The government’s plan to involve cooperatives intensely in economic activities to achieve the goal of 8.5 percent growth is likely to be a non-starter due to lack of an effective monitoring system at the federal, state and local levels, officials and entrepreneurs said.

The budget statement released on Tuesday has emphasised the role of cooperatives in economic development and permitted them to engage in manufacturing, energy generation and farm modernisation, among other sectors. “The scope of cooperatives will be extended to manufacturing industries, tourism, energy, housing, education and health sectors,” states the budget for fiscal 2019-20.

After the country went federal, the government handed over the task of overseeing cooperatives to the provincial and local levels. A new Cooperative Act and regulation have been enforced, but many sub-national governments have devised their own legal measures to keep tabs on cooperatives, which the government has described as one of the three pillars of the Nepali economy.

The provincial and local governments do not have a separate bureaucratic set up to monitor these institutions, and this poses a risk, said stakeholders.

Anjana Thami of Nishan Uddhyami Mahila Savings and Credit Cooperative, Dhankuta, said lack of uniformity in the policies and standards and inadequate manpower at the local governments had raised doubts about the proper functioning of cooperatives.

“Due to this reason, even the grants provided through cooperatives under the Prime Minister Agriculture Modernisation Project have not been utilised properly,” Thami told the Post.

According to the Department of Cooperatives, 34,512 cooperatives have received operating licences. Among them, 13,578 are savings and credit cooperatives and 4,371 are multipurpose cooperatives which are licensed to carry out banking functions. These cooperatives hold deposits totalling more than Rs300 billion.

Even the central government does not have an effective mechanism to supervise cooperatives which handle an immense amount of the people’s money. Tok Raj Pandey, registrar of the department, said the regulatory body itself was struggling because it is understaffed.

Speaking at a programme organised by the Cooperative Journalists Society Nepal on Friday, Pandey said the department lacked chartered accountants, among other specialists, to assess the financial reports of cooperatives. “Due to poor monitoring, many cooperatives landed in trouble in the past. If the situation persists, the sector in which the budget has put so much hope will face a severe problem in the future,” said Pandey.

According to him, the department will request Nepal Rastra Bank to help it keep tabs on cooperatives. The newly issued regulation requires the central bank, Department of Cooperatives and central or sub-national government to work together to supervise cooperatives with annual transactions of more than Rs500 million.

In the past too, the department was required to keep tabs on large cooperatives in coordination with the central bank, but the most of the time the central bank was not very forthcoming, according to department officials.

The budget has also targeted increasing the involvement of cooperatives in enterprises like herb processing, small and medium businesses, milk processing, fair price shops and renewable energy, but officials doubt this will happen in the absence of effective monitoring. The government invested a huge amount of money on fair price shops run by cooperatives, but many of them just took the money and did nothing, they said.

Pandey said this time the government had laid emphasis on production related businesses for cooperatives. “The government will provide tax rebates and big grants to cooperatives in a bid to promote domestic products,” he said.

The budget also emphasised involvement of cooperatives in contract farming and land consolidation to boost agricultural productivity. “Cooperatives will be offered an attractive package of subsidies on machinery imports and cash support if they engage in farming by pooling lands together to create large farms of 100 ropanis in the hilly region and 100 bighas in the Tarai,” the budget statement said.  

Keshab Prasad Badal, chairman of the National Cooperative Federation of Nepal, praised the government’s move to open large sectors to cooperatives. “This can also help in poverty alleviation at the grass roots level if the cooperatives are mobilised properly,” said Badal.