Firm grip of a few led to malpractices in co-ops: FM

KATHMANDU, MAR 27 -

Finance Minister Ram Sharan Mahat said a firm grip of a few promoters on operations of cooperatives has resulted in malpractices in the sector.

He said general members are usually ignored as a few promoters exercise autocratic power, which pushed many cooperatives into trouble.

Cooperatives are based on the norm of incorporating the people with same economic status, particularly low-income people, who are brought together by common objectives.

“But cooperatives have become big money businesses for a few people with intentions to amass wealth at the cost of others,” said Mahat, on the second day of the National Cooperative Congress.

An investigation into troubled cooperatives carried out by the Department of Cooperatives showed the institutions were run like family businesses, installing the entire family members on the board. It was found interest-free loans were disbursed in the name of family members and relatives by board members.

Some cooperatives grew so big that are more than 500 savings and credit cooperatives have an annual transaction of over Rs 500 million. Two of the biggest cooperatives—Oriental and Guna—landed in trouble due to massive lending realty projects undertaken by the promoters.

Depositors are struggling to recover Rs 9 billion from 130 troubled cooperatives, according to a high-level commission formed to recover the amount.

Mahat said the sector was muddled after some influential class started to run cooperatives as family business. “Cooperatives have to be run under ‘one person-one vote’ principle and ‘one for all and all for one’ in order to prevent growing anomalies,” he said.

Praising the role of cooperatives in reducing rural poverty even during the insurgency, Mahat said the sector’s role has become even more crucial in the new political development. “It is also important to make consumers and producers free from exploitation of the middlemen.”

Almost all the cooperatives operating in rural areas have been waived off income tax. However, savings and credit cooperatives in urban areas need to pay 10 percent income tax, which is just half of the rate that banks pay. “However, a number of them are not paying even the subsidised tax,” said Mahat, indicating the government would give a last chance to the cooperatives to clear the dues of face action.

There are more than 29,000 cooperatives in the country. The number jumped mainly in the last two decades. Lal Mani Joshi, secretary at the Ministry of Cooperatives and Poverty Alleviation, said the ministry would now focus on regulating the cooperatives to ensure better self regulation.

Dame Paulin Green, president of the International Cooperative Alliance, said cooperatives should not be the ones that solve all the problems. “The time has come to rethink on a way forward than just sticking to the traditional business.”

Source: The Kathmandu Post