Historical Profile of Cooperative Movement in India

COOPERATIVES –
PROBLEMS AND LIMITATIONS OF COOPERATIVES

 HISTORICAL PROFILE OF COOPERATIVE MOVEMENT IN INDIA
 WHAT IS COOPERATIVES ?
 WHO NEEDS COOPERATIVES
 TYPES OF COOPERATIVES
o The Primary Agricultural Credit/Service Societies ---
o Agricultural Non-Credit Societies
o Agricultural Co-Operative Marketing Societies
o Co-Operative Farming Societies
 CAUSES OF SLOW PROGRESS:
o Government Interference:
o Mismanagement And Manipulation:
o Lack Of Awareness:
o Restricted Coverage:
o Functional Weakness:
 LIMITATIONS OF CO–OPERATIVE SOCIETY
o Limited Capital:
o Problems In Management
o Lack Of Motivation
o Lack Of Co-Operation:
o Dependence On Government:
 PROBLEMS OF COOPERATIVES
o Lack Of Adequate Working Capital
o Bad Leadership - Mismanagement
o Lack Of Modern Business Techniques And Liability To Complete
o Bad Record Keeping And Shortage Of Supervisory Staff
o Inadequate Capital Base To Cope With The Need Of Smes
o Proliferation Of Weak Cooperative Societies Which Results From
Lack Of Coordination Of Activities.
o Inconsistency On The Past Of Government In Supervision And
o Challenging Fund Through The Cooperative Societies
o Widespread Illiteracy And Mass Ignorance Of The Societies
o Out Dated Cooperative Laws
o Government Interference And Manipulation Of Cooperative
Programmes In Of Government Policies
o Identified The Leadership Problems As A Major Setback To The
Performance Of Cooperative Societies Saying That Group Action Is
More Difficult To Coordinate Than Individual Actions.
Historical Profile Of Cooperative Movement In India
Around The World Modern Cooperatives Have Developed For Over 200
Years. Cooperative Institutions Exist All Over The World Providing Essential
Services Which Would Otherwise Be Unattainable. In 90 Countries Of The World,
Over 700 Million Individuals Are Members Of Cooperative Institutions. Globally,
Cooperatives Have Been Able To Elevate Its Position As A Powerful Economic
Model.
During The British Rule , Nicholson A British Officer In India Suggested To

Introduce Raiffersen Model Of German Agricultural Credit Cooperatives In India.
As A Follow-Up Of That Recommendation, The First Cooperative Society Act Of
1904 Was Enacted To Enable Formation Of "Agricultural Credit Cooperatives"
The 1904 Cooperative Societies Act, Was Repealed By 1912 Cooperative

Societies Act Which Provided Formation Of Cooperative Societies Other Than
Credit. Under 1919 Administrative Reforms Act. In 1942, The British Government
Enacted The Multi-Unit Cooperative Societies Act, 1942. In The Post
Independence Era In India And Armed With An Experience Of 42 Years In The
Working Of Multi Unit Cooperative Societies And The Multi-Unit Cooperative
Societies Act, 1942, The Central Government Enacted A Comprehensive Act
Known As Multi State Cooperative Societies Act,1984,Repealing The Act Of
1942.
What Is It ?
Co-Operation Is A Movement Of People. It Is Essentially An Activity Of The
People For Mutual Help And Collective Progress. Co-Operation Is An Activity,
Where A Group Of People Having Common Interests Come Together And Work
For Mutual Benefit. The Groups Can Organise Themselves To Cater To Diverse
Interests, From Housing Societies, To Industrial Production To Co-Operative
Credit To Massive Co-Operative Banks
Who Needs It ?
Co-Operation Touches Everyone’s Life, Directly Or Indirectly. The House You

May Be Staying In Or The Shop You Conduct Your Business From May Be A Co-
Operative Society. The Tea Which You Drink Has Sugar And Milk In It, In All
Possibilities The Sugar Has Come From A Co-Operative Sugar Factory And The
Milk From A Dairy Co-Operative. The Clothes That You Wear May Be From A
Co-Operative Textile Mill.
Everybody Needs Co-Operation , After All We Need To Co-Operate To Live!
Types Of Cooperatives
The Co-Operative Movement Was Introduced Into India By The
Government As The Only Method By Which The Farmers Could Overcome Their
Burden Of Debt And Keep Them Away From The Clutches Of The Money-
Lenders.
(1)The Primary Agricultural Credit/Service Societies --- The Agricultural Co-

Operative Credit Structure Into Two Sectors,
1. One Dealing With The Short-Terms And Medium-Terms Finance And
2. The Other With The Long-Term Credit.
The Short-Term And Medium-Term Credit Structure Is Based On A Three-Tier

System, I.E., The Apex Co-Operative Bank At The State Level, The Central Co-
Coperative Bank At The District/Tehsil Level And The Primary Agricultural
Credit Societies At The Village Level.
(2) Agricultural Non-Credit Societies
The Co-Operative Movement Relatively Slow, Since 1912, The World War
Ii (1939-45) Came As A God Send Boon With Respect To The Development Of
The Cooperative Movement. Prices Of Agricultural Goods Began To Rise And
Touched New Peaks. The Repayment Of Loans Was Accelerated And Deposits
Began To Pour In. The Number Of Societies Also Rose. Another Interesting
Development In Co-Operative During The War Was The Extension Of The
Movement To Non-Credit Activities, Viz. Consumer’s Co-Operative Marketing
Societies, Consolidation Societies, Etc. The Number Of Agricultural Non-Credit
Societies In The District Was 38 In 1978-79.
(3) Agricultural Co-Operative Marketing Societies
Marketing Has Occupied A Far Smaller Place In The Co-Operative Picture In

India Than In Many Countries, The Development Of Co-Operative Marketing In
India Is Closely Bound Up With The Problem Of Credit-The Claims Of The
Money-Lenders Commonly Inhibiting The Cultivator’s Freedom Of Action In
Disposing Of His Crop.
(4 ) Co-Operative Farming Societies
Co-Operative Farming Is A Compromise Between Collective Farming And The

Peasant Proprietorship And Gives All Merits Of Large-Scale Farming Without
Abolishing Private Property. Organization Of The Farmers On The Basis Of
Common Efforts For Common Interests. Under This System, All Landowners In A
Village Form A Co-Operative Society For Tilling The Land. The Land Is Pooled,
But Each Farmer Retains The Right Of Property. The Produce Is Distributed By
Each.
Causes Of Slow Progress:
A. Government Interference:
Right From The Beginning The Govt Has Adopted An Attitude Of

Patronizing The Movement. Cooperative Institutions Were Treated As If These
Were Part And Parcel Of The Administrative Set Up Of The Government. The
Govt Interference Thus Became An Essential Elements In The Working Of These
Institutions. As A Result People’s Enthusiasm For The Movement Did Not Grow.
The Movement’s Independence And Self-Reliance Existed Only On Paper And
Files. But Even The Cooperative Movement Has Not Become Full-Fledged People
Movement.
B. Mismanagement And Manipulation:

Is That It Gives The Farmers The Status Of Shareholders And Assures Them
Agricultural, Educational And Medical Facilities. The Relationship Between The
Shareholder Farmer And The Cooperative Is Simple - The Farmer Is Committed
To Contributing A Certain Amount Of Cane Per Season And The Mill Is Bound
To Take This Cane. The Strength Of The Movement Was The Involvement Of The
Farmers Who Were Shareholders In The Sugar Mill Regardless Of The Size Of
Their Holdings. Over The Years, This Truly Democratic Idea Got Corrupted And
Farmers With Larger Holdings Grew More Powerful. The Governing Bodies Of
The Sugar Factories, Money Became Such A Powerful Tool That The Top Posts
Of Chairman And Vice-Chairman Usually Went To The Richest Farmers Even
Though The Majority Of Members Were Farmers With Small- Or Medium-Sized
Holdings.
C. Lack Of Awareness:
People Are Not Well Informed About The Objectives Of The Movement,
The Contributions It Can Make In Rebuilding The Society And The Rules And
Regulations Of Cooperative Institutions. Lack Of Education, Dirty Politics Of The
Village, Caste Ridden Elections To The Offices Of Cooperative Societies,
Bureaucratic Attitudes Of The Govt Officers At The Lower Rank Are Some Of
The Hurdles In Spreading The Correct Information About The Cooperative
Movement And In Educating The People About Its True Character And Vital Role
In The Society.
D. Restricted Coverage:
The Cooperative Movement Has Also Suffered On Account Of Two
Important Limitations On Its Working. One Is That The Size Of These Societies
Has Been Very Small. Most Of These Societies Are Confined To A Few Members
And Their Operations Extended To Only One Or Two Villages. As A Result Their
Resources Remain Limited, Which I Make It Impossible For Them To Expand
Their Means And Extend Their Are Of Operations .Two, The Most Of The
Societies Have Been Single Purpose Societies
E. Functional Weakness:
The Cooperative Movement Has Suffered From Inadequacy Of Trained
Personnel Right From Its Inception. Lack Of Trained Personnel Has Been Caused
By Two Major Factors. In The First Place, There Has Been A Lack Of Institutions
For This Purpose Of Training Personnel. Secondly Because Of It Unsatisfactory
Working Of Cooperative Institutions, Efficient Personnel Did Not Feel Attracted
Or Motivated Towards Them.
Limitations Of Co–Operative Society
Limited Capital: The Amount Of Capital That A Cooperative Society Can Raise
From Its Member Is Very Limited Because The Membership Is Generally
Confined To A Particular Section Of The Society. Again Due To Low Rate Of
Return The Members Do Not Invest More Capital. Government’s Assistance Is
Often Inadequate For Most Of The Co-Operative Societies.
Problems In Management: Generally It Is Seen That Co-Operative Societies Do

Not Function Efficiently Due To Lack Of Managerial Talent. The Members Or
Their Elected Representatives Are Not Experienced Enough To Manage The
Society. Again, Because Of Limited Capital They Are Not Able To Get The
Benefits Of Professional Management.
Lack Of Motivation: Every Co-Operative Society Is Formed To Render Service

To Its Members Rather Than To Earn Profit. This Does Not Provide 43 Enough
Motivation To The Members To Put In Their Best Effort And Manage The Society
Efficiently.
Lack Of Co-Operation: The Co-Operative Societies Are Formed With The Idea
Of Mutual Co-Operation. But It Is Often Seen That There Is A Lot Of Friction
Between The Members Because Of Personality Differences, Ego Clash, Etc. The
Selfish Attitude Of Members May Sometimes Bring An End To The Society.
Dependence On Government: The Inadequacy Of Capital And Various Other

Limitations Make Cooperative Societies Dependant On The Government For
Support And Patronage In Terms Of Grants, Loans Subsidies, Etc. Due To This,
The Government Sometimes Directly Interferes In The Management Of The
Society And Also Audit Their Annual Accounts.
Problems Of Cooperatives The Major Of These Problems Are Highlighted

Below;
(I) Lack Of Adequate Working Capital
(Ii) Bad Leadership And Succession Problems Characterized By Mismanagement
(Iii) Lack Of Modern Business Techniques And Liability To Complete
(Iv) Bad Record Keeping And Shortage Of Supervisory Staff
(V) Inadequate Capital Base To Cope With The Need Of Smes
(Vi) Proliferation Of Weak Cooperative Societies Which Results From Lack Of

Coordination Of Activities.
(Vii) Inconsistency On The Past Of Government In Supervision And
Challenging Fund Through The Cooperative Societies
(Viii) Widespread Illiteracy And Mass Ignorance Of The Societies
(Ix) Out Dated Cooperative Laws
(X) Government Interference And Manipulation Of Cooperative Programmes In

Of Government Policies
(Xi) Identified The Leadership Problems As A Major Setback To The

Performance Of Cooperative Societies Saying That Group Action Is More Difficult
To Coordinate Than Individual Actions.

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COOPERATIVES –

PROBLEMS AND LIMITATIONS OF COOPERATIVES

During The British Rule , Nicholson A British Officer In India Suggested To

The 1904 Cooperative Societies Act, Was Repealed By 1912 Cooperative

Co-Operation Touches Everyone’s Life, Directly Or Indirectly. The House You

(1)The Primary Agricultural Credit/Service Societies --- The Agricultural Co-

1. One Dealing With The Short-Terms And Medium-Terms Finance And

2. The Other With The Long-Term Credit.

The Short-Term And Medium-Term Credit Structure Is Based On A Three-Tier

(2) Agricultural Non-Credit Societies

(3) Agricultural Co-Operative Marketing Societies

Marketing Has Occupied A Far Smaller Place In The Co-Operative Picture In

Co-Operative Farming Is A Compromise Between Collective Farming And The

Causes Of Slow Progress:

Right From The Beginning The Govt Has Adopted An Attitude Of

B. Mismanagement And Manipulation:

Limitations Of Co–Operative Society

Problems In Management: Generally It Is Seen That Co-Operative Societies Do

Lack Of Motivation: Every Co-Operative Society Is Formed To Render Service

Dependence On Government: The Inadequacy Of Capital And Various Other

Problems Of Cooperatives The Major Of These Problems Are Highlighted

(I) Lack Of Adequate Working Capital

(Ii) Bad Leadership And Succession Problems Characterized By Mismanagement

(Iii) Lack Of Modern Business Techniques And Liability To Complete

(Iv) Bad Record Keeping And Shortage Of Supervisory Staff

(V) Inadequate Capital Base To Cope With The Need Of Smes

(Vi) Proliferation Of Weak Cooperative Societies Which Results From Lack Of

(Vii) Inconsistency On The Past Of Government In Supervision And

Challenging Fund Through The Cooperative Societies

(Viii) Widespread Illiteracy And Mass Ignorance Of The Societies

(Ix) Out Dated Cooperative Laws

(X) Government Interference And Manipulation Of Cooperative Programmes In

(Xi) Identified The Leadership Problems As A Major Setback To The

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