Objective and principals of cooperative societies

Objective and principals of cooperative societies

1. AEC 302 Agricultural Finance
and Co -operation (2+1)
Lecture19:AgriculturalCooperationinIndia
–Meaning,briefhistoryofcooperative
developmentinIndia.

2. Objectives
The basicobjectiveof the
cooperativemovementinIndiawasto
eradicatelocalmoneylenderswho
usuallyexploitthefarmersbycharging
unreasonable rates of
interest.Agriculturalcreditsocieties
wereestablishedwiththepromulgation
ofCooperativeCreditSocietiesAct1904

3. Cooperationistheuniversalinstrumentof
creation”.
ThehistoryofcooperativemovementinIndiais
aboutacenturyold.
ThemovementwasstartedinIndiawithaview
toencourageandpromotethriftandmutual
helpforthedevelopmentofpersonsofsmall
meanssuchasagriculturists,artisansandother
segmentsofthesociety.
Itwasalsoaimedatconcentratingtheeffortsin
releasingtheexploitedclassesoutofthe
clutchesofthemoneylenders.

4. AccordingtoCalvert,“Co-operationisa
specializedformofeconomicorganizationin
whichpeoplevoluntarilyassociatetogetherona
basisofequalityforthepromotionoftheir
commoneconomicinterests”.
ACo-operativeSocietyisanenterpriseformedand
directedbyanassociationofusers,applying
withinitself,therulesofdemocracy,anddirectly
intendedtoservebothitsownmembersandthe
communityasawhole-Lambert.
Definition-Co-operationandCo-operativeCredit

5. Cooperative Thinkers and Leaders
•MahatmaGandhienvisioned`GramSwaraj'wherein
therewouldbesocialandeconomicchangesinthe
villages.HisprogrammeforGramSwarajincluded
`cooperation'also
•PanditNehruclearlystatedtheimportanceofcooperative
societiesthat-“Ihavenodoubttheoreticallyin
cooperation;cooperativeworkingisgoodineverysingle
departmentofhumanactivity.Itisabetterwayoflife
andinfactitisaninevitablewayoflifewhenyoulivein
crowdedcommunities.Thereisnootherwayexceptthe
cooperativeway.”
•IndiraGandhi–“Iknowofnootherinstrumentas
potentiallypowerfulandfullofsocialpurposeasthe
cooperativemovement.”

6. Meaning of Cooperative Movement
Cooperativemovement explainasa
“Voluntarymovementofthepeople,carried
outdemocraticallybypoolingtogethertheir
resourcesorcarryingonthegivenactivity,
withthepurposeofachievingorsecuring
certainbenefitsoradvantagewhichgivento
peoplecannotgetindividuallyandwiththe
purposeofpromotingcertainvirtueandvalues
suchasselfhelp,mutualhelpandgeneral
goodsofall.”

7. Origin of Word Cooperation
Thetermcooperationisderivedfromthe
Latinwordcooperari,wherethewordco
means‘with’andoperarimeans‘towork’.
Thus,cooperationmeansworkingtogether.
Sothosewhowanttoworktogetherwithsome
commoneconomicobjectivecanforma
societywhichistermedas“cooperative
society”.
Itworksontheprincipleofself-helpaswellas
mutualhelp.

8. Principles of Co-operation
a)Universality:Themembershipofaco-operativesocietyis
opentothosewhoareconvincedofitsbenefitsandthosewho
arepreparedtosharethebenefitsandresponsibilitiesinvolved
insuchamembership.
b)DemocraticControl:Theaffairsofthesocietymustbe
ministeredbythemembersthemselvesandallthemembers
mustequallybetreated(onememberhasonevoteinthe
electionofBoardofManagement).Allforeachandeachforall.
c)SelfHelpThroughMutualHelp: Thebenefitarising
outofthecollectiveeffortisavailabletoallmembers.
d)UnityorPoliticalandReligiousNeutrality:Unityis
thefundamentalforcebehindallco-operativeorganizations.Itis
aboveallbeliefs,faithsandconvictions.

9. e)LimitedInterestoncapital:Themainaimofthe
societyisnottoearnabnormalprofitbuttoenablethe
memberstoimprovetheireconomicconditions.Ifthere
isanyexcessincome,itwillbeusedtomeetunforeseen
lossorstrengtheningthefundsofthesocietysothat
cheaperservicesmaybemadeavailabletothe
members.
f)PrinciplesofPublicity:Theco-operativeorganizations
donotbelieveinmaintainingsecrecyabouttheir
workingandprogress.
g)Ofthepeople,forthepeopleandbythepeople:
Membersshouldhavethespiritofdedicationand
servicewithabsolutehonestyandunquestionable
integrity.Hence,co-operationisthemovementofthe
people,forthepeopleandbythepeople.

10. History of Co-operative Movement
RobertOwen(1771–1858)isconsideredthefatherof
thecooperativemovement.Owenbelievedinputting
hisworkersinagoodenvironmentwithaccessto
educationforthemselvesandtheirchildren.Heputhis
ideasintoeffectsuccessfullyinthecottonmillsofNew
Lanark,Scotland.Itwasherethatthefirstco-operative
storewasopened.
TheFamineCommissionof1901recommendedthe
establishmentofAgriculturalBanksonthelinesof
MutualCreditAssociationofEuropetoprovidecredit
tofarmersinordertopreventfurtherfamineandalso
toimproveagriculture

11. ACommitteeunderthepresidentshipofSir
EdwardLawdraftedamodelbilltoestablishco–
operativecreditsocieties.
ThebillwaspassedasCo-operativeCreditSocieties
Acton25
th
March,l904.
Ruralsocietieswereorganizedon‘Raiffeisen
Model’whiletheurbansocietieswereestablished
on‘SchulzeDelitzchPattern’.
InRaiffeisenModel,unlimitedliabilitywasan
importantfeaturewhileinSchulzeDelitzch
societies,limitedliabilityprinciplewasfollowed.

12. RealizingthedefectsnoticedintheCo-operativeCredit
SocietyAct,1904,thatis,
i)noprovisionforpurposesotherthancredit,i.e.,marketing
ii)unlimitedliability,theGovernmentpassedCo-operative
SocietiesAct,1912.
Accordingtothis,a)non–creditsocietiescanalsobeformed
andb)theliabilityofthecentralsocieties(collectionof
primarysocieties)shallbelimitedandtheliabilityofrural
(primary)societiesshallbeunlimited.
After1912,therewasarapidgrowthnotonlyinthenumberof
co-operativecreditsocietiesbutalsoinnon-agriculturalcredit
societies.
However,thedevelopmentwasnoteven.Itmaderapidprogress
onlyinBombay,MadrasandPunjab(whereagriculturistshad
mortgagerights)thanintheZamindhariareaslikeBengal

13. •In1914,theGovernmentofIndiaappointeda
committeeunderSirEdwardMaclaganto
examinetheprogressoftheco-operative
movement
a)Misappropriationoffundsbythemembersof
themanagementcommittee,
b)Nepotisminadvancingloanstofriendsand
relatives,
c)Improperauditingandinspectionofsocieties.

14. Themajorrecommendationswere:
i)Formationofthreeclassesofsocietiesnamely:
a)Primarymeantforindividualsandunionsor
federationofsocietiesmeantforsupervision;
b)Centralbankatdistrictlevelforbankingbusiness;
and
c)Provincialbankattheprovincial1eveltoserveas
apexbanks.
ii)Restrictionofareaunderprimarysocietytoa
village,and
iii)Encouragementofnon–creditsocietiesthrough
thefinancialsupportbycentralbanks.

15. OnpassingoftheGovernmentofIndiaActin
1919undertheMontague Chelmsford
Reforms,co-operationbecametheprovincial
subjectandwasadministeredbyprovincial
governments.
Theeconomicprosperitybetween1920and
1929facilitatedrapidincreaseinthenumberof
societies.
However,duetotheworldwideGreat
Depression(1929-34)andtheSecondWorld
War,theco-operativemovementhadaserious
setback.

16. MadrasCo-operativeSocietiesAct,1932
MadrasCo-operativeLandMortgageBanksAct,
1934.Whilethe1932Actconferredmorepoweron
theRegistrarwithregardtotherecoveryofbad
debts,audit,supervisionandcontrol.
The1934Actprovidedforlong-termcredit
throughco-operativelandmortgagebanks.
TheMadrasProvinceappointedaCommitteeon
Co-operation(1939)underT.VijayaRaghavachary
tostudytheconditionsoftheco-operative
movementinthestate.Thecommitteesuggested
severalamendmentsto1932Act.

17. ReserveBankofIndiawasestablishedin1935
withanAgriculturalCreditDepartment.
TheAgriculturalFinanceSubCommittee(Prof.
D.R.GadgilCommittee)setupin1944.
In1945,theGovernmentofIndiaappointed
theCooperativePlanningCommitteeunder
thechairmanshipofR.G.Saraiyyafordrawing
upaplanforfuturedevelopmentoftheco-
operativemovement