The cooperative movement in Maharashtra

In 1950, a group of farmers in Pravaranagar (Loni), in present-day Ahilyanagar district, did something unusual. Instead of selling their sugarcane to private mill owners, they pooled their resources and built their own factory. Led by Vitthalrao Vikhe Patil, with guidance from the economist D. R. Gadgil and the cooperative leader Vaikunthbhai Mehta, the Pravara Cooperative Sugar Factory became the first cooperative sugar factory in Asia to begin production.

Within a few decades, cooperatives — in sugar, dairy, banking, spinning, housing and more — had transformed rural western Maharashtra. They also created a powerful political class. For MPSC, the cooperative movement links economy, geography, polity and ethics.

What is a cooperative?

A cooperative is an association of people who voluntarily come together to meet common economic needs through a jointly owned and democratically controlled enterprise. Key principles:

• voluntary and open membership;
• democratic control — one member, one vote;
• economic participation by members;
• autonomy;
• education and concern for community.

History in brief

The Maharashtra State Cooperative Bank, the apex cooperative bank of the state, traces its origins to 1911.

Types of cooperatives in Maharashtra

Sugar cooperatives

• Concentrated in the irrigated river valleys of western Maharashtra (Kolhapur, Sangli, Satara, Pune, Solapur, Ahilyanagar) and parts of Marathwada.
• Each factory is owned by cane-growing farmers who supply it.
• Sugar cooperatives built schools, colleges, hospitals, roads and banks around them — creating a model of rural industrialisation.

See our separate guide on the sugar economy.

Cooperative credit and banking

Rural cooperative credit follows a three-tier structure:

There are also urban cooperative banks, which are regulated jointly by the state Registrar of Cooperative Societies and the Reserve Bank of India. The Banking Regulation (Amendment) Act, 2020 strengthened RBI's supervision of cooperative banks after failures such as that of the Punjab and Maharashtra Cooperative (PMC) Bank in 2019.

Dairy cooperatives

• Major cooperative dairies in Kolhapur (such as Gokul), Warananagar, Pune and Ahilyanagar.
• They provide steady incomes to small farmers, including women, and complement cropping.

Other cooperatives

The 97th Amendment and the 2021 judgment

The 97th Constitutional Amendment Act, 2011:

• added "cooperative societies" to Article 19(1)(c) (the right to form associations);
• inserted Article 43B (a Directive Principle to promote cooperatives);
• added Part IXB (Articles 243ZH–243ZT) on the governance of cooperatives — elections, board size, audit, supersession.

In July 2021, in Union of India v. Rajendra N. Shah, the Supreme Court held that Part IXB was invalid in respect of state cooperative societies, because "cooperative societies" is a State List subject and the amendment had not been ratified by half the states. Part IXB continues to apply to multi-state cooperative societies.

Maharashtra has a State Cooperative Election Authority to conduct elections to cooperative societies.

Why cooperatives succeeded in western Maharashtra

• Irrigation in river valleys made sugarcane viable.
• Leadership — figures such as Vitthalrao Vikhe Patil, Yashwantrao Chavan and Vasantdada Patil championed cooperatives.
• State support — share capital, loan guarantees and policy backing.
• Social capital — dense village networks and a tradition of collective action.

Problems and criticism

The way ahead

• Professional management and independent audit.
• Transparency in elections and accounts.
• Digitisation of PACS (a national programme is under way) and linking them to wider services.
• Diversification — PACS as multipurpose service centres.
• Regulation of cooperative banks by the RBI for depositor safety.

Practice

Prelims-style:

1. Where was Asia's first cooperative sugar factory to begin production, and who led it?
2. Which constitutional amendment dealt with cooperatives?
3. In which case did the Supreme Court strike down Part IXB for state cooperatives?
4. Under which list of the Seventh Schedule are cooperative societies?

Mains-style:

• "The cooperative movement in Maharashtra has been both a model of rural development and a source of political patronage." Discuss.
• Examine the implications of the 2021 Supreme Court judgment for cooperative federalism.