Credit crunch: State asks coop societies to set apart 20% profit

By TheHindu on 25 Aug 2017

Faced with acute shortage of credit and pressure to shore up revenues, the Maharashtra government on Thursday declared that all cooperative societies would have to contribute 20% of their annual profit to “public purposes and strengthening smaller societies”.

The government, however, clarified that cooperative housing societies have been exempted from the tax, which will be levied only on commercial and non-commercial societies governed by the State Cooperatives Act, 1960. The societies will be given the option of contributing the amount or spending it on their own on social causes.

The money spent will have to be audited by a certified accountant and the certificate should be submitted to the charity commissioner. Senior government officials said the revenue generated would be spent on fields such as environment, health, education, agriculture, sports and women’s empowerment.

The government has made it mandatory that the amount will not be spent on religious purposes and promotion of leaders of religious sects. The fund also cannot be used to promote electoral activities while the code of conduct is in force.

Anil Choudhary, Section Officer, Co-operation, Marketing and Textiles Department, said, “The cooperative societies are free to contribute their profit to causes such as construction of canals, toilets and local government offices; supporting government projects like Jal Yukta Shivar; planting trees; maintaining sports complexes and stadiums; providing skill training to women and supporting women’s groups.”

Right to Information activist Anil Galgali has called on the government to ensure transparency and accountability in the exercise. He said, “The initiative should be free of corruption. The government must make every penny is spent for its intended purpose. The benefits of many State-supported schemes never reach the poor and needy.”

Officials said the government decided to levy the tax as the financial crunch had placed cooperative infrastructure in sectors such as textile and social development under stress. A senior official of the Co-operation, Marketing and Textiles Department said, “Of the seven fundamental principles of the cooperatives movement, an important one was the development of all. On the basis of this principle, it is binding on strong co-operative societies to support weaker bodies in need.”

The orders have been issued under Section 69 of the Maharashtra Cooperatives Act, 1960, which makes it binding on profitable cooperatives to not only support weak cooperatives but also contribute towards development of society.