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Rural Management
Unit 3: Managing Cooperatives
1. CONCEPT AND DEFINITION
Cooperative institutions are democratic people-oriented rather than capital-oriented organisations.
Cooperatives are a universal form of organisation found practically in all countries and used by people
in many ways in their economic and social life:

• for marketing the products of their labour;

• for purchasing supplies for their business or their households and families,
• for depositing their savings or for borrowing money,
• for providing housing, for securing protection like insurance and health services,
• for the development of their regions,
• for producing together certain goods and/or services.
There is, practically, no end to the ways in which the cooperative form of organisation can be used to
benefit people in their every day needs. A cooperative is a 'user-owned' and 'user-controlled' business
that distributes benefits on the basis of use. More specifically, it is distinguished from other businesses
by three basic concepts:
First, the user-owner concept- "Persons who own and finance the cooperative are those that use it.
Second, the user-control concept- Control of the cooperative is by those who use the cooperative. Third,
the user-benefits concept- Benefits of the cooperative are distributed to its users on the basis of their
use. The user-benefit concept is often interpreted as business-at-cost.
A definition of the cooperative, which comes from these three basic concepts, is a business organisation
that is owned and controlled by those who use its services, the net income (surplus) of which is divided
among the members in proportion to the use they make of its service.
The definition of a Cooperative, as adopted by the International Cooperative Congress in 1995, and
now universally accepted, reads as: "A cooperative is an autonomous association of persons united
voluntarily to meet their common economic, social and cultural needs and aspirations through a "
jointly-owned and democratically-controlled enterprise." Cooperation means people doing some of
their economic activities together for their mutual benefit. By uniting their efforts, people gain from one
another ideas, talents, skills and energies. In this way, they are able to achieve results, that they could
not achieve alone. The basic human concept has been practised throughout history. Informal types of
cooperatives are as old as human history. But the cooperative movement, as we know it today, started
in the nursery of modem civilization, that is Europe, in the context of the industrial revolution, the
expansion of the money economy and the growing concentration of power in the hands of the few. With
the introduction of 'The Cooperative Credit Societies’ Act of 1904, the Cooperative Movement was
started in India. The main objective was 'to encourage thrift, self-help and cooperation among the
agriculturists, artisans and other persons of limited means.
2. DEVELOPMENT OF CO-OPERATIVES IN INDIA
During British rule, Nicholson a British Officer in India suggested introducing Raiffeisen model of
German agricultural credit cooperatives in India. As a follow-up of that recommendation, the first
Cooperative Society Act of 1904 was enacted to enable the formation of "agricultural credit
cooperatives" in villages in India under Government sponsorship. With the enactment of 1904 Act,
Cooperatives were to get a direct legal identity as every Agricultural Cooperative was to be registered
under that Act only. The Cooperative Societies Act (1904) was repealed by the Cooperative Societies
Act (1912) which provided the formation of Cooperative societies other than credit.

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Under the Administrative Reforms Act (1919) Cooperative was made a provincial subject making each
province responsible for Cooperative development. The National Cooperative Union of India (NCUl)
was established in 1929 as an apex promotional organisation for promoting and strengthening of the
cooperative sector, providing education and training in cooperatives, propagation of cooperative
ideology and research in cooperatives, international cooperative relations, cooperative planning and
information services. Similarly, a National Cooperative Development and Warehousing Board was set
up in 1956, in pursuance of the recommendations of the All India Rural Credit Survey Committee
(1954) under the aegis of the Reserve Bank of India.
The National Cooperative Development Corporation (NCDC) was established in March 1963 by the
Government of India under NCDC Act 1962 as a successor organisation to the above Board, with an
objective of"planning and promoting programs for production, processing, marketing, storage, export
and import of agricultural produce, foodstuffs and certain other notified commodities and collection,
processing, marketing, storage and export of minor forest produce on cooperative principles," NCDC
.since then have been playing a very crucial role in promoting the cooperatives on the above 'said
objective. India unlike the developed countries started the cooperative movement with the poor people
so as to share the benefit with the poor in improving their quality of life. In some countries, we come
across very small community based cooperatives and large industrial cooperative establishment which
are, sometimes difficult to distinguish from other industrial enterprises but their service to members is
unique. In India the industrial cooperatives in the fertiliser sector, milk sector, sugar sector which have
come up a long way to compete with the big industries have maintained their structure of primarily
serving to the poor.
Multi-Unit Cooperative Societies Act, 1942 enacted by the British Govenunent with an objective to
cover societies I whose operations are extended to more than one state. The impulses of the Indian
freedom movement gave birth to many initiatives and institutions in the post independence era in India
and armed with an experience of 42 years in the working of Multi-Unit Cooperative Societies and the
Mult-Unit Cooperative Societies Act, 1942. The Central Government enacted a comprehensive Act
known as Multi-State Cooperative Societies Act, 1984, repealing the Act of 1942.
An Expert Group constituted by the Government of India in 1990, - recommended
i) to facilitate the building up of integrated co-operative structure;
ii) to make the co-operative federation organisations responsive towards their members;
iii) to minimise government interference and control in the functioning of cooperatives; and
iv) to eliminate politicisation. Based on the recommendations, the central government enacted the
Multi-State Cooperative Societies Act, of 2002 which provided for democratic and autonomous
working of the Cooperatives, which came into force with effect from August 19, 2002. The Government
of India formulated the National Policy on Co-operatives which uphold the values and principles of
cooperation recognizing its autonomous characters and attaching priority to professionalism, and human
resource development and to act as preferred instrument for execution of public policy in rural areas
and in sectors where they provide the most effective delivery system. To strengthen their competitive
edge in the market, total quality control initiatives, management initiatives and cost reduction initiatives
will also be taken up. It is now increasingly recognised that the co-operative system in India has the
capacity and potentiality to neutralise the adverse effects emerging from the process of globalisation
and liberalization, and continue to play an important role in employment promotion and poverty
alleviation,both as production enterprises- mainly ofthe self-employed - and as providers of services to
members. Although cooperatives are not : instruments of employment promotion, they do effectively
create and maintain employment in both urban and rural areas and thus prov.ide income to both
members and employees in the form of shares of surplus, wages and salaries or profits depending on
the type of cooperative.
Cooperative Movement in India:

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India has basically an agrarian economy, 71 per cent of its total population reside in rural areas and 29
per cent in urban areas. The rural people need lot of services in daily life which are met by village
cooperative societies. The village cooperative societies provide strategic inputs for the agricultural
sector, consumer societies meet their consumption requirements at concessional rates; marketing
societies help the fanner to get remunerative prices and cooperative processing units help in value
additions to the raw products etc. In addition, cooperative societies are helping in building up of storage
godowns including cold storages, rural roads and in providing- facilities like irrigation, electricity;
transport and hea Ith. Thus the . cooperative societies in India in fact are playing multi-functional roles
both in rural and urban areas. The industrial cooperatives in the fertiliser sector, milk sector, sugar sector
which have come up a long way to compete with the big industries have maintained their structure of
primarily serving to the poor. Cooperation in a vast country like India is of great significance because:
It is an organization for the poor, illiterate and unskilled people.
It is an institution of mutual help and sharing.
It softens the class conflicts and reduces the social cleavages.
It reduces the bureaucratic evils and follies of political factions.
It overcomes the constraints of agricultural development.
It creates conducive environment for small and cottage industries.
The share of Cooperatives in National economy is as follows:

The statistics here indicates that modem cooperative movement has made' tremendous progress in every
walk of its activities and occupies a major place in the share of the national economy.

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3: DIFFERENT FORMS OF AGRICULTURAL AND RURAL DEVELOPMENT

COOPERATIVES
Cooperatives are no more limited to rural credit. It has spread its activities to almost all aspects of rural
life. This section highlights the important forms of cooperatives in operation serving the interest of their
members.
3.1 Consumer Cooperatives:
The village cooperatives are expected to provide consumption loans to the farmers to avoid them going
to the money lenders. Another aspect is the supply of essential commodities, particularly to the weaker
sections of society. The government has launched a nationwide Public Distribution System (PDS),
which is being implemented by the State Governments. Under this programme, fair price shops have
been allotted to individuals, non-governmental organizations including cooperatives. Of the total
number of fair price shops allotted in the rural areas, the share of cooperatives is 17.7 per cent. The
cooperative fair price shops supply all the items identified under the PDS. In a few states, only
cooperatives have been assigned the task.
3.2 Sugar Cooperatives:
India is one of the largest sugar producers in the world based on the sugarcane and produced 15.5 million
·tons of sugar during 1998-99. The share of sugar produced through the cooperatives is more than 57
per cent of the total sugar production of the country ~ compared to 0.5 per cent in 1950-51. The
ownership of these sugar cooperatives is mainly with the sugarcane growers. During 1998-99 the
average capacity utilisation in the cooperative sector sugar mills was 104 per cent compared to 103 per
cent overall capacity utilisation of the industry. The average recovery of sugar in the cooperative. sector'
was 10.35 per cent compared to 9.86 per cent in the overall sugar industry.
3.3: Horticulture Cooperatives:
In the present milieu, cooperatives have a pivotal role to play in shaping and hosting the export trade of
the country, especially with respect to those high-value crops such as Fruits and Vegetables. It has been
already established that various horticultural commodities such as banana, grapes, sapota, lychee, onion,
tomato and mushroom etc., of India are highly competitive in the international export market. The
potentiality in the export trade of these valued crops needs to be exploited further. In fact, it has indeed
been only in the last few years that Indian horticultural exports got a real boost because of more liberal
market environment. An integrated approach to the post harvest management through active and joint
participation of various organizations such as National Horticulture Board (NHB), Agricultural and
Processed Food Products Export Development Authority (APEDA), NCDC, etc. will, therefore, be
more appropriate to boost country's net horticultural exports. It has already been established that the
growth prospects of developing countries will be more favourable in the export trade of F & Vs due
mainly to the fact that these countries with abundant labour in relation to capital or land enjoy a
comparative advantage in labour intensive horticultural production as compared to cereal production.
3.4: Fisheries Cooperatives:
The Government of India as well as National Cooperative Development Corporation (NCDC) have
evolved several schemes, which inter alias, help the economic upliftment of poor fishermen and fish
fanners through various welfare schemes like the Fish Fanners Development Agency (FFDA,s) and
strengthening various fish farmers cooperative institutions such as fish drying through fishennenl
women cooperatives. Schemes are implemented by the government, along with pattem of sharing of
budget with respective states. At the initial stage, the coverage was limited to some infrastructural
facilities (such as godowns, diesel pumps, etc.) and share capital to the cooperative. Subsequently, the
coverage widened to other areas, like facilities of marketing, transportation, processing, cold storage,
retail outlets etc. There is a network of fisheries cooperatives in India with vertical structure up to the
national level (8,372 Primaries, 78 District Federations, 15 State Federations and national federations
of Fishennan's Cooperatives).
3.5 Women Cooperatives:

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For the upliftment of women of weaker sections and rural artisans various schemes were started on
cooperative basis by the central and state government, with the financial support ofNABARD and other
banks along with technical support of different institutions and NGOs. Women's Cooperative in the field
ofprocessing and marketing of agro products like, 'papad making; preservation of fruit and vegetables
and dairy farming are the some of the successful enterprises runs by the women on cooperative basis.
A survey ofthe existing livelihood skilis showed that, after farming, the dairy trade is the most
commonly-pursued occupation in the village. Today, several NGOs are working to change this scenario
to be more inclusive of women. The Self-Employed Women's Association (SEWA), Ahmedabad,
Gujarat was the first one to start the concept of all-women dairy cooperatives in the Banaskantha district.
This scheme is implemented by women members of SEWA, now organised into the Development of
Women and Children in Rural Areas Association. SEWA has also revived some defunct dairies in
Santhalpur and Radhanpur talukas. Apart from NGOs, govenunental organisations like the National
Dairy Development Board have also organised special training programmes for women in modem
livestock management. Traditionally, India's dairy cooperative societies have been run by men, but this
is gradual1y changing. According to 'Dairy India' - a publication on the dairy industry - at present, of
an all-India total of 9.2 million cooperative members, 1.63 million (18 per cent) are women. Some 2,476
all-women cooperatives are functioning in the country.
3.6 Credit Societies:
The Cooperative 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 Cooperative 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 Cooperative Societies Act of 1912. This Act recognized non-credit
societies also. But the rural credit societies have continued to be predominant till now.
The agricultural cooperative credit structure is broadly divided into two sectors, one dealing with the
short-terms and medium-term 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 Cooperative Bank at the
State level, the Central Cooperative Bank at the district tehsil level and the Primary Agricultural Credit
Societies at the village level. Primary Agricultural Credit Societies (PACS): The Primary Agricultural
Credit Societies constitute the 'hub' of the Indian cooperative movement. Every fourth. co-operative in
India is a primary credit society. The main objectives of a PACS are:
• to raise capital for the purpose of giving loans and supporting the essential activities of the members,
• to collect deposits from members with the objective of improving their savings habits,
• to supply agricultural inputs and services to members at remunerative prices,
• to arrange for supply and development of improved breeds of livestock for the members,
• to make all necessary arrangements for improving irrigation on land owned by members, and
• to encourage various income-augmenting activities such as horticulture, animal husbandry, poultry,
bee-keeping, pisciculture and cottage industries among the members through supply of necessary inputs
and services.
District Central Cooperative Banks (DCCB): The PACS are affiliated to the DCCBs who perform the
following functions.
• Serve as balancing centre in the district central financing agencies.
• Organise credit to primaries.
• Carry out banking business.

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• Sanction, monitor and control implementation of policies.

State Cooperative Banks (SCB): The DCCBs in turn are affiliated to SCBs, which perform the following
functions serve as balancing centre in the States.
• Organise provision of credit for credit worthy fanners.
• Carry out banking business.
• Leader of the Cooperatives in the States.
The National Federation of State Cooperative Banks:
At the national level is the National Federation of State Cooperative Banks. It performs the following
functions:
• Provides a common forum to the member banks.
• Promotes and protects the interests ofthe member banks.
• 'Co-ordinates and liaison with GOI, RBI, National Banks and others.
• Provides research and consultancy inputs to the member banks. • Organises conferences/seminars
workshops/meetings.
3.6 Business Cooperatives:
Today, the cooperative movement has really come of age in this country. The major thrust of the
cooperative sector today is towards supporting agricultural production through supply of necessary
inputs, providing post-harvest support facilities, and facilitating export trade of agricultural produce.
The success of IFFCO, KRIBHCO, cooperative sugar factories, large-sized dairies establish the fact
that cooperative have the potential and experience to venture into large. industrial enterprises in the
field of agro, horticultural and food processing. They not only provided gainful employment to the rural
masses but increase the income of fanners in particular and rural masses in general. Cooperatives have
played a major role in integrating the village and national market to the international market in the
present scenario of globalization and liberalization of market. Major business cooperative in agricultural
sector are:
a) Krishak Bharati Cooperative Limited (KRIBHCO): It is a premier Cooperative Society for
manufacturing of fertilizer, registered under Multi-State Cooperative Societies Act-1985, was promoted
by the Govt. of India, IFFCO, NCDC and other agricultural Cooperative societies spread all over the
country. KRIBHCO has setup a Fertilizer Complex to manufacture Urea, Ammonia and Bio-fertilizers
at Hazira in Gujarat State.
b) Indian Farmers Fertilisers Cooperative Limited (IFFCO): The objectives of IFFCO shall be to
promote the economic interest of its members by conducting its affairs in a professional, democratic
and autonomous manner through self-help and mutual cooperation. It undertake
manufacture/production/development of chemical fertilisers, bio-fertilisers, petrochemicals, refining
industrial chemicals, and hydrocarbon, their inputs and technologies and allied products/by-products
and conversion, storage, transportation and marketing. It also undertake
manufacture/processing/conversion 'of farm and forestry products, biotechnology, pisciculture and
aqua-farming, agriculture machinery and implements and other agricultural inputs/outputs and their
conversion, storage, transportation and marketing, activities. IFFCO extend to. undertake trading,
shipping, transportation, communication and telecommunication, information technology, power
generation and distribution from conventional or non-conventional energy sources, housing, real estate,
construction, banking and insurance. It undertakes such other activities which are conducive and
incidental thereto.
c) National Agricultural Co- operative Marketing Federation of India (NAFED): The objectives of the
NAFED shall be to organise, promote and develop marketing, processing and storage of agricultural,
horticultural and forest produce, distribution of agricultural machinery, implements and other inputs. It

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also undertake inter-State, impart and export trade, wholesale or retail as the case may be and to act and
assist far technical advice in agricultural production for the promotion and the working of its members
and cooperative marketing, processing and supply societies in India.
d) National Dairy Development Board (NDDB): The National Dairy Development Board (NDDB) was
founded replace exploitation with empowerment, tradition with modernity, stagnation with growth,
transforming dairying into an instrument for the development of India’s rural people. The National
Dairy Development Board as been constituted as a body corporate and declared an institution of national
importance by an Act of India's Parliament. The National Dairy Development Board - n .itially
registered as a society under the Societies Act 1860 - was merged with the erstwhile Indian Dairy
Corporation, a company formed and registered under the Companies Act 1956, by an Act of lndia's
Parliament - the NDDB Act 1987 (37 ofl987), with effect from October 12, 1987.
4: STRATEGIES FOR SUCCESSFUL COOPERATIVES
In a protected economy the functioning of enterprises be it cooperative or otherwise, used to be a
different affair, but with the opening up of the economy and lifting of quantitative restrictions on
imports, the cooperatives face a great challenge to compete with the Multi National Companies (MNC)
who have a strong financial backup, efficient marketing network, professional management and high
technology Research and Development. Most of the cooperatives in India lack in all these areas, If the
cooperatives do not wake up at the right time to strengthen their systems and management, they are
prone to become sick and may die in the stiff competition,
Some of the parameters where innovations are essential for success are discussed below:
• Paradigm Shift in Governance of Cooperatives: The cooperatives need to be governed in a
participative manner by its members having common business interest. The Cooperative Laws need to
be reformed to provide environment for growth, adequate autonomy for its management and encourage
members' participation. The cooperative societies of various sectors should be allowed to integrate at
primary levels to provide a number of services/products under one roofing the true spirit of cooperation.
• Professionalism in Management: Cooperative societies basically consist of the members and they elect
their committee which manages the administration of the society as well as the business of the society.
When there is a competition in the market, the cooperative societies need professional managers in the.
areas of its core business and financial management etc., so as to make the society a profitable entity.
Profit by the Society will not only benefit its members but also necessary for its sustenance.
• Technologies in Manufacturing and Quality Control: The manufacturing areas of the cooperative
societies need to adopt the latest technologies for competitive quality and economy" of scale so as to
provide a product with added value at competitive prices. Many ofthe cooperative ventures in the areas
of sugar manufacturing or textile manufacturing have become sick in absence of technological
upgradations, product innovations and competitive prices. The success of IFFCO and KRIBHCO in
fertiliser sector and Amul in milk/dairy sector for adoption of latest innovative technologies and
professionalism in management are good examples of successful cooperative societies.
• Innovative Marketing: The competitive marketing needs evolving a system to include various channels
of distribution. In the competitive environment, cooperative societies may require to join hands with
other strategic partners for distribution, export and other products. It may need even strategic alliance
with the MNC's and vice-versa for marketing.
• Joint Ventures in Strategic Areas: The cooperative also need to join hands with MNC's forjoint
ventures abroad to source certain vital raw materials or products which are not available in the country
so as to remain competitive with others in the market and also vice-versa for export of Indian produce.
Therefore, to grow competitively in a business environment, the cooperatives have to keep its eyes and
ears open and be innovative to join hands with MNC's at the appropriate time. That is how IFFCO is an
example of innovative cooperati ve society.
• Information Technology: The cooperative societies need to be networked with the computer system
for information flow and to be put on e-commerce route of business for fast decision taking and

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marketing. This area needs a lot of education and support to bring the cooperative ventures and the
cooperative network competitive in the economic liberalisation process. Basically for carrying out a
particular business a multi unit cooperative society is formed with the membership of a number of
primary cooperative societies at the grassroots level. Therefore, for dissemination, sharing and adoption
of latest information technology is essential forthe success ofthe cooperative movement. All the primary
cooperative societies should be provided with computer system linked network with the apex
cooperative society as well as with the internet and other relevant agencies. The sharing of knowledge
through networking of cooperative will be a move in right direction and will be conducive to
cooperative principle. The cooperative societies will have to think for adopting e-commerce system of
business as well. With the economic liberalisation and opening up of the markets under WTO
provisions, the localised production! marketing willnot suffice.
• Operational Transparency: Most of the Cooperatives today suffer from charges of corruption,
malfunctioning and non-transparent decision making. The computerized system of working will have
operational transparency of business. Every member of the society will be able to know the status of
their societies business, trend etc., and to give his suggestions to the society instantly. The transparency
in operation will also attract greater support from members in decision making and increase the
operational efficiency. The cooperative ventures need to follow strict financial discipline and strong
financial management for not only profitability but also for its credibility in the financial market for
mobilisation of financial resources and decision making.
• Value Addition to Agri-Produce: Agro processing plants in cooperative sector are needed a lot to
minimise the wastages of perishable commodities and improve its packaging and marketing for
remunerative prices. A network of cold storages along with food processing plants needs to be
developed in the cooperative sector to avoid the losses of agricultural produce. It will be worthwhile to
note that because of the infrastructural and other constraints, million of tonnes of perishable agricultural
products in India are wasted every year. Avoidance of these wastages will not only boost the economy
but also provide food to a large number of underfed human beings. Also in the season of harvesting,
they are sold at throwaway prices which at times do not bring even the input prices for these items to
the farmers. Therefore, if this produce are kept in cold storages or proper warehouses the wastages could
be minimised and by selling it in off-season and also by adding value through agro-processing, better
returns shall be achieved:
• Diversification: The cooperative societies in India need to come forward in the health, insurance,
irrigation sectors etc. These sectors are still not exploited by the cooperatives where a lot of people are
affected and could be utilised for the well being of the members. For example, with the opening up of
the insurance sector in India, IFFCO is diversifying into insurance business which will include
providing insurance services to the farmers for their crops and agricultural products etc. in addition to
other areas.
Cooperative Society is an organisation formed to provide financial assistance to its members. The
members are responsible for raising capital to help those in need. It mainly protects the weaker sections
within rural communities from exploitation by wealthy individuals and companies. Our rural economy
needs faster and more sustainable development to cater to the needs of its population. The Cooperative
Societies have a responsibility to play a constructive role in this area.
5: Features of Co-operative society:
The main features of Cooperative societies are as follows:

• Voluntary and Open Membership – Cooperatives are accessible to every member of the rural
society. They can join or leave the organisation as per their choice. If a member wants to exit
the cooperative, they have to give notice before leaving. It does not discriminate against anyone
based on religion, caste, gender, creed or language.
• Registration – Cooperatives need to follow a registration process as per law to become a legal
entity. They can enter into contracts or acquire property only after the registration of their
society.

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• Limited Liability – The liability of members is limited to the extent of capital invested by them.
It also helps protect their financial interests.
• Government Supervision – State governments regularly monitor cooperative societies and their
activities. They do this to ensure that the financial interests of its members are protected. The
organisation has to maintain proper accounts at all times. Independent auditors check their
accounts regularly to ensure that no financial malpractice is taking place.
• Democratic Principles – Any Cooperative Society has to ensure voting rights for its members.
The members elect a managing committee that makes important decisions related to running
the organisation.
6: Cooperative societies and their contribution to the rural economy
The role of cooperatives in rural development can be very significant and beneficial for the rural
economy. We will discuss their role in the below paragraphs:

• Provide credit facilities – Cooperative societies can help their members – individuals or small
businesses – in rural areas with financial assistance. Credit Cooperative societies are involved
in disbursing loans at low rates of interest and flexible repayment terms. The role of
cooperatives in rural development is crucial as they protect their members from private
moneylenders who give loans at very high-interest rates. Credit cooperatives rarely raise large
amounts of capital due to the limited financial resources of their members. However, they play
a vital role in sustaining the viability of both agrarian and non-agrarian occupations in a rural
economy.
• Housing facilities for lower-income groups – Housing cooperative societies in rural areas assist
their members in getting a place to live. They are primarily involved in helping people from
lower-income groups get housing facilities at affordable rates.
• Help consumers get affordable products – Several Consumer Cooperative Societies help rural
households get products at relatively cheaper rates. They purchase products directly from the
manufacturer and sell them to their members below market price, thus removing the
involvement of intermediaries. Anyone who wants to buy a product at these rates becomes a
member of Consumer Cooperative Societies.
• Assist small businesses to stay profitable – Cooperative Societies help small scale entrepreneurs
procure raw materials at cheaper rates to reduce their cost of production. They also provide
producers with a platform to sell their products directly to consumers. Removing intermediaries
helps to cut down the selling price and ensure higher sales and profits for producers.
• Share Profits among members – Cooperatives were established to serve the economically
weaker sections of rural communities. They distribute profits from the operations among their
members as a dividend. These earnings are vital for the sustenance of rural households.

7: Managing Co-operatives society in rural area:

Managing cooperatives in rural areas requires a specific set of skills and knowledge due to the unique
challenges and opportunities that are present in rural communities. Rural cooperatives often serve as a
crucial economic and social lifeline for rural communities, providing access to markets, financing, and
services that may not be available otherwise.

Some key aspects of managing cooperatives in rural areas include:

1. Understanding the local context: Rural cooperatives operate in a unique context with different
challenges and opportunities than those in urban areas. Managers must understand the local economy,
culture, and social dynamics to effectively manage the cooperative.

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2. Building and maintaining strong relationships with members: In rural areas, members of the
cooperative are often closely connected and have strong relationships with one another. Managers must
work to build trust and cooperation among members, and involve them in decision-making processes.

3. Accessing resources: Rural cooperatives may face challenges in accessing financing,

technology, and other resources. Managers must work to identify and access resources that can support
the cooperative's success.

4. Marketing and distribution: Rural cooperatives may face challenges in reaching markets and
distributing products. Managers must work to identify and develop efficient and effective marketing
and distribution channels.

5. Addressing rural development needs: Rural cooperatives can play a key role in addressing rural
development needs, such as improving access to healthcare, education, and other services. Managers
must work to identify and address these needs, and collaborate with other stakeholders to support rural
development.

8: Leadership issue in Co-operative society in India:

There are several leadership issues that have affected cooperative societies in India over the years. Some
of the key issues are:

Lack of democratic leadership: In many cases, cooperative societies have been plagued by leadership
that is not truly democratic. Leaders are often elected through a show of hands, rather than through a
transparent and fair voting process. This has led to the emergence of leaders who are not accountable
to the members and who may use their position for personal gain.

Lack of transparency and accountability: Cooperative societies are meant to be member-driven

organizations, but in many cases, the leadership has been opaque and unaccountable. Members may not
have access to information about the society's finances or decision-making processes, which can lead
to mistrust and discontent.

Corruption and misuse of funds: There have been instances of corruption and misuse of funds in
cooperative societies, where leaders have siphoned off funds meant for the society's development. This
has resulted in financial losses for the society and has eroded the trust of members in their leadership.

Poor governance: Cooperative societies are governed by a board of directors, who are responsible for
making important decisions on behalf of the society. However, in many cases, the board may not have
the necessary skills or expertise to make informed decisions, which can lead to poor governance and
mismanagement.

Lack of training and capacity building: Leaders of cooperative societies often lack the necessary training
and capacity building to effectively manage the society. This can result in poor decision-making, lack
of innovation, and inadequate responses to changing market conditions.

To address these leadership issues, there is a need for greater transparency, accountability, and
democratic processes in cooperative societies. Members should be encouraged to participate in
decision-making processes and leaders should be held accountable for their actions. Additionally, there
should be greater investment in capacity building and training for leaders, to ensure that they have the
necessary skills and knowledge to manage society effectively.

9. Evolution of technology in co-operative society in India:

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India is home to a unique movement called ‘cooperatives’ which involves citizens and their democratic
involvement at a grassroot level. A cooperative society is an organization owned and run by the people
and for the people using its goods and services. As the name suggests, the people or members of the
organization work in cooperation to pool resources for their common benefit and progress. Cooperative
societies in India were first formed in late 1890s when farmers in western Maharashtra rebelled against
money lenders’ tyranny for agricultural loans. In 1904, the British government in India enforced the
Cooperative Society Act, to safeguard interests of poor farmers in Maharashtra.

After Independence, this ‘cooperative movement’ in India gained momentum. The government realised
that the cooperative sector plays a significant role in boosting the rural economy. It provisioned for
plans for this sector in its Five Year Action Plans. Every village was encouraged to have at least one
cooperative society. It also helped setting up cooperative farms. From agricultural markets, these
Cooperative societies in India expanded to credit sector, and later to other large-scale sectors, housing
and development, fishing markets, banking, etc. This led to formation of different types of co-operative
societies.

Economic growth and the increase in disposable incomes have played an important role in the growth
of cooperatives in India. However, there are reasons on the micro level such as certain decisions, good
execution, policies and procedures, among others, which are the key reasons behind the success of
cooperatives.

The evolution of technology has had a significant impact on the cooperative movement in India,
enabling societies to streamline their operations, improve efficiency, and expand their reach. Here are
some key milestones in the evolution of technology in cooperative societies in India:

Adoption of computers and internet: In the early 2000s, many cooperative societies began to adopt
computers and internet connectivity to manage their operations and communicate with members. This
enabled them to automate tasks such as record keeping, accounting, and member communication,
making their operations more efficient and cost-effective.

• Implementation of mobile technology: The widespread adoption of mobile phones in India has
also had a significant impact on cooperative societies. Many societies have implemented
mobile-based systems for member registration, loan processing, and payment collection. This
has made it easier for members to access services and for societies to reach remote areas.
• Introduction of biometric technology: In recent years, many cooperative societies have
implemented biometric technology to authenticate member identities and prevent fraud. This
has made loan processing and payment collection more secure and reliable.
• Use of digital payment systems: The government's push for digital payments has also had a
significant impact on cooperative societies. Many societies have adopted digital payment
systems such as UPI and BHIM to enable members to make payments and transfer funds easily
and securely.
• Development of custom software solutions: In order to meet the specific needs of cooperative
societies, many software developers have developed custom software solutions for various
sectors such as agriculture, dairy, and credit. These solutions enable societies to manage their
operations more effectively and provide better services to members.

Overall, the adoption of technology has enabled cooperative societies in India to overcome some of the
challenges they faced in the past, such as inefficient operations and limited reach. With the continued
evolution of technology, cooperative societies are likely to become even more effective and efficient in
the future.

Some of the recent developments in the field of science and technology in India are as follows:

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• In November 2022, Norwest Venture Partners agreed to invest US$ 32 million in Celebal
Technologies, which specialises in AI, big data, and enterprise cloud among other technologies.
In exchange, Norwest Venture Partners will acquire a minority stake in the company.
• In August 2022, a centre of excellence (CoE) for the Metaverse and Web3 technologies was
opened in India by Coforge, a provider of digital services and solutions. Over 1,000 people will
be trained and upskilled by the company.
• In August 2022, Samsung announced that it was expanding its industry-academia program
PRISM (Preparing and Inspiring Student Minds) across 70 engineering colleges in India. The
program will help educate students in the domains of artificial intelligence, machine learning
and IoT.
• Technology incubator T-Hub launched the semiconductor companion of the AIC T-Hub
Foundation programme to develop innovation and entrepreneurship across the semiconductor
sector startups.
• Actis, a global investor in sustainable infrastructure, is planning to invest over US$ 700 million
in order to acquire and expand assets for its platform aimed at offering real estate to tenants in
the life sciences and allied sectors in India.
• In March 2022, Toyota launched its Mirai hydrogen fuel cell car in India. The Indian Oil
Corporation would be supplying hydrogen to power the car.
• India's Top 5 IT firms (TCS, Infosys, Wipro, HCL and Tech Mahindra) added more than
122,000 employees in in the first six months of FY22, nearly matching the 138,000 employees
hired in the entirety of FY21.
• In October 2021, Biz2Credit, a fintech company, announced plan to invest US$ 100 million in
India over the next five years on research and development activities and expansions.
• From 2014 to 2021, India recorded a 572% growth in patent approvals.
• To accelerate digital innovation in India, NITI Aayog, Amazon Web Services and Intel have
come together to develop a new experience studio to boost problem-solving and innovation
between government stakeholders, start-ups, enterprises and industry experts. The new
experience studio will use technologies such as artificial intelligence, machine learning,
Internet of Things, augmented reality, virtual reality, blockchain and robotics to accelerate their
use in the public sector.
• TechnoPro, a Japanese tech firm, plans to hire 10,000 engineers and researchers in India by
2022-23.
• Qualcomm plans to invest US$ 8.5 million on design initiatives in India, which would include
funding its innovation labs at Hyderabad and Bangalore for R&D.

10. Information Communication Technology (ICT) And Co-Operative:

Cooperative societies in India played an important role in development of agriculture, banking,

credit, agro processing, storage, marketing, dairy, fishing and housing sectors. Cooperatives role in
poverty alleviation, food security and employment generation is well established. Knowledge
Management (KM) is collection of work used in an organization to identify, create, represent,
distribute and adoption of insights and experiences. Such insights and experiences include
knowledge, either physically or stable in organizational processes or practice. Knowledge
Management is the collection of processes that govern the creation, dissemination, and utilization
of knowledge. In one form or another, knowledge management has been around for a very long
time. ICTs can help transform the management of co-ops by improving management practices,
financial information and reporting and records management as well as create an online presence.
These

improvements help increase efficiency and lower operating costs. ICTs can change the way
cooperatives work and bring vast benefits especially in agriculture. Cooperatives providing access
to information such as crop cycles, localized weather reports, farming methods and local markets,
available online or direct via text message, is just one example of how innovative ICT use can
revolutionize the day-to-day functioning of cooperatives and benefit members.

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The key roles of ICT in Cooperative are

• Take a lead role in the strategic planning of ICT service provision.

• Provide Strategic operational and technical support to ICT planning and Implementation.
• Provide timely and regular reports on the effectiveness of the ICTS.
• Provide support for IT hardware and software audit.
• Produce annual plan for ICT equipment and software installation.
• Provide a professional, customer focused support service to all ICT service users.
• Provide a Technical support requests to be resolved.
• All technical support related information to be provide to the ICTS helpdesk
• All procurement should assign a unique reference number.
• Customers to be informed of detailed in delivery of goods.
• Increase access to market information and lower transaction.
• Increase efficiency, competitiveness and the technology availability and accessibility to
daily user
• Use of remote sensing technologies.
• Effective monitoring, resource management and mitigation of environmental risks.
• Facilitates knowledge exchange and networking.

It’s clear ICT’s are vital in the development of cooperatives but there are some challenges to be
overcome, namely cost and infrastructure issues relating to access. Although access to telephone
communications is now widely available all over the world, many rural communities still don’t
have reliable access to the internet and mobile broadband. In areas with little or no internet access,
awareness of the benefits of ICT is also a challenge and getting smaller cooperatives to bridge the
digital divide is important.

11. INDIAN CASE STUDY:

1. AMUL is the first company in the co-operative form to adopt the e-revolution. In this information
communication-Entertainment age, the barriers between the business organization and consumers,
between manufacturers and end-users are all breaking down. The organization believes in
innovations in product as well as process. For rapid communication access to Veterinary Health
Assistance they have introduced the GIS facility. The adoption of the electronic milk testers to
ensure efficient testing and measurement of milk constituents is a step in this direction. This has
been possible by creating an IT network, which links the production, centers with sales offices and
dealers by VSAT and e-mail connectivity.

2. Self-Employed Women’s Association (SEWA) established Community Learning Centers

(CLCs) which function as 'hubs' for 10-15 villages and offer a gamut of services - ICT training,
capacity building, skill development, disaster mitigation related activities and trainings, childcare,
village database etc. The initiative aims to develop a sustainable ICT based model for addressing
economic and social problems and sustainable livelihoods generation.

3. IFFCO Kisan Sanchar Limited (IKSL) a tri-lateral venture between the Indian Farmers’ Fertilizer
Cooperative Ltd (IFFCO), Airtel and Star Global Resources Limited, promotes Airtel SIM cards
branded “Green Card”. Users receive recorded voice messages, free of charge, each day pertaining
to crop calendar activities, localized weather forecasts, yield increase tips, government schemes and
disease alerts, as well as answers from experts in agriculture to any farming question.

4. Wrana, a small district of Maharashtra state in India is a well-developed rural area. Much of
Warana's success is due to the presence of a strong co-operative movement. The main economic
activity is sugar cane growing and processing. Using ICT to streamline the operations connected
with sugar cane growing and harvesting. This is benefiting small farmers, both in terms of

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transparency and time saved on administrative transactions, as well as the cooperative, in terms of
monetary gains.

5. Digital Mandi is an electronic trading platform for agri-commodities to bring the benefit of ICT
to farmers and traders by eliminating geographical barriers and temporal limitation and removing
cash crunch through active participation of various financial institutions. Digital Mandi is inspired
by the vision of Media Labs Asia sustainable village through culturally appropriate use of new
technologies.Enhancing possibility of this initiative through rural cooperative society to whom it
may enrich a farmers at local level for proper resource sharing towards to project outcome.

6. Fisher Friend is a BREW-based application offered on a low cost CDMA handset with a graphic
interface, an icon-based menu and programmable shortcut keys. In addition to safety and weather
information, fishermen can receive the locations of fishing areas and real time market prices with
one click in their local language.

7. iKisan is a one-stop solution for farmers in providing information on crops, crop management
techniques, fertilizers, pesticides and other related information like market updates and weather
forecasts.

12: OPPORTUNITY

In order to facilitate or provide access to ICTs to cooperatives, they must be strengthened by the
establishment of an enabling environment, including a legal, policy, business environment and
participatory frameworks that are conducive to the establishment and development of organizations.
A greater number of cooperative members should benefit training in the use and application of
ICTs, in particular women and youth. Young people learn quickly and can then teach the others.
ICTs can equally make the agricultural sector more attractive to young people. Participatory needs
assessments should also be carried out, in view to better understand what ICT is most appropriate
in different contexts. Awareness needs to be raised on the benefits of ICTs in accessing and
communicating timely market information. Extension services can be increasingly provided
through modern technologies.

13. CO-OPERATIVE PRINCIPLE

Cooperatives around the world operate according to the same set of core principles and values,
adopted by the International Co-operative Alliance. Cooperatives trace the roots of these principles
to the first modern cooperative founded in Rochdale, England in 1844. These principles are a key
reason that America’s electric cooperatives operate differently from other electric utilities, putting
the needs of their members first.

1. OPEN AND VOLUNTARY MEMBERSHIP: Membership in a cooperative is open to all persons

who can reasonably use its services and stand willing to accept the responsibilities of membership,
regardless of race, religion, gender, or economic circumstances.
2. DEMOCRATIC MEMBER CONTROL: Cooperatives are democratic organizations controlled by
their members, who actively participate in setting policies and making decisions. Elected
representatives (directors/trustees) are elected from among the membership and are accountable to
the membership. In primary cooperatives, members have equal voting rights (one member, one
vote); cooperatives at other levels are organized in a democratic manner.
3. MEMBERS’ ECONOMIC PARTICIPATION: Members contribute equitably to, and
democratically control, the capital of their cooperative. At least part of that capital remains the
common property of the cooperative. Members allocate surpluses for any or all of the following
purposes: developing the cooperative; setting up reserves; benefiting members in proportion to their
transactions with the cooperative; and supporting other activities approved by the membership.

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4. AUTONOMY AND INDEPENDENCE: Cooperatives are autonomous, self-help organizations

controlled by their members. If they enter into agreements with other organizations, including
governments, or raise capital from external sources, they do so on terms that ensure democratic
control as well as their unique identity.
5. EDUCATION, TRAINING, AND INFORMATION: Education and training for members, elected
representatives (directors/trustees), CEOs, and employees help them effectively contribute to the
development of their cooperatives. Communications about the nature and benefits of cooperatives,
particularly with the general public and opinion leaders, helps boost cooperative understanding.
6. COOPERATION AMONG COOPERATIVES: By working together through local, national,
regional, and international structures, cooperatives improve services, bolster local economies, and
deal more effectively with social and community needs.
7. CONCERN FOR COMMUNITY: Cooperatives work for the sustainable development of their
communities through policies supported by the membership.

CASE STUDY
The Anand Pattern
Maximizing farmer profit and productivity through cooperative effort is the hallmark of the Anand
Pattern. The Anand Pattern is an integrated cooperative structure that procures, processes and markets
produce. Supported by professional management, producers decide their own business policies, adopt
modern production and marketing techniques and receive services that they can individually neither
afford nor manage. The Anand Pattern succeeds because it involves people in their own development
through cooperatives where professionals are accountable to leaders elected by producers. The
institutional infrastructure -- village cooperative, dairy and cattle feed plants, state and national
marketing -- is owned and controlled by farmers. Anand Pattern cooperatives have progressively, linked
producers directly with consumers.
Three tier structure
Village Society
An Anand Pattern village dairy cooperative society (DCS) is formed by milk producers. Any producer
can become a DCS member by buying a share and committing to sell milk only to the society. Each
DCS has a milk collection centre where members take milk every day. Each member's milk is tested
for quality with payments based on the percentage of fat and SNF. At the end of each year, a portion of
the DCS profits is used to pay each member a patronage bonus based on the quantity of milk poured.
The District Union
A District Cooperative Milk Producers' Union is owned by dairy cooperative societies. The Union buys
all the societies' milk, then processes and markets fluid milk and products. Most Unions also provide a
range of inputs and services to DCSs and their members: feed, veterinary care, artificial insemination
to sustain the growth of milk production and the cooperatives' business. Union staff train and provide
consulting services to support DCS leaders and staff.
The State Federation
The cooperative milk producers' unions in a state form, a State Federation, which is responsible for
marketing the fluid milk and products of member unions. Some federations also manufacture feed and
support other union activities.
Dairy is an important sub-sector of Indian agriculture, accounting for nearly 17% of value of output
from agriculture and allied activities. Dairying has emerged as an important source of income and
employment in rural areas, especially for marginal and small farmers, who own about 33 per cent of
cultivable land mass but account for almost 60 per cent of female cattle and buffaloes in the country.
Dairying contributes to a third of the gross income of rural households and nearly half of the landless.
This sector is livelihood-intensive and gender sensitive. Dairying is a centuries-old tradition for
millions of Indian rural households; domesticated animals have been an integral part of the farming

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systems from time immemorial. Milk contributes more to the national economy than any other farm
commodity. Dairying is largely an organized activity, consisting of milk vendors, sweet shops as well
as other milk sellers, constituting about 84% share in liquid milk market. The organized sector in
dairying is relatively new in historical terms and consists of modern processing units. This sector
handles the balance of milk procurement and sale. The record of milk production is impressive and
now India is the largest producer of milk in the world. India’s milk production increased from17.0
million tonnes in 1950-51 to 88.1 million tonnes in 2003-04. The per capita availability of milk
increased from 112 gms per day in 1968-69 to 231 gms per day at present . The growth rate of milk
production during the 5th Five Year Plan (1975-76 to 1979-80) was 2.91 per cent per annum and it
increased to 4.13 per cent per annum during the Ninth Five Year Plan (1997-98 to 2001-02). In terms
of trade, the value of output from livestock at about Rs. 1,733 billion in 2004-05 of which milk
accounted for 68 percent3. In fact, the value of milk was higher than paddy (Rs. 704 billion) and wheat
(Rs. 480 billion). Thus, in terms of value of output, milk is now the single largest agricultural
commodity in India. Dairy products account for 70 percent of the output of the livestock sector and also
provide employment to around 75 million women and 15 million men.
History of Dairy Co-operative in India
The Co-operative movement started in India in the last decade of the 19th Century since the enactment
of “the Co-operative Credit Societies Act, 1904 (Act 10 of 1904)” under the British hegemony on
Raiffeisen model borrowed from Germany with two objects in view, i.e. to protect the farmers from the
hands of the private money lenders and to improve their economic condition. Madras province was the
birth-place of this movement. With the setting up of an Agricultural Co-operative Banks there the
movement took root in our Land and slowly gained strength. However, the growth of Co-operative
movement in India during British rule was very slow and haphazard one. In most of the cases, the
provincial governments took the lead. The foreign ruler had only made some committees or framed a
few rules and regulations. But they did not take any wide-ranging programme to spread the movement
all over the country. It has been observed that the co-operative movement in India owes its origin to
agriculture and allied sectors. This sector has emerged as one of the largest in the world and is playing
an important role in socio-economic development of the country. It is an attractive mechanism for
pooling the meagre resources of its members for solving common problems relating to credit, supplies
of input and marketing of produce. The golden era of Co-operative movement began after India had
won freedom. Within two decades of independence the membership of primary societies had increased
four times while the share capital and working capital increased 23 and 31 times respectively. The dairy
cooperative movement has been central to the development of dairying in India. The history of Dairy
Development Movement in India is a new one.
During the pre-independence period this movement was limited to a few pockets of Calcutta, Madras,
Bangalore and Gujarat. The most notable of this venture was Kaira District Co-operative Milk
Producers’ Union Limited of Anand, Gujarat -- better known as Amul, founded in 1946 in response to
the exploitation of district’s dairy farmers. Dairy producers came under the influence of Ghandian
philosophy and nationalist revolutionaries, which prompted the growth of the dairy co-operatives. But
after independence, the National Government took great initiative in setting up new Dairy Co-operatives
in many parts of the country. In 1973, the Kaira Cooperative Union set up a marketing agency named
Gujarat Cooperative Milk Marketing Federation (GCMMF), which follows a three-tier structure at
village, district and state level for procuring, processing and marketing milk and milk products. The
district units also provide technical back-stopping to the milk producers and a range of services such as
feed, veterinary care, artificial insemination, education and training. These milk cooperatives of Gujarat
today own the GCMMF, the largest food products business in India. GCMMF is also the largest exporter
of dairy products from India and its brand name Amul is known all over the world. This experiment
laid the foundation of the cooperative movement in milk production and marketing in India. The federal
and egalitarian structure of these cooperatives ensures social and economic equity to the milk producers
and is one of the major reasons for its success. The government adopted this successful model and set
up the National Dairy Development Board (NDDB) in 1965 which prepared a blueprint for a milk
revolution across the country. Known as Operation Flood, this programme began in 1970 and was
implemented across the country. It was also one of the largest rural development programmes in the

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world which ran for 26 years and helped India to emerge as the world’s largest milk producer in 2003-
04 with a record output of 88.1 million tonnes.
Role of Dairy Cooperatives
In the rural sector, dairying and milk production is an important economic activity and has become a
secondary source of income and employment. Co-operatives play an important role in animal husbandry
and dairying sector, which contributes about one-fourth of agricultural GDP of the country. In India as
of 2004, there are 1.07 lakh cooperative societies, spread all over the country with a membership of 119
lacks. Dairy development along the cooperative lines was considered to be the most effective strategy
for helping the rural poor without altering the village social structure and providing guaranteed market
for milk at fixed prices, supply of cattle feed at a reasonable cost and efficient veterinary and extension
services. Dairy co-operatives all over India help small and marginal farmers to take initiatives in shaping
their destiny, as land-less; marginal and small farmers constitute 75% of the total farmers engaged in
this occupation. They serve more than 10 million farmers in over 1.30 lakh villages, covering 326
districts. Role of dairy co-operatives is increasing day by day. During the year 2003-04, average daily
marketing of milk by cooperatives was 148.75 lakh litres. Dairy co-operatives could also generate
employment opportunity for some 12 million farm families. Processing of liquid milk is also undertaken
in co-operative sector. Milk is processed and marketed by 170 milk producers’ co-operative unions
(with a capacity of 298 LLPD) and 15 state Cooperative Marketing federations. Milk production
generally takes place in rural areas, whereas the profitable market exists in urban areas. Lack of
transport facility, organized system of processing and marketing as well as farmer’s margin in this
occupation is very small. In view of these and several other constraints, dairy co-operatives provide an
answer for proper marketing of fluid milk. Dairy co-operatives have succeeded simply because the
farmers own and manage them. The core feature of these co-operatives is farmer control at all three
stages i.e. procurement, processing and marketing of milk. The structure of dairy co-operatives consists
of primary milk producer societies at the primary level and milk supply unions at the district level. The
primary milk societies are federated into unions, while state federations are functioning in some states.
At the national level, there is a National Co-operative Dairy Federation (NCDFI), which co-ordinates
the marketing efforts of all the state level co-operatives. National Dairy Development Board (NDDB)
is the national level body involved in promoting, financing and supporting milk-distribution
organizations that are owned and controlled by producers themselves. NDDB was established with the
objective of replicating the 'Anand Model' of dairy development. The board, founded in 1965 has
undertaken the challenging task of organizing the illiterate farmers into a large co-operative
network.NDDB supports the development of dairy cooperatives by providing them financial assistance
and technical expertise. Over the years, brands in milk products created by cooperatives have become
synonymous with quality and value. Brands like Amul (GCMMF), Vijaya (AP), Verka (Punjab), Saras
(Rajasthan). Nandini (Karnataka), Milma (Kerala) and Gokul (Kolhapur) are among those that have
earned customer confidence. The Dairy Cooperative Network includes 170 milk unions, operates in
over 338 districts, covers nearly 1,08574 village level societies, and is owned by nearly 12 million
farmer members.
Dairy Co-operative Development in India :
The number of dairy co-operative societies was more in Uttar-Pradesh (18104). The second highest was
in Gujarat. The states in the eastern part of the country had relatively smaller number of such societies.
The states of Karnataka, Tamil Nadu, Maharashtra, Punjab and Rajasthan showed good growth of
societies. In terms of membership of these societies, the state of Gujarat ranked first. This was followed
by Tamil Nadu, Karnataka and Mahrashtra. The membership was very less in all states located in eastern
India. As for the procurement of milk was concerned, about one-third of total milk procured by these
co-operatives comes from Gujarat. It was followed by Maharshtra, Karnataka and Tamil Nadu.
Operation Flood 'Operation Flood ' was launched by the National Dairy Development Board (NDDB),
an institution constituted as a body corporate in 1965, which was declared as an 'institution of national
importance' by an Act of Parliament, in 1965. Operation Flood, launched in 1970, introduced co-
operatives into the dairy sector with the objectives of increasing milk production, augmenting rural

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income, and providing fair prices for consumers. The objectives of Operation Flood can be summarized
as follows:
1. To enable each city’s liquid-milk scheme to restructure and capture a commanding share of its
market;
2. To identify and satisfy the needs of milk consumers and producers, so that consumers’ preferences
can be fulfilled economically and producers can obtain a larger share of the price paid by consumers
for their milk;
3. To facilitate long-term productive investment in dairying and cattle development; and
4. To ensure a sufficient supply of personnel to handle each facet of the project.
The three phases of Operation Flood succeeded in fulfilling a major part of their objectives. During its
first phase,
Operation Flood’s Phase I (1970-1980) linked 18 of India’s premier milk sheds with consumers in
India’s four major metropolitan cities: Delhi, Mumbai, Calcutta, and Chennai.
Operation Flood’s Phase II (1981–1985) increased the milk sheds (collection centers) from 18 to 136;
290 urban markets expanded the outlets for milk. By the end of 1985 there was a self-sustaining system
of 43,000 village co-operatives covering 4.25 million milk producers. Domestic milk-powder
production increased from 22,000 tons in the pre-project year to 140,000 tons by 1985, all of the
increase coming from dairies set up under Operation Flood. Producers’ co-operatives increased direct
marketing of milk by several million liters a day.
Phase III (1985–1996) enabled dairy co-operatives to expand and strengthen the infrastructure required
to procure and market increasing volumes of milk. Veterinary health-care services, feed, and artificial-
insemination services for cooperative members were extended, and member education intensified.
Phase III consolidated India’s dairy cooperative movement, adding 30,000 new dairy co-operatives to
the 42,000 existing societies organized during Phase II. Milk sheds peaked to 173 in 1988-89 with the
numbers of women members and Women’s Dairy Cooperative Societies increasing significantly. From
the outset, Operation Flood was conceived and implemented as much more than a dairy programme.
Rather, dairying was seen as an instrument of development, generating employment and regular
incomes for millions of rural people. Most of the dairy co-operatives in India are based on the principle
of maximization of farmers’ profit and productivity through cooperative effort. This pattern, known as
the Anand Pattern, is an integrated cooperative structure that procures, processes, and markets produce.
Supported by professional management, producers decide their own business policies, adopt modern
production and marketing techniques, and receive services that individually they can neither afford nor
manage. The Anand Pattern succeeds because it involves people in their own development through co-
operatives where professionals are accountable to leaders elected by producers. The Anand model co-
operatives have progressively eliminated middlemen, bringing the producers in direct contact with
consumers. Structure and Services of the Anand Pattern The basic unit in the Anand Pattern is the
village milk-producers’ co-operative, a voluntary association of milk producers in a village who wish
to market their milk collectively. Every milk producer can become a member of the co-operative society
by buying a share and committing to sell milk only to the society. Each producer’s milk is tested for fat
percentage (many also measure solids-not-fat) and is paid on the basis of the quality of the milk. In
addition to milk collection, other services such as cattle feed, artificial insemination, and veterinary
services are also provided by the societies. Village milk producers’ co-operatives in a district are
members of their district co-operative milk-producers’ union. The Union buys all the societies’ milk,
then processes and markets fluid milk and products. Most Unions also provide a range of inputs and
services to the village societies — feed, veterinary services, artificial insemination, and other services
and have milk-processing plants to convert seasonal surpluses of liquid milk into milk powder and other
conserved products. This allows the Union to ensure better returns to its members. The farmers had
realized that marketing was the key to the success of the Anand Pattern and to their success, when they
had control over the marketing system.

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Achievements of the Dairy Cooperatives in India till 2003-04 Reach

• The dairy cooperative network is owned by nearly 12 million farmer members.
• These producers are grouped in nearly 1,08,574 village-level dairy cooperative societies.
• The societies are grouped in 170 district-level unions spanning 338 districts.
• The unions make up 22 state-level marketing federations. Milk Production
• India's milk production increased from 21.2 million MT in 1968 to 88.1 million MT in 2003-04.
• Per capita availability of milk in 2003-04 is 231 grams per day, up from 112 grams per day in 1968-
69.
• India's 3.8 percent annual growth of milk production surpasses the 2 per cent growth in population;
the net increase in availability is around 2 per cent per year. Marketing
• In 2003-04, average daily cooperative milk marketing stood at 148.75 lakh litres; annual growth has
averaged about 4.2 per cent compounded over the last five years.
• Dairy Cooperatives now market milk in about 200 cities including metros and some 550 smaller
towns..
• During the last decade, the daily milk supply per 1,000 urban consumers has increased from 17.5 to
52.0 litres, Innovation
• Bulk vending - saving money.
• Milk travels as far as 2,200 kilometers to deficit areas, carried by innovative rail and road milk tankers.
• Ninety-five percent of dairy equipment is produced in India, saving valuable foreign exchange. Macro
Impact
• The annual value of India's milk production amounts to about Rs. 880 billion.
• Dairy cooperatives generate employment opportunities for some 12 million farm families.
Challenges Faced by the Dairy Cooperatives and Interventions required to strengthen them With the
opening up of the economy, preferential treatments of yesteryears are no more available to the dairy
cooperatives. They are now required to compete in the open market. The terms of the World Trade
dictates removal of all safeguards put in place earlier to protect the dairy industry from unfair outside
competition. As a result, gradually internationalization of our dairy business is taking place. This
transformation demands the dairy cooperatives to improve their performance; be it in marketing or
quality of products or governance. While trying hard to improve their performance and
professionalising their functions and governance, the biggest obstacle that the dairy cooperatives face
today is political and bureaucratic interference. The cooperative laws are unable to provide the
protection the dairy cooperatives require to function as independent business entities. To end this dismal
state of affairs, the most important intervention needed to professionalise the functioning of the dairy
cooperatives is to liberate them from the clutches of the archaic cooperative laws enacted to establish
State control over the affairs of the cooperatives. Additionally, in line with the developed countries,
there should be minimum laws to control the affairs of the cooperatives. Registrars of cooperatives
should be responsible only for registration of cooperatives, their byelaws and arbitration as and when
required. Routine management and governance should totally be left to the wisdom of the owners (i.e.
members) of the cooperatives. The management in majority of the dairy cooperatives carries some or
the other political leanings. As a result, it has become a common practice that the management of dairy
cooperatives, irrespective of performance, gets superseded or suspended as and when opponent political
parties come to power. In consequence, to ensure continuity of and protection to good management,
depoliticalising cooperative institutions is a must. As business institutions, the dairy cooperatives from
time to time are bound to take hard decisions. Irresponsible outside interference in the affairs of the
dairy cooperatives is sure to deteriorate performance, eventually making them unfit for competition. To

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arrest the trend, the members need to be educated on governance matters. A few restrictions in the
cooperative laws could be introduced such as limiting term of members of governing bodies, setting up
independent bodies to hold free, fair and timely election and audit in cooperatives. Improving quality
of products poses a big challenge to the dairy cooperatives. In today’s highly competitive market
demand for superior quality products is on the rise. To capture the world market the necessary
prerequisite is product quality needs to match international standards. Improvements in product quality
are required to enhance and retain their share in domestic market also. As quality upgradation is a long
process, it calls for, besides commitment of the management, substantial investment in hygienic milk
production, upgrading plants and machinery, upgrading manpower skills and setting up facilities for
cold-chain storage and distribution of milk and milk products starting from the farm level. Presently,
the dairy cooperatives do not have the capacity to make such huge investments requiring the
Government support to create institutional facilities for research and development, credit, training and
education etc. Poor productivity of milch animals constrains rapid development of the dairy industry.
Systematic planning and integrated policies and programmes for animal breeding, genetic upgradation
and feed and fodder management could only improve the situation. For all these to happen, the
Government has to intervene and create funds (may be called Dairy Development Fund) for such
programmes to be implemented on mission mode integrating various schemes. Excess manpower and
low skill level of employees are areas of great concern for the dairy cooperatives. The dairy cooperatives
need to shed excess flab in manpower in order to match manpower productivity as per market demand.
Skill sets of the employees need to improve to benchmark desired performance. Since the dairy
cooperatives generally do not have capacity to hire high-calibre professionals, the only out is to invest
in extensive training and education to upgrade the skills of the existing manpower. The employees need
to be educated about the merits of scientific and modern management practices and processes. Securing
members’ participation in the affairs of the cooperatives is another area where the dairy cooperatives
need to work hard. To earn allegiance of the members, cooperatives need to be responsive to their needs.
The dairy cooperatives have to work out suitable strategies so that they can satisfactorily meet the
requirement of the members. They can do so by providing required support services to their members
for veterinary care, input supply and selling their milk and all these have to be done at reasonable cost.
Members need to be encouraged to participate in the business affairs of their cooperatives and they
could no longer be treated as mere suppliers of milk. Deputation of government officers to head the
affairs of cooperatives has to stop to secure members’ participation. Legal provisions to hold free, fair
and timely election are must and have to be ensured by the Government.
14: Problems and Issues facing Farmers groups and cooperatives in Agriculture marketing:
Farmers group and cooperatives:
A farmer group/ cooperative is a business organization owned and controlled by its members for their
mutual benefit. Members finance their cooperative through equity investments. Control comes via
membership rights to vote for and become directors. The directors hire the manager and establish the
policy under which the manager operates. While the manager and directors have little direct control
over the external environment, they do have control over and the responsibility for how the cooperative
adjusts to a continuously changing world environment. Groups and Cooperatives face many problems
and issues, both internally and externally, in seeking to adjust to these national and global changes.
Advantages of marketing from a group
• Collection in one place to bulking of produce so that volume of produce can be achieved and the
traders will be attracted to visit the farmer’s place;
• Regular supply is possible if proper planning and management is done;
• Price fluctuation can be managed if there are practices like contract farming, agreements etc.
• Easy in communication for dissemination of information about price, volume and others;
• Cost of production can be reduced by procuring all necessary inputs using big transport;
• Collection of produce and transport to reduce marketing cost;

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• Access to fund without collateral with group as a guarantee;

• Easy access of funds and other support services by the government and donors;
• More funds can be gathered from the members if big plans are envisioned;
• Post harvest loss can be minimized;
• Provision of capacity building and training from the processing company;
• Bargaining power improved
Problems and Issues
1. Lack of marketing skills Most of the groups or cooperatives usually do not have marketing skill.
They are managed by someone from the members of a group who do not have any knowledge on
marketing and managing business as such. Groups or cooperatives will have to use marketing strategy
to run their business. Some of the innovative strategies followed are: fair price shop, branding etc. They
should advocate Government to support them in providing services and finance as a seed capital to start
their business.
2. Lack of cooperation Past experiences have shown that the group approach works only when the
member of the group have similar problems. The most common problems with the farmers are
marketing of their produce and receiving all types of inputs regularly. Farmers are reluctant to share
their land or work in a common land for growing agricultural commodities. Group has worked in the
land to grow vegetables and collectively sell in the local market. So, it is better to work in a group for
collectively purchasing inputs such as seeds, fertilizers, pest, etc. so that the cost will be reduced and
also for marketing of their produce. It is evident that the single farmer will not be able to fulfill the large
order placed by the market traders. Farmers can join hands working together by bringing their produce
at the collection centres to sell the traders.
3. Weak economic status Most of the cooperative societies are not financially strong enough to deliver
vibrant products and services to ensure their market share. This is a basic challenge before the
cooperatives. They should be made financially self sustained by increasing the members and their
contribution as a share capital.
4. Access to local market It is very difficult to manage and is costly in marketing of produce far from
the cultivation. There are more market opportunities if people can identify local market needs of the
consumer and farmer can easily make a profit by selling it
5. Poor management Cooperatives are efficiently managed by experienced, trained and professionally
qualified staff under the supervision and control of democratically-elected boards of directors.
Organisation should be led and managed by energetic, professional and dynamic persons. Business
should be conducted in accordance with modern management principles. The managers of cooperative
business should be more professional in their market operations. They should be active enough to trace
new marketing opportunities as and when they appear and make use of them for their further growth.
They should make brilliant purchase decisions by studying the market trends. For example, investing
more in fast moving products may increase the returns. Quality should be the key in cooperatives and
steps should be taken to reduce the wastages and cost of goods sold. In short, the manager / secretary
of a cooperative store should deliver his service in a professional way to prove himself competent and
his business successful.
6. Leadership and understanding Leadership and understanding between the team members are the
success factors. If there is understanding between the members then it will be easy for visioning and
planning of activities. There will not be any dispute and will be an attitude of helping each other. Leaders
should take care of providing marketing services to their members without his selfishness.
7. Lack of communication and participation among the members Interaction between the members and
the management committee of cooperative is very less and takes place when there are only economic

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activities. This has caused difficulty in understanding their problems and issues. Experience has shown
that success of cooperatives is due to strong relationship and trust with their membership, which has
been built over years through effective marketing support, services support and transparency of the
exchange process.
8. Absence of common brands To make cooperative businesses successful there is a need of more
common brands which is absent today. For example, dairy products in India have individual names in
each state, and they are well-known as cooperative products to people of that particular state only.
Instead, if we could integrate them under a common brand it will be more successful and beneficial. It
will be recognized as the cooperative product of India not only by Indians but also by the people abroad.
This will reduce the marketing overheads, including promotion costs and will also result in high reach
as a single advertisement serves the purpose.
9. Poor management of Storage facilities There is a common understanding that when there is
oversupply produce can be stored and marketed later when price rises. Most agricultural crops are
suitable for short-term storage, maybe for few days. Storage is usually expensive and spoils its freshness
and quality. In most situations, when the produce is brought out of the store it has to compete with
freshly arrived produce. Finally, farmer will get less price, and in addition they have to pay for the
storage costs as well. There are few crops suitable for long term storage. Storage in production areas is
often not successful because the storage facilities are under utilized for most of the year and are
uneconomic.
10. Middlemen makes excessive profits Why farmers do not get the retail market price? If the retail
price of tomatoes is set at Rs.20 and if the same information is made available in the chart, farmers may
not get the same price. There will be variation in the price received by the farmers due to various quality
factors. Traders are blamed for making more profits. Usually traders are the middlemen, who link the
farmer’s produce with the consumers. Sometimes they also build linkages with the different market far
away from the production area. Many times, they are neglected and tried to sell directly in the market.
Actually, the profit margins for the farmers are more than 60 per cent but due to low quantity of
transaction, farmers are not benefited. For examples, if farmer sells 10 kg of chilli at the rate of Rs. 80
per kg then will get total of Rs. 800. The retail price of chilli is Rs. 100, which shows that farmers have
received 80 per cent margin where as traders margin is only 20 per cent. Traders still make good money
taking advantage of selling in volume. If he sells 8 tons, which is one mini truck load and makes profit
of Rs.160 thousands.
11. Groups and cooperatives formed only for the sake of getting government and donor’s support.
Groups or cooperatives should be managed in a more business-like manner – these are not social clubs
or charity organisations. They should provide advice to the farmers on planting suitable crops, which
earn them higher income. Regular dialogues among farmers, cooperatives and market authorities should
be undertaken to resolve problems. For success, the farmers’ orientation should be on improving
productivity and quality. Farmers will have to take the risk at different stages of production until the
marketing. So risk management strategies at various stages of marketing from production until the
marketing will help to manage risk.
12. Old traditional business activities There are many cooperatives, which do not take care of market
trend and follow the same old business principle. They are not able to adjust themselves by providing
knowledge on business techniques adopted by other professionals to their members.

By: Artee Bhadauria