Government's Directive on Cooperative Branches Faces Implementation Hurdles

Biratnagar. The '6-point directive' issued by the Department of Cooperatives on Poush 24 to resolve the crisis in the cooperative sector has become a difficult burden for the department itself. Based on the report submitted by the High-Level Economic Reform Suggestion Commission led by former secretary Rameshwor Khanal, the department had directed cooperatives with more than one branch to close them, but this directive remains unimplemented.

'Cooperatives with more than one branch should settle accounts and close the branches,' was mentioned in the first point of the letter. Based on that letter, the Ministry of Industry, Agriculture and Cooperatives of Koshi Province also immediately wrote to its subordinate offices. The correspondence reached the local level, but ministry officials admit it has not been implemented yet. 'We have immediately written to all concerned bodies,' said Ministry Secretary Pashupati Dhungana.

Toyanath Timsina, an officer at the Cooperative Promotion Branch of the Ministry, stated that cooperatives have ignored their follow-ups. 'One of the reasons for the deterioration of cooperatives is allowing the opening of branch offices,' he said. 'The government has issued a circular, but since large cooperatives under the federal government are defying it, others are following suit.'

Cooperative sector expert and activist Ramchandra Upreti has rejected this directive from the department. He claimed that this directive was brought without understanding the essence of cooperatives and has only created further confusion.

Shashi Kumar Lamsal, Deputy Registrar and Information Officer at the Department of Cooperatives, indirectly admitted that the letter sent by the department has not been implemented. He said that although there is a compulsion to implement government decisions, a resolution is yet to be reached due to reports from various committees and differing opinions.

'Rameshwor Khanal's report came, the Cabinet decided to implement it, the ministry also asked for progress, and we also issued letters, but now the report of the mismanagement investigation committee is also in the final stages. Instead of talking about partial things, a comprehensive solution will come. It will proceed as the government decides,' said Lamsal.

He admitted that there is a problem in implementation due to two schools of thought within the cooperative movement. 'One side says that by merging, institutions should be strengthened and service centers should be provided, while the other says that primary institutions should be limited to the ward or municipal level and branches should not be allowed. Both types of debates exist. Unless the Government of Nepal decides otherwise, the old directive (to close branches) remains in effect, but the extent of the follow-up will be known within about a month,' he said.

In the report submitted to the government on Chaitra 29, 2081, the High-Level Economic Reform Suggestion Commission suggested that all three levels of government should immediately stop the opening of new cooperative institutions and branches of existing cooperatives.

Meanwhile, cooperative sector expert and activist Ramchandra Upreti has rejected this directive from the department. He claimed that this directive was brought without understanding the essence of cooperatives and has only created further confusion. 'This is a directive brought by those who do not understand cooperatives properly and have a (biased) view towards them. This is not a matter that can be implemented. Because it could not be implemented, the department once issued a notice and later removed it from the website,' he said.

Upreti said it is wrong to ask for the immediate closure of service centers that were opened by following legal procedures. 'Service centers have come into existence by exercising the rights given by the law; there is a method and process to merge or shrink them. Such a decision cannot be implemented without discussion with stakeholders. This is like saying that multipurpose cooperatives must follow the 70/30 ratio (70 percent main business and 30 percent savings and loans) in the Cooperative Act 2074, which has not been implemented yet,' he said.

Upreti stated that the only effect of this directive will be that no new branches will open. 'Now new service centers will not open, the department will not give permission, but the state's decision to close old ones was made without understanding the impact, and it will not be implemented,' he said.

The letter signed by Saroj Bhusal, Branch Officer of the Department of Cooperatives, mainly asked for the implementation of 6 points. The first point mentioned settling accounts and closing branches for cooperatives operating with more than one branch, that cooperative institutions cannot make any company or organized institution a member, that the total loan investment given to a single person from one or more promissory notes should not exceed 10 percent of the institution's total share capital, that savings and credit cooperatives cannot purchase land for sale except for their own use, that they can only provide loans to members without a house for the purpose of building a house up to a certain area (1000 square meters), and that savings and credit cooperatives cannot invest more than 25 percent of their total loan investment in a single purpose or sector, and that the loan-to-deposit ratio should be maintained at a maximum of 90 percent.

In the report submitted to the government on Chaitra 29, 2081, the High-Level Economic Reform Suggestion Commission suggested that all three levels of government should immediately stop the opening of new cooperative institutions and branches of existing cooperatives.