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Agriculture co-operative societies

Paper Type: Free Essay Subject: English Language
Wordcount: 5053 words Published: 1st Jan 2015

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Agriculture co-operative societies

An agricultural cooperative, also known as a farmers’ co-op, is a cooperative where farmers pool their resources in certain areas of activity.

A broad typology of agricultural cooperatives distinguishes between agricultural service cooperatives, which provide various services to their individually farming members, and agricultural production cooperatives, where production resources (land, machinery) are pooled and members farm jointly. Agricultural production cooperatives are relatively rare in the world, and known examples are limited to collective farms in former socialist countries and the kibbutzim in Israel. Worker cooperatives provide an example of production cooperatives outside agriculture.

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The default meaning of agricultural cooperative in English is usually an agricultural service cooperative, which is the numerically dominant form in the world. There are two primary types of agricultural service cooperatives, supply cooperative and marketing cooperative. Supply cooperatives supply their members with inputs for agricultural production, including seeds, fertilizers, fuel, and machinery services. Marketing cooperatives are established by farmers to undertake transformation, packaging, distribution, and marketing of farm products (both crop and livestock). Farmers also widely rely on credit cooperatives as a source of financing for both working capital and investments.

Why farmers form cooperatives

Cooperatives as a form of business organization are distinct from the more common investor-owned firms (IOFs). Both are organized as corporations, but IOFs pursue profit maximization objectives, whereas cooperatives strive to maximize the benefits they generate for their members (which usually involves zero-profit operation). Agricultural cooperatives are therefore created in situations where farmers cannot obtain essential services from IOFs (because the provision of these services is judged to be unprofitable by the IOFs), or when IOFs provide the services at disadvantageous terms to the farmers (i.e., the services are available, but the profit-motivated prices are too high for the farmers). The former situations are characterized in economic theory as market failure or missing services motive. The latter drive the creation of cooperatives as a competitive yardstick or as a means of allowing farmers to build countervailing market power to oppose the IOFs. The concept of competitive yardstick implies that farmers, faced with unsatisfactory performance by IOFs, may form a cooperative firm whose purpose is to force the IOFs, through competition, to improve their service to farmers.

A practical motivation for the creation of agricultural cooperatives is sometimes described as “overcoming the curse of smallness”. A cooperative, being an association of a large number of small farmers, acts as a large business entity in the market, reaping the significant advantages of economies of scale that are not available to its members individually. Three typical examples are a machinery pool, a marketing cooperative, and a credit union. A family farm may be too small to justify the purchase of a tractor or another piece of farm machinery for its own use; a machinery pool is a cooperative that purchases the necessary equipment for the joint use of all its members as needed. A small farm does not always have the means of transportation necessary for delivering its produce to the market, or else the small volume of its production may put it in an unfavorable negotiating position with respect to intermediaries and wholesalers; a cooperative will act as an integrator, collecting the output of its small members and delivering it in large aggregated quantities downstream through the marketing channels. A small farmer may be charged relatively high interest rates by commercial banks, which are mindful of high transaction costs on small loans, or may be refused credit altogether due to lack of collateral; a farmers’ credit union will be able to raise loan funds at advantageous rates from commercial banks because of its large associative size and will then distribute loans to its members on the strength of mutual or peer-pressure guarantees for repayment.

An Integrated Automation Solution for Primary Agricultural Co-operative Societies (PACS)

One of the major concerns in any developing economy is the efficacy of the rural financing systems that advances credit to its large population of rural poor. Such operations are plagued by small size of the loans, inadequate risk profiling of loanee, large volume of transactions, non-standardized operations, and difficulty in monitoring credit disbursal and collection.

Nelito’s MFin brings the benefit of computerization into the field of micro-finance that helps to achieve the following: –

  • Reduction in operational cost
  • Standardization of operation
  • Production of reports for statutory monitoring and transparent operations
  • Reduce the risk of lending
  • Transacting in cash and kind
  • Prudent saving habits
  • Easiness of installation
  • Minimal training

Mfin (Micro Finance) launched during 1996 has been accepted as both private and public sector banks are aggressively planning to tap the rural potentiality.

Major Functional Modules

  • Savings Bank
  • Current Accounts
  • Cash Credit Accounts
  • Daily Deposit Accounts
  • Term Deposits
  • Recurring Deposits
  • Term Loans
  • Trading
  • Membership Accounting

Key features

  • Graphical User Interface
  • Modular Approach
  • Parameterized set up
  • Online Help
  • GL Maintenance
  • Investment Register
  • Gold Loans (Agriculture & General)
  • Kisan Credit Card
  • Loans in kinds and Repayment in kinds
  • Loans Against Deposit
  • TL for Agriculture Allied Activity
  • Standing Orders and Lien Noting
  • NPA Marking and Reports
  • Reconciliation
  • Membership Accounting
  • Investment Register
  • Reconciliation
  • Inventory Control
  • Purchase Register
  • Sundry Creditors
  • Dividend Calculation & Register
  • Stock Statement
  • Trial Balance
  • Trading Account
  • Trial Balance
  • Profit & Loss Accounts
  • General Ledger
  • Balance Sheet
  • Statement of Account
  • Statutory Reporting

Agriculture cooperatives

Various development activities in agriculture, small industry marketing and processing, distribution and supplies are now carried on through co-operatives. the co-operatives in the State have made an all-round progress and their role in, and contribution to agricultural progress has particularly been significant. The schemes regarding the construction of godowns and the conversion of villages into model villages.

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. The Co-operative Credit Societies Act, 1904 was passed by the Government of 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 the Co-operative Societies Act of 1912.

The primary agriculture credit societies

The agricultural co-operative credit structure in the Punjab State is broadly divided into two sectors, one dealing with the short-terms and medium-terms finance and the other with the long-term credit. In the State, 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. The major objectives of the primary agricultural credit service societies are to supply agricultural credit to meet the requirements of funds for agricultural production, the distribution of essential consumer commodities, the provision of storage and marketing facilities.

Owing to an increasing emphasis on the development of land and agriculture, long-term co-operative credit has assumed great importance. There is the Punjab State Land Mortgage Bank at the Apex and the Punjab Mortgage Bank at the district/tehsil level.

At the operational level, there exists a primary co-operative to extend credit to the farmer. This unit epitomizes the vitality and service potential of the Co-operative Movement in India. The organization of these societies dates back to 1904, when the first Co-operative Societies Act was passed. These societies were started with the object of providing cheap credit to the agriculturists in order to free them from the clutches of the rapacious money-lenders. the agricultural primary credit society is the foundation-stone on which the whole co-operative edifice is built.

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The first Agricultural Credit Society in the Firozpur District was registered on 4 October 1911, at the Village of Khalchi Kadim in the Firozpur Tehsil. Originally, the movement was confined to the credit societies only and, thus, credit dominated till the partition (1947). After the partition, the Co-operative Movement began to spread to other field, viz labour, construction and farming.

Agriculture non-credit societies

While credit is and must remain for some time the chief concern of the Co-operative Movement relatively slow, since 1912, when the non-credit societies were brought officially under the aegis of the Movement. the World War II (1939-45) came as a God send boon with respect to the development of the Co-operative 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 wast the extension of the Movement to non-credit activities, viz.

Agriculture co-operative marketing societies

Marketing has occupied a far smaller place in the co-operative picture in India than in many countries, notably Denmark and the USA, but not other non-credit line of co-operation, with the possible exception of the consolidation of land holdings and joint farming enterprises, seems to hold greater possibilities of help to the agricultural population of India. 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.

The full utilization of loans advanced depends upon the arrangements for the marketing of surplus produce. For this purpose, there the Punjab State Marketing Federation at the State Level, wholesale societies at the district level and marketing societies at the market level. These societies also provide other agricultural facilities and make arrangements for the supply of domestic items in the rural areas.

At the State level, the Punjab State co-operative Supply and Marketing Federation (MARKFED) is playing an important role in building up an integrated structure for remunerative marketing and storing of agricultural produce. it has played an important role in hastening the Green Revolution in the State by arranging ready supplies of essential farm inputs needed by the cultivators.

Co-operative farming societies

The Royal Commission on Agriculture in 1928 observed that it co-operation failed, there would fail the hope of the Indian agriculturist. 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. It implies an organization of the farmers on the basis of common efforts for common interests. Under this system, all landowners in a village form a co-operativesociety for tilling the land. The land is pooled, but each farmer retains the right of property. The produce is distributed by each. They are allowed to withdraw fromthe co-operative farm whenever they de3sire. In India, the exceedingly small size of holdings is perhaps the most serious defect in our agriculture. If agriculture has to be improved, the size of the holdings must be enlarged.

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

Challenges before co-operatives

The IndianCo-operative Movement has earned distinction of being the largest in the world.This is true in terms of membership and Co-operative network which spread over almost all the villages in the country and the number of Co-operative Societies. In our country, there are about 5.5 lakhs of cooperative Societies with membership of more than 22crores. It covers a wide range of commercial activities and nearly 50% of them are engaged in agriculture and agriculture related matters. Nearly 70% of the Indian population beingdependant on agriculture, is thus, connected with agricultural Co-operatives. Co-operatives have covered 100% of villages and 67% of rural households. Co-operative sectorcontributes 50% of total agricultural credit and distributes 35% of total fertilizer consumption in the Country. They are procuring 60% of total sugar-cane. They are also playing crucial role in the agro-processing sector i.e. processing of sugar-cane, milk, cotton and oil seeds etc.Dairy Co-operatives have excelled in their area of operation and have enabled India to attain top position in milk production in the world. Edible oil marketed through Co-operative channel is estimated at 50% and handloom Co-operatives account for 55% of the total out-put.

But in spite of being largest movement in the world and strongest link, it faces number of challenges like lack of internal resources and poor mobilization of external resources, inadequate infrastructure, competitive tier structure, apathy of members towards management, lack of accountability increasing sickness, dormancy, low level professionalism, excessive government control, political interference, dominance of vested interest over the management, lack of human resources development, education and training.Despite all challenges, Co-operatives have to be sustainable over a period of time for which professionalism is a must. Co-operatives have been looking for Governmental help. But they have been paying of it like official domination and interference in their day-to-day working etc. Dr. Kuriyan, an eminent co-operator in the country said recently that the Co-operatives have undergone a crisis of identity being neither government nor private. He further said that Co-operatives need to be more efficient and competitive, but at the same time they cannot sacrifice the basictenets of co-operation. Inefficient Co-operatives will have to either pull up their socks or down their shutters. Co-operatives have many advantages in tackling problem poverty alleviation, employment generation and food security. They also have the potential to deliver goods and services in areas where both the State and Private sectors have failed. Over the past few years, steps like the enactment of mutually aided Co-operative Societies Act by some States and the Multi-State Co-operative Societies Act have been taken to give the Co-operative sector a boost. But I am aware that the Co-operatives registered under the Mutual Aided Act have certain constraints and deficiencies, which may be –

  • Lack of supervision and inspection by Registrar of Co-operative Societies resulting into financial misuse and disproportion institutional development.
  • Government is hesitating to entrust any important government work since it does not have any participation.
  • These Co-operatives are away from the mainstream. The Co-operative Banks and other important institutions are not prepared to admit them as members.
  • 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”.
  • Perhaps we are not prepared or educated or sensitized enough to work without control and supervision.
  • Mischievous 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.

The circumstances and the situation give rise to the Co-operative Movement in the Country are still prevalent. The market is still not accessible to small and marginal farmers. Supply of agricultural credit is not adequate. About 50% of our rural and tribal household still have no facility for institutional credit. The Co-operatives are today at the cross road at their existence, particularly in view of the fast emerging economic liberalization and globalization. The Co-operatives still continued to function in a traditional way with poor governance and management, poor resource mobilization, outside interference, dependence on Government and lack of professionalization. The Co-operatives are neither member-driven nor functioned professionally in a transparent manner with accountability to members. In spite of all these, no doubt, the Co-operatives have contributed a lot to the agriculture development of the Country. We cannot afford to see that these institutions wither away. It needs reform. It is not-worthy to say that in the National Common Minimum Programme of present UPA Government it has been mentioned to bring constitutional amendment to ensure the democratic autonomous and professional functioning of Co-operatives. The constitutional amendment may limit itself with –

  • timely conduct of elections
  • timely conduct of audit,
  • uniform tenure of managing committee
  • conduct of general body meetings
  • right of a member for access to informations and
  • the accountability of the management.

In this context our strategies may be as follows. –

  • Co-operatives need be member-driven; stakeholders should have a command over its affairs and activities. There is need for more transparency, more of interaction and confidence -building measures.
  • Aggressive marketing strategy be adopted for sensitizing members and general public about the service and quality rendered by the Co-operatives. Commitment to best
  • service and pursuit for excellence should be the hallmark of Co-operative. Every society should adopt their customers’ or members’ charter and should meticulously adhere to this charter.
  • Co-operative should compete with other players in prevailing market forces without any protectionist or discriminator approach.
  • In respect of short-term, medium-term, long-term sector and Urban Bank sectors, restrictions have been stipulated by Reserve Bank of India, NABARD in respect of finance. These restrictions need be liberalized which would help Co-operative to optimize its lendable resources and provide finance to members.
  • Strengthening information and database of Co-operatives if of utmost importance. MIS need be adopted by the process of computerization and inter-connectivity to provide best services to members and customers with anytime and anywhere service.
  • Professionalization of management is one of the basic prerequisites of Co-operatives. Both the personnel as well as directors of committee of management should be exposed to regular training, interaction and orientation.
  • Adoption of scientific planning for deployment of human resources on the principle of ‘right man for the right post at right time’ would help Co-operatives to accelerate the pace of reforms. Human resources need be proactive. Motivation, recognition for good work and leadership be inculcated for augmenting productivity.
  • Basic tenets corporate governance be adopted like fair play, transparency and accountability.
  • The PACS, as the foundation of the Co-operative system are meeting the development needs of the farmers by providing credit, inputs and storage and processing and marketing facilities. The Co-operative federated at the district and State level constitutes the Co-operative system. But it is found that the Apex institutions have grown stronger whereas the primaries and in some cases, Central Co-operatives have gone weaker. The situation has to be changed and the primaries have to grow stronger. The business of the Primary Societies have to be diversified.

Cooperative Credit in Agriculture Development

(Role of agriculture co-operative societies in agriculture)

Now-a-days credit serves as an elevator. It has been recognized as the life blood of all economic activities. Like all other producers,agriculturists also need credit. According to an old proverb, “credit supports the farmers as the hangman’s rope supports the hanged.” This Statement is fully true in the context of Indian farmers. Thus, for stimulating the tempo of agricultural production, an adequate and timely credit is most essential. The Co-operative Societies Act, 1904 gave concretized shape for establishing primary co-operative societies to meet both the short and medium-term loan needs of farmers. The provision of these loans did not make any improvement and did not have any impact on the farmmer’s socio-economic status and consequently, they were head and ears indebt. In order to solve this problem and make the farmers free from the cruel clutches of money lenders, the idea of co-operative long-term credit institutions called Co-operative Agricultural and Rural Development Banks/Co-operative Gram Vikas Banks (earlier called Cooperative Land Development/Mortgage Banks) was mooted.

Role of agriculture co-operative societies:

  1. An agricultural co-operative society which is authorised by its rules to borrow money may at any time, subject to the provisions of this section and with such consent of the Minister as is mentioned in this Act and whether the issue of debentures is or is not authorised, or is or is not forbidden by the rules of such society, issue debentures to any authorised lender for the purpose of securing to such lender the repayment, with or without interest, of any capital sum of money lent by such lender to such society before the issue of such debentures (whether before or after the passing of this Act) or intended to be so lent at or after such issue, or partly so lent and partly so intended to be lent.
  2. An issue of debentures shall not be made by an agricultural co-operative society under this section unless either the committee of such society has power under the rules of such society to borrow money and the amount to be borrowed on the security of such debentures is within such borrowing power or a resolution approving of the making of such issue has been passed by a special meeting of the shareholders of such society convened expressly for the purpose of considering and, if thought fit, passing such resolution.
  3. The following provisions shall apply to debentures issued by an agricultural co-operative society under this section, that is to say:—
    1. such debentures may be expressed to charge the money secured thereby in either or both of the following ways, that is to say, by way of fixed charge on any specified property (including uncalled capital) of such society or by way of floating charge on the assets, property, and undertaking (either with or without specified exceptions) for the time being and from time to time belonging to such society;
    2. such debentures may contain all or any such provisions for enforcing or making effective the security thereby afforded as are usually contained in debentures issued by a limited company;
    3. such debentures shall operate and have effect in accordance with the terms thereof so far as such terms are authorised by this Act.
  4. An issue of debentures made by an agricultural co-operative society under this section may consist either of a single debenture to secure the whole amount of the sum of money for the securing of which such issue is made or of a series of debentures for separate sums ranking pari passu and amounting in the aggregate to the full amount of the said sum of money, and in any event shall rank in priority to any issue of debentures subsequently made by such society under this section.
  5. An issue of debentures made by an agricultural co-operative society under this section may be accompanied and collaterally secured by a trust deed of the general character usual in respect of trust deeds entered into for similar purposes in relation to an issue of debentures or debenture stock by a limited company.
  6. Whenever an issue of debentures is made under this section by an agricultural co-operative society, the authorised lender to whom such debentures are issued shall, within twenty one days after the issue thereof, apply in the prescribed form and manner to the Minister for the registration of such issue in the register, and if such authorised lender fails so to apply for such registration every debenture comprised in such issue shall, upon the expiration of the s


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