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1.

Introduction
“I know of no other instrument so potenti ally powerful and full
of social purpose as the co-operati ve movement”
-Smt. Indira Gandhi
 
Agriculture is backbone of Indian economy, but due to scarcity of resources the
farmers are unable to carry out the farm business efficiently. To overcome this
problem Cooperative can play an important role as it talks about joining of
individuals’ resources to work more effectively. By the cooperatives the farmers will
be able to grow more as compare to their individual efforts.
The cooperati ve movement is both a theory of life and a system of
business. It is form of voluntary associati on where individuals unite for
mutual aid in the producti on and distributi on of wealth upon principles of
equity, reason and common good. It stands for distributi ve justi ce and
asserts the principle of equity and equality ensuring to all those engaged
in the producti on of wealth a share proporti onately commensurate with
the degree of their contributi on. It provides as a substi tute for material
assets, honesty and sense of moral obligati on and keeps in view the moral
rather than the material sancti on.
The cooperati ves are the preferred instruments of socio-economic
development. Their contributi on to the nati onal economy of the country
is very signifi cant. In the wake of declining role of public sector and
various limitati ons of private sector, relevance of cooperati ves is
achieving greater heights. In the emerging environment of capitalisti c
form of society, cooperati ves must succeed to provide opportuniti es to
marginal and deprived secti on of society for their socio-economic
development. Government is also committ ed to provide policy support for
the development of cooperati ve sector in the country.

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Cooperatives in India
2.1. What is Cooperative?
Cooperation generally means working together to achieve a common goal

Derived from Latin word

Co - “Together”

Operari- “Working”

It is a sort of association of persons, joined for common purpose which they can not
achieve separately

2.2. Definition
A co-operative is an autonomous association of persons united voluntarily to meet their
common economic, social and cultural needs and aspirants through a jointly owned and
democratically controlled enterprise.

2.3. Values of Cooperatives:


 self help,

 self responsibility,

 Democracy, equality and solidarity.

2.4. Maxims of Cooperation


Sir Horace Plunkett the founder of Irish cooperation sums up cooperation in three famous
maxims:

1. Better Farming- The farmers’ objective of higher production is realized only when
the resources are available in adequate quantities.
2. Better business- The toiling efforts of the farmer bear fruit only when an efficient
marketing system is accessible to him.
3. Better living- cooperative efforts help the producers in fulfilling their objective in
production & consumers to get their domestic requirements at reasonable prices.

2.5. Principles of Co-operation


1. Voluntary and open membership- the admission into a co-operative is open to all
irrespective of caste, creed & religion or any social and political affiliations.

2. Democratic member control- Each member is given the right to vote irrespective of
the magnitude of his share capital. “one man one vote” is the important principle of
cooperation.

3. Member economic participation-

4. Autonomy and independence.

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5. Education, Training and Information- education to members & training to office
bearers and executives in cooperatives are imperative for promoting awareness and
efficiency in operations of cooperatives.

6. Co-operation among cooperatives.

7. Concern for community- The spirit of service evokes the loyalty among the members
of the society, which is contrary to the motive of business organizations.

3. Cooperatives in INDIA
Cooperative movement in India has celebrated its centenary year of service recently. Indian
cooperatives are unique as they were initiated and supported by the government.
Elsewhere it had always been organized only by volunteer members with least or no
government intervention. In India it was introduced in 1904, as the planners of the country
firmly believed that it could serve for national development and also could serve as a shield
in protecting the vulnerable section of populace, especially the farmers from certain social
evils like agricultural backwardness, poverty and rural indebtness.

Though they were initially organized only as the credit institutions, Indian cooperatives
today, tirelessly serve in endless areas of services. They serve in credit and non credit areas.
They deliver credits for agriculture as well as non agriculture purposes. They operate their
businesses in numerous non credit phases too. They work for milk producers, agricultural
producers, weavers, consumers, fishermen, coir makers, employees, students of universities
and colleges, and for many others

India is a land of villages depending on culti vati on, in order to relieve the
peasants from the clutches of private, moneylenders and capitalists the co-
operati ve movement had entered in 1878. But the Co-operati ve Societi es Act
1904, signalled the birth of modern co-operati ve movement in India.

 The first known mutual aid society in India was probably the ‘Anyonya Sahakari
Mandali’ organised in the erstwhile princely State of Baroda in 1889
 The seeds of cooperation in India were sown in 1904 when the first Cooperative
Credit Societies Act was passed.
 Cooperative Societies Act in 1912 to strengthen non credit cooperatives
 The cooperative credit system has the largest network in the world and
cooperatives have advanced more credit in the Indian agricultural sector than
commercial banks.
 1956- National Cooperative Development & Warehousing Board.
 1963-NCDC
 1967- VAMNICOM
 2002- Multi-State Co-operative Societies Act

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Cooperatives in India
4.1. Important Segments of Indian Cooperatives
1. Cooperative education and training

2. Agricultural credit cooperatives

3. Non agricultural credit cooperatives (urban banks)

4. Cooperative marketing

5. Tribal cooperatives

6. Fertilizer cooperatives

7. Consumer cooperatives

8. Weaver cooperatives

9. Sugar cooperatives

10. Cooperative spinning mills

11. Industrial cooperatives (non weavers)

12. Dairy cooperatives

13. Fisheries cooperatives

14. Housing cooperatives

15. Labour cooperatives

16. Poultry cooperatives

4.2. Market Share


 In fertilizer production and distribution the Indian Farmers Fertilizer Cooperative (IFFCO)
commands over 35 percent of the market.

 In the production of sugar the cooperative share of the market is over 58 percent and in
the marketing and distribution of cotton they have a share of around 60 percent.

 The cooperative sector accounts for 55 percent of the looms in the hand-weaving sector.

 Cooperatives process, market and distribute 50 percent of edible oils.

 Dairy cooperatives (70% milk share)operating under the leadership of the National Dairy
Development Board and through 15 state cooperative milk marketing federations has
now become the largest producer of milk in the world

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4.3. Dairy Cooperatives
First Milk Producers Cooperative Union: Kaira- Gujarat- 1946

 Number of Dairy Cooperatives : 121,180


 Membership Total (in Million) : 12.95
 Women Membership (in Million) : 2.96

(Millions US$)

 Share Capital : 83
 Working Capital : 465
 Assets : 413
 Turnover (Total) 2004-05 : 1206
 Total Milk Procured by Coops (Mill It.) : 7325
 Liquid Milk Marketed per day (Mill It.) : 15
 Balanced Cattle feed Production : 1.09 million tns

4.4. Sugar Cooperative


 First Cooperative Sugar Factory: Parwara Maharashtra – 1948
 Number of Cooperative sugar mills : 316
 Membership Total (in Million) : 5.14
 Growers Membership : 92.5 %
(Millions US$)
 Share Capital : 716
 Turnover (Total) 2004-05 : 285
 Total cane crushed (Mill tns.) : 44
 Total Sugar Produced (Mill tns.) : 7.8

5. National Cooperative Union of India (NCUI)


 Apex body in India which represent all the segments of Indian Cooperative
Movement.
 It was established in 1929 as All India Cooperative Institutes Association.
 Was rechristened as National Cooperative Union of India (NCUI) in 1961.

5.1. Functions of NCUI


 Promotion and Strengthening of Cooperative Movement
 Cooperative Education and Training
 Development of Inter-Cooperative Relations
 Collection and Dissemination of Co-operative information
 Promotion of International Co-operation and Co-operative Trade
 Voicing of Co-operative Opinion and views
 Provides 100% grant in aid for “Intensification of co-operative education in co-
operatively under developed states”.

6. Cooperative Credit Organization


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Cooperatives in India
6.1. State Cooperative Bank(SCB)
These are the cooperative credit organizations present at state level. DCCB & PACS are
members of these banks. These banks supervise the activities of the member banks and
mobilize and deploy the financial resources among the member bank. These are the link
between RBI & PACS. These

 helps State Govt. in formulating Development plans regard to co-op.


 Banker’s to DCCB, supervise, control & guide
 Normal banking operations

6.2. District Central Cooperative Bank(DCCB)


These banks are, in fact the link between State Cooperative Banks & PACS. They are meant
to meet credit requirements of PACS. They also undertake banking business functionssuch
as accepting deposites from public, collecting bills, cheques, drafts etc.

Some basic features are:

 members : individuals & societies


 Guide, Supervise & inspect PACS
 Non credit activities: supply of seeds, fertilizers & other consumer goods.
 Provide requisite funds to the societies
 Accept deposit both from public & societies.

6.3. Primary Agricultural Cooperative Societies(PACS)


 Minimum number required is 11;
 Members buy shares;

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 PACS raise money from district banks for lending to members for purchase of farm
inputs – fertilizer, seeds, farm chemicals, farm implements, land improvement, agro-
processing, warehousing etc.
 80-85% PACS loans are used for agricultural production;
 PACS are major contributors to national food stock;
 PACS are major procurement agents of government for foodgrain stocks [buffer
stock];
 PACS are major price-stabilisers.

6.4. Farmer Service Society (FSS)


 FSS introduced in the country in 1973 on recommendation of National commission
on agriculture (NCA).
 A commercial bank or central cooperative bank can launch a FSS.
 A FSS initially covers around 8 to 10 villages and then subsequently the whole block.

6.5. Current status of Cooperative Credit Organization


 LT-MT-ST Credit through PACS;
 32 State Cooperative Banks;
 850 District/Sub-district Banks; with12600 Branches;
 1.12 lakh PACS
 World’s largest agri credit system;
 Central financing through NABARD;
 8% lending rate [2% subsidy by Govt];
 PACS major users for agri production;
 Investments in LT & land improvement
 7 SCBs & 143 DCCBs do not comply with minimum share capital requirement
 More half of the PACS & more than 500 PCARDBs are incurring losses

7. National Agricultural Cooperative Marketing Federation (NAFED)

National Agricultural Cooperative Marketing Federation of India Ltd.(NAFED) was


established on the auspicious day of Gandhi Jayanti on 2nd October 1958. Nafed is
registered under the Multi State Co-operative Societies Act. Nafed was setup with the object
to promote Co-operative marketing of Agricultural Produce to benefit the farmers.
Agricultural farmers are the main members of Nafed, who have the authority to say in the
form of members of the General Body in the working of Nafed.

7.1. Objective of NAFED

1. to facilitate, coordinate and promote the marketing and trading activities of the
cooperative institutions in agricultural and other commodities, articles and goods;

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2. to undertake or promote on its own or on behalf of its member Institutions or the
Government or Government Organisations, Inter-State and international trade and
commerce and undertake, wherever necessary, sale, purchase, import, export and
distribution of agricultural commodities, horticultural and forest produce, other
articles and goods from various sources for pursuing its business activities and to act
as the agency for canalisation of export and import and interstate trade of
agricultural and other commodities or articles under any scheme formulated by the
Government of India or other Government agencies and to facilitate these activities,
wherever necessary, to open branches/sub-offices and appoint agents at any place
within the country or abroad;
3. to undertake purchase, sale and supply of agricultural products, marketing and
processing requisites, such as manure, seeds, fertiliser, agricultural implements and
machinery, packing machinery, construction requisites, processing machinery for
agricultural commodities, forest produce, dairy, wool and other animal products;
4. to act as warehouseman under the Warehousing Act and own and construct its own
godowns and cold storages;
5. to act as agent of any Government agency or cooperative institution, for the
purchase, sale, storage and distribution of agricultural, horticultural, forest and
animal husbandry produce, wool, agricultural requisites and other consumer goods;
6. to act as insurance agent and to undertake all such work which is incidental to the
same;
7. to arrange for the training of employees of marketing/processing/supply
cooperative societies;
8. to maintain common cadres/pools of managerial/technical personnel required by
the marketing/processing/supply cooperative societies;
9. to establish processing units for processing of agricultural, horticultural and forest
produce and wool;
10. to undertake grading, packing and standardisation of agricultural produce and other
articles;
11. to acquire, take on lease or hire, lands, buildings, fixtures and vehicles and to sell,
give on lease or hire them for the business of NAFED.
12. to advance loans to its members and other cooperative institutions on the security
of goods or otherwise;
13. to guarantee loans or advances or give undertakings to any Society or Company in
which the Federation has a shareholding or financial involvement as a promoter to
be able to assist its development or expansion or for starting any industrial
undertaking by such societies/companies;

7.2. Total internal trade Rs. 408045.96 lakh

7.3. Total International trade Rs. 98458.88 lakh

8. National Cooperative Housing Federation (NCHF)

Set up in 1969, the National Co-operative Housing Federation of India (NCHF) is the nation-
wide organization for the co-operative housing movement in India. Founded by 6state-level
federations, NCHF takes the lead in promoting, co-ordinating and facilitating the

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development of housing co-operatives, along with providing guidance to housing
cooperatives and their federations. NCHF is also sponsored by the Ministry of Housing and
Urban Poverty Alleviation which enables them to receive regular grant-in-aid.

 4 tier structure – housing coop, distt. Federation, State fed, & national.
 26 state level federations
 92,000 housing cooperatives with6.6 m members
 3 million dwelling upto 2008

9. Issues of Cooperatives
1. Heavy erosion in their democratic and autonomous functioning.
2. Most of the grassroots co-operatives are not self-reliant and heavily dependent on
Government Assistance.
3. Management not responsive to the needs of the members and not truly accountable
to them.
4. Sickness is increasing resulting in large number of defunct / dormant societies.
5. Co-operatives are not well equipped to face the challenges of open and competitive
market oriented economy. As a result, they are not only loosing ground in their
traditional areas of activities but also unable to enter into new ventures

9.1. Constraints of Cooperatives

The Co-operative Sector, in spite of its voluminous growth and its significant contribution to
various sectors of national economy is beset with several constraints, such as:

 Elections are not held regularly.


 Supersession of Board of Directors and appointment of Administrators for undue
longer period.
 General Body meetings are not held regularly.
 Audit is not professional. It is also not conducted in time.
 There is undue and unnecessary political interference and bureaucratic control even
in their day-to-day affairs.
 Unprofessional management leading to high operational cost and delayed delivery of
services to members.
 Lack of member participation.
 Poor system of monitoring and inadequate checks and balances.

9.2. What are the challenges?

1. Weak economic base


Most of the cooperative societies are not financially strong enough to deliver vibrant
products and services so as to ensure their market share. This is a basic challenge before the

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cooperatives. They should be made financially self sustained by increasing the member
contribution in realistic terms. In addition, the Government or apex organizations like RBI,
NABARD, NAFED, NDDB, etc may issue the needful financial assistance to their respective
member cooperatives for this revival process. Such financial assistance to affiliated
members by their respective apex organizations is not at all a new suggestion, but financial
assistance this time, backed by professional management which will work for assured
results, with given responsibility to pay back them on pre determined dates, will make
things better and productive.

2. Poor member participation


Attracting the attention of consumers / a member participant is the topmost as well as the
toughest job to be achieved. Thanks, to their root level functioning, cooperatives need not
start their marketing operations from square one. They are already familiar to all, now it is
enough for them to convert their products or services in to better brands and make their
customers to believe these brands are good. Effective changes in strategic and operational
marketing plans will help cooperatives for this. Sales promotional activities including
powerful advertisements, personal selling, disseminated selling etc, can help cooperatives
to get their market domains revived. Members are least interested only because their
societies are loss making. If a successful manager/secretary is allowed to take whichever
action he consider is good for growth and success, and if he really prove his business
successful member participation will be gained automatically. When a strong set of
customer bond is developed in the market private competition can be handled boldly and
effectively.

3. Absence of common brands


To make Indian cooperative businesses successful worldwide, we need more number of
common brands which is absent today. Dairy products for example, bear individual names in
each state as ‘milma’ in kerala, ‘aavin’ in tamilnadu, ‘parag’ in uttarpradesh, etc and they are
well-known as cooperative products to people of that particular state only. Instead, if we
could integrate them under a common brand it will be more successful and beneficial. It will
be recognized as the cooperative product of India not only by Indians but also by the people
abroad. This will reduce the marketing overheads including advertise ment costs and will
also result in high reach as a single advertisement serves the purpose in place of many.

4. Uneconomic demand
Thanks to their PDS operations, they are usefully popular among the economically weaker
sections. But in open market their products are found less popular and least demanded.
Many cooperative stores do not offer shopping environment to a general consumer, i.e.,
their location, Infrastructure, interior, etc are not as great and convenient as of their private
competitors. Since research and development towards innovation is limited in cooperatives,
they could offer products only with limited quality and variety which reduces the buyer’s
interest to pay a shopping visit. Further, private businesses educate their customers through
aggressive advertisements which is lacking in cooperatives. Only limited advertisements are
given for cooperative products, for example ‘kool cafe’ of AMUL and Cooptex
advertisements. Even they are quality wise good enough, how shall they know our products
unless we let them know?

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5. Diluted management
The success of cooperative businesses lies in their democratic way of management. The
boards of cooperative societies in many places, for example in Tamilnadu, have been
liquidated, and the businesses are handed over to bureaucrats who are more administrative
like than being businesslike. But the member’s interest and participation is vital for success
than any other thing. When the members have no say in their own business, their
patronizing can not be expected to continue. It is after all their business, why they should be
refused to administer it anyway? The justification for such unhealthy official intervention is
given on the basis that governments have made huge financial investments in cooperatives.
But this too, should be remodeled.

6. Losses and increasing NPAs


Cooperative businesses are loss making and dormant with few exemptions. Especially the
ever growing bad debts and non performing assets in credit cooperatives have made their
financial shape the worst. Increased number of willful defaulters, political interferences in
loan recovery, waiver practices of governments, weak and delaying recovery tribunal
processes, ineffective credit administration and supervision, artificial profit showing in the
accounts, increased frauds and misappropriation of money etc are the causes for their
business losses. Lesser product strength, inability to attract customer due to poor quality or
limited variety, absence of effective advertisements and successful marketing plans are the
main reasons for their failures in non credit businesses.

7. Corruption and frauds


Red tapism in business operations, vested interests of bureaucrats and increased corruption
and frauds are the other challenges which affect the efficiency of cooperative businesses.
Unless such offences are severely punished it will erode their financial soundness like
anything and will hinder their successful operation in the market. Regular audit of accounts,
sincere action against misappropriation of funds if any are mandatory to ensure their
viability.

10. Suggestions
1. Cooperative Reforms
 Simplified procedure for registration
 Removal of unwanted govt. interferences
 Members of non political background
 Defined rules & procedures

2. Administrative Reforms
 Debureaucratisation
 Professional Management & staff
 Skill building/ skill upgradation of staff
 Adoption of uniform accounting procedures.

3. Business Reforms
 After scanning environment development plan should be made

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 The plans should be quantifiable & measurable with specified time frame for
achievement.
 Empowered monitoring scheme.

11. Some Success Stories

11.1. AMUL-Anand Milk-producers Union Limited


 Formed in Dec,1946, & started a dairy cooperative movement in India under the
leadership of Varghese Kurian.
 It is a brand name managed by an apex cooperative organisation, Gujarat Co-
operative Milk Marketing Federation Ltd. (GCMMF), started with 2 village having 250
lt/day milk which today is jointly owned by some 2.8 million milk producers in
Gujarat, with milk collection average of 10 million litres/day
 It is also the world's biggest vegetarian cheese brand.
 13 : District coop. milk producers' Union
 2.8 million : Milk producing members
 12,792 : Village Societies
 10 million liters : Daily(avg) milk collection
 60 percent milk : Converted to value added
 594 Mts. : Daily milk drying capacity
 2640 Tns/ day : Cattle feed manufecturing
 1.05 Billion US$ : Annual Turnover
 28 Million US$ : Exports
 Automatic Milk Collection System units (AMCUS) at village societies were installed in
the first phase to automate milk producers logistics.
 AMCUS facilitated to capture member information, milk fat contents, volume
collected and amount payable to each members electronically via a plastic card for
identification
 Now officials at AMUL are planning to upgrade the plastic card to SMART cards to
facilitate farmers to withdraw money from ATM’s
 Initiatives have been taken for online order placement for AMUL’s products as a
result of which AMUL is today exporting products to West Asia, Africa and U.S.A.
 AMUL also planning to double the production by 2020 to fulfill the future demand.

11.2. Indian Farmers Fertiliser Co-operative Limited (IFFCO)


 Indian Farmers Fertiliser Co-operative Limited (IFFCO) was registered on November
3, 1967 as a Multi-unit Co-operative Society at Kandla.
 The number of co-operative societies associated with IFFCO have risen from 57 in
1967 to more than 38,155 at present, undertaking distribution of its fertiliser
through these co-operative societies.

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Cooperatives in India
11.3. Suguna Poultry
 Suguna's Success of an Extraordinary Vision Incorporated as a company in 1994
 The success of Suguna is a glorious testimony of the power of human visionary zeal,
innovation, determination and co-operation.
 “Poultry Integration” is a concept introduced and achieved by Suguna.
 Suguna has been successful in the integration of tens of thousands of farmers,
thereby enhancing their life-styles.
 Suguna has steadily and positively grown on its core ideals of Total Quality
Management, constant Innovation, impeccable hygiene and understanding
Customer needs.

12. Conclusion:

Cooperative have a unique place in growth of the rural India, this is the only tool by
which the problem of scarcity of resources can be eliminated. But there is a need to revamp
the cooperatives’ structure & status to achieve the full fledged benefits of it.

For reforms in the co-operative structure the prime requisite is that the bodies must
be member driven, fully autonomous, operationally sound, viable institutions. This would
pave the way for favoured strengthening and revitalisation of the co-operative structure by
way of recapitalisation, dovetailed to co-operative reforms and consolidation. Furthermore,
certain broad principles must be laid down and certain precautions must be insisted upon
with the vision that people must be in the main, be left to work out their own salvation on
their own lines, the function of the Govt. Being confined to hearty sympathy, assistance &
advice.

13. References:

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Cooperatives in India
 Subba Reddy S. , Raghu Ram P.,2008 Agricultural Economics, Oxford & IBH Publishing
Company Pvt. Ltd.
 Jain P L, 1990, Cooperative Credit in Rural area, Mittal publication New delhi
 Acharaya S S & Agrawal N L, 1992, Agricultural Marketing in India, Oxford & IBH
Publishing Company Pvt. Ltd.,
 Kumar Ranjana, Consolidation-future of Coopertive Banks, , January 2005 IBA Bulletin,
Vol XXVII-No.1
 Sidhu R.S., Gill Sucha, Agriculture Credit and Indebtedness in India, Jan-March 2006
Indian Journal of Agri. Economics, Vol. 61, No. 1,
 http://agriculture.indiabizclub.com/info/agriculture_cooperatives
 http://www.indiadairy.com/default_nondhtml.html
 http://www.rbi.org.in/scripts/fun_urban.aspx
 http://www.nafed-india.com/
 http://www.iffco.nic.in/
 http://www.nchfindia.net/
 http://www.indiatogether.org/php/search.php?
words=sugar+cooperative+in+maharashtra
 http://www.mu.ac.in/arts/social_science/economics/pdf/vibhuti/wp21.pdf
 http://www.boloji.com/opinion/agriulturecooperatives/ajeet.htm
 http://www.maharashtra.gov.in/english/gazetteer/BULDHANA/home.html

All sites retrieved on Feb. 1 & 2, 2010

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