Cooperative Movement in India | Development

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In the today’s growing world Co-operatives do activities for the development of agriculture, small industry marketingandprocessing, distribution and supplies. The progress report of co-operatives in the State is very good and contribution to agricultural progress has particularly been significant. For the purpose of Green Revolution, these Co-operatives introduced various schemes for the conversion of villages into towns and also the construction of go downs.

The Co-operative Movement was introduced into India by the Government to overcome the burden of debt of farmers and they can sell their products easily and can get the maximum profit. The Co-operative Credit Societies Act, 1904 was passed by the Governmentof India and rural credit societies were formed. Through the appointment of registrars and through vigorous propaganda, the Government attempted to popularize the Movement in the rural areas. Within a short period, the Government realized some of the shortcomings of the 1904 Act and, therefore, passed a more comprehensive Act, known as theCo-operative Societies Act of 1912. This Act recognized non-credit societies also. But the rural credit societies have continued to be predominant till now.

Agricultural Credit/Service Societies

The structure of Agricultural Co-operative credit in the Punjab State is divided into two sectors i.e. Dealing with the short-terms and medium-terms finance and 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-operative Bank at the district level and the Primary Agricultural Credit Societies at the village level. The major role of these services which is provided to the farmers is to make the funds available to the farmers for their agriculture production, for the purchase of machinery, fertilizers etc.

Type of societies

  • Co-operative Weaver’s society
  • Co-operative Consumer’s Societies
  • Co-operative Housing Societies
  • Co-operative Women’s Societies
  • Co-operative Milk-Societies

Problems for Co-operatives

  • Lack of supervision leads to the misuse of the financial resources.
  • Lack of inspection by Registrar
  • Government is hesitating to entrust any important government work since it does not have any participation.
  • The Co-operative Banks and other important institutions are located far away from the reach of the farmers.
  • NABARD and RBI are not agreeing for conversion of Central and Urban Co-operative Banks.
  • R.B.I. has also objection about the use of word “Co-operative” since Banking Regulation Act uses the word “Co-operative Society”.
  • Wrong persons may take advantage of the situation to cheat the general public.
  • When the Government are exploring the possibility of regulating the Non-governmental organizations having vast experience, it is doubtful as to whether the mutually aided Co-operatives in various field can give desired result.

Introduction to NABARD

NABARD is set up by the Government of India as a development bank for facilitating credit flow for promotion and development of agriculture and integrated rural development. It also helps in all other economic activities in rural areas, promoting sustainable rural development and for the prosperity of the rural areas.

With a capital base of Rs 2,000 crore provided by the Government of India and Reserve Bank of India, it operates through its head office at Mumbai, 28 regional offices situated in state capitals and 391 district offices at districts.

Present Scenario

Initiates measures toward institution-building for improving absorptive capacity of the credit delivery system, including monitoring, formulation of rehabilitation schemes, restructuring of credit institutions, training of personnel, etc.

Coordinates the rural financing activities of all the institutions engaged in developmental work at the field level and maintains liaison with the government of India , State governments, the Reserve Bank of India and other national level institutions concerned with policy formulation

Prepares, on annual basis, rural credit plans for all the districts in the country. These plans form the base for annual credit plans of all rural financial institutions

Undertakes monitoring and evaluation of projects refinanced by it

Promotes research in the fields of rural banking, agriculture and rural development

Functions as a regulatory authority, supervising, monitoring and guiding cooperative banks and regional rural banks

Role and Functions


In pursuance with the recommendations of the Parliamentary Committee on Agriculture, Cooperative Development Fund was constituted by NABARD in the year 1992-93 under the provisions of Section 45 of NABARD Act, 1981 with a view to strengthening and providing assistance to Co-operative Credit Institutions for improving their infrastructural facilities. The initial Corpus of the Fund was Rs.10 crore which was subsequently raised to Rs.75 crore. The cumulative assistance sanctioned to cooperative institutions from the Fund for various purposes unto 31 March 2007 amounted to Rs.76.35 crore against which Rs.67.66 crore has been disbursed.

National Conference of Urban Credit Cooperative Societies

Saturday, 22 April, 2006,


(Talking Points)

Dignitaries on the dais,

Ladies and Gentlemen,

The Cooperative Movement in India has contributed to the rural development of the country. Though the movement has developed in different States of the country not in the uniform manner, some of the States like Maharashtra, Gujrath, Karnataka, Andhra Pradesh have shown tremendous growth of the Cooperative Movement in these States. The cooperatives were considered as the balancing force between the private sector and the public sector. The advantages of the private sector and the public sector could be very well achieved through the cooperative sector and the disadvantages associated with the private sector and the public sector could be eliminated in the cooperative sector. The societies, which were promoted by the leadership having vision and who managed these cooperatives well, have become successful; whereas the cooperative societies, which suffered from the lack of dynamic leadership were mismanaged and these cooperative societies became failure. Maharashtra State is one of those States in our country, which can boast of claiming that the cooperatives in the State are managed by the elected representatives by the members and the elections do take place regularly except in few cases where there are problems of mismanagement. Out of the total number of 1.75 lakhs cooperative societies in Maharashtra there are hardly few hundred cooperative societies, where the administrators are functioning. This shows the Cooperative Movement in Maharashtra is functioning purely on democratic principles. The Cooperative Movement in Maharashtra has made tremendous progress during the last 45 years. The number of societies in 1960 was hardly 30,000 in 1960, which has gone upto 1.75 lakhs in 2005. The number of membership of all these societies increased from 42 lakhs in 1960 to almost nearing 5 crores in 2005, whereas the members capital was only 53 crores in 1960, which has increased to around 13,000 crores in 2005.

Though the figures indicate that the cooperatives have made tremendous progress in Maharashtra some of the sectors in cooperatives have been highly successful, whereas some of the sectors could not make any success. The examples of successful societies are found in large number in the areas of Cooperative Sugar Factories, Dairy Cooperatives, Urban Banking, whereas almost 50% of the Primary Agricultural Credit Coop. Societies and 50% of the District Central Cooperative Banks are in a very bad financial position. The Agro Processing Cooperatives also could not make any progress, though there is a tremendous potential for these cooperatives, considering the huge production of the fruits and vegetables (production of fruits is about 100 lakh tonnes and that of vegetables is around 50 lakhs tonnes, which is likely to be doubled in the next 5 years) as well as other agricultural produce in Maharashtra.

The Government of Maharashtra has recently passed various amendments in the Maharashtra Agricultural Produce Marketing (Regulation) Act, 1963, on the lines of Model Act prepared by the Govt. of India and has introduced the provisions for establishment of Private Markets, Farmer Consumers Markets, Direct Marketing, Single Licence for the Traders and the Contract Farming.

These amendments will have very good effect on the growth of agro-processing sector, exports of fruits and vegetables and value added produce from agriculture and the development of retail chain management, as these sectors will be able to source the requirement of their produce directly from the farmers. This will also have good impact on large private investment coming in to agricultural sector, development of infrastructure like pre-cooling units, cold storages, cold chain for transportation of perishable produce, putting up of the processing industries etc. The employment generation in agriculture and allied sectors will also be improved. It is envisaged that because of these changes the overall economy will grow and the farmers will get better returns for their produce. This will also have the positive effect on quality and productivity improvement in agriculture.

Besides 20,000 Primary Agricultural Credit Coop. Societies, 34 District

Central Cooperative Banks and the Maharashtra State Cooperative Bank, there are about 25,000 Urban Cooperative Credit Societies in Maharashtra. While the Primary Agricultural Credit Cooperative Societies give loans to the farmers for agriculture and for crop production, the urban credit societies cater to the needs of the urban population, particularly to meet their requirements of credit for consumer articles. The total membership of these societies is around 1.10 crores. The share capital of these societies is around Rs.3,500 crore and their own funds amounting to Rs.5700 crore. The deposits of these societies are around Rs.10,000 crore and they have given loans of about Rs.15,000 crore.

The working capital of these societies is around Rs.25,000 crore. The cooperative credit sector is operating in both Urban and Rural areas. The Urban credit societies cater to the needs, primarily, of the urban population. It also caters to the household needs of the rural population. Recently the urban cooperative credit societies in rural areas have started financing the agricultural needs of farmers. This effort was initiated and promoted by the Government by issuing the Govt. Resolution on 22.12.2005.

The loans to the tune of about Rs.15,000 crore to 1.12 crore member itself speaks of volume of work of these cooperative credit societies, who necessarily reach the urban and rural masses. The presence of credit societies in the vicinity provides confidence of easy availability of funds, to both urban and rural masses.

The credit societies are now intending to diversify by extending their services such as cash transfers and other permitted banking operations. The credit societies’ Federation is trying to play a prominent role to have joint venture operations along with the similar international organisations. The State Federation of Urban Credit Societies in Maharashtra has decided to extend the insurance to the Depositors of Urban Credit Societies, by forming their own Deposit Insurance Scheme. This is a unique revolutionary decision and it will go a long way in building confidence of the depositors in these societies.

There are 2,106 Urban cooperative Banks in the country having deposits of Rs.1.10 lakh crore. Out of these, there are nearly 650 Urban Cooperative Banks in Maharashtra, having the total deposits of Rs. 65,000 crore. The Urban cooperative Banks are also catering to both the rural and urban population. The huge membership base available for both the urban cooperative banks and cooperative credit societies must be utilized for the ultimate upliftment of both the members and the organizations. This base can be utilized as channels – both forward and backward – in respect of different managerial aspects such as marketing, distribution, services etc. For achieving this, both these organizations should have integrated approach in functioning and their policy framing like Rates of Interest on deposits, Rates of Interest on loans etc. It is necessary that borrowers get loans at reasonable rate of interest so that any business becomes viable and borrower is able to repay loans.

The financial involvement of both the urban and rural masses in the cooperative credit societies by way of deposits always demanded its safety. The involvement of Insurance Agencies was well solicited. However, the effort in this direction was uniquely made by the Maharashtra State Cooperative Deposit Guarantee Corporation which happens to be a cooperative society. It has to go a long way but a good start has been made to cover up 70 credit societies guarantying their deposits up to the limit of Rs.50,000/-. The consolidated effort to qualitatively strengthen the organisation and increase its scope is the need of this hour.

The cooperative credit societies are facing innumerable problems some of them can be listed as follows.

  • Accepting deposits at higher rate from depositors
  • Huge expenses on administration.
  • Lack of management skill
  • Lack of training and education to the employees and Board of Directors
  • Poor performance in recovery
  • Loans are sanctioned without proper scrutiny

These problems needs to be addressed by all the concerned with the focus on the overall quality to be maintained by these cooperative organizations. The cooperatives including the urban credit cooperative societies should function in such a manner that they have the highest operational efficiency and professional management so that they can deliver the desired results to the members and the common man. Unfortunately the professional management and operational efficiency is lacking in many societies.

As I have already mentioned earlier the societies, which have been managed efficiently and have been able to serve their members and public in a most desirable manner the example of the cooperative sugar factories in Maharashtra is an eye opener to a person who looks at these societies very closely. Out of 200 cooperative sugar factories in Maharashtra almost 50% have excellent results whereas 50% of these factories are in problems. Some of the cooperative sugar factories, which are excellently managed could pay almost Rs. 1100 to 1200 per tonne as a sugarcane price, whereas many of the badly managed Cooperative Sugar Factories could not pay even statutory minimum price. For paying the statutory minimum price, these factories are required to borrow from banks by creating short margin and with the Govt. guarantee. The Govt. of India is helping these factories with the package for rehabilitation.

Though this is required in the larger interest of the farmers, the sugar factories, which are performing well should also be given incentives by the Govt. of India. Same policy should be applied to the other successful cooperative societies also. The urban cooperative credit societies in the State and in the country must remember that they have to face competition with big Multi-National Banks and the Commercial Banks. These societies should therefore, be vigilant in advancing loans and in no case loans, which cannot be recovered should ever be sanctioned. These societies must adopt the modern management practices including computerization in their working, professional training to their employees and to their members of the Board and should keep their level of functioning very competitive. This only can bring success to these societies.

Thank you.

Jai Hind ….!!! Jai Maharashtra …..!!!!


In the above article, the man stress is on using the modern techniques of working, professional training should be given so that they can handle each and every single problem and most important all work should be done thorough computers so that the commitment of errors should be minimum. Whatever the loans provided to the farmers, the record of that and the documents should be maintained properly so that it will be easy for the working of the employees as well as for the farmers to know every single point. With this proper documentation recovery department can easily comes to know about the person from they have to collect the particular amount. Proper education training should be given so that the employees can give their 100% to the work and they should no charge higher rate for accepting the deposits. The loans which will be given to the farmers should be given after the enquiry of that particular person that whether the person really need the loan and the information he is providing is true or not.



Agricultural Cooperatives in India are very actively and intimately involved in several agriculture related activities. The most important activities are the disbursement of production credit and distribution of fertilisers and other inputs viz seeds, pesticides and agricultural implements. Agricultural Cooperatives are also involved in procurement of farm produce, processing and marketing of oilseeds, Cotton, sugar, milk and milk products, distribution of essential commodities, clothes, kerosene oil and merchandise etc. Coop. movement in India started way back in 1905. Till 1939, Agricultural Cooperatives in India were distributing only the credit to the farmers. Its activities got diversified to consumer articles and also some agricultural inputs in the rural areas over a period of time. Subsequently, based on the suggestions made by different committees and commissions, the cooperatives were given a significant role in distribution of fertilisers. Currently, cooperatives are playing a significant role both in production and marketing of fertilisers.

Cooperatives Role in Agricultural Credit Disbursement

Cooperatives play a very important role in disbursement of agricultural credit. Credit is needed both by the distribution channel as well as by the farmers. The distribution channel needs it to finance the fertiliser business and farmers need it for meeting various needs for agricultural production including purchasing fertilisers. The credit needed by the farmers for purchase of fertilisers and other inputs is called ‘short term’ credit or ‘production credit’ whereas credit needed by the distribution channel is called ‘Distribution Credit’. Cooperatives also play a very important role in disbursement of ‘Medium Term’ and ‘Long Term’ credit needed by the farmers’ for purchasing agricultural equipments viz tractors, installation of tubewells and land development works etc.

‘ Joint General Manager(Marketing), IFFCO, 53-54, Nehru Place, New Delhi -110019 Paper presented at 13th ICA-Japan Training Course on “Strengthening Management of Agricultural Cooperatives in Asia” 1988-99 at FMDI, Gurgaon, Haryana, India, on Jan 21, 1999 In India, 78 per cent of the farmers belong to the category of small and marginal farmers. They depend heavily on credit for their agricultural operations. These farmers will not be able to adopt the modern agricultural practices unless they are supported by a system which ensures adequate and timely availability of credit on reasonable terms

and conditions. Credit in India is made available to the farmers through a multi-agency network consisting of cooperatives, commercial banks and Regional Rural Banks (RRBs). However, cooperatives accounts for a large proportion of the agricultural credit made available to the farmers. National Bank for Agriculture and Rural Development (NABARD) was established in the year 1982 by an Act of Parliament and was entrusted will all matters concerning policy, planning and operation in the field of credit for agriculture and other economic activities in the rural areas. Before that, this job was being done by Reserve Bank of India itself. NABARD works for progressive institutionalization of the rural credit and ensures that the demands for credit from agriculture including the new and upcoming areas like floriculture, tissue culture, bio-fertilisers, sprinkler irrigation, drip irrigation etc. are met. The medium and long term of loans are disbursed to the farmers through Primary Land Development Banks (757) who draw their finances from Central Land Development Banks (20) who in turn draw their finances from NABARD. As for the short term credit, this is disbursed to the farmers through Primary Agricultural Credit Societies (PACS-66,200) who draw their finances from Central Cooperative Banks (363) who in turn draw their finances from the State Cooperative Banks (29). The State Cooperative Banks draw their finances from NABARD.

Cooperative’s Role in Fertiliser Distribution:


Agriculture continues to be the mainstay of India’s national economy. Its contribution to India’s Gross Domestic Product (GDP) is about 30 per cent. Nearly two thirds of the population still depends on this sector directly or indirectly. Self-sufficiency in foodgrains has been the basic objective of India’s policy on agriculture. Foodgrain production has increased from the level of 52 thousand tonnes in 1951-52 to 199

million tonnes in 1996-97. However, the foodgrain production declined to 193 million tonnes in 1997-98. The present population of the country is about 960 million and is likely to touch 1000 million by the turn of this century. To feed this level of population, India has to produce 208 million tonnes of foodgrains from the present level of 193

million tonnes which is, no doubt, a gigantic task The vital role of fertilisers in increasing agricultural production is well recognised. Since, the land man ratio is declining due to increasing population, the additional foodgrain production has to come by increasing the productivity of land under cultivation. Adoption of modern agricultural practices is the only way for increasing agricultural productivity. This calls for application of inputs like chemical fertilisers, high yielding seeds and pesticides besides use of mechanical equipments like seed-cum-fertilizer drills, sprayers, pump sets etc. Chemical fertilisers are very costly, particularly the phosphatic and potassic ones which have been decontrolled w.e.f 25th August, 1992. Urea, of course, is relatively low priced due to grant of subsidy by GOI. However, unless balanced nutrients are applied, the productivity cannot be sustained.

Fertilizer Distribution Channels

Fertilizers are produced/ imported at about 200 locations in the country and distributed to the farmers scattered through the length and breadth of the country in about 600,000 villages through a network comprising of private and institutional channels. Some quantities are also made available through manufacturers’ own outlets. Private trade accounts for about 60 per cent of the total fertilisers distributed in the country followed by institutional agencies at 35 per cent and remaining 5 percent through the manufacturers’ own outlets. Among the institutional agencies, cooperatives are the main agency which alone account for nearly 30% of the total fertiliser business. The

total number of fertiliser salepoints in the country is 262,000; out of which about 71,000 (27%) are institutional agencies’ salepoints (mainly cooperatives) and the remaining 1,91,000 (73 %) are controlled by the private trade.

Cooperative Channels

Cooperatives are the main institutional agency in the country handling fertilizers. Cooperative network, at present, comprises of 29 state level marketing federations, 171 district level marketing societies and about 66,200 village level cooperative societies. These village level cooperative societies are generally called Primary Agricultural Credit Societies (PACS). These societies are the backbone of the cooperative marketing system. These societies are well spread in the entire country covering 97 % of the 0.6 million villages and 95 % of the farming families. The other main institutional agencies engaged in the distribution of fertilizers are State Agro-Industries Development Corporations, Commodity Federations and State Departments of Agriculture etc. They operate both through their own sale depots as well as through the private dealers network. However, their share is only marginal. The cooperative structure differs from state to state and societies at different levels (district/taluka/village) perform different functions in different states. Generally, the cooperative network operates through a 3 tier system. However, in some states such as Haryana, the cooperative marketing system operates on 2 tier basis, while in some others like Gujarat a 4 tier system exists. At the state level, Apex Cooperative Marketing Federations act as wholesalers; marketing societies at district/taluka level as sub-wholesalers while PACS, PAMS (Primary Agricultural Marketing Societies) at grass root level act as retailers. The function of State level Apex Cooperative Marketing Federations differ from state to state. In some states, the Federations are actively involved in fertiliser business like Gujarat, Haryana, West Bengal, Madhya Pradesh etc. and they act as the wholesalers for the entire State. In some States like Uttar Pradesh (U.P.), they are not directly involved in the fertiliser business and do the job of liaison and coordination only for which they are getting service charges from the fertiliser suppliers. In U.P. , the State Federation is also doing warehousing as well as transportation job both for IFFCO and KRIBHCO (The only manufacturers in the cooperative sector). In the States where Federation is not involved in fertiliser business, the manufacturers are supplying fertilizers directly to the lower societies at the district/village level and the societies are getting full or near full distribution margin which has improved the financial health of these societies.

Current Cooperative Fertilizer Distribution Status

Presently, in Gujarat, Haryana, Madhya Pradesh, West Bengal, Tamil Nadu, J & K, H.P. and Assam, in the cooperative sector, fertiliser supplies are made to the Apex Coop. Marketing Federations only and they act as wholesalers. Direct supplies are not there at all. Only small quantities under the special scheme like IFFCO-NCDC scheme in Haryana and IFFCO societies adoption programme in M.P. are supplied

directly to the societies. In these states district level societies operate as sub-wholesalers. In the states like Punjab, Karnataka, Maharashtra, Orissa A.P. and Kerala, both the systems i.e. supply through federation as well as direct supply to the societies are prevalent. As a result, some of the societies at the lower levels are getting supplies directly from the manufacturers while others are getting from the Federations. However, in the states of U.P. and Bihar, supplies of fertilisers are made to the village level societies directly by the manufacturers. In states where state level federations act as wholesalers, the manufacturer has to deal with only one agency. Consequently, the job of sales planning, movement and stocks planning, realisation of sales proceeds etc. becomes very easy. In states where manufacturer deals with the lower tier cooperatives directly, the volume of work increases many fold and it becomes much more complex. The material has to be

released to individual societies and the sales proceeds realisation has also to be done at that level only. This requires deployment of larger field force. Decentralised release system leads to establishing larger number of warehouses and correspondingly larger inventory. This all increases the operating cost. Manufacturers Own Outlets Some manufacturers viz. IFFCO, KRIBHCO, GSFC, GNFC and NFL have their own retail outlets called Farmers Service Centres or Service Centres or Farm Information Centres etc. In these outlets, agricultural inputs like fertilisers, seeds, agro-chemicals and agricultural implements etc. are made available to the farmers under one roof along with agricultural production technology literature. The main motto of these service centres is not only to provide all quality agro-inputs to the farmers but also educating them on scientific agricultural by providing technical know how in the field of agriculture. This help the farmers in increasing their agricultural productivity and profitability. Promotion activities are also carried out in the villages located around these centres ( within radius of 8-10 kms) which includes demonstrations, farmers meetings, soil test campaigns, crop seminars etc. In addition, social campaigns like tree plantations, medical check-up, veterinary check up etc. are also organized. They also serve the purpose additional/alternative distribution channel for the organization. A graphical presentation of fertilizer distribution channels in India – the cooperatives and the private trade is given at Annexure- I. Linkage in disbursement of Production Credit and Agro-Input Distribution As already mentioned elsewhere in this paper a large number of farmers in India particularly the small and marginal farmers depend upon credit for purchase of fertilizers and other inputs. A very strong point with the cooperative is that the Primary Agricultural Credit Societies (PACS) which are involved in disbursement of agro-inputs


Agricultural Cooperatives in India are the backbone of the cooperative system and involved in variety of function and serving the rural masses by providing credit, fertilizers, seeds, Agro-Chemicals, Agriculture Implements etc. Their role has been commendable and helped in making essential inputs availability to the rural masses. These need to be further strengthened.


In the end we can say that these Co-operative societies plays a vital role in the growth of the rural areas as well as the growth of the Economy of the Country. These societies helps in the development of the farmers by providing funds to them for the irrigation purpose and also provide new machines for the farming so that they can produce maximum in the minimum time period and of the best quality and also they helps them in earning the good value of their produced products.




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