Cooperatives and Dairy Sector
Context:
The Union Minister for Home and Cooperation announced in Parliament that newly established cooperatives engaged in manufacturing activities will enjoy a reduced tax rate of 15%, similar to the rate available to new manufacturing firms.
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- Milk cooperatives, crucial to India’s dairy sector, are now allowed to accept cash payments exceeding ₹2 lakh on bank holidays for milk price payments.
- Typically, under Section 269 ST of the Income Tax Act, cash receipts above ₹2 lakh are prohibited and subject to penalties.
- Section 269 SS of the Income Tax Act restricts cash deposits or loan advances above ₹20,000, with penalties equal to the transaction amount for violations.
- For primary agricultural cooperatives, the limit has been raised to ₹2 lakh per member, allowing flexibility in providing financial support to members.
The Role of Cooperatives in India
- Cooperatives are member-owned grassroots enterprises that share profits and losses equally.
- With a history spanning over a century, the sector is a vital source of livelihood for millions, especially women, across industries such as dairy, fisheries, finance, housing, and agriculture.
- Prominent examples include Amul, India’s largest dairy brand, and IFFCO, the country’s leading fertilizer cooperative.
- The cooperative model also supports a vast network of urban and rural banks, emphasising its significance in India’s economic fabric.
Legal Framework
The Constitution of India: Part IXB, introduced by the 97th Amendment (2011), this part provides a constitutional status to cooperative societies, outlining their governance and regulation.
The Multi-State Cooperative Societies Act, 2002: This act governs cooperatives that operate in more than one state. It is administered by the Central Registrar of Cooperative Societies and aims to promote cooperative societies and ensure their democratic functioning.
- The Multi-State Cooperative Societies (Amendment) Bill, 2023, aims to enhance governance, transparency, and accountability in multi-state cooperatives by incorporating provisions from the 97th Constitutional Amendment.
The Cooperative Societies Act, 1912: One of the earliest acts, it provides the framework for the registration, regulation, and management of cooperative societies in India.
State Cooperative Societies Acts: Each state in India has its own cooperative societies act that governs cooperatives operating within its jurisdiction.
Dairy Sector
India’s dairy sector is the largest in the world, with significant contributions to the economy and livelihoods of millions.
- Milk Production: In 2022-23, India produced approximately 230.58 million tonnes of milk, accounting for about 22% of global production, which is more than three times that of China.
- Per Capita Availability: The per capita availability of milk in India is around 459 grams per day, which is higher than the global average.
- Major Milk-Producing States: Uttar Pradesh, Maharashtra, Himachal Pradesh, Madhya Pradesh, Punjab, Rajasthan and Tamil Nadu.
- Economic Contribution: The dairy sector contributes approximately 5% to India’s national economy and supports over 80 million farmers, primarily smallholders.
- Export Potential: India’s dairy exports reached about 63,738.47 MT valued at approximately ₹2,260.94 crores (USD 272.64 million) in 2023-24, with major destinations including the UAE, Saudi Arabia, USA, Singapore, and Bhutan.
Steps taken by Government
- National Programme for Dairy Development (NPDD): Aim to enhance the quality of milk and increase organised milk procurement, processing, and marketing.
- White Revolution 2.0: Launched in September 2024, this initiative aims to increase milk procurement by dairy cooperatives by 50% over five years.
- Animal Husbandry Infrastructure Development Fund (AHIDF): Relaunched with an increased budget of ₹29,610 crore to incentivise investments in dairy processing and value-addition infrastructure.
- Subsidy Schemes: Various subsidies are provided for purchasing milch animals, constructing dairy infrastructure, and expanding milk processing facilities.
- The Rashtriya Gokul Mission supports the genetic improvement of milch animals and promotes indigenous breeds.
- Kisan Credit Card (KCC) Scheme: Extended to dairy farmers to provide working capital loans up to ₹2 lakh, facilitating easier access to credit.
- Tax Incentives for Cooperatives: Income tax exemptions under Section 80P for primary cooperative societies supplying milk.
- Reduction in surcharges and alternate minimum tax rates for cooperative societies.
