Co-ops at Crossroads

The cooperative movement must shed its outdated self-image and embrace the transparency and rigour of the market lest it risks becoming obsolete.

On July 5, the world marked International Cooperative Day with modest fanfare. 2025 has been designated by the United Nations as the International Year of Cooperatives, a moment meant to spotlight a century-old experiment in collective ownership and mutual benefit. Yet in India, especially in Maharashtra where cooperatives once defined rural economic architecture, the mood is far from celebratory. Bankrupt sugar mills and failed cooperative banks cast a long shadow. The question is no longer whether cooperatives made sense in the past (they clearly did) but whether they still make sense today.

The original vision behind the cooperative movement was noble and practical. In the early decades after independence, the private sector was weak, the state was omnipresent and capital was scarce. Investing in private enterprise was rare, sometimes even frowned upon. Against this backdrop, cooperatives emerged as an ideal middle path - a space where citizens could pool small resources without feeling they were compromising their values or feeding the profit motive. Sugar mills, agricultural credit societies and cooperative banks were built on the idea of democratic ownership and mutual gain.

But that was a different India - one defined by the ‘license-permit-raj,’ socialist ideals and a deep suspicion of private enterprise. Few Indians had access to mechanisms like equity markets, and fewer still trusted them. The stock market was an elite ‘satta bazaar’, not a viable platform for everyday investment.

Then came 1991. Globalisation, liberalisation and the arrival of the private sector in full force fundamentally altered the Indian economy. Suddenly, ordinary citizens had access to equity markets. Despite early setbacks like the Harshad Mehta scam, regulatory institutions such as SEBI were born, making the financial system far more transparent, disciplined and inclusive.

And that’s when the contrast between cooperatives and companies began to blur. On paper, cooperatives are ‘member-owned’ and geared towards mutual welfare, while companies are shareholder-driven and profit-oriented. But in practice, both are entities that sell goods and services in the open market. Whether it’s a cooperative dairy or a private one, both must compete for customers, cut costs, manage profits and deliver returns to their stakeholders.

The supposed distinction between the two - one moral, the other mercenary - is now untenable. Both operate in the same ecosystem and pursue similar goals. The only real difference lies in ownership structure: cooperatives have closed membership, while companies allow shares to be traded freely. That, however, is an increasingly irrelevant distinction in a modern, competitive economy.

More worrying is how cooperatives often enjoy regulatory leniency not afforded to private players. Take the example of cooperative banks. Though they function much like commercial banks, they fall under the governance of NABARD rather than the Reserve Bank of India, resulting in a diluted regulatory grip. Dual regulation has meant accountability falls through the cracks. In urban India, cooperative housing societies face exactly the opposite problem - crippled by convoluted rules, land ownership issues and bureaucratic inertia.

The real problem is this: cooperatives today occupy a confusing no-man’s land. They are not government institutions bound by the transparency and responsibility of public service. Nor are they corporate entities forced to meet the unforgiving demands of the market. They are something in between - an identity that breeds opacity, inefficiency and in too many cases, outright malpractice.

The fallout is visible. Dozens of cooperative sugar mills in Maharashtra are defunct. Several cooperative banks are either distressed or bankrupt, having swallowed the savings of unsuspecting depositors. A small nexus of politically connected individuals, often with dynastic roots, run these institutions like personal fiefdoms.

To understand how outdated the co-op model has become, consider the ideological shifts in the broader political economy. Leftist regimes like China and Vietnam now woo global capital with open arms, while capitalist icons like Warren Buffett and Bill Gates pledge their fortunes to philanthropy. Many for-profit companies actively engage in Corporate Social Responsibility (CSR) and adopt governance models rooted in trusteeship. The old binaries of for-profit versus not-for-profit or right versus left no longer hold.

The cooperative movement must take note. Its institutions cannot demand special status based on ideals forged in another century. If a cooperative runs a bank or a dairy or a mill in the open market, it should be subject to the same standards of regulation, accountability, and transparency as a private firm in the same field.

What we need is not the dismantling of the cooperative model, but its modernisation. The principles of collective ownership and decentralised participation remain attractive only if they’re paired with clear governance frameworks and legal parity with private counterparts. Cooperatives should no longer be allowed to operate in a regulatory grey zone simply because they once served a noble purpose.

India has an opportunity to lead by example. But the country must use this moment to rethink what cooperatives are, what they aren’t and what they need to become.

They must ask themselves a hard question: are they institutions of public service, or players in a competitive economy? If the answer is both, then they must accept both the responsibilities of public scrutiny and the disciplines of the market.

(The writer works in the Information Technology sector. Views personal.)