Worker’s Cooperatives: An Alternative Model for Welfare and Development
Manoj K. Puthiyavila
[Published in the special issue of 'Thozhil Kshema Ramgam' magazine published in connection with the International Labour Conclave held on 24, 25 & 26 May 2023.]
This article describes the evolution of labour cooperatives in Kerala, the supports given by various governments including the British colony government, to which extent a labour cooperative can grow and the level of labour, wages, welfare and decent life a cooperative can provide.
In the early years of the 20th century, the Kerala society was undergoing dramatic changes which manifested in various forms of social actions in various regions. The social reform movements led mainly by the renaissance leaders from oppressed classes, philosophers, activists and revolutionaries generated new thoughts of equality, modesty, rights for a better life and liberation from social discriminations. The proclamations of the most influential leaders such as “Get enlightenment through Education, Strength through Organization, and Economic Independence through Industries,” by Sree Narayana Guru were translated in to action through a number of initiatives. The freedom movement, by the influence of its progressive section, was also becoming popular in Kerala through inclusive approaches addressing the pressing issues of the peasants, the labourers in agriculture and other sectors and all oppressed classes. Newspapers were bringing in new ideas and information from other parts of the country and the world. In the northern parts of Kerala various reforms introduced by Tipu Sultan and the British Government also accelerated the transformation. At this juncture the united labourers in a North Malabar village embraced the idea of Co-operatives taking advantage of the co-operative law brought by the colony government.
It happened in a remote village of British Malabar 99 years ago where 14 labourers facing social ban by the upper cast landlords for their reformist activities decided to found a labour cooperative for their own survival. It came in to existence on 13 February 1925 as ‘Uralungal Koolivelakkarute Parasparasahaya Sangham’ (Uralungal Labourers’ Mutual Aid and Co-operative Society) which later modified its name as the Uralungal Labour Contract Cooperative Society (ULCCS) Ltd. The founders were the disciples of Guru Vagbhatananda, a reformist leader of Malabar, whose ideals influence and govern the cooperative even now on the threshold of its centenary. Although there were many ‘mutual aid societies’ in Kerala at that time, a dedicated one for labour contracting and for daily-wage labourers was a revolutionary idea even in the whole of India.
The state of Kerala came into existence only in 1956 and the first government was elected in 1957, during the period of the second five year plan. The Union Government had begun taking initiatives to promote labour cooperatives by that time. They directed the states to entrust the construction and other public works with the labour contract cooperatives. A standing committee, formed as part of the second five year plan which began in 1956, once again brought this matter into the attention of the State Governments in 1958. The Government of Kerala led by E. M. S. Namboothiripad took immediate steps in this regard which went in line with their pro-labour ideology. They decided to form labour cooperatives in every development block.
Prof. Joseph Mundassery, the then Minister for Education and a well-known co-operator, explained the perspective in an article written in ‘Sahakarana Prabodhini’, a magazine for co-operatives, “There is much to be gained by avoiding middle men and entrusting the public works directly with the workers in the locality. Workers will get better remuneration. Local development activities would be taken up with great sincerity. Labour contract societies can also be utilized to mobilize volunteer work for development programmes.”
The EMS Government developed model bylaws addressing the major challenges of mobilizing sufficient capital to undertake public works, developing management skills among the workers and preventing private contractors hijacking the cooperatives. The bylaws restricted the membership to masons, carpenters and ironsmiths allowing only a few others for accounting and work supervising purposes. ULCCS Ltd. was the only labour cooperative in Kerala at that time. As part of the new initiative, 56 societies were formed during the tenure of the Government. No other State in India had shown such enthusiasm in this regard. The EMS Government was dismissed by the Union Government in 1959 following the infamous Anti-Communist Liberation Struggle. Six more societies were formed by the next Congress-led Government before 1961.
A large number, say around 50 percent, of the labour societies were dormant. They faced several problems like delay in getting credits, non-cooperation and hesitation from the authorities to grant public works and their own inefficiency. The later years, especially in the absence of a strong political will to curtail corruption and to promote labour cooperatives, were favourable to the private contractors. Some of the contractors even formed benami cooperatives to exploit the prerogatives given by the Government to the cooperatives.
The number of labour contract societies grew from 58 in 1970 to 75 in 1980 and 97 in 1990. The percentage of the dormant cooperatives which was reduced to 25 during 1970s from 50 in 1961 again rose to 32 percent in the 80s. In 1990 the dormant societies were only 14, bringing down the percentage to 14. During 1991-95 the number of labour contract cooperatives grew to 231 out of which 58 (25%) were dormant. But it jumped to a total number of 424 with 152 (36%) dormant and 272 functional societies during 1997-2003 as an impact of the participatory implementation of the Decentralised People’s Plan.
Unfortunately most of these functional societies were unsuccessful in the competition with the private contractors. None of the labour cooperatives except the decades old ULCCS were making profit till 1985. In 1990 profit making societies were 28 which grew to 56 by 1995 and 92 by 2003. At the dawn of the new millennium the number of memberships in labour cooperatives rose above 50,000 from 7,844 in the 1967-70 period.
The 1996 - 2001 period of the People’s Plan Campaign by the Kerala Government, a milestone in the history of decentralized and participatory democracy, was a golden era for labour cooperatives. It inspired many local self-governments to come up with public works, and the Government permitted and encouraged them to entrust public works with labour societies without tender to avoid delay, corruption and poor quality in the absence of a proper support system. This caused the boom of labour cooperatives. This order issued in 1997 was modified in 1998, 1999, 2001 2003, 2004, 2005 and 2007 rectifying problems identified through experience.
Now there are 778 registered labour cooperatives in the state with 401 functional, 330 dormant and 47 under liquidation.
Supports for a noble cause
Labour Cooperatives, who complete the works on time with maximum quality at reasonable expenditure, substitute intermediary profit-seeking contractors and avoid middlemen and corruption, one of the biggest social evils prevailing today. The working class rightly perceive public works as part of our nation building, so they participate in their execution with great devotion and sincerity.
Since the labour cooperatives focus on employment generation, they always implement modern technologies and equipment without reducing the human resource, but enhancing higher wages through up skilling, and increase workdays by executing more works. They can provide more secure and satisfying work with better wages to its members. They also diminish bonded labour and cast aside the exploitation faced by women workers, migrant labourers and all oppressed classes and ensure gender equality.
They can also mitigate hardship of workers by incentives and welfare activities. It is proven that the properly functioning labour cooperatives can provide Provident Fund, Gratuity, Life Insurance, Medical Aid, Medical allowance, Bonus, Leave benefit, Welfare fund and dividend on shares.
Considering all these aspects, the Kerala Government has always been keen on supporting the labour cooperatives from the very beginning. Even before the formation of the State, in 1954, the Departments of Agriculture as well as Cooperatives had begun this tradition. Following the All India Co-op. Planning Committee’s recommendation, the Department of Agriculture and Cooperation ordered that the government and local bodies should give preference for contract to labour contract societies, not by tenders but by directly offering the work. In the same year the Cooperative Societies Registrar also had granted some favours: security deposit may be waived, bills may be paid at shorter intervals and fee for registration as contractor may be exempted. In 1955, two Labour Cooperatives, the ULCCS in Malabar, along with one in Thirunelveli (of the erstwhile Kingdom of Travancore) were given some concessions from the Department of Public Works (PWD). It ordered to entrust works up to a limit of Rs. 5,000 which don’t demand special technical skills with both the societies at estimate rate and without tender. ULCCS was exempted from tender deposit also.
Through another order in 1958, PWD limited the earnest money deposit (EMD) for labour cooperatives to one percent of the probable amount of the work subject to a maximum of Rs. 500. It also exempted labour contract societies from registration fee. In 1960 and ’61 the Department of Agriculture (Cooperation) issued orders exempting the labour cooperatives from executing agreements in stamp papers and from EMD respectively.
In 1997, the Cooperative Department came up with a few more supportive steps. According to these, the authority can award the work to the labour society if it quotes an amount within a limit of 10 percent higher than the lowest quotation. If it is even higher than the lowest quotation amount, they have a chance to take up the work at an amount 10 percent higher than the lowest one, through negotiation. In such situations the authority will seek the willingness of the labour society and initiate negotiation in this regard. The Kerala State Electricity Board (KSEB) in 1998 brought out relaxations in the preferential terms and conditions for entrusting works with labour cooperatives. PWD implemented 10 percent tender preference in 2008. Tax Department also supported labour societies by exempting them from excess liability over compounded sale tax. Another important protective measure was to accredit capable cooperatives in the construction sector along with various Government agencies to whom public works can be awarded without tender up to a ceiling which is revised on time. This was to avoid procedural delays, corruption and to ensure quality. Today there are 46 accredited agencies including 40 government agencies and 6 nongovernmental agencies including cooperatives.
Worker’s welfare at its best
Workers’ welfare is always the prime concern for labour cooperative societies. Labour societies can set the best models in this regard. It can be illustrated through a case study of a model labour cooperative in Kerala. The first labour cooperative that was mentioned in the beginning, the Uralungal Labour Cooperative Society (ULCCS) Ltd. is the best model to establish to what extent a labour cooperative can provide wages and welfare to the workers.
Now in ULCCS, the lowest daily wage for a construction worker is Rs. 1600 including allowance for working outside the hometown. It is Rs. 1700 to 2000 for skilled labourers who operate machines. This is in addition to free residential facilities and food including breakfast, lunch, supper and light refreshments. Every worker gets a minimum monthly salary of Rs. 40,000 - 50,000 in hand. Contributory pension is also implemented for workers since 2007. ULCCS provides regular skill upgradation to its workers making them eligible for better wages. It implements mechanisation in a big way aiming at reducing the difficult jobs and creating more skilled jobs without reducing the number of labourers but increasing from a few hundreds to around 16,000 in the past 25 years.
Welfare Schemes at ULCCS
● Overtime allowance for night work comes to double the wages
● Bonus of 20 percent given twice a year, during Onam and Vishu
● Provident Fund and Gratuity for workers. ULCCS provides 12 percent of salary for PF. Gratuity is five days wages for every 100 days work.
● ESI coverage for those who are eligible. Attractive benefits for the others. In ESI, the employer’s share is 3.25 percent and medical allowance 2.5 percent.
● Pensions to the senior workers and their dependents
● Health insurance: Workers or members will get Rs 2.5 lakh in case of illness or accident. Besides this, 60 to 70 percent wages for sick leave. ULCCS pays the premium amount except the worker’s share of Rs. 2,750.
● Family Group insurance (includes parents of spouses also): Rs. 2 lakhs for treatments. Free medical expenses and care of Rs 4,000 to Rs 50,000 to women workers and daughters of all workers for childbirth along with a financial support of Rs. 10,000. Half of the premium is paid by the society. There is a buffer policy to support workers’ families in case of expensive treatments.
● Two personal insurance schemes completely paid by the society:
1) A medical health insurance of Rs. 75,000.
2) An accident claim insurance: Rs. 22 - 30 lakh for any accident death (not only at work sites). Rs. 5 - 20 lakhs for disabilities. A grant of Rs. 5,000 - 10,000 for the children of the deceased. A weekly leave salary of Rs. 25,000 - 35,000 for the survivors.
● For marriages special gifts of one sovereign (8 gms) gold for women and Rs. 10,000 for men along with advances.
● Workers are given interest free loans without collateral.
● Interest free soft loans for house building, house repair, house warming, marriage of working women and daughters of workers.
● Scholarships offered to students.
● The highest security measures at work sites.
As a Co-operative Society which is rooted in social responsibility, ULCCS is involved in welfare activities for the upliftment of the society at various levels, much before the inception of a similar thought in the corporate business world. NCDC on their website summarises the welfare activities of ULCCS as, “Conducts Civil Service Foundation Class for around 150 students in a batch; Vocational Training and Rehabilitation Centre for Intellectually Challenged Adults, a programme of ULCCS Foundation; Geriatric care at a safe and well-equipped facility centre and medical and palliative care for the terminally ill.” Wages and other benefits provided for their workers and employees are also a model to the nation. They have a separate wing, the ULCCS Foundation, to implement these social welfare activities.
The heights an LCC can achieve
Development experts position ULCCS as a co-operative alternative to the corporate world. It redefines the role the working class in national development, while emerging as a global model to the labour co-operative movement. The name of the book itself telling the inspiring story of ULCCS Ltd. is ‘Building Alternatives; The story of India’s oldest construction workers’ cooperative’, written by Dr. T.M. Thomas Isaac and Michelle Williams.
The success story of ULCCS illustrates the potential of labour cooperatives in a country like India. ULCCS which has become one of the largest labour cooperatives, as well as primary cooperatives in Asia, was selected as Model Co-operative Society by the United Nations Development Programme (UNDP) in 2016. UNDP made a film on ULCCS to exhibit globally. ULCCS received membership in the International Co-operative Alliance (ICA) in 2019 becoming the only Primary Cooperative getting such a privilege.
In three subsequent years 2020, 2021 and 2022, the ULCCS Ltd. has remained second in the sector of Industry and Utilities Co-operatives in the global ranking of World Co-operative Monitor, published by the International Co-operative Alliance.
“Major clients of the Society include National Highways Department, Public Works Department of Govt. of Kerala and other state government ministries and a host of reputed private enterprises,” the NSDC website says. “Considering the meritorious service performance of the Society, the Government of Kerala appointed ULCCS as an Accredited Agency for the execution of Government sponsored projects like civil construction work for development of roads, bridges, buildings and allied infrastructure.”
Now ULCCS is the Total Solutions Provider for the departments of Public Works, Finance, Local Self Government, Tourism, Labour and Co-operative for execution of projects without tender. The ULCCS which owns an IT Firm, the UL Technology Solutions, is a Total Solution Provider of the Government of Kerala.
Presently, ULCCS is the only contractor capable of participating in tenders for major projects like the Bharat Mala by the National Highway Authority of India (NHAI). It has completed more than 7,500 projects in its 98-year long history. It has diversified into IT, IT Infrastructure, Tourism & Hospitality, Arts & Crafts, Education & Skilling, Quality Testing, Housing and Agriculture. Its name is synonymous with quality, integrity, and trust.
