The Union government’s plan to introduce a new national cooperative policy is seen with contempt by the ruling LDF in Kerala with them claiming that the Kerala model is the best in the country.

D Dhanuraj, CPPR Chairman, comments on the news published in The South First.

Cooperatives are the silent weavers of our nation’s social and economic fabric, threading together the lives and livelihoods of nearly 30 crore members through more than 8.5 lakh societies.

From dairying to fisheries, agro-processing to housing, and weaving to marketing, these cooperatives are deeply entwined in diverse sectors, fostering community spirit and mutual support.

They stand as vibrant hubs of collective strength and resilience, binding people together in a shared journey of growth, empowerment, and self-sufficiency.

In Kerala, over 23,000 registered cooperatives contribute 6-8 percent of the state’s Gross Domestic Product (GDP) and employ around 3,50,000 to 4,00,000 people.

With the new uniform cooperative policy expected to be announced soon, how is it expected to impact the cooperative sector in Kerala?

Given the importance of the cooperative sector in Kerala’s economy, is the state prepared to implement this change? Could this be a strategic move by the saffron party? Has the policy already been piloted? What do Kerala’s cooperation minister, former finance minister, the BJP in the state, and political experts say about this?

‘Cooperation among cooperatives’

On 30 June, Union Home Minister Amit Shah — who also holds the portfolio of the Ministry of Cooperation — called on individuals involved in cooperative institutions to open their bank accounts with District Cooperative Banks (DCBs).

His appeal was designed to enhance the viability of the cooperative sector, stressing that if the principle of “cooperation among cooperatives” is effectively implemented, external assistance could become redundant.

Shah delivered these remarks during the 76th Annual General Meeting of Kheda District Central Cooperative Bank Limited, Nadiad, via video conferencing.

The bank’s recent achievements, including the introduction of a loan management system, document management system, and tablet banking, represent significant progress in Gujarat’s cooperative banking sector.

Shah praised the bank’s success and cited Amul’s model, originating from the Kheda district, as a prime example of “Sahkar se Samriddhi” (prosperity through cooperation).

Established in 1950, Kheda District Cooperative Bank now boasts a net profit of approximately ₹31 crore, with substantial reserves and deposits, highlighting its strong financial position.

Primary agricultural credit societies

On 6 July, Amit Shah announced the government’s plan to introduce a new national cooperative policy within a month. Speaking at the ‘Sahkar Se Samriddhi‘ conference in Gandhinagar in Gujarat, on the 102nd International Day of Cooperatives, Shah outlined his vision for the future of Primary Agricultural Credit Societies (PACS).

He envisions a scenario where, by 2029, every gram panchayat in India will host a PACS. Currently, 65,000 PACS are in operation, with 48,000 of them working to enhance the services.

The government’s goal is to establish PACS in an additional 2 lakh gram panchayats, aiming to strengthen the cooperative network across the country.

Shah underscored the significant role of cooperatives in various sectors such as dairying, fisheries, agro-processing, credit, housing, weaving, and marketing, illustrating their broad impact on the Indian economy.

Nationwide expansion and potential risks

According to political experts, The BJP’s strategy to replicate Gujarat’s successful cooperative model across India is poised to have considerable political implications.

To craft the new cooperative policy, the government had earlier formed a 49-member committee.

A pilot project, running from June 2023 to January 2024 in Gujarat’s Banaskantha and Panchmahal districts, has been crucial in this initiative.

This project involves linking cooperative banks through core banking systems to create a central fund pool, allowing banks with surplus funds to assist those with lower deposits, thus facilitating easier access to loans.

However, the political consequences are notable, as the cooperative model might be utilised by political parties to influence voter support.

The backbone of Kerala’s resilience and progress

On 19 November 2023, Chief Minister Pinarayi Vijayan highlighted the crucial role of Kerala’s cooperative sector, describing it as one of the most extensive and dynamic networks in the country.

Deeply integrated into the daily lives of the people, this sector spans banking, dairy, handloom, fishing, and women’s cooperatives.

Vijayan emphasised that the cooperative system has been instrumental in navigating crises, such as floods and pandemics, and stabilising the state during challenging times.

With investments and loans exceeding ₹2.5 lakh crores, Kerala’s cooperative sector has attracted significant attention from corporations and the Union government.

Till 31 March 2023, Kerala has 23,263 registered cooperative societies. 16,352 functioning under the administrative control of the Registrar of Co-operative Societies, of which 4,157 are credit societies or banks. 6,911 cooperatives are regulated by other departments.

Moreover, there are 66 multistate cooperative societies in the state.

Recent estimates suggest that the cooperative sector in Kerala provides direct and indirect employment to around 3,50,000 to 4,00,000 people out of which 55,000 are permanent employees. The societies also have a cumulative membership of over 6 crore people.

The cooperative sector in Kerala, which includes agriculture, dairy, fisheries, banking, and various other industries, contributes approximately 6-8 percent to the state’s GDP.

In agriculture, cooperatives, particularly PACS and dairy cooperatives like MILMA, play a vital role in supporting rural livelihoods. They are instrumental in providing agricultural financing, procurement, and distribution services, significantly boosting Kerala’s agricultural GDP.

Government reports estimate that cooperative banks and societies in Kerala contribute around 70 percent of the state’s agricultural loans. A significant portion of the savings from Kudumbashree projects is deposited in district cooperative banks and PACS, which then extend loans to women’s collectives for further investment.

Kerala has 1,647 PACCS that collectively hold deposits amounting to ₹7,27,200 crore (approximately $1.04 billion, as of 31 March 2020.

These societies represent the grassroots level of the cooperative banking system, providing loans to both their estimated 20 lakh members and non-members. Additionally, PACCS deposits funds in district cooperative banks, which form the next tier in the cooperative banking hierarchy.

Minister criticises Union government’s interference

Kerala’s Cooperation Minister VN Vasavan has strongly criticised the Modi government’s interference in matters that fall exclusively under state jurisdiction, particularly in the cooperative sector.

Speaking to South First, Vasavan said, “The Modi government is unnecessarily involving itself in state matters. According to the Constitution’s 7th Schedule, Entry 32, cooperative subjects are a state matter. We are fighting with the Centre in the Supreme Court on this very issue.”

Vasavan pointed out that the Union government’s involvement began after a Gujarat High Court verdict prompted it to approach the Supreme Court.

“The Rohinton Nariman bench reiterated what the Constitution already states — that cooperatives are a state subject. However, the BJP continues to challenge the values of the Indian Constitution, ignoring even the Supreme Court’s verdict,” he said.

The Kerala government has filed a fresh suit in the Supreme Court, which is expected to be heard soon. “We will fight this legally. The Centre is using multistate cooperative societies as tools for scams, manipulating deposits for their benefit,” Vasavan alleged.

He emphasised that cooperative loans should not be a federal matter, especially in Kerala, where cooperatives are designed to support the common man in their daily life.

“The situation is starkly different in Gujarat, where the cooperative sector has been dismantled by Modi and Amit Shah. Even our pride, AMUL, has suffered due to the intervention of saffron parties,” Vasavan lamented, adding that many cooperative banks in Gujarat were destroyed, with the details previously made public.

Addressing the Karuvannoor Cooperative Bank controversy, Vasavan asserted that it was the only issue Kerala BJP could raise against the CPI(M)-led government.

“We resolved it by distributing more than ₹126 crore to depositors, and there are no ongoing issues. In contrast, Kerala BJP has no answers about the Travancore Cooperative Society under their watch, which is embroiled in a ₹32 crore deposit fraud,” he said.

“We will continue to fight legally against the Centre’s misguided policies,” Vasavan added.

Targeting the cooperative sector

Former Kerala finance minister TM Thomas Isaac, in an interview with South First, criticised the Union government’s attempts to control the cooperative sector.

“The Supreme Court has given a very clear judgment: As per the Constitution, the cooperative sector falls entirely within the domain of state power. The Centre can intervene only in matters concerning interstate cooperatives. However, the central government is still trying to find some loophole to capture control of the cooperative sector in India,” he added.

“To achieve this, they are introducing new policies and have already made some administrative changes. It is evident that the Modi government aims to control every national institution, and now they are targeting the cooperative sector, not for local development but for political control. Their actions are primarily driven by corporate interests rather than the welfare of the people,” the former minister claimed.

Needs investment for long-term survival

Dr D Dhanuraj, policy researcher and chairman of the Centre for Public Policy Research (CPPR) in Kochi, told South First that Kerala has a strong traditional cooperative sector. According to the Cooperatives Act, ten sound adults can form a cooperative society. However, for the long-term survival and strengthening of the sector, there is a need to bring in more investment.

“The counterargument is that cooperative societies’ products are already in the market. But if they want to perform well in a competitive market, their operations need to scale up, and for that, we need money and capital,” Dhanuraj said.

He pointed out that while interstate cooperative societies could emerge, current laws do not permit this, and the Kerala government alone cannot resist these changes.

“One thing the Union government can do is to create a model cooperative policy and allow state governments to adapt it according to their interests,” he suggested. Dhanuraj cited Amul as a successful example of a cooperative expanding its business to other states, including Kerala, and emphasised that similar strategies could be adopted for Kerala’s cooperative society products.

However, he warned that if the Government of India directly intervenes without negotiating with states, it could turn into a political battle. “I don’t see an immediate solution for this. Other states could counter and form coalitions. At the end of the day, consumers do not mind whether a product is from a cooperative society or not,” he remarked.

“For competing with corporates, we have to raise capital to perform well in a bigger market,” Dhanuraj concluded.

‘New policy will end left’s monopoly’

BJP State President K Surendran told South First that the cooperative sector in Kerala is dominated by Left politics.

According to him, the new cooperative policy introduced by the Modi government aims to end this politicisation and monopoly, allowing more societies to operate in the sector.

“Currently, in Kerala, it’s the CPI(M) that decides who can register a cooperative society,” Surendran said and added: “But the new policy will be revolutionary. Transparency is the biggest question in Kerala’s cooperative sector.”

Surendran also commented on the CPI(M)’s criticism of the so-called Gujarat model of cooperatives. “They label it the Gujarat model, but we are proud of that labelling. Gujarat has the strongest cooperative sector in India.”

He added that the Kerala BJP will soon launch awareness programs to explain the Union government’s mission on the cooperative policy to the public.

BJP used scheduled banks in Madhya Pradesh

CPI(M) State Committee Member and lawyer K Anilkumar emphasised the significant role of cooperative societies in Kerala’s development.

He highlighted that the Kerala model had been emulated by other states.

“Our cooperative sector involves everyone — farmers, workers, women, and people from all walks of life. We are number one. The uniqueness of our cooperatives is that a village’s deposits are used for loans within that same area,” he said, underscoring the localised focus of the sector.

Anilkumar also pointed out that Kerala’s villages, with their urban characteristics, stand unmatched by villages in North India.

“No other state has developed like Kerala. Haryana and Punjab may perform well, but their social life is poor. The Centre is trying to nationalise cooperatives to provide loans to corporates. That’s their real motive,” he argued.

Criticising the BJP’s actions in Madhya Pradesh, Anilkumar noted: “They used scheduled banks for electoral gains, distributing loans, with 25 percent of the burden falling on the Centre.”

“They benefited from this, but we won’t allow our cooperative sector in Kerala to be politicised,” he told to South First.

Views expressed by the author are personal and need not reflect or represent the views of the Centre for Public Policy Research.