Cooperatives of India: 47.05% of India’s societies defunct, under liquidation or in loss

Story so far: The dire financial crisis India’s cooperative societies are in was on full display on March 10 when Centre informed Lok Sabha that of the 8.48 lakh societies, 2.11 lakh are in loss, 1.41 lakh non-functional and 47,688 under liquidation. The profit/loss data is not available for 99,325 cooperative societies, stated Union Cooperatives Minister Amit Shah in a written reply. Only 3.49 lakh cooperatives are in profit.

Uttar Pradesh—one of the largest States—has the highest percentage of defunct societies at 41.8% (16,997), followed by Madhya Pradesh with 34.4% (18,545), Rajasthan with 31.8% (13,357), Andhra Pradesh with 30.1% (5475) and West Bengal with 27.8% (8,930). The condition of smaller States is even worse—Nagaland (72.7%), Delhi (67.1%), Sikkim (55.3%), Manipur (52%) and Chandigarh (46.4%). 

In contrast, Maharashtra, which has the highest number of cooperatives (2.26 lakh), has the lowest share of defunct societies (2,739 or 1.21%). A similar pattern emerges in Gujarat, where 6,272 of 86,519 societies (7.25%) are defunct, followed by Karnataka (7.54%) and Haryana (8.23%).

Among the top ten States with the highest number of cooperatives, southern and western States–Maharashtra, Gujarat, Tamil Nadu, Karnataka and Telangana have managed to keep most of their societies afloat. However, West Bengal and the Hindi Belt—U.P., Madhya Pradesh, Rajasthan—have at least 25% of their societies defunct.

Functional cooperatives in loss, liquidation 

The status of the functional cooperatives is also dire. On average, 31.75% of the cooperatives in the above-mentioned States are in loss. Underperformers include Telangana (47.22%), Madhya Pradesh (38%), Haryana (41%) and Tamil Nadu (35.3%), while Maharashtra stands on the borderline (31.14%). States like Gujarat (20.02%), Karnataka (25.9%), Uttar Pradesh (28.98%) and Rajasthan (23.53%) fare better. 

Apart from those in loss, 47,688 societies are under liquidation. The five States with the largest number of cooperatives—Maharashtra (2,25,986), Gujarat (86,519), Telangana (60,858), Karnataka (46,969) and Madhya Pradesh (53,965)—amount to 44,561 (93.44%) of societies under liquidation. 

Though the West and Southern States have managed to keep more societies afloat, the data clearly indicates that most of them are either in loss, under liquidation, or data about their profit/loss status is not available. On the other hand, West Bengal and the Hindi Belt have managed to keep more societies in profit than in loss. 

Why are cooperatives performing badly in these States?

A breakdown of the top five States—Maharashtra, Gujarat, Telangana, Karnataka and Madhya Pradesh points to five sectors bringing down their performances—Dairy, Housing, Credit & Thrift, Labour and Women Welfare. 

Here’s a look at how the numbers stack and what ails them. 

Dairy

One of the worst-hit sectors is dairy cooperatives. Defined as a voluntary group of dairy farmers to collectively procure, process, and market milk and its products, 14,251 dairy cooperative societies (DCS) in the five States are either non-functional or under liquidation. In Madhya Pradesh, of 53,965 societies, 2,793 are non-functional, and 3,952 are under liquidation, while Maharashtra and Gujarat, which have the highest number of dairy cooperatives, are performing better—396 and 271 societies respectively are non-functional or under liquidation. 

The dairy sector acts as a financial buffer for farmers during crop failures, droughts, floods, and market volatility due to its steady income, according to the National Bank for Agriculture and Rural Development (Nabard). However, in the post-COVID period (2022-23), the dairy industry faced tough times due to the unreasonable fall in milk prices, which did not cover farmers’ production costs. Since then, with renewed farmer engagement and sustainable fodder programmes, the milk production surged by 25% in the October 2024-March 2025 period, according to a report by financial services firm Systematix. But unseasonal rains, geopolitical disturbances in Asia, and robust festive demand have led to rising milk procurement costs, eating into the cooperatives’ surplus inventory. 

The Centre has urged cooperatives to ensure 100% circularity and sustainability in the dairy sector by using skin and bones of cattle apart from dung, adding to income of farmers.

Housing

Maharashtra and Gujarat top the list of non-functional or under-liquidation housing cooperatives, with 2,102 and 2,457 societies out of a total of 8,033 defunct or liquidating housing cooperatives. Housing cooperatives are a democratically controlled, legally incorporated group constituted to meet members’ housing needs and improve living conditions. With a higher concentration of housing cooperatives in urban areas, societies in Maharashtra, Gujarat and Telangana are facing a financial crunch mainly due to depositors losing money by investing in scam-hit cooperative banks like PMC, New India and Mumbai Bank, among others. 

Other issues plaguing the housing cooperatives are non-payment of maintenance charges by members, mismanagement of funds by committees and long-drawn redevelopment processes.  

Credit & Thrift 

Credit and Thrift societies are member-owned financial cooperatives which promote the savings, credit, and insurance needs of their voluntary members. The terms and conditions of mutual aid are decided by the members themselves. Gujarat, Telangana and Madhya Pradesh have the highest number of non-functional Credit & Thrift societies, contributing to 4,128 of 4,898 such cooperatives. In Maharashtra and Madhya Pradesh, 1,452 and 1,424 housing cooperatives are under liquidation. 

A majority of such societies are smaller ones with reserves less than ₹ 1 lakh and are not directly inspected by the Reserve Bank of India (RBI). Due to a lack of oversight, the lending and interest rates are set by these societies and often do not compensate. High-cost borrowers are offered high interest rates, putting such societies under severe stress. Scam-hit cooperative banks and mismanagement of credit unions have also compounded these societies’ issues. 

Labour

A worker-owned, democratically run cooperative is a labour society which helps workers in unorganised sectors seek fair wages, secure contracts, and make profits through work. Except for Telangana, labour cooperatives in the five States constitute a very small chunk of the non-functional societies. In Telangana, 2,134 labour societies are non-functional while 185 are under liquidation.

Successful labour cooperatives like the Indian Coffee House, the Mahila Griha Udyog Lijjat Papad and the Mumbai Tiffin Box Suppliers Trust (Mumbai Dabbawala) have made history by not just adapting, but retaining their customers and providing better services than commercial competitors. However, in Telangana, reports show that many cooperatives involved in construction have been driven to bankruptcy. One such example is Eturu Grama Prajala Isuka Quarry Labour Contract Cooperative Society Limited, which was slapped with a ₹3.4 crore GST liability after third-party sand miners excavated sand worth ₹24.5 crore but paid a small amount to the cooperative itself. 

Women’s welfare

Managed by women to improve their socio-economic status, the cooperatives help women with job opportunities, easy-access loans, capital, and lines of credit. Across States, women cooperatives are functioning well, except in Madhya Pradesh, where 8,495 such societies have become defunct. Ranking second, 562 women cooperatives in Telangana have become non-functional. 

According to a study, limited access to formal finances, lack of exposure to business networks, mobility restrictions and social inhibitions had severely clipped the progress of women entrepreneurs who were part of such cooperatives in Madhya Pradesh. The study states that while 60% of the women were aware of government schemes aiding them, only 25% benefited from them and relied mainly on self-help groups (SHGs) as a primary source of capital. Lack of support at home had also added to the stress 80% of these women faced while juggling work, household responsibilities and child-care.

What is the road ahead?

With the rollout of the National Cooperation Policy, 2025, the Centre has shown intent to strengthen the cooperative system. Aiming to connect 50 crore people with the sector, Mr. Shah has said that Dalits, Adivasis and women are at the core of the new policy. The Centre has already kicked off cooperatives in taxi services (Bharat Taxi) and plans to expand to insurance and green energy shortly. 

Critics, like farm union Samyukt Kisan Morcha has stated that the new policy is aimed at making cooperatives serve corporate interests and centralised power with the Union government rather than the States. It stated that the policy provided the Rashtriya Swayamsevak Sangh (RSS) and the BJP more control at grassroot-levels rather than helping societies.