Empowering Workers through Labour Co-operatives in India’s Construction and Forest Sectors

India’s unorganised labour sector has long been associated with exploitation – middlemen who pocket the bulk of profits, irregular work, and wages that barely cover subsistence. Labour co-operatives offer a direct counter to this reality. By enabling workers to collectively take on contracts, eliminate intermediaries, and share the proceeds equitably, these co-operatives have quietly transformed livelihoods in two of India’s most labour-intensive domains: construction and forest produce collection. Understanding how they work – and why they matter – is essential for anyone studying India’s cooperative movement.

What is a labour co-operative? 🔗

A labour co-operative is a worker-owned and worker-managed organisation that collectively undertakes contracts for work and distributes the earnings fairly among its members. Labour co-operatives are found registered under the Co-operative Societies Act, Public Trust Act, Society Registration Act 1860, Trade Union Act, and Companies Act, and are active across sectors including construction, forestry, micro-industry, food stores, and more. The fundamental principle is simple: workers pool their collective strength to bargain for work, execute it, and divide the wages – without a contractor or middleman siphoning off their earnings.

There are primarily two categories relevant to India’s context – Labour Contract Co-operatives, which take up construction and public works contracts, and Forest Labour Co-operatives, which organise workers involved in collecting and processing minor forest produce. Both types serve the same core purpose: protecting the economic interests of workers who would otherwise be at the mercy of private contractors.

The national framework: NLCF and government support 🔗

The National Labour and Cooperative Federation (NLCF), started in 1981, works closely with the Ministry of Cooperatives under the Multi-State Co-operative Societies Act, 2002, and focuses on capacity building, research, policy advocacy, and fostering collaboration among labour co-operatives across India. This federation acts as the apex body that coordinates and represents the interests of labour co-operatives at the national level.

The NLCF currently represents 44,143 Labour Contract and Forest Labour Co-operatives through 215 district and 17 state-level federations, with a combined membership of around 27.30 lakh workers. Labour contract co-operative societies collectively execute works worth more than ₹2,350 crore per year. These are not marginal entities – they are a significant force in India’s construction and forest economy. NLCF’s primary objective is to organise and develop labour co-operatives for the economic and social development of the unorganised sector, particularly among Scheduled Castes, Scheduled Tribes, and Other Backward Classes.

At the policy level, the Government of India has consistently backed labour co-operatives through subsidies, preferential contract allocations, and dedicated support schemes. In 2021, a new Ministry of Cooperation was established to provide a distinct administrative, legal, and policy framework for the cooperative movement, aiming to simplify procedures and facilitate ease of doing business for co-operatives. More recently, a ₹2,000 crore grant to the National Cooperative Development Corporation (NCDC) for FY25-29 is expected to mobilise up to ₹20,000 crore in lending for cooperative projects, including working capital and infrastructure development.

Labour contract co-operatives in construction 🔗

Construction is one of India’s largest employment sectors, yet it has historically been dominated by a contractor-subcontractor chain that leaves daily wage workers with little power over their earnings or working conditions. Labour contract co-operatives disrupt this chain by directly taking on public works contracts from government departments, thereby cutting out the middlemen.

The ULCCS story: 100 years of worker power 🔗

No discussion of construction labour co-operatives in India is complete without the Uralungal Labour Contract Co-operative Society (ULCCS) – the oldest and most celebrated example of the model. A hundred years ago, in the village of Uralungal in Kerala’s Malabar region, a group of 14 young workers ostracised by an oppressive caste hierarchy laid the foundation for what would become one of the world’s largest workers’ co-operatives.

In 1923, social reformer Guru Vagbhatanandan encouraged the youth of Uralungal to break free through self-reliance. They first formed the Uralungal Ikkya Nanaya Sangham to provide financial support to workers facing economic discrimination. Two years later, on 13 February 1925, they registered the Uralungal Labourers’ Mutual Aid and Co-operative Society – which later became ULCCS.

The society grew steadily from small agricultural bund repairs and pathway construction to major infrastructure projects. ULCCS now provides direct employment to more than 13,500 workers from rural areas and focuses on construction, infrastructure, and development, usually delivering projects ahead of schedule and to the highest quality standards.

ULCCS promotes gender equality by treating women and men fairly with equal distribution of wages and work, fosters sustainable economic growth through welfare schemes, and has garnered international recognition including membership in the International Cooperative Alliance and the ICA AP Excellence Award. Kerala’s Chief Minister noted that ULCCS directly provides jobs to more than 18,000 people – making it the fourth largest employer in the state after the State Government, KSRTC, and KSEB.

What makes ULCCS especially significant from a co-operative law perspective is its governance: only workers can be elected as directors, each director is assigned responsibility for project execution, and members attend co-operative education and various training programmes. A worker is free to take decisions as per prescribed procedure, which sharpens leadership skills. Workers receive daily wages for work done, along with additional benefits like provident fund, medical allowance, gratuity, and holiday wages – far beyond what typical daily wage construction workers receive on the open market.

How labour contract co-operatives work in practice 🔗

Labour contract co-operatives take direct contracts for public and private works, enabling labourers to share profits and gain economic independence. This model eliminates middlemen, ensuring that the profits flow back to the workers themselves, providing them with consistent work and a dignified livelihood. Workers who are members of the co-operative collectively bid for government tenders, execute the project using their pooled skills and equipment, and divide the earnings as per the society’s rules after setting aside a portion for the common fund.

Forest labour co-operatives: protecting tribal workers 🔗

While construction co-operatives are visible in urban infrastructure, forest labour co-operatives operate in a very different – and often more vulnerable – environment. They organise tribal and forest-dependent communities who collect minor forest produce (MFP) such as honey, tendu leaves, mahua flowers, bamboo, gums, and medicinal plants.

The historical context of exploitation 🔗

Since British rule, contractors employed forest dwellers to do unskilled jobs for low wages and in appalling conditions. In some tribal regions with no regular markets, private wholesale dealers would buy minor forest produce at very low rates and sell them at huge profits in cities. Many times, traders would pay tribals in advance and later buy their goods at nominal costs. This cycle of debt and exploitation was the direct driver behind the formation of forest labour co-operatives.

In 1946-47, the Forest Labour Societies were initiated by B.G. Kher in the then Bombay State with the purpose of giving Adivasi labourers full wages along with a share in profits, and gradually training them to take responsibility for conducting forest and other business through their cooperative efforts. The Second Five Year Plan subsequently recommended establishing Forest Labour Societies in increasing numbers across all states.

Policy backing and the National Forest Policy 1988 🔗

The National Forest Policy of 1988 was a landmark moment for forest labour co-operatives. It explicitly stated that contractors should be replaced by institutions such as tribal co-operatives, labour co-operatives, and government corporations as early as possible, and called for the protection, regeneration, and optimum collection of minor forest produce along with institutional arrangements for marketing such produce.

Nearly 23 percent of India’s terrain comprises forest area, and 200 million citizens are dependent on forests for their livelihoods. According to the Ministry of Tribal Affairs, tribal communities derive 20-40 percent of their annual income from minor forest produce. The products collected – including wild honey, tamarind, sal leaves, mahua seeds, neem seeds, and bay leaves – sustain millions of families, particularly in states like Chhattisgarh, Madhya Pradesh, Odisha, Jharkhand, and Maharashtra.

TRIFED and the MSP scheme 🔗

A critical institutional pillar for forest labour co-operatives is the Tribal Co-operative Marketing Development Federation of India (TRIFED), established in 1987 under the Ministry of Tribal Affairs. TRIFED was formed with the main objective of institutionalising the trade of minor forest products and providing tribals a fair price for their produce, ensuring sustainable harvesting.

To support forest dwellers and tribal gatherers, the Government of India launched the Minimum Support Price (MSP) for Minor Forest Produce Scheme in 2013-14 under the Ministry of Tribal Affairs to provide fair and remunerative prices for MFPs, prevent exploitation by middlemen, and promote value addition, processing, and marketing of forest produce. Many states including Madhya Pradesh, Chhattisgarh, Odisha, and Jharkhand have set up State Minor Forest Produce Federations and co-operative societies to manage MFP collection and marketing.

In 2020, TRIFED along with the Ministry of Tribal Affairs launched the TRIFOOD project, setting up tertiary value addition units in Jagdalpur, Chhattisgarh and Raigad, Maharashtra, to enhance the income of tribals by adding value to forest products. These initiatives show how government policy has progressively moved from contractor-led exploitation toward co-operative-driven empowerment.

What labour co-operatives deliver: wages, welfare, and dignity 🔗

The tangible benefits that labour co-operatives provide to their members go beyond just wages. In the construction sector, members of societies like ULCCS receive provident fund contributions, medical allowances, and gratuity – benefits that are rare among private sector construction workers in India’s informal economy. In the forest sector, co-operatives ensure that the price tribals receive for their produce is not dictated by moneylenders or private traders but by a collective institution with a mandate to protect their interests.

Cooperatives formed among tribal communities give them a stronger voice, social protection, and organisational strength. ILO programmes in tribal regions of India have shown that income-generation schemes through cooperatives have allowed workers to stop migrating to distant places in search of work, providing economic security within their own communities.

The empowerment dimension is equally important. By organising into co-operatives, workers gain bargaining power, better working conditions, and protection against exploitation. The co-operative structure ensures that the benefits of development reach the most vulnerable, fostering inclusive growth and reducing income disparities. This is particularly significant for SC/ST communities who form the majority of labour co-operative membership in India.

Challenges that remain 🔗

Despite their achievements, labour co-operatives in India face real structural obstacles. In the construction sector, co-operatives often struggle with limited access to capital for heavy machinery, competition from large private contractors, and inconsistent flow of government contracts. Labour co-operatives face challenges like lack of continuous work, competition, and lack of skills and safety measures, which can be addressed by providing skilled job variety, exemptions from fees, rental machinery, and permanent work assignments.

In the forest sector, tribal collectors often receive low returns due to dependence on intermediaries, and the absence of local value-addition units leads to wastage and lower profitability. Poor connectivity and lack of awareness restrict access to larger markets, and co-operatives face difficulties accessing working capital. The structural dominance of private traders and the complexity of coordinating between forest, tribal, and commerce departments remain persistent barriers.

There is also the broader legal and political environment to contend with. The cooperative legal environment in India has been characterised as only limitedly cooperative-friendly, with the relationship between the State and the cooperative sector having moved from promotion and patronage to control and regimentation over time. Bureaucratic interference and political patronage, rather than genuine worker empowerment, can dilute the democratic essence of the cooperative model.

The road ahead 🔗

The trajectory for labour co-operatives in India is, on balance, positive. The creation of a dedicated Ministry of Cooperation, the expansion of MSP coverage for minor forest produce, TRIFED’s Van Dhan Yojana clusters, and the NCDC grant all signal that government support for the cooperative sector is deepening. Expanding MSP coverage, capacity building in sustainable harvesting and value addition, promoting Van Dhan clusters for entrepreneurship, and developing digital platforms like the Tribes India E-Marketplace for MFP sales are among the key priorities going forward.

For the construction sector, the ULCCS model demonstrates that a labour co-operative can not only survive but thrive – diversifying into IT, arts and crafts, and even telemedicine – while keeping worker welfare at its core. India’s cooperative movement is entering a new phase, with growing digital capabilities and government support enabling expansion into e-commerce, agri-export, organic food processing, and green energy. Labour co-operatives, if given the right institutional backing and freed from political interference, are well-placed to lead that expansion.

What do you think? India has over 44,000 labour co-operatives, yet most people have never heard of them – should labour co-operatives be given greater visibility and priority in government employment schemes? And given that forest labour co-operatives protect both workers and ecosystems, can they serve as a model for sustainable development in other natural resource sectors?

References

1. https://en.wikipedia.org/wiki/Uralungal_Labour_Contract_Co-operative_Society
2. https://mpforest.gov.in/img/files/Policy_NFP.pdf
3. https://en.wikipedia.org/wiki/Tribal_Co-operative_Marketing_Federation_of_India