Cooperative society

Imagine a hundred families in one neighbourhood who all feel they pay too much for dal, atta and sugar. They can join together, buy in bulk and share the savings. That is the idea of a cooperative society: a voluntary association of persons who join together for their welfare, run on democratic lines. It must be registered under the Cooperative Societies Act, 1912 (or the state's own Act).

Its features:

• Voluntary membership: anyone with a common interest may join and leave freely; membership is open to all, whatever their religion, caste or gender.
• Legal status: registration gives it a separate identity from its members.
• Limited liability: members' liability is limited to the capital they put in.
• Control by an elected managing committee.
• Service motive: it exists to help its members, not mainly to make profit.

Merits: equality in voting ('one man one vote', whatever capital a member holds); limited liability; stable existence (it is not affected by members leaving or dying); economy in operations (members often give their services free, and middlemen are cut out); support from government (low taxes, loans at low interest); and ease of formation.

Limitations:

• Limited resources, because members' capital is usually small.
• Inefficient management, as it cannot pay high salaries to skilled managers.
• Lack of secrecy, since its affairs are discussed openly at meetings.
• Government control: it must follow rules, have its accounts audited and file returns.
• Differences of opinion among members.

Types of cooperatives:

• Consumers': buy goods in bulk and sell them to members at fair prices.
• Producers': help small producers get raw materials and tools.
• Marketing: help small producers sell their output together; Amul, the milk cooperative, is a famous example.
• Farmers': help farmers get better seeds, fertilisers and machinery by farming together.
• Credit: give members loans at low interest, saving them from moneylenders.
• Housing: help members build or buy homes at a reasonable cost. Building many houses together costs less per house than building each one alone.