Historical Perspective Of Co-operatives in Indian Context

Essay by sagar_isUniversity, Bachelor'sA, March 2007

download word file, 23 pages 5.0

Downloaded 2246 times

Historical Perspective in Indian Context


Development Of Indian Co-operative

Recommendations of Co-operative Movement

Co-operation In Maharashtra

Development of Indian Co-operatives

The Co-operative Movement, which has an ultimate goal of strengthening the position of economically weaker sections, can make a real contribution towards the progress of national community. Over 96 yrs co-operative activity has been undertaken and since, it got a legal acceptance after the co-operative credit society act was passes in 1904.

The main objective was to combat indebtness and provide credit to the agriculturalist. With reference to the agro based of Indian economy the co-operative sector has played a substantial role in the process of lending a helping hand for economic upliftment.

With the passing of time, the co-operative act was amended, with a net result that co-operation, expanded its role, from a mere agriculture credit provider to helping, in other inputs, like seeds, fertilizers, pesticides, storage, marketing and processing.

It also expanded into wholesaling and retailing trade, consumer distribution, rural and small-scale industries, urban credit, training of co-operative personnel etc.

The Co-operative Movement has left no sector of the economy untouched. But inspite of its existence, for almost a century, it has definitely not shown an outstanding growth. To study the growth and progress of co-operative movement we have to look back in the history.

The first legislation in the field of Co-operation in India was on the Co-operative Credit Society for releasing the farmers from the clutches of moneylenders. It was Co-operative Credit Societies Act 1904, thereafter came the Co-operative Societies Act 1912. In order to suit the circumstances existing in different provinces, need was felt to have separate legislation for the particular province .The Bombay province then enacted the Bombay Co-operative Societies Act 1925. It is then replaced by Maharashtra Co-operative Societies Act 1960 and Rules 1961.

The entire Co-operative Movement can be divided in 3 phases:

I Period prior to the enactment of the 1st co-operative society act 1904

II Period between 1904 - 1951 before the beginning of planning in India

III Growth of co-operatives during the planned period (5 yr. plans)

Present Situation

Phase I : Co-operative Movement prior to 1904

The credit of initiating the co-operative movement as seen earlier goes to the Rochdale Pioneers from England. The policies of organizational setup adopted by them, have survived the test of time and have become the principles of co-operative movement.

Co-operation is not new to India, but the versions were different. In ancient India, it was in form of 4 principles like the 'Kula, Gram, Sreni and Jati'.

(hierarchy based on units)

Kula - Family

Jati - Caste

Gram - Village

Sreni - Classification at different levels

The Kula was the 1st form of a co-operative activity; it was both a political and socio-economic activity. As the society stabilized and expanded the aspects of economic and social co-operation narrowed to the limits of joint family. Where the land is owned and cultivated commonly and the adult members share the duties of the family and live under one roof. Co-operation at the Gram (village) level emerged after the Kulas were stabilized. The gram sabha was a co-operative engine which undertook, the works for economic and social progress of the village commons such as land, pastures, roads, highways, paths, common gardens, etc.

The artisans and cultivators often combine for the purpose of co-operative working and the members jointly undertook, the use of selling of tools and implements of production. The Sreni has been a development of the post Vedic era.

The co-operative and economic organization in this time was more of artisans, industrial and handicrafts workers, merchants, traders, bankers, agriculturists, house builders, etc. The Sreni worked basically as bankers and merchants guilds but also extended their role as charitable institutions.

The co-operation at Jati level was mainly for achieving social goals such as education, charity, and relief work.

Phase II : Co-operative Movement (1904 - 1951)

Co-operation became legalized and was introduced as official movement in 1904. This was considered as a turning point in the economic and social history of India. The period between 1904 - 1951 can be studied better if it is divided into the following stages.

I. Between 1904 - 1912

1904 act provided an impetus for organization of primary credit societies and stress was laid on promoting agricultural credit. There were 8187 societies by 1912, which had a membership of 4lakhs and working capital of 3357.7lakhs. One of the major features was that the government was the prime mover of this movement but the credit was marked by insufficiency and delay, and the recoveries were far from satisfactory.

The loans system was also defective. Mr. C.S. Campbell, the registrar of co-operative society Bombay had correctly pointed out that, the lazy secretary of a dull sort, will collect and pay out again to the same person by the book of transaction.

The worse of the system is lump on another day, meanwhile a guest comes, a cow dies, etc are some of the excuses.

II. Between 1912 - 1919

1912 saw the amendments, where another co-operative societies act was enacted and the defects of the 1904 act were removed. Some important changes of the new act were:

a. It enabled the registration of non-credit societies so as to ensure all round progress of the movement and the economy. The original act confined the registration, only to primary, credit society.

b. Registration of Central societies was now possible.

c. A provision was made for the distribution of profits in order to protect the interests of the investors.

This period saw a rapid growth in the number of co-operative credit societies but also of non-agricultural credit societies. Though the development was uneven in different provinces. By 1919 the number of seats had gone upto 28,000

III. 1919 - 1929

With the introduction of reforms act of 1919, it gave an option, of modifying the existing act 1912, at the provincial level. Certain provinces did enact their own acts, which gave rise to a rapid growth of the movement in this time. This is referred as the period of unplanned expansion.

IV. 1929 - 1939

The great economic depression gave a serious set back to the co-operative sector. The falling prices of the agricultural products threatened the existence of some societies and disturbed the economic stability of others.

Other major causes of the failure where, lack of requisite education and adequate supervision and guidance. During this period of stress, rectification and rehabilitation was the main aim of the co-operative departments. Rather than expansion one of the significant development was the establishment of Reserve Bank of India in 1935. Its agricultural credit department was entrusted the responsibility of studying the problems of the agricultural credit.

V. 1939 - 1947

The Second World War and the rising prices made it possible to recover the over dues, with the scarcity of resources due to war, lot of control were imposed on the distribution of essential commodities.This helped the consumer co-operatives for a better organization. The co-operative movement, which was till then, confined more or less as a credit movement started diversifying its activities. The important landmark was the setting up of co-operative planning committee under Mr. R.G. Sargiya, who suggested that the credit supply covered only one aspect in the life of a cultivator, but should extend its cover to his entire life. This period is treated as the period of recovery.

Phase III : Co-operatives in Independent India (5 Year Plans)

The most important event in the post independence era was the appointment of rural credit survey committee, by the RBI - 1951. The report submitted by the committee, revealed that, inspite of a co-operative effort, over the last 50 yrs. Rural credit is still considerably controlled by the private agencies, whereas the institutional agencies played a significant role. The co-operatives provided 3.5% of total borrowings by the agriculturist and that too was taken up by the wealthy members of the credit society.

The committee recommended for an integrated scheme of rural credit, which will have state partnership, creation of special funds with RBI, today called national agricultural credit stabilization, national agricultural relief and guarantee funds.

It is also recommended, establishment of large sized credit society, linking credit with marketing, training and co-operative personnel and effective supervision and audit.

The 1st plan recognized (1951 - 56) co-operative as an instruments of planned economic action in democracy. It also stated that since the purpose of the plan is to change the economy from individualistic to socially regulated economy co-operation could be an effective tool, to implement this ideal.

The 2nd plan (1956 - 61) was based on the recommendations of the All India Rural Credit Survey committee. The RBI acts was amended thereby, the rural credit facilities could be improved. There were provisions made for the creation of special funds as recommended by the committee. The national co-operative development and warehousing board and state warehousing co-operatives were setup. This plan also gave attention to the marketing and processing co-operatives. This period saw a rise in the number of societies from 2.4lakhs between (1953 - 56) to 3.32lakhs in (1960 - 61), 18,000 primary marketing societies, 390 processing units, 30 co-op sugar factories and an intensive program for co-operative training was implemented.

The 3rd plan 1961 - 66 saw the use of co-operative movement in implementing, the schemes of economic development. By the end of the plan, primary agricultural credit societies covered 89% of villages and total number of societies was 1.92lakhs. The emphasis was more on making the societies more viable than expansion. Inspite of the efforts of revitalizing 31% societies still work, at loss. This period also saw as emergency and development of agro based processing industries - e.g. sugar factories, butter processing, rice mills, oil crushing, fruit and vegetable co-operatives etc. where as the co-operative stores raised from 7058 in 1960 - 61 to 13077 in 1965 - 66. There was also an attention paid to the formation of consumer and industrial co-operatives.

The 4th plan 1966 - 71 had a keynote of growth and stability. The agricultural and consumer co-operatives occupy a central position in the co-operative movement. A committee was setup by the governor of RBI to review the supply of rural credit and intensive agricultural program, which gave a series of recommendation like

 Reorganizing of rural credit in RBI

 Setting up of SFDA (Small farmers development agencies)

 Rural electrification

The 5th plan 1971 had a keynote of growth and social justice. More attention was therefore given to consolidate and strengthen the co-operatives so as to make them, viable, democratic institutions. An attempt to establish stable and fair price shops, through the consumer co-operative was made.

The same trend of strengthening continued in the 6th and 7th plan in which the dairy and fishery co-operatives were initiated along with development of professional management in co-operative institutions and development of managerial levels were also touched upon.

Present Situation

Today there are 14 national level co-operative federations, there is also a co-operative union and a national council for co-operative training and 24 states level co-operative unions. Pune has a national level training institute for co-operative management i.e. Vaikuthbhai Mehta Institute of Co-operative Management. Other than this, there are 17 colleges and 73 training centers for training and education in co-operative. At state level there are 26 state co-operative banks and 344 district central co-operative banks.

Important sectors where co-operative is active are:

Credit marketing, industries, storage, processing, consumer, farming, housing, transport, education, and supply etc.

Co-operatives for weaker section includes co-operative rural banks, dairy, poultry, fishery, coir, silk, honey, handloom, etc. Amul is the best example in Asia for its milk and milk products.

Recommendations of Co-operative Movement:

Co-operative Movement (1904)�� HYPERLINK "file:///C:\\My%20Documents\\Co-opnotes\\html\\ch2.2.1.htm" ���

All India Rural Credit Survey Committee (1954)

Co-operative Credit Committee (1960)

( I ) Co-operative Movement (1904)

The first Indian co-operative act was passed in 1904 under the Viceroy Lord Curzon. During the period of 1904-1912 the co-operative movement made rapid strides in different fields. To boost the development process the government of India appointed a committee under the chairmanship of Sir E.D. Mac lagan to observe and suggest recommendations.


1. There should be one co-operative society for one village

2. The size of co-operative society should not be very large

3. There should be unlimited liability of a co-operative society

4. Society should give importance to recovery of loans

5. Society should increase the reserve funds

6. While sanctioning to any members their should be consideration of his ability to repay and also his honesty towards the society

( II ) All India Rural Credit Survey Committee (1954)

To recommend the developmental majors for co-operative sector in Rural India, the Government of India appointed a committee under the chairmanship of A.D. Gorewalla in 1951. This committee submitted its recommendations in 1954.


1. There should be mergers of primary co-operatives to make them financially sound

2. The purpose of the loan should be taken into account while sanctioning the loan

3. No money lender/Commission Agent should be provided credit. Care should be given to give credit only to the weaker sections of the society

4. Primary co-operative society should be provided with more finances by the National Credit Institutions

5. Members who don't pay arrears in time should be dismissed from the society on legal grounds

6. There should be a link between Agricultural Credit Societies and Marketing Societies

( III ) Co-operative Credit Committee (1960)

In May 1960 the committee under the chairmanship of Dr. Vaikunthbhai Mehta gave its report to suggest recommendations on strengthening the co-operative credit structure.


1. Service co-operative should be organized on the basis of the village community as the primary unit. Number of villages within a radius of 3-4 miles should be grouped together

2. The society should have sound management to enhance the deposition confidence

3. RBI should liberalize its Credit limits for the central co-operative banks

4. The credit limit of a member should be fixed keeping in mind his repaying capacity

5. Care should be taken to see that the loan given is applied to agricultural productive purpose only

Co-operation In Maharashtra

Maharashtra is one of the major States of India. It is also the most urbanized and industrialized State. Co-operative movement is widespread and has a long history in Maharashtra and even today it plays an important role in the economy of Maharashtra. The genesis of the co-operative movement in Maharashtra can be divided into six stages.

1. The pre-co-operative stage (1870-1903) with the Deccan Agriculturists' Relief Act, The land Improvement Loan Act 1883 and the Agricultural Loans Act, the Nickolson Report.

2. The Initial Stage (1904-1911) from the Agricultural Credit Co-operative Societies Act 1904 to the creation of the Bombay Central Co-operative bank.

3. The Evolution Stage (1912 to 1924) After the Co-operative societies Act of 1912, the movement passed through a new phase of re-organization, formation of co-operative financing agencies, formulation of co-operative educational schemes and organization of non-credit societies.

4. The Stagnation Stage (1925-1947) The enactment in 1925 of the Bombay Co-operative Societies Act widened the scope of the movement in the Bombay province both horizontally as well as vertically. The Bombay Co-operative Insurance Society was established in the year 1930. In the same year the Co-operative Land Mortgage Bank was also formed for long term financing for redemption of debts, land improvement and purchase of land.

5. The Growth Stage (1948-1961) There was an all round progress during these two decades after India attained Independence from the British Rule. The movement diversified especially in the rural area where sugarcane was grown. The agriculturists pursued this concept of self-help and made the best use of the credit facilities given to them for augmenting the production. Examples like the Pravaranagar Sugar Co-operative inspired many to organize co-operatives in the sugar sector with long-term goals in mind. Significant attitudinal changes had occurred at the grass root level.

This was also the period of emergence of rural leadership through co-operative movement.

The Apex Bank also started to strengthen its organization and the working of the secondary level central financing agencies. This was also the period where institutional foundation was strengthened.

6. The Diversification Stage (1962 onwards) Expansion, accompanied by extensive vertical and horizontal diversification embraced all fields of socio-economic activity with gains varying from 2 to 6 times.

The State government initiated policies and programs to strengthen the co-operative effort. Some of the noteworthy features of the movement during this period were the increased mobilization of resources, strengthening the co-operative effort in the sphere of agricultural production and the building of rural leadership.


Chapter 3: Co-operative Movement in the World Context




Co-operative Movement in Germany

Ø Reiffeisen

Ø Schulze Societies

Co-operative Movement in Denmark

International Co-operative Alliance


Man is a social animal. For him co-operation is a necessity rather than a choice. World over the co-operative movement started in order to bring people together for a 'common cause'.

Primitive concept of Co-operation

Right from the don of civilization, the concept of co-operation has existed. In a primitive society, a man's life was simple with only a few wants. As the civilization grew, instead of an individual, the villages emerged with a large number of farmers and a few carpenters, cobblers, goldsmiths, etc. Co-operation was in those days a means to lead a life better. There was a mutual aid and collaboration among different individuals and society. There is a mention of the co-operative movement in the Rig Veda and also co-operative bodies managed the temples in South India.

Modern concept of Co-operation

The modern concept of co-operation is altogether different from the primitive one. It denotes a special method of doing business. It is an off-shoot of the industrial revolution which is a name given to the series of changes that came about in the method of production (18th Century) in Europe, especially in Great Britain.

The end of 18th century, gave rise to capitalism. This resulted in concentrating the tools of production in few hands, which gave them a complete control​ over the labor class, which was although very large in number, but was poor and weak.

Dishonesty, capitalization, rising rates and black marketing, was the rule of the day to maximize profits. The workers were exploited and were becoming poorer day by day. The Capitalist Class in its greed to make more profits started exploiting the working class like payment of low wages, increase in working of working hours, insecurity in employment etc. This led to frustration and discontent among the working class. They therefore looked about for an alternative to save themselves from the grip of inhuman employers. Few learned people came forward to encourage the labor class and one of them was Robert Oven. Social reformists like Robert Owen and Dr. William King, gave a thought to the formulation of a new philosophy. As a result the co-operative movement began on the world stage.

Although Robert Oven was an industrialist he also lived a laborious life with the rising exploitation and plight of workers there was a change in Robert Oven's thinking about the labor class, and in an attempt to improve the condition he reduced working hours and rising wages in his factory. He initiated labor colonies and helped them to produce various things where by they could raise their income.

In an attempt to find out a solution against capitalism, Robert Oven and his friend Charles Forea wanted to find an alternative to capitalism. They were concentrating on an idea where instead of co-operation and exploitation a policy of mutual co-operation and mutual help could be used.

The new organization and the idea was no definite program, even then unity, spontaneous co-operatives, control by general public and social cause became the main principles of this alternative arrangement against capitalism. A series of shops started by Robert Oven, could not really succeed.

To study the co-operative movement in the world perspective, it would be important to make a study in the countries of England and Germany, because these are the two countries where the co-operative movement started.

Rochdale Founders

England the birthplace of many new things was also responsible for presenting the co-operative movement to the world as an alternative philosophy to trade unionism, for fighting capitalistic exploitation.

In 1844, a group of 28 weavers met in the Chartist Hall and decided to establish a co-operative store. The members of this store would purchase the requirements collectively to economize on their expenditure, for they knew that it would be difficult for them to get a raise in their wages. They were greatly influenced by the writings of Robert Owen, Dr. William King and William Thompson.

Thus Robert Oven's dream of an alternative to capitalism was brought into reality by the villages of Rochdale, 28 weavers came together and established Rochdale equitable pioneers society 1844 contributing 1 pound each. Thus gathering a capital of 28 pounds and registered it under the Friendly Society Act. It was a consumer co-operative. They hired a place and started a shop and sold items of daily necessities such as candles, tea, butter, soap etc in bulk and sold them to consumer at reasonable prices. It opened with a legal amount under unfavorable circumstances but slowly made good progress in the years to come. The membership raised to 74 in 1 year and by 1888 it had 1123 members with a capital of 3.4lakhs pound and declared 2.5lakh ponds as a profit.

Objective of Rochdale Model

1. To take up production and distribution of the commodities required by the members.

2. To make available houses to its members to improve their living conditions and to better their status.

3. To meet the clothing requirements of its members.

4. To arrange for education to its members.

5. To manufacture articles, so as to generate employment to its members.

The rules and regulation followed on the transaction of the Rochdale stored where:

 Open Membership

 Business on demonstration basis

 Limited Interest on capital

 Division of profits as per transactions by members

 Cash payment

 Supply of best quality goods

 Educating Members

 Religious Neutrality.

The Rochdale Pioneers of England framed the principles based on their experience on a consumer co-operative store; popularly know as the Rochdale Principles. These principles have been adopted in almost all countries, which have same or other type of co-operatives.


Co-operative Principles govern the life activity of a co-operative enterprise. The Principles are as follows:

1. There should be democratic control

2. All should be welcomed in it

3. Limited interest should be paid on capital

4. All trading should be made in cash

5. No politics should be allowed

6. Co-operation should be kept free from religion

7. There should be no faults in co-operation education

Co-operative Movement in Germany

The co-operative movement in the world started in Germany. Intolerable adverse conditions for the poor in the country led to the growth of a new economic organization known as the "Co-operative Credit Society". The emergence of the co-operative credit movement in this country was the result of an enormous amount of work done by two great men - Reiffeisen & Schulze.

In the middle of the 19th century in Germany the life of an average German was miserable both in the village and town. In rural areas the Jews controlled and regulated the economic activities of many people they purchased the excess surplus of the farmers by paying them very low prices and sold their purchases at high prices. The economic condition of the villagers went on deteriorating. They had to source money from the Jews at exorbitant rates of interest.


Schulze Societies

Reiffeisen Principles

Herr, F.W. Reiffeisen (1818 - 1888) was an official, holding the position of a mayor in Germany. He saw the sufferings of the poor and set up a "poor people's committee" to make bread for the poor. With a view to promote relief to Agricultural workers in 1862 Reiffeisen started agricultural society in the country based on the principle of "EACH FOR ALL - ALL FOR EACH".

The members of this society known as HEDDESDROF CREDIT UNION, were the needy persons who required were given its services. The Grand Union - Co-operative Societies was set up in 1877, which is generally know as Reiffeisen Union. This was a federation of Reiffeisen Societies.


1. Organization should follow principle of self-help

2. Area of operation should be limited

3. Surplus should be used for community services

4. All should be accepted as members

5. Assistance should be given to members

6. Liability should be limited

7. Board members should be on a voluntary services

Schulze - Delitzsch Banks

This model is named Schulze - Delitzsch model because the first co-operative society founded by Schulze was in the city of Delitzsch. Heer Fran. W. Schulze (1809 - 1883) was a judge by profession. As a chairman of the Famine Commission, he moved by their bitter struggle for survival. He attempted to relieve suffering. In 1849 in association with his friend, Dr Bernhard, he started a friendly society for relief sickness. In 1850, the first credit association was founded. Schulze published a book in 1856, which contained principles formulated by him. His efforts paid him rich dividends in the form of an increase in number of Schulze Banks.

The Schulze Banks were started for the fulfillment of the main objectives:

1. To cater to the credit requirements of traders, artisans and middle class people residing in urban areas.

2. To run the bank as a business organization.

When Schulze died in 1883, there were 1926 co-operative credit banks of this type in Germany. Till his death, he tried hard to serve the under-privileged sections of the societies in Germany.

Co-operative Movement in Denmark

Denmark is an agriculture country and the co-operative movement was started spontaneously by the Danish people. These societies are self-reliant and Danish government did not give any help to this movement. It is free from any government control and therefore it is called co-operative Denmark.

The main feature of the co-operative movement in Denmark was that there are separate societies for different type of activities. There are wholesale milk-eggs, exporting, bread manufacturing, building and productive types of co-operative society. All the societies have their own organization, which decides on their product price, dealing with the public, companies, appointment of auditors etc.

Features of Milk Co-operative in Denmark

1. Formally Denmark was an agricultural country but shifted later to dairy business at the beginning of 19th and has been a leading producer of dairy products, since then.

2. Dairy business is of prime importance in the export of Denmark. More than 70% of its products are exported. The farmers and people engaged in dairy business have formed their local co-operatives. They not only collect milk but also process them and have an organization at the district and state level.

3. The working of society is democratically based and the representation of the society is given according to the milk supplied by them.

4. The members have an agreement for supplying milk for a period of 15-20 yrs and cash payments are made to the proportion of milk supplied.

5. The principles of government are followed by the dairy society of Denmark.

International Co-operative Alliance

Definition: "A Co-operative is an autonomous association of persons united to meet their common, economic, social, cultural needs and aspirations through a jointly owned democratically controlled enterprise".

The International co-operative Alliance had appointed commission under the chairmanship of Shri D.G.Karve, which enunciated following principles of Co-operation.

1) Open and Voluntary membership.

2) Democratic administration.

3) Self help and mutual help.

4) Principles of service.

5) Distribution of surplus.

6) Political and religious neutrality.

7) Principle of education.

8) Co-operation amongst co-operatives.

These Principles of co-operation were amended in the Manchester Congress of the International Co-operative Alliance held in September 1995 as follows.

In the words of International Co-operative Alliance "Principles are those practices, which are essential for the achievements of the purpose of co-op movement. Thus principles give the way for organizing and conducting the co-operative activity, which is the inherent and indispensable corollary of the ideal or objective of the co-operative movement"


1. Voluntary and opened membership:

The element of compulsion is absent, as stated by the ICA, the membership of a co-operative society shall be voluntary and available without artificial restrictions or any social, political, radical or religious discrimination. This voluntary membership also means that a person is free to joining as a member and also has a free will, to withdraw whenever he wants.

Open membership implies that there shall be no restrictions on the admission of members, open to all persons who are able to use their services and willing to accept the responsibilities of members, without gender, social, racial, political or religious discrimination. It seeks a homogenous interest of the members who come together for a mutual benefit.

This principle is undergoing changes with time. A little amount of compulsion and restriction is imposed for the smooth working and speed of the movement. The gates of membership cannot be kept open for persons with vested interests e.g. Moneylender, as a member of credit society.

A person can be compelled to join or withdraw, from such a co-operative in larger interest.

2. Democratic member control:

Such a control is a cardinal principle of co-operation, which will definitely have a healthy influence in the political and economic structure in a country like India. It has been pointed out rightly that if democracy is to be attained it will come not by voting, not by taxing nor by a revolution but by putting into operation, the co-operative democracy, beginning with a smaller scale and inter-expanding it on a larger scale.

The main purpose of a co-operative is to promote and protect the interests of the members and nobody can protect the interests, of a person than he himself and therefore it becomes necessary that the administration of co-operatives must be carried out democratically by the members themselves.

According to the ICA co-operative society is a democratic organization and their affairs shall be administered by the persons appointed/elected in a manner or process agreed upon by the members and are accountable to them.

The members will enjoy equal rights of voting and participation in the decision making process. The principle of democratic control implies the following:

 A general body meeting of the members of the society is the supreme authority in conducting affairs of society.

 1 member - 1 votes irrespective of the individual share holding.

 The rule of majority and control of board of management in accordance with, the democratically expressed will, of the members.

 The board of management elected through a process agreed by the members and the board is accountable to the members.

3. Member Economic Participation:

Members contribute equally and also democratically to control capital of their co-operatives. The capital is the common property of co-operatives. Members usually receive limited compensation, if any on the capital subscribed as a condition for membership. Members allot surplus for the following purposes:

 Development of infrastructure

 Setting up of reserves

 Allied activities relating to the co-operatives

4. Autonomy and Independence:

Co-operatives are autonomous self-help organization, controlled by their members. If they enter into agreements with other organization, including government or raising capital from external sources they do so on terms that ensure democratic control by the members to maintain co-operative autonomy.

5. Education, Training and Information:

The co-op education becomes a prime factor to make a co-operative successful. According to the ICA - all the co-operative societies are supposed to make provision for educating their members, officers and employees and lastly the general public. The principle technique of co-operative is both economic and democratic. There are 3 aspects of co-operatives.

 Education for its members

Since most members are poor and illiterate they are more or less unaware about the principles and practices of co-operatives. Therefore, for an active participation it is necessary to evolve a system, which will educate these members and keep in formed about the decisions and activities of the society.

 Education for office bearers

The office bearers are the elected members of the co-operatives and as they are interested with the responsibility to conduct the business on co-operative lines, it is necessary for them to acquire the technical skill and thorough knowledge of co-operatives. Right from the elementary level to the advanced technique.

 Education for prospective co-operative members

To bring in more participation from the general public it is necessary that the people should have faith and for this it is the responsibility of the office bearers, to keep the general public involved about the principles, aims, achievements and future plans of the co-operative movement.

Co-operatives also provide training for their members, elected representatives, managers and employees so that they contribute effectively to the development process. They also inform the general public on the nature and benefits of the Co-operatives.

6. Co-operation among Co-operatives:

It's a new concept that concentrates on developing and strengthening of different co-operative sectors by making them inter dependent. Co-operatives serve their members most effectively to strengthen their co-operative movement by working together through Local, Regional, National and International Structures.

7. Concern for community:

Co-operatives work for their sustainable development of communities through various programs and policies approved by their members.

8. Values:

Co-operatives are based on the values of Self-help, Self-responsibility, Democracy, Equality and Solidarity. In the tradition of their founders the members believe in the ethical values of honesty, openness, social responsibility and caring for others.

9. Limited interest on capital (No profit motive):

It is a unique principle where capital is treated as subsidiary where as the prime and ultimate objective is service to members, the economic outcome arising out of the operations of a society. The member will be benefited in a manner where it would avoid one member gaining at the expense of others. Capital is a factor of production and is also entitled a fair rate of return. In co-operatives capital cannot dominate, rather it serves in return for a limited interests as service being the supreme.

The motive of earning a profit is absent in co-operatives otherwise it will mark the basic motive of co-operation i.e. service.

10. Equitable distribution of surplus:

A profit earned by a co-operative is to be distributed according to the decision of members. A limited interests or dividend, can be paid in proportion to their transactions with the society after making provisions of business and social welfare activities.

In a joint stock company the surplus is distributed on the number of shares held by an individual irrespective of their transactions with the company, but in a co-operative the surplus is distributed on the basis of the number of dealings with the society.

It is not obligatory to pay dividend out of surplus as the members may divert the use of these funds for overall development of the society and its members. It is not obligatory to pay dividends out of the members entitled for logically it also means they are obliged to bear loses if any, Usually any such loses are adjusted from the reserve funds.

11. Self help and Mutual help:

As the co-operative enterprise is meant for the economic weak, they come together; form a co-operative, pool their resources, work together for mutual benefit and the benefit is shared by all the participants.

Individually a person may not be capable to withstand the market forces and exploitation, but together they can strengthen their position and pursue their economic interests.