Co-operative societies or Co-ops are a worldwide phenomenon with various definitions and diverse structures. Essentially, they are an association of users or firms, or households in pursuit of economic, social, or cultural objectives, applying to themselves the rules of joint ownership and democracy, aiming to serve its members and the community as a whole. They are a voluntary association that replaces capitalism with co-operation, listens to their members’ needs, is non-discriminatory, arrives at decisions through discussions, and follows the ideals of self-help and mutual help.
Cooperatives exist in sectors such as retail, banking, housing, marketing, agriculture, manufacturing, purchasing, and employment, among others. Some of the most renowned co-operatives in India are Amul, Shree Mahila Gruha Udyog (Lijjat Papad), KRIBHCO, and Indian Farmers Fertiliser Cooperative (IFFCO – which is also one of the largest cooperatives in the world).
What are the types of cooperatives in India?
Let’s have a look at some cooperative society example that exist in India.
1. Consumer Cooperative Society
These societies are primarily for consumers who wish to buy household goods at lower prices. The society buys goods or products in bulk amounts directly from the producer on wholesale rates and sells them to the members, thus eliminating the need for a middleman. The purchased goods are sold to members and non-members in cash. Capital is raised by issuing low denominational shares to the members who also get dividends on the shares. Consumer co-operatives do not use advertising but rely on word-of-mouth. They ensure a regular supply of goods at reasonable rates. They set up stores or outlets to sell goods and avail huge trade discounts from producers. Some of the best
2. Producer Cooperative Society
Also known as industrial co-operatives, these types of cooperative societies look out for the small-scale producers in a cut-throat market scenario. Production and distribution are handled from within the co-operative. These producers could be farmers, ayurvedic herbal medicine producers, organic produce sellers, handicraft or handloom producers, artisans, etc. Raw materials, ingredients, tools, processing units, etc. needed for the manufacturing or producing the goods are obtained by the members directly, provided to the producers and the final output is distributed to the buyers/non-members without a middle link. Producers pool in their resources, increase production volumes and minimise risk in the face of the competitive capitalistic markets. Best examples are dairy, fish farmers, weavers and artisans and tribal co-operatives.
3. Cooperative Credit Societies
These are urban and rural financial societies that provide loans to members at low rates of interest, protecting the members from massive debts to traditional moneylending agencies. They serve a basic but highly personalised banking role in a sense. They have deposit schemes in forms of saving accounts, FD, RD, pension schemes, etc. The money procured is then given on loans to members as personal loans, agricultural loans, housing or vehicle loan, etc. These societies are regularly aided by state and national government subsidies and funding. Some examples are Teachers Co-op Credit society, State Electric Board Employee Co-op Credit Society.
4. Marketing Cooperative Society
Mostly for the benefit of farmers, these societies function to market the produce profitably at the best possible prices, increase the bargaining strength of the farmers and protect them from the trials of individual selling and market exploitation. The profits are distributed on the basis of the contribution of produce made. They also educate the farmers on market prices, stabilise supply against demand, help them get loans, and help with grading, pooling, processing and procurement of produce and provide safe storage and reliable transportation facilities. Some good examples are Milk Co-operatives in Gujarat, Maha Grape, Cotton Marketing Co-ops.
5. Housing Cooperative Society
Housing co-ops are a type of society that provides affordable housing to the middle and low-income groups. One becomes a member by purchasing shares in the cooperative. Instead of owning the real estate, the members own a share in the entire corporation, which in turn gives them a house to reside in. Such societies are commonly found in urban and semi-urban cities. They construct the residences or flats and provide them to the members to live in and collect the money in instalments. In other cases, they provide the land to the members who themselves construct their own residences.
6. Cooperative Farming Societies
The financially challenged farmer may not be able to maximise his agricultural output individually and earn optimum profits. Farming co-ops are a way for farmers to retain the right to their land, yet pool together and consolidate land, livestock and equipment while earning a share in the total output as per the contribution made. In better farming co-ops, members co-operate for pre-sowing, seeds, fertilisers and equipment, and joint selling, but cultivate the land separately. In joint farming, they pool in the land as well. Co-op tenant farming is the type in which the society leases the land to the farmers and collects the rent. In collective farming co-ops, farmers are members for life and cannot remove their land but can transfer the land rights to another.
Why do cooperative societies matter?
Every Indian national should acknowledge the worth and significance of co-operative societies since they are an important contributor to economic equality and welfare. Even though they are not the predominant public or private financial organizations, a flourishing network of co-operative societies improves the standard of living of the weaker and middle-income sectors of the society as agents of change and reformation.
They provide an economic model with a higher level of entrepreneurial or social sustainability and often work as pressure groups to voice the views of its members in a larger market. Being a part of a co-op improves your creditworthiness as a producer as well as a consumer. They are easy to join, ensure equitable distribution of profits, prioritise welfare over individual profits, are stable in their functioning and output, and receive a substantial amount of government support. The spirit of co-operation and unity in chasing common interests is the driving force behind co-ops. In a growing democracy, they are the symbol of meritorious collectivism.
Features of Cooperative society
- Voluntary Association: The membership of co-operative societies is voluntary. Anyone interested is free to join a co-operative society and leave the society any time after giving proper notice.
- Equal Voting Rights: A co-operative society is based on the principle of “one man one vote”. A member of the cooperative society has only one vote irrespective of the number of share(s) held by him and so co-operative society runs on democratic principles.
- Separate Legal Entity: A cooperative society needs to be registered under the Cooperative Societies Act. This registration will result in the co-operative society being a separate legal entity. It can make agreements as well as purchase and sell property in its own name and sue and be sued in its own name.
- Service Motive: A cooperative society’s main objective is to provide service to the members and not to maximize profits.
- Distribution of Surplus: Members are paid dividends & bonuses out of the profits of the co-operative society.