Cooperatives and Rural Markets

7/28/2019 Cooperatives and Rural Markets

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Cooperatives and Rural Markets

SYBMS

SEM IV


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Historical Background of Cooperation

in India

Uplift the weaker sections of the society.

Industrial Revolution in England affected the

village cottage industries in India.

Dependencies on agriculture sector increased.

Increase indebtness of rural people.

Agricultural India = Moneylenders = Poverty


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in India

To reduce the importance of moneylenders GOI passedthe following act,

1. Deccan Agricultural Relief Act,1879

2. Land Improvement Act, 18833. Agriculturist Loan Act, 1884

Demand for starting Credit societies for giving loansto agriculturist were increased.

As per recommendations given by Sir FrederickNicolson and Justice Ranade, 1899, 200 cooperativesocieties were established in UP and Madras.


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in India

In 1903, the membership of these societies

went up to 36000

GOI formed a committee for studying the

possibilities of Co-operative Credit in India.

1904 , GOI passed Cooperative Act.


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Development of Indian Cooperative

Movement

THE FIRST STAGE1904 - 1911


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Co-operative Credit Society Act was

introduced on 25th March 1904

Started to provide credit for agri- sectors.

Not successful in solving the problems of non

agriculture.

Played a major role as starting point of the co-

operative movement in India .


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Important clauses of Law:

1. atleast 10 people living in the same

village/town

2.Control of Registrar

3. Free Audit of Accounts by the Registrar

4. Classification of rural and urban societies

5. Limits on the distribution of dividend.


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Movement

THE SECOND STAGE1912- 1918


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Cooperative act 1904 was not sufficient to

cope up with the needs of societies.

Necessary to provide financial assistance to

other fields

Thus, GOI passed another act in 1912.


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Important clauses of Law:

1. permission to start non-credit supplying

societies

2.utilisation of profit

3. special rights to societies

4. restrictions in using co-operative in name

5. concession to cooperative societies


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Movement

THE THIRD STAGE1919-1929


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Number of committees were formed to regulate

the cooperatives

The Royal Commission was appointed to studythe Indian Agriculture

Because the Act passed in 1919, number of

cooperative societies providing credit increased. During this stage, only QUANTITATIVE

development of societies would be seen, NO

ATTENTION was given to QUALITATIVE GROWTH.

Defined as UNPLANNED DEVELOPMENT.


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Movement

THE FORTH STAGE1929-1939


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1930 = GREATE DEPRESSION PHASE

Indian economy received a setback

Prices of agricultural product fell -> failure in

repayment of credit -> growth of cooperatives

hampered.

Number of newly formed credit societiesdeclined but other types of cooperatives

flourished.


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Cooperative societies had invested in

agricultural activities

Prices of agricultural product went down ->arrears increased -> dangerous for

cooperatives

The percentage of arrears went up to 93% About 50% cooperatives went into liquidation.

Royal committee pointed out failure was due

to lack of education of members and lack ofproper guidance


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During this period only, The Land Mortgage Bankwas established.

Objective was to provide agricultural loans onlong term basis

Central Banking Enquiry Committee (1931),stressed on the strengthening of cooperativemovement to serve agricultural needs of thecountry

1934, Reserve Bank of India was created and

1935 ,Rural Credit Department was created in theBank -> gave a new life to the cooperativemovement in India.


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Movement

THE FIFTH STAGE1939-1947


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During second world war -> prices of

agricultural produce started increasing ->

increase income of agriculturist ->repayment

capacity increased.

Increase in the deposits and funds of

cooperative societies .

During 1939-1945 there was an increase in the

deposits from 25 crores to 54 crores with

Primary Credit Cooperative Societies.


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The Consumer Cooperative stores proposeddue to the restriction imposed during war

time Industrial cooperative societies came into

existence for the purpose of providing war

materials. A committee headed by Dr. Dhananjayrao

Gadgil was appointed in 1944 to review theposition of cooperative societies.

Committee suggested> govt. should givefinancial aids .


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Movement

THE SIXTH STAGE1947-1970


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During second world war -> prices of

agricultural produce started increasing ->

increase income of agriculturist ->repayment

capacity increased.

Increase in the deposits and funds of

cooperative societies .

During 1939-1945 there was an increase in the

deposits from 25 crores to 54 crores with

Primary Credit Cooperative Societies.


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Movement

THE SEVENTH STAGE1970-2000


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More importance on the development of

Rural Banking sector

Cooperatives were asked to develop rural

banks

Formation of NABARD as an apex bank for

monitoring cooperative banks


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Movement

THE EIGHT STAGE2000-ONWARDS


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Cooperatives have to face direct competition

from multinationals.

Govt. is providing adequate support and help

to the cooperatives by building brands,

distribution network and also in exporting

their products to global market.


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Organizational

Structure of

Cooperatives in

India


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Co-operatives as a formal organisation came

into existence after passing of the co-

operative Credit Society Act of 1904

The co-operative Movement was activated

after independence.

The policies regarding National Development

including Co-operation are planned and

managed at the national level.


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Co-operative at National Level

1955 Central Govt. set up a small Cooperation

Division in the Ministry of Food and

agricultural Dept.

In 1958 separate dept. was started

In August 1976, a separate ministry was again

formed as the dept. of Civil Supplies and co-

operation


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Functions :

1) Decide policies of urban supply

2) Decide policies regarding education and trainingin cooperation and make necessary

arrangements3) To look after the problems of all consumer

Cooperatives

4) To coordinate all the activities in all the sectors

5) To arrange Workshops, National Conferences,Seminars etc.


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Structure of State Level Co-operatives

Registrar of Co-op. Soc. Maharashtra -> Addl.

Registrars -> Dy. Registrars-> Asst. Registrars ->

District Co-op. Officers -> Asst. Co-op. Officers

Cane Co-op. -> Cane Commissioner -> Dy.

Cane Commissioner -> District Cane

Commissioner -> Dist. Cane Officers -> Cane

Development Inspectors -> Cane Supervisors


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Every state has passed separate acts

pertaining to the co-operative segment.

In most of the states Departments ofCooperation has been created.

State Minister of that Co-operation is the chief

of that dept. Registrar of societies is the HOD of co-

operation

For assisting the registrar appointment ofother inspectors, auditors are made


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For sugar factories and production of sugar

cane a post for Commissioner is created at

state level. Cane Co-op. -> Cane Commissioner -> Dy.

Cane Commissioner -> District Cane

Commissioner -> Dist. Cane Officers -> CaneDevelopment Inspectors -> Cane Supervisors


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For dairy development there is a Director.

Dairy Co-op. -> Director dairy development

(Addl. Registrar)->Dairy Development Officer

-> Dy. Dairy Development Officer-> Dairy

Manager -> Asst. Technical Officers -> Milksupervisors


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Registrar is very important in co-operative

movement.

He is known as Friend, Philosopher and Guidefor the Cooperative movement.


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Functions of the Registrar :-

1) As Administrator :

- Planning organization

- Motivation

- Coordination- Control


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2) Executive :-

- executing the policies

- providing Counseling- Removal of Members officials

- Arranging Meetings, seminars, Workshops


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3)Judicial :-

- as a judge decides disputes arisen amongsocieties

4) Other Duties :-- Enforcement of Act and duties

- Cancellation of societies

- Audit Enquiry- Recovery of Dues


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Distinguish between Co-operatives

and other Forms of Organization

Co-operative Management

Owner

Registration is optional

At least 11 members Enjoy exemption from

income tax

Society can be dissolved

only by orders of court Profits of the business are

not divided

Joint Stock CompanyManagement

Shareholders are the owners

Registration is compulsory

The minimum number in publiccompany is two. No limit for

maximum no.

Never exempted from income tax

Liquidated by the legal process

only

After provisions and reserves aside

remaining profit is distributed as

dividend.


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Sources of Principles1) ROCHDALE PRINCIPLES:

Robert Owen formed Rochdale Equitable PioneersSociety in 1844.

He made this principle with help of 28 weavers.(industry Oriented)

- Main Principles:1) Open and voluntary membership

2) Limited interest on capital

3) Democratic management

4) Cooperative education5) Distribution of surplus

6) Cooperation among cooperators


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- Secondary Principles :-

1) Equal rights to all

2) Cash transaction

3) Neutrality in political and religious matters

4) Service motive human service5) Limited responsibility


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2) REIFFEISEN PRINCIPLES:-

Late 19th century there was a serious problem ofagricultural indebtedness in Germany

To provide relief to agricultural workers , startedAgricultural Societies in 1862

(Agricultural Oriented)

He proposed the following principles:

1) All should be accepted as member

2) Liability should be limited

3) Board members should be on voluntary services

4) Surpluses should be used for services

5) Assistance should be given to members


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3) SCHULTIZ PRINCIPLES :

Reiffeisen had started the concept of b bankswith the objects of meeting the needs of middleand lower middle class people.

Schultiz ran these banks on cooperative basis.

He proposed following principles:-

1) Organization should be managed on the basis ofSelf Help

2) Maximum interest should be paid on shares

3) Surplus should be distributed on the basis of

cooperation4) 10% of the surplus should be kept as reserve

5) Each bank should have some specialisation


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Following Cooperative Principles were

universally accepted in International

Conference held at Vienna in 1966 :-

1) Open and voluntary membership

2) Limited interest on capital

3) Democratic management

4) Cooperative education

5) Minimum Profit

6) Equitable distribution of profit

7) Cooperation among cooperators.


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Managementof

Co-operative

Societies


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Definition of Co-operative Society

is a union of persons, established according tothe principles of equality, where the membershipis unlimited , the purpose is to improve thefinancial positions of its members by jointperformance of their economic acts, by means ofeither self-help or with Govt. Support, providedthat all profits made by the joint action shall be

distributed in the proportion to which eachmember has taken part in the business and not inproportion to the capital invested.


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Features of Co-operative Society

Union of Persons

Membership

Equality

Common Interest

Spirit of Service

Part of co-operative movement

Body Corporate

Declare Dividend


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Benefits of Co-operative

Easy formation Democratic management

Limited Liability

Open membership

Stability

Low cost of operation

Self financing and charity

Low prices

Cash trading

Tax concession


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Types of Co-operative


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Types of Co-operative Societies

1) Agricultural Marketing Society :

Sec.2(1) of Maharashtra Co-op. Soc. Act, 1960defines ,

a) the object of which is the Marketing ofagriculture produce and the supply ofimplements and other requisites for agriculturalproduction

b) not less than 3/4th of the member of whichare agriculturist or societies formed byagriculturists.


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2) Consumer Co-operative Society :

Sec.2(9) of Maharashtra Co-op. Soc. Act,1960 defines ,

a) the procurement , production orprocessing and distribution of goods to or,the performance of other services for itsmembers and also other customers

b) distribution among its members andcustomers


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3) Co-operative Bank :

Sec.2(10) of Maharashtra Co-op. Soc. Act, 1960defines , a society which is doing a business of

banking and includes any society which isfunctioning or is to function as an Agriculturaland Rural Development Bank

a) Central Banks: District Central Banks,

NABARDb) other banks : Janakalyan Sahakari Bank

Ltd., The Saraswat Cooperative Bank


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4) A Federal Society : Sec. 2(14) of the Act,

defines a Federal Society as a Society,

a) Not less than five members of which are

themselves societies

b) Voting rights are regulated that the members

which societies have not less than four-fifths

of the total number of votes in the generalmeeting.



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5) A Farming Society : Section 2(12), of the Act

defines, a society in which, with the object

of increasing agricultural production,

employment and income and the betterutilization of resources, lands are brought

together and jointly cultivated by all the

members.



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6) A Crop Protection Society : Section 2(10), of

the Act defines, a society in which, with the

object of protection of the crops, structures,

machinery, agricultural implements .



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7) A Processing Society : Section 2(22), of theAct defines, a society in which, with theobject of processing of goods.

8) Lift Irrigation Societies : Sec. 2(16-4) of the actdefines, a society the object of which is toprovide water supply by motive power orotherwise to its member for irrigation andotherwise.



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Lift irrigation


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9)Housing Society : Section 2(22), of the Actdefines, a society in which, with the object ofwhich is to provide its members with open plotsfor housing or flats are already acquired to

provide its members common amenities andservices .

10) A General Societies : Sec. 2(15) of the act

defines, a society not falling in any of theclasses of societies defined by the other clausesof this section.


Membership of Co operatives


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Membership of Co-operatives

Societies

Definition of a Member:

Sec. 2(19) defines a member as, A person who

joins in an application for the registration of a co-

operative society after the society is registered. Before registration of the society such a person is

called a Promoter or Founder Member of thesociety.

After registration of the society a person who isduly admitted to the membership of a societybecomes a member of that society.

Types of Membership


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Types of Membership Original Member : a person who is admitted to

the membership of the society is the originalmember of the society.

Joint / Associate Member: a member who holdsjointly a share in the society with others, but

whose name is not first on the share certificate. Nominal Member : a person may be admitted

after the registration of the society as a nominalmember on payment of small admission fee.

Sympathizer Members: a person whosympathizes with the aim and objects of thesociety.

Rights and Duties of Members:


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Rights and Duties of Members:

To hold share

Transfer his share

Right to get an entry in the register of members

Right to nominate

Right to vote

Right to receive copies of documents Right to inspect

Right to Contest Election

Right to know affairs

Right to refer the dispute Right to resign

Right to receive dividend


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Pay the dues of the society regularly

To comply with the provisions of the act

Not to create nuisance in the society

A member should make sure that his interest

shall not conflict with the objects of the

society of which he is a member.

Duties of Members:


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Termination of Membership

On his registration from membership being

accepted

On the transfer of his share or interest in the

society to another member

On his death

On his removal


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CREDIT

CO-OPERATIVES


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Introduction

Government took certain steps,

1) All India Rural Credit Survey Committee

Report, 1954

2) Co-operative Planning Committee Report,

1946

More stress was laid on the publication of All

India Rural Credit Survey Committee Report,

1954( Gorwala Report)

All India Rural Credit Survey


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All India Rural Credit Survey

Committee Report, 1954

The RBI appointed a Committee in 1951 under thechairmanship of A.D. Gorwala to assess the source ofrural finance and suggest some crucial measures to re-organize rural credit.

Committee surveyed 600 villages in 75 districts andpublished its report in 1954.

Committee found that rural areas were under thecomplete control of money lenders and only 3.5%needs were fulfilled by the Govt.

Committee also pointed out the ineffectiveness of co-operative Institutions to supply adequate credit to thefarmers.


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Recommendation of the Committee

State Partnership Loans against crops

Long term operation fund

Linking of credit with marketing

Large sized societies Training facilities

Effective Supervision and Audit Inspection

Additional Special Funds ( National Agricultural Credit

Fund- State Level, National Stabilization Fund Centrallevel)

Co-operative Credit Structure


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Co-operative Credit Structure

Agricultural Credit Soc

Short Term(12 to 15

months)

Long Term(Exceeding 5

years)

Non Agricultural Credit Soc

1. State Co-operativeBank

2. Central Co-operativeBank

3. Primary NonAgricultural Co-op. Bank


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PACS

(Primary Agricultural Credit Society)

Primary Agricultural Credit Society


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Primary Agricultural Credit Society

(PACS)

PACS may be started with 10 or more persons,normally belonging to a village

The value of each share is generally nominal

The liability of each member is unlimited

Short term loans are provided normally for a year Rate of interest is low

Profits are not distributed as dividend to theshareholders but they are used for the welfare of the

village The PACS have stepped up their advances to the

weaker section particularly Small and Marginal farmers


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Functions:

To distribute different agricultural inputs To provide sufficient finance to their members

To supervise the use of loans

To provide storing facilities to the farmers for

agricultural produce To encourage their member to promote the habit of

saving

To collect or purchase agricultural produce from the

farmer and supply the same to consumer Co-operativesocieties

To borrow from central agencies


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Central Co-operative Banks

Central Co-operatives Banks constitute one of theimportant agencies

Operate at district level

Objectives :

- to provide finance for financing Co-operative CreditSociety

- to collect savings from members and general public

- to create, develop and extend banking facilities fortheir members

- to develop the co-operative movement in theirrespective districts

Apex Co-operative Banks or State Level


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Apex Co-operative Banks or State Level

Banks

The structure of co-operative creditinstitutions :

Primary Co-operative Credit Society at village

Central Co-operative Credit Society at district State Co-operative Credit Society at State

Generally for each state there is one State co-operative Credit Society


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Purpose of Bank: To provide leadership to Co-operative Movement in the

state To link the co-op organization with general money

market and commercial banks in the country

To prepare and formulate forecast report for central co-op bank

To co-ordinate the working of different central Co-opbank

To provide financial resource to Central Co-op bank

To make maximum extension of credit to the rural

section To play the role of media of communication between

other co-operative societies and the District Central Co-op Banks.

Objectives and Functions of Apex Co-


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Objectives and Functions of Apex Co

operative Bank

To ensure overall direction and regulation of the co-opmovement

To supervision and guide the activities of the centralco-op bank

To acts as investment agency for the central co-op bank

To establish and maintain control with money market

To co-ordinate the co-op policies of the state

To act as a banking centre clearing house and financingagencies of the co-operative institutions.

Land Development Co-operative Bank


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Land Development Co operative Bank

(LDCB)

The Primary Co-op Credit societies and otherCo-op Institution who provided finance foragricultural development could not provide longterm finance for agricultural development

There was a need for long term finance With this purpose LDCB (earlier known as Land

Mortgage Co-op. Bank) was established.(1929,Madras)

These banks are suppose to provide credit at lowrate of interest and also without delay.


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Need for LDCB

To provide long term financial loans foragricultural sector

Reducing impact of money lenders and

unorganized sectors various committees also recommended

different measures for supplying long termcredit to cultivators.

Because of all above reasons GOIdecided to set up LDCB


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Functions of LDCB:

To encourage savings and co-operation among

members

To supervise and inspect the working of PACS

To open branches of to organize new primary

land development banks

To grant loans to PACS

To provide valuable advice to cultivators in

connection with their land

Regional Rural Banks(RRBs)


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Regional Rural Banks(RRBs) Main and important objective of RRBs is to

provide credit and other facilities to small andmarginal farmers, agricultural labourers, artisans,and small entrepreneurs.

Initially five RRBs were set up in October 2, 1975

at Jaipur in Rajasthan, Moradabad and Gorakhpurin Uttar Pradesh, Bhiwani in Haryana and Malta InWest Bengal.

These banks were sponsored by the SyndicateBank, SBI, the PNB, United Commercial Bank andUnited Bank of India respectively

The share capital of the RRBs is subscribed byCentral Govt. (50%), concerned state Govt. (15%),and the Sponsoring Commercial Bank(35%).

Objectives of RRBs


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Objectives of RRBs To provide credit at the rate of interest at

which co-op. credit societies provide To provide credit to small and marginal

farmers, agricultural labourers and rural

artisans To limit the area of functioning

b k


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Urban Co-operative Banks

First Urban Co-op. Banks was set up atKanjivaram in Madras(1904)

In 1915 the Mallegan Committee emphasized

on the expansion of Urban Co-op. Banks inurban areas.

Main objective of Urban Co-op. Bank is to

provide credit to middle class and smallincome group.

Obj i


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Objectives :

To provide credit at reasonable rate of interest tothe members

To promote the habit of savings among themembers

To provide credit on the security of valuablegoods and immovable property

To provide credit to small merchants, smallindustrialist, and craftsman

To accept deposits and raise capital through sharecapital.


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I d i d D fi i i


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Introduction and Definition

The prime necessities of human beings

One of the basic problem housing

The reasons are varied like tremendous

growth in population , migration from rural to

urban, highly speculative trend in the cost of

land, weakening of joint family system =

creating a requirement of a separate house foreach family unit.



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To solve housing problem of common man co-

operative housing emerged. These are legally established association of persons

and democratically controlled by the members

These co-operatives provide for minimum required

facilities like drinking water, electricity, commonparking and terrace

a society, the object of which is to provide itsmembers with open plots for housing or flats, dwelling

houses or if open plot, the dwelling houses or flats arealready acquired to provide its members commonamenities and services.


Working of different types of co-


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Working of different types of co

operative Housing Societies

1) Tenant Ownership Operative Housing Society: To purchase or take on lease land for the purpose of

construction of houses for members

To develop the land , obtain water connection,

electricity connection etc. Division of land into plots and allotment of plots to

the members

To formulate policy regarding construction of housesby the society of members

To collect contribution for common expenditure suchas bills for electricity provided in the society campus,payment to watchman, payment of non-agriculturalland tax.



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2) Tenant Co-partnership Co-Operative Housing Society:

To purchase land/building duly constructed and sellthe flats or shops to the members

To maintain and manage the property of the society

in the interests of the members or the society

To provide common amenities to the members asper agreement

To collect contribution from members formaintenance

To arrange for social/educational/entertainmentprogrammes for the members to develop cordial

relations amongst members and management



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3)House Mortgage Co-operative Housing Society:

To sanction loans to members for the construction of

houses against the property mortgage

To give loans for repairs or extension of the ownedhouse

To purchase or sell property or to lease out the

property

To raise funds from Maharashtra Housing Finance

Co-operative Society

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4) District Level Housing federation:

To help the co-operative housing societies in getting

approval to the plans from town planning

department and completion certificate from themunicipal authorities

To give legal and technical guidance

To guide the members in administration and

management of their societies.

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5) State level Housing Federation: To help primary housing societies in getting loans

To guide the primary co-op housing societies

technical, legal, management problems To advance loans to small housing complexes

To help the housing societies in getting betterbuilding material at reasonable rates

To help proposed co-operative housing societiesin getting land.

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6) National Co-operative Housing Federation: To established financing institutions at the state level

for helping the primary co-operative housing societiesin getting loans at lower rate of interest.

To give technical and legal guidance to memberfederation

To undertake research and development work forreduction in the construction cost and give publicity tothe results

To give publicity and propaganda of co-operativehousing movement

To explain various financial schemes to the co-operativehousing societies and their members.

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LABOUR

CO-OPERATIVE

SOCIETIES

MEANING


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MEANING

Labour societies are those which work for givingemployment to the group of labourers.

More number of labour is required for building,constructional work, roads, factories, irrigationwork, dams etc.

The co-op labour society has good scope at suchworks.

The co-op labour societies after consulting thebigger projects take the contract of providinglabour and complete the work in time.

Objectives


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Objectives

To provide instrument to members for carrying outessential jobs.

To get the work for the society and plan it in a such away that the labour will get regular employment.

Mutual understanding amongst members, self serviceand inculcation of saving habit among the members tobe increased.

To take contracts of public and private works

To work for over all welfare of members.

To increase the skill of members

To increase the dealings power of labourers.

Problems of Labour Societies


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Problems of Labour Societies

Obstacles by govt. and semi govt officials ingetting work for society

Lack of continuity of work

Difficulties in accepting big jobs

Exploitation of societies

Competition with private contractors

Shortage of working capital

Remedial Measures


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Remedial Measures

A) REMEDIES FOR SIZE,CONSTITUTION ANDCAPABILITY:

Undertake the jobs of the area where there

are no labour societies or even if suchsocieties exist, but are not capable ofshouldering responsibilities

The area of operation of the society should

be fixed with a view to its size, nature ofwork and possibilities of getting the work

B) INSTRUCTION FOR RESERVATION OF WORKS :


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The unskilled type of works should be separated

from skilled type and should be entrusted to

these societies Every year works upto Rs. 50,000 for skilled and

unskilled labour in govt, semi govt. and localbodies should be reserved for these societies

There should be separate arbitrator for thedifferences and disputes arising in completion ofwork

The machinery required for the job to be

undertaken by job offering agencies or made itavailable on rental basis.

C) FINANCIAL INSTRUCTION


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C) FINANCIAL INSTRUCTION :

The societies which give work to labour co-op

societies should pay 20% of total contract inadvance

On the basis of work certificate produced by thesocieties, SBI should give advance to districtcentral banks

Labour co-op can directly transact with primarylabour co-op societies

Govt. should give financial aid in order to fulfillthe requirement of working capital of labour co-op societies.

Cooperatives and Rural Markets

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