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Mudra Agriculture and Skill Development and Multi State Co Operative Society Ltd

ఒకరి కోసం అందరు అందర ి కోసం ఒకకరు

MUDRA AGRICULTURE & SKILL DEVELOPMENT

MULTI STATE CO –OPERATIVE SOCIETY LTD.

(Regd.NO :MSCS/CR/1273/2017)

WELCOME TO MASDMSCS

THE MUDRA AGRICULTURE & SKILL DEVELOPMENT MULTISTATE CO-OP. SOCIETY LTD. WAS ESTABLISHED IN 2017

UNDER THE MULTI STATE CO-OPERATIVE SOCIETIES ACT 2002.

CO-OPERATIVE IS AN ORGANIZATION WHEREIN PERSONS VOLUNTARILY ASSOCIATED TOGETHER AS HUMAN

COLLECTIVE RESOURCE ON THE BASIS OF EQUALITY FOR THE PROMOTION OF THE ECONOMIC INTEREST OF

THEMSELVES. CO-OPERATION IS A SELF-HELP AND MUTUAL HELP TO ACHIEVE THE COMMON GOAL.

ABOUT SOCIETY

MUDRA AGRICULTURE AND SKILL DEVELOPMENT MULTI STATE CO OPERATIVE SOCIETY IS REGISTERED UNDER

MSCS CO OPERATIVE ACT 2002, ON APRIL 12 2017. THE SOCIETY OPERATES IN BOTH TWO TELUGU STATES AND HAS

ESTABLISHED TILL DATE AROUND 280 CO ORDINATION CENTERS WITH DIRECTLY OR INDIRECTLY INVOLVED WITH

1700 PERSONNEL WITH SOCIETY ACTIVITIES. THE SOCIETY HAS PROSPERED UNEXPECTEDLY WITHIN TWO YEARS

SINCE ITS BEGINNING. THE SOCIETY HAS MADE A REMARKABLE RECOGNITION NATIONALLY WITH ITS ACTIVITIES

AND PROGRAMS. THE FOUNDER CHAIRMAN HAS ESTABLISHED THE SOCIETY WITH A MOTO TO ACHIEVE THE DREAM

OF FARMER PRIVILEGED CULTIVATION. THIS SOCIETY AIMS TO INTERLINK THE PRODUCER AND CONSUMER WITH A

DIRECT CHAIN AVOIDING INVENTORY AND EXCESS WASTAGE AND TO BENEFIT THE BOTH CLASSES. THE SOCIETY

LOOKS FORWARD IN CONSTRUCTION OF WAREHOUSES AND COLD STORAGES AT IT'S PLOTS THAT HAVE BEEN

ALLOCATED AT APIIC INDUSTRIAL FOOD PARKS AT 15 DIFFERENT LOCATIONS IN ANDHRA PRADESH. THE SOCIETY

HAS TRAINED UP AROUND 25 SELECTED CANDIDATES AT HIGHLY PRESTIGIOUS INSTITUTION INSTITUTE OF CO

OPERATIVE MANAGEMENT - HYDERABAD, WITH HIGHER DIPLOMA IN CO OPERATIVE MANAGEMENT FOR 6 MONTHS.

IT GAVE A SCOPE TO VISIT VARIOUS CO OPERATIVE SOCIETIES AROUND THE INDIA FOR NEARLY 3 WEEKS. FROM

OCTOBER 3RD NCCET HAS PROVIDED AN OPPORTUNITY TO OUR SOCIETY TO UNDERGO TRAINING WITH A 3 MONTH

TENURE DIPLOMA COURSE ALONG WITH FOREIGN STUDENTS.


INTRODUCTION

Cooperation is as old as humanity and cooperation is older than the cooperative movement. The cooperative

movement is only one example of human cooperation among others. The meaning of cooperation varied from

thinker to thinker and from one sphere of human activity to another. To the sociologists, it is a social economic

movement, for the socialists, it is a social order in which man is free form class struggle, economists believe

that, it is a form of business organization in which there is no scope of being exploited by middlemen. The

lawyers take it to be an organization in whose membership one enjoys the special privileges and concessions

conferred by law. According to E.R. Bowen, “Cooperation is the universal instrument of creation”. The history

of cooperative movement in India is about a century old. The movement was started in India with a view to

encourage and promote thrift and mutual help for the development of persons of small means such as

agriculturists, artisans and other segments of the society. It was also aimed at concentrating the efforts in

releasing the exploited classes out of the clutches of the money lenders. Keeping this as one of the objectives,

credit societies were formed under Cooperative Societies Act of 1904. The 1904 Cooperative Societies Act was

repealed by 1912 Cooperative Societies Act which provided formation of Cooperative societies other than

credit. The Government of India set up an Agricultural Credit Department in the Reserve Bank of India with a

view to providing financial assistance and credit to the cooperatives. The Central Government enacted a

comprehensive Act known as Multi State Cooperative Societies Act, 1984, repealing the Act of 1942. The

movement would thus be completing a century its existence next year i.e. 2004.

The International Co-operative Alliance is the global steward of the Statement on the Cooperative Identity – the

Values and Principles of the cooperative movement.

In 1995, the ICA adopted the revised Statement on the Cooperative Identity which contains the definition of

a cooperative, the values of cooperatives, and the seven cooperative principles as described below. You can also

consult the Guidance Notes on the Cooperative Principles and Values which give detailed guidance and advice

on the practical application of the Principles to the cooperative enterprises.

ORIGIN OF WORD COOPERATION

The term cooperation is derived from the Latin word cooperari, where the word co means 'with' and operari

means 'to work'. Thus, cooperation means working together. So those who want to work together with some

common economic objective can form a society which is termed as “cooperative society”. It works on the

principle of self-help as well as mutual help.

CONCEPT OF COOPERATIVES

A cooperative is a democratic organization engaged in the market place, providing goods and services. It is

based on people, not capital or government direction. As a source of credit, food, social protection, shelter and

employment, cooperatives play an important role. As per International Cooperative Alliance (1995),

Cooperatives are based on the values of self-help, self-responsibility, democracy, equality, equity and

solidarity. In the tradition of their founders, cooperative members believe in the ethical values of honesty,

openness, social responsibility and caring for others.


DEFINITION

“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”.

H. 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”.

Cooperative Thinkers and Leaders

Mahatma Gandhi envisioned `Gram Swaraj' wherein there would be social and economic changes in the

villages. His programme for Gram Swaraj included `cooperation' also. In an article the Mahatma had penned,

`cooperative societies are ideally suited organizations not only for developing village industries but also for

promoting group effort by the villagers.'

Pandit Nehru clearly stated the importance of cooperative societies that-“I have no doubt theoretically in

cooperation; cooperative working is good in every single department of human activity. It is a better way of life

and in fact it is an inevitable way of life when you live in crowded communities. There is no other way except

the cooperative way.”

Indira Gandhi “I know of no other instrument as potentially powerful and full of social purpose as the

cooperative movement.”

Thakur Pyarelal Singh (Father of Cooperation) - The contribution of Thakur Pyarelal Singh in the field of

cooperation was excellent. Chhattisgarh Govt. Awards every year for the excellent performance in cooperative

sector by the name of Thakur Pyarelal Singh,

Waman Rao Lakhe (RAI SAAB) of Raipur- Waman Rao Lakhe established Raipur Cooperative

Central Bank in year 1913. He made extraordinary contribution in cooperation system.

Cooperative values

Cooperatives are based on the values of self-help, self-responsibility, democracy, equality, equity,

and solidarity. In the tradition of their founders, cooperative members believe in the ethical values of honesty,

openness, social responsibility and caring for others.

Cooperative Principles

The cooperative principles are guidelines by which cooperatives put their values into practice.

1. Voluntary and Open Membership

Cooperatives are voluntary organisations, open to all persons able to use their services and willing to accept the

responsibilities of membership, without gender, social, racial, political or religious discrimination.

2. Democratic Member Control

Cooperatives are democratic organisations controlled by their members, who actively participate in setting their

policies and making decisions. Men and women serving as elected representatives are accountable to the

membership. In primary cooperatives members have equal voting rights (one member, one vote) and

cooperatives at other levels are also organised in a democratic manner.


3. Member Economic Participation

Members contribute equitably to, and democratically control, the capital of their cooperative. At least part of

that capital is usually the common property of the cooperative. Members usually receive limited compensation,

if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the

following purposes: developing their cooperative, possibly by setting up reserves, part of which at least would

be indivisible; benefiting members in proportion to their transactions with the cooperative; and supporting other

activities approved by the membership.

4. Autonomy and Independence

Cooperatives are autonomous, self-help organisations controlled by their members. If they enter into

agreements with other organisations, including governments, or raise capital from external sources, they do so

on terms that ensure democratic control by their members and maintain their cooperative autonomy.

5. Education, Training, and Information

Cooperatives provide education and training for their members, elected representatives, managers, and

employees so they can contribute effectively to the development of their co-operatives. They inform the general

public - particularly young people and opinion leaders - about the nature and benefits of co-operation.

6. Cooperation among Cooperatives

Cooperatives serve their members most effectively and strengthen the cooperative movement by working

together through local, national, regional and international structures.

7. Concern for Community

Cooperatives work for the sustainable development of their communities through policies approved by their

members.

Co-Operative Movement in India

The Co-operative Movement in India was born out of the distress and turmoil that prevailed in the last quarter

of the 19th century. The Industrial Revolution had given a death blow to village industries and driven people to

agriculture, the only avenue of employment and livelihood. The consequent sub-division and fragmentation of

holdings had made agriculture an uneconomic proposition.

This, combined with the rigidity of land revenue collection, uncertainty of rainfall and, therefore, of crop

production, compelled the agriculturist to knock at the door of the money-lender who advanced money cither by

purchasing the crop at a throwaway price or by charging a sky-high rate of interest.

The deteriorating condition of farmers under the heavy strain of increasing indebtedness and frequent famines

not only proved the inadequacy of legal measures but also emphasised the need for the provision of cheap credit

through an alternative agency.

Early History of the Co-Operative Movement in India


The prevalence of widespread distress in the country, the growing volume of rural debt and the machinations of

the money-lender led to certain voluntary efforts in the field of rural credit. In the Madras Presidency were

organised ‘Nidhis’ or Mutual-Loan Associations.

Based on the Co-operative Principle, these associations achieved considerable success. By 1901, there were 200

nidhis with more than 36000 members and subscribed capital of more than 2 crores of rupees. In the Punjab, a

society on co-operative lines was started as early as 1891 at Panjawar in Hoshiarpur district for control.

The common land of the village for the benefit of the co-sharers and functioned (ill 1922 when the land was

partitioned. Another society started in 1895 embraced 22 villages? The state of Mysore introduced Agricultural

Banks’ in 1894, while U.P. saw the establishment of village banks and the beginnings of distributive co-

operation.

All these efforts were purely voluntary, strictly non-official, and, at best, enjoying only govt’s patronage. The

first official step was taken when Sir William Wedderburn made, after the Deccan riots, the proposal for the

establishment of agricultural banks as a remedy against rural indebtedness.

In 1881, some Bombay capitalists drew up a scheme for starting an agricultural bank in Poona. Even a bill to

that effect was introduced in the Legislative Council by Mr. Mandlik. Meanwhile, Wedderburn tried but failed

to enlist public support for his scheme and it could not take practical shape.

The interest of the govt. now turned to voluntary mutual credit associations modelled on Raiffeisen co-operative

societies of Germany.

In 1892, the Madras Govt. deputed Fredrick Nicholson to Germany “on special duty for the purpose of

enquiring into the possibility of introducing into this Presidency system of Agricultural or other land banks.”

In his Report, Nicholson stressed the point that “the substitution of organised credit for that of the money-

lender is a necessary development of civilisation —the individual system must be eventually passed as

general wealth, order, business confidence, and habits of business associations develop.”

As to I he form it should lake, Nicholson favoured the establishment of co-operative societies based on

Raiffeisen model. He, therefore, summed up his report in the two words: “Find Raiffeisen.” The Govt.,

however, took no immediate action on the report which was submitted in 1895.

While Nicholson’s enquiries were in progress, Mr. Dupernex began experimenting with ‘Peoples Banks’ in

U.P., Maclagan; and Crosthwaite started similar societies in Multan district of the Punjab and Mr. Lyon in

Bengal.

The interest shown by local agriculturists in these societies and the powerful support lent by the Indian Famine

Commission (1901) induced the govt. to set up a committee under the presidentship of Sir Edward Law to

report on the introduction of co-operative societies in India. The Committee reported favorably in 1903 and the

first co-operative Societies Act was passed in 1904.


The main provisions of the Act were as follows

The Act of 1904

1. Any ten persons living in the same village or town or belonging to the same class or tribe could form a co-

operative credit society ‘for the encouragement of thrift and self-help among the members’.

2. Societies were classified as Rural and Urban. A society in which 80% of the total membership was

agricultural was classed as rural, and the one in which 80% of the membership was non-agricultural, was

classed as urban.

3. Rural society was to have unlimited liability but urban societies were free to opt for either limited or un-

limited liability.

4. Rural society was not permitted to distribute profits, but in the case of urban societies, profits could be

distributed after carrying 25% of the net profits to the Reserve Fund.

5. Loans could be made only to members usually on personal security or on the security of some immovable

property.

6. Loans could also be made by one credit society to another with the sanction of the Registrar.

7. No member could hold shares in a society for more than Rs. 1000.

8. The organisation and control of the movement in each province was put under the charge of a Registrar of

Cooperative Societies.

9. The societies were exempted from the payment of stamp and registration duties as well as the Income Tax.

Even with the passing of the Act, the movement did not make the progress expected of it. By 1911, there were

only 8177 credit societies all over the country with a share capital of Rs.50.5 lakhs and a membership of a little

over 4 lakhs. For this, the fault lay with the Act itself.

In the first place, it permitted the registration of only credit societies but gave no legal protection to non-credit

societies. Secondly the Act, unlike the Wedderburn’s scheme of Agricultural Banks, made no provision for

mobilising urban savings for financing agricultural operations. Institutions like central banks or unions could

have been very useful in this respect but the act did not permit their establishment.

That is why these societies suffered from a great paucity of funds, their entire working capital being “less than

the rural indebtedness of a single taluk in many parts of India.” In the third place, the classification of societies

into urban and rural was found to be arbitrary, unscientific, and highly inconvenient.


Fourthly, the prohibition regarding the distribution of profits in rural unlimited societies was a hardship

especially in the Punjab and Madras where share capital had become important.

Fifthly and lastly, a good many provisions of the Act of 1904, as interpreted by the Courts, became a hindrance

to the further spread of the movement. These drawbacks were removed by the passing of the second Co-

operative Societies Act in 1912.

The Act of 1912

Under this Act

1. Any society, credit or otherwise, could be registered which had as its objective, the promotion of the

economic interest of its members.

2. A federal society like the central Bank or union could be registered.

3. Unless otherwise directed, the liability of central societies was to be limited and that of rural credit

societies un-limited.

4. No member could have more than 1/5 of the total share capital or hold share exceeding Rs. 1,000 in such

a society.

5. The societies were granted exemption from compulsory registration and from the payment of income tax

and stamp duties.

6. 1/4 of the net profits of a society were to be carried to its reserve fund.

7. Co-operative Societies were given the first claim to enforce the recovery of certain dues.

8. Requirements of annual audit were retained, as were numerous other provisions of the Act of 1904.

The enlargement of the functions infused fresh life into the movement and it did not “take long to outgrow the

dreams of its founders.” The number of co-operative societies rapidly grew to 15000 and their membership to

6,95,000 in 1914.

A number of new societies sprang up for such purposes as the sale of agricultural produce, cattle insurance, the

purchase of seeds, manures and implements, and the promotion of irrigation projects. District unions of primary

societies and central banks began to be established. Loan, policy was liberalised and, from 1914, co-operative

societies were authorised to grant loans even for ‘domestic occasions.’

Maclagan Committee:

These fast changes rapid growth obliged the govt. to take stock of the situation and, accordingly, a committee

headed by Sir Edward Maclagan, was appointed in 1915, to study and report whether the movement was

proceeding on economically and financially sound lines.

The Maclagan Committee, in its report, emphasised the need for proper selection of members, knowledge of co-

operative principles, honesty, proper audit, careful scrutiny of loan applications, one man, one vote, thorough

audit to prevent bad management and embezzlement and prompt repayment of loans.


Its report, submitted in 1915, resulted in reorganization and thorough overhauling of the whole administration

of Co-operation. Attempt was made to eliminate societies which did not live up to the ideals of co-operation,

and in particular, to insist upon prompt repayments.

Under the Reforms Act of 1919, co-operation became a transferred subject with the result that the control and

direction of the movement passed entirely into the hands of the new Provincial govts.

This gave the movement the advantage of greater flexibility since it could now be adapted in accordance with

the needs of every province. Besides, advanced provinces could no longer be held back by the backward ones.

Several provincial govts, set Up special enquiry committees, important among them being the Oakden

Committee of U.P., King committee of C.P., Townsend committee of Madras and the Calvert committee of

Burma.

Many provinces, realising the inadequacy of the Act of 1912, decided to replace it with acts of their own.

Bombay govt. was the first to have a separate Act in 1925 followed by Burma and Madras which enforced their

separate acts in 1927 and 1932 respectively.

The Royal commission on Agriculture also emphasised the need for strengthening the movement for, according

to it, the best hope for progress and prosperity of the agriculturist in India lay in co-operation. “If co-operation

fails, there will fail the best hope of rural India.”

It was this deep and comprehensive realisation of the difficulties of cooperative movement that led the govt. of

India to establish an Agricultural Credit Department in the Reserve Bank of India in 1935.

The period between 1913-14 to 1927-28 was one of substantial progress in the field of cooperation. The number

of societies increased from 14881 to 96091, membership from 6.96 lakhs to 37.80 lakhs and working capital

from rupees 7.44 crores to rupees 76.70 crores.

In other words, the growth was by over 6 times in the number of societies, more than 5 times in membership

and by about 10 times in working capital. The period is also significant for the birth of the Land Mortgage

banking in India, the first such bank having been established at jhang in the Punjab in 1920.

Heartening as the progress was, the movement was yet inadequate. It affected a small proportion of the rural

population ranging from 1.8% in U.P., to 36.2% in coorg. Among the major provinces, the Punjab and Bombay

stood highest with a record of 11% and 10% respectively while U.P., and C.P. stood at the bottom with only

1.8% and 2.4% of the rural population having been covered by the movement.

Broadly, the movement made greater progress in the roytwari areas of Punjab, Bombay and Madras where the

agriculturist had mortgageable rights in land than in the zamindari areas of U.P., Bihar and Orissa and Bengal

where he had nothing to offer but his personal security.


The Depression and the Co-Operative Movement in India

The onset of the depression ‘imposed on the movement a much severer strain than it had ever had to face

before’. The precipitate fall in the prices of agricultural commodities adversely affected the economic condition

of the agriculturists.

Their repaying capacity dwindled. The demand for loans increased while the proportion of overdoes mounted

up from 20% in 1927—28 to 40% in 1932—33. In Madras, more than 60% of the short-term loans fell in

arrears.

This threw the entire movement in a very precarious state with many societies and central banks winding up

their affairs. An investigation by Sir Darling showed that up to the end of 1934, 24% of the total number of

societies started since the beginning of the movement had gone into liquidation—the percentage varying from 9

in Bengal to 49 in C.P. and Berar.

The timely help provided by some of the provincial govts, considerably helped the movement to tide over the

crisis created by the depression.

The Second World War:

With the rise in prices and the return of agricultural prosperity during world war II, a new chapter opened in the

progress of the movement. Between 1938-39 and 1945-46, the number of societies rose from 1.22 lakhs to 1.72

lakhs; membership from 53.7 lakhs to 91.6 lakhs and working capital from rupees 106.45 crores to 164.0 crores.

This amounted to a 41% rise in the number of societies, 70.6% in membership and 54% in working capital.

The progress may also be judged from the fact that in 1945-46, there was one society for very 3.8 villages and

10.6% of their population as against only one society for 5.4 villages and 6.2% of their population in 1938—39.

The overdoes were repaid and the demand for new loans fell with the result that many societies and central

banks came to possess surplus funds for which they were keen to find profitable outlets of investment.

The most notable contribution of the war was the shifting of emphasis from credit to non-credit aspect of the

movement, the percentage of non-credit societies having increased from 17 in 1938—39 to 23 in 1945-46.

The shortage of consumer articles like sugar, cloth, Kerosene and matches led to the establishment of a large

number of consumer’s Co-operative Stores. Similarly, many new types of producers’ societies like weavers’ co-

operative societies marketing societies, Fruit grower and cane-Grower societies, Motor transport societies came

to be formed.


The war period also saw a growing trend towards the establishment of multipurpose co-operative societies.

In short, the war broadened the functional range of the movement and brought about a shift from the lopsided

emphasis on the credit aspect to the productive and distributive functions or to its multipurpose potentialities

and thereby imparted that ‘richness and balance’ which was so necessary for its proper development.

The Co-Operative Planning Committee

In 1945, the govt. appointed the cooperative planning committee to draw up a plan of cooperative development

in the country. The committee, which was presided over by R.G. Saraiya, fixed an overall target of bringing

50% of the villages and 30% of the rural population within the scope of the movement in a period of ten years.

With the achievement of Independence and the advent of planning, the role of cooperatives underwent a radical

change.

Co-operation no longer signified a ‘series of activities organised on cooperative lines’ but it was acknowledged

as an organisation that could play ‘a very useful role in the promotion of economic and social democracy and in

the implementation of democratic planning in the country.’

In order to equip the movement for its new role, it was necessary to formulate a long term policy in regard to its

structure and organisation. It was in this context that the Rural credit survey Committee was appointed in 1951.

The committee put forward an integrated scheme of rural credit based on:

a. ‘State partnership at different levels;’

b. ‘Full coordination between credit and other economic activities, especially marketing and processing;’

c. And administration through adequately trained and efficient personnel, responsive to the needs of the

rural population. This scheme was approved and accepted as the basis for the future development to be

incorporated into the second Five year plan.

A notable shift in policy occurred in 1958 when the National Development Council passed a ‘drastic and

sweeping’ resolution” which in effect, led to the rejection of the old large-sized credit society and the

emergence of small sized ‘Service Cooperatives’.

Over the period of the three Plans, the co-operative movement made rapid progress.

The number of societies of all types increased from 1.8 lakhs to 3.47 lakhs; membership rose from 137 lakhs to

503 lakhs and their working capital expanded from Rupees 276 crores to rupees 2800 crores. In other words,

there was a near-doubling of the number of societies, a more than 3½ times increase in membership and a more

than 10 times rise in working capital.


This growth was, however, not equally shared among all the states. The progress was more marked in the Stales

of Maharashtra, Gujarat, Tamil Nadu, Punjab and Madhya Pradesh. The movement was, however, weak in the

eastern region comprising the states of Assam, Bengal, Bihar, Orissa, Manipur and Tripura.

The uneven progress was reflected in wide differences in the per capita loan distribution to rural population

which ranged all the way from rupees 33 in Maharashtra to just two rupees in Bihar and Assam.

A most welcome development during the plan period was the diversification of the movement. A major

breakthrough was witnessed in the field of agricultural marketing and processing. The development of

consumer’s Stores and industrial co-operatives was also significant.

This can be judged from the fact that in 1965-66 the number of stores stood at 13077, membership at 33.32

lakhs and sales at 162.30 crores of rupees. In the sphere of industrial co-operatives, there were 78 sugar

factories, 142 rice mills, 155 cotton ginning and pressing societies, 298 oil crushing and 329 Paddy husking

societies in 1965-66.

The co-operative movement, during a span of over six decades, had come a long way. From humble beginnings

in 1904, it had expanded into a mammoth organisation covering 85% of villages and 33% of the rural

population of the country. In 1961-62 it met 25.8% of the credit needs of the agriculturists as against 3.1% in

1951-52.

The average Loan advanced per member had increased from rupees 44 in 1950-51 to rupees 137 in 1965-66.

Apart from providing finance, the movement had diversified into such fields as agricultural production,

marketing and processing, small and medium industries, housing, transport, and distribution of essential

commodities.

And yet it failed to ‘convulse’ the country. More than 60% of the rural population was still outside its fold and

for nearly 75% of his credit needs, the cultivator was dependent on agencies other than the co-operative society.

The movement had neither materially reduced the burden of the agricultural’ debt nor their dependence on the

money-lender. It even failed to improve their self-reliance, resourcefulness, or capacity for concerted action. In

the words of Dr. Gadgil, “over large areas, was a sense of disillusion regarding the actual performance of

the co-operatives.”

MEANING OF COOPERATIVE MOVEMENT

Cooperative movement can be explain as a “Voluntary movement of the people, carried out democratically by

pooling together their resources or carrying on the given activity, with the purpose of achieving or securing

certain benefits or advantage which given to people cannot get individually and with the purpose of promoting

certain virtue and values such as self help, mutual help, self reliance and general goods of all.”


COMMITTEE REPORTS ON COOPERATIVE MOVEMENT

Researcher has made an attempt to review of different committee's reports like review committee, reports of the

working groups, study teams on cooperatives etc. for detail study of the research work. Various expert

committees were appointed to study the development of cooperatives and to make the recommendations for the

sustainable development of cooperative movement, from time to time, as and when the Government felt that

something was wrong with the movement.

Maclagen Committee on Cooperation, 1914

The Banking Crisis and the First World War both affected the growth of cooperatives though

member deposits in cooperatives increased sharply, the war affected the export and prices of cash crops

adversely, resulting in increased over-dues of loans of primary agricultural societies. To take stock of the

situation, in October, 1914 a Committee on Cooperation under Sir Edward Maclagen was appointed by the

Government, in October 1914, to study the state of, and make recommendations for the future, of cooperatives.

It recommended building up a strong three-tier structure in every province with primaries at the base, the

Central Cooperative Banks at the middle tier and the Provincial Cooperative Bank at the apex, basically to

provide short-term and medium-term finance.

Royal Commission on Agriculture, 1928

The agricultural credit scenario was a matter of concern and various committees looked into the

problems of cooperative banks in various provinces. The Royal Commission on Agriculture in 1928 also

reviewed the cooperative sector and among others recommended the setting up of land mortgage banks.

Mehta Committee, 1937

The setting up of the Reserve Bank of India (RBI) in 1934 was a major development in the thrust

for agricultural credit. The Reserve Bank of India Act, 1934 itself required the RBI to set up an Agricultural

Credit Department. As cooperatives were to be channels for rural development, with the establishment of

popularly elected governments in 1935, programmes were drawn up in which rural indebtedness received

priority. The Mehta Committee appointed in 1937 specifically recommended reorganization of Cooperative

Credit Societies as multi-purpose cooperatives.’

Gadgil Committee, 1944

In 1944, the Gadgil Committee recommended compulsory adjustment of debts and setting up of

Agricultural Credit Corporations, wherever cooperative agencies were not strong enough.

Cooperative Planning Committee, 1945

The Cooperative Planning Committee under the chairmanship of Shri R.G. Saraiya was set up in

1945. The Committee found cooperative societies to be the most suitable medium for democratization of

economic planning and examined each area of economic development.

Registrar's Conference, 1947


The Registrar's Conference in 1947 recommended that the Provincial Cooperative Banks be reeffective linking

of credit with marketing, and providing assistance by way of liberal loans and subsidies for establishment of a

large number of godowns and processing plants was considered.

All India Rural Credit Survey or Gorwala Committee, 1954

Committee was appointed by the Reserve Bank of India in 1951, to supervise a survey regarding

facilities available in rural areas for providing agricultural loans to the agriculturists and to make necessary

recommendations. The Committee submitted its report in 1954. After analyzing the various causes for

unsatisfactory working of the movement, the committee concluded that

“Cooperation has failed but it must succeed”. The committee recommended-

1. an „Integrated Scheme of Rural Credit involving three fundamental principles, namely-

i) State participation at different levels,

ii) Coordination of credit with other economic activities especially processing and marketing in the

cooperative sector, and

iii) Administration through trained and efficient personnel responsible to the needs of the rural

population.

2. Suitable amendments were suggested in RBI Act and the establishment of a National Cooperative

Development and Ware Housing Board at all India level.

3. The establishment of three special funds under the RBI was suggested- i.e.

i) The National Agricultural Credit (long-term operations) Fund,

ii) The National Agricultural (stabilization) Fund,

iii) National Agricultural Credit (Relief and Guarantee) Fund.

All India Cooperative Congress, 1956

The All India Cooperative Congress, held at Patna in 1956, accepted the principle of state participation and

government representation on the Board of Directors of cooperatives. It resolved that the number of such

nominees should not exceed one-third of the total number of Directors or three, whichever is less and applicable

even to cooperatives having government share capital in excess of 50% of total share capital.

Law Committee, 1956

Law Committee was set up by Government of India, under the Chairmanship of S.T. Raja. The

committee submitted its report in 1957 and prepared a draft bill, which was forwarded to all State Governments

for simplifying and liberalizing the provisions of cooperative laws and procedures, with suitable modifications

to their local conditions. The law related to cooperatives, their responsibility of enactment and administration

rested in the State Governments. After the committee report, many State Governments passed their new Acts.

Policy Resolution of 1958

National Development Council (NDC) discussed in detail and recommended radical reforms in

the pattern of organization of societies at village level in its policy resolution of 1958 about cooperative

movement. As per their recommendations in 1959 Government of India pointed out to the State Governments

the broad outlines of the policy to follow in respect of cooperative development. According to the resolution,

the policy of organizing large-sized societies was given up and the scheme of service cooperatives, organized

on the basis of village community as a primary unit with the object of helping the members increase their


agriculture production was introduced. Policy emphasized on linking credit with marketing for strengthening

the cooperative movement. Policy suggested coverage of all villages and all rural families within a short period

as possible up to the end of third plan. Every agriculturist and rural worker should get advantage of cooperatives

through the credit facilities.

Mehta Committee, 1959

Committee on Cooperative Credit gave its report in October 1960, with many important

recommendations, to determine the question of viability, providing adequate finance and state participation at

the primary level. The Committee suggested suggestions to expand credit facilities for agricultural production

as well as credit structure for strengthening cooperative movement. Organized service cooperatives on the basis

of the village community as the primary unit and if villages are too small the number of villages to be covered

by a society may be increased in the interest of viability, to encourage members to subscribe sufficient share

capital in the society as well as Government also contribute to share capital to service cooperatives.

Committee on Consumers Cooperatives, 1961

Set up by National Cooperative Development and Warehousing Board to examine the promotional and

organizational aspects of the consumer's cooperative movement for ensuring sustainable development. Its main

recommendations were- organizing primary consumer's stores, Government assistance for construction of

godowns and contribution in share capital, cash credit from cooperative banks and establishment of National

Federation of Consumer's Stores etc.

Working Group on Industrial Cooperatives, 1962

In 1962, the Ministry of Commerce and Industry appointed the second working group on

Industrial Cooperatives, called as Working Group on Industrial Cooperatives, to review the present condition

and to suggest targets during Third Plan. The report submitted in May 1963 with the recommendations that the

setting up of new and revitalizing the existing industrial cooperatives strengthening weavers and handicrafts

cooperatives and extension of credit facilities of Industrial cooperatives by cooperative banks and the formation

of federations of industrial cooperatives. Special orientation of 2 to 3 weeks should be given to the officer's in

charge of providing technical, financial and other facilities to the industrial societies.

Committee on Taccavi Loans, 1962

The Ministry of Community Development and Cooperation, GOI, appointed the Committee on Taccavi Loans

in July 1961, under the Chairmanship of Shri. B.P.Patel, to examine the existing arrangements for the supply of

taccavi loans to farmers and suggested measures as will ensure effective implementation of the policy of routing

taccavi loans through cooperatives. Committee submitted its report in August 1962. As per National

Development Councils recommendation in November 1958, was that takavi loans and other facilities make

available to agriculturists through cooperatives and make advantage to every agriculturists and worker to find it

to join the village cooperative. Government of India therefore

requested to the State Governments to route takavi loans through cooperatives.

Study Group on Transport Cooperatives, 1962

In September 1962, under the Chairmanship of S.N.Bilgrami, the Minister of Transport, GOI, a

study group was to examine the scope for transport cooperatives, draw up a pattern of organization for such

cooperatives, assess their financial requirements and suggest pattern of financial assistance. Study group

submitted its report in May 1964 with some fundamental recommendations that was government participation


in the share capital up to 35% of the total share capital, government guarantee through cooperative banks, state

and national level federation.

Study Group on Panchayats and Cooperatives, 1962

It was appointed by the Government of India, under the chairmanship of Misra S.D.W. to study

and suggest measures to achieve maximum coordination between the cooperatives and Panchayats. Concern to

the State Governments participation in the share of cooperative societies, working group suggested that it

should not be rated through the Panchayati Raj institution, whether they both have a close ideological link and

aim at democratic decentralization.

Committee on Cooperative Administration, 1963

It was appointed in April 1963, under the Chairmanship of V.L.Mehta. The committee appointed

to review the departmental set up and to suggest recommendations to make stronger the departmental

administrative staffs at various levels. Committee recommended that the Registrar, Cooperative Societies,

should be an IAS officer along with two years training. There should be Joint Registrar for audit, credit and

banking, marketing and processing, industrial societies, forming societies and consumer societies.

M.L. Dantwala Committee, 1964

Government of India appointed a committee on cooperative marketing to review the pattern of

organization of cooperative marketing and give recommendations for ensuring sound and speedy with following

major recommendations such as- for the future pattern of organization two-tire structure of marketing societies,

apex societies at State level and primary societies at mandi level. State Trading Corporation and Food

Corporation of India should purchase their requirements of agricultural production through it.

Mirdha R.N. Committee, 1964

It was appointed by Government of India to suggest measures for proper development of the

cooperative movement by eliminating non-genuine societies and vested interests. Assessing the size of the

problem of non-genuineness in the cooperative movement, the report came to the conclusion that the movement

was by and large moving in the right direction and that it would be wrong to magnify a few malpractices and

come to a conclusion that the movement was replete with non-genuine societies. The committee however, gave

certain suggestions to overcome a wrong type of tendencies i.e. cooperative training and education, regular

audit of societies by an agency independent of Registrar, Government assistance etc.

All India Rural Credit Review Committee, 1966

Under the chairmanship of B. Vendatappiah, and the Committee submitted its report in 1969.

Which recommended the entry of commercial banks into the rural credit system stated clearly that this was

being done to “supplement” and not “supplant” the cooperative credit structure. According to the committee “a

large number of Primary Agricultural Credit Societies are neither viable nor even potentially viable and must be

regulated as inadequate and unsatisfactory agencies for dispensing production oriented credit”. The committee

gave emphasis to integrity, efficiency and the sense of dedication, functioning based on democratic and

egalitarian principles and effective supervision.

All India Rural Credit Review Committee, 1969

Government of India had appointed the committee under the chairmanship of B.Venkatappiah.


Main objective of the committee was to suggest measures for the reorganization of rural credit. The Committee

found that there is marked increase in the cooperative credit between 1951-52 and 1967-68 i.e. from Rs.24 crore

to 500 crore.

P.R. Dubhashi Committee, 1972

The issues addressed by the Committee were-

a. Adoption of professional management,

b. Extension of deposits and insurance,

c. Quality of working- litigation pending, adjournment, hundred percent audit, security of loan proposals,

documentation, loan recovery plan, grant of membership, maintenance of records, revision of bye-laws,

Registrar's power, court procedures, nature of appeals in the court, a common law for all types of

Cooperative Societies, etc.

M. K. Madhavdas Committee, 1978

Reserve Bank of India appointed committee under the Chairmanship of M.K. Madhavdas,

Executive Director of Agricultural Loan Dept. to examine and give recommendations on the working of Urban

Cooperative Banks and examine as to which types of services they would be able to provide in future. The

committee submitted its report in July 1978 with the recommendations that- Composition of Model Bye-Laws,

providing finance to small scale industries, managerial aspects and self-employment etc. The committee also

remarked that- to fulfill the requirement of credit in urban and semi-urban areas urban banks are a good

channel.

Marathe Committee, 1978

The Committee worked in to the issues of : Development of Urban Cooperative Banks (UCB) as

per their need, regional imbalance in development and the principle of one district one bank, branch expansion

by the new UCB's instead of by the old established UCB's, encouragement of establishment of Women’s

Cooperative Banks, utility of UCB's for non-agricultural loans in rural areas as the basis for future branch

expansion, survey at the national level to be taken by the Federation and Cooperative Dept. of the state.

Ardhanarishwaran Committee, 1987

Pointed out towards the modern and professional management, financial discipline, human resource

development, composition of Board of Directors, criteria for selection of the staff and General Manager

Khusro Committee, 1989

The Agricultural Credit Review Committee under the chairmanship of A.M. Khusro was

appointed by the Reserve Bank of India in August, 1986 to undertake among others a review of the rural

financial system and to assess the credit requirements of the agricultural sector during the next decade. Khusro

Committee submitted its report in August 1989. The committee recommended ceiling on lending rate of

commercial banks on agricultural lending at 15.5 per cent, whereas in case of Primary Land Development

Banks, it was suggested at 5 per cent and for the RRBs 8.65 per cent. According to the committee demand for

credit was limited and more realistic as it is based on agriculturist desire of borrowing from institutional and

non-institutional sources.

Pant Committee, 1990


The Ministry of Agriculture set up another Committee in October 1990 under the chairmanship of Pant J.C.

(Additional Secretary, Department of Agriculture and Cooperation) to consider the implement of the

recommendations of the Agricultural Credit Review Committee (1989) for strengthening the cooperative Credit

delivery system on sound financial lines. To make each primary agricultural credit society viable the committee

suggested some action programme. As the first step would be to train personnel working in cooperative banks in

all aspects of preparation of business development plans (BDP) for PACS, committee suggested that the

personnel training will develop the total scope of activities necessary for increasing loan business, deposit

mobilization, increase the range of profitable activities, etc.

Committee on Organization of Cooperatives for Rural Poor, 1990

At the same time in October 1990 another committee was set up on organization of cooperatives

for rural poor under the chairmanship of Sankam S.R. (Secretary, Department of Rural Development). The

committee submitted report in June 1991. It explained that the cooperatives which engaged as organizations to

protect the poor from economic exploitation were no longer helping them. As the result of that a bulk of the

rural poor population was still dependent on private moneylenders for meeting their requirements.

Brahm Prakash Committee, 1991

It was appointed to revise the existing cooperative laws for cooperative development through

voluntary participation of the people. The Committee recommended a Model Cooperative Law in 1991 in order

to make cooperatives self-reliant, autonomous and democratic. It was circulated to all the states with the advice

to incorporate the same, as it ensures more power to the members, more participation and less government

intervention in the affairs of cooperatives.

The Narsimhan Committee Report, 1991

Does not show concern to review the working and evaluating the performance of UCB's and did

not make suggestions to how challenges in future should be met by the UCB's. Cognizance taken of the problem

of banking in the various sectors is tilted more towards the nationalized and private sector banks than the

cooperative sector. However, the recommendations made by the committee certainly influenced the RBI policy

directives about functions in future and the policy adopted by the RBI keeping in view only the problems of

nationalized banks, this will not necessarily be relevant but also detrimental to the interest of UCB?s. Moreover,

basic and urgent problems remain unnoticed e.g. the problem of declining profitability and viability owing to

stringent SLR, CRR recommendations and interest thereon, priority sector lending, lending for housing,

vehicles, loans to small traders, extension of consumption loan limits, permitting scheduled banks to open

branches, outside state grant of foreign exchange dealership, merchant banking, etc.

The Narsimhan Committee Report, 1998

The second part of the report of the Narsimhan committee was submitted on 24/4/1998. Committee

recommended close up the branches which are under loss or percentage of NPAs over 2%.

Capoor Committee, 2000

The Government of India appointed the Jagadish Capoor Committee to recommend on the lines

that cooperative societies must evolve as independent self-reliant, autonomous and member- driven institutions.

Committee recommended several points concerned to professionalization, business diversification, recovery

management, human resource development, fund mechanism and setting up of a cooperative rehabilitation and

development fund. Capoor committee also mentioned that the cooperatives have lost their democratic character


and have become the government controlled bureaucratic organizations. Committee suggested minimizing

excessive control and regulation for the sound development of the cooperatives throughout its own principles.

National Policy on Cooperatives, 2002

In 2002, the Government of India enunciated a National Cooperative Policy. The objective of the

Policy is to facilitate an all round development of cooperatives in the country. The policy promises to provide

cooperatives with the necessary support, encouragement and assistance, to ensure their functioning as

autonomous, self-reliant and democratically managed institutions, accountable to their members, and making a

significant contribution to the national economy. Based on the recommendations made at a Conference of State

Ministers for Cooperation, the Government of India in 2002 constituted a Ministerial Task Force to formulate a

plan of action for implementation of National Cooperative Policy. The Task Force suggested that a single law

instead of parallel laws should be introduced in the States. It also recommended, among others, that in order to

depoliticize cooperatives, Members of Parliament or Members of Legislative Assemblies should not be allowed

to hold office of any cooperative society.

A.Vaidyanathan Committee, 2004

Government of India constituted a committee under the Chairmanship of A.Vaidyanathan, known as Task Force

on Revival of Cooperative Credit Institutions, to reviving and revitalizing the rural cooperative credit structure

(CCS) and attributes high priority and urgency to it. Report of Task Force on Revival of Rural Cooperative

Credit Institutions (in the Short Term Cooperative Credit Structure) was submitted in February 2005 and Report

of the Task Force on Revival of Rural Cooperative Credit Institutions (in the Long Term Cooperative Credit

Structure) was submitted in August 2006. To nurse the rural cooperative credit system back to health, to ensure

that the rural credit doubled over three years and that the coverage of small and marginal farmers by

institutional lending was expanded substantially, the Government of India in August 2004 set up a Task Force

to suggest an action plan for reviving rural cooperative credit institutions and legal measures necessary for

facilitating this process. The Task Force, chaired by Prof. A. Vaidyanathan, recommended that any financial

restructuring which did not address the root causes of the weaknesses of the system would not result in its

sustained revival and would

require legal measures. The recommendations of the Task Force in accordance with its Terms of Reference are

basically confined to revival of credit cooperatives for which it suggests a financial package. The Vaidyanathan

Committee has also suggested a model cooperative law that can be enacted by the State Governments.

Recommendations of the Task Force are being currently implemented. The Vaidyanathan Committee has also

given its report on the long-term cooperative credit structure.

Radhakrishana R., 2006

The Expert Group on Agricultural Indebtedness was set up in August 2006 under the chairmanship of

Radhakrishana. The Group came out with detailed report which gave a large number of recommendations

covering immediate credit measures, financial architecture, institutional architecture, risk mitigation and other

measures. The Expert Group observed that as the indebtedness of farmers is largely because agriculture depends

mainly on the monsoon, which ultimately affects the repaying capacity of the farmers. Second, though

agricultural credit has increased manifold, most of the farmers depend fully/ partly on non-institutional sources

where the rates of interest are quite high and the terms and conditions often exploitive. Third, the dominance of

middle-man often prevents the farmers from getting remunerating price for their produce. Fourth, the farmers

do take loans for special functions or medical expenses from money-lenders which do not yield incomes and the

interest rates are high leading to indebtedness.

High Powered Committee on Cooperatives, 2009


The year 2004 was the centennial year of the Indian cooperative movement. The World Order, in which

cooperatives along with other business organizations are required to function, has indeed changed since the first

cooperative law in India was enacted in 1904. New paradigms and changing contours and structures of the

business landscape have their own inexorable logic leading to the recommendation of the Conference of State

Cooperative Ministers in December, 2004 that a High Powered Committee be constituted by the Government of

India for preparing a road map for cooperatives over the coming years. The Committee, duly constituted in

2005 has since been engaged in this task. The task has been daunting, given the vast network of cooperatives in

the country and that cooperatives functioning in different sectors face diverse problems. The situation is further

complicated by the fact that Cooperatives is a State subject under the Constitution of India and State

cooperative laws and their implementation have vastly differed. Changes in political authority at State level

have over the years at different times resulted in wholesale super cession of cooperative institutions in many

States vitiating their continued functioning as democratically elected cooperative institutions. The Committee

has chosen to look at the common face of cooperatives as an institutional form and focused on delving into the

multitudinous components of what ails cooperatives in this regard. In its search, the Committee has drawn upon

the recorded wisdom of previous Committees through available literature and documents, looked at success

stories, and held consultations with those who have an interface with the sector in any manner. This, it has done

through the written word seeking

views from various segments of intelligentsia, cooperators, cooperative institutions at all levels, national and

State government officials and civil society organizations, via a questionnaire as well as through a series of

meetings. Needless to say, it's own deliberations have been many and deep. The Committee concluded that

cooperatives have not been given due importance, despite the emphasis laid by the Planning Commission and

Prime Minister Jawahar Lal Nehru on developing cooperatives as a third important sector of the economy. The

Committee's Report has been guided by its vision of Cooperative Identity, true to itself as a voluntary,

autonomous and democratic entity of its members and in keeping with what is the common international

acceptance. While there are many problems and challenges, which the cooperatives face and

these have been looked at in detail to the extent possible, the root causes appear to converge upon the common

problem of governance, which in turn is to a major extent determined by the laws that govern cooperatives.

CO-OPERATIVE LEGISLATION, NEED, HISTORY AND EVOLUTION

Objectives: on reading this chapter, the participant should be able to;

1. Appreciate the need for a separate law for co-operatives,

2. Have a background understanding of the history and evolution of co-operative legislation in

India, and

3. Understand the place of co-operatives in the Constitutional Scheme.

When the co-operative Movement made its formal beginning there was no separate Law under which Co-

operative societies could be registered. In fact, the world’s first successful co-operative society the Rocha dale

Society of Equitable Pioneers, which was organised in the year 1844, was registered under the Friendly

Societies Act. It was only in 1852 a separate law was enacted in Brittan for co-operatives in the form of

Industrial and Provident Societies Act. Even today there is no separate Co-operative Law in Denmark Where

co-operatives are free to work under their buy-laws. However, need is felt for having a separate Law for Co-

operatives on the following grounds.

(a) The Companies Law does not facilitate the working of co-operative Societies as the Law is basically

framed for facilitating capital creation and profit maximization. Co-operatives, on the other hand, are

member centered organizations and aim at maximizing services to members.

(b) Laws like the friendly Societies Act is eminently suited for promoting cultural activities, sports etc.

Which are conducted mostly in non-formal way. Further, the Law impose restrictions on acquisition


and disposal of property etc. Co-operative are business organizations and hence their activities are

not facilitated by Laws like the friendly Societies Act.

(c) Co-operatives are generally organizations of the poorer and unsophisticated sections of society.

Hence, the Law has to be simple and easily understandable by common people for whom it is

intended.

BRIEF HISTORY OF CO-OPERATIVE LEGISLATION IN INDIA

The first Law enacted on the subject in the country was the Co-operative Credit Societies Act of 1904. The

salient features of CCSA 1904 are as under

a) At least 10 persons living in the same village or town or belonging to the same class or caste could start

a society for encouraging thrift and self-help among members.

b) The main function of the societies was to raise funds and give loans to members.

c) Each province was to appoint a Registrar of Co-op Societies to guide and control the societies.

d) In view of concessions given to societies and in order to create confidence among the public, the

accounts of each society were to be audited by the Registrar or his staff.

e) Societies having four-fifth of the members as agriculturists were classed as rural societies, urban

societies were those, which had four-fifth non-agriculturist members. Rural societies had unlimited

liability whereas the urban societies could have limited or unlimited liability. In rural societies, no

dividends were allowed. All profits were credited to the Reserve Fund. In urban societies, one-fourth of

the profits were credited to the Reserve Fund and out of the rest, dividend could be given.

f) Societies were exempt from Stamp Fees, Registration Fee and Income-tax.

The CCSA 1904 suffered from some inherent limitations. For instance, the Act did not provide for organization

of non-credit societies nor did it provide for the establishment of secondary/federal societies. These and some

other limitations of CCSA 1904 were removed by the enactment of Co-op Societies Act of 1912. The

distinguishing features of the 1912 Act as compared to 1904 Act are summarized below.

a) The 1912 Act provide for the organization of all types of co-ops and not just credit societies.

b) Instead of classification of societies as rural and urban, the 1912 Act classifies societies based on the

nature of liability of their members. However, agricultural credit societies continued to be of unlimited

liability.

c) Distribution of profits was made easier. Profits could now be divided even in rural societies after

keeping one-fourth as reserve fund.

d) The Act also provide for organization of secondary/federal societies.

With the Constitutional Reforms of 1919, Co-operation became a Provincial Subject. Every Province started

enacting its own Co-operative Law, keeping in mind, the growth and special needs of the co-operative

movement in that Province. The Bombay Province was the first to enact its own Co-operative Law in 1925,

followed by other Provinces like Madras in 1932, Bihar in 1935, Orissa and Bengal in 1940 etc. Even though

the provincial laws continue to have the essential features of 1912 Act, many improvements were however

made to the 1912 Act by these laws and some of the improvements made are listed below.

a) The scope of movement has been widened by omitting from preamble the words “persons of limited

means” found in the Act II of 1912.

b) Procedure regarding arbitration found place in the Act itself, instead of being left to the rules as in the

old Act and provision had also been made for conditional attachment of property.

c) Provision had been made for amalgamation and division of societies and for change of liability.


d) Provision had been made for winding up of a society before it could be cancelled. Large powers had

been given to liquidator to wind up the affairs of the societies expeditiously under the guidance of the

Registrar.

e) The principle of ‘one member one vote’ found place in the Act.

f) In some Acts, the Government or the Registrar had been given the powers to supersede the committee of

societies which may be found to be mismanaging the affairs.

g) The Registrar had also been given powers to impose surcharge against persons found responsible for

losses, misappropriation, breach of trust, etc.

h) The limit of individual shareholding in the capital of a society was increased to enable them to undertake

larger economic activities.

i) Provision was also made for the provincial Government to extend financial assistance to co-op societies.

With Independence and the reorganization of States on linguistic lines in 1956, almost every State in the

country is having its own separate Co-operative Law, as co-operation is included in the State List (entry 32)

under the Indian Constitution (Seventh Schedule). On acceptance of the concept of State Partnership in Co-

operatives as recommended by the All India Rural Credit Survey Committee (1954) by Government of India, a

committee was constituted under the Chairmanship of Shri.S.T.Raja in 1957 to draft a model co-operative

societies bill, providing for enabling provisions to give effect to this concept. The Model Bill 1957 drafted in a

simple and lucid form, has honestly tried and succeeded in retaining the essential characters of a co-operative

organization like democratic control, voluntary membership, limited interest on capital etc, while providing for

state partnership in co-operatives. State Laws on the subject are essentially structured on this Model Bill with

necessary additions/modifications to suit the special conditions and requirements of individual States. However,

unfortunately overtime co-operative laws in different States acquired several aberrations, distorting the very

essential features of a co-operative organization like voluntarism, democratic control by members, autonomy,

member economic participation etc and reducing these organizations to the status of para statal institutions, as

mere tools in the hands of government for implementing its policies. The process for correcting these distortions

started in the 1990s, gathered momentum there after culminating in the adoption of The 97th Constitutional

Amendment Act 2011. The evolution of co-operative law in the post- Liberalization era is dealt in detail in a

later chapter.


CHAPTER – 3

Multi State Cooperative Societies ACT, 2002

The objective of Multi-State Co-operative Societies (MSCS) Act 2002 is to facilitate the organization and

functioning of the cooperative societies having jurisdiction in more than one States. This Act which came in

force with effect from 19.8.2002 was enacted to replace the Multi-State Cooperative Societies Act, 1984. The

Act facilitates voluntary formation and democratic functioning of multi-state cooperative societies as member

driven institutions based on self-help and mutual aid and to enable them to promote their economic and social

betterment and provides for functional autonomy.

Based on the experience of implementation of the MSCS Act, 2002, interaction and feedback received from

various stakeholders including the multi- state co-operative societies and recommendations made by the High

Powered Committee on Cooperatives constituted by the Government of India under the chairmanship of Shri

S.O. Patil, a need was felt to further amend the Multi-State Co-operative Societies Act, 2002 to keep the

legislation in tune with the changing economic policies and to facilitate the multi-state co-operative societies to

take advantage of the new and emerging opportunities.

ORGANISATIONAL STRUCTURE OF NABARD

RESERVE BANK OF INDIA


The origins of the Reserve Bank of India can be traced to 1926, when the Royal Commission on Indian

Currency and Finance – also known as the Hilton-Young Commission – recommended the creation of a central

bank for India to separate the control of currency and credit from the Government and to augment banking

facilities throughout the country. The Reserve Bank of India Act of 1934 established the Reserve Bank and set

in motion a series of actions culminating in the start of operations in 1935. Since then, the Reserve Bank’s role

and functions have undergone numerous changes, as the nature of the Indian economy and financial sector

changed.

Reserve Bank of India (RBI) is India's central bank. Central bank of a country execute multiple

functions such as overseeing monetary policy, issuing currency, managing foreign exchange, working as a bank

of government and as banker of scheduled commercial banks, etc. It also works for overall economic growth of

the country. The Reserve Bank of India was established in 1935 with the provision of Reserve Bank of India

Act, 1934.Though privately owned initially, in 1949 it was nationalized and since then fully owned by

Government of India (GoI).

Origins of the Reserve Bank of India

• 1926: The Royal Commission on Indian Currency and Finance recommended creation of a central

bank for India.

• 1927: A bill to give effect to the above recommendation was introduced in the Legislative

Assembly, but was later withdrawn due to lack of agreement among various sections of

people.

• 1933: The White Paper on Indian Constitutional Reforms recommended the creation of a Reserve Bank.

A fresh bill was introduced in the LegislativeAssembly.

• 1934: The Bill was passed and received the Governor General’s assent

• 1935: The Reserve Bank commenced operations as India’s central bank onApril 1 as a private

shareholders’ bank with a paid up capital of rupees fivecrore (rupees fifty million).

• 1942: The Reserve Bank ceased to be the currency issuing authority of Burma(now Myanmar).

• 1947: The Reserve Bank stopped acting as banker to the Government ofBurma.

• 1948: The Reserve Bank stopped rendering central banking services toPakistan.

• 1949: The Government of India nationalised the Reserve Bank under theReserve Bank (Transfer of

Public Ownership) Act, 1948.

The preamble of the Reserve Bank of India describes it main functions as:To regulate the issue of Bank Notes

and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency

and credit system of the country to its advantage.

Main Functions

Monetary Authority:

• Formulates, implements and monitors the monetary policy.

• Objective: maintaining price stability and ensuring adequate flow of credit to productive sectors.

Regulator and supervisor of the financial system:

• Prescribes broad parameters of banking operations within which the country's banking and financial

system functions.

http://en.wikipedia.org/wiki/Central_bank

http://en.wikipedia.org/wiki/Government_of_India


• Objective: maintain public confidence in the system, protect depositors' interest and provide cost-

effective banking services to the public.

Manager of Foreign Exchange

• Manages the Foreign Exchange Management Act, 1999.

• Objective: to facilitate external trade and payment and promote orderly development and maintenance of

foreign exchange market in India.

Issuer of currency:

• Issues and exchanges or destroys currency and coins not fit for circulation.

• Objective: to give the public adequate quantity of supplies of currency notes and coins and in good

quality.

Developmental role

• Performs a wide range of promotional functions to support national objectives.

Role and Functions of General Body:

The General Body is the supreme authority of consumer cooperative stores in whom the ultimate authority lies.

The generally accepted functions of a general body are as follows:

1. To elect the board of directors

2. To appoint the auditors

3. To fix borrowing limits

4. To approve, reject or modify the proposals such as the following, placed before it by the board of

directors or other authorized person or body;

a. The repost of the office bearers including trading and profit and loss accounts, balance sheet,

b. Appropriation of surplus profits

c. Expulsion of a member

d. Liquidation and amalgamation of the society

e. Amendments to the bye-laws of the society

5. To give or offer directions thought fit to board of directors;

Board of Directors:

The management of cooperative consumer stores as in other cooperatives is conducted by the board of directors.

In case of wholesale stores it generally consists of 12 members. Most of the members are elected. The

Government nominees are also represented on the board. In case of primary stores the board of directors

comprises an average of 10 persons. Most of them are elected, while in some stores, there are official

representatives also.

Functions of the Board of Directors:

On account of the increase in the size and volume of business of consumer stores, the functions of the board of

directors have undergone considerable change. A board is, now, not expected to waste its time in trivial details.

The modern trend in management is that the board should leave many things to the specialists.

This is because, no layman, however, able and assiduous, can fully grasp the complex and complicated

techniques of modern management, such as stock control, budgetary control, forecasting, modern accounting

system etc.

Apart from what the Act, rules and bye-laws say, the basic functions of the Board of Directors are as follows:


1. To act as trustees

2. To appoint the general manager and determine his salary and conditions of work

3. To lay down the general policy on prices, dividends and reserve allocation

4. To review the performance periodically.

CHAPTER-I

CLASSIFICATION OF COOPERATIVE SOCIETIES

Cooperative societies may be classified into different categories based on the objectives, and purpose for which

they are formed and nature of activities these cooperatives are performing.

The said classification of Cooperative societies could be Credit Cooperatives, Agricultural Non-credit

cooperatives, non-agricultural non-credit cooperatives. The types of cooperative societies functioning under

each of these classified societies are as under.

1.Agricultural Non Credit Cooperatives

a) Marketing Cooperatives

b) Processing Cooperatives

c) Producer Cooperatives

d) Cooperative Farming societies

e) Dairy Cooperatives

f) Fisheries Cooperatives

g) Poultry Cooperatives

2. Non Agricultural Non Credit Cooperatives

a) Consumer Cooperatives

b) Housing Cooperatives

c) Industrial Cooperatives

d) Labour Cooperatives

e) Service Cooperatives

3. Credit Cooperatives

A)Agricultural credit cooperatives

• State Cooperative Banks

• District Central Cooperatives Banks

• Cooperative Agricultural and Rural Development Banks

B)Non Agricultural credit Cooperatives

• Urban Cooperative Bank


• Thrift and Credit Societies

• Salary Earners Society

I. AGRICULTURAL NON-CREDIT COOPERATIVES

Marketing Cooperatives:

Meaning and Definition of Co-operative Marketing

Marketing is a comprehensive term covering a large' number of functions. Recently the concept of marketing

has broadened considerably. It includes not only purchase and sales of goods, but also the various business

activities and process involved in bringing the goods from the producer to the consumer.

According to the Reserve Bank of India a co-operative marketing society is an association of cultivators formed

primarily for the purpose of helping the members to market their produce more profitably than possible through

the private trade". According to Margaret Digby: "co-operative marketing is the system by which a group of

farmers or market gardeners join together to carry on some or all the processes involved in bringing goods from

the producer to the consumer".

Thus, co-operative marketing may be considered as a process of marketing which enables the growers to market

their produce at better prices, followed by the intention of securing better marketing services, and ultimately

contributing to improvement in the standard of living of members. It is significant to note that a society

consisting of a group of people simply for the purpose of selling commodities produced by other cannot be

called a co-operative marketing society.

III. Activities Involved in Agricultural Marketing

Marketing begins at the farmers field. Activities included in it are discussed below briefly.

A. Information and extension

It informs and helps the farmers about the world and domestic market so that they can adjust their production

according to the demand. It also informs them about the quality, variety, whole-sale and retail prices of

commodity.

B. Assembling the produce

The produce may be assembled either through personal delivery at the society's office or society may collect it

from the farms. The society may establish collection centres in outlying areas or may set up mobile collection

services which may visit the various collection points according to a fixed schedule.

C. Grading

Through grading, the society sorts out the produce into lots of uniform quality and characteristics. It would be

advantageous to the society if it makes use of standard grades recognized by national or even international

trading customs.


D. Storage

The store houses, go downs or warehouses must be well planned in their size and design, which will largely

depend upon the form in which the produce is to be sold. The go downs should be such as not to allow the

goods to be spoiled, deteriorate in quality or weight and to be pilfered.

The responsibilities involved in the operation of a ware-house are enumerated below.

1. Prevention of infestation through regular cleaning and spraying, testing or fumigating with chemicals.

2. Storage of the commodities according to its grade and varieties separately.

3. The planned storage of perishable goods.

4. A regular and daily check on the quality of the produce stored.

E. Packing

For the prevention of loss in handling in transit, the agricultural products, particularly fruits and vegetables must

be properly packed.

F. Processing

Processing is done either to make the produce marketable or to avoid loss in quality before it reaches the

consumer. This can be done by (1) changing the appearance or substance of the produce and (2) increasing

durability through application of modern methods of preservation.

G. Selling

In selling the agricultural produce, co-operative societies can act either as an agent or as an independent trader.

H. Transportation

Transportation of agricultural produce from the farms to the buyers, marketing centres or processing.

Co-operative Marketing Structure

The broad aim of co-operative marketing society is to rationalize the whole marketing system so that it may be

beneficial to the producer. Its immediate objective is to strengthen the bargaining power of the cultivator so as

to secure him better prices, to eliminate middlemen, to provide him the needed finance, to persuade him to grow

better quality of products, and to stabilize prices by an orderly and judicious supply of commodities in the

market.

The co-operative marketing structure is federal in character and pyramidal in structure.

National Agricultural Co-operative Marketing Federation

(NAFED) (National level)


State Co-operative Marketing Federation (SCMF)

(State level)

District or Regional Marketing Society (DMS)

(District or Regional level)

Primary Marketing Societies (PMS) It"

(Base level)

1. National Agricultural Co-operative Marketing Federation (NAFED)

The NAFED is a federal organization of state level apex co-operative marketing societies in India. Its chief

function is to coordinate the activities of state federations and render advice and technical guidance to them.

The federation also undertakes export and inter-state trade. It was established in 1958 with headquarter in New

Delhi and its operational area covering the entire country.

2. State Marketing Societies

The apex marketing societies (or federation as they are called in some states) are expected to undertake

marketing operations on behalf of affiliated societies, particularly in the field of inter-state trade. They are also

expected to procure agricultural inputs and other goods required by the farmer for distribution through co-

operative agencies within the state. The apex societies have also been entrusted with varying functions in

different states such as distribution of chemical fertilizer, cement, iron and steel, sugar, milk powder, kerosene

oil, etc.

3. District /Regional Marketing Societies

These societies are expected to coordinate the functions of primary marketing societies both in regard to

marketing of agricultural produce, distribution of agricultural requisites and consumer goods. They also

undertake processing, inter-district trade, etc. In actual practices, these societies are mostly engaged in the

distribution of agricultural production requisites like fertilizers and essential consumer articles.

4. Primary Marketing Societies

The primary marketing societies are, by and large, located, at the secondary market (mandi) or wholesale

assembling centres with their area of operation limited to the natural hinterland of the market concerned.

However, in few states, marketing societies have been organized at the headquarters of the block and covering

the whole block.

The structure of marketing co-operatives in various states is greatly varying. In some states like Assam, Bihar,

Orissa, M.P., Karnataka, Kerala and West Bengal, it is two-tier pattern i.e. primary marketing societies

organized at the level of secondary market and the apex marketing society at the state level. In other states like

Maharashtra, Gujarat, Andhra Pradesh, Punjab, V.P. and Tamil Nadu, it is three-tier pattern comprising of


primary marketing societies at the base, the central marketing societies at the intermediate or district level and

the apex marketing societies at the state level.

Cooperative processing :

Processing of food grains and other agricultural products is the most important stage in preparing them for the

ultimate consumption. Almost all the agricultural commodities have to undergo one or more stages of

processing before they reach the consumer.

It is an activity connected with the preparation of foodgrains and commercial crops for the purpose of making

them fit for ultimate consumption. For example, paddy may be threshed and winnowed by the cultivator but

husked by the millers, the trader or even the consumer. Similarly, cotton has to be ginned and pressed, before it

goes to textile mills. Sugarcane has to be processed into gut or sugar and so on.

The small and marginal farmer cannot afford to take up this aspect of agriculture because of limited resources in

terms of finance, technical skill, knowledge and limited marketable surplus. Consequently, it is being

undertaken by the middle men in the private sector. For achieving maximum economy, processing units may be

set up close to the sources of supply. A processing unit or society can offer a number of advantages to the rural

people.

Need and Importance

Well established co-operative units can effectively undertake to recover the loan paid by the co-operative credit

societies for agricultural production, for the development of co-operative marketing and consumer co-

operatives.

There is now an increasing awareness of the importance of the role of co-operative processing in economy

development in general and in co-operative development in particular. The importance of co-operative

processing relates to following considerations.

1. Indispensable for marketing

Co-operative processing is an indispensable part of co-operative marketing, particularly with regard to cash

crops. The price--spread between the producer and the consumer is sizable in the case of commodities which

have to be processed before they reach the consumer. Consequently, successful handling of these commodities

on a co-operative basis is generally not possible, unless their processing is also undertaken by co-operative

institutions.

2. Linking credit with processing

Well established co-operative processing units can effectively undertake to recover the loans provided by the

co-operative credit institutions for production of relevant agricultural commodity. This has been tried with a

large measure of success in the case of cooperative sugar factories in Maharashtra, where they are recovering

the loans advanced by the primary credit societies for raising of sugarcane crop.

3. Help to consumer societies

In several parts of the country the distribution of sugar, produced , by co-operative sugar factories, has been

entrusted to co-operative supply agencies and this has been to the mutual benefit of co-operative processing


organizations and the co-operative supply institutions. It is quite obvious that the functioning of consumer

institutions will be considerably facilitated if there is a large scale development of co-operative processing

activity. what is desirable is that the cooperative processing units and the consumer institutions should

establish suitable points of contact.

4. Base for rural industrialization

It has been seen that the rural economy gets immediately transformed and immensely strengthened by taking up

agricultural processing. Larger surplus become available for further investment and larger inputs make for

technical and economy advancement in both agriculture sector and industry.

5. Socio-economic change

Co-operative processing societies ,have facilitated the introduction of technical change in agriculture: they have

created not only economic opportunities, but have helped in building a class of entrepreneurs amongst ordinary

farmers. Besides, co-operative processing accelerates the rate of capital formation in agriculture both at the

production and processing stages.

Agricultural processing has been assigned a significant role in co-operative development. Processing of

agricultural produce is now being considered specially appropriate for the co-operative method of organization

A .Sugar processing co-operative

One of the most hopeful development of the last decade in the field of co-operative processing has been the

establishment of co-operative sugar factories in the country.

Growth of Cooperative Sector of Sugar Industry

The real growth of the cooperative sugar sector started after India’s independence, when the Government

decided to industrialise the country by expanding the cooperative sector. The principal of cooperation was

assigned an important role for the country’s economic and social development and was given priority over the

other sectors. Due to the involvement of farmers right from the inception, the sugar factories were never looked

upon as merely processing units of sugarcane, but through the medium of the factories they endeavored for

socio-economic, educational and cultural development of the entire area surrounding the sugar factories.

The growth of the Indian sugar industry in an organised manner had its beginning, when the Government of

India passed the Industrial Policy Resolution on April 6, 1948, followed by the Industrial Act, 1956, wherein

the principle of Cooperation was assigned an important role for the country's economic development,

particularly for industries based on agricultural produce such as sugarcane. Under this policy, the Government

of India started giving preference to licensing of new sugar factories in the cooperative sector. This policy was

reemphasized in all the subsequent Industrial Policy Resolutions made by the Government till the delicensing of

sugar industry in 1998. The preferential licensing policy was mainly responsible for the rapid development of

the sugar industry in India.

Co-operative Cotton Processing


In the past production and demand for cotton has been highly fluctuating. As a result of this, about 10 lakh in

year 2000 cotton growers had to meet a very upsetting situation in the country when cotton price plummeted

extremely low to make their economic situation miserable. The nature of cotton as a product is quit ticklish as a

number of processing activities are involved before it goes into the hands of consumers. The private traders,

ginner, spinners, weavers, dyers and processor together appropriated a big chunk of consumer’s rupees. Cotton

farmers had to face a lot of distress in the absence of their own group. Effort. Cooperatives has saved them a lot

and today cotton growers have set up 142 spinning mills. Cooperatives have helped the cotton growers by

maintaining stabilization of price and increased receipts by value adding methods.

C. Oilseed processing co-operatives

The oilseed economy has been characterized by large imports of edible oil to meet the needs of the growing

population. The government has, initiated a number of measures to stimulate domestic production of oilseeds.

The National Oilseed Development Programme has been launched to step up the production of oil seeds.

D. Co-operative Marketing of Fruits and Vegetables

Marketing of fruits and vegetables is a critical area in which fruit and vegetable growers find themselves

vulnerable to trade’s exploitation and there is genuine need for cooperatives worth Rs. 343.12 (2000) crores.

The state-wise progress of cooperative marketing of fruits and vegetables in 1991-92 and 1994-95 shows a jump

of about 180 percent However, major effort in this direction was made by Maharashtra, Gujarat and Kerala have

also done well. The achievements of other states are not so significant. Success in fruit and vegetable marketing

shows real efficiency of marketing structure as it involves processing, storage, handling, grading, transportation

and packaging far more than other commodities. At present there 1336 Fruits and vegetable coop. marketing

societies in India.

E. Co-operative cold storage

Cold storage in the co-operative sector enables the farmers to secure better fruits and vegetable products.

Programme of promotive development and financing of co-operative cold storage have been undertaken by the

NCDC since 1962, when there were only 15 cold storages in the co-operative sector. As on March 1987, the

number of cold storages organized in the co-operative sector has increased to 244 with a capacity of I 6.7 lath

tonnes. About 80% of the cold storages in the co-operatives sector are located in 6 states viz. Punjab, UP,

Orissa, MP, Bihar, and West Bengal.

F. Co-operative processing of plantation crops

The major plantation crops in the country are tea, coffee, rubber, cashew, cardamom, arecanut. cocoa and

coconut. The total number of co-operative plantation crops processing units organized and installed stood at 88

and 70 respectively. NCDC had assisted 6 plantation crops processing units in the underdeveloped and least

developed states up to March 1986.

G. Paddy Processing Cooperatives

Probably one of the best rice mills working on these lines is located at Kodad in Gujarat State. During 1970-71

to 1973-74 the members pooled 6,300 tons of paddy in the society. They got an advance price equal to 50% of

the average market price of paddy, while the balance was paid to them at pooled rates at the end of year.


The system of pooling does not prevail in all the States mostly because of the different systems of procurement

introduced by the State governments in their respective States. During 1974-75, in most of the States, namely,

Assam, Karnataka, Kerala, Orissa, M.P., A.P., Bihar and West Bengal, the State governments or their agencies

procured paddy by way of graded levy on producers. In Karnataka and Madhya Pradesh, entire paddy so

procured was handed over to the Co-operative rice mills in these two States worked to near full capacity and

showed good financial results. In other States, only a part of the paddy was allotted to the co-operative rice

mills while the rest was given to the private rice mills for milling.

Since the co-operative rice mills have been depending almost entirely on the paddy allotted to them by the State

governments their performance has been good or bad in proportion to the paddy allotted to them by the

government.

Processing of food grains and other agricultural items is the most important stage in preparing them fit for

ultimate consumption. Almost all the agricultural commodities have to undergo one or more stages for

processing before they reach the consumer. For instance, paddy has to be milled before it is bought by the

consumer. Similarly, cotton has to be ginned and pressed before it goes to textile mill. Sugarcane has to be

processed into gur or sugar and so on. At present the work of processing is largely done by middlemen owning

the processing units and a good chunk of the ultimate price paid by the consumer goes to these intermediaries.

This can be eliminated if the processing activity is organized on a co-operative basis by the producers

themselves with the result that they can get better return on their produce.

The primary objective of co-operative processing is to reduce the price spread between the producer and the

consumer and thereby to ensure that the producer gets his legitimate share in the final price paid by the

consumer.

Organization and Structural Pattern

In India, processing units established in the co-operative sector conforms to two distinct patterns.

1. Units established as adjunct to co-operative marketing societies.

2. Units established by independent processing societies.

Medium and small units, such as rice mills and hullers, oil mills, jute baling units, and cotton ginning and

processing units, mostly fall under the first category. Large units such as sugar factories, oilseed solvent

extraction plants, spinning mills, cattle feed factories etc. are set by the co-operatives exclusively organized by

growers either in a federal or unitary form depending upon the size and local situation.

The co-operative processing units have their own state level and federal organization in respect of some

commodities. The co-operative sugar factories have federated themselves into 8 state level federation and one

national level federation. The co-operative spinning mills (both in weavers' and in growers sector) have

federated themselves into an All India Federation. The other types of processing units have not yet formed

federation. There are also a few instances where independent processing units have federated themselves into

central processing federation for the purpose of undertaking secondary processing.

Producers Cooperatives:

The producers Cooperative Societies are formed to protect the interest of small producers by making available

items of their need for production like raw materials, tools and equipments, machinery, etc., Handloom societies

like APPCO, Bayanika, Hariyana Handloom, etc., are examples of producers cooperative society.

A worker cooperative or producer cooperative is a cooperative, that is owned and democratically controlled by

its “worker-owners”. There are no outside owners in a “pure” workers cooperative, only the workers own shares


of the business, though hybrid forms exist in which consumers, community members or capitalist investors also

own some shares. In practice, control by worker-owners may be exercised through individual, collective or

majority ownership by the workforce, or the retention of individual, collective, therefore, has the characteristic

that the majority of its workforce owns hares and the majority of shares are owned by the workforce.

Membership is not always compulsory for employees, but generally only employees can become members

either directly or indirectly through membership of a trust that owns the company.

Cooperative Farming society:

This society is formed by the farmers of a particular locality. Instead of going for individual farming, they go

for mass farming to get higher rate of return from economies of scale.

Combined they contribute land, labour, and capital in the field of agriculture and share of benefits in a desired

proportion among the members. This process is more benefited because of (i) Mass production (ii) Maximum

output, (iii) Application of advanced technologies, fertilizers, seeds and others, (iv) pooled resources fund, land

and labour etc. (v) no financial crunch.

Co-operative Farming Structure

All those activities in agriculture which are undertaken jointly and which directly influence the primary process,

are included in co-operative farming. Under this system, all decisions influencing production, partly or

completely, are taken by the co-operative society. These decisions may range from joint management and

planning for particular purpose to the complete control of all resources.

The main objectives of a co-operative farming society is to:

1. Secure increased agricultural production through more intensive programme of land improvement and

agriculture;

2. Undertake improved techniques in agriculture and agro-based industries, so as to make proper utilization

of land, manpower, cattle, knowledge and skill of farmers;

3. ensure suitable and scientific crop planning and rotation of crops;

4. secure increased and regular employment for the members; and

5. provide solutions to the pressing agrarian problems from which the country is suffering.

There are four types of co-operative farming societies as described below.

1. Co-operative Better Farming Societies

In this type of society, members retain their individual holdings but agree to follow a plan of cultivation laid

down by the society. Farmers join together for meeting some specific common process of cultivation or for joint

purchase and distribution of improved seeds, fertilizers, implements etc. But joint cultivation is not obligatory

and each member cultivates his own land and takes his profit or bears his loss.

2. Co-operative Tenant Farming Societies

In such a society, large area of land is procured either by purchase or on lease or free-hold and then the entire

land is divided into small plots and each plot is allotted to a tenant cultivator, who is its member. He is entitled

to the produce of this land but he has to pay a stipulated rent to the society.

The society undertakes the supply of credit, seeds, manure and heavy agricultural implements.

3. Co-operative Joint Farming Society


In this type of society, land holders (whether tenants or owners) pool their small plots of land for joint

cultivation. The proprietorship of such plots rest with the owner, of the land. Joint cultivation is done on the

pooled land in accordance with the programme decisions which are taken by the committee of the society.

Each member gets wages for his daily labour, irrespective of the ownership of land. The produce raised is

disposed off collectively.

4. Co-operative Collective Farming Society

In this type of society, land is held in free-hold or lease hold and cultivation is undertaken jointly. After the

formation of such society, the land becomes the property of the collective farm and the members lose their

individual ownership. The produce is raised collectively and distributed among members in proportion to

labour and other resources contributed by them. Each member receives wages for the work done by him. Net

profits are divided in proportion to wages earned by each member.

Dairy co-operatives

The main object of the primary societies is to help the members to increase their milk production and arrange

for the profitable sale of milk and milk products in the market. They also provide full range of technical

services, They serve as the retail outlet for the sale of balanced cattle feed and fodder seeds. Milk supply

societies at the district level provide micro inputs like veterinary health care, artificial insemination programme,

manufacture of cattle feed and the extension services.

Organizational Structure

The most rational organizational parameters for dairy co-operatives would be (A) primary milk producers co-

operatives, (B) district milk producers co-operatives, and (C) state dairy federation (state level).

A. Primary milk producer's co-operatives

These village level co-operative societies should be operationally and financially viable. Thus the primary milk

producers co-operatives are concerned with:

1. helping the members to increase their produce of milk; and

2. arranging for its profitable sale in the consumer markets through the milk supply unions. Providing

inputs and allied services

B. District milk producers co-operative union

Primary milk societies are federated to district milk producers co-operatives. They own chilling and

pasteurization plants located in different areas. The capacity of pasteurization plant should be decided with

regard to:

1. The quality of milk which could be marketed locally in the urban areas of the district;

2. the possibility chilling and transporting surplus milk after meeting the local. demand, to the nearest

metropolitan city dairy for pasteurisation and distribution.


C. State dairy federation

It is a state level co-operative federation which would be able to support and guide district unions, absorb

surplus milk available with the district unions for distribution in the big cities and also convert any surplus milk

received from the district unions into milk powder and other products either for sale, or for later use for

recombination in times of scarcity particularly in the lean season. It is important that the federation should have

control over the it’s dairies and the market in at least one major city which could absorb surplus milk and the

number of federations to be I formed should be based primarily on this consideration of the availability of a

ready market within its area of operation. It is important to note that. this is only an outline organisational

pattern and there should be no rigidity in applying it.

In some districts of Maharashtra, tehsil level milk producers unions have worked successfully. The actual

organizational structure should only take into account, the special regional and other local factories affecting the

growth of the cooperatives, ownership of the dairies, price control on milk and milk products etc.

Fishery co-operatives

Fisheries co-operatives are the organization of fishermen formed with specific purpose of improving their

economic conditions through improved collection, rationalization of the distribution system and stabilization of

prices. In other words, such co-operatives render comprehensive economic assistance to the vast unorganized

community of fishermen who have long been exploited by the middlemen and traders.

Functions :

• They undertake grading, preservation, storage, trans port and processing of fish and thereby ensure them

a reasonable margin of profit to the fishermen.

• They also supply necessary inputs like nets, ropes, oil and other requirements to the members on

economical terms so that the capacity of the fishermen to secure larger catches IS Improved.

• They may also regulate fish markets where fair prices could be through action and regulation of

marketing and long -term contracts with organized buying institutions.

Though the main and central objectives of a fisher men's co-operative is considered to be the production

catching and marketing of fish, it was noticed that many of these co-operatives have diversified their operations

and have taken up a variety of connected and ancillary activities.

These activities are broadly classified as under.

1. Supply of fishing requirements such as nylon yarn nets and gears, coal tar and paints, spare parts of

vessels, floats, engine oil and lubricants etc.

2. Construction and repair of boats and its subsequent sale to members and/or sometimes to others.

3. Ice plants and cold storages had been set up by many societies. Since the marketing business is not yet

fully developed, major part of the ice produced is being sold to the milk production sector.

4. Supply of household requirement to members is another activity of many fishermen co-operatives. As

on 30th June 1979, fishery co-operatives in the country supplied to their members fishery requisites and

consumer articles worth Rs 12.44 crores.

5. Some societies have undertaken mixed farming activities. The Captain Bheery Society in West Bengal

has some spare land on the banks of the fishing tanks, on which they have been growing vegetables. The

vegetables so grown are distributed among members as a welfare activity. It has also recently set up a

poultry farm at a cost of Rs 34,328. It has reared 200 birds in this farm. About 500 trees have also been


planted by the society on the banks of the tanks which have added to the scenic beauty of the area, apart

from being a source of income in the years to come.

The importance of fishery co-operatives lies in rendering economic assistance to the dispersed and disorganized

fishermen, whose dependence on merchants and middlemen is even greater than farmers.

Structure of Fishery Co-operatives

Fishery co-operatives follow the three-tier pattern, though in some states it is two-tier. The tiers are -(A)

Primary Co-operative for a village or group of villages, at primary level; (B) District or Regional Federation

between the Apex Body and Primary Co-operative; and (C) State level Co-operative Federation as the Apex

Body.

A. Primary fishermen co-operative

Fishermen societies at the primary level are more complex than their counterparts in the agricultural sector.

Good working fishermen primary societies combine in them a number of functions viz. advancement of credit

for development of fisheries, culturing and production of fish, supply of fishing and household requisites,

establishment of ice-plants, cold storages, transport and marketing of fish, members' education, supervising,

utilization of loans and extension programmes in collaboration with other concerned agencies. In the fisheries

sector a multipurpose approach has to be developed because combination of variety of functions in the primary

co-operatives are very important. This approach seems to be appropriate and practical.

B. District or regional federation

This federation acts as an intermediate agency between the Apex Body and the Primary Co-operatives. They

provide assistance to the members and primary co-operatives with regard to provision of supplies, preservation,

transportation, marketing and processing.

These societies are organized at district level only. In fact, there should be federation of fishermen societies in

every district having sizeable number of marine and inland fisheries. These federations should be pure type

organizations having only primary fishermen societies as their members. No individual should be admitted by

them even j as nominal members. The objective of these federations should be to co-ordinate the activities of

.the afflicted primary societies and render them all necessary assistance in the development and exploitation of

the fisheries held by them. The federation should not undertake any of the i functions of primary nature as is

being undertaken by many of the central societies at present. They may provide common services of residuary

nature which cannot conveniently or profitably be taken up by the primary societies individually.

C. State level federation

The apex body should be considered as the most important unit in the fishery co-operatives structure because of

its location, size, capacity to command resources of men, money, material and market. It should be organised in

each of the states having coastal/inland fisheries. The object of these federations would be to serve as vital link

between the entire fishermen's co-operative sector on the one hand and the State Government and concerned

semi-government organization on the other. They should also provide liaison between the fisheries co-

operatives and the rest of the co-operative sector in the state as well as the concerned commercial and trading

organizations. These federations should in consultation with the State Government frame , policies and give

policy guidance to the structure below. They could also take up some residuary business operations and give

technical guidance in matters like culturing of fish, establishment of cold store, freezing facilities, boat build-


ing/repair facilities. They may undertake interstate trade and export business. Training and educational work

may also be taken up by them.

The State Level Federation has to function as a mouth -piece of the entire structure in regard to the policies

pertaining to organization and development of fishery sector on co-operatives. This function, would do well vis-

a-vis the official and non official areas concerned with fishery industries. Internally, the federation should act as

a balancing centre, both for business and development. Thus it would help in reallocation of resources of men,

money, material and, development of marketing and processing (including canning utilization of by products

export etc.) can be planned on most modem lines by apex federation. In recent years vast potential for fishing

and fish-products export has been revealed for this country and the federation should be enabled to exploit these

avenues for the benefit of fishermen at the primary level as also to contribute their might to earning foreign

exchange for the country.

D. National federation

The objective of the national federation is to facilitate, co-ordinate and promote fishing industry in the country

through co-operatives and for this purpose to promote and undertake activities like inter-state and export trade,

supply of fishing vessels, storage, transport, processing of fish, insurance business, training and education,

consultancy work, advancement of loans etc. Its byelaws provide for a wide range of activities. It has, however,

to be selective in taking; up activities for actual implementation. The federation also undertakes to provide

expert services for planning project , preparation, monitoring, guidance etc.

Poultry co-operatives

Development of poultry activities in the co-operative sector has been recognized as an important programme for

benefiting small farmers. By the end of June 1982, there were over 1271 primary poultry co-operative in the

country with a membership of 73581. Many of these co-operatives are small and not functioning effectively due

to limited support from high level marketing organisations and lack of adequate working capital for marketing

the products.

Now NCDC has formulated an Integrated Poultry Project Programme, which has provision for common

facilities for rearing poultry birds under a common shed, feed, mixing unit, hatchery, storage of eggs and also

for marketing the poultry products. Primary poultry societies under the project will provide input services and

training to farmers on scientific poultry farming.

Forest Labour Co-operatives

Forest Labour Co-operatives generally consist of wood- workers, timber men, etc., organized under a foreman,

who undertake work on contact, usually in public owned forests. They not only undertake processing, sawing

wood seasoning work but also engage themselves in the direct exploitation of forests. The forest labour co-

operatives need to be developed to:

1. prevent exploitation of forest labourers by private contractors; and

2. uplift the tribals and other backward classes working as forest labourers.

The main purpose and reason for organizing such societies is to put an end to the incredibly inhuman treatment

of forest labour by contractors. Incidentally, it brings them better wages and improved living.

To make these societies, the Mirdha Committee on Co- operation has given the following suggestions.


1. No contractors should be allowed to become a member of a labour co-operative. Other non-members

may be j allowed membership' up to 5 % of the total membership.

2. There should be adequate resources available to the societies by the state and other financial institutions.

3. Technical assistance should be provided to the society for a well developed labour Co-operatives which

would make economical and efficient execution of government tasks.

Service Cooperatives:

Broadly service Cooperatives includes Hospital Cooperatives, Educational Cooperatives, Transport

Cooperatives, Tourism Cooperatives, Service Cooperatives also render services of supply of raw-material,

spares equipments, marketing assistance etc., Though these cooperatives are relevant and related for common

people, both from rural and urban locations and having existence in Indian cooperative environment. Such

cooperatives and similar other forms needs to be strengthened and replicated across India.

Leadership

Leadership has been described as "a process of social influence in which one person can enlist the aid and

support of others in the accomplishment of a common task.

Leadership Involves

• establishing a clear vision,

• sharing that vision with others so that they will follow willingly,

• Providing the information, knowledge and methods to realize that vision, and

• Coordinating and balancing the conflicting interests of all members and stakeholders.

• The act of inspiring subordinates to perform and engage in achieving a goal.

Leadership Qualities That Make Good Leaders

➢ Honesty and Integrity

➢ Confidence

➢ Inspire Others

➢ Commitment and Passion

➢ Good Communicator

➢ Decision-Making Capabilities

➢ Accountability

➢ Delegation and Empowerment

➢ Creativity and Innovation

➢ Empathy

Principles of Leadership:


➢ To help you be, know, and do, follow these eleven principles of leadership (U.S. Army, 1983).

➢ Know yourself and seek self-improvement

➢ Be technically proficient

➢ Seek responsibility and take responsibility for your actions

➢ Analyze the situation

➢ Make sound and timely decisions

➢ Set the example

➢ “We must become the change we want to see.” - Mahatma Gandhi.

➢ Know your people and look out for their well-being

➢ Keep your workers informed

➢ Develop a sense of responsibility in your workers

➢ Train as a team.

➢ Use the full capabilities of your organization.

CO-OPERATIVE GOVERNANCE

Establishment of policies, and continuous monitoring of their proper implementation, by the members of the

governing body of an organization. It includes the mechanisms required to balance the powers of the members

(with the associated accountability), and their primary duty of enhancing the prosperity and viability of the

organization.


Cooperative Governance has been

defined as a set of internal and external

mechanisms and controls enabling the

members to define and ensure attainment

of cooperative objectives, securing their

continuity and cooperative principles.

Co-operative governance regulates the relationship between members of co-operatives, the Board of

representatives of members (that advises management on behalf of members) and management (that has the

care and control of the co-operative).

The good co-operative governance will:

• ensure that board and management pursue objectives that are in the interests of co-operatives and

members;

• lead to effective monitoring of activities of societies;

• ensure efficient and effective use of available resources;

• reduce conflicts; and

• Increase accountability and transparency in co-operatives.

CODE OF BEST PRACTICES FOR THE BOARD OF DIRECTORS


• As per the co-operatives legislation, a Board of Directors shall manage a co-operative society. The

Board of Directors (BOD) shall exercise all the powers of the co-operative society subject to any

limitations contained in the law and the constituting instruments. The BOD shall abide by the following

codes of ethics and good governance:

Leadership & Management

❖ The BOD should exercise leadership, entrepreneurship, integrity and sound judgment in directing the

affairs of the co-operative

❖ The BOD shall provide guidance for long-term and short-term planning

Transparency and Accountability

❖ Directors shall adopt the principles of transparency and accountability

❖ The BOD should ensure good governance

Compliance

❖ The BOD shall ensure that the society complies with all statutory and legal requirements, together with

co-operative values, principles and prescribed codes of best practices

Control and Supervision

❖ The BOD shall set up a monitoring mechanism to assess the performance of societies

❖ The BOD shall ensure that regular performance appraisal of the management and staff is carried out

INDEPENDENCE OF THE BOARD OF DIRECTORS

The majority of Board members should be independent non-executive directors

• Directors must not involve in related party transactions

Remuneration

The Board members should be paid a realistic financial compensation for their work

Communication

The BOD should establish effective and ongoing communication between stakeholders at all levels

Appointment of Chairperson

A Chairperson having the ability, power and commitment to guide and organize the work of the Board, initiate

and monitor strategic decisions and having the know-how and experience should be appointed

Members


The Board should ensure expansion of membership, the participation of members in the operation of the

society, and that members are aware of their rights

Co-operative Principles and Values

Boards should adopt co-operative principles and adhere to co-operative values while managing the affairs of the

co-operative societies

CODE OF BEST PRACTICES FOR MEMBERS

In accordance with the Cooperatives Act 2005, a “member” means a person who holds a share in a society.

No individual shall become a member of a society unless he has attained the age of 18, except in the case of a

school society or credit union.

An individual, a society and/or a body corporate may be a member of a primary society.

A member shall comply with the following codes of ethics and good governance:

Rights of Members

• Members should know their rights as members and exercise these rights as members/ owners of

societies

• Members should have access to relevant and required information on a timely basis and in an

understandable manner for analysis and comments thereon

Participation of Members

• Members should participate actively and fully in all activities of societies

• Members should participate actively in deliberations at the annual general meetings and any special

general meetings

Responsibilities of Members

• Members should abide by rules of the society and observe co-operative values and principles

• Members should refrain from acting to the detriment of societies

• Members should ensure that policies and performance are in accordance with the stated aims of societies

and values and principles of co-operatives

• Members should use the services of societies and settle their liabilities/ debts relating to societies

CODE OF BEST PRACTICES FOR INTERNAL CONTROLLER

• As per the co-operatives legislation, a co-operative society shall have an internal controller.


• The Board of Directors and Management of the co-operative society shall establish an internal control

system to ensure efficiency and effectiveness of operations, reliability of financial reporting and

compliance with appropriate laws and regulations.

• The internal controller shall comply with the following codes of ethics and good governance:

Appointment of Internal Controller

• The Board and Management/ Audit Committee shall define the profile, qualifications and experience of

the internal controller and his/ her scope of work

• A panel comprising members of the Board and Management should select the internal controller. The

panel, after obtaining the approval of the Audit Committee, should propose the selected internal

controller for appointment at the annual general meeting.

Functions of Internal Controller

Internal controllers shall:

• Ensure that all activities follow approved and established procedures

• Ensure that all books of societies are kept up to date

• Carry out inspections of money, stocks, books and other assets of society

• Ascertain the authority and validity of all expenditures, payments, loans and advances as the case may

be

• Examine regularly accounts of societies and ensure that all transactions of societies are properly

recorded in respective books, accounts and other relevant documents

Responsibilities of Internal Controller

• The internal controller shall, within a reasonable period, identify errors or irregularities in transactions

already processed, and missing assets/ invalid disbursements

• The internal controller shall safeguard the assets of the society

• The internal controller shall secure the completeness and reliability of the records of the society

• The internal controller should produce reviews on the control effectiveness of the society to the

Board/Audit Committee

• The internal controller should ensure that there is separation of duties and that no individual has control

over a transaction. For societies where separation of duties is not possible because of insufficient staff,

vacations, etc., the transactions should have written approval of the manager

Access to Information

The internal controller shall have unrestricted access to all records, property and personnel matters


Reporting

• The internal controller should provide timely and quarterly reports to the Board and to the Registrar of

Cooperative Societies on significant audit findings and recommendations; and to the Audit Committee,

if any

• The internal controller should provide timely information to the Audit Committee or the Board

concerning suspected fraudulent activities, significant instances of non-compliance or abuse, if any

Confidentiality

The internal controller shall keep confidential all information obtained in the exercise of his/ her duties

CODE OF BEST PRACTICES FOR AUDIT COMMITTEE

An Audit Committee may be defined as a Committee of non-executive Directors, responsible for liaising with

the full Board, Internal Audit and External Audit.

It may be composed of 3 to 5 non-executive members (members of the Board of Directors who are neither

officer nor employee having the responsibility to maintain contact with the internal and independent auditors of

the society).

The Audit Committee shall abide with the following codes of ethics and good governance.

Setting Up Of Audit Committee:

• Audit Committees should be formally constituted as subcommittees of the main Board

• There should be written Terms of Reference, which deal with membership, authority and duties

• There should be a minimum of three and a maximum of seven members in the Internal Audit Committee

and members elected for the Audit Committee shall hold office for a period of three years

• Members of Audit Committees must have skills and knowledge in accounting and auditing

• Audit Committees should have at least one discussion annually with auditors but without executive

Board members, to ensure that there are no unresolved issues of concern

• Audit Committees should have explicit authority to investigate on matters within its Terms of Reference

and should have full access to relevant information.

CODE OF BEST PRACTICES FOR MANAGEMENT ACCOUNTABILITY AND RESPONSIBILITY

Management should:

• Ensure that policy decisions taken by the Board are implemented


• Follow the objectives and guidelines set out by the Board Ensure that the functioning of the society is in

line with co-operative values and principles, and the Co-operatives Act 2005 and the Co-operatives

(Amendment) Act 2006

• Be accountable to the Board and member owners.

Efficient Management

Management should:

Ensure that resources of the society are used productively for the betterment of the society and its members

Build up the image of the society so that trust, reliability and confidence prevail

Transparency

Management should:

• Be committed to integrity and transparency in operations

• Ensure that financial statements are transparent and that

the statements give a true and fair view of the

state of affairs of the society

Supply of Information

Management should:

• Supply all required information on a timely basis and in the correct format

• Keep up to date information, especially as regards the books and accounts of the society

Conflict of Interests in the Society

• The posts of Chairperson of the Board and Management Executive should not be held by one and the

same person

• The posts of Chief Executive and Secretary should not be held by one and the same person

• Inform the society of any activity being undertaken that may lead to potential conflict of interests.

• Communication

• Management should have effective and regular communication with the Board and other stakeholders.

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