Cooperatives-how Is That?

Cooperatives- how is that?

Professor paramjit Sharma [email protected]

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Cooperatives - how is that? Historically, cooperatives are in existence in this world for more than a century and half. In many countries cooperatives served their objectives for which these were created and in many countries there has long been confusion in the mind of the public on to what constitutes a Cooperative and the Governments are not sure about their role in the development of a country. They are not sure to whether to continue development process through cooperatives or adopt some other alternative. Cooperatives are simply a special type of business enterprise within the formal market system, both economic and social in character, which reflect a deep sense of social and environmental responsibility. True cooperatives could be those which come in the ambit of this statement. The word true cooperatives may again raise some controversy. What is a true cooperative?

The one which achieve its objectives or the one which distribute

handsome dividend to its members or the one which earns profits or the one professionally managed or the one which applies the cooperative principles and values or the one which has enlivened all the characteristics mentioned thereof. According to the definition formulated by International cooperative Alliance, Cooperatives are, ‘autonomous associations of persons united voluntarily to meet their common economic and social needs through jointly-owned and democratically-controlled enterprise'. If this definition is analyzed, there are four-five conceptual characteristics of cooperatives i.e. autonomous organizations, united voluntarily, meeting economic and social objectives and jointly-owned and democratically-controlled enterprise'. Autonomous organization signifies that cooperatives are independent organizations having the freedom to work independently. It needs to be validated, whether cooperatives are autonomous organizations or not.

The second important characteristic is, members are united

voluntarily. This is also not true always. The third characteristic is, meeting economic and social objectives of the members. That means increasing the income of the members and helping to raise their social status. Large numbers of cooperatives are defunct and increasingly incurring losses. So there is some amount of doubt about this characteristic too.

The fourth one indicates, members jointly own the cooperative.

Ownership by

members is ok on paper, but the members in cooperatives are hardly involved in decision making. Last characteristic says cooperatives are democratically controlled institutions, which means board of the cooperatives is democratically elected.

There are numerous

examples to nullify this characteristic if we look at the role of the registrar, big farmers in case of agricultural societies, businessmen & industrialist in case of urban Banks. ---------------------* Professor & Head, Centre for IT, VAMNICOM, Pune

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The question than comes, what are cooperatives doing or done? Are they justifying the characteristics imbedded in its definition?

The answer may be sought in terms of a

question, which is often asked by bowler in a cricket match to an Umpire.

While

appealing, the bowler raises his voice to say - how is that? Such appeals can be made by the bowler or the field men against the batman, when according to them the batsman is either leg before wicket, or run out or caught or hit his wicket or handed the ball etc. The umpire who is expected to be knowledgeable about the rules of the cricket declares the batsman out or not out. The umpire never declares that the batsman is either out or not out. While in doubt he refers the matter to the third umpire, who helps the field umpires in taking right decision

No doubt cooperatives can not be compared with a game of

cricket. But we can certainly ask a question to know whether cooperatives have achieved the purpose for which they have been created or not and may be to what extent? Actually a true cooperative must comply with entire five characteristics of the definition for being eligible to be called a cooperative.

Therefore, it may be pertinent to analyze the

cooperatives as such through a question about its justification & credibility. Purpose of cooperatives - needs of members or board. As mentioned earlier the cooperatives are formed to meet the economic and social needs of the members.

If we look at formation of consumer cooperatives in India, these were

formed after Chinese invasion. More out of the need of the state, rather than the need of the public. Industrial Cooperatives are mostly one family institution. What ever may be the reasons for the formation of sugar cooperatives, now these are serving as launching grounds into politics. The labour cooperatives are often formed to get labour contracts rather than collectively joining to enhance their bargaining power or income. The urban banks are mostly formed by businessmen and industrialist to serve their own interests and housing cooperatives formed by the builder. Members contact point is only annual general meeting which is hardly attended by the members.

It is the board, which

functions supreme rather than the members, who hardly shows their presence in the AGM’s, not because they are not interested but the board invokes them in a manner to make them disinterested in the affairs of the organization. Cooperative Governance - who are the leaders? Who comprise the board members of the cooperatives? In case of Credit cooperatives, they are often big landlords who may or may not require credit. In case of sugar cooperatives, they could be from a political family inspiring to be member of legislative Assembly or parliament. In case of Urban Bank, they may be industrialist, who can facilitate their well wishers to make use of the facilities of the Bank. Very rarely, competent and professional person find place amongst the board.

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Consumer's Cooperatives - Price or Service Why formed; Are they controlling price, matching with the department stores, Apna, Kendriya Bhandar, Warna, other's have just failed.

Prices are high, services are poor.

Worldwide, particularly in Europe, the consumer’s cooperatives have done wonderful service. The Cooperative Group of United Kingdom, KF of Sweden and many more has size and strengths to compete with private sector. But in most of the developing countries, cooperatives just could not sustain the competition of private sector.Neither in Price nor in Service Housing cooperatives Clusters of housing cooperatives in Maharashtra, Gujarat. In other states followed. In Maharashtra/Gujarat more or less builders formation.

In other states they work as

financing institutions with interest rates much higher than other banks.

Can this

compete? Credit cooperatives Credit cooperatives were the first cooperative institution initiated in India with the objective to save Indian farmers from the crutches of money lenders. Recent central Govt. initiatives to waive Rs.70,000 crores loans of farmers could be the biggest mockery of these institutions. Have they reduced or increased rural indebt ness of the farmer's. Marketing cooperatives - apex or primaries Marketing cooperatives were formed to help farmers in getting better prices for their crops. A structure was created with primary Marketing societies at village or Mandi lend, district federation at district level and apex at state level. While district level federations lost their stings in due course of times and the primaries, first got confused between their role and the primary agricultural societies and later got completion frame the apex societies, which opened their own branches at the area of operation of the marketing societies. Principles of Cooperations & Values From rocdale pioneer to 1995 cooperative identity, the cooperatives principles have seen many changes to regulate the cooperatives.

If we look at the seven principles of the

cooperation, there is hardly any one followed scrupulously in Toto. How about cooperative Values? Very rarely followed but there could be lot of deliberations on this topic at all forums. Even if cooperatives strict to values advocated by Rochdale pioneers, they can get inherent strengths to success even at this stage. Cooperative law - State or Central Control

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To regulate cooperatives, cooperative law is administered at State and Central level. There is a cooperative law and rules of every state and Multi State cooperative societies Act controls multi-state or central cooperative societies. Cooperative Election The cooperative elections in some organizations are contested fiercely and in some organizations it is just a formality. The same board members continue to be in the board for many years and not many people are taking interest in contesting elections, and in some organizations the present board does not allow outsiders to contest elections. Similarly the cooperative law in some of the states is not implemented in true spirit which allows the same board to continue for more number of years and these board members always take it for granted to become the board members of these Cooperatives. Lot of changes in the Cooperative Act and Rules are required to set right the elections in Cooperatives. In some of the organizations crores of Rupees are spent for contesting the election of a Chairman or board member. What can be the reason behind it needs to be proved. Members or State Institutions Cooperatives are often called Sarkari Institutions.

In fact in some of the States, they feel

proud to mention even in their display board that this is a Government Organisation. No doubt the State is free to give grants to the Cooperatives but they should never contribute to the share capital of a Cooperative. Therefore, once the State becomes a shareholder they also become its member and start dominating over the Management of the Organisation. This should be discouraged at all cost. Capital - owned or borrowed One of the reason for success of many Cooperatives is contributed by generation of its own capital. Because, if they have their own capital, no interference from Government or other credit agencies can be foreseen in the Management of that Organisation.

Statistically,

most of the Cooperatives have borrowed from Government or other Credit Institutions to run the operation of their organization. Unless the money is shared or contributed by the members they may not take interest in the Management of that Organisation. Therefore, this aspect of borrowing capital from Government of credit institutions may be discouraged at all cost. Number of cooperatives - Quality Cooperatives always boast for large number of Cooperatives in India. Many of them are mostly dormant. What is more important to judge can be their contribution in increasing the income of their members rather than large number of cooperatives.

In fact these

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Cooperatives need to be consolidated like what has happened in U.K. where Cooperative group was merged with many retail organizations to form one organization rather than showing so many different organizations doing the same business. Conclusion Nevertheless Cooperatives have survived for more than 150 years in this world and over a century in India. There must have been some inherent strength in these Institutions that they have not failed despite going through many problems.

If we look at some

cooperatives in Europe, they are competing with much larger network of retailing institutions and in many cases successful than their private counter parts. Recently ICA has prepared a list of 300 Biggest Cooperatives in the world.

Their turnover is much

larger than many Organizations listed in Fortune 500. It may be astonishing to note that ICA is a part of the biggest human network which is next only to United Nations. Similarly the cooperative training set up worldwide is one of the best in the world and Cooperatives are considered as a part of the third sector with social objectives to achieve. We may like to conclude that Cooperatives which started with only Credit in its manifesto has now spread in almost all field and opening some of the vistas where private sector is hesitating to enter.

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