Relevance: GS-3: Indian Economy, mobilization of resources, changes in industrial policy.

Relevance: GS-2: Government policies and interventions for development in various sectors.

Key phrases: Amul, collective enterprises, SHGs, resilience, value-driven, social capital, FPOs, local community.

Why in News?

• These organisations are embedded in local communities and are driven by a common social purpose. The two years of pandemic and lockdown have been a litmus test for the businesses to assess their resilience. While there have been massive job losses, collective enterprises like cooperatives have exhibited extraordinary resilience.

What are the collective enterprises?

• Collective enterprises are value-driven, member controlled, and democratically governed enterprises. They have emerged when both the state and the market failed to meet the needs of the community. These are promoted as an ‘alternative’ to the existing systems of service delivery and often have a history of social movement behind them. Many SHG federations in India are promoted as a part of the women’s empowerment movement.
• In the case of collective enterprises, because of its member-driven approach, organisational actions are largely driven by social rationality. Social rationality implies that decisions are taken largely with purpose of building and maintaining relationships. It drives organisational action towards sustaining relationships with their target clientele.
• Collective enterprises are firmly embedded in the local community. Members are geographically close to the collective enterprise and thus get closer to the decision-making process leading to solidarity. Because of their deep embeddedness within the local environment, they can anticipate the demand of local community better. It has the knowledge of stakeholders’ demand and understand new opportunities.

How Collective Enterprises were resilient during Covid-19?

• Amul, one of the most successful cooperative brands in the world, has recorded a turnover of ₹52,000 crore in the last financial year.
• The nations, collective enterprises like federation of SHGs have diversified their operations to cope with the lockdown and bounced back. The organisational form of collective enterprises is vital for their resilience.
• The purpose of collective enterprise is to benefit its members. The members are the user of services especially in cases of cooperatives, and farmer producer organisations. Satisfying the members’ need is embedded in the functioning of collective enterprises. During the 2020 lockdown, the dairy cooperatives in Gujarat continued procuring milk from their members while there was a dip in demand for milk due the closure of commercial establishments like hotels etc.
• The concern was to address the need of members by ensuring that their milk gets into the market. Because of its member-centricity, many of the enterprises continued their functioning during lockdown despite no market being functional. Many of the federations of SHGs have organised community kitchens to help migrants returning from cities. FPOs have provided relief services and sanitisers to farmers during this period.
• This embeddedness has helped many collectives to alternate their operations to address the immediate need of members. There are instances where cooperatives offered homestay services before the lockdown altered their services and started offering Covid-stay care services to seize the opportunity and ensure regular cash flows. The homecare cooperatives supported by SEWA Ahmedabad modified their services to offer care services during the pandemic as they witnessed a huge demand for such services during the second lockdown.
• Agricultural cooperatives have arranged working capital to supply seeds to their members so that farming can continue without a break. The embeddedness of collectives in local economy helped them to design and delver additional services.
• Registrations of FPOs in Maharashtra have doubled in 2020 as compared to 2019, as farmers realised the convenience of working collectively when the market is not functional. FPOs have altered their marketing channel and connected to the customer directly instead of following the route via market.
• The responsiveness demonstrated by SHGs during the Covid-19 crisis at the community level is commendable. SHGs located in 521 districts came forward and have already manufactured over two crore face masks for distribution. SHGs are also involved in the distribution of dry rations, and provision of cooked food to the poor. Their role is being expanded to produce sanitisers, protective gear and gowns for frontline workers.

Hurdles in way of Collective Enterprises:

• Lack of access to information, training and awareness: Members of Collective Enterprises typically come from very poor and less educated or illiterate background. Hence they remain unaware of various government and non — government schemes and aids. Secondly they need skill and employability training, training for financial and business management and awareness of their rights, responsibilities, needs and potential of growth and prosperity.
• In some rural as well as urban sectors, gender inequality and restricting, unproductive conventions hamper in the entrepreneurial efforts, especially in the case of women entrepreneurs. Collective Enterprises are mostly formed by women from lower-income groups.
• Parochial and unrealistic government policies offering aids and supports subjecting it to divisive caste and creed phenomenon, not taking into account the actual financial status of the recipients and thus violating the very basis of Collective Enterprises — affinity, too much of hassles in documentation and procedures slow down the entrepreneurial potentials of Collective Enterprises.
• Banks and financial institutions still do not consider Collective Enterprises as viable entities for granting loans. The credit offers from banks and FIs are subject to pay-off of first phase of small amounts of loans over three to five years with no allocation of interim funds for scaling up. Banks and FIs often deny Cash Credit mode of funding to such enterprises by Collective Enterprises.
• The incidences of forming Collective Enterprises only with the idea of procuring loans and then dismantling without paying back force banks to be edgy in providing loans to SHGs.
• Many a time government funds meant for capacity building programmes for Collective Enterprises are diverted to arrange political programmes or building capacity building centres.
• Bureaucratic mismanagement or misuse of fund disbursement to appropriate vested interests also deprive Collective Enterprises in actuating their potential to develop a social enterprise.
• Political ownership and interference also disturbs the very essence of democratic structure and functioning of Collective Enterprises, limiting their capacity to start a social enterprise.

Way forward:

• Collective Enterprises are untapped powerhouse of economy and highly potential vehicles to deliver social good. Hence more capacity building exercise and efficient utilisation of funds towards developing social enterprises in the fields of education, health, sanitation, environment and employment generation through Collective Enterprises should be considered by new social entrepreneurs.

Source: The Hindu BL

Mains Question:

Q. “Collective Enterprises are untapped powerhouse of economy and highly potential vehicles to deliver social good”. Critically analyse the Statement.