The Economics of Cooperatives
Maharashtra's Sugar Cooperatives
How farmer-owned sugar mills transformed rural Maharashtra, why they became centres of political power, and the problems they faced.
In 1950, farmers at Pravara in Ahmednagar district, Maharashtra, set up Asia’s first cooperative sugar factory, led by Vitthalrao Vikhe Patil with support from economist D.R. Gadgil.
How sugar cooperatives work
- Sugarcane farmers become members and own shares.
- The co-op crushes members’ cane and sells sugar.
- Farmers receive payment for cane and a share of profits.
- Co-ops often run schools, colleges, hospitals and banks in their areas.
Growth and impact
Sugar cooperatives spread across western Maharashtra, transforming rural areas:
- Higher incomes for cane farmers.
- Local development: roads, schools and credit.
- Employment for mill workers and cane cutters.
Political power
Control of sugar cooperatives became a route to political power. Many Maharashtra politicians built their bases through co-ops. Critics say this led to:
- Political interference in management.
- Poor financial discipline.
- Government bailouts.
Problems
- Water use: sugarcane is very water-intensive, in a drought-prone state.
- Debt and losses at many mills.
- Many co-op mills were sold to private owners, sometimes controversially.
- Cane cutters, often migrants from drought-hit regions, work in harsh conditions.
Ethanol
Diverting cane to ethanol has improved some mills’ finances in recent years.
A sugar cooperative in western Maharashtra runs a mill, a school, a hospital and a bank. Its chairman becomes a powerful local politician. When the mill struggles, the state steps in with support.
In Maharashtra's sugar belt, cooperatives became closely tied to political power.
- Asia's first cooperative sugar factory opened at Pravara in 1950.
- Sugar co-ops raised farm incomes and funded local development.
- They became bases for political power, with interference and bailouts.
- Water use, debt and privatisation are ongoing issues.
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