Managing Collective Enterprises:

Course Introduction

Class 1, Nov 15-16, 2021

Dr C Shambu Prasad
 Contents
• Pre-course survey
• Why study producer collectives
• Cooperatives and IOF
• Contextualising cooperatives
• Course reading – objectives
• Philosophical and theoretical foundations of
coops
 PRM41 Pre-course survey
PRM 40 response on MCE term?
Reasons and expectations from the course…

Managing FPOs How CEs are Basics and

and creating Beyond Amul formed and challenges
linkages sustained faced

Management innovations and

Real world
strategies in politics in Extending CAC
examples
collectives collectives

Operational
More classroom
aspects of
activities
collectives
 Reimaginging Producer Collectives: 18 case studies and
compendium
Sl.
No. FPOs Locations
Malihabad
1Navyug
2Bhangar South 24 Parganas
Pandhana Pashu
3 Palak Khandwa
4Jana Jeevana Anantapur
5Chitravathi Kolar
6Maha Farmers PC Pune
7Ram Rahim Dewas
8Gujpro consortium Ahmedabad
9Mahanadi Lakhanpuri, Kanker
10Jeevika Khagariya
11Diwak Mata Pratapgarh
12Madhya Bharat FPCL Bhopal
13Kazhani Erode
14Desi Seeds Shimoga
15KBS Coop Gumla
16Krushidhan Vadnagar
17Hasnabad Vikarabad District
18Kesla Gwalior
What is Common between these Businesses?

How are their business models different?

WHY STUDY PRODUCER COLLECTIVES?
 Central Tendencies of Three Alternative Institutions
Investor-Owned Firm
Nestle India Ltd
Share
Holders Parthasaraty 1992
in Shah 1996

Governance
Structure

Government Operating Producers

System

Consumers Competitors
Maximize Shareholder Value
 Central Tendencies of Three Alternative Institutions

Mehsana Co-operative:
Milk
A Producer Organisation
Producer

Governance
Structure

Government Operating Consumers

System

Competitors

Maximize Producer Value

 Central Tendencies of Three Alternative Institutions

Greater Bombay Milk Scheme:

Government Bureaucratic ‘Spoils System’

Governance
Structure

Producers Operating Consumers

System

Competitors

Degenerate into a Spoils System

 Unique features of Coop Management
Features Co-operative Non-Co-operative Implications for Co-
operatives
Purpose Maximize member Maximize returns to Profit maximizing
income stockholders decisions, not always the
best for the member
Decision Making Democratic one One vote/share of Members need education
Process member one vote common stock for decision making
Director From members Inside/outside or both Directors often need
Selection training
Structure Those who own, Those who own, use, Members need education
use, control, are control may be for decision making
the same people different people
Policy Making Quasi-public Often private Members need education
Procedure for decision making
Contribution to Proportional to use Money available to Members need to be
owners’ equity by current invest and proportional educated to understand
and distribution member-owners return on investment their responsibilities
of net margins
WHY STUDY COLLECTIVES: OWNERSHIP,
INEQUALITY AND DEMOCRACY
Governance of Coops- Sept 2015
Gandhi on
democracy…
Sabarmati Ashram
 India Inequality Report
the combined wealth of US billionaires inc
60% during March 18, 2020 and August 17,
2021, top 5 104%

Wealth of India's richest 1% more than 4-times

of total for 70% poorest
Billionaire fortunes in India up 35 %, 13.6 crore lowest 10%
in debt (India adds 40 billionaires in pandemic
year)

top 10% holds 77.4% of national wealth, 1% , 51.5%

Bottom 60, 4.8%

combined net profit of the listed firms was up 57.6% in

FY21,
In 2020, Covid pushed nearly 23 crore people into poverty
10 million jobs vanished in this round and 97% households saw
their incomes drop
 Pikety & Chancel
on Inequality
From British Raj
to Billionnaire Raj

“inequality regime”
CONTEXTUALIZING COLLECTIVES
 Preparing for the Course

Producer collectives
Workshop 2015
DISs on FPOs
Case studies
 Rethinking Dr Kurien’s legacy:
Rural Capital Goods
Harish Damodaran….White Revolution Part II

Between 2002-03 and

2016-17, the average
procurement price
paid by GCMMF
unions to producers
has gone up from Rs
185 to Rs 680 per kg
fat.
Framing Futures
Repositioning Cooperation
 Strengthening Farmer Collectives: National
Conference on FPOs

FPOs: Policy and other issues

Rethinking Producer Collectives – Post Lockdown 22 blogs
ABOUT THE COURSE
 Introduction
Despite the wide-ranging successes of co-
operatives, in financial terms as well as in the
development of sustainable communities, the
study of these democratic forms of enterprise
remains surprisingly absent from the curricula
of most university business schools around
the world.

Internationalisation and Co-operatives: Protecting Local Jobs Diarmuid

McDonnell, 03/12/2012
 Course Objectives
• Understand the principles, emergence and
development of cooperatives
• Importance design principles in building a
cooperative/ FO
• Understanding contemporary challenges in
managing Farmer Producer Organisations (non-
dairy)
• Reflecting on appropriate management theories
and tools to manage producer collectives
 EVALUATION
• Class (and out) Participation & Case reflection– 15%
• Quizzes – 30 %
• MC Project* - 20 %
• End Term Exam – 35 %
* Groups of 6-7, analyse a collective enterprise’s
performance and challenges
IRMA’s Golden Era of
Cooperative Research
Intl Symposium on
Management of
Cooperatives 1992.
300 papers, 60
shortlisted

Not much work

since 1997
2016 IRMA OP 17
 Managing Collectives
• “Cooperatives comprise a special category of business
organisations, because their raison d'être is not profits for
shareholders, but returns to the farmers who invest in land and
animals. Therefore, they need to be treated differently and with
care. Foisting discordant and capitalistic decisions on them with
only weaken them.
• “the ideal route for good leadership to emerge – not only for our
cooperatives, but also for our democracy – would be to encourage
a plurality of democratic institutions to undertake procurement,
processing and marketing of rural produce. Our democracy will not
sink into our lives and our collective psyche until our democratic
institutions in Delhi and our State capitals are underpinned by
numerous democratic institutions reaching down to our villages. …
Verghese Kurien
Emergence of Cooperatives and Coops and
other organisations

MCE 2, Nov 29-30, 2021

 Content
• Recap of last class
• Cooperatives emergence internationally
• Cooperatives in India
• Example of Totgar cooperative
 Kurien and Faith in Farmers
• Let us rediscover the truth that the unlettered villager is often the wisest of
teachers and that, without our guidance and direction, the villager survives
and even thrives in conditions we could not face. Every day the farmer
faces challenges and responsibilities far greater than ours. Why, then,
should we not place our faith in him and let him be responsible for his own
destiny? I have been an employee of farmers for forty years.
• It is a reflection of our lack of faith in our farmer’s ability to manage their
own affairs that the bureaucracy has so deeply penetrated and controlled
people’s organisations. In my opinion, to continue to justify and perpetuate
the hegemony of an insensitive bureaucracy by arguing that people cannot
organise and manage their own affairs and that they will not employ
professionals to do so is not only naive but reflects self-serving hypocrisy of
the worst kind. (Kurien, 1989)
 Theoretical foundatios of Cooperatives
• Safety Net perspective: (little people’s chance in world of bigness)
– Primary producers common disadvantage, rapid growth when chips are
down (pandemic), yardstick (farmers share of consumer rupee)
• Alternative forms of business organisation
– Operate in world of imperfections (markets, TC 0)
– Spontaneous act of human nature…building ethics
• As a broader form of organisation
– Means by which farmers get greater share of market channels… important
rural development (Banas…)
– Integral part of decentralised economic democracy
 Summary… Datta
• Coops are creations from a higher calling of mankind, they are not
automatic. They cannot be evolved, nor sustained in the absence of
conscious and painful efforts to observe, administer and preserve
certain processes.

• Not for everyone, not to take this form of organisation for granted
• Multiplicity and diversity of goals
• Failure of a co-operative form of organization is more natural than
the same for a more tightly defined and individually motivated
investor-oriented firms (IOFs)
 Some Dos and Donts
• Pre-reading • Strict No Mobile in classroom
• Compressed course – go beyond • Delay submission deadlines
• Share – experiences/ doubts
directly and in groups
• Feel free to communicate
through acadcomm/ AA/ directly
 Are cooperatives different?
• Differences regarding objectives
• Differences regarding ownership rights
– Right to decision making (equal, patronage linked to participation in management)
– Right to residuals (the ratio of their patronage)
• Distribution of value
– limiting return on capital invested, a cooperative forces the people to generate wealth
more by their capacity to produce goods and services rather than gain from efforts of
others or by speculation.
• Differences in Goal and task orientation
– single objective function vs exercise a choice and achieve a balance in what it is trying to
maximise and consequently for whom
– balancing the multiple objectives and without compromising on principles of equity and
equality
EVOLUTION OF COOPERATIVES AS ALTERNATE
ORGANISATIONS
 Stages of Cooperative Development
1. 1800 – 1840s…Owen ‘Report on Poor”, Fourier “phalanxes”
2. 1844 – WW1 – Rochdale & spread, ICA 1895, consumer coop
domination
3. WWI to 1950s – cooperative communities (Kibbutz)… 1937, 7
principles, ‘coop sector’
4. 1950s- 1980s – growth of service and ag coops, competition,
growth in size, distinction lost
5. 1980s to present (1992)…Laidlow’s global study…greater focus on
food, workers & industrial coops (Mondragon) (Craig, 1992)
 Evolution of the Cooperative
Enterprise
• Owenite ideals – self-help
and cooperation
• 1800 took over management
of New Lanmark Mills,
– sold quality goods, Paid full
wages to workmen in 1806
even when mill stopped
– “8 hrs labour, 8 hrs recreation,
8 rest"
• The Co-operative
Magazine 1826, The Co-
Robert Owen 1771-1858 founder of
operator 1828 (William King) cooperative movement
 Traditions of Cooperatives in 1800s
5 distinct traditions
• Consumer cooperatives - Britain
• Workers Cooperatives – France
– 1st national federation 1884
• Credit cooperatives – Germany
• Agricultural coops – Denmark (Germany)
• Service Cooperatives – housing and health, many part of
industrial Europe
 Rochdale Principles
1844 Rochdale Society of Equitable
Pioneers
1. open membership,
2. democratic control,
3. limited interest on capital
4. trade only in goods of excellent quality,
5. patronage refund,
6. political and religious neutrality,
7. education and training of members, popular sympathy: government
and support and political
expediency helped the
8. trading by cash payment cooperative movement.
1852 Wholesale department
1860 membership of 4000 and a
turnover of over a million
 CO-OPERATIVE PRINCIPLES
1. Voluntary and Open Membership
2. Democratic Member Control
3. Member Economic Participation
4. Autonomy and Independence
5. Education, Training and Information
6. Co-operation among Co-operatives
7. Concern for Community
 Identity Statement
• “A cooperative is an autonomous association of persons
united voluntarily to meet their common economic, social and
cultural needs and aspirations through a jointly-owned and
democratically-controlled enterprise.” (ICA 1995)
Institutional Changes & Development of Coops
• Legal Framework: The society as a legal person not recognized
until 1852 Industrial and Providence Societies Act, allowed it to
sue and be sued.
• Federated Structures: Significant economies of scale if coops
could bulk-buy. Cooperative Wholesale Society (CWS) in 1864.
– Non-business activities: between liberals and Trade union movement.
Own lobbying. helped the cooperatives in training for the office
bearers, employees and members, and in promotion, publicity and
propaganda. (ICA part of that)
 Credit Cooperatives in Germany
• Delitze-Schulze (1808-83) the urban small entrepreneurs,
– most expensive component of small self-employed workers
production was interest on working capital
– Established banks, provided working capital to the artisans.
guarantee of their word of honour and surety of the group.
– Started 1850, very large by 1900, by 1914 the largest credit
institutions in Germany, ended with Nazi rule

• Rural credit unions started by Raiffessein (1818-88)

– one credit union for one village (1st in 1864), lending to a man
for individual worth not against collateral; group surety
– Forerunners of modern cooperative credit institutions for
agriculturalists in many countries
– The unions took up trading activity. They brought fertilisers,
seeds, and other supplies on behalf of the peasants.
 Cooperatives in Denmark, Holland
and Sweden
• Heavy dependence on exports for dairy & animal products.
• Origin in old system of common processing of village milk into cheese. Cured cheese
apportioned in proportion of milk.
• Commonly owned creameries Holland, Denmark & Sweden. Paid on fat content.
Butter/ cheese exported to England.
• Opening of Americas invasion of cheap dairy & meat.
• Dutch and Swedish dairy farmers & cooperatives worked on quality norms,
federated enterprises for farmer benefit.
• Sweden coop dairies, meat packing plants started around the turn of 20th C,
Denmark and Holland somewhat earlier.
 Cooperatives in Canada
• Alphonse Desjardins and loan sharks, first credit union in 1900
to provide relief to working class
• 7 million members, largest cooperative financial group in
Canada, 31% of service outlets in sparsely populated areas
rd
• 3 most Socially Responsible financial institution according to
Maclean’s (2015 ranking)
• Ranked first in North America in Bloomberg’s World's 20
Strongest Banks in 2015
 Co-operatives globally

Source: ‘Statistical Information on the Co-operative Movement’ ICA. http://www.ica.coop/coop/statistics.html, accessed 29 September 2011.
World Cooperative Monitor 2020
Rethinking Cooperation - Arindom
 EVOLUTION OF COOPERATIVE
ENTERPRISE IN INDIA: STATE AND
BEYOND
 Cooperatives in India
• Origin in condition of peasantry in late 19th C
– Committee on Deccan riots against money lenders in Deccan 1875
• Rural indebtedness, chit funds and coops – shortage of agri credit
• 1901 Famine Commission recommended the establishment of Rural Agricultural Banks
• Cooperative credit societies Act 1904 (J McNeill 1st ROC)
– Kanaginhal Agri Credit Coop Society 1st coop,
– loan to coops up to Rs 2000 based on thrift…
– By 1911, 300 societies, Bombay Central Coop (BCC) Bank
• Cooperative Societies Act 1912– Registrar of Coop Societies and registration for audit
• Maclagen Committee on Cooperation (1914)
– 4 tiered system – primary society, guaranteeing union (taluka), District Central Bank & Provincial
Bank
 Cooperatives in India
• Early focus on middle peasants…. more successful in irrigated areas than ‘dry’
with high indebtedness
• 1917 new rules to increase power of Registrars.. Vaikuntal Mehta manager of
BCC and others resist
• After 1919 Cooperation a provincial (state) subject
• 60,000 new cooperative enterprises, 28 lakh members, 68 crore capital by end
1920s….deceleration in 1930s
• 1928 huge arrears, registration of coops in Deccan stopped
• Royal Commission of Agriculture 1928 “If Cooperation fails, there will fail the
best hope for rural India”….official guidance and control
• Early history of coops history of contradiction of the colonial state trying to
develop a self-reliant peasantry”!
 Cooperatives in India
• All India Association of Cooperative Institutes in 1929
• GoI’s Multi-Unit Coop Societies Act 1942 (incorporation and winding up in more than one province)
• 1984 Comprehensive Multi State Coop Societies Act
– Coops integral part of 5 year plans (until 7th)
– Between 1950-51 to 1996-97 coops increased from 1.81 to 4.53 lakh, Membership 1.55 to 20.45 crores
– Self- reliant cooperatives defined as those which have not received any assistance from the Government in
form of equity, loans and guarantees.
• Committee on Cooperative Law for Democratization and Professionalization of Management in
Cooperatives in 1985
• Model Cooperatives Act, 1990
• Multi-State Cooperative Societies Act, 2002
• 2004 Vaidyanathan Committee revival of cooperative credit
• http://www.ncui.coop/history-coop.html
Indian Cooperative Movement at a Glance 2016-17
Percent Share of Coops in National Economy
 Cooperative movement – Pre-independence
• An ideal Indian village will be so constructed as to lend itself to
perfect sanitation. …. It will have houses of worship for all, also
a common meeting place, a village common for grazing its
cattle, a co-operative dairy, primary and secondary schools in
which industrial education will be the central fact, and it will
have Panchayats for settling disputes.
– Gandhi in Harijan 1937
Development Retold: Voices from The Field

• Character of development
• Quickest and most satisfying method of rehabilitation for
refuges would be self-help
– ICU set up “to help refugees help themselves”
• Gandhi’s suggestion on keeping away from Government
• “Doer” to “advocator”
Founded ICU, Crafts Council, AIHB, Cottage,
NSD, Sangeet Natak Academy, ICCR refused
to be President of India
 Indian Cooperative Union
• Kamladevi asks Jain 2 days after visit to camp; ICU discussed to work on the conditions of the
landless agricultural workers
• Socio-economic survey or refugees were done
• Magistrate for labour for Mehrauli, Jain were looking to be owners not labourers
• Only way to occupy the land. Labourers asked for rations (6 months), 200 families moved out with
Jain
• “How can you profess socialism in one breath and recreate the zamindari system in the other”?
• Occupy Chattarpur and agricultural cooperatives. The Sacchkand Multipurpose Cooperative Society
at Chattarpur
• Contractors vs refugees in building Faridabad township
• “ICU not a refugee rehabilitation organisation but a social body .. with faith in the cooperative way of
life and is striving not just to provide economic props to the community but more to forge human
relationships between man and man, and man and his vocation, through the cooperative technique.”
 ICU
• Sensitive to people’s needs, rural community development; promotion of
handicrafts (CCIE) and launched Delhi’s Super Bazar
• Groups’ constant self-analysis and reconciling practice with ideology (research
section)
• “cooperation fails if it is reduced to a set of rigid and predetermined rules and
procedures; if it does not have the capacity to respect and to adapt itself to the
special circumstances and the special ethos of every community”
• KC’s combination of research, independent study and survey of whatever we
were undertaking was useful.
• We were not the mothers, we were the midwives. …We were there to promote
self-help… that was the cooperative union’s philosophy.
• “Don’t build dependence. Must not stay in a place for too long… “our business
was to create conditions in which people can do their business”.
 Future of Cooperatives: Vaidyanathan
• 2004 Task Force on Revival of Cooperative Credit Institutions
• Coops growth impressive, but uneven, heavy dependence on
govt, not a movement
• Finances in chronic state of sickness and prone to recurrent
crises
• An Altruistic measure
• Development policy driven
only 13% of rural households report
borrowing from cooperatives, banks and
other institutional sources.

Barely 5% of households in the lowest

asset classes report borrowing from.
25% in group with largest assets

Borrowings by NSSO less than half

reported to RBI, highly profitable to
divert funds for other purposes
 Weak Institutions
• resources of cooperatives come from public funds, no mechanism to
ensure prudent and efficient management
• Aggravated by increase in public funds & periodic loan waivers
• Laxity in audits of state govts, independent survey required
• Committeees “need for major legal and institutional reforms to free
cooperatives from government interference and make them efficient”
• Eligibility for central assistance conditional on their agreeing to a set of
specific legal and institutional reforms.
• NAFSCOB significant redn in societies viability Collection rates at 60-70%
Reviewing Cooperative Thinking
and Perspectives

MCE Class 3
Dec 5-6, 2021
 Totgar cooperative
• “We Have a Pie In Every Aspects of a Farmer”
• TSS integrates various businesses and services to provide benefits to its member
farmers, while creating value for other stakeholders.
• Member benefits
– TSS offers higher bid price…better returns to farmers, rents out storage capacity, farmers
can sell in a staggered manner
– Sales and purchase incentives … price discounts on inputs… quality inputs
provided…bonus and dividends
– commission agent at the Sirsi yard (61% in betel nut)
• Reducing risks
– Access to credit, agri-inputs, extension services, liquidity
– Output market (also open to non-members), price stabilization fund
• Net returns to farmers (input, extension, output…. Supermarket, hospital, reduce
info asymmetry, search costs, direct monetary transfer)
 Member Centrality
member centrality. Cooperatives by their very
nature are inward looking organisations. They are
meant to serve the member community unlike the
outward looking organisations such as the
corporate which `sells to any one so long as there is
profit.' The focus of all activities of cooperatives
should have been members. Business activities are
to be developed based on member needs, policies
are to be designed according to member views and
administration is to be carried out through member
participation. Indian cooperatives generally do not
stick to this value.
Cooperatives in North East
Comparative review of three recent
books on co-operatives in India

Tushaar Shah B S Baviskar & D Attwood

Vs
 Commonality and differences
• Comparative data on rural coops, across
regions and sectors.
• Conceptual and theoretical issues on coops
• Address each other, complementary
How to study coops and strategies for successful
coops
 Commonality and differences
1. Question of leadership or broadly agency
2. Debate over green-house versus blueprint
3. Cooperatives and political power
• Agency versus structure debate.
• Normative concerns cannot be considered as mere
“spill-overs”. Cooperatives must be seen as ongoing
movements, as social criticisms, not merely as
organisations
• Broad characteristics of regional political economy (a
non-interfering state), the social structure (some
homogeneity in class and caste) and internal designing
of a coop together bring about coop success.
 Baviskar & Attwood’s view
• Performance of coops can be understood only by analysing
broad contours of regional political economy in which they
function. (Mah, Gujarat, W Bengal, TN, UP and Kerala).
1. Coops flourish in regions where there is a strong middle
peasant class, relatively less inequality, broad sense of
identity and political power unifying small and large
producers
2. Society not stratified a lot in caste dimensions.
– Marathas as eg. Vs W Bengal
3. When insulated from state bureaucracies.
Internal design principles, effective managerial control with
products of high perishability and greater vertical integration
(sugar and milk) and high degree of capacity utilization
ingredients for success.
 Tushaar Shah critique
• Why are there failures in some successful
domains (such as Gujarat)? And successes in
“failure” domains?
• Thus not across states but within states.
Micro-dynamics of cooperative organisations.
• Political economy enabling or disabling,
design provides vital clue to enduring success.
• Management oriented, situation-specific
Five components of any village coop

1. Governance structure – locus of control,

patronage cohesiveness
2. Critical linkages with federal cooperatives
3. Patronage systems – patronage potential
(volume of business) and centrality (degree)
4. Micro-environment local socio-political
context
5. Operating system (operating efficiency and
patronage responsiveness)
Five components of any village coop
 IRMA Research on Cooperatives 1990’s
Design
Collective agency

Self-
Member
External Task Preservation
centrality
Environment

Patronage Self-
centrality Propagation

Domain
Internal Task Design-
centrality
Environment sanctity

Entrepreneurial Drivers Success

Drive
 Agency/ Leadership and Blueprint
• Shah – Leadership overemphasised, “organisations manage to get
leadership and talent they need to succeed”
• Who designs?

Core and auxiliary

1. Identify a sustained market
2. Enough distance between procurement and marketing to justify chilling
investment freeing coops from small time vendors
3. Powder plant
4. Member control
5. Professional management

Auxilliary – 3 tier structure, vertically integrated, democratic structure

• Overall success not that impressive in replicating Anand model
• Failure not sufficiently explained
 Supriya Roy Chowdhry summary
• Shah’s centrality of the incentive principle and of
providing ever increasing economic returns to
producer members important.
• Cooperatives, unlike factories, treat a delicate
balance of technology, markets, human
endeavour, leadership and a certain universe of
morality. Normative discourse part of the
cooperative experiment and cannot be wished
away for practicalities.
• Task of designing cannot be divorced or
abstracted from the normative discourse.
A comparative analysis of sugar co-operatives in India
Attwood, D. M., & Baviskar, B. S. (1987).

WHY DO SOME CO-OPERATIVES

WORK BUT NOT OTHERS?
Baviskar and Atwood
 Baviskar’s contribution
• Unusual path of understanding cooperatives
– (not caste/ Sanskritization but institutions)
• Cooperation was seen as desirable and needed by
society, but to be promoted by the state.
• Counterpoint came from practitioners - Kurien
• BS not about charismatic leaders or “desirability” as
developmental tool. Why co-operation worked in
certain settings and failed in others; whether
cooperation was inclusive (as it was touted to be); and
fallout of successful cooperatives were.
• …We need more voices that understand markets in a
larger social context. (MS Sriram, 2013)
 Finding the Middle Path
means releasing energies and utilizing the human
capital of local organizers
1. Analytical: Performance of coops can only be
understood through analysis of regional political
economy
2. Substantive: Coops flourish only when they are
free of direct political and admin control by state
• Our bent towards theories of political economy
• The greenhouse approach
 Rethinking cooperatives
• The key problem is not finance or technology
but organisation
• Comparative studies – Field research & how
organisations operate and networks of
informal alliances and interests within
operation.
• Cane supply problem solved efficiently by
cooperatives
Success of Sugar Coops in Maharashtra
• Not only in superior cane supply system
• Ability to generate stable alliance among S, M
and Large farmers
• Internal – technical requirements of sugar
• External – agrarian system of region
• Probable success/ failure of coops can be
predicted through comparative analysis
– Technical and organisational of production process
– Distribution of interests and possibilities for alliance
– Regional agrarian systems – natural & social environs
 Sugar enterprises
• India – absence of factory owned plantations
• Perishable and bulky, better crushed through
heavy machinery, high capital, adequate supply
reqd
• If factory depends on individual suppliers, high
transaction costs and efficiency affected
• Landlords and moneylenders appointed in 1930s
as cane supply agents (inefficient and
exploitative), later cane-supply coop unions
• Private mills not investing, nationalizing ‘sick’
units, deadlocked class conflict in N India
 Sugar enterprises
• Competitors in W &S India organised on different lines
as cooperative factories
• 1950 1st factory, 1960 - 14, 1970 – 30, 1980-60 in
Maharashtra, 90% of all sugar from coops
• Managed by elected local leaders not govt officials,
elected Board, one vote one share
• Resolved cane supply – growers and owners not
antagonistic, strong incentive to supply by farmers
(Mah 75% cane processed in factories, N India – 25%)
• Maharashtra, 15% of sugar but 1/3rd of its white sugar;
90% of cane goes to mills, 40-50% in UP (Damodaran,
2008)
Technical and Economic Efficiency
Coops outperform private
1. Superior organisation
2. Political leverage

Late 1960s 79% of Maha

coops at 100% capacity
Only 22% Northern
factories

Ex-gate versus Ex-farm

N India 1/3rd at loss for a

decade, Maha… 22%

Technical efficiency much

higher
 Basis for Alliance
• How is it possible for members to operate?
• What prevents big farmers from exploiting smaller ones?
• Successful alliance
1. Technical, that requires small to be part (individually small but
collectively 40-50%)
2. Agrarian relations structure that allows for pragmatic
innovation and common purpose (75% attend GBM and 100%
vote in survey)
• Large farmers get more profit overall but smaller ones do
not lose and are able to survive
– 30 to 50-60% of supply gives them veto and bargaining power
 Why Maharashtra?
• Low density, insecure agricultural system.
Loose stratified society
• Marathas – common cultural and political
identity
• Pragmatic alliance making in agri, rural
education, coop credit and marketing societies
growth, vigorous non-Brahmin movement
(earlier institutions provided political and
admin experience for leaders)
Comparisons with other Co-operatives
• N India 1930s cane unions largely organised and run by
Govt, favouritism etc 7000 cane growers boycott
unions
• Why did they work poorly?
• Stratification in N led to greater disunity, less cultural
identity between rich and poor
• Cane supply unions assume common interests but do
nothing to strengthen interests, rationally just dispose
cane… need for strong economic rationale for
cooperation
• Farmers did not change production systems in N India –
cost minimizing than yield maximizing
 Milk and Sugar
• 1946 – Samarkha & Shrirampur
• Patidars
• Barias – small farmers and sharecroppers
• Amul’s expansion beyond Charotar, now more control by
Barias
• External factors important – agrarian structure of the
region, dynamics of caste, clan and class relations,
dynamics of irrigation and population. Internal and external
need to work together
• Close relations between coops and state politics in Mah,
not so much in Gujarat
– 1981-82, 700 of 895 village societies in Kheda uncontested
– Power more in managers and technocrats
 Cooperation and State
• Overregulation…
• what is primarily wasted is human capital; skills
and creative energies of Indian villagers
• Development: Human capital and social
organisation..
– Within their domain they are entrepreneurs tuning so
subtly to economic conditions that many experts fail
to recognize how efficient they are
– When organisations are allowed to experiment in
adapting to local conditions, new and more efficient
organisations would emerge
 What should be done?
1. Coops governed by elected boards
2. Election every 3-5 years
3. Never suspended
4. If so only by petition of sizeable fraction
5. Elected board final authority, ratification by AGM
6. State subsidies should be temporary
7. State to convene workshops for redrafting laws
8. Laws to require producers invest in fixed capital of
coops & proportional to volume business
9. Patterns of ownership that ensure regular
contribution