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Cooperatives in Maharashtra: Challenges Ahead

As the leading state in the field, Maharashtra has witnessed the rise and stagnation of cooperatives and gathered much experience on the way. The state administration must now learn to be a facilitator rather than a controller.

Cooperatives in Maharashtra:Challenges Ahead

As the leading state in the field, Maharashtra has witnessed the rise and stagnation of cooperatives and gathered much experience on the way. The state administration must now learn to be a facilitator rather than a controller.


aharashtra is recognised as one of the leading states in India in the field of cooperation. The two decades between 1960 and 1980 are considered to be the golden age of the state’s cooperative movement. The first ever-successful sugar cooperative in India was set up in 1951-52 in Ahmednagar district with the initiative of V E Vikhe Patil and D R Gadgil. Four years later, the second cooperative sugar factory came up with the efforts of Ganpatrao Autade at Kolpewadi near Kopargaon in the same district. A dozen such factories came up in 1959-60 and in a short period thereafter a large number of them emerged all over the state. By 1980, their number crossed 100, and by 1988, Maharashtra overtook Uttar Pradesh as the largest sugar producing state in the country.

Thanks to their success a vast network of cooperatives in several related fields emerged in the vicinity of sugar cooperatives: cooperative spinning mills, cooperative poultries, cooperative dairies, other agricultural processing cooperatives, cooperative sale and purchase unions, similar other cooperative enterprises, cooperative credit societies, and cooperative banks.

New Centres of Power

In the Maharashtra of that period there were three important centres of power: panchayati raj institutions, cooperative organisations, and the Congress Party. Those aspiring to be MLAs, MPs or ministers had to work this route to get ahead. The struggle for power in all power structures from the village panchayat to the state assembly, and from the rural credit society to the sugar factories and district banks, was confined mostly to Congressmen. As a result, there used to be at least two rival factions among Congressmen at every level. Since the other parties were weak, the internal rivalry among Congressmen did not cause any serious damage to the party. In fact the party high command cleverly used the existing factionalism to contain the power struggle within the party.

Marathas occupied important positions in the panchayats, cooperatives, Congress Party and the state legislature and were the largest single caste group in the state. The minority castes such as the malis, dhangars and vanjaris could enjoy a limited scope in acquiring positions of power. As a consolation they would be offered the vice-chairmanship of a sugar factory or a secondary position in the zilla parishad. The minority caste leaders resented this, but had to suffer the humiliation in silence. One of the important reasons behind Y B Chavan’s grip over Maharashtra politics was that he was a maratha, and this strengthened his position in the power-play in Delhi.

Such outstanding leaders as V E Vikhe Patil, D R Gadgil, Tatyasaheb Kore, Ratnappa Kumbhar, Vasantdada Patil, Annasaheb Shinde, Yashwantrao Mohite, Shankarrao Mohite Patil, Shankarrao Kale and Shankarrao Kolhe emerged in the cooperative field in the state during this period. They made the cooperatives in their respective areas self-reliant, economically strong, and shining examples of successful enterprises. No wonder this was called the golden age of cooperatives.

Rise of Corruption

There are many reasons for the decline of these cooperatives during the 1980s and 1990s. It is not easy to determine if the Congress Party lost its grip over cooperatives because it became weaker as a party, or it became weaker as a party because it lost control over cooperatives.

After Indira Gandhi took over the reins as prime minister she started dismantling

Economic and Political Weekly October 20, 2007 the well-established party structure in order to concentrate power in her hands. She did not relish the dominance of cooperative sugar barons, as they were often called in Maharashtra, and Y B Chavan’s hold over them. She started encouraging Shankarrao Chavan another maratha, against Y B Chavan. Her dual objective was to reduce the power of sugar barons and of their leader Y B Chavan. During the period of her son Sanjay Gandhi’s ascendancy, leaders without any mass base, such as Babasaheb Bhosale and A R Antulay were made state chief ministers, thus sidelining the once powerful cooperative lobby.

In addition to changes in leadership, two events in this period seem to have led to the decline of cooperatives. Firstly, in the general elections of 1977, Indira Gandhi and her party were defeated and the Janata Party government-led by Morarji Desai came to power. The new government decided in favour of total decontrol of sugar, which brought about a dramatic fall in prices and sugar sold as cheap as Rs 2.5 per kg. The collapse of the sugar market adversely affected sowing of cane and production of sugar thus resulting in severe shortage the following year. The central government imposed a ceiling on sugar prices with a view to controlling inflation. With the scarcity of sugar in the market, and its demand far exceeding supply, the traders started offering “on money” to sugar factory owners. On money was the amount paid to the manufacturer over and above the price fixed by the government and thus a kind of black market emerged in the sugar industry.

At first the sugar barons were uncertain about the best way of handling the sudden spurt of money flow. Some cooperative leaders decided to adopt a transparent policy to avoid allegations of corruption. A large number of sugar cooperatives called meetings of their boards of directors to discuss the issue of on money. Some went to the extent of discussing the matter in the general body meetings. Resolutions were passed to keep the on money separately and to use it for development of the surrounding area. As a lot of money was spent on the frequently held elections in the area, some leaders decided to utilise the sudden windfall for various election campaigns. In the end the sceptics proved to be right. The leaders pocketed all such money. Since all such transactions were illegal, there were no receipts, accounts and audit of the vast funds collected.

The second important event was the appointment of A R Antulay as chief minister of Maharashtra in 1980 due to the pressure exerted by Sanjay Gandhi. The main aim of this move was to sideline the powerful maratha leaders of the cooperatives lobby. Antulay had nothing to do with cooperatives, nor did he have a popular support base among the masses. With a view to please Indira Gandhi and to proclaim his loyalty and devotion to her, he set up the Indira Gandhi Pratibha Pratishthan (Indira Gandhi Talent Foundation). He pressurised cooperative sugar factories and other cooperatives to donate to the foundation. In fact, he assig ned a quota of donations from all the big cooperatives and compelled traders in

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    Economic and Political Weekly October 20, 2007

    controlled commodities such as steel and cement to donate generously for the foundation.

    The cooperative leaders of Maharashtra learnt an important lesson from Antulay and following his example set up educational trusts and foundations in their own areas and compelled the sugar factory members to “donate”. However, they cleverly kept these trusts legally separate from the cooperatives. They appointed themselves and their family members as life-long trustees and thus ensured that the trusts remained under their control even if they lost control over the sugar cooperatives or allied organisations. In this way, trusts controlling crores of rupees came into existence all over Maharashtra. Corruption in this manner became an open and integral feature of cooperatives in Maharashtra with the silent approval of all concerned.

    With the money collected from ordinary members of cooperatives, the leaders set up big educational enterprises. They charged heavy capitation fees for admission to their engineering, medical, computer and management colleges. Yesterday’s ‘sahakar maharshis’ (cooperative bosses) thus transformed themselves into ‘shikshan maharshis’ (education barons). All transactions were “under-the-table” and without any receipts and audit, there was no record of the capitation fees.

    Rise of Dynasties

    Dynastic rule has been a common feature in sugar factories and other prominent cooperatives in the state for the last two decades. In the pioneering sugar factory at Pravaranagar, admired as a pilgrim centre of ideal cooperation, founder V E Vikhe Patil was succeeded by his son Balasaheb who in turn installed his son Radhakrishna as the chairman of this “model” sugar cooperative, thus retaining the cooperative under family control continuously for three generations. The same history was repeated at Warananagar in Kolhapur district, another hallowed place for cooperators in Maharashtra. After its founder Tatyasaheb Kore died, his son took over as chairman, and now the grandson Vinay is in charge. At the Vasantdada sugar factory in Sangli and the Rajarambapu sugar factory in Walva, the sons of their founders, Prakashbapu and Jayantrao respectively, succeeded as chairmen. At the prominent sugar factories of Kopargaon and Sanjivani in Ahmednagar district powerful leaders Shankarrao Kale and Shankarrao Kolhe have taken care to install their sons as chairmen. The long-standing political rivalry between Kale and Kolhe continues: their sons contested against one another in the October 2004 assembly elections in Kopargaon constituency. The loser, Bipin Kolhe was the official candidate of the Nationalist Congress Party (NCP) while the winner Ashok Kale was in the Shiv Sena camp. At Karad, another big cooperative complex in Satara district, two brothers, Yashwantrao Mohite and Jayantrao Bhosale, have been fighting for power against one another for the last two decades, thus restricting the power struggle within one family.

    With the advent of globalisation, the cooperatives are facing new challenges. The trend of privatisation has also adversely affected them. Not many cooperative leaders seem to be fully aware of the implications of these wider changes.

    Deteriorating Financial Situation

    According to a report, there were in all 30 district central cooperative banks in Maharashtra in 2000, one for each district. Only 15 of these banks made a profit worth Rs 88.19 crore, while the rest incurred a loss of Rs 386.79 crore [Sahakari Maharashtra 2000]. Uncontrolled corruption is the main cause of losses suffered by these banks. Sixty-four directors of Nagpur, Wardha and Osmanabad district central cooperative banks and 65 directors of four urban cooperative banks together misappropriated government bonds worth Rs 250 crore. The state government has confiscated the personal property worth Rs 22.89 crore of these 129 directors [The Link 2002].

    A large number of the cooperative sugar factories are sick. The chief minister stated publicly in 2003 that 52 of the 110 working sugar factories were sick, and also declared that no permission for new cooperative sugar factories will be given unless there is improvement in the financial condition of the state[Cooperative Sugar Press News 2003]. The situation deteriorated in the following years. During 2004-05, of the total of 190 cooperative sugar factories in the state, only 70 had revenues exceeding costs, 26 might be salvageable, but 17 were truly sick and 77 had closed down. (These figures are derived from various official and unofficial reports.) Seventeen sugar cooperatives in the state owed to the banks dues (with interest) to the extent of Rs 157.95 crore as on March 31, 2000 [Sahakari Maharashtra 2000]. In the 1970s several loss making privately owned sugar factories were taken over by the local sugar cane growers converting them into cooperatives and running them profitably. The irony is, currently some of the loss-making sugar cooperatives have been rented out to private entrepreneurs for day-to-day operations. In spite of such miserable condition, the CM had announced a loan-cumgrant of Rs 1,500 crore in 2002 to these sick factories hoping that their health would improve.

    There are many other cooperatives which are seriously sick because of heavy debt burdens. Among the agricultural pro ce ssing cooperatives, six units owed debts (with interest) amounting to Rs 153.50 core on March 31, 2000 (ibid). Similarly 25 cooperative spinning mills had outstanding debts of Rs 295.31 crore on the same date (ibid). In Ahmednagar district alone 200 cooperative credit societies, out of 2,000, have been proclaimed bankrupt (ibid).

    Many cooperatives suffer from huge losses, misappropriation of funds, and scams of various kinds. However, what happened in the Terna sugar cooperative is shameful and shocking. This factory is chaired by Padmasinh Patil, Maharashtra’s former irrigation minister and Sharad Pawar’s close relative and trusted lieutenant. During 1999-2001 Patil mobilised shareholder-farmers of Terna and other donors in Osmanabad district to donate for various deserving causes such as Rs 10.60 lakh for the Assam Relief Fund, Rs 15.05 lakh for the Kargil war heroes and their families, Rs 10.30 lakh for the Gujarat Earthquake Fund, and Rs 16.01 lakh for the sugar complex fund. In all Rs 51.96 lakh was collected through donations, but not a single rupee was used for the purpose for which it was collected. All this money was diverted to salvage Patil’s sinking cooperative, using most of it for working expenses. At the last count, outstanding dues of this cooperative to various financial institutions amounted to nearly Rs 200 crore. Besides, permanent factory workers have not been paid regular salaries, shareholder-farmers have not received dividends, and retired workers are awaiting their dues running into lakhs. Patil also admitted that Rs 1.3 crore meant to be a grant for shareholder-farmers to

    Economic and Political Weekly October 20, 2007

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    Economic and Political Weekly October 20, 2007

    improve sugar cane yields were diverted to daily expenses [Outlook 2004].

    Ray of Hope

    There is a ray of hope though. One has to identify the positive elements in the existing situation and use these to regenerate the cooperatives. To appreciate these elements we have to place Maharashtra in the context of India.

    In 1999-2000 in the country there were 5,04,000 cooperative societies having

    20.91 crore members [Maharashtra Cooperative Quarterly 2001]. Maharashtra alone had 1,52,619 of these societies with

    4.14 crore members. This means Maharashtra alone has 30 per cent of the total cooperative societies with 20 per cent of the total members. During the same year, the share capital of cooperatives in the state amounted to Rs 4,560 crore, deposits accounted for Rs 35,311 crore, and the working capital was Rs 70,501 crore [Sahakari Maharashtra 1999]. In all the above respects, Maharashtra occupies the top position among states.

    India is the largest producer of sugar in the world since 1988, and Maharashtra is the largest sugar producing state within India. In 2001-02 India produced

    18.52 million tonnes of sugar, to which Maharashtra alone contributed 5.56 million tonnes, and all this sugar was produced in cooperative sugar factories. This should be a matter of pride for sugar cane farmers in Maharashtra [Cooperative Sugar Press News 2003]. Hutatma Ahir sugar cooperative at Walva in Sangli district is recognised as the model sugar factory in India. It occupies the first position in India in respect of the highest sugar recovery. Moreover, it has acquired fame for corruption-free and transparent administration and the highest productivity.

    India is also the largest producer of milk in the world. In 1998 India produced 74 million tonnes of milk thus reaching the world’s top position as a milk producer. It has retained that position since then [Sahakari Maharashtra 1999]. While dairy cooperatives in Gujarat are leading in this field, milk cooperatives in Maharashtra occupy the second position.

    There are over 1,500 urban cooperative banks in India. Maharashtra alone has more than 600 (i e, 40 per cent) of them. The urban cooperative banks in the country together have total deposits of Rs 40,700 crore and the banks in Maharashtra alone have Rs 23,000 crore of deposits (56 per cent of the total) [Sahakari Maharashtra 2000].

    Another example of successful cooperation is the Warana cooperative bazar located in the well known Warana coope rative agro-industrial complex in Kolhapur district. This consumer cooperative’s area of operation covers 78 villages in the Warana valley. Its annual turnover is over Rs 40 crore, which places it among the top five consumer cooperatives in the country. It is the only one of its kind in a rural area in India. It is even more remarkable that this cooperative has a woman as chairperson and its 17-member board includes as many as nine women. It has also 131 women as employees in its various departments [Maharashtra Cooperative Quarterly 2001].

    The cooperative field in Maharashtra enjoys certain special characteristics. The ideology of cooperation has penetrated in many diverse spheres of state’s social and economic life. It has 147 potters’ cooperatives, 82 leather-workers’ cooperatives, 16 cooperative hospitals, a large number of washermen’s and autorikshaw drivers’ cooperatives, cooperative student hostels, and cooperative educational societies. Such diversification and multiplication of cooperative enterprises is rarely found in other states [Sahakari Maharashtra 2000]. Even today one finds a network of vibrant cooperatives in the rural areas of Kopargaon, Pravaranagar, Warananagar, Karad, Sangli, Baramati and Akluj in Maharashtra.


    The winds of liberalisation, privatisation and globalisation are blowing all over the world. They are irreversible. However, this should not lead one to conclude that the cooperative era has ended. On the contrary, in today’s changing situation, there is a greater need for cooperation. There is cut-throat competition in trade and industry and it is only going to intensify further. Small farmers, agricultural labourers, small artisans and producers would survive and prosper only if they come together through cooperatives.

    A genuine cooperative movement must help small producers and make them stronger. It should also reduce poverty and inequality. That should be the ultimate test of success or failure of cooperation. The state will have to reorient its role vis-à-vis cooperatives. It should be a facilitator rather than a controller and manager of cooperatives. For this purpose, the cooperatives must be made free, auto nomous and self-reliant by suitably amending the cooperative laws. This is essential to liberate cooperatives from the clutches of bureaucracy and power-hungry, selfish politicians. The state should not allow proliferation of cooperative sugar factories through political pressure. The reckless expansion of sugar factories without availability of adequate irrigation and sugar cane has ruined the industry and the farmers.

    Involvement of sincere and dedicated leaders and activists is the key to the revival of genuine and successful cooperatives. This could be achieved with the help of competent non-governmental organi sations (NGOs) dedicated to the cause of cooperatives such as the Cooperative Development Foundation (CDF) in Andhra Pradesh. NGOs have not entered the field of cooperation in any significant way. If a few CDF-type NGOs enter this field, it is possible to revive and recreate the era of vibrant cooperatives.



    [This is a revised version of the paper presented at the Silver Jubilee Symposium of the Institute of Rural Management (IRMA), Anand on December 14-19, 2004. I am grateful to A M Shah for his valuable comments and suggestions on the earlier draft.]


    Cooperative Sugar Press News (2003): Vol 34,

    No 6, March 13, pp 3, 10. Maharashtra Cooperative Quarterly (2001):

    Vol LXXXIV, No 3, January-March, p 33.

    – (2001): Vol LXXXV, No 1, July-September,

    p 50. Outlook (2004): June 21, p 31. Sahakari Maharashtra (1999): November,

    p 19.

    – (2000): November, pp 79, 80.

    The Link (2002): Vol 8, No 5, September-October, p 2.

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