The Political Economy of a Successful Cooperative Movement : A Kerala Experience

In the context of Beedi Industry showing negative growth, the cooperative initiated discussion on diversification in the mid-1996, and it opened up the food processing centre[r]

The Political Economy of a Successful Cooperative Movement : A Kerala Experience

Ashique Ali T, Jawaharlal Nehru University

The Political Economy of a Successful Cooperative Movement : A Kerala Experience

Ashique Ali T, Centre for Political Studies, Jawaharlal Nehru University |Working Paper

1.0 Introduction

The emergence of cooperatives as an alternative model has a clear history The formation of Rochdale Pioneers in England during 1844 is understood in the context of rising unemployment, increasing food prices, massive poverty and deteriorating working conditions during the age of industrialization It is with the birth of capitalism, one can trace the enormous acceptance and experimentation of the idea of cooperatives The Rochdale Pioneers who were participants of Chartism, a working-class movement aimed at political reform in Britain during the 19th century was disillusioned with the failed attempts of political reform ultimately settled with cooperatives as a strategy for social transformation The Indian cooperative movement inaugurated by the British colonial government to safeguard the peasantry weakened by tragic famines and debilitated condition of agriculture, from the clutches of monstrous money lenders But compared to other states in India, cooperatives in Kerala are more developed, because of the “local tradition of public action, high density of grassroots social organizations” and due to the initiatives of union and state government1 For socialists in Congress party and Communists

in Kerala, the vision about cooperatives underlined it as an instrument for social transformation.2 Even contemporary political Leaders in Kerala consider building

of socialism in an economy dominated by cooperative networks

cooperatives as an attempt to build small defensive networks to resist the ill effects of neoliberalism.3

In the context of high public action in Kerala, this paper enquires the following questions Whether the success of cooperative movements in Kerala is because of their political and social dimension? And does these political dimensions help the cooperative movement in Kerala to overcome various limitations like a) its inner contradiction while facing the competitive market b) Its self-exploitation of own labour c) low capital formation etc.?

2.0 Exploring the Case Studies

a) The Uralungal Labour Contract Cooperative Society (ULCCS)

The history of renaissance in Malabar cannot omit the name of Vagbhatananda Born into an Ezhava family in 1884 in Thalassery (Kannur), Vagbhatananda was deeply inspired by the teachings of Sree Narayana Guru, an Ezhava social reformer and Siva Yogi who was informed

by a rationalist outlook In 1917 he initiated Atma Vidhya Sangham (AVS) at Karakkad, Calicut The attempt was to popularise the notion of self-knowledge and create an organizational form for people from different castes and religion to unite on the very idea of universal brotherhood.4 He launched ruthless critique on feudal order and caste society and openly jettisoned idol worships in the temple and Brahmanical rituals As his organization Atma Vidhya Sangham was gaining currency, the agitated feudal upper-caste landlords launched a social boycott against his followers Work, the security of tenure and education was denied, and the members of Sangham faced immense hardship This was the fate of the Tiyya community in the caste society of Malabar

3 The statements of Chief Minister and Finance Minister of Kerala in,

Subin Dennis, “Book Launch- ‘Building Alternatives: The Story of India’s Oldest

Construction Workers’ Cooperative’,” Left Word, April 4, 2018,

https://blog.leftword.com/book-launch-building-alternatives-the-story-of-indias-oldest-construction-workers-cooperative/

4 Divya Kannan, “Social Reform in Twentieth Century Malabar : Vagbhadananda and the Atma Vidya Sangham” (M.Phil diss., Jawaharlal Nehru University, 2012), 56

It is in this context, Vagbhatananda suggested the formation of cooperative societies in Malabar The financial boycott on the members of Atma Vidhya Sangham was fought with the formation of Aikya Nanaya Sangham, a Credit Cooperative in 1924.5 The denial of work was met with the formation of Uralungal Koolivelakarude Paraspara Sahaya Yogam6 in 1925.7 It was this society, which was re-registered in 1967 as Uralungal Labour Contract Cooperative Society under the leadership of Tiyya workers.8 The formation of Uralungal Koolivelakarude Paraspara Sahaya Yogam in 1925 contained fourteen-member director board, where except Vagbhatananda all were engaged in manual works like building cane fences, extracting fish oil, stone cutting etc. 9 The membership of the organization was exclusive to the members from Uralungal village in Calicut, and the entry fees were charged at four annas10 (old currency unit used in India)

The initial period witnessed a lot of hardship, particularly due to the lack of capital, deficiency

of capacity of the workers to undertake the work of Public Works Department and there was lack of support from the government as well To compete with private contractors were not easy, and they had to under quote their tenders submitted to the government to catch some work By sheer force of determination, the cooperative was earning reputation and building the capacity of its workers The initial credit required for the cooperative was made available by borrowing from the wealthy people from their locality It should be noted that till 1964, the secretary of Uralungal labour cooperative society was not even guaranteed of a regular salary.11From 1927 to 1929, the company made no loss with a turnover of Rs 1,240.12 From 1929-31 the turnover was zero During 1931-32 the cooperative earned a turnover of Rs 167 and incurred a loss of Rs 14.13 The situation got bettered from the period of 1932-34 when the

5 Ibid., 62

6 Uralungal Wage Labours Mutual Aid and Cooperative Society

7 Kannan, “Social Reform in Twentieth Century Malabar,” 62

turnover was Rs 3,010, and this ensured a profit of Rs 204.14 But from 1934- 38, the cooperative faced a loss of Rs 473.15 From 1938-43 the company was successful in earning a net profit of

Rs 1,264.16 From 1943 to 48, the cooperative again went into a massive loss of Rs 7,067.17 It was only in post-independent India the cooperative started to have a stable performance Baring

a few private contracts, most of the deals committed was from local government The competition from private contractors, who could easily squeeze the labour, wages and engage

in bribing the officials of local government and public work department was enormous Construction Cooperatives also faced the delayed payment from the government for its projects, which caused intense financial tensions It was by ensuring quality work at a low rate even by succumbing loses Uralungal Labour Contract Cooperative Society (ULCCS) won the public trust

In 2018, after finishing the works of two major flyovers in Kozhikode which had a combined estimate of Rs 129 crore, the ULCCS completed the work at a rate less than the budgeted and gave back Rs 14 crore to the state government.18 Such gestures and the quality of work has ensured high public trust for the cooperative The Kerala state government has granted ULCCS the status of accredited agency and has exempted from going through the tender process In the villages of Calicut, opinion mobilization by the public to award development projects to ULCCS has become common, said Hameed, a political activist from Koolimad, Calicut.19

The first EMS Ministry took a landmark decision to promote cooperatives by initiating and entrusting labour contract society for implementing public works The government took measures to limit one labour contract society in a block Even during people's plan campaign

18 “Kerala: Labour cooperative returns Rs 14 cr saved from infra project to govt,”

Development Channel, accessed July 20, 2019,

saved-from-infra-project-to-govt/

http://www.developmentchannel.org/2018/12/30/kerala-labour-cooperative-returns-rs-14-cr-19 Abdul Hameed, Political activist, Interviewed by author, July 4, 2019

(1996-2001) for decentralization, priority was given to the labour contract societies.20 This has helped the growth of ULCCS In 1963-64, the government granted ULCCS with its first capital contribution of Rs 2000.21 If we look at the recent state support for ULCCS, one could see that both Communist and Congress government lent its helping hands In the year 2014 during Congress-led government, ULCCS received state support in the form of share worth Rs 79,03,950 through National Cooperative Development Council. 22

From 2014- 18, ULCCS received zero assistance from the state, either in the form of direct state support.23 In 2018-19, through National Cooperative Development Council ULCCS has again received an amount of Rs 75,00,00,000 as loan and Rs 25,00,00,000 in the form of share.24 This is the period of the Communist government in Kerala It should be noted that in March 2018 ULCCS holds a paid-up share capital of 94.75 Crore and the Kerala State government contributed 85.84 Crore of it.25 This state support should be seen in the context of overall performance and economic activities of ULCCS From 2013-18, ULCCS has executed projects of value Rs 2,522.29 Crore and enjoyed a net profit of Rs 553.19 Lakhs (Rs 5.5319 crore)

The Value of Project Executed by ULCCS Net Profit of ULCCS

20 Isaac and Williams, Building Alternatives, 120

21 Project proposal for financial assistance for purchase and modernization of Stone Crusher unit under NCDC Sponsoring Scheme, Submitted through Department of Co-operative, Government of Kerala on 27 February 2019

22 Data received from Department of Co-operative, Government of Kerala Collected on 5thJuly 2019

23 In the form of Loan or Shares

24 Data received from Department of Co-operative, Government of Kerala

25 Project proposal for financial assistance for purchase and modernization of Stone Crusher

Source : Project proposal for financial assistance for purchase and modernization of Stone Crusher unit under NCDC Sponsoring Scheme, Submitted by ULCCS through Department of Co-operative, Government of Kerala (2019)

The ULCCS employs about 9072 workers, of which 1981 workers are members26 and 7091 workers are non-members.27 Though the significant number of non-members is a matter of concern for abiding the spirit of cooperatives, there is no discrimination of wage benefits All enjoy Provident Fund, Employees' State Insurance, medical aid and allowance, dividend, bonus and gratuity Workers generally reside near their project area in hygienic conditions and a three-time quality meal is provided by the cooperative itself The efforts for diversification was fruitful and on 30th November 2011, as ULCCS registered the UL Technology Solutions in Trivandrum under the companies act of 1956 This has a paid capital amount of Rs 4.49 crores.28 This company engages in domains like e-governance, utility management, health care, transport and logistics, block chain, consultancy services, geospatial solutions, web and mobile application development etc On 20th January 2012, ULCCS opened its Cyber park in Calicut, which is the first IT park being owned by a Cooperative in India ULCCS also runs Sargalaya, Kerala Arts and Crafts Village, a project committed for tourism and handicraft promotion in areas near by Vadakara, Calicut

b) Dinesh Beedi

The history of Dinesh Beedi marks the heroic resistance of the working class in Kerala against the exploitation and informalization of the labour market by capitalist firms Beedi (the poor man’s smoke) became one of the major economic activity in Malabar by the early 1920s Muslims made the significant contribution of entrepreneurship during this time, and their international ties helped the exports of Beedis to Ceylon and Burma (Sri Lanka and Myanmar

26 There are 479 A Class members and 1502 C class members C class memberships are open for all non-regular workers who are employed in ULCCS for at least a minimum of one year

B class membership is given for government shares

27 Project proposal for financial assistance for purchase and modernization of Stone Crusher

28 Ibid

respectively).29 Muslims were the second largest workforce in the Beedi Industry after Tiyyas (a lower caste community in Kerala) During the independence movement, Beedi became an alternative to the boycott of imported cigarettes and enjoyed a flourishing market Compared

to Mangalore, the wages in Kannur, Northern Malabar were lower and hence witnessed the opening of many Mangalore based Beedi Companies Ganesh Beedi (1942), Great Darbar Beedi (1943) and PVS Beedi (1948) ensured their operational base in Kannur.30 Another Major Brand which was functioning in Kannur was Bharat Beedi But in the late 1940s the trade union movement in Malabar was getting highly militant Backed by Communists, in the year 1946, Kannur witnessed a series of protracted struggles by Beedi workers Deeply disturbed by the intensified working class movement, the goons of major Beedi companies initiated attack on protesting workers In response this, in one instance the angry protesters even burned downed the Ganesh Beedi factory.31 The Beedi workers were the most militant and politically conscious workforce and have made significant contributions to the Nationalist Movement in Malabar

The increasing labour militancy was met with the informalization of the work process Ganesh Beedi adopted the technique of shifting their work base from factories to the home base production units Sadhoo Beedi first experimented the method of informalizing work process

in 1950, and other private Beedi companies followed this method.32 The working class movement though tried for deliberations, was not in any mood of compromising the workers interests A K Gopalan, one of the prominent communist leader in Kerala took this issue to Indian Parliament He was exploring the possibilities of private members bill on the Beedi and Cigar Workers But his deliberations with the Union government ensured a government bill instead of private member bill On 1966, the Beedi and Cigar Workers (Conditions of Employment) Act was passed in Indian parliament which had clear provisions for minimum wages, provident fund, maternity benefits, gratuity, medical allowance etc But the scope of implementations was left to individual states

29 T M Thomas Isaac, Richard W Franke, and Pyaralal Raghavan, Democracy at Work in

an Indian Industrial Cooperative: The Story of Kerala Dinesh Beedi (London : Cornell

University Press, 1998), 23

30 Ibid., 44

31 Ibid., 46

32 Ibid., 47

In 1967 the second E.M.S ministry in Kerala was sworn into power Within a year, the Communist government in Kerala became the first state in India to implement the Beedi and Cigar Act As a response to this, the major beedi companies like Ganesh Beedi, Bharat Beedi and P.V.S Beedi suddenly ended its production, leaving the mass of workers into overnight unemployment As a political response, under the leadership of the T.V Thomas, the Industrial Minister, senior civil service officials camped in Kannur for months to institute Kerala Dinesh Beedi.33 This was following the Cabinet decision taken by the left government on 18 December

1968.34 Kerala Dinesh Beedi Workers Cooperative Society contained one apex central society and twelve primaries and it became functional on 15th February 1969.35 The society was imitated with 2500 beedi workers, each having a share value of Rs 20 The impoverished workers were helped by the state government by offering a loan of Rs 19 for each of their share and Rs 1.35 Million and Rs 0.71 million was granted as share capital and working capital respectively for the central society of Kerala Dinesh Beedi.36 The initial trouble to run the Beedi industry was solved by appointing a government civil servant as Chairman and Secretary

of the society The board of directors contained a representative from the finance department

of Kerala and five workers representatives belonging to different political parties.37 The Government appointed the Director board till 1986 38 and the workers gradually took over the complete control over the cooperative The initial diversity of trade unions appointed by the government to ensure the absence of any political opposition to the project was a pragmatic move and gradually the director board reflected the organizations which had strength among the workers.39 Currently, the director board of Dinesh Beedi is majorly occupied by members

33 K Prabhakaran, Secretary of Kerala Dinesh, Interviewed by author, February 15, 2019

34 Isaac, Franke and Raghavan Democracy at Work in an Indian Industrial Cooperative, 67

of Communist Party of India (Marxist) and Communist party of India However, before making any major policy decisions, the director board still calls for an all-party meeting where the representation of different trade unions is ensured.40 This conscious attempt to build consensus among various trade unions has ensured Dinesh Beedi, a smooth functioning

The naming of Dinesh Beedi was an attempt to dupe the name of Ganesh Beedi, one of the major private beedi company which was behind the misery of workers Shifting the brand loyalty of smokers was difficult But the commitment of workers and trade unions ensured the market success of Dinesh Beedi The Communist leaders like E.K Nayanar, who was one of the Chief Minister of Kerala attempted a conscious marketing of this cooperative by smoking Dinesh Beedi openly in large public meetings and gatherings.41 The history and commitment

of workers of Dinesh Beedi was often mentioned by working-class leaders during their speeches as well The Cooperative also enjoyed public sympathy and solidarity Choosing Dinesh Beedi became a conscious political choice of consumers The uncompromising commitment to the quality of the product helped Dinesh Beedi stabilize its Market In the early 1980's the turnover of Dinesh Beedi crossed Rs 120 crores, and the cooperative was in a position to employ 42,000 workers.42 But by 1993 the cooperative marked its phase of decline The anti-tobacco campaigns and increasing health consciousness of the highly literate public

in Kerala, the prevalence of low-quality counterfeit Dinesh beedi in the market, the emergence

of new local beedis and high purchasing power of the population and their shift to cigarettes are some of the reasons behind this decline In 2003, India passed the COTPA Act43, which prohibited direct and indirect adverting and promotion of tobacco products By the late 1980s gulf migration in search of work was becoming rampant The option of better paid skilled jobs

chairman and the General manager of District industries centre These two nominated positions are written into the bylaw of the cooperative due to the government investment received by the cooperative in the beginning But the functioning and control of cooperatives are strictly under the supervision of workers

40 K Prabhakaran, Secretary of Kerala Dinesh, Interviewed by author, February 15, 2019

41 Ibid

42 Ibid

43 The Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation

of Trade and Commerce, Production, Supply and Distribution) Act

was also becoming attractive By 1995, 60 per cent of the workforce in Beedi industry were women.44 Today around 99 percentage of the Beedi workforce is women.45

In the context of Beedi Industry showing negative growth, the cooperative initiated discussion

on diversification in the mid-1996, and it opened up the food processing centre in 1998 to rehabilitate some of the beedi workers The year 2000 witnessed the launching of Dinesh Umbrella division By 2001 Dinesh auditorium started its functioning in Kannur city The Dinesh IT park was also a bold initiative In 2007, Dinesh Apparels was also established by the apex society The Kerala Dinesh Beedi Workers Cooperative Society is now a dynamic cooperative enterprise of manufacturing The food processing unit manufactures a variety of products Curry powder, pickles, quashes, coconut milk, coconut oil are some of it The apparels unit is known for producing export-oriented garments like cotton, denim, synthetic and silk shirts It has found its market in the United Arab Emirates, United States of America and parts of Europe Dinesh Umbrellas are known for its quality and low prices Dinesh Auditorium complex has a capacity of thousand seats and contains even video conferencing halls Dinesh Information Technology Systems is ensuring merchandise software, core banking software to various cooperative banks It has also stepped into IT training and processing ATM networks for co-operative banks

The most crucial feature of Kerala Dinesh Beedi Workers Cooperative Society is that it ensures workers a fair wage and additional benefits like Sunday wage, holiday wage, earned wage, gratuity, dearness allowance and bonuses to all workers It provides a hygienic working environment and protects the workers' interests The engagement of Kerala Dinesh in manufacturing various commodities also helps in stabilizing the market price of different commodities The employees of the diversified projects of Dinesh are old beedi workers and their dependents

The support given by state and trade unions without any doubt is remarkable for its success In the last five years, Dinesh has not taken any financial assistance from the Cooperative

44 Isaac, Franke and Raghavan Democracy at Work in an Indian Industrial Cooperative, 7

45 K Prabhakaran, Secretary of Kerala Dinesh, Interview to author, February 15, 2019,

Kannur