Discuss the characteristics, merits and limitations of co-operative form of organization. Also describe briefly different types of co-operative societies.

Q.4:- Discuss the characteristics, merits and limitations of co-operative form of organization. Also describe briefly different types of co-operative societies.



According to The Indian Co-operative Societies Act, 1912, “Co-operative organization is a society which has its objectives for the promotion of economic interests of its members in accordance with co-operative principles.”



Features of a Co-operative Society
(i) Voluntary Membership The membership of a co-operative society is voluntary. There is no compulsion for anyone to join or quit a society after serving a notice procedurally. Membership is open to all, irrespective of their religion, caste and gender.
(ii) Legal Status Registration of a co-operative society is compulsory. This accords a separate identity to the society which is distinct from its members. The society can enter into contracts and hold property in its name, sue and be sued by others. As a result of being a separate legal entity, it is not affected by the entry or exit of its members.
(iii) Limited Liability The liability of the members of co-operative society is limited to the extent of the amount contributed by them as capital. This defines the maximum risk that a member can be asked to bear.
(iv) Control In a co-operative society, the power to take decisions lies in the hands of an elected managing committee. The right to vote gives the members a chance to choose the members who will constitute the managing committee and this leads the co-operative society a democratic character.
(v) Service Motive The co-operative society through its purpose lays emphasis on the values of mutual help and welfare. Hence, the motive of service dominates its working. If any surplus is generated as a result of its operations, it is distributed amongst the members as dividend in conformity with the bye-laws of the society.



Merits of Co-operative Society

(i) Equality in Votes Co-operative society is governed by the principle of ‘one man one vote’. Each member is entitled to equal voting rights irrespective of the amount of capital contributed by a member.
(ii) Limited Liability The liability of members of a co-operative society is limited to the extent of their capital contribution and hence, the personal assets of the members cannot be used to repay business debts.
(iii) Continuity Death, bankruptcy or insanity of the members do not affect continuity of a co-operative society.
(iv) Economy in Operations The focus of co-operative society is on elimination of middlemen which helps in reducing costs. The members generally offer honorary services to the society and the risk of bad debts is lower as customers or producers are members of the society too.
(v) Government Support The co-operative society is supported by the government in the form of low taxes, subsidies and low interest rates on loans.
(vi) Ease of Formation The co-operative society can be started with a minimum of ten members and the registration procedure is done under Co-operative Societies Act, 1912.



Limitations of Co-operative Society

(i) Limited Resources Capital contributions in a cooperative society are from the members with limited means.
(ii) Inefficient Management The members of co-operative societies are not professionals and offer honorary services on a voluntary basis. They are not equipped to carry out the management functions effectively.
(iii) Lack of Secrecy It is difficult to maintain secrecy about the operations of a co-operative society due to open discussions in the meetings and disclosure obligations as per the Societies Act, (7).
(iv) Government Regulations Co-operative societies have to comply with several rules and regulations related to auditing of accounts, submission of accounts, etc and also work under control of state co-operative departments.
(v) Internal Conflicts Internal conflicts arise when personal interests start dominating the welfare motive.



Types of Co-operative Societies

(i) Consumer’s Co-operative Societies The consumer co-operative societies are comprises to protect the interests of consumers as its aim is eliminating middlemen to achieve economy in operations and provide good quality products at reasonable prices. It purchases goods in bulk directly from the wholesalers and sells goods to the members.
(ii) Producer’s Co-operative Societies These societies are comprise to protect the interest of small producers and are set up to provide the supplying of raw materials, equipment and other inputs to the members and buying their output for sale. Profits among the members are distributed on the basis of their contributions to the society.
(iii) Marketing Co-operative Societies Such societies consist to help the small producers who wish to obtain reasonable prices for their output and want to market their products. Its members jointly perform marketing functions like transportation, warehousing, packaging, etc to sell the output at the best possible price and profits are distributed according to each member’s contribution to the pool of output.
(iv) Farmer’s Co-operative Societies These societies comprise of farmers as members who jointly take up farming activities to gain the benefits of large scale farming and increase the productivity. Such societies provide better quality seeds, fertilizers, machinery and other modern techniques to member farmers.
(v) Credit Co-operative Societies Credit co-operative societies are formed for providing easy credit on reasonable terms to the members. These societies provide loans at low rates to members out of the amounts collected as capital and deposits from the members thereby eliminating exploitation by moneylenders.
(vi) Co-operative Housing Societies Co-operative housing societies help people with low income to construct houses at reasonable costs and giving them the option of paying in installments. These societies construct flats or provide plots to members for construction of houses.