic landscape have exposed deep-seated challenges that demand urgent attention. If co-operatives are to remain relevant and competitive, these issues must be addressed head-on.

The professionalism deficit: a structural problem
What professionalism looks like in practice
The tax burden and the case for income tax relief
Why broader tax relief still matters
Autonomy under threat: the problem of government interference
The contrast with successful co-operatives
Technology adoption: closing the digital gap
Technology as a tool for member engagement
Building a positive public image
Involving youth and women as change agents
Competitiveness and the path forward

The professionalism deficit: a structural problem

One of the most persistent challenges facing Indian co-operatives is the lack of professional management. Unlike private companies that recruit trained managers and specialists, most co-operatives are run by elected members – often with little formal training in finance, operations, or strategic planning. Research published in the International Journal for Research Publication and Seminar identifies poor management and operational inefficiencies as core reasons for the decline of many cooperative institutions.

This matters because co-operatives today compete directly with well-managed private firms and corporate retailers. A handloom co-operative run without professional marketing expertise will struggle to match a private brand’s reach. A credit co-operative that lacks trained loan officers risks poor lending decisions and rising defaults. The problem is not the co-operative model itself – it is the failure to pair democratic ownership with professional execution.

What professionalism looks like in practice

Bringing professionalism into co-operatives means hiring qualified managers, adopting sound accounting practices, training board members in governance and financial oversight, and building internal audit systems. India’s National Cooperation Policy 2025 explicitly calls for professional management while staying true to co-operative principles – a recognition that the two are not mutually exclusive. The policy also supports the establishment of the Tribhuvan Sahkari University in Anand, Gujarat, which aims to produce trained co-operative professionals at scale. This kind of institutional investment in human capital is exactly what the movement needs to close its management gap.

The tax burden and the case for income tax relief

Co-operatives in India are legally treated as separate taxable entities under the Income Tax Act, 1961. Unlike charitable trusts or non-profit organisations, they do not enjoy blanket tax exemptions. Their income is subject to progressive tax rates, Alternative Minimum Tax (AMT), surcharges, and TDS obligations – creating a cost burden that private companies often manage more efficiently due to better tax planning resources.

Recognising this imbalance, the government has introduced several relief measures in recent budgets. According to the Press Information Bureau, the surcharge on co-operative societies was reduced from 12% to 7% on income between ₹1 crore and ₹10 crore, and the Alternate Minimum Tax rate was brought down from 18.5% to 15% to create parity with private companies. New manufacturing co-operatives are now eligible for a concessional tax rate of 15%, and sugar co-operatives received relief worth nearly ₹10,000 crore related to decades-old sugarcane payment disputes.

Why broader tax relief still matters

While these steps are welcome, many co-operatives – particularly smaller primary agricultural credit societies and consumer co-operatives – argue that the tax framework still does not adequately recognise their non-profit orientation and community service function. Section 80P of the Income Tax Act provides deductions for income earned from specified activities, but its coverage is not universal, and co-operatives that opt for concessional tax rate schemes under Sections 115BAD or 115BAE lose the benefit of Section 80P entirely. This creates a difficult trade-off. A more comprehensive tax policy – one that recognises co-operatives’ social role while keeping compliance manageable – would significantly improve their financial sustainability.

Autonomy under threat: the problem of government interference

From the very beginning, India’s co-operative movement has struggled with an identity problem. As far back as 1932, the cooperative scholar Plunkett observed that what India had was not a genuine movement but a government policy – created by administrative resolutions rather than growing organically from communities. That observation remains strikingly relevant today.

Governance challenges – including political interference, lack of transparency, and the suppression of democratic decision-making – are widely cited as major structural weaknesses in the Indian co-operative sector. In many states, the Registrar of Co-operative Societies (RCS) functions more as a regulator and inspector than a promoter, imposing uniform by-laws and intervening in internal affairs in ways that undermine member autonomy.

The contrast with successful co-operatives

It is no coincidence that India’s most successful co-operatives – AMUL (GCMMF), IFFCO, and KRIBHCO – operate largely outside direct government control. Their success demonstrates that co-operatives thrive when given the freedom to make market-driven decisions while staying true to their member-oriented values. The 97th Constitutional Amendment (2011) and the Multi-State Co-operative Societies Amendment Act (2023) have introduced some safeguards around elections and financial disclosures, but systemic autonomy – particularly at the district and primary society level – remains elusive in several states.

Technology adoption: closing the digital gap

NABARD has identified the lack of technology adoption as one of the primary reasons for the declining market share of co-operatives in India. While private competitors have moved to digital platforms, real-time inventory management, and online sales, many co-operatives still rely on manual record-keeping and cash-based transactions. This creates inefficiencies, reduces transparency, and limits their ability to serve younger, digitally active members.

The government’s ₹2,516 crore computerisation project for Primary Agricultural Credit Societies (PACS) is a step in the right direction, aiming to digitise operations across 63,000 societies. PACS are also being integrated as Common Service Centres to deliver over 300 e-services to rural citizens. However, experts at the National Economic Forum have stressed that the sector’s real transformation depends on addressing internet literacy gaps among members and field staff – not just installing software.

Technology as a tool for member engagement

Beyond operational efficiency, technology can dramatically improve member participation. Digital voting platforms can make annual general meetings more accessible. Mobile apps can keep members informed about dividend payments, loan schemes, and policy changes. Integration with platforms like eNAM and GeM – as envisioned under the National Cooperation Policy 2025 – can connect agricultural co-operatives directly to national markets, bypassing exploitative middlemen. The potential is enormous, but realising it requires sustained investment in digital infrastructure and training, not one-time deployments.

Building a positive public image

Perception is a real problem for the co-operative sector. Years of mismanagement in certain sugar and credit co-operatives, combined with political scandals in some states, have dented public trust. Many potential members – especially educated urban youth – associate co-operatives with bureaucratic inefficiency rather than modern enterprise. This makes member recruitment and capital mobilisation significantly harder.

Scholars have noted that elite capture – where wealthier or more politically connected individuals dominate co-operative boards – has historically reinforced this negative image and driven away genuine grassroots participation. Rebuilding credibility requires tangible action: transparent governance, regular public disclosure of financial performance, member education programmes, and showcasing success stories from sectors like dairy and fisheries where co-operatives have delivered measurable benefits.

Involving youth and women as change agents

One of the most effective ways to refresh the image of co-operatives is to actively involve youth and women in leadership. The National Cooperation Policy 2025 emphasises this directly – calling for co-operatives to be positioned as a people’s movement by bringing women, youth, Dalits, and tribal communities into decision-making roles. When a co-operative is led by its actual members – rather than political appointees – its decisions reflect genuine community interests, and public confidence naturally follows. Programmes that invest in cooperative education at school and college levels can also help build a new generation of informed cooperators.

Competitiveness and the path forward

The challenges before India’s co-operative movement – professionalism, taxation, autonomy, technology, and public image – are interconnected. Addressing any one of them in isolation will not be sufficient. A co-operative that adopts technology but remains politically controlled will still struggle. One that gains tax relief but lacks trained management will misallocate its savings. Meaningful reform requires a coordinated push across all these dimensions simultaneously.

India’s cooperative sector has the foundational strengths – a vast membership base, legal recognition, government support, and proven success models – to become a far more powerful engine of inclusive growth. The goal, as stated in the National Cooperation Policy 2025, is to triple the co-operative sector’s share of GDP by 2034 and draw in 50 crore new members. That ambition is achievable, but only if co-operatives confront these structural challenges with the same urgency they bring to their daily operations.

What do you think? Given that India’s most successful co-operatives like AMUL operate with significant management independence, should the government take a more hands-off approach to co-operative governance across the board – and if so, what safeguards would be needed to prevent mismanagement? Also, with the PACS computerisation project underway, do you think digital infrastructure alone is enough to make co-operatives competitive, or is member education the more critical piece of the puzzle?

References

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Table of Contents

The professionalism deficit: a structural problem 🔗

What professionalism looks like in practice 🔗

The tax burden and the case for income tax relief 🔗

Why broader tax relief still matters 🔗

Autonomy under threat: the problem of government interference 🔗

The contrast with successful co-operatives 🔗

Technology adoption: closing the digital gap 🔗

Technology as a tool for member engagement 🔗

Building a positive public image 🔗

Involving youth and women as change agents 🔗

Competitiveness and the path forward 🔗