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Co-operative Society
So far you have learnt about sole proprietorship, partnership and joint stock company as
different forms of business organisation. You must have noticed that besides many differences among them in respect of their formation, operation, capital contribution as well as
liabilities, one common similarity is that they all engage in business activities to earn
profit. Without profit it is impossible for them to survive and grow. But there are certain
organisations which undertake business activities with the prime objective of providing
service to the members. Although some amount of profit is essential to survive in the
market, their main intention is not to generate profit and grow. They pool available
resources from the mem-bers, utilise the same in the best possible manner and the benefits
are shared by the mem-bers. Let us know more about them.
9.1 Objectives
After studying this lesson, you will be able to:
1! explain the meaning of co-operative society;
2! state the characteristics of a co-operative society;
3! describe the procedure of formation of a co-operative society;
4! identify different types of co-operative societies;
5! discuss the advantages and disadvantages of a co-operative society; and
6! assess the suitability of cooperative society form of business organisation.
Business Studies
v
elp
e
inste
ad of
S
com
o
petiti
c
on
i
3! Self
e
help
t
inst
y
ead
1! R
of
dep
e
end
n
enc
d
e
e
r
s
e
r
v
i
c
e
r
a
t
h
e
r
t
h
a
n
Om
ba
j k
ei
c
n
t
g
i
v
ep
s r
o
of
f i
t
C
oM
2!
ou
pt
eu
r a
al
t h
i
94
v.
il A
la g
ga
e. i
Sn
o
mh
ee
b
of
di
yn
md
as
y
te i
ll t
hd
i i
mf
tf
oi
sc
el u
l l
t t
h,
ea
ms
il
kh
i e
n
t d
ho
ee
ns
e
an
r o
bt
yh
t a
ov
we
n
om
r o
ci n
tye
y to go
to the
town to
sell
milk.
What
should
he do?
He
is
faced
with a
problem
.
Do
you
have
any
solution
for him?
One day
that
poor
villager
met
a
learner
of NIOS
who had
earlier
read this
lesson.
The
learner
told
him,
you see,
you are
not the
only
person
facing
this
problem
. There
are
many
others
in your
village
and also
in the
nearby
vn
il d
la
ga
e
ws
ho
ol
f u
at
ci
eo
an
si
mt
il o
a
r y
po
r u
or
bc
le o
mm
. m
Wo
hn
y
dp
or
no
t b
yl
oe
um
al ?
l
si I
t n
t
ot
gh
et e
h
em
r o
ar
nn
di
fi n
g you
can
collect
the
surplus
milk at
a
commo
n place
and
send
somebo
dy
to
the
nearby
town to
sell it.
Again
in the
evening,
you can
sit
together
and
distribut
e
the
money
accordin
g
to
your
contribu
tion of
milk. Of
course
first you
have to
deduct
all the
expense
s from
the sale
proceed
s.
That
villager
agreed
to what
the
learner
said. He
t d
ou
l c
de
er
vs
e
r i
yn
b
oh
di
ys
a
bv
oi
ul
t l
t a
hg
is e
n.
eB
wy
i
ds
ee
al
al
ni
dn
f g
o
r t
mh
ee
d
am
gi
r l
ok
u
pi
on
f
mt
il h
ke
p
r n
oe
arby
town
they
were all
able to
earn
money.
After
that
they did
not face
any
problem
of
finding
a
market
for the
surplus
milk.
This
process
continue
d for a
long
time.
One day
some
body
suggeste
d that
instead
of
selling
only
milk
why not
produce
other
milk
products
like
ghee,
butter,
cheese,
milk
powder
etc. and
sell
them in
t r
ho
ed
mu
ac
r e
kd
et
at q
au
ba
et l
te i
r t
py
ri
cm
ei
?l
Ak
ll
op
f r
t o
hd
eu
mc
at
gs
r
ea
en
dd
a
nf
do
du
i n
dd
t
ha
e
sv
ae
mr
e. y
T
hg
eo
yo
pd
market
for their
products
not only
in the
nearby
town
but in
the
entire
country.
Just
think it
over. A
poor
villager,
who
was not
able to
sell five
litres of
milk in
his
village,
is now
selling
milk
and
milk
products
through
out the
nation.
He
is
now
enjoyin
g a good
life.
How
did
it
happen?
Who
made it
possible
? This is
the
reward
of
a
joint
effort or
cc
oo
oo
pp
ee
r r
at a
i r
oi
n,
. w
h
T
e
h
r
e
e
te
r
t
m
h
c
e
o
w
o
o
p
r
e
d
r
at
c
i
o
o
n
m
is
e
d
a
e
n
ri
s
v
e
d
w
fr
i
o
t
m
h
t
h
a
e
n
L
d
at
i
o
n
p
w
e
o
r
r
a
d
ri
means
to
work.
Thus,
cooperatio
n means
working
together
.
So
those
who
want to
work
together
with
some
commo
n
economi
c
objectiv
e
can
form a
society
which is
termed
as cooperativ
e
society
. It is a
voluntar
y
associati
on
of
persons
who
work
together
to
promote
their
economi
c
interest.
It works
on the
principl
ep
op
f o
sr
el t
f- t
ho
el
pt
ah
se
w
el m
l e
am
sb
me
ur
t s
u.
al N
ho
el b
po
. d
Ty
h
ej
mo
ai i
nn
os
b
jea
ct
i c
vo
eo
is p
t e
or
pa
r t
oi
vv
i e
d
es
so
uc
iety to
earn
profit.
People
come
forward
as
a
group,
pool
their
individu
al
resource
s, utilise
them in
the best
possible
manner,
and
derive
some
commo
n
benefit
out of it.
In the
above
example
,
all
produce
rs
of
milk of
a village
joined
hands,
collecte
d
the
surplus
milk at
a
commo
n place
and sold
milk
and
milk
products
in the
market.
This
wt
ah
sa
pv
oe
s
si b
be
le e
bn
e
cp
ao
us
ss
ei
ob
f l
t e
h
ei e
r i
j t
oh
i e
nr
t t
eo
ff
os
rt e
. l
I l
no
dr
i p
vr
i o
dd
uu
al c
l e
y
it a
wn
oy
u
l m
di
nl
ok
product
in that
village.
They
had
formed
a
cooperativ
e
society
for this
purpose.
In
a
similar
way, the
consume
rs of a
particula
r locality
can join
hands to
provide
goods of
their
daily
need and
thus,
form a
cooperative
society.
Now
they can
buy
goods
directly
from the
producer
s and sell
those to
members
at
a
cheaper
price.
Why is
the price
cheaper?
Because
they buy
gd
ou
oc
de
s r
di a
re n
ct d
ly
fr t
oh
me
th r
ee
pb
r y
o
the
middlem
ens
profit is
eliminate
d.
Do
you
think it
would
have
been
possible
on
the
part of a
single
consume
r to
Co-operative Society
Consumers Co-operative Society: These societies are formed to protect the interest of general consumers by making consumer goods available at a reasonable price.
They buy goods directly from the producers or manufacturers and thereby eliminate
the middlemen in the process of distribution. Kendriya Bhandar, Apna Bazar and
Sahkari Bhandar are examples of consumers co-operative society.
2.
3.
4.
Co-operative Credit Society: These societies are formed to provide financial support to the members. The society accepts deposits from members and grants them
loans at reasonable rates of interest in times of need. Village Service Co-operative
Society and Urban Cooperative Banks are examples of co-operative credit society.
5.
6.
Business Studies
(3) Small producers who find it difficult to sell their products individually may form
__________________ co-operative society to sell their produce.
(4) Consumers co-operative societies help to eliminate ________ in the process
of dis-tribution of goods.
(5) Pani-panchayats and lift-irrigation co-operative societies are example of
_____ co-operative society.
2.
3.
4.
5.
4.
Service motive: Co-operatives are not formed to maximise profit like other forms
of business organisation. The main purpose of a Co-operative Society is to
provide ser-vice to its members. For example, in a Consumer Co-operative Store,
goods are sold to its members at a reasonable price by retaining a small margin of
profit. It also provides better quality goods to its members and the general public.
5.
Separate Legal Entity: A Co-operative Society is registered under the Coopera-tive Societies Act. After registration a society becomes a separate legal
entity, with limited liability of its members. Death, insolvency or lunacy of a
member does not affect the existence of a society. It can enter into agreements
with others and can purchase or sell properties in its own name.
96
Co-operative Society
6.
7.
2.
97
(1)
(2)
(3)
(4)
Business Studies
2.
3.
4.
5.
Elimination of Middlemens Profit: Through co-operatives the members or consumers control their own supplies and thus, middlemens profit is eliminated.
6.
State Assistance: Both Central and State governments provide all kinds of help to the
societies. Such help may be provided in the form of capital contribution, loans at low
rates of interest, exemption in tax, subsidies in repayment of loans, etc.
7.
Stable Life: A co-operative society has a fairly stable life and it continues to
exist for a long period of time. Its existence is not affected by the death,
insolvency, lunacy or resignation of any of its members.
(1)
(2)
(3)
(4)
It can exist for long due to a legal entity separate from its members.
(5)
98
Besides the above advantages, the co-operative form of business organisation also suffers
from various limitations. Let us learn these limitations.
Co-operative Society
1.
Limited Capital: The amount of capital that a cooperative society can raise
from its member is very limited because the membership is generally
confined to a particular section of the society. Again due to low rate of return
the members do not invest more capital. Governments assistance is often
inadequate for most of the co-opera-tive societies.
2.
3.
4.
Lack of Co-operation: The co-operative societies are formed with the idea
of mu-tual co-operation. But it is often seen that there is a lot of friction
between the mem-bers because of personality differences, ego clash, etc. The
selfish attitude of mem-bers may sometimes bring an end to the society.
5.
Disadvantages
Easy formation
Limited Capital
Open membership
Problems in Management
Democratic Control
Lack of Motivation
Limited Liability
Lack of Cooperation
Elimination of Middlemans
Profit
Dependence on Government
State Assistance
Stable Life
99
Business Studies
c
IF
F
C
O
:
In
di
a
n
F
ar
m
er
s
a
n
d
F
er
til
is
er
s
C
oo
p
er
at
iv
e
Lt
d.
K
R
I
B
H
C
O
:
K
ri
sh
a
k
B
h
ar
at
i
C
oo
p
er
at
iv
es
.
ferred.
Housin
g cooperati
ves,
Market
ing cooperati
ves,
etc., are
formed
to
achieve
the
commo
n
econo
mic
objecti
ves of
the
membe
rs.
Genera
lly cooperati
ve
society
is
suitable
for
small
and
mediu
m size
busines
s
operati
on.
Howev
er,
large
scale
cooperati
vn
e
F
s
oT
ci
____
et
____
ie_.
s
li C
k
P
e
I
F
F
C
O
,
K
R
I
B
H
C
O
et
c.
a
r
e
al
s
o
f
o
u
n
d
(4)
i
n
I
n
d
ia
.
s
o
ci
et
ie
s
b
e
c
a
u
s
e
t
h
e
y
d
o
n
o
t
g
et
a
d
e
q
u
at
e
_
_
_
_
_
_
.
L
ar
g
e
c
o
o
p
er
at g
iv
e9
s
oA
ci
et M
ie
s A
li
kC
e
1)
K
R
I
B
H
C
O
a
n
d
I
F
F
C
O
s
er
v
e
th
e
w
h
ol
e
_
_
_
_
_
_.
(5)
T
h
e
r
e
m
a
y
b
e
ri
m
e
d
to
el
i
m
in
at
e
th
e
r
ol
e
o
f
m
id
dl
e
m
e
n
a
n
d
s
u
p
pl
y
hi
g
h
q
u
al
it
y
g
o
o
d
s
and
servi
ces
at
reas
onab
le
price
to
cons
umer
s.
2) Produ
cers
cooper
ativ
e
soci
ety for
med
to
help
prod
ucer
s to
proc
ure
raw
mat
erial
,
tool
s,
equi
pme
nt
etc.
3) Cooper
ativ
e
mar
keti
e
t
f
o
r
s
m
a
ll
p
r
o
d
u
c
e
r
s
t
o
s
e
ll
t
h
e
o
u
t
p
u
t
a
n
d
g
e
t
a
g
o
o
d
r
e
t
u
rn
on
sale.
4) Cooper
ativ
e
cred
it
soci
ety for
med
to
prov
ide
fina
ncia
l
help
to
me
mbe
rs
thro
ugh
loan
s at
r
a
g
e
s
a
v
i
n
g
h
a
b
it
a
m
o
n
g
m
e
m
b
e
r
s.
Co-operative Society
5)
6)
2!
Co-operative societies are easy to form and have a stable life. Membership is
open to all and members have limited liability. There is democratic
management based on one-man, one vote. The societies have stable life and
they enjoy government pa-tronage.
3!
4!
3.
4.
5.
6.
7.
State the functions of co-operative credit societies. State the types of cooperative credit societies, giving one example each.
8.
9.
What are the causes of conflict and lack of motivation among members of a
co-operative society?
101
Business Studies
ve society in
9.4
your locality?
If yes, then
(i)
visit the
Cap
office and
ital,
find out:
(ii)
Pro (1)
fit,
(iii)
Re
mu
ner
atio
n,
(iv)
Nat
ion,
(v)
Go
ver
nm
ent
A
c
t
i
v
i
t
y
F
o
r
Y
o
u
Is
th
er
e
an
y
co
op
er
ati
(2)
W
h
a
t
i
s
t
h
e
p
u
r
p
o
s
e
o
f
t
h
e
s
o
c
i
e
t
y
?
W
h
o
a
r
e
t
h
e
m
e
m
b
e
r
s
of
th
e
so
cie
ty
?
(3) Wha
t
ar
e
th
e
act
ivi
tie
s
of
th
e
so
cie
ty
?
(4) Doe
s
th
e
so
cie
t
y
f
a
c
e
a
n
y
p
r
o
b
l
e
m
s
i
n
it
s
o
p
e
r
a
ti
o
n
s
?
1
0
2