Formation of Cooperative marketing and processing societies
Evolution of co-operative marketing is as old as the Co-operative Societies Act of 1912, which recognized non-credit forms of co-operation, including marketing. The first market society started in India was the Kumbakonam Agricultural Society in 1913, which supplied seeds, manures, implements and arrangement of sale of the products of its members.
In the year 1915 and 1917 two Marketing Co-operative Societies were formed at Hubli and Gadag respectively. The basic objective was to encourage the cultivation of improved cotton and sell it collectively.
In 1918, the South Canara Planters Co-operative Society was formed in the then Madras Province for joint sale of areca nut.
A co-operative sales association is a voluntary business organisation established by its member patrons to market farm products collectively for their direct benefit. It is governed by democratic principles and savings are apportioned to the members on the basis of their patronage.
The members are the owners, operators and contributors of the commodities and are the direct beneficiaries of the savings that accrue to the society. No intermediary stands to profit or loss at the expenses of the other members.
Functions of Co-operative Marketing Societies are:
- Purchase and Sale of Produce: The marketing co-operatives purchase the produces from their member growers and sell it in bulk quantities, which enables them to reduce marketing cost and earn fair returns.
- Distribution of Agricultural Inputs: The co-operatives supply the agricultural inputs such as seeds, fertilizers, pesticides, agricultural implements etc., the supply of quality materials at reasonable prices save cost of the member producers. Sometimes these inputs may be also given on credit basis.
- Providing Storage Facility: To provide storage facilities, the societies may have their own godown or hired godown.
- Supply of Agricultural Implements: They supply the needed agricultural implements like tractors, tillers, power sprayers etc., on rent basis to the cultivators for the purpose of production.
- Provide Financial Assistance: They make credit facilities to the members against the security of the produce brought for sale. Members get advances up to 75 percent of the market value of the produce deposited.
- Processing of Produce: Some societies undertake processing of agricultural produce, which ensures high prices to the producers after processing.
- Providing Transportation Facility: The co-operative societies make arrangements for the transport of the produce of the members from the villages to the market on collective basis, which reduces the transportation costs for its members.
- Providing Market Information: They provide latest information about the new techniques of production as well as the market information about the market prices from time to time, which will help the members to get a good price for their produce.
- Stable Price: The societies adjust the supply of commodities according to the market demand. In this way, in long run the prices get stablised, which helps the farmers from the evil effects of the seasonal price fluctuations.
- Participation in Foreign Trade: These co-operative societies participates in the export trade of the country, which helps to get better prices for the growers. Through export trade, the marketing co-operatives provide wide market to the agricultural produce. The share of agricultural exports in India’s total exports is around 16 percent.
Cooperative Marketing Need
- To Eliminate Malpractices:
Different malpractices prevailing in the system of rural marketing, and such as arbitrary deductions from the price manipulation of weights and measures, collusion between brokers and the business buyers, are of special mention. These malpractices were regarded as nothing less than scientific theft by Royal Commission.
The impact of these was further aggravation by critical financial position where producers are indebted to traders or money-lenders. In such a situation, co-operative marketing can help the producers to reduce, if not to eradicate malpractices to a greater extent.
- To Establish Appropriate Reward for the Efforts:
There exists a large army of middlemen participating, with deep interest in collection, storage, financing insuring grading, scale and transportation of rural produce. One must appreciate their services that are vital victorious marketing. However, their charges for such services are not proportionate and hence not appropriate.
In some case, such charges are not only prohibitive but exorbitation. As a result poor producers do not get their due share in the price paid by the ultimate users. Co-operative marketing, if efficiently and honestly organised, will be able to reduce the ‘price spread’ between the producer and the consumers, thereby giving fair return to the producers, without affecting the interests of the consumers.
- Concomitant of Integrated Programme:
Co-operative marketing has developed as concomitant of large scale expansion of co-operative credit. Co-operative marketing societies will be acting as the agents to collect or to recover the loans advanced by cooperative credit societies.
Therefore, the successful working of credit co-operatives, depends largely, on the development of marketing societies. That is, only co-operative marketing societies constitute a vital feature for integrated programme of co-operative development, envisaged in this country.
- To Stabilise the Agricultural Price:
If the market mechanism is completely left to the sweet will and caprice of the private intermediaries, one can hardly expect price stabilisation, which is essential ingredient of a balanced economic development.
So longer private sector dominates; “profit motive” wilt have upper hand, where normal market conditions deviate from healthy practices to the unwanted practices of speculation; hoarding will be resorted to, resulting in price manipulation and reflection of undesirable price fluctuations.
- Primary Co-Operative:
At the base level there are primary cooperative marketing societies. These societies market the product of the producer members in that area. They may be single commodity or multi-commodity societies depending upon the production of the rural products in the area.
Primary marketing co-operatives are those which are operating in the small and limited area, may be either a taluka or a block. The members are the producers engaged in production of rural produce. These co-operatives will either buying from members or acting as agents for the grower producers to sell, on behalf of them.
They sell the members’ produce directly to consumers or industrial users. They make advances of loans to the members on the security of their produce. They also provide for manures, fertilisers, equipment etc.
- Central or District Level Co-Operative Societies:
After the primary co-operative societies operating at block level, there are cooperative marketing societies covering a larger area or a district. These district level co-operative societies are called federations or marketing unions. These are engaged in the task of buying selling and extending credit facilities to primary cooperative societies.
Their main job is to market the produce brought for sale by the primary cooperative marketing societies of the area. These are located in the secondary wholesale markets and generally offer a better price for the produce.
The primary cooperative marketing societies are members of these unions in addition to the individual producer members. In the two-tier structure, the state societies perform the functions of district level societies by opening branches throughout the district.
- State Marketing Societies:
At the State level there are apex body that is State Co-operative marketing societies which serve the state as a whole. Their members both the primary co-operative societies and the Central Cooperative Union of the State. They are above the level of central co-operative marketing societies which is grown as a provincial society.
The basic function of these is to coordinate the activities of the affiliated societies and conduct such activities as inter-State trade, export-import, procurement, distribution of inputs and essential consumer goods, dissemination of market information and rendering expert advice on the marketing of rural produce.
They undertake the task of granting credit that facilitates needy and deserving co-operatives, whether primary or central.
Further, membership is extended to individuals of repute. These societies are to act as the lenders of last resort. In addition, the State Marketing Co-operative Society is expected to co-ordinate the activities of different societies at the primary level and bring about, overall sound development of co-operative structure. It is at commanding height to watch the activities of primary and central co-operatives.
(i) Ordinary Members:
Individual farmers, co-operative farming societies and service societies of the area may become the ordinary members of the co-operative marketing society. They have the right to participate the deliberations of the society, share in the profits and participate in the decision making process.
(ii) Nominal Members:
Traders with whom the society establishes dealings are enrolled as nominal members. Nominal members do not have the right to participate in decision making and share in the profits.
- Sources of Finance:
In 1966, the Dantwala estimated a capital base of Rs. 2.00 lakhs for a co-operative marketing society. At 1991 prices, it should be at least Rs. 14,000 lakhs.
The following are the major sources of finance of a co-operative marketing society:
(i) Share Capital:
Farmer-members and the State Government subscribe to the share capital of co-operative marketing societies. Members may purchase as many shares as they like. They are encouraged to invest sufficiently in the share capital. They are also persuaded to invest their dividend and bonus in the shares of co-operative marketing societies.
Co-operative marketing societies may raise their finance by way of loans from the Central and State Cooperative Banks and from commercial banks by pledging and hypothecation and also by clean credit to the extent of 50 per cent of onward capital.
The co-operative marketing societies get a subsidy from the government for the purchase of grading machines and transport vehicles to meet their initial heavy expenditure. They also get a subsidy for a part of the cost of the managerial staff for a period of 3 years to make them viable.
- Service Motto:
The co-operative societies are formed, mainly for the purpose of providing and extending various services, to the members and not to earn maximum profits. The service facilities, like providing seeds, manures and fertiliser, grading and standardization, selling the members’ produce at prices that are favourable.
Therefore the co-operative marketing societies are organised for the purpose of providing services and not for making profits, solely.
- One Man One Vote:
Irrespective of the shares held by the members of the co-operative societies, each member has a right to vote as a single unit of a ‘single’ vote so one man one vote is the principle of co-operative marketing societies. This is based on the democratic principles and freedom.
Nobody is to become the thumb rule of few people as is in the case of joint stock companies where the right to vote given to the members in proportionate to the number of shares held by them. It is free from the practices of discrimination among the members of the co-operative marketing societies.
- Open Membership:
In co-operative marketing societies to become a member is open for all. Any person can become a member of the society provided he is a producer of the rural product. Any time he can enter or exit the membership as per his desires and convenience. Moreover, the procedure to become a member is very simple, free from the complications and formalities.
- Reasonable Reward to Capital:
The practices of tile cooperative marketing societies are very genuine and based on the principle of equality and fraternity. The capital invested by the members and paid at the rate of 6% or the loans and advances enjoyed by the members are also charged with the same rate of interest.
This is so because the capital is degraded and hence the human race is elevated. The capital investment is not rewarded properly and the return in the form of interest is given at the rates mentioned above. This makes the profitability of the marketing societies a limited one.
- Teaching the Principle of Co-Operation:
The basic principles of co-operative movements are “One for all and all for one” “self help, through mutual help”. The existence of co-operative marketing societies is based on these principles. It creates the sense of co-operation and mutual help. These things are helpful in better marketing, better business, better living, and better citizenship of the societies. All this education is imparted through cooperative marketing societies.
The management of the co-operative societies is kept in the hands of its members. Every member is to take part in the management, functioning and proceedings of a cooperative society. He exercise these powers by using the right to vote. The government of the cooperative marketing societies is called a self-government because it is of the members, for the members and by the members of the co-operative societies.
This government is totally based on the principle of democracy where the government is of the people, by the people and for the people. Thus it is following the sound principles of democratic practices.
- Distributive Justice:
Unlike the principle of one mart one vote, the members are distributed the share of profits in proportion with their contribution in the total network. More the contribution of the members, higher the dividends they will get and vice-versa. The profits of the cooperative societies are the result of the contribution made by the members. So they must be rewarded according to their contribution in total network.