On July 6, the Indian government came out with the announcement of a separate Ministry of Cooperation with the avowed aim of realising the vision of "Sahkar se Samriddhi" ("Progress Through Cooperation"). The creation of the new ministry, a fulfilment of the announcement made during the budget presentation in February this year, came a day before Prime Minister Narendra Modi undertook his mega expansion and reshuffle of his council of ministers, and promptly came under the charge of Home Minister Amit Shah, Modi's trusted aide.

According to the official statement, the Ministry of Cooperation will provide a separate administrative, legal and policy framework for strengthening the cooperative movement in the country and help deepen co-operatives as a "true people-based movement reaching up to the grassroots." Spelling out the rationale behind the creation of the new ministry, it said a cooperative based economic development model is very relevant for India, where each member works with a spirit of responsibility. The ministry will work to streamline processes for ease of doing business for cooperatives and enable the development of multi-state co-operatives.

The history of cooperatives in India goes back more than a century. What makes them still relevant is their reach right down to the grassroots and their ability to serve the population (mainly in rural areas) who find it difficult to access commercial banks for their credit needs. The Ministry of Statistics and Programme Implementation says cooperatives are of immense significance for 65 percent of India's population who depend on agriculture and related activities.

The strength of unity is at the very base of cooperatives, whether it comes to collective bargaining for prices of products or financial requirements. Various kinds of cooperatives in India include cooperative banks, cooperative credit societies, and consumers' and producers' cooperative societies. The producers' cooperative societies protect the interest of small producers by enabling access to raw materials and equipment while consumers' cooperatives procure goods directly from the growers or manufacturers and reach consumers by doing away with middlemen. Among the biggest success stories of the cooperatives in India is Amul, that has developed itself out of the Gujarat Cooperative Milk Marketing Federation, owned by 3.6 million milk producers and formed by dairy farmers who find it difficult to sell their products individually. According to the annual report of the National Dairy Development Board for 2020-21, India has 194,195 societies in the dairy sector and, according to The Indian Express, 35 percent of India's sugar comes from cooperative sugar mills. Big money is involved in cooperative banks in rural and urban areas.

Cooperatives may be a sound economic development model but behind good economics lies good politics. The same is true as far as the cooperation ministry is concerned. Earlier, the Cooperation department was under the Ministry of Agriculture. So, will a separate ministry for cooperatives help the cooperatives?

The cooperative movement in India flourishes mainly in a handful of states like Maharashtra (the most industrialised state), Gujarat and Karnataka. The cooperatives in these states have a great say in controlling their respective economies. Hence, the political significance of cooperatives. Electorally, Maharashtra, with 48 Lok Sabha seats, is the second most important state of India after Uttar Pradesh, where 80 seats are up for grabs in general elections.

Opinions are divided as to whether cooperatives are on the Concurrent list of the Indian Constitution—which means both the federal and state governments can have control over them—or if they exist only in the domain of state governments. This creates an area of potential turf war between the parties that are in power at the centre and those ruling the states. The opposition parties, which let no opportunity go by to accuse the central government of concentrating powers in its hands and demand more autonomy for states, have frowned upon the new ministry and questioned the motive behind creating it.

The Congress, CPI(M), and CPI General Secretary Sitaram Yechury fired the first salvo at the new cooperation ministry, alleging it would further erode the space of states in running the cooperatives in a cooperative federal system of India. However, a number of cooperative societies spanning the banking and dairy sectors welcomed the setting up of the new Ministry for Cooperation, saying it would get a new lease of life and more financial muscle. The opposition has also questioned why the home minister has been given the charge of the cooperation ministry when the cooperative sector is related to the economy. The reason why the opposition has raised the flag over Shah being given charge is that he is an old hand in politics surrounding cooperative bodies. At the age of 36 in mid-1990s, Shah defeated a close aide of the then Gujarat Chief Minister Chimanbhai Patel to be elected as the youngest president of Ahmedabad District Cooperative Bank. Shah also helped the BJP to wrest control of district cooperative banks from the Congress and to make inroads into dairy cooperatives in northern part of Gujarat, which had been the BJP's Achilles' heel.

The cooperative institutions in Gujarat and Maharashtra have been the nursery for politicians who have honed their leadership skills and built up a strong support base for their parties. Some leading instances of this at present are octogenarian Sharad Pawar, who leads the Nationalist Congress Party, his party colleague Ajit Pawar in Maharashtra, and Indian Home Minister Amit Shah in Gujarat. The leadership of the Shah and Pawar duo emerged from the cooperative sector.

Many successful politicians in Maharashtra have cut their teeth in politics by joining the cooperative movements, and have gone on to become chief ministers. It is from the cooperative bodies that state-level satraps draw their political and financial sustenance even when they are not in power, either in parliament or in state assemblies. The central government pumps funds into the cooperative bodies as working capital or equity, especially at times of funds crunch, which gives it some leverage in controlling them. On the other hand, cooperative banks at the village, district and state levels also serve as centres of considerable political and financial clout to parties holding power in states. That explains the fierce competition among political parties in Maharashtra and Gujarat for establishing their hold over the cooperatives. The political parties have also bickered over scams in cooperative banks, which have allegedly turned into hotspots for parking the unaccounted money of some of the rich and powerful.

Details regarding the areas of jurisdiction and functioning of the central Ministry of Cooperation are not yet public. It remains to be seen how these details will add up. Cooperation and competition among cooperative bodies is desirable, but it should not be a stage for confrontation.

Pallab Bhattacharya is a special correspondent of The Daily Star. He writes from New Delhi, India.