1 Meaning:
A co-operative form of business organization is different from
other forms of organization. It is a voluntary association of persons for
mutual benefit and its aims are accomplished through self help and collective
effort. The main principle underlying a cooperative organization is mutual
help, i.e., each for one and all for each. A minimum of 10 persons are required
to form a co-operative society. To be called a co-operative society
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it must be registered
with the Registrar of Co-operative Societies under the Co-operative Societies
Act. The capital of a co-operative Society is raised from its members by way of
share capital. It can also obtain additional resources by way of loans from the
State and Central Co-operative Banks.
A Co-operative society
has much in common with partnership, yet there are differences between the two
types of organisation. In partnership, mutual benefit is restricted to partners
only, but in a co-operative society it extends to its members as also the
public. For example in a consumer co-operative store or a co-operative credit
society, the benefits are available to the members as well as the general
public. Besides, partnership requires the existence of some business activity
whereas a co-operative may be formed whenever individuals have common needs,
which are difficult to fulfill single-handed. Also, registration is optional in
the case of partnership but it is compulsory for a co-operative society.
3.4.2 Type of Co-operative Societies
Co-operative societies
may be classified into different categories according to the nature of
activities performed by them. The main types of co-operative societies are:
1.
Consumers’ co-operative societies.
2.
Producers’ co-operative societies.
3.
Co-operative marketing societies.
4.
Co-operative credit societies.
5.
Co-operative farming societies.
6.
Co-operative housing societies.
1.
Consumers’ co-operative
societies: Consumer’ co-operatives
are organised by consumers to eliminate middlemen and to establish direct
relations with the manufacturers or wholesalers. These societies are formed by
consumers to ensure a steady supply of goods and services of high quality at
reasonable prices. It purchases goods either from the manufacturers or
wholesalers for sale at reasonable prices. The profit if any , is distributed
among members as dividend in the ratio of capital contributed and also bonus in
proportion to the purchases made by them.
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2.
Producers’ co-operative
societies: Producers’
co-operative are formed to help the members in procuring inputs for production
of goods or services. These societies generally provide raw material, tools and
equipment and other common facilities to its members. This helps them to
concentrate their attention on production of goods. The society provides inputs
to the members and takes over their output for sale to outsiders. The basis for
distribution of bonus is the goods delivered for sale by each member.
3.
Co-operative marketing
societies: Co-operative marketing
societies are voluntary associations of small producers, who find it difficult
to individually sell their products at a profit. The main purpose of such a
society is to ensure a steady and favourable market for the output of its
members. The output is pooled together and sold at the best price. The sale
proceeds are distributed in proportion to the contribution of the members to
the pool. Marketing co-operatives eliminate middlemen and ensure honest trading
practices in weighing, measuring and accounting.
4.
Co-operative credit
societies: Such societies are
formed to provide financial help in the form of loans to members. The
funds of these societies consist of share capital contributed by the members
and the deposits made by them and outsiders. The funds are used in giving loans
to needy members on easy terms. Thus, the members are protected from the
exploitation of moneylenders, who charge very high rates of interest. Another
important purpose of credit co-operatives is to encourage the habit of thrift
among their members.
5.
Co-operative farming
societies: In co-operative
farming societies, small farmers join together and pool their resources
for cultivating their land collectively. Their objective is to achieve
economies of large scale farming and maximising agricultural output. Such
societies are particularly important in the case of countries like India, where
agriculture suffers from excessive sub-division and fragmentation of land.
Co-operative farming makes it possible for members to use modem tools and
equipments, good seeds, fertilizer and irrigation facilities in order to
achieve higher production.
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6.
Co-operative housing
societies: They are formed to provide
residential accommodation to the members. They undertake the purchase and
development of land and/or construction of houses/flats on the land. Some
housing co-operatives provide their members with necessary loans at low rates
of interest to build houses. These societies are gaining popularity in big
cities.
3.4.3 Characteristics of Co-operative Organisation
The
following are the main characteristics of cooperative societies:
(i)
Voluntary association: In co-operatives, the membership is voluntary. Anybody
having a common interest is free to join a co-operative society. The member can
also leave the society anytime after giving proper notice.
(ii)
Equal voting rights: In a co-operative society, the principle of one-man one
vote is adopted. A member has only one vote irrespective of the number of
share(s) held by him. Thus, a co-operative society is run on democratic
principles.
(iii)
Separate legal entity: A co-operative society is required to be registered under
the Co-operative Societies Act. Registration provides it a separate legal
entity. Its existence is quite different from its members. The death,
insolvency or lunacy of a member does not affect its existence. It can sue and
be sued in its own name. It can make agreements as well as purchase and sell
properly in its own name.
(iv)
Service motive: A co-operative society is based on the service motive of
its members. It’s main objective is to provide service to the members and not
to maximize profits. Earning profit is the most important objective of other
forms of business organisation. It is not so in the case of co-operatives.
(v)
Distribution of
surplus: Out of the profits of
the co-operative, members are paid dividend and bonus. The bonus is given
according to the volume of business transacted by each member with the
co-operative society. For example, in a consumer co-operative society, bonus is
paid in proportion to the purchases made by members during a year. In
producers’ co-operative the valued goods delivered for sale form the basis of
distributing bonus.
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Forms of Business
Organisation
3.4.4 Merits of Co-operative Organisations
The
co-operative form of organisation offers the following advantages:
(i)
Easy to form: A co-operative society is voluntary association and may
be formed with a minimum of ten adult members. Its registration is very simple
and can be done without much legal formalities.
(ii)
Open membership: Membership in a Co-operative organisation is open to
all having a common interest . A person can become a member at any time he
likes and can leave the society by returning his shares without affecting its
continuity.
(iii)
Democratic management : A co-operative society is managed in a democratic
manner. It is based on princiiple of one man one vote. All members have equal
rights and can have a voice in its management.
(iv)
Limited liability: The liability of the members of a co-operative society is limted
to the extent of capital contributed by them. They don’t have to bear personal
liability for the debts of the society.
(v)
Stability: A co-operative society has a separate legal existence. It
is not affected by the death, insolvency, lunacy or permanent incapacity of any
of its members. It has a fairly stable life and continues to exist for a long
period.
(vi)
Economical operations: The operation of co-operative society is quite
economical due to elimination of middlemen and the voulantarily services
provided by its members.
(vii) Government patronage:
Government gives all kind of help to co-operatives, such as loans at
lower rates of interest and relief in taxation.
(viii)Other benefits:
Certain non-economic benefits are also derived by members through
cooperatives. Credit co-operatives, for instance, promote habits of thrift and
producers’ co-operative encourage joint activity among members.
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3.4.5 Limitations of Co-operative Organisations
As against the
above-mentioned advantages of cooperatives the following limitations and
drawbacks of this form of organisation must also be noted:
(i)
Limited capital: Co-operatives are usually at a disadvantage in raising
capital because of the low rate of return on capital invested by members.
(ii)
Inefficient management:
The management of a co-operative society is generally
inefficient because the managing committee consists of part-time and
inexperienced people. Qualified managers are not attracted towards a
co-operative on account of its limited capacity to pay adequate remuneration.
(iii)
Absence of motivation: A co-operative society is formed for mutual benefit and
the interest of individual members are not fully satisfied. There is no direct
link between effort and reward. Hence members are not inclined to put in their
best efforts in a co-operative society.
(iv)
Differences and
factionalism among members: Once
the initial enthusiasm about the co-operative ideal is exhausted,
differences and group conflicts arise among members. Then it becomes very
difficult to get full co-operation of the members. The selfish motives of
members begin to dominate and service motive is some times forgotten. But the
society continues because it functions in the interest of members.
(v)
Rigid rules and
regulations: Excessive government
regulation and control over Co-operatives affect their functioning. For
example, a Co-operative society is required to get its accounts audited by the
auditors of the co-operative department and submit its accounts regularly to
the Registrar. These regulations and control may adversely affect the
flexibility of operations and the efficiency of management in a co-operative
society.
INTEXT QUESTION 3.2
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1.
What is the main aim of co-operative society?
2.
What are the voting
rights of the members in a co-operative society?
