Crisis in India’s Cooperative Sector

Cooperative societies are an important part of India’s economic and social system, especially in rural development and financial inclusion. However, recent data presented in Parliament by Union Cooperation Minister Amit Shah has raised serious concerns.

Extent of the Crisis

According to data presented by the central government in Parliament:

• Out of a total of 8.48 lakh cooperative societies:
  • 3.49 lakh are profitable
  • 2.11 lakh are running at a loss
  • 1.41 lakh are non-functional
  • 47,688 are under liquidation

Defunct Cooperative Societies

• Uttar Pradesh: 41.8% (16,997) – highest
• Madhya Pradesh: 34.4%
• Rajasthan: 31.8%
• Andhra Pradesh: 30.1%
• West Bengal: 27.8%

Worse conditions in smaller states:

• Nagaland: 72.7%
• Delhi: 67.1%
• Sikkim: 55.3%
• Manipur: 52%
• Chandigarh: 46.4%

Better-performing states:

• Maharashtra: 2.26 lakh societies, only 1.21% defunct
• Gujarat: 7.25%
• Karnataka: 7.54%
• Haryana: 8.23%

Although western and southern states have more functional societies, many are still loss-making or under liquidation.

Loss-making Cooperative Societies

• On average, 31.75% of cooperative societies in major states are running at a loss
• Telangana: 47.22%
• Haryana: 41%
• Madhya Pradesh: 38%

Cooperative Societies Under Liquidation

Liquidation is the legal process of closing down an organization, selling its assets, and using the proceeds to repay creditors and employees.

• Total: 47,688 societies under liquidation
• 93% concentrated in five states:
  • Maharashtra
  • Gujarat
  • Telangana
  • Karnataka
  • Madhya Pradesh

Sector-wise Challenges

1. Dairy Cooperatives

• Important for cushioning agricultural shocks (as per NABARD)
• 14,251 societies are non-functional or under liquidation

Issues:

• Decline in milk prices post-COVID
• Rising input costs
• Low margins despite 25% production increase (Oct 2024–Mar 2025)

2. Housing Cooperatives

• Worst affected in Maharashtra and Gujarat

Reasons:

• Depositor losses in scam-hit banks like PMC, New India, and Mumbai Bank
• Non-payment of maintenance charges
• Mismanagement of funds
• Delays in redevelopment

3. Credit and Thrift Cooperatives

• Small-scale financial institutions

Issues:

• Very low capital (often below ₹1 lakh)
• Lack of direct RBI supervision
• Arbitrary interest rate setting
• High borrowing costs → defaults → losses
• Poor management

4. Labour Cooperatives

• Crucial for workers in the informal sector

Issues:

• Weak financial capacity (especially in Telangana)
• Poor contracts and low income
• High GST burden

5. Women Cooperatives

• Perform well in most states but face challenges in some
• Madhya Pradesh: 8,495 defunct
• Telangana: 562 non-functional

Issues:

• Limited access to finance
• Lack of business networks
• Social constraints
• Low scheme utilization (60% awareness but only 25% beneficiaries)
• Family responsibilities

Way Forward

The government has initiated reforms through the National Cooperative Policy, 2025, but more steps are needed:

• Ensure professional management and transparency
• Reduce political interference
• Strengthen regulatory oversight (especially for small cooperatives)
• Improve access to financial assistance and institutional credit
• Simplify GST processes for small labour cooperatives
• Sector-specific reforms (dairy, housing, labour)
• Support women cooperatives with finance, market access, and social backing
• Maintain balance between central and state roles

Conclusion

While reforms have begun, sustained and targeted efforts are essential to ensure the long-term stability, efficiency, and inclusiveness of India’s cooperative sector.

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