A free nation throughout history, Nepal could gain democracy only in 1951, though. The popular revolution then forced the 104-year-old Rana oligarchy to return power to the people. Leaders who represented the masses in the Interim Government could now think of development and must have thought of Co-operation.
Within three years, in 1953, the Department of Co-operatives was established and tasked to encourage Co-operation among the people. One of the few new agencies of Nepal Government, the Department was quick to send two of its officers to Sri Lanka to learn from her nearly half a century of experience in developing co-operatives. On returning home, they worked out programmes as well as drafting the necessary pieces of legislation.
Widespread flooding, the scale of which was not known for the last 50 years, intervened. Caused by the almost incessant rains from 24 to 28 July 1954, the calamity left an estimated 1,000 people dead and over 132,000 homeless in many eastern and central – and also some western – parts of the country. As well as the International Committee on Red Cross, Governments of India, the United Kingdom and the United States were quick to respond to the Nepal Government call for help.
Working together in relief operations, Nepal and the United States also agreed to co-operate on the Rapti Valley Multi-purpose Project, a major early development initiative subsequently featured in the country's First Five-year Plan (1956/57 - 1960/61). Government of Nepal had for some time looked upon the Rapti Valley as a base for development in that its sizable expanse of land could be used to produce surplus foodstuffs for Kathmandu and other deficient areas, to employ thousands of the poverty-stricken people and to initiate agro- and forest-based industries. But it was thwarted in its development undertakings by the deadly form of malaria. Now that there were also flood-affected people in need of settlement or resettlement and the United States Aid Mission package included a malaria control component as well, the project was on a firm footing and was readily launched.
One of the beauties of the Rapti Valley Project was that it foresaw the need for a co-operative endeavour among the new settlers just as it did for schools and health centres. In fact, it insisted that there was no better alternative to the co-operative if the newly resettled were to be provided with the required credit for farming.
Needless to say, the Department and the Project could work together at this new venture. Farmers in the valley were organised into Agricultural Credit Committees, the first of which was registered in Bakhanpur on April 2, 1956 under the Nepal Government Executive Order issued in the same year. This was followed by the registration of an additional 16 co-operatives in fiscal 1956/57 itself. Alongside, the first plan document stated that an ably developed co-operative movement would help raise the standard of living of the people and also foster among them the democratic way.
Thus began the co-operative movement in the country and the work of the Department of Co-operatives.