Cooperation and Rural Development CBCBA5T09B

Syllabus topics (RTMNU)

• Meaning, Definitions & Principles of Co-operation
• Role of Co-operation in Economic Development
• Co-operative movement in India – origin, progress
• Role of Government in the development of co-operation in India

Meaning and Definitions of Co-operation

Co-operation means working together voluntarily for a common economic purpose. A co-operative society is an association of persons who join voluntarily, on the basis of equality, to promote their common economic interests through a jointly owned and democratically controlled enterprise.

Principles of Co-operation

The first successful modern co-operative was the Rochdale Society of Equitable Pioneers (England, 1844), started by 28 weavers. The ICA restated the principles in 1995:

1. Voluntary and open membership — open to all who can use the services, without discrimination.
2. Democratic member control — "one member, one vote", irrespective of shares held.
3. Member economic participation — members contribute capital equitably; limited interest on capital; surplus used for development, rebates to members in proportion to transactions.
4. Autonomy and independence — controlled by members, even when taking government help.
5. Education, training and information for members, elected representatives and staff.
6. Co-operation among co-operatives — local, national and international.
7. Concern for community — sustainable development of their communities.

Role of Co-operation in Economic Development

1. Rural credit — cheap credit to farmers; frees them from moneylenders.
2. Agricultural development — supply of seeds, fertilisers, irrigation, marketing.
3. Dairy and agro-processing — Amul and the White Revolution; co-operative sugar factories of Maharashtra.
4. Employment and self-employment in villages; handloom, fisheries, labour co-operatives.
5. Fair prices — consumer co-operatives check profiteering.
6. Housing — co-operative housing societies in cities.
7. Equitable distribution of income; reduces exploitation.
8. Democratic training and leadership at the grassroots.
9. Women's empowerment — e.g. Lijjat Papad, women's dairy societies.

Co-operative Movement in India: Origin

• Rural indebtedness and famines of the late 19th century led to the idea (Frederick Nicholson's report, Madras, 1895).
• Co-operative Credit Societies Act 1904 — the movement formally began; only credit societies allowed.
• Co-operative Societies Act 1912 — non-credit societies and federations (central banks) allowed.
• Maclagan Committee 1915 — reviewed the movement and suggested a three-tier credit structure.
• 1919 — co-operation became a State (provincial) subject; Bombay passed its Co-operative Societies Act in 1925.
• 1935 — RBI set up its Agricultural Credit Department.

Progress after Independence

• Co-operation was given an important place in the Five-Year Plans.
• All India Rural Credit Survey Committee (Gorwala), 1951–54 — state partnership and integrated rural credit.
• Growth of co-operative sugar factories, dairies (NDDB 1965, Operation Flood 1970), fertiliser co-operatives (IFFCO 1967, KRIBHCO), marketing federations (NAFED).
• NABARD (1982) for rural credit and refinance.
• Multi-State Co-operative Societies Act 2002 (amended 2023).
• 97th Constitutional Amendment (2011, in force 2012) — right to form co-operatives under Article 19(1)(c), Article 43B, and Part IXB; in 2021 the Supreme Court held Part IXB valid only for multi-State co-operatives.
• Ministry of Co-operation created at the Centre in July 2021; computerisation of PACS; a new National Co-operation Policy (2025) — check latest.
• India has one of the largest co-operative networks in the world (lakhs of societies; check latest figures).

Role of Government in Development of Co-operation

1. Legislation — Co-operative Societies Acts, rules, model bye-laws.
2. Registration and supervision through the Registrar of Co-operative Societies.
3. Financial help — share capital contribution, loans, subsidies, guarantees.
4. Audit and inspection.
5. Education and training — National Council for Co-operative Training, VAMNICOM Pune.
6. Policy and planning — plan allocations, NCDC (1963) finance.
7. Tax concessions for co-operatives — check latest.

Criticism: too much government control, political interference, and officialisation have weakened the democratic character of many co-operatives.

Likely exam questions

1. (Long, 8/16 marks) Define co-operation. Explain the principles of co-operation.
2. (Long, 8/16 marks) Trace the origin and progress of the co-operative movement in India and the role of government in its development.
3. (Short, 4 marks) State the role of co-operation in economic development.
4. (Short, 4 marks) Write a note on the Rochdale Pioneers.
5. (Short, 4 marks) What is the significance of the 97th Constitutional Amendment for co-operatives?

Syllabus topics (RTMNU)

• Co-operative legislation
• Review of co-operative legislation in India
• Main provisions of Maharashtra Co-Operative Societies (MCS) Act 1960
• Amendment of Feb-2013

Co-operative Legislation: Meaning

Co-operative legislation means the laws that govern the registration, management, audit, supervision and winding up of co-operative societies. Since "co-operative societies" is a State subject (Entry 32, State List), each State has its own Act; multi-State societies are governed by a Central Act.

Review of Co-operative Legislation in India

1. Co-operative Credit Societies Act 1904 — first law; only credit societies; rural and urban types; unlimited liability for rural societies.
2. Co-operative Societies Act 1912 — allowed non-credit societies and federal societies; classified by limited and unlimited liability.
3. Provincial Acts after 1919 — Bombay Co-operative Societies Act 1925 (first State Act), Madras 1932, etc.
4. Multi-Unit Co-operative Societies Act 1942, replaced by the Multi-State Co-operative Societies Act 1984 and then 2002 (amended in 2023 — Co-operative Election Authority, Ombudsman, rehabilitation fund).
5. Model Co-operatives Act (Brahm Prakash Committee, 1991) — recommended autonomy; led to "self-reliant/mutually aided co-operative societies" Acts in some States (e.g. Andhra Pradesh MACS Act 1995).
6. 97th Constitutional Amendment (2011) — Part IXB: maximum 21 directors, 5-year term, elections by an independent authority, supersession limit, audit within 6 months, AGM within 6 months; States amended their Acts (Maharashtra in 2013).

Main Provisions of the Maharashtra Co-operative Societies Act 1960

• Registrar: the State appoints a Registrar of Co-operative Societies with powers of registration, supervision, inspection, inquiry and liquidation.
• Registration: an application signed by the required number of persons (generally at least 10, from different families) with proposed bye-laws; the Registrar registers it and issues a certificate. A registered society is a body corporate with perpetual succession and common seal; it can own property, sue and be sued.
• Classification of societies by the Registrar — e.g. agricultural credit, non-agricultural credit, marketing, processing, consumers, housing, farming, producers, federal and general societies.
• Bye-laws and their amendment with the Registrar's registration.
• Members: eligibility, admission, rights (vote, information, inspection of books) and duties; "one member, one vote"; limit on shareholding by one member.
• General body: supreme authority; Annual General Meeting within the prescribed time after the end of the financial year (six months after the 2013 amendment) — adopts accounts, audit report, appoints auditor, approves appropriation of profit.
• Committee/board of directors: manages the society; elected for 5 years.
• Funds: profits must be credited to a Reserve Fund (a fixed minimum share of net profit) before dividends; limits on dividend; contribution to education fund.
• Audit: annual audit of accounts; audit report to the society and the Registrar; rectification report.
• Inquiry and inspection (Registrar may inquire into the working of a society), surcharge (recovery from persons who caused loss), and supersession of a committee in cases of default or mismanagement.
• Disputes are decided by Co-operative Courts; appeals to the Co-operative Appellate Court.
• Liquidation (winding up) by the Registrar's order; a liquidator is appointed.
• Offences and penalties for false returns, misuse of funds, etc.

Amendment of February 2013

Maharashtra amended the MCS Act (through an Ordinance in February 2013, later enacted as the Maharashtra Co-operative Societies (Amendment) Act 2013) to bring it in line with the 97th Constitutional Amendment. Main changes:

1. Board size: maximum 21 directors.
2. Reservation on the board: 2 seats for women, 1 for SC/ST, 1 for OBC, and 1 for VJ/NT/SBC.
3. Term of the board: 5 years; elections before expiry of the term.
4. State Co-operative Election Authority to conduct elections independently.
5. Co-opted/expert directors: up to 2 experts in banking, management, finance etc. (without voting rights in elections of office-bearers); functional directors.
6. Active and non-active members: a member must attend general meetings and use the society's services to a minimum level to remain "active" and vote.
7. Supersession limit: a board cannot be superseded or kept under suspension for more than 6 months (special rules for co-operative banks under the Banking Regulation Act).
8. Audit within 6 months of the close of the financial year by an auditor/firm appointed by the general body from the approved panel.
9. AGM within 6 months of the close of the financial year.
10. Right to information for members; training of directors.
11. Greater autonomy and reduced government interference.

Likely exam questions

1. (Long, 8/16 marks) Review the development of co-operative legislation in India.
2. (Long, 8/16 marks) Explain the main provisions of the Maharashtra Co-operative Societies Act 1960 and the important changes made by the amendment of February 2013.
3. (Short, 4 marks) State the procedure of registration of a co-operative society under the MCS Act 1960.
4. (Short, 4 marks) What are active and non-active members?
5. (Short, 4 marks) State the powers of the Registrar of Co-operative Societies.

Syllabus topics (RTMNU)

• Co-operative credit structure in India: Need, Objectives, Structure
• Progress & Problems of Co-operative Credit
• Agricultural Non-credit Co-operatives
• Co-operative Farming - Meaning and Features, Types, Progress, Problems and Solutions
• Irrigation Co-operatives - Progress, Problems & Role in Water Conservation

Co-operative Credit Structure in India: Need and Objectives

Need: Indian farmers need credit for seeds, fertilisers, cattle, wells and machinery, but have low income and little security. Moneylenders charged very high interest and exploited them; commercial banks did not reach villages earlier. Co-operative credit was started to give cheap and timely credit.

Objectives: provide short-, medium- and long-term credit at reasonable interest; free farmers from moneylenders; encourage thrift and savings; link credit with marketing and supply; promote rural development.

Structure of Co-operative Credit

In urban areas there are Urban Co-operative Banks and employees' credit societies. NABARD refinances the rural co-operative structure; RBI regulates co-operative banks (strengthened by the Banking Regulation (Amendment) Act 2020). Some States have a two-tier short-term structure.

Progress of Co-operative Credit

• Very wide network — around one lakh PACS covering most villages (check latest figures).
• Large share of crop loans to small and marginal farmers; Kisan Credit Cards through co-operatives.
• Computerisation of PACS and model bye-laws allowing PACS to run multiple businesses (dairy, fisheries, Common Service Centres, PM Kisan Samriddhi Kendras) — check latest.
• Share in total agricultural credit has fallen as commercial banks and RRBs grew.

Problems of Co-operative Credit and Solutions

1. High overdues and poor recovery; wilful default; loan waivers.
2. Political interference in elections and loan sanction.
3. Weak financial position of many PACS and DCCBs; dependence on refinance.
4. Poor management and untrained staff.
5. Regional imbalance — strong in Maharashtra and Gujarat, weak in the east and north-east.
6. Benefits captured by large farmers.

Solutions: professional management, timely recovery, deposit mobilisation, computerisation, autonomy, training, strict audit, and linking credit with marketing.

Agricultural Non-credit Co-operatives

Co-operatives that provide services other than credit to farmers — marketing (NAFED, state federations), processing (co-operative sugar factories, cotton ginning, dairies like Amul), supply of inputs (IFFCO, KRIBHCO), farming, irrigation, dairy, fisheries and poultry co-operatives.

Co-operative Farming: Meaning and Features

Co-operative farming is a system in which farmers pool their land, labour and resources voluntarily and cultivate jointly under common management, sharing the produce in proportion to land and labour contributed, while (in most types) retaining ownership of their land.

Features: voluntary association; pooling of land; joint management by an elected committee; ownership retained by members; income shared on the basis of land and labour; economies of large-scale farming; use of modern technology.

Types of Co-operative Farming

• Co-operative better farming society: land is cultivated separately, but members co-operate for inputs, marketing and improved methods.
• Co-operative joint farming society: members pool land and cultivate jointly; paid wages for work and a share (dividend) for land.
• Co-operative tenant farming society: the society owns or leases land and gives plots to members as tenants.
• Co-operative collective farming society: land is owned collectively by the society; members work for wages and share profits.

Progress, Problems and Solutions of Co-operative Farming

Progress: encouraged in the Five-Year Plans, but growth remained limited; many societies were formed only for subsidies. Today Farmer Producer Organisations (FPOs) — the scheme for forming 10,000 FPOs — carry forward the idea of collective farming and marketing.

Problems: farmers' attachment to their own land; fear of losing ownership; lack of trust and leadership; disputes over sharing; small and scattered plots; inadequate finance; bogus societies. Solutions: education and demonstration, voluntary formation, financial and technical support, good leadership, consolidation of holdings, and linking with FPOs and markets.

Irrigation Co-operatives: Progress, Problems and Role in Water Conservation

Irrigation co-operatives are societies of farmers that construct, manage and distribute water from wells, tanks, canals or lift-irrigation schemes. Maharashtra has many co-operative lift irrigation societies (especially in sugar belts) and Water Users' Associations under the Maharashtra Management of Irrigation Systems by Farmers Act 2005.

Progress: participatory irrigation management, water distribution by volume, collection of water charges by farmers' bodies. Problems: high electricity and maintenance cost, unequal distribution (head vs tail-end farmers), poor recovery of charges, lack of technical skill, disputes. Role in water conservation: fair and timely distribution; promoting drip and sprinkler irrigation; repairing canals and tanks; rainwater harvesting and watershed works; crop planning according to water availability; reducing wastage through farmer participation.

Likely exam questions

1. (Long, 8/16 marks) Explain the need, objectives and structure of co-operative credit in India. State its problems.
2. (Long, 8/16 marks) What is co-operative farming? Explain its features, types, problems and solutions.
3. (Short, 4 marks) Write a note on Primary Agricultural Credit Societies (PACS).
4. (Short, 4 marks) State the role of irrigation co-operatives in water conservation.
5. (Short, 4 marks) Name any four agricultural non-credit co-operatives.

Syllabus topics (RTMNU)

• Cooperative Structure and Policy
• Role of government in co-operative development
• A. D. Gorwala Committee: 1951
• Cooperative Democracy - Policy, Planning and Decision making
• Institutional Support to Co-operatives: DCC Banks, NABARD, SBI

Co-operative Structure and Policy

India's co-operatives are organised in a federal structure: primary societies at the village/town level, federations at district and State level (district central banks, district/State marketing federations, State co-operative banks), and national federations (NAFED, NCUI, NAFSCOB, NCDC as a promotional body, IFFCO, KRIBHCO, NCCF). Co-operative policy is the set of government objectives and measures for developing co-operatives — legal framework, finance, autonomy, education and planning. The first National Policy on Co-operatives came in 2002; a new National Co-operation Policy was announced in 2025 by the Ministry of Co-operation — check latest.

Role of Government in Co-operative Development

1. Legal framework — State Acts, Multi-State Act, rules and model bye-laws.
2. Promotion and registration through the Registrar.
3. State partnership — contribution to share capital (recommended by the Gorwala Committee).
4. Finance — through NABARD, NCDC, State budgets, subsidies and guarantees.
5. Supervision, audit and inspection.
6. Training and education — NCCT, VAMNICOM, State co-operative unions.
7. Infrastructure — warehouses, cold storage, processing units.
8. Policy initiatives — computerisation of PACS, multipurpose PACS, national co-operatives for exports, seeds and organic products (2023) — check latest.

Limits: excessive control and political interference can reduce autonomy; the modern view is "government as facilitator, not controller".

A. D. Gorwala Committee (All India Rural Credit Survey Committee), 1951

Appointed by the RBI in 1951 under the chairmanship of A. D. Gorwala; report submitted in 1954.

Findings: co-operatives met only a very small share (about 3%) of rural credit needs, while moneylenders and traders supplied most of it; famous remark — "Co-operation has failed, but co-operation must succeed."

Main recommendations (Integrated Scheme of Rural Credit):

1. State partnership in share capital at all levels of co-operatives.
2. Integration of credit with marketing and processing — loans to be recovered through sale of produce.
3. Large-sized primary societies to make them viable.
4. Full coordination between co-operative and government agencies.
5. Trained personnel and proper administration.
6. Creation of the State Bank of India (Imperial Bank nationalised in 1955) to extend banking in rural areas.
7. Setting up of RBI's National Agricultural Credit (Long-term Operations) Fund and (Stabilisation) Fund.
8. Development of warehousing — Warehousing Corporations.

Co-operative Democracy: Policy, Planning and Decision-making

Co-operative democracy means that a co-operative is owned and controlled by its members, who take decisions democratically on the principle of one member, one vote.

• Policy: the general body lays down policies — bye-laws, budget, appropriation of profit, election of the board.
• Planning: the board prepares annual plans and business plans with member participation; federations prepare district and State plans.
• Decision-making: general body for major decisions; board for policy execution; chief executive/staff for day-to-day decisions; members' right to information and to question the board.
• Safeguards: regular elections by an independent election authority, reservation for women and weaker sections, AGM within 6 months, audit, and limits on supersession (97th Amendment).
• Problems: domination by a few rich members, political interference, poor member participation and awareness. Remedies: member education, transparency, professional management.

Institutional Support to Co-operatives

1. District Central Co-operative Banks (DCCBs): the middle tier at district level. Functions: finance PACS (short- and medium-term loans), act as a balancing centre for surplus and deficit PACS, supervise and guide PACS, accept deposits from public, provide banking services to members, implement government schemes (Kisan Credit Card, crop loans). Regulated by RBI and supervised by NABARD.

2. NABARD (National Bank for Agriculture and Rural Development): set up on 12 July 1982 on the recommendation of the CRAFICARD (Shivaraman) Committee. Functions:

• Refinance to StCBs, DCCBs (through StCBs), RRBs and commercial banks for agricultural and rural loans.
• Development — Rural Infrastructure Development Fund (RIDF), watershed development, SHG–bank linkage, FPO promotion, training of co-operative staff.
• Supervision — statutory inspection of State and District co-operative banks and RRBs.
• Institution building and computerisation of co-operative banks and PACS.

3. State Bank of India (SBI): established in 1955 (on the Gorwala Committee's recommendation) by taking over the Imperial Bank of India. Support: opening rural branches, remittance facilities for co-operatives at low cost, loans to co-operative marketing and processing societies, financing co-operative sugar factories and warehouses, agricultural credit through its own branches and Kisan Credit Cards, and acting as a banker to co-operative institutions.

Likely exam questions

1. (Long, 8/16 marks) Explain the findings and recommendations of the A. D. Gorwala Committee (All India Rural Credit Survey Committee).
2. (Long, 8/16 marks) Explain the institutional support given to co-operatives by DCC Banks, NABARD and SBI.
3. (Short, 4 marks) What is co-operative democracy?
4. (Short, 4 marks) State the role of government in co-operative development.
5. (Short, 4 marks) State any four functions of NABARD.