Types of Cooperative societies in India

Majority of the co-operatives in the country combine some business activity along with providing services to members. Though they are not profit oriented, they can earn reasonable profits by providing services to non-members.

Types of Cooperative Societies in India

Based on the nature of activities performed, co-operatives can be categorized as:

  1. Consumers’ Co-operative Societies.
  2. Producers’ Co-operative Societies.
  3. Marketing Co-operatives.
  4. Housing Co-operatives.
  5. Co-operative Credit Societies.
  6. Co-operative Farming Societies.

1. Consumers’ Cooperative Societies: They are the oldest form of cooperatives. They are formed for the benefit of consumers who wish to get household goods at reasonable prices. These societies make bulk purchases of goods from producers directly or from wholesalers at wholesale rates and sell the goods to members. Sometimes the goods are also sold to non-members. The prices charged from non-members would be higher when compared to the prices charged from members.

Since purchases are made directly from the producers or wholesalers in bulk quantities, the cost of purchases is less and they are able to pass on this benefit to members in the form of lower prices. They ensure steady supply of goods to members. The difference between the sale price and purchase price represents the surplus earned. The surplus is distributed among the members in the form of bonus.

The first consumer co-operative was set up in 1903 in Madras province. Currently there are around 9,000 consumer co-operatives in the country. There are Primary societies at the local level, Central or wholesale societies at the district level, State Consumer Co-operative Federation at the State level and National Co-operative Consumer Federation at the National level.

2. Producers Co-operatives: They are formed by small producers who plan to obtain inputs (raw materials, components, tools and equipment) and to sell their output (finished goods) by direct distribution and without any involvement of middlemen. They are also called as industrial co-operatives. Goods are produced to meet the requirements of members. Goods can also be sold to outsiders at a profit. Certain portion of the profits earned is spent for the welfare of the community and the balance is distributed among members.

3. Marketing Co-operatives: They are voluntary associations of producers formed with the objective of ensuring a steady market for the output of members. Marketing Co-operatives are especially suitable for marketing of agricultural products.

They seek to protect producers from being exploited by the middlemen. The output of the members is pooled together, the products are processed (e.g. crushing of oil seeds, ginning and pressing of cotton etc.) graded and sold at the best possible price. The members are assured of correct weight and measurement and fair prices for their produce. The sale proceeds are distributed among the members according to their contribution to the pool. They also provide credit, storage facilities, information about market price, demand and supply etc.

4. Housing Co-operatives: Housing co-operatives are formed by those who are interested in acquiring residential property. They undertake activities relating to purchase of land, obtaining governmental approvals, development of the site, construction of houses or flats and allotment of houses/flats to its members. Since housing co-operatives construct many flats or buildings they are able to purchase building materials at cheaper rates. The Stamp duty to be paid when property is purchased from a co-operative society is waived off. Therefore members are benefited by the lower cost of property.

5. Co-operative Credit Societies: The objective of forming cooperative credit societies is to provide loans to members at reasonable rates of interest and to develop the habit of thrift among members. They accept deposits from members and provide loans to members at reasonable rates of interest. The formalities are much simpler when compared to availing of a bank loan. The co-operative credit societies are of two types. They are:

  1. Agricultural credit societies and
  2. Non agricultural.credit societies.

Agricultural credit societies are formed in villages and provide loans to agriculturists and rural artisans. Non agricultural credit societies are formed in urban areas and provide loans to people living in urban or semi-urban areas.

Co-operative credit societies in India operate in a three tier structure. At the lowest tier are the Primary Agricultural Co-operative Credit Societies which are organized at the village level. At the second tier are the Central Co-operative Banks organized at the district level. At the uppermost tier are the Sate Co-operative banks organized at the State level. From July 1982, NABARD has been designated as the apex institution for policy making, planning and operations in the field of agriculture credit.

6. Co-operative Farming Societies: They are formed by small farmers with the objective of maximizing agricultural output. It is especially suitable for developing countries like India where land is highly fragmented. High fragmentation of land leads to low output, and lack of resources to implement modern methods of cultivation. In the case of co-operative farming societies, land holdings of members are consolidated, modern methods of cultivation adopted and good quality of seeds and fertilizers are used. Since the purchase of seeds and fertilizers and hiring of equipment is done in a centralized manner, the costs are lower. The benefits of collective farming such as lower cost of inputs, implementation of modern methods of cultivation etc leads to higher productivity and profits which is shared by all the members.

The co-operative movement has played an important role in promoting economic welfare among the weaker sections and the rural community. Political interference and corruption among members of the managing committee in some co-operatives have led to their failure. Information regarding the benefits offered by the co-operatives has to be communicated on a wide scale among the rural poor and weaker sections of the society. They should be encouraged to voluntary associate themselves and start co-operative enterprises for furthering their welfare.

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