A cooperative society is a voluntary association of people coming together to achieve common economic, social, and cultural benefits. Its principle is based on mutual help, wherein the resources are pooled so that the members share profits equitably. Cooperative societies are found in all sectors, including agriculture, banking, housing, and consumer goods. They encourage self-reliance, reduce economic inequality, and promote small business owners and farmers. Their purpose is first to serve members and not to make profits.
What is Cooperative Society?
A cooperative society is a member-owned organisation formed by those who unite to meet their daily needs. They are different from traditional companies, mainly based on maximising shareholder profits. They are focused more on the members’ benefits because of shared resources, profits, and decision-making. The basic principle of a cooperative is one member, one vote, where every member has an equal say, irrespective of his investment or contribution. The most famous example of a Cooperative Society is Amul.
Features of Cooperative Society
The features of a cooperative society are entirely different from those of other business organisations. Its features depict how the values of equal rights, democracy, and mutual aid remain the central tenets of cooperative societies.
Voluntary Membership
Anyone can become a member of a cooperative society if they agree to the duties and responsibilities that accompany membership. No discrimination based on caste, religion, gender, or social status exists. Members are free to join or leave at their discretion. For instance, any dairy farmer involved in milk production can be a member of Amul.
Democratic Management
In cooperative societies, a one-member, one-vote rule is used no matter how much a person has invested. Major decisions usually occur in general meetings, where every member has equal voting rights. For instance, in a housing cooperative, all members vote equally regarding maintenance fees regardless of their apartment size.
Service Motive
The main goal of a cooperative society is to serve its members instead of gaining maximum profits. Although cooperatives make some profits, they consume them to benefit the members or invest them for expansion. For example, a consumer cooperative mainly aims to sell commodities at fair prices instead of maximising profits.
Limited Liability
The financial risk of each member in a cooperative is limited only to the sum they invest in the cooperative. If the business suffers losses, members do not have to contribute more than their investment. Take, for example, a credit cooperative. Members lose only what they invested and not their savings if the business fails.
Distribution of Surplus
Cooperative societies share profits based on members’ participation rather than investment. Apart from this, they keep some earnings for growth and development. For instance, in the case of a worker’s cooperative, the profit-sharing is based on the number of hours put in by each member.
Legal Status
A cooperative society has its legal identity separate from its members. It can hold property, enter into contracts, and sue or be sued. In India, cooperatives must register under the Cooperative Societies Act of 1912. For instance, a registered cooperative bank carries out its financial activities independently.
Mutual Cooperation and Self-Help
Cooperative societies are based on the principles of teamwork and self-reliance, and in it members work together for common goals. Success is measured only by their active participation. An example would be farmers who purchase reduced-priced seeds, fertilisers, and other equipment in an agricultural cooperative.
Cooperative Society Examples
Cooperative societies exist in different sectors to fulfil the economic needs of their members. They help farmers, traders, and consumers by offering better prices, services, and financial support.
Amul- Dairy Cooperative Society
Amul is one of India’s most successful cooperative societies, specifically in the dairy industry. It was formed in 1946 to help local farmers get a fair price for their milk. In the collaborative model followed by Amul, thousands of farmers contribute milk, which the society processes into butter, cheese, and milk powder.
Amul serves as a milk-marketing federate that also ensures farmers do earn a predictable income, hence helping consumers with quality dairy at low prices. Amul was managed by the Gujarat Cooperative Milk Marketing Federation, maintaining the principle of fair trade that involved profit distribution between the different levels of society. The GCMMF proved instrumental in shaping India’s white revolution since India became a prominent milk supplier globally.
SEWA – Women’s Cooperative Society
The Self-Employed Women’s Association, or SEWA, is a cooperative society that empowers women workers in India. SEWA was founded in 1972 to empower women in the unorganised sector to gain financial independence. SEWA facilitates training, microfinance, and small business opportunities for women, thereby improving their incomes.
SEWA is a federation working across different industries like textiles, handicrafts, and agriculture. It supports women in obtaining fair wages, skill training, and financial assistance for their entrepreneurship and self-reliance through setting up their enterprises. Promoting women’s entrepreneurship and economic empowerment, SEWA reduces poverty and creates better job opportunities for women in India.
Indian Farmers Fertiliser Cooperative (IFFCO)
IFFCO is a large cooperative society that assists farmers in obtaining fertilisers at affordable prices to enhance crop production. It was established in 1967 and deals with thousands of farmers in India. It produces and distributes high-quality fertilisers such as urea and DAP, which improve soil fertility and support agricultural growth.
IFFCO functions farmer-friendly so that small and marginal farmers can obtain agricultural inputs necessary for cultivation at fair prices. It also teaches farmers to farm better, including soil health and sustainable agriculture. Thus, through increased production among the farming communities, IFFCO strives to boost food security and rural development in India.
Types of Cooperative Society
Cooperative societies can be divided into categories based on members’ purpose, structure, and needs. The following are the main types of cooperative enterprises:
Consumer Cooperatives
Consumer cooperatives provide their members with goods and services at a relatively cheap price. Individuals order products in bulk and then sell them at agreed reasonable prices, bypassing the middleman. For example, in India, there is a consumer cooperative known as Apna Bazaar, and its members are owners and customers. Such an arrangement gives the consumers lower prices, reasonable quality control, and profit-sharing between the members. However, it will still be affected by problems like low product variation and management because of the lack of professionalism.
Producer Cooperatives
Producer cooperatives allow producers, whether farmers, artisans, or manufacturers, to sell their produce with the proper means. The pooled resources enable a member to source raw materials for production, produce goods, and then sell those goods in an aggregated form. Some well-known examples are Amul, which supports dairy farmers, and Lijjat Papad, which empowers women in the food industry. They guarantee better prices, scales of economies, and wider market access. A drawback to cooperatives is their dependence on management and problems regarding quality control.
Worker Cooperatives
Worker cooperatives provide employment where workers are owners, managers, and business controllers. They invest in the cooperative and make decisions; hence, the profit is equally divided. Its workers manage Kerala’s Uralungal Labour Contract Cooperative Society (ULCCS). The cooperatives give job security, equal wages, and ownership; however, the cooperatives are often marred with inadequate funds and fight over management control.
Housing Cooperatives
The main objective of housing cooperatives is to offer affordable housing to its members. Members pool money to acquire land, build homes, and run the property together. Quite a few housing societies in large cities such as Mumbai and Delhi function as cooperatives. The benefits include affordability, better maintenance, and good community bonding. Still, they face issues with property management disputes and high maintenance costs in the big societies.
Credit Cooperatives (Cooperative Banks)
Credit cooperatives are also known as cooperative banks. Credit cooperatives offer loans and other credit facilities, deposits in savings accounts, etc., to the members. Here, the capital is contributed by the members and utilised to issue loans at low interest rates. Such models include Urban Cooperative Banks in India, offering low-interest loans, easy credit access to small businesses, and profit-sharing among members. However, there are risks of loan defaults and limited capital compared to commercial banks.
Functions of Cooperative Society
Cooperative societies perform several roles for the common good of their members and to enhance the economy. These roles ensure smooth operations and long-term sustainability.
- Encouragement of Savings and Investments: Members of a cooperative society contribute a small amount of money regularly. Savings help in financing various projects, loans, and welfare activities.
- Providing Financial Support: The co-operatives offer low-interest loans to the members. This cuts down on private moneylenders.
- Removal of intermediaries: Cooperatives allow the producers to sell directly to customers. This implies that the returns are higher and fair prices are obtained.
- Creating Employment Opportunities: Cooperative societies employ in agriculture, banking, and trade. Hence, it develops the rural and urban economies.
- Promoting social welfare: A cooperative society fights for fair remuneration and work conditions. Communities are developed concerning education, medical care, and member’s shelter.
- Protecting Consumer Interests: Consumer cooperative societies provide quality products at reasonable prices. They prevent exploitation by large corporations and private traders.
- Improving Agricultural and Industrial Development: Agricultural cooperatives provide modern farm facilities. Industrial cooperatives provide small-scale industrial inputs as well as marketing services.
Cooperative Society Act
Cooperative Society Act is one of the major legal structures under which cooperative societies can be formed, regulated, and function in India. Operations of cooperative societies are governed by the Cooperative Societies Act 1912 and other state-specific cooperative laws. This act allows cooperative societies to function freely and transparently and enforces the legal procedure for protecting rights among its members. Rules about membership, financial management, and governance help make cooperatives work efficiently and act in the interest of their members.
The Act elaborates on all the provisions so that accountability is maintained and proper practices are pursued. The government should register all cooperative societies to have legal recognition. After registration, it becomes an independent legal body with rights and liabilities. They should have proper democratic functioning within the society through regular elections to appoint leaders. Moreover, they must maintain appropriate financial records for regular audits for transparency. The government supports these societies by giving them financial aid, tax benefits, and incentives to help them grow and benefit their members properly.
Cooperative Society FAQs
1. What is the main objective of a cooperative society?
A cooperative society’s main objective is to promote its members’ economic and social welfare by sharing resources and equally dividing the profit.
2. What is cooperative?
A cooperative is a self-help organization whereby individuals come together for common financial or social advantage. It functions on democratic lines.
3. What is Cooperative Society Act?
A legal frame for the formation, registration, and working of cooperative societies: The Cooperative Society Act
4. What are some cooperative society examples?
Examples include Amul (Dairy Cooperative), IFFCO (Agricultural Cooperative), and Indian Cooperative Credit Society.
5. How does a cooperative society help farmers?
Cooperative societies help farmers by providing credit, seeds, fertilizers, modern farming techniques, and fair prices for their produce.
