BANE OF CO-OPERATIVES IN INDIA

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The major problem of cooperatives in India is the Government .plus there are some other problems they are explained as given below

 

1)      Non-accountability:

It is like if a child when given too many benefits it gets spoiled.

The same is the case with cooperatives in India. The government gave too many benefits to cooperatives like reservation of items extra benefits like finance facilities so also it was also provided with other support this was a good thing to do, but then there was no further accountability which led to these cooperatives becoming more and more lethargic. Besides as there was no competition they became more and more costly they were not at all efficient and the worst part was that the government allowed them to function like this and pass on the burden of costs to consumers.

 

2)      Vested interest of some people:

A lot of times people who are in position in control of cooperatives are actually people who have joined cooperatives for personal gains. One of the major problems this causes is conflicting of personal interests with the interest of the cooperatives now this affects the performance of the cooperatives in a negative way.

 

3)      Lack of coordination:

Generally what happens in cooperatives is that different cooperatives at different level don’t coordinate this makes the work of cooperatives difficult. Coordination is the key to success of any organization. The best example for this is AMUL which works best because of coordination

 

4)The Internal Free Rider Problem:

This problem arises when:

a) New members who provide very little capital enjoy the same benefits as long-standing or founding members who have major investments in the cooperative in fixed assets (plant, machinery, equipment) and working capital;

 

b) When the patronage of new members does not make the cooperative much more efficient or competitive by producing significant economies of scale. New members get a “free ride” on the investments and other efforts of existing members, thereby diluting the returns to existing members. In this situation, new members do not have much incentive to provide capital because it will not appreciate in value and existing members have little incentive to provide capital that will disproportionately benefit new members.

 

5)      Quality more than Quantity:

This is another major problem faced by different cooperatives who go in for quantity this causes a major problem because they think it’s a quick way to earn money so this basically affects the productivity.

 

6)      No Balanced Growth:

The cooperatives in northeast areas and in areas like West Bengal, Bihar, Orissa are not as well developed as the ones in Maharashtra and the ones in Gujarat. There is a lot of friction due to competition between different states, this friction affects the working of cooperatives.

 

 

7)      Political Interference:

Now this is the biggest problem faced by Sugar cooperatives in Maharashtra. The Politicians use the sugar coops as if they are their personal property and also they use it to their political advantage. This is the biggest problem of cooperatives as they use them to increase their vote bank. They also get their own favorites on the boards of such boards so they are on control these cooperatives.

 

Example:

GTB adds to the muddle created by co-op banks
The virtual collapse of the Global Trust Bank (GTB) has once again eroded depositor confidence in the banking system, already hit by several scams involving cooperative banks during 2002-04.

While many of the cooperative banks are on the road to recovery, some continue to struggle. Financial irregularities, mismanagement and involvement in the Rs. 252 crore- government securities scam led to the supercession of the boards of directors of over 17 co-operative banks in the state after February 2002.

This scam, which rocked the co-operative banking sector, involved the payment of money by co-operative banks to brokers like Home Trade and Giltedge Shares for investment in government securities.

While the brokers accepted the money, the banks failed to get physical possession of the securities.

Boards of directors of Nagpur (Rs 150 crore), Wardha (Rs 25 crore) and Osmanabad ( Rs 30 crore) district central co-operative banks were superseded, along with Sri Sadguru Jangli Maharaj (Rs 27 crore), Pavna (Rs 59.22 lakh), Suvarnayug (Rs 5.65 crore), Amravati People’s (Rs 9.5 crore) and Raghuvanshi (Rs 8 crore) co-operative banks due to the securities scam.

 

According to co-operation department officials, the Reserve Bank of India (RBI) has given the green signal for holding elections in the Pavna co-operative bank. The bank achieved a first of sort in recovery, when it recovered Rs 59.22 lakh from Harischandra Gat & Co for investing in IDBI bonds.

 

“The bank has now become stronger and made a profit of Rs 1.13 crore in the year-ended March 31, 2004. It’s net non-performing assets (NPAs) are now zero,” officials said.

The Jangli Maharaj bank has succeeded in reducing its loss from Rs 45 crore to Rs 15 crore as of March 2004.

“The People’s co-operative bank and Suvarnayug bank have done well but Rupee, Agrasen and Citizens’ co-operative banks are struggling, though further decline has been arrested,” officials said.

Another bank which faced supersession of board of directors in 2003 was the Jaihind co-operative bank. The RBI cancelled the licence of Adinath co-operative bank and a liquidator appointed.

 

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