Cooperative Marketing Notes

CHAPTER 1
HISTORICAL PERSPECTIVE OF CO-OPERATIVE MOVEMENT

DEFINITION OF CO-OPERATION
Ho Calvert: “Cooperation is a form of organization in which persons voluntarily associate together as human beings on the basis of equality for the promotion of economic interest of themselves”.

DEFINITION OF CO-OPERATIVE SOCIETY (May 06)
Co-operative society is defined as “a union of persons established according to the principles of equality, the purpose is to improve the financial position of its members by joint performance, provided that all profits made, aims to distribute among members and not in proportionate to investment”

OBJECTIVES OF CO-OPERATION (May 07)
1. The members should be prepared to work in a sprit of cooperation.
2. There should be equality in all respect.
3. There should be no exploitation.
4. There should not be any political influence.
5. There should not be any regimentation.
6. There should be no loss of initiative.
7. Capital should not be allowed to dominate.
8. Both producer and consumers should feel satisfied.

PRINCIPLES OF CO-OPERATION (Nov. 06, May 06, 07)
Mr. Watkiw: “Co-operative principles are the ideas inherent in co-operation, which determine what is the mode of action”.

1. Rochdale Principles
In 1997, ICA declared the following principles as Rochdale Principles:
1. Main Principles 2. Secondary Principles
– Open and voluntary membership – Equal rights to all irrespective of cast, religion etc.
– Limited interest on capital – Neutrality in political and religious matters
– Democratic management – Cash transaction
– Cooperation among cooperators – Limited responsibility
– Cooperative education – Publicity and propaganda
– Distribution of surplus – Thrift and Savings

2. Reiffeisen Principles
In order to provide relief to agricultural workers in Germany, Reffeisen started agricultural societies in 1862. He proposed the following principles:
1. All should be accepted as a member
2. Members should be on voluntary services
3. Assistance should be given to members
4. Liability should be limited
5. Area of operation should be limited
6. Should follow the principle of self-help
7. Surpluses should be used for services

3. ICA (International Co-operative Alliance) Principles (Nov. 01, 05)
1. *Voluntary and Open Membership: The membership is based on the concept of people willing to accept responsibility of membership without general, social, racial, political or religious discrimination. (Nov 03, 07, 08)
2. Limited Interest on Capital: Capital is an instrument of production and like any other item it is entitled to receive a fair remuneration. In a cooperate economy, capital cannot dominate but has to serve in return for a fixed remuneration or a limited interest. This principle shows that the co-op movement seeks to neutralize the disparities caused by ownership of capital and seeks to eliminate the profit motives. (Nov 07, May 08)
3. Democratic Management: Co-ops are democratic organizations; they are managed and controlled by their own members. In a co-op, members have equal voting rights, i.e. they follow the principle of “One Member One hand”. (Nov. 02)
4. Cooperation among Co-operatives: Co-ops strengthen their movement by working together through local, regional, national and international structures.
(May 04, 07, Nov. 04, 08)
5. Cooperative Education: Co-ops provides various types of management training programmes to their members and employees so that they can contribute to the development of their co-ops.
6. Member’s Contribution: Members contributes equally to capital contribution and receive limited compensation depending upon their contribution. They allocate surpluses as development fund for their co-ops.
7. Autonomy and Independence: Being self-helped organization, co-ops are controlled by their members. In case they enter into agreement into other organization including the government, they maintain the co-operative autonomy.
8. Concern for Community: The co-ops work for the sustainable development of their communities.

DEVELOPMENT OF INDIAN CO-OPERATIVE MOVEMENT (Nov. 02, 08)

1. Beginning Period of Co-operative Movement in India (1904-1912): The Indian co-op movement started on 25th March 1904 with the passing of an Act. Provision was made for Primary Credit Co-op Society and more importance was given to agricultural finance. There were 8177 co-ops in 1912 with a membership of more than 4 lakhs. In 1911Mr. Samaldas and Mr. Gokhale started a Central Co-op Bank in Mumbai.
2. Period of Hurried Expansion (1912-1918): Shortcomings of 1904 Act were overcome by 1912 Act. Permission was granted to start co-op societies in other fields. Central Co-op Societies was developed. The number of co-ops reached 25192 in 1917 with a membership of more than 109 lakhs. A committee was appointed under the leadership of Sir Edward Mcgalan for taking overall review.
3. Unplanned Rapid Development (1919-1928): The matter of cooperation was entrusted to the provincial government. Depending upon the situation of the province various acts were passed by the respective provincial government to develop the co-operative movement in their provinces. During this period there was only quantitative growth of societies but no proper attention was given to qualitative growth. Therefore Ramdas Pantalu defined this co-ops movement as “Unplanned Development”.
4. Period of Consolidation and Reorganization (1929-1939): Because of the worldwide financial depression in 1929 the development of co-op movement stopped and about 50% of co-op societies went into liquidation. The Royal Agricultural Commission 1927 and Provincial Banking Inquiry Commission 1929 gave their recommendation and pointed out that the failure of co-ops was due to lack of education and proper guidance. During this period the existing societies had combined and registration of inactive societies were cancelled and hence the number of societies went down by 13%.
5. Period of Recovery (1939-1947): Due to the world war the price of agricultural goods started increasing thereby increase in the income of farmer, which in turn increased deposits from 25 crores to 54 crores with Primary Credit Co-operative Societies. Consumer Co-operative Stores proposed and Industrial Co-operative Societies came into existence for supplying the war materials. Due to bifurcation in 1947 some of the co-ops had been shifted to Pakistan thereby reducing the number of societies.
6. Sixth Stage (1947-1970): Co-operatives were included in the Five Year Plans.
7. Seventh Stage (1970-2000): Co-operatives were asked to develop rural banks. NBARD formed as an apex bank for monitoring the co-operative banks. Initiatives were taken for replicating the Anand model for dairy co-operatives across the country.
8. Eighth Stage (2000 onwards): The co-operatives have to face direct competition from MNCs and have to work within WTO restrictions. The government is providing adequate support to the co-ops by building brands, distribution networks and in exporting their products in global markets.

Recommendations of Sir Edward Mcgalan Committee
1. The field of co-operative should be limited to village level.
2. Co-operative societies should be smaller.
3. The responsibilities and liabilities should be limited.
4. More attention should be paid for collection of deposits.
5. Recovery of loans should be as per schedule
6. There should be regular auditing of co-ops
7. Government should have strict control over the capital of co-ops.
8. All co-ops should have separate joint reserve funds.

CO-OPERATIVE MOVEMENT IN ENGLAND (Nov. 07)
Initial Steps
– In 18th century, because of industrial revolution in England, capitalist exploited labours.
– Robert Woven, father of co-operative movement in England, started labour exchanges, formed labour colonies and put demand of having separate act for labours.
– To conquer capitalism, he started co-operative shops alongwith William King but could not succeed.
– 28 weavers from Roshdel village came together and established “Roshdel Equitable Pioneers Society” in 1844. They contributed one pound each and registered their society under Friendly Societies Act. In 1888 membership was 1123 and the capital was 3.4 lakh.
Legal Provisions
– Upto 1852 co-operative societies registered under Friendly Societies Act, which provide registration only to the societies with unlimited liabilities.
– After struggle of Christian society, government passed Co-operative societies Act in 1852, which registered only societies with limited liabilities and second-class societies.
– In 1862 Provident and Industrial Societies Act passed which was a landmark of legal recognition of co-ops in England.
Consumer C-ops
– In 1863, “North England Co-operative Wholesale Agency and Depot Society” was established. The name of society was changed as “Co-operative Wholesale Society”. It has its subsidiary bank and in 1937 its started first co-operative shop.
Agricultural Co-ops
– Farmers started agriculture and horticulture co-operative society in 1876.
– In 1956, agriculture societies formed co-operative federation, which provide guidance to member societies.
– In 1977, the number of agriculture societies was 500 with memberships of 3,32,000.

CO-OPERATIVE MOVEMENT IN GERMANY (Nov. 07, 08)
– Co-operative credit society first started in Germany.
– In the villages, the Jew businessmen controlled the economic activities. They purchased goods from farmers at a very low price and sold at a very high price. Worse they had to borrow money from Jew moneylenders at high rate of interest.
– F.W. Raiffeissen, mayor of the city, “A Poor Peoples Committee” and a credit society of poor people who need credit.
– H. F. Schulze a German Judge founded a credit association in 1850.

CO-OPERATIVE MOVEMENT IN ISRAEL (Nov. 07)
In Israel co-operatives represents 18% of the national economy. Agricultural co-operatives cover more than 58% of production. Agricultural co-ops are mainly of three types:
1. Kibbutz: Members of Kibbutz eat in common dining room and receive clothing from the common store. Kibbutz children are placed from early infancy in nurseries. Kibbutzes are affiliated with political parties and some religious groups. Kibbutz economy is based only on agriculture and it has also developed various industries.
2. Moshav Shitufi: This form of co-operative represents a media between the Kibbutz and Moshav Ovdim. Here the members work on the farm and in return get an equal share in income of the society. Society provides a house with some amenities to each member.
3. Moshav Ovdim: The citizens, who did not satisfy with the other two societies, formed it in 1921 at Nahalal. This society gets land on lease from the government and allots it to the members for cultivation. Beside this, the society also supplies fertilizers, seeds, equipments and household commodities on credit. The members are required to sell their surplus produce through the society. The Moshav Ovdim also perform some municipal functions such as health, sanitation, education etc. for which taxes are collected form the members.

CO-OPERATIVE MOVEMENT IN DENMARK
On the basis of Rochdale system, H. C. Sone started Co-operative movement in Denmark. There are dairy, eggs, eatables, bread and fruits exporting, manufacturing and productive types of co-operative societies.

Features of Milk C-operatives in Denmark
1. Formerly Denmark was agricultural country, shifted towards dairy business and soon became one of the leading countries in the world.
2. 70% of its dairy production is exported to England, Germany and other countries.
3. Farmers have formed their local co-operative societies, which have their organizations at district and state levels.
4. Representation of the society is given according to the milk supplied by them. Executive Board is elected among representatives.
5. Agreements are made with the members for supply of milk for a period of 15 to 20 years against cash payment.
6. Use various methods for production and processing of milk.
7. Follow the principles laid down by the Danish government.

CO-OPERATIVE MOVEMENT IN SWEDEN
– Sweden had agriculture-based occupation but it is soon replaced by industries. Industrialisation caused exploitation of working class.
– In 1850, first co-operative society “Commodity Building Company” was established.
– In 899, “Swedish Cooperative Union” and a wholesale society known as KF founded.
– “Federation of Swedish Farmers” is a national level body commonly known as SL.
– Cooperative dairies are the largest industry in Sweden.

PROBLEMS OF CO-OPERATIVES (Nov. 01)

1. Poor Performance and lack of Financial Viability: The performance of co-ops in India is not satisfactory. In spite of huge government grants & equity participation, SCBs, DCBs, SCARDBs, PCARBs are not performing financially well. If the government grants were stopped many co-ops would lost their financial viability.
2. Lack of Professionalism in Management: Co-operatives in India still follow the traditional management techniques. Indian co-ops are underestimated, mismanaged or not managed at all. Beside this the government officers deputed to head the co-ops are not accountable to political persons and not to members.
3. Excessive Government Control and Political Interference: The government created various co-ops in India and hence the politicians see co-ops as a vehicle for political agenda and key to vote bank within party politics. In the state of Tamilnado, Andhra Pradesh, and Maharashtra the government started tampering the management of co-ops mainly for the political reasons.
4. Lack of Good Leadership: Every co-operative needs a good, skilled, honest and dedicated leader to take power the co-op movement without any compensation, but in India such leaders are in short supply.
5. Poor Board Management Relation: In co-ops the members elect the Board of Directors and have the power to appoint or dismiss their managers, it leads to politics and strained relations.
6. Loss of Focus on the Prime Objective: The prime objective of any co-op is to provide maximum benefits to the members. But there is growing evidence that many members feel betrayed by their co-operative.
7. Poor Work Environment: Like govt. servant’s co-op managers regularly get salary, annual increments and promotion irrespective of their performance. There is neither incentive for good performance nor punishment for poor performance. Hence the work environment is very poor.
8. *Unlimited and Limited Liability: In a corporate enterprise if the losses do occur, it has to be born by the BOD or the financial institutions, whereas in co-operatives the entire loss is shared equally among the members. Unlimited liability can be enforced only at the time of liquidation of society.
i) Limited Liability: It refers to that liability which is limited to a certain predefined percentage or an amount, which a member is obligate, may be at the time of closure or loss of a co-op. There are three types of limited liability.
a) Liability limited to the value of share.
b) Liability limited to the multiple of shares.
c) Liability limited by guarantee.

ii) Unlimited Liability: In a registered society, unlimited liability practices merely to the contributions which a liquidator my levy in the process of liquidation. Its main characteristics are:
– The amount is fixed by liquidation.
– It can be enforced only at the time of closer or liquidation.
– It comes only as a last resort when the liquidator fails to collect money from the defaulter.

REMEDIAL MEASURES
1. Reform in Co-operative Laws.
2. Establish Professional Co-operative Management Centers.
3. Services of Professional Managers and Leaders.
4. Practice Good Human Resource Management

Political and Religious Neutrality (Nov. 05)
ICA principle of 1937 gave Neutrality in Politics and Religion. The principle suggests that the cooperative should not discriminate amongst existing or perspective members on he grounds of policies or religion. However the cooperative is free to carry out its cooperative tasks by taking the help of any political party or religious organisation.

One Person One Vote (Nov. 06, May 07, 08)
Since the cooperatives are democratic organisations they are managed and controlled by their own members. Democratic management of a co-operative is ensured by allowing one vote for one member and the amount of capital invested has no consideration. One person one vote does not allow concentration of power in the hands of few.

CHAPTER 2
ORGANISATIONAL STRUCTURE OF CO-OPERATIVES IN INDIA

POWER OF REGISTRAR OF A CO-OPERATIVE (Nov. 01, 07)
1. Deciding policies as per the financial policies of state and central governments.
2. Registration of co-op societies
3. Consent for amendment of byelaws submitted by co-ops at the time of registration.
4. Permission for investment of society’s Reserve Fund in any business or lending loans.
5. Audit and inspection of society
6. Stoppage of business of society, if he found that the work of society is against the welfare of its members.
7. Imposing penalty on defaulter members of executive committee.
8. Assisting in recovery of loans provided by Land Development Bank
9. Decisions for the disputes of members regarding elections and other matters.

FUNCTIONS OF A CHAIRMAN OF A CO-OPERATIVE (Nov. 07)
1. Preside over committee meetings.
2. In case of equality of votes, use casting vote to resolve dead lock.
3. Give notice in writing to the secretary to hold a special meeting of the committee.
4. Direct and superwsie the act of officers and servants
5. Check the accounts of the secretary or trustee and examine the register and account books to take steps for recovery of dues to society.
(Nov. 01, 06, May 04)
CO-OPERATIVE SOCIETY JOINT STOCK COMPANY
1. Definition
It is an association of persons who have come together on a voluntary basis to promote their economic interest. It is an artificial person, recognized by law with a common seal, carrying a limited liability and having a perceptual succession.
2. Basic objective
To provide basic service to its members. Profit earning is a secondary motive.
To earn profit out of the business
3. Registration
Done under Co-op Societies Act 1912
Done under Indian Companies Act 1956
4. Members
At least 11 members are necessary but no limitation on maximum members For a Pvt. Ltd. Company minimum 2 members are required and for a Pub. Ltd. Company minimum 7 members are required.
5. Voting Rights
Based on the principle of ‘One Man One Vote’
Based on principle of ‘One Share One Vote’
6. Liability
Members either have limited or unlimited liability
Liability of shareholders to the face value of shares.
7. Transfer of Shares
Shares are non-transferable
Shares are freely transferable in the market
8. Financial Resources
They are limited because they don’t have the capacity to raise and borrow funds.
They are unlimited, since the capacity to borrow and raise funds is very high.
9. Privileges
Enjoy exemption in income tax and stamp duty
Never get any exemption if income tax
10. Closure
Can be dissolved under order of court Can be liquidated by legal process, i.e. by the consent of the state.
11. Audit
Accounts are audited by Registrar of co-ops
Accounts are audited by statutory auditor

(Nov. 01, 06, May 04)
CO-OPERATIVE SOCIETY PARTNERSHIP FIRM
1. Definition
It is an association of persons who have come together on a voluntary basis to promote their economic interest.
When two or more persons come together to undertake certain activities to earn profit.
2. Basic objective
To provide basic service to its members. Profit earning is a secondary motive.
To earn profit out of the business
3. Registration
It is compulsory and done under Co-op Societies Act 1912
It is optional and done under Partnership Act.
4. Members
At least 10 members are necessary but no limitation on maximum members Atleast 2 persons are required and maximum number is 10 for banking business and 20 for non-banking business.
5. Liability
Members either have limited or unlimited liability
6. Closure
Can be dissolved under order of court Can be liquidated any time with consent of partners.
7. Audit
Accounts are audited by Registrar of co-ops
Accounts can be audited by any CA
8. Legal Status
It has separate legal entity It has no separate legal entity. There is no distinction between partners and their firm
9. Surplus
Not more than 12% of the net profit can be distributed as bonus.
Surplus is shared by the Partners in agreed Ratios.

CO-OPERATIVES AT NATIONAL LEVEL
General Co-operatives
1. NAFED – National Agricultural Co-op Marketing Federation
2. NCCF – National Consumer’s Co-ops Federation
3. NCUI – National Co-ops Union in India
4. NCHS – National Co-ops Housing Society
5. IFFCO – Indian Farmers and Fertilizers’ Co-operatives
6. UCIS – Union Co-operatives Insurance Society
Industrial Co-operatives
1. NCFS – National Federation of Co-operative Sugar Factories
2. NFIC – National Federation of Industrial Co-operative

CHAPTER 3
MANAGEMENT OF CO-OPERATIVE SOCIETIES

FEATURES OF CO-OPERATIVE
1. Association of Persons: Co-operative society is an association of people who associate together and contribute capital in the form of shares.
2. Business Enterprise: Co-operative society is not a charitable organization, but aims at business with a profit and risk.
3. Voluntary Enterprise: The admission and retirement of member in the society is completely voluntary.
4. Democratic Enterprise: Every member has a right to vote, irrespective of the number of shares he holds.
5. Body Corporate: C-operative society once registered becomes a body corporate with perpetual succession and a common seal.
6. Spirit of Service: The prime objective of the co-operatives is to serve rather than to earn. This concept is based on the motto “To Help People to Help Themselves”.
7. Common Interest: The object of co-operative society is to promote common interest of its members.
8. Equality: The members of a co-operative are equal, irrespective of their differences in social, economic and political conditions. The concept is “Each for all and all for each”.

BENEFITS OF CO-OPERATIVE (Nov. 04)
1. Easy Formation: Procedures for registration of co-operative society is simple with nominal fees.
2. Democratic Management: Each member enjoys an equal right to vote, and participation in decision-making process.
3. Limited liability: Liability of members is limited to the extent of unpaid shares held by them.
4. Open Membership: Any person can become member by purchasing the shares of society.
5. Stability: Continuity of co-operative society does not affected by death or insolvency of members.
6. Low Cost of Operation: Since no salaries are paid to the office bearer and also enjoy various concessions and subsidies.
7. Cash Trading: Credit transition is not practiced in co-operative society and hence there is no risk of bad debts.
8. Tax Exemptions: Co-operative society is exempted from income tax upto certain limit.

BENEFITS OF CO-OPERATIVE TO THE SOCIETY (May 04)

TYPES OF CO-OPERATIVE SOCIETIES (May 08)
Various types of Co-ops under section 2 of Maharashtra Co-operative Societies Act are:
1. Apex Society: Its area if operation extends to the whole of the state of Maharashtra.
2. Federal Society: Atleast its five members are themselves a society. E.g. Maharashtra State Co-operative Union.
3. Society with Limited Liability: Liability of its members is limited by its by-laws.
4. Society with Unlimited Liability: Liability of members extends beyond their shares.
5. Agricultural Marketing Society: Atleast three-forth of its members is agriculturist and its objectives are the marketing of agricultural products.
6. Credit Co-operative: It Engage mainly in the disbursement of credit to their members. E.g. Agricultural Credit Thrift.
7. Consumer Co-operative Society: Its objectives are the procurement, production or processing and distribution of goods to its members and also other customers.
8. Co-operative Bank: A society, which is doing the business of banking as defined in section 5 of Banking Companies Act 1949, or functioning as an Agricultural and Rural Development Bank. E.g. Janakalyan Sahakari Bank Ltd. Saraswat Co-operative Bank Ltd.
9. Housing Society: Its object to provide its members with open plots for housing, dwelling houses and common amenities and services.
10. Industrial Co-operative: It is an organization of workers and craftsmen engaged in the cottage, village or other small-scale industries to undertake production, purchase of raw materials, marketing of products to the members. E.g. Leather co-operative.
11. Dairy Co-operatives: Milk producers at the village level form these types of societies.

REGISTRATION OF CO-OPERATIVE SOCIETY (May 04)
Sec. 4 says that a society with the object of promotion of economic interest and general welfare of its members and public may be registered under the act.
Conditions for Registration:
1. Society should consist of minimum 10 members.
2. Members should belong to different family and not from the one family.
3. Members should be eligible to contract as per Indian Contract Act 1872.
4. All persons forming the society must reside in the area of the operation of society.
Refusal of Registration:
Registrar may refuse to register the society under the following circumstances:
1. Society does not comply with the conditions laid down in the Act.
2. Society fails to furnish the required information.
3. When the name of the society is similar to any registered society.
4. If Registrar feels that the society will adversely affect the development of co-operative movement.
Cancellation of Registration:
Registrar may cancel the registration of a society under the following circumstances:
1. It transfers the whole of its assets and liabilities to another society.
2. It amalgamates with another society.
3. Its affairs are wound up
4. It is de-registered
5. Winding up proceedings are terminated on its liquidation.

MEMBERSHIP OF CO-OPERATIVE SOCIETY *(Nov. 07, 08)
There are four types of membership in the society
1. Original Member: A person who is admitted to the membership of the society.
2. Associate Member: A member who holds jointly a share in the society with others. He gets the right of vote only in the absence of person whose name is first in the share certificate.
3. * Nominal Member: Sec. 2(19) of the Act states that “A person may be admitted after the registration of the society as a nominal member on payment of nominal fee, in accordance with the by-laws of the society”.
a. He does not have any right and privilege of member.
b. He has no right to vote
c. He is not eligible to be a member of committee.
d. He cannot be appointed as the representative of the society.
e. He will not be entitled to any shares in the profits or assets of the society.
4. Sympathiser Member: Sec. 2(19) of the Act states that “A person may be admitted as a member who sympathises with the aims and objectives of the society”. (All points from a-e of nominal member)

Rights of Members (May 04)
1. Right to hold shares, not exceeding one fifth of share capital of society or Rs. 20,000.
2. Right to transfer his shares to an outsider who applies for membership.
3. Right to receive dividend at the rate not exceeding 12% in case of profits.
4. Right to vote in General Body Meeting personally and not by proxy.
5. Right to inspect the books and records of the society free of costs.
6. Right to contest elections of any post of any committee.
7. Right to raise loan from the society.
8. Right to refer any dispute to the co-operative court.
9. Right to resign from membership of the society.
10. Right to receive refunds 6 months after his resignation.

Duties and Liabilities of Members (May 04)
1. To pay the dues of society regularly.
2. To comply with the provisions of the Act and Bye-laws of the society
3. Not to create nuisance in the society.
4. Not have any interest that conflicts with the objectives of society.

Cessation of Membership
A person shall cease to be a member under following circumstances:
1. His resignation from membership being accepted.
2. He transferred all of his shares or interest to another member.
3. He removed or expelled from the society.
4. He has died.
5. Any member corporate body, firm or trust dissolved.

MANAGING COMMITTEE
Members of Managing Committee are appointed as per byelaws of the society and comprises of Chairman, Vice Chairman, President, Vice President, MD, Secretary and Treasurer.
Powers of Managing Committee
1. Manage the business of the society.
2. Scrutinize the membership applications.
3. Check the books of accounts and register of the secretary and treasurer.
4. Sanction working expenses and any emergency expenses.
5. Appoint, suspend, and remove all officers except auditors.
6. Deposit the funds of society to any bank
7. Enter into any contract of the society
8. Borrow, raise or secure the payment of money
9. Refuse transfer of share if transferee is not qualified to be a member.
10. Settle or contest any suit or claim by or against the society in a court of law.

Duties of Managing Committee (May 08)
1. To observe the provision of the act, rules and bye-laws
2. To get the account of society audited and placed before the General Body Meeting.
3. To hold elections of the committee before expiry of terms.
4. To maintain particulars of assets and liabilities of the society.
5. To maintain prescribed books of accounts

Functions of BOD
1. Elect chairman of society from amongst its members
2. Register new members and allot of shares to them
3. Authorize transfer of shares
4. Allow investment of funds
5. Lay down policies, guidelines, and procedures as per act, rules and byelaws

Duties of Secretary (May 08)
1. To prepare and enforce office rules and procedures
2. To maintain record book of business transactions and annual budget of the society.
3. To execute the decisions of managing committee as regards borrowings & investment of surplus funds.
4. To fix date of AGM and Managing Committee Meetings in consultation of chairman.
5. To issue notice, agenda etc. for meetings.
6. To maintain register of members, share ledger, capital register minutes book.
7. To file statements of accounts with the registrar.
8. To issue circulars, notifications and booklets to the members.
9. To receive loan applications from members and placed before managing committee.
10. To keep contact with the press and to inform about publicity of activities of society.

SIGNIFICANCE OF CO-OPERATIVE LAWS
Cooperative Credit Societies Act 1904
The main provisions of this Act were:
1. Registration is for primary agricultural societies.
2. Area of operation limited to villages
3. Members have unlimited liability
4. Any 10 people of a village or town with a common objective could form a co-op.
5. Societies registered were exempted from fees, taxes payable under various acts.

Cooperative Societies Act 1912
Co-op Credit Societies Act 1904 had certain difficulties. In 1912 government removed word credit and passed Co-op Societies Act 1912 to consider non-credit activities also. The main provisions of this Act were:
1. Provision for creation of Reserve Fund.
2. Restriction on individual shareholding to avoid monopoly of rich people.
3. Statutory enquiry, inspection and audit of societies.
4. Provision for appointment of registrar for the implementation of Act.
5. Admission to nominal and sympathiser members.
6. Division of societies not as urban and rural but as limited and unlimited liability.

Maharashtra Cooperative Societies Act 1960
The main provisions of this Act after the amendment in 1986 and in 2000:
1. The registration fees are required to be paid.
2. Members will get voting rights after two years from his admission as member.
3. Before the filing of revision application, defaulter members have to pay 50% of dues.
4. In the managing committee, one seat is reserved for SC, ST, VJ and one seat for EBC

CHAPTER 4
PROFESIONAL MANAGEMENT OF CO-OPERATIVES

PROFESIONALISM IN CO-OPERATIVES (Nov. 03, 07, May 04, 05)
Professionalism is focused, accountable, confident and competent motivation towards a particular goal with less of emotion.
Cooperative societies have to practice following code of conducts so as to become a professional organisation.
1. Adhere to the provisions of co-operative Act and rules and to other applicable laws.
2. Adhere to the co-operative values framed by International Co-operative Alliance.
3. While preparing byelaws, consider the needs and interest of the members.
4. Does not indulge in any financial malpractice.
5. Maintain all the books of accounts in a transparent manner.
6. Pay the taxes in time.
7. Invest the funds judiciously with maximum returns.
8. Follow strategies for the development of human resource, fair wages and ethics among the employees.
9. Organize in-house and outdoor educational, training and development programme for employees.
10. Update its technology and introduce modern technology.
11. Participate in research, innovations and creativity techniques.

Problems in Professionalisation of Management in Co-operatives
1. Governmental way of working creates obstructions like delays, laziness, etc.
2. Being a democratic body co-operatives generally influenced by political system.
3. More harm is caused by lack of support from members.
4. Reluctance to delegate authority and to give reasonable freedom to managers.
5. Managers and supervisors are not enthusiastic. They are reluctant to learn new techniques.
6. Deputation- Government deputes his officers as managers of cooperatives, who is not a part of society and hence cannot manage the business efficiently.

COMMON APPROACHES WITH REAGRDS TO
COOPERATIVES & CORPORATE SECTOR (Nov. 03)
A Cooperative have a lot in common with the corporate bodies, following are few:

COOPERATIVES CORPORATE SECTOR
1. Business
It is to serve the needs of its member and to earn surplus revenues.
It is to earn sufficient profit to satisfy its shareholders
2. Stakeholders
It has to maintain good relations with its stakeholders, which include suppliers, distributors
It has to maintain good relations with its stakeholders, which include suppliers, distributors
3. Area of Operations
It operates in sectors like banking, sugar, healthcare, fertilizers, food processing, etc.
It operates inn similar sectors but on a larger scale.
4. Management
Managing committee appoints a chairman Shareholders appoint Board of Directors, who appoint CEO, who appoints a chairman
5. Regulatory Bodies
Provide funds for development, organise seminars for cooperative awareness. E.g. NCDL, KVIC, MCDC etc.

Control the working of corporates. E.g. NASLDM, SEBI etc.
6. Leadership
A good leader is a visionary, a motivator and has dynamic influence on people to join a co-operative. E.g. Dr. Varghese Kuren of Amul and NDDB.
The leader is a strategist and a decision maker. E.g. Narayan Murthi of Infosys, Anil Ambani of Reliance Energy, Azim Premji of Wipro.
7. Meetings
It holds meetings like Statutory Meetings, AGM, First General Meeting, Special Meetings.
It holds meetings like Statutory Meetings, AGM, EOGM, BOD Meetings, Crisis Management Meetings etc.
8. Policy Interface
Every co-operative has to register itself with the Registrar if Co-operative Societies Every corporate has to register itself with the Registrar of Companies
9. Social Responsibility
Perform their social responsibility as:
1. Create employment opportunities
2. Organise social welfare programmes
3. Give fair return to investment
4. Disclose correct income
5. Perform ethical business
Perform their social responsibility as:
1. Create employment opportunities
2. Organise social welfare programmes
3. Provide quality goods and services
4. Use environment friendly technology
5. Perform ethical business
10. Accountability
Cooperatives are accountable to its members
Corporates are accountable to their shareholders and also to the society at large.

CHAPTER 5
ROLE OF LEADERSHIP IN CO-OPERATIVE DEVELOPMENT

CO-OPERATIVE LEADERSHIP (Nov. 06)
According to Koonz and O’Donnell “Leadership is the ability of a manager to induce his subordinates to work with confidence and zeal”.
Maharashtra is rich in co-operative leaderships as discussed below
– In order to relieve agriculturist from money lenders Justice Ranade fought for Rural Banks in 1880
– First co-operative sugar factory was started at Pravaranagar by Dr. Vithalrao Patil with the help of Dr. Dhananjayrao Gadgil in 1949.
– Gulabrao Patil started Rajya Sahkari Sangh and Paschim Maharashtra Pradeshik Mandal for c co-operative training in Sangli.
– Bhausaheb Bhollare fought for scheme of monopoly procurement of cotton.
– Ratnappa Khumbhar developed co-operative movement in Kolhapour.
– Vasantdada Patil started co-operative societies in Sangli
– Tatyasaheb Kore developed Warnanagar Co-operative Complex, which has international reputation.
– Dr. Varghese Kurien is a name in international co-operative history for Amul and NDDB.

Role of Leadership in a Co-operative (May 04)
1. Encourage his fellow members to move ahead.
2. Convince the prospective members that the society will provide solutions to their problems – for marketing of produce, getting loans or buying consumer goods.
3. Guide members to setup organization, undertake business and make proper decisions.
4. Build confidence in the mind of members.
5. Maintain proper coordination among members of the society.
6. Prescribe performance goal of the society.
7. Set task, which must be taken up responsibility at any point of time.

Qualities of a Cooperative Leader (Nov. 01, 08, May 04, May 07)
1. Perception: Leaders education about the cooperatives is known from his perception and awareness of cooperation.
2. Performance: Leaders are expected to participate actively in the business of their cooperative. They are also expected to maintain cordial relations with the officials and non-officials in the interest of their cooperative.
3. Attitude: Attitude of the cooperative leaders can be categorized as:
a. Attitude towards cooperation
b. Attitude towards financing bank and federal body
c. Attitude towards the policy of the state.
4. Other Qualities: Leader is to be a good servant and not a master in serving the society. Cooperative leader has faith in cooperation, democracy and education.

COOPERATIVE EDUCATION AND TRAINING (May 06, 08)
– Need for cooperative education has been emphasized by all the commissions that reviewed the working of the cooperative movement, such as Mallagan Committee 1915 and Royal Commission on Agriculture.
– National Council for Cooperative Training (NCCT) is responsible for organizing, directing and evaluating the cooperative training of those employed in the cooperative institutions. NCCT also offers consultative services to the following institutions:
1. Vaikunth Mehta National Institute of Cooperative Management, Pune
2. 5 Regional Institutes of Cooperative Management (RICM)
3. 14 Institutes of Cooperative Management (ICM)
– A postgraduate diploma in cooperative offered at VAMNICOM, RICM Bangalore and ICM Bhopal.
– About 3 lakhs people have been trained every year.
– National Cooperative Union of India, State Cooperative Unions and District Cooperative Unions are responsible for promotion, development and implementation of cooperative education for the member cooperatives.
– About 600 cooperative educators are involved in this task.

CHAPTER 6
SOCIAL REPONSIBILITIES OF CO-OPERATIVES

DEFINITION
According to Hicks, Social Responsibility is “a philosophy which states when business managers make decisions, they should concerned about the effect of their decisions on various public such as employees, customers, owners, managers and society in general”.

SCOPE FOR SOCIAL RESPONSIBILITY IN CO-OPERATIVES (Nov. 04)

Responsibilities Towards Customers
1. Supply goods at fair and reasonable prices to customers.
2. Avoid artificial scarcity of goods and services.
3. Avoid exploitation of consumers though malpractices such as adulteration etc.
4. Honor and protect the rights of consumers.
5. Conduct marketing research activities in order to make business consumer friendly.

Responsibilities Towards Members
1. Face value of share is kept low as the cooperative is meant for poor and weak.
2. Activities of society should promote the interest of members.
3. Supply quality goods at low rates through cooperative stores.
4. Provide fair return for the capital provided.
5. Provide opportunity to keep savings by accepting deposits.
6. Provide complete and fair information about financial position of co-operative.
7. Help in education of children from the Reserve Fund
8. Attend their social and economic affairs and help in the expenses of marriages, death in the family etc.

Responsibilities Towards Employees
1. Pay fair wages and allowances to workers.
2. Practice impartial promotion and transfer policies.
3. Provide security of job to raise their morale and sense of loyalty.
4. Provide welfare facilities to workers.
5. Introduce suitable grievance handling machinery.
6. Appreciate and encourage special skills and capabilities.

Responsibilities Towards Competitors
1. Encourage free, open and healthy competition.
2. Avoid using unfair means to eliminate competition.
3. Respect the competitions and do not treat them as enemies.
4. Do no publish false, indecent and misleading advertisement to face competition.

Responsibilities Towards Government
1. Pay different taxes, duties, fees etc. regularly and honestly.
2. Respect and follow commercial, industrial, and other relevant laws.
3. Follow fair trade practices.
4. Repay the loans taken from public sector banks and financial institutions as per terms.
5. Not buy political favours and favours from government officials.
6. Submit information and documents to government authorities correctly on time.

Responsibilities Towards Public (Nov. 04)
1. Contribute towards economic growth and national security.
2. Generate employment opportunities.
3. Ensure better life and welfare of all members of society.
4. Ensure protection of environment and ecological balance.
5. Introduce social audit by professional experts.
6. Provide financial support to social and cultural activities.
7. Rehabilitate the population affected by the operation of business.
8. Setup educational institutions, social service institutions, hospitals etc.

CHAPTER 7
INSTITUTIONAL SUPPORT FOR CO-OPERATIVES IN INDIA

International Co-operative Alliance (ICA)
ICA is a NGO, which unites, represents and serves co-operatives worldwide. It was founded in London in 1895. Its members are National and International Co-operative Organization in all sectors of activity. ICA has more than 230 member organizations from over 100 countries.
In 1946, ICA was accorded UN’s Consultative Status.
Role: is to promote and strengthen autonomous co-operatives throughout the world.
Objectives of ICA:
1. Promote and protect co-operative values and principles.
2. Facilitate the development of economic and other mutually beneficial relations between its member organisations.
3. Influence government to create favourable environment for co-operative development.
4. Networking and promoting the exchange of experience.
5. Mobilising financial resources for co-operative development.
Specialized Organization under ICA:
1. International Co-operative Agricultural Organization (ICAO)
2. International Co-operative Banking Association (ICBA)
3. Consumer Co-operative International (CCI)
4. International Co-operative Energy Organization (ICEO)

National Co- operative Development Corporation (NCDC)
It was setup in 1963 for development and co-operative movement at national level. In 1991-92 NCDC disburse funds up to Rs. 340 corers.
Role and Functions of NCDC:
1. To provide loans and grants to various co-operative societies.
2. To utilize the National Co-operative Development Fund for various development activities of co-operative societies.
3. To provide technical facilities to agricultural co-operative society through respective state governments.
4. To participate in the share capital of the different co-operatives societies working at the national level.
5. To develop co-operative fields like processing, warehousing, import-export of agricultural commodities etc.
6. To assist state government in Human Resource Development.

Maharashtra Cooperative Development Corporation (MCDC)
MCDC is a “non banking finance company” registered as a government company under Indian Companies Act 1956.
Functions of MCDC:
1. Provide financial assistance and infrastructural facilities to the co-operative projects.
2. Prepare techno-economic feasibility report of cooperative projects in the state.
3. Setup research and development centers for cooperative projects in the state.
4. Provide loans for modernization and expansion of existing cooperative projects.
5. Channelise funds on behalf of the central and state government and NCDC to co-operative societies in the state.
6. Prepare rehabilitation packages for sick co-operative units.

National Cooperative Union of India (NCUI)
NCUI entrusted with the responsibility of expanding cooperative educational programme in national level. The Cooperative Education Programme consists of:
1. Two weeks course for secretaries and managers of primary agricultural cooperatives.
2. Three days programme for leadership development.
3. Three days classes for ordinary members and potential members
4. Three days classes for Managing Committee.

Maharashtra State Cooperative Union (MSCU)
MSCU is an association of State Cooperative Institutions, District Cooperative Societies and District Cooperative Boards.
Functions of MSCU:
1. Propagate and expand cooperative movement
2. Arrange cooperative training and education as per NCUI
3. Arrange camps and seminars for cooperative workers.
4. Advice state government about the problems of cooperatives
5. Review public opinion about cooperative movement.

Maharashtra State Cooperative Council (MSCC)
It is constituted as per sec. 154A of Maharashtra Co-operative Society Act 1960
Function of MSCC:
1. Suggest plans and policies for improving cooperative movement.
2. Advise government for implementation of special schemes of co-operatives.
3. Evaluate existing schemes and suggest new schemes for backward classes.
4. Suggest means to remove the difficulties faced by co-operatives.

Central Warehousing Corporation (CWC)
CWC is operating 444 warehouses across the country with a storage capacity of 7.3 million tonnes. Apart from storage, CWC offers following services:
1. Clearing and forwarding
2. Handling and transpiration
3. Procurement and distribution
4. Disinfection and fumigation services
5. Consultancy services.
Objectives of CWC:
1. Running warehouses for storage of agricultural products and notified commodities.
2. Providing services ancillary to storage such as transport, handling etc.
3. Arranging training personnel for management of warehouse.
4. Expanding institutional credit by warehousing receipts.
5. Adding to national income by reducing losses in storages.

Khadi And Village Industries Commission (KVIC) (Nov. 01, 03, May 06)
KVIC was setup in 1957 under the khadi and village industries commission Act 1956.
Functions of KVIC:
1. Promote sale of khadi products of village industry and handicrafts.
2. Encourage khadi and village industries by promoting research in the production techniques in these sectors.
3. Provide financial assistance to institutions or persons engage in the development of khadi and village industries.
4. Attend problems of KVIC and suggest recommendations.
5. Maintain separate organisation for the purpose of carrying its activities.

National Dairy Development Board (NDDB) (Nov. 08)
It was created in 1965 under the vision of Prime Minister Lalbahadur Shastri to extend success of Kaira Co-operative milk Producers Union to other parts of India. World Food Program in 1970 financed the board with Rs120crores. This fund was for the development of Milk Supply Co-operatives under name of ‘Operation Flood’.
Objectives of NDDB:
1. To replicate the Anand Model all over India with under the World Food Programme.
2. To introduce the development program for development of dairy operation and agro-based industries by providing financial and technical aids.
3. To conduct research and development of agriculture and horticulture.
4. To provide technical support for societies collecting, storing, selling milk and also producing various milk products.
5. To provide consultancy services for management of dairy co-operatives.
6. To advice the Government of India on Rural Development Programs.
7. To help in export of dairy products and also to import technical goods.

National Co-operative Consumer Federation (NCCF)
NCCF is the highest body of consumer co-operative in India. It was formed in 1966 with its headquarter located in Delhi.
Function of NCCF
1. Establish processing and manufacturing units for consumer goods.
2. Assist import export of consumer goods.
3. Assist working of consumer societies.
4. Establish trade relations with suppliers and manufacturers.
5. Hold seminars, conference etc. to understand the problems of societies.
6. Help and guide state federations in their operations.
7. Act as the chief spokesman of consumer co-operative in India.

National Agricultural Co-operative Marketing Federation (NAFED) (May 06, 08)
NAFED is the highest body of marketing co-operatives in India. It was formed in 1958. Its headquarter is located in Delhi.
TRIFED – Tribal Marketing Development Federation has been setup by government of India to attend the problems of the marketing of agricultural products of exclusively of tribal areas.
Objectives of NAFED
1. To coordinate and promote the marketing activities of its members in agricultural and other commodities.
2. To arrange agricultural inputs require by the member institutions.
3. To act as an agent for government for the purchase, store and sale of agricultural and other commodities.
4. To promote inter-state and international trade in agricultural and other commodities.
5. To develop co-operative marketing of tribal produce.
6. To act as a central nodal agency for price support operations for pulses and oil seeds.
7. To monitor the export of onion, potatoes, pulses, chilies, garlic, ginger etc.

National Co-operative Housing Federation (NCHF)
The National Co-operative Housing Federation (NCHF) was formed in the year 1969 as per the recommendations of a study group on co-operative housing. The state level and district level housing societies as well as the state level institution financing the housing societies can become a member of the NCHF.
Objectives
1. To establish financial institution at state level to help the primary housing co-operatives in getting loans at lower rate of interest.
2. To undertake research and development work for reduction in the construction cost.
3. To give technical and legal guidance to member societies.
4. To explain various financial schemes to member societies.
5. To give publicity of co-operative housing movement by publishing books, brochures etc.

National Federation Of Industrial Co-operatives (NFIC)
NFIC was established in the year 1966 with its headquarter is located in Delhi.
Objectives:
1. To import, purchase and sell raw materials too the member societies.
2. To help in marketing of manufactured by member societies.
3. To study the problems faced by industrial co-operatives and suggest solutions.
4. To formulate and implement programs relating to the development of industrial co-operatives.

NABARD (Nov. 01, 02, 05, May 04, 05, 08)
NABARD is an apex institution for making policy, planning and operations in the field of credit for agriculture and other economic activities in rural areas. The bank was setup by the Indian Parliament in 1982. NABARD has paid up capital of Rs. 2000 crores, which was contributed by the Government of India and RBI in equal proportion.
Functions NABARD:
1. It works as an apex body, which looks after the financial needs of agriculture and rural development.
2. Provides short-term loans to state cooperatives for seasonal agricultural operations
3. Provides medium-term loans to state cooperatives and RBBs for approved agricultural operations.
4. Provides log-term loans to state cooperatives, RBBs and commercial banks for investment in agriculture.
5. It develops policy and plans relating to agriculture and allied activities.
6. It prepares rural credit plans for all districts in the country.
7. IT maintains research and development funds for research in agriculture and rural development.
8. It inspects the central and state cooperative banks and RRBs.

NABARD and Rural Credit (Nov. 03, 06)
1. Production Credit Refinance (Short-Term)
Eligible institutions – State Cooperative Banks, Regional Rural Banks
Eligible Purpose:
1. Agricultural production and marketing of crops by farmers
2. Marketing and distribution of fertilizers, seeds, pesticides etc.
3. Production and marketing activities of village and cottage industries and SSI.
Loan period – upto 18 months
2. Investment Credit Refinance (Medium and Long-Term)
Eligible institutions – State Cooperative Banks, Regional Rural Banks, Commercial Banks, State Agricultural Development Finance Companies (ADFC)
Eligible Purpose:
1. Investment in agriculture and allied activities, e.g. irrigation, land development, soil conversation, dairy, sheep, poultry, fishery, horticulture, forestry.
2. Investment activities of village and cottage industries and SSI.
Loan Period – 7 to 25 years
Special focus on – North Eastern states, high-tech and export oriented projects.

Land Development Cooperative Bank (LDCB) (Nov. 04)
First Land Development Bank in India was setup in1929 at Madras. The main reason of development of LDB is that the most of the financial institutions provide only short-term credit to agriculture and there was need to provide long-term loans. LDCB has been renamed as State Co-operative Agriculture and Rural Development Bank.
Functions of LDCB:
Bank provide credit for the following purposes:
1. Consolidation of holding of lands or purchasing of lands.
2. Renovation of lands, cultivation of waste lands and fencing of lands.
3. Building of farm houses and places of cattle.
4. Digging and repair of wells, tube well and tanks.
5. Protection of land from floods and soil erosion.
6. Erection of gobar gas plant
7. For Setting up of oil engines, motor pumps, tractors etc.
8. Horticulture, i.e. grapes, mangoes, lemon, cashew nuts etc.

Difficulties in Working of LDCB:
1. Certain banks are not financially viable to carry out their activities.
2. There is no proper supervision of working of banks due to lack of requisite staff and political interference.
3. They have defective loan policies, e.g. they insist on securities for grant of loans, however most agriculturist cannot provide securities.
4. There is delay in sanction and disbursement of loan and hence the farmers do not get the finance on time.
5. There is no proper coordination between different cooperative financial institutions, thus sometime there is duplication of functions.
6. Registering authorities are not cooperative and helpful.
7. Generally these banks are not managed efficiently.

Central Cooperatives Banks (CCB)
CCB is a cooperative credit institution operating at district level.
Types of CCB
1. CCB the membership of which confined to individual only.
2. CCB the membership of which confined to co-operative societies only.
3. CCB the membership of which is open to both individual and co-operative societies.
Objectives of CCB:
1. To provide finance to primary cooperative credit societies when there is shortage of funds.
2. To provide safe avenue for investment of reserves of co-operative societies.
3. To collect savings from members and general public.
4. To create banking facilities for their members.
5. To develop cooperative movement in their respective districts.

Apex Co-operatives Banks (ACB)
ACB is a cooperative credit institution operating at state level. Generally for each state there is one State Cooperative Bank (SCB).
Objectives & Functions of ACB (May 06, Nov. 06)
1. To supervise and guide the activities of CCB.
2. To provide finance to the CCB when there is shortage of funds
3. To provide investment channel to CCB
4. To formulate and execute credit policies for cooperatives in the whole state.
5. To establish control with money market and RBI.
6. To act as a banking center and financing agency for co-operatives.

Maharashtra State Co-operative Bank (MSCB) (Nov. 02)
Objectives:
1. To grant credit to need and creditworthy farmers.
2. To provide crop loans.
3. To participate in the share capital of District, Rural and Urban Cooperative Banks.
4. To provide raw material to industrial co-operatives and to sell their finished goods.
5. All points of ACB

Maharashtra State Co-operative Adivasi Development Corporation (MSCADC)
It was established in 1972 for the all round upliftment and development of tribal people as well as to prevent their exploitation.
Objectives:
1. To provide marketing information to the members of corporation.
2. To implement schemes of development of tribal areas assigned by the state.
3. To takeover the production activities of adivasi cooperative societies.
4. To make provision for essential commodities through tribal areas.
5. To launch programme for employment of tribal landless workers.
6. To construct warehouses and cold storage for maintaining the agricultural and forest products.

Regional Rural Banks (RBB) (Nov. 02)
In 1975, five RRB were setup at Jaipur, Moradabad, Gorakhpur, Bhiwani and Malda. The share capital of RBB is subscribed by central government (50%), concerned state government (15%) and the sponsoring Commercial Bank (35%). Sponsoring banks are SBI, PNB, Syndicate Bank, United Commercial Bank and United Bank of India etc.
Objectives
1. To provide credit at the rate of interest at which cooperative credit societies provide.
2. To provide credit to small farmers, agricultural labourers and rural artisans.
3. To remove the paucity of finance in the rural sector.
4. To limit the area of functioning of two district in the state.

Urban Co-operative Bank (UCB) (Nov. 03, 08)
In 1904, first UCB was setup in Kanjivaram. Credit needs of middle class and small income group of urban areas went on increasing and thus various committees such as Mallegan Committee made recommendations for expansion of the UCB.

Objectives of UCB:
1. To provide credit at reasonable rate of interests to the members
2. To provide credit on the security of valuable goods and immovable property.
3. To provide credit to small merchants, small industrialists and craftsman.
4. To make discounting of bills and to carry out all banking functions.
5. To accept deposit and raise capital through share capital.
Credit Provisions of UCB
UCB grants following types of credits:
1. Sort-term credit – on security of gold, silver.
2. Cash credit – to processional artisans for the storage of goods.
3. Consumption loan – for marriage and education of children.
4. Credit at concessional rate of interest – for small-scale industrialists.

CHAPTER 8
GOVERNMENT, RBI, SBI AND CO-OPERATIVES

ROLE OF RBI IN CO-OPERATIVE MOVEMENT
– Prior to 1982 RBI provided finance and guidance for the development of co-operative movement through Agricultural Development Department. From 1982 this work was taken by NABARD.
– RBI convened a conference of people connected in co-operative movement in 1951 and made some important recommendations.
– RBI performed following functions:
1. Improved the operational efficiency of co-operative financing agencies.
2. Helped the state government in reorganizing primary agricultural credit societies.
3. Build up a co-operative credit structure in qualitative and quantitative terms.
4. Made policies to remove regional imbalance and extend more credits to small and economically backward farmers.

ROLE OF SBI IN CO-OPERATIVE MOVEMENT
1. Provides finance to marketing and processing societies at 7% rate of interest.
2. Provide loans to consumer co-operative for working capital.
3. Grant advances against raw material and finished goods to industrial co-operatives.
4. Provide remittance facilities to co-operatives within certain limits.
5. Provide finance for debentures for Land Development Banks.
6. Provides overdraft facilities to Central Co-operative Banks at concessional rate.
7. Maintain close coordination between RBI’s Agricultural Development Department.

Development of Co-operatives through 5 Years Plans
1951 – 1956: Focus on credit aspects of co-operatives
1956 – 1961: Focus on village and primary market
1961 – 1966: Focus on to go on national level and Rs. 30 crores (short term loans)
1969 – 1974: Focus on to eliminate all negative elements
1974 – 1979: Focus on uniting co-operative and making their products popular
1979 – 1985:
1985 – 1990: Focus on to pay attention to underdeveloped region
1992 – 1997: Open doors to global competition

CHAPTER 9
CREDIT CO-OPERATIVES

CO-OPERATIVE CREDIT STRUCTURE (Nov. 04)

Co-operative Credit Structure

Agricultural Credit Societies Non- Agricultural Credit Societies

Short Term (12-15 months) State Co-op Bank State Industrial Co-op Bank

Long Term (Exceeding 5 years) Central Co-op Bank Central Industrial Co-op Bank

Primary Credit Societies (e.g. UCB, RRB)

PRIMARY AGRICULTURAL CREDIT SOCIETY (PACS) (May 06)
Primary Co-operative Credit Societies are the base of structure of co-operative institutions.
Features of PACS
1. It may be started with ten or more persons belonging to village.
2. The value of share is nominal so as to poorest farmer can become a member.
3. The liability of member is unlimited i.e. he is fully responsible for the loss of society.
4. The management consists of president, secretary and treasure.
5. The management is honorary; the only paid member is accountant.
6. Profits are not distributed but it is used for the welfare of village.
Functions of PACS
1. Provide sufficient finance to members so as to reduce their dependence on money lenders.
2. Distribute agricultural products such as seeds, fertilizers, and pesticides etc. to member farmers.
3. Provide storing facilities to the farmers for agricultural products.
4. Collect agricultural products from farmers and supply to the consumer co-operative societies.
5. Supervise the use of loans and recover the loans disbursed.
6. Encourage the habit of savings among members.
7. Borrow funds from central agencies.
Shortcomings of PACS
All India Rural Credit Review Committee brought out following shortcomings of PACS
1. Most of the credit societies are not able to meet the production oriented credit needs.
2. They are not able to provide adequate and timely credit for needy farmers.
3. Overdues are increasing at all level indicating the failure of credit societies.
4. All points of findings of Rural Credit Survey Report

Deficiencies in the Working of Co-operative Credit Societies (May 08)
1. All points of difficulties of LDCB
2. Duality of Control of Co-operatives (Nov. 08)
The root cause of most of the problems of the co-operative banks, especially the UCBs is the dual control system. On one hand, under the provisions of Co-operative Societies Act, the Registrar of Co-operative Societies is responsible for regulating their transactions on behalf of the state government and on other hand, under the Banking Regulation Act, RBI on behalf of the central government. It is mainly this duality of control there is no effective regulation of co-operative banks by any of these two regulatory bodies. Whenever there is a problem, the state government points its fingers at RBI and vice-versa.

RURAL CREDIT SURVEY REPORT – 1954 (May 04, 06, Nov. 04)
The RBI appointed a committee under the chairmanship of A.D. Gorwala to assess the source of rural finance and suggest some crucial measures.
Findings of Committee
1. Large part co-operative credit societies went to the big farmers only.
2. There was a big communication gap in villages.
3. People are illiterate and did not know the importance of co-operative credit.
4. Only 3.1% was provided by societies and remaining 97% was provided by private money lenders.
5. There were no facilities of training the personnel of co-operatives.
Recommendations of Committee
1. State Partnership: Only financial help is not sufficient; state should enter into partnership for effective rural development.
2. Long Term Operation Fund: RBI should constitute a special fund of Rs. 10 crores for giving the state government for direct participation in co-operatives.
3. Linking of Credit Societies with Marketing Societies: Primary Credit Societies should finance the member on condition that he should sell hi products to the marketing societies.
4. Large Size Societies: Large size credit societies should be established which would be viable and easily serve a cluster of village effectively.
5. Training Facilities: Sufficient training facilities should be provided to the staff of co-operatives under the guidance of central government.
6. Additional Special Funds: National Agricultural Credit Fund at state level and National Stabilization Fund at the central level should be established.
7. Loan Against Crops: Crop loan should be given the societies in suitable installments.

DANTWALA COMMITTEE
It was appointed by RBI to find out the difficulties faced by Regional Rural Banks.
Recommendations:
1. Should make proper structural and functional changes in the banks.
2. The development of RRB should go to every corner of India.
3. The area of operations of bank should be restricted to a single district.
4. RBBs should work at the middle level.
5. The area where credit deficiency remains, the RBB, CCB and Primary Credit Societies should work in that place by proper coordination.

MADHAVDAS COMMIITTEE
It was appointed by RBI to find out the difficulties faced by Urban Co-operative Banks.
Recommendations:
1. Encourage the setting of UCBs in small towns and semi urban areas.
2. Financing Urban Co-operative Societies may be converted to UCB.
3. Limit of raising loans by these banks from outside should be increase from 12 times to 20 times more.
4. The face value of each share should be Rs. 25 each.
5. Servant co-operative credit societies and co-operative credit societies should not accept deposits from others who are not members.

McLAGAN COMMITTEE ON CO-OPERATION
Under the chairmanship of Sir Edward McLagan, the weakness of the co-op movement and areas were immediate attention was required was made into a report:
Recommendations:
1. All dealings should be lent through its members only.
2. Loan should be given for productive purpose only and not for speculative purpose.
3. Committee of society should watch over the use of loans sanctioned.
4. Due importance should be given to recovery of loans.
5. Society should increase their reserve fund.
6. Liabilities of members of society should be unlimited.
7. All primary co-operative societies should purchase share capital of the district co-operative society for better control.
8. Supervision and auditing of the co-operatives should be done regularly.

CHAPTER 10
CONSUMER COOPERATIVES

CONSUMER CO-OPERATIVES (Nov. 08)
According to the Maharashtra Co-operative Societies Act 1960, sec. 2(9) a consumer co-operative society is defined as “a society the object of which is (a) the procurement, production or processing and distribution of goods or services for its members or other customers, and (b) the distribution among members and customers, of profits occurring such procurement, production or processing and distribution”.

Need and Importance (May 04)
1. Supply of goods and services as per need of the consumers.
2. Eradication of malpractices like black marketing, artificial scarcity, hoarding and cheating in measurements.
3. Establishments of proper trading system – consumer co-operatives supply good quality products at reasonable costs.
4. Eradication of trader’s chain – There is a long chain of middlemen between producers and consumers who add their profits making the things costly. Consumer co-operatives purchase things directly from producers at cheaper price.
5. Consumer have to satisfy their needs as per their income – Due to existence of consumer co-operatives consumers automatically learn to satisfy the needs as per income and the habit of savings.
Objectives
1. To educate the consumers and keep their needs within the income limits.
2. To improve the standard of living of consumers
3. To inculcate the habit of savings among the consumers.
4. To stabilize the market rates.
5. To supply the goods and services at reasonable prices.
6. To protect consumers from trade malpractices such as black marketing, hoarding etc.
7. To control the profit making tendency.

Composition
1. National Co-operative Consumer’s Federation (NCCF)
2. State Co-operative Consumer’s Federation – coordinate between NCCF & divisional stores.
3. Central Wholesale Consumer Co-operative Stores – It is established where the population is more than 50,000 people.
4. Departmental Stores or Super Bazaars – It first established in Delhi in 1996, e.g. Apna Bazaar, Sarkari Bhandar)
5. Primary Co-operative Society – It is opened by the members of central wholesale stores to supply the essentialities of life.

Problems Faced by Consumer Co-operatives in India (Nov. 06)
1. Consumers in India are indifferent to their own needs and still believe in the private trade system.
2. Consumer co-operatives are not well integrated and are scattered isolated.
3. The procurement and purchase operations are technically faulty.
4. They also face problems of low efficiency and low level of quality of products.
5. There is also intense competition from private traders who create various problems for the consumer movement.
CHAPTER 11
AGRO PROCESSING AND SUPERVISON

AGRO-PROCESSING CO-OPERATIVES
Co-operative agro-processing is the transformation of agricultural products into consumable form on co-operative basis.

Importance of Agro Processing Co-operatives (May 05)
Role of co-operatives in the development of agro-processing industry in India (May 04)
Sugar Co-operatives in Maharashtra (Nov. 01, 03, 05, 06)

Problems of Agro Processing Co-operatives (May 06)
1. Pricing policy of produce like cotton, oil seed, sugarcane etc. is faulty.
2. There is inefficient supply of agricultural produce affecting the functioning of units.
3. In most cases the private traders from co-operative processing units to safeguard their interest. This affects the co-operative principles.
4. Due to stiff competition and price fluctuations processing societies cannot work to the fullest capacity.
5. There is scarcity of experienced personnel for management of the societies.
6. Points of problems of sugar cooperatives

SUGAR COPERATIVES
Indian Sugar Co-operative can be broadly classified into:
1. The organized sector e.g. Sugar Factories.
2. The unorganized sector e.g. Manufacture of Gur and Khandsari.
Out of the 453 sugar mills in the country, 252 are in the co-operative sector, 134 are in the private sector and 67 are in the public sector. The government of India has Indian Legislation passed the Sugar Industry Protection Act in 1932.
Working of Sugar Co-operatives (Nov. 08)

Problems of Sugar Co-operatives (Nov. 08)
1. De-zoning: Initially zoning were compulsory due to which farmer has to sell sugarcane to the prescribed factory within the zone of its field. But this policy was dismantled in 1996 due to which the factories, which could not give better price to the farmers had to close down.
2. Shortage of Sugarcane: Many sugar factories are located in the main shadow region due to which there is a lack in sugarcane produced.
3. High Cost of Water and Electricity: High cost of water and electricity increases the cost of production.
4. Huge Financial Loses: Improper irrigation facility, scanty rainfall and also due to improper storage facilities result in huge financial loses.
5. Corruption: The main concept of “Self help through mutual help” is lost in corruption.
6. Political Influence and Interference in the co-operative society.
7. Problems of Trade Union: The trade unions come up with strikes and lockouts, which result in poor functioning of the co-operatives.

CONTRACT FARMING (Nov. 05)
Agro processing companies enter into contract with the farmers that they provide the farmers with the inputs like fertilizers, seeds, pesticides and guidelines to grow crops and buy back the products with a rate specified in advance.
Advantage for Farmers
1. They get the better price for the produce as there is no middle man
2. They have assured markets for their produce
3. They are assured about the quality of seeds and pesticides
4. They received financial support in kind
5. They obtain efficient and timely technical guidance free of cost
Drawbacks of Contract Farming
1. It involves mainly cash crops, which may lead to scarcity of food crops.
2. It may create the danger of imposition of undesirable seeds.
3. Market making outside the country may cause breaking of country market.
4. The temptation of getting profits by cultivating variety of crops may cause permanent damage to the land.

CONSUMER FOOD INDUSTRIES
– Consumer food industry mainly consists of ready to eat or ready to cook products like cocoa based products, soft drinks, bakery products, biscuits etc.
– Bakery industry is the largest processed food industry. Annual turnover of bakery products is more than 30 lakhs.
– Nearly 20 industries are engaged in manufacture of cocoa products like chocolate, malted milk etc. with a production of 3400 tonnes.
– Production of soft drinks has increased from 5670 million bottles in 1999 to 6230 million bottles in 2000.
– Wheat based products such as vermicelli; macaroni and noodles are becoming popular.

CHAPTER 12
DAIRY CO-OPERATIVES

Objectives / Functions of Dairy Co-operatives (Nov. 02, May 07)
1. Arrange for collection center and distribution network.
2. Arrange for processing of milk into milk products.
3. Arrange for selling of milk through their own depot and through licensed vendors.
4. Distribute cattle feed to the milk producers and also provide veterinary services.
5. Provide technical services to member farmers, like artificial insemination, veterinary facilities and supply of quality seeds and root slips for production of green fodder.
6. Protect the hybrid quality of animals.
7. Organise dairy industry on a system of rural milk production and urban marketing.
8. Conduct Research and Development activities to improve the productivity rate.
9. Provide financial assistance to poor farmers to purchase cattle.
10. Encourage co-operation and self-respect among the members.
11. Prepare and undertake necessary projects for dairy development in the area.

Problems of Dairy Co-operatives (Nov. 02, May, 06 07)
1. Supply of inputs through the network of dairy co-operatives is not satisfactory.
2. Irregular payments to milk producers have frustrated them.
3. Balance cattle feed and fodder seed is not available regularly, which compelled farmers to use traditional feed.
4. Frozen semen technology to ensure grater productivity is used popularly.
5. Reach and effectiveness of animal health cover is still unlimited.
6. Framers induction programme is given low priority.
7. Dairy co-operatives are facing cutthroat competition with milk vendors.
8. Lack of proper coordination with district level authorities.

Benefits of Dairy Co-operatives for Members
Excludable Benefits:
1. Reliable access to the market for the milk produced.
2. Field services, insurance and market information.
3. Knowledge about the industry costs, returns and practices in the industry.
4. Access to value added margin from dairy processing activities.
5. Representation into legislative process at low cost.
6. Negotiation of overdue premiums.
Non-Excludable Benefits:
1. Balancing milk supplies among dairies.
2. Transporting milk to locations where needed.
3. Providing milk to deficit areas seasonally.
4. Affecting policies and trade practices in favour of milk producers.
5. Providing leadership for effective legislative process.

ANAND PATTERN
Anand Pattern is a doctrine of rural development. Mulani has identified 14 key elements of Anand Pattern.
1. Single commodity approach
2. Member ownership and control of the co-operative
3. Democratic control and Decentralised decisions making
4. Three-tired structure i.e. Village Diary Cooperative, District Dairy Cooperative Unions and Dairy Federation.
5. Use of professional managers and technologies
6. Accountability of professionals to members.
7. Coordination of milk procurement, processing and marketing
8. Annual audit of village co-operatives and district unions.
9. Daily or weekly payment of milk as per the quality
10. Investment in village social expenses capital
11. Autonomy of unions in fixing of prices
12. Adoption of Anand Pattern byelaws.

CHAPTER 13
COOPERATIVE MARKETING

Definition (Nov. 05)
According to RBI, “Co-operative marketing is a c-operative association of cultivators formed for the purpose of helping members to market their produce more profitably than is possible though private trade”.

Types of Cooperative Marketing Societies
1. Single Commodity: deal only in marketing of only one agricultural commodity e.g. Sugarcane Co-operative Marketing Society, Cotton Co-operative Marketing Society.
2. Multi-Commodity: deal in marketing of number of commodities such as food grains, oilseeds etc.
3. Multi Purpose Multi-Commodity: deal in marketing of number of commodities and also perform other functions such providing credit, supply of inputs etc.

Structure of Marketing Cooperative
National Agricultural Co-operative Marketing Federation (NAFED)

State Marketing Co-operative Society

Dist. Marketing Co-operative Society

Primary Marketing Co-operative Society

Objectives of C-operative Marketing Societies (Nov. 05)
1. To sell the member’s products directly in the market that offers best price.
2. To improve economic conditions of produce by strengthening it’s bargaining power.
3. To help members to produce the best product and those in most in demand.
4. To establish fair trade practices and prevent manipulation of prices.
5. To help farmers to obtain finance at cheaper rate of rate interests.
6. To give the farmers a better understanding of all stages of marketing process.

Need / Importance / Advantages of C-operative Marketing Societies (Nov. 04)
1. Market Intelligence: Co-operatives can obtain data on market price, demand and supply and other information.
2. Reduce Cost: Co-operative marketing helps to reduce cost and improve service.
3. Improve Marketability: It helps to improve marketability of products and reduce all undesirable market charges.
4. Safeguards Against Price Rice: It safeguards the interests of members against the price rising.
5. Provides Credits: It provides credit to the framers and save them from selling their produce immediately after harvesting.
6. Storage Facility: Farmers can wait for better price as these societies have storage facilities.

Limitations / Problems of C-operative Marketing (Nov. 04)
1. Illiterate Farmers: Farmers are illiterate and do not know about the benefits of selling produce through co-operatives.
2. Less Price: Mostly price offered by co-operatives are less than open market price.
3. New Societies: Some of the societies are of recent origin and do not have adequate capital to work as efficient unit.
4. Insufficient Godwons: Most of the societies do not have sufficient godowns to keep the produce and pledge loans.
5. Defective Loan Policy: 50 to 90% of total loans are given as production and clean loans, which has resulted in high overdues.
6. Domination of Traders: Societies are dominated by clever and intelligent traders and non-cultivators.
7. Shortage of Funds: Societies are not in a position to provide trade credit to buyers because of shortage of funds.
8. Untrained Personnel: Society personnel are not trained, qualified and competent to compete with traders who already have a good hold.
9. No Encouragement given by Apex Society like NAFED to primary co-operative marketing societies.

LIZZAT – THE SUCCESS STORY (Nov. 03, May 07)
– Shadi, Utsav Ya Tyohar …Lizzat Papad Ho Har Bar
– Lizzat Papad began on March 1959 by seven women on the terrace of their flats in Girgam Mumbai.
– Sales increase and so production. Within three months there were 25 women working in their group and in two years number rose to 150.
– In fourth year they rented 8 rooms in the building for processing of papad.
– When business expands, they felt the need of a brand, for this a contest was launched in their locality with a prize of 5 rupees and the name lijjat means tasty was born.
– From Girgam to a plush office at Bandra Shri Mahila Griha Udyog Papad has come a long way. Today it has ha a central managing committee consists of 21 members. Any woman irrespective of religion or caste could become member.
– At present it has 63 branches which is run bay a Sanchalika and 42 divisions and provides self-employment to about 42,000 sister members across India.
– They also manufacture products like Khakhra, Masala, Wadi, Detergent powder, Cakes, Bakery items and Chapaties.
– They also export their products to US, UK, Thailand, Singapore, Australia and other.
– The principle of Lijjat is promoting self-employment, dignity of labour and earning capacity of women from home.

CHAPTER 14
HOUSING AND LABOUR CO-OPERATIVES

Definition of Co-operative Housing Society
According to Maharashtra Act of Housing Society Act 1960, a housing society is defined as “a society, the object of which is to provide its members with open plots, dwelling houses or flats and to provide common amenities and services”.

Types of Co-operative Housing Society (May 06) *(Nov. 04)
1. Tenant Ownership Housing Society: It is the housing society where the land, on which the houses are built, is secured on lease by the society and the houses are owned by the individual members.
2. Tenants Co-partnership Housing Societies: It is the housing society where the land and the houses both are secured on lease by the society and the houses are allotted on rent to the individual members.
3. Builder’s Society: Builders themselves purchase the land, plan and construct the building and then sale on profit. The people who purchase the flat become the member of society.
4. * Flat Ownership Co-operatives: These societies are formed under Flat Ownership Act. Due to the scarcity of land for constructional works, the housing societies have adopted the system of constructing flats and then sell at certain costs. All the flat holders have joint ownership on land.
5. Housing Credit Societies: They arrange loans for building houses. The member can obtain loan and build the houses as per their needs and requirements.

Problems of Housing Co-operatives (May 04, 05)
1. Difficulties in Getting Land: Prices of land is high and the government is also not supportive in purchasing of land.
2. Difficulties in Getting Building Materials: Prices of materials are always going up and there is no regular supply of materials.
3. Inefficient Personnel: Co-operative personnel are not qualified and experienced.
4. Inadequate Finance: In some states there is no apex organisation and the LIC’s assistance is also inadequate.
5. Public not Interest: There is disinterest in the minds of people about co-operative housing societies. Middle class is neutral because of financial stress.
6. Malpractice: Many contractors and agents obtained black money and have constructed their own flats in posh areas.

LABOUR CO-OPERATIVES (May 04, 07, 08)
Labour co-operatives are those, which work for giving employment to the group of labourers. Generally more number of labours is required for construction of buildings, roads, and factories, dams’ irrigation work. The Concept of labour co-operative had its origin in India in 1948 where the government of Mumbai made special provisions for labour contracts, whereby any contract above Rs. 20,000 was awarded to the co-operatives.
The co-op labour societies directly deal with companies i.e. middlemen are eliminated thus labour are saved from exploitation and every member gets a fair share of return on his investment.

Objectives of Labour Co-operatives
1. To provide instrument to members for carrying out essential job.
2. To ensure that the labour will get regular job.
3. To take contracts of private and public works.
4. To increase the skill of members by imparting them training.
5. To increase the dealing power of labour.
6. To promote self-helped and co-operation amongst members
7. To work for overall welfare of members.

Problems of Labour Co-operatives
1. Shortage of Working Capital: The working capital is limited and the society cannot avail loans because less share capital.
2. Difficulties in Accepting Big Jobs: Due to the weak financial position it is not possible for the society to accept big works.
3. Competition with Private Contractors: Due to the weak financial position they cannot compete with private contractors.
4. Government Indifference: Government officers are not interested in giving jobs to the co-operative societies.
5. Lack of Continuity of Work: These societies do not get work all the times and hence cannot give works to members.

OVERSEAR / MUKADDAM
The society may appoint an overseer or a mukaddam for following functions:
1. To prepare tenders
2. To organize labourers and distribute works
3. To supervise works of each labourer carefully for ensuring deadlines and perfection
4. To repot to the control committee who in turn report to the managing committee.

CHAPTER 15
INDUSTRIAL CO-OPERATIVES

INDUSTRIAL CO-OPERATIVES
Industrial co-operative is an association of workers and craftsman involved in cottage or village industries, who came together to undertake collective production, processing and marketing of goods manufactured by members.

Objectives of Industrial Co-operatives
1. To train workers and improve their skills so that they are able to increase their productive capacity.
2. To purchase machinery and other equipment, to hire for better production.
3. To purchase and market products produced by members.
4. To apply for contracts or tenders on behalf of the members.
5. To provide employment to members.
6. To grant advances against the security of raw materials and finished goods.
7. To contribute towards industrial development in their own way.

Kinds of Industrial Co-operatives
1. Workshop Co-operative (Production Co-operatives): They undertake production directly. They provide raw materials, designs of goods whereby all members come together and do work.
2. Industrial Service Co-operative: They are formed mainly to provide service to members such as marketing, purchase of raw materials, tools, equipments etc. They do not participate in production but provide technical assistance in order to facilitate production and sell of goods.
3. Common Facility Workshop Co-operative: They provide facilities like workshop, machinery or tools required to give finishing or final touches to goods. In These workshops members can bring their manufactured goods and make necessary changes.

Sources of Finance to Industrial Co-operatives (Nov. 06)
1. State Financial Corporation: It grants loans to all industrial concerns, which are repayable within 20 years, and also subscribes debentures floated by industrial concerns.
2. IDBI: It provides finance to SSI and co-operatives through state level institutions and commercial banks by way of refinance.
3. SIDBI: It is a wholly won subsidiary of IDBI. It has taken over the responsibility of administering small industries development fund and national equity fund.
4. Central Co-operative Banks (CCB): Refer chapter 7
5. State Co-operative Banks (SCB): Refer chapter

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