OBJECTIVES OF CO-OPERATIVE ORGANISATION
To
understand the meaning and characteristics of co-operative form of
organisation.
To
know the different types of Co-operatives
To evaluate the merits and limitations of co-operative organisation
To evaluate the merits and limitations of co-operative organisation
All forms of business organizations whether
sole trader, partnership of company centre around one theme namely maximization
of profit. The co-operative form of organisation is different from these in one
basic respect. Ti is set up not with profit as the guiding motive but with the
fundamental object of organizing and rendering service for the organisation and
its members. In a co-operative society, members participate in different
capacities as producers, consumers workers and managers and secure the benefit
of business activities through an equitable division of the business income.
DEFINITION OF CO-OPERATIVES
International
Labour Organisation (ILO) defines a co-operative organisation as “an
association of persons, usually of limited means, who have voluntarily jointed
together to achieve a common economic end through the formation of a
democratically controlled business organisation, making equitable contributions
to the capital required and accepting a fair share of risks and benefit of the
undertaking”. Dr. H.N. Kunzru, another leading authority on co-operation
writes, co-operative is self-help as well as mutual help. It is joint
enterprise of those who are not financially strong and cannot stand on their
own legs and therefore, come together not with a view to get profits but to
overcome disability arising out of the want of adequate financial resources.
Thus,
a co-operative society may be defined as “an association of persons, with
limited resources and belonging to a homogeneous group, who join together on a
voluntary and equal basis for the realization of their common economic
interests in a democratic way.
CHARACTERISTICS OF CO-OPERATIVES
1.
Voluntary
association
A Co-operative society is a voluntary
association of persons. Any person can join a co-operative society of his free
will and can leave it at any time after giving due notice to the society. While leaving he can withdraw his capital
form the society. He cannot however, transfer his share to another person.
2.
Open
membership
The membership of a co-operative
organisation is open to all irrespective of race, caste or sex.
3.
Finance
The capital of a co-operative society is
raised form members by way of share capital. since co-operatives are generally
formed by relatively weaker sections of the society their capital collections
are meager. Hence, the Government to encourage co-operatives lends financial
support in the form of loan from the state and central co-operative banks.
4.
Liability
of members
The liability of the members of
co-operative society is limited.
5.
Democratic
control
Democracy is the most significant
characteristic of co-operative societies. The members elect the managing
committee which manages the society. Since most of the co-operatives operate on
a local scale, the meetings of the members are well attended and this puts the
managing committee under close supervision. Each member irrespective of the
number of shares held by him has only one vote, ‘One man one vote’ is the basic
element of co-operative democracy. Member cannot vote by proxy. Again to
strengthen democracy, some issues are not decided by a simple majority but by
two-thirds or there fourths majority.
6.
Distribution
of surplus
In co-operative organisation the surplus
arising out of a year’s working is given to the members in the form of bonus
which need not the proportionate to their respective capital contributions.
7.
Fixed
return on capital
The capital is entitled to limited return
and the co-operative pay fixed interest on paid up capital to its members.
8.
Service
motto
A co-operative society is organized
primarily with the object of rendering maximum service to its members. Through
it also strives to get profit, the objective of getting profit is only
secondary.
9.
State
Regulations
The co-operatives are subject to
considerable state control and supervision. The co-operative societies are
registered under the co-operative Societies Act. 1912. The co-operative
department keeps a watch on the working of the societies and tries to regulate
in whenever necessary. Every co-operative has to get its accounts audited by an
auditor from the co-operative department and has to furnish returns of
membership and annual report and accounts to the Registrar of co-operatives.
10.
Education
and training
A co-operative society also exhibits the
feature of education and training to its members with the purpose of developing
co-operative spirit.
However with the passage of time, some of
the above principles have undergone modifications keeping in view the demands
of the new and emerging situations.
TYPES OF CO-OPERATIVES
From
the nature of their activities, business co-operatives may be broadly
classified into the following categories.
1.
Consumers’
Co-operatives
2.
Industrial
Co-operatives
3.
Marketing
Co-operatives
4.
Co-operative
credit societies
5.
Co-operative
farming societies
1.
Consumers’
Co-operatives
A consumer co-operative society is a voluntary
association of consumer formed to obtain their requirements of goods and services
at reasonable prices. These co-operatives make their purchase in bulk from
manufactures or wholesalers and sell the goods to members as well as to
non-members at market prices. Such societies help in eliminating middleman and
stabilizing prides. The surplus earned by such societies is distributed among
members in the form of bonus.
2.
Producers’
Co-operatives
This is also called industrial co-operatives. These
societies are voluntary associations of small producers formed for undertaking
collective production or providing production facilities and services like new
materials, tool, technical knowledge etc to its members. The members supply
capital and may also provide labour. The products are sold to members and non-
members.
3.
Monetaring
Co-operatives
A marketing co-operative is a voluntary
association of producers organized to arrange the sale of their output and
performs essential marketing functions like grading, warehousing, and
transportation. The main aim of these societies is to rationalize the whole
marketing system so that it may be beneficial to members. The sale proceeds are
distributed among the contributing producers according to their contribution to
the pool.
4.
Co-operative
credit societies
A co-operative credit society is a
voluntary association of people with limited financial resources formed with
the objective of extending short-term loans and developing the habit of saving
among them. These societies may be formed by agriculturists, artisans, salary
earners etc. The fund of these societies consists of share capital contributed
by the members, deposits and loan form the co-operative central financing
organizations and the Government grants and subsidies.
5.
Housing
Co-operatives
A Co-operative housing society is a
voluntary association of persons with limited resources formed to secure the
ownership of a house or obtaining accommodation at fair and reasonable rent.
Each member has to buy atleast one share and his liability is generally limited
to the value of that share.
6.
Farming
Co-operatives
These societies are basically agricultural
co-operatives formed with the object or achieving the benefit of large scale
farming and maximizing agricultural output. These societies aim at expansion of
production, improvement of farming techniques, rational utilization of land and
most desirable allocation of manpower.
ADVANTAGE AND LIMITATIONS OF CO-OPERATIVE ORGANISATION
Advantages
1.
Easy
formation
It is easy to form of co-operative society. Any ten
adult persons can from it. No cumbersome legal formalities are involved and the
cost of formation is also less. The rules and bye-laws are more or less
standardized.
2.
Democratic
management
The principle of ‘one man one vote’ makes
the functioning of the society really democratic. There is a continuous
interaction between the managers and the managed at the meetings. The
operational expenses are also minimum.
3.
Scope
for internal financing
Since, a portion of the profit is kept as
reserve, it saves as a useful source of internal financing for the
co-operatives.
4.
Limited
liability
The liability of the members is limited to
the proportion of their capital contributions mentioned in the bye-laws.
5.
Stability
The co-operative society enjoys perpetual
existence. Its life is not affected by the death, retirement insolvency or
lunacy of a member.
6.
Economic
production and distribution
A co-operative society is able to produce
and market goods and services at economical prices by procuring input resources
at subsidized rates from the government.
7.
Special
exemptions and privileges
A co-operative society enjoys a special
exemption in matters of taxes, stamp duties, and registration fees and other
benefits from the Government.
8.
Social
benefits
Co-operatives bring about a host of social
advantages. The promote the habit of thrift and saving among members. A strong
family spirit is developed among the members belonging to a particular area or
profession. By distributing surplus to members, co-operatives ensure a more
equitable distribution of wealth.
LIMITATIONS OF CO-OPERATIVES
1.
Limitations
of Capital
Co-operative are able to collect only
limited capital as the members are people with limited resources.
2.
Inefficient
management
A co-operative society generally suffers on
account of inefficient management. It is not in a position to employ and retain
competent professionals due to limited financial resources. Hence, it has to depend on its own members who lack
technical knowledge, skill or experience.
3.
Lack
of unity and cohesion
The functioning of a co-operative society
is generally marred by a lot of rivalry, functionalism and politicking among
its members and this reflects on the efficiency and effectiveness of the society.
4.
Limitation
of size
Since, a co-operative society is generally
organized to cater to the requirements of limited membership, its size is small
and therefore operations are also small consequently it may not be able to
achieve the economies of large scale operation.
5.
Inadequate
motivation
Low dividend to members and poor
remuneration do not motivate people in the cooperative society.
6.
Delay
in decision making
The conduct of business of a co-operative
society is strictly according to the rules and regulations framed by the
Government. Important matters can be decided only at the general meeting. Due
to these there is delay in decision making and the implementation.
7.
Excessive
state regulations
The society is subjected to a lot of
supervision and regulation by the Government such as submission of accounts,
its audit, approval of appointments etc. This affects the flexibility of its
operation and the efficiency of its management.
8.
Lack
of public confidence
A co-operative society generally does not
enjoy much public confidence. It is due to both the excessive state regulation
and the dishonest and political conduct of the office bears. From the foregoing
evaluation, it emerges that co-operatives are suitable mainly for small and
medium sized enterprises and where there is definite demand of goods and
services, where sophisticated technology, advertising are not involved and
where area of operation is small.
