Bittersweet pillhttps://indianexpress.com/article/opinion/editorials/bittersweet-pill/

Bittersweet pill

Sugar cooperatives are in decline, but the producer-owned enterprise is not a failed idea

There isn’t much to mourn in the fact that private mills  today are producing almost 30 per cent of Maharashtra’s sugar, and that this share could well cross the 50 per cent mark in the next couple of years. The marginalisation of cooperatives —  which accounted for 95 per cent or more of the state’s sugar output in the early 2000s — parallels a trend seen in dairying as well. Till the onset of liberalisation, India hardly had any large organised private dairies, barring the odd Nestle or Milkfood. But now, there are 20 or more players handling at least 5 lakh litres each of milk per day. In fact, the organised private sector’s share in the country’s milk procurement probably exceeds that of cooperatives — something unimaginable during the heyday of Operation Flood. The breaching of Maharashtra’s cooperative bastion, extending from sugar mills to banks, seems only part of a larger process.

The driving force here is competition unleashed by the de-licensing of the dairy and sugar industries in the 1990s, coupled with the gradual withdrawal of state support to cooperatives. The new capacities created in the private sector owe largely to the strength of risk capital and entrepreneurial initiative, sans  subsidies, equity participation or loan guarantees from governments. Competition has meant that only the  better-run cooperatives, with professional managements insulated from political pressures — the likes of Amul and the Indian Farmers Fertiliser Cooperative (IFFCO) —  have seen their business grow. Others have fallen or are increasingly falling by the wayside. And that isn’t a bad thing at all.

Cooperatives ultimately are businesses whose raison d’être lies in servicing the interests of its members, whether they are sugarcane growers or dairy farmers. So long as they are efficiently processing and marketing the produce supplied by their members to guarantee the best possible price, these organisations have relevance even in a modern, globalised economy. The fact that the world’s largest dairy products exporter, New Zealand’s Fonterra, is a cooperative, just as Amul is, probably suggests that agro-processing lends itself naturally to producer-owned, as opposed to investor-owned, business ventures. But as worldwide experience shows, these organisations do well only when they are allowed to operate free of political and bureaucratic interference. India is perhaps among the few countries where we still have separate departments and registrars for cooperatives. Most cooperatives, including those in Maharashtra, have served mainly as vehicles for dispensing political patronage and siphoning off public funds. That is certainly not what they were originally intended to be.