According to K. R. Kulkarni – “Co-operative marketing is the marketing for the producers and by the producers that aims at eliminating the chain of middlemen operating between producers and the ultimate consumer and thus securing the maximum price for their produce.”
Co-operative marketing organisations are association of producers for the collective marketing of their produce and of securing for the members the advantages that result from large-scale business which an individual cultivator cannot secure because of his small marketable surplus.
In other words, co-operative marketing societies are established for the purpose of collectively marketing the products of the member producers.
It emphasises the concept of commercialisation. Its, economic motives and character distinguish it from other associations.
These societies resemble private business organisation in the method of their operations; but they differ from the capitalistic system chiefly in their motives and organisations.
Learn about:
1. Historical Development of Co-Operative Marketing in India 2. Meaning and Definitions of Co-Operative Marketing 3. Need 4. Structure 5. Features
6. Functions 7. Progress. 8. Types 9. Methods 10. Merits 11. Limitations 12. Suggestions.
Cooperative Marketing: Historical Development, Meaning, Definitions, Need, Structure, Functions, Merits and Limitations
Cooperative Marketing – Historical Development of Co-Operative Marketing in India
In India, evolution of co-operative marketing is as old as the Co-operative Societies Act of 1912, which recognized non-credit forms of co-operation, including marketing. The first market society started in India was the Kumbakonam Agricultural Society in 1913, which supplied seeds, manures, implements and arrangement of sale of the products of its members.
In the year 1915 and 1917 two Marketing Co-operative Societies were formed at Hubli and Gadag respectively. The basic objective was to encourage the cultivation of improved cotton and sell it collectively.
In 1918, the South Canara Planters Co-operative Society was formed in the then Madras Province for joint sale of areca nut.
In 1920-21 there were only 31 co-operative societies. The Royal Commission on Agriculture (1928) stressed the need for group marketing instead of individual marketing.
In 1945, the Co-operative Planning Committee recommended that at least 25 percent of marketable surplus should be channelised through co-operative societies within the next 10 years by framing one society for the group of 200 villages.
In 1954, the All India Rural Credit Survey Committee brought to light the dismal performance of the existing co-operative marketing. In a survey of 75 districts, there was no co-operative marketing society in 63 districts. In other districts, only 1 percent of the total sale of rural produce was done through the societies.
In 1958, the National Agriculture Co-operative Marketing Federation (NAFED) came into power as the apex body of co-operative marketing.
In 1963, the National Co-operative Development Corporation (NCDC) was established for the promotion of programmes relating to processing, storage, packing and marketing of rural produce through co-operative markets.
In 1968, the RBI recognized the linking of credit with marketing as a necessary step for the development of agricultural marketing.
Cooperative Marketing – Meaning and Definitions
A co-operative sales association is a voluntary business organisation established by its member patrons to market farm products collectively for their direct benefit. It is governed by democratic principles and savings are apportioned to the members on the basis of their patronage.
The members are the owners, operators and contributors of the commodities and are the direct beneficiaries of the savings that accrue to the society. No intermediary stands to profit or loss at the expenses of the other members.
Co-operative marketing organisations are association of producers for the collective marketing of their produce and of securing for the members the advantages that result from large-scale business which an individual cultivator cannot secure because of his small marketable surplus.
In a co-operative marketing society, the control of the organisation is in the hands of the producers arid each member has one vote irrespective of the number of shares purchased by him. The profit earned by the society is distributed among the members on the basis of the quantity of the produce marketed by him.
In other words, co-operative marketing societies are established for the purpose of collectively marketing the products of the member producers. It emphasises the concept of commercialisation. Its, economic motives and character distinguish it from other associations. These societies resemble private business organisation in the method of their operations; but they differ from the capitalistic system chiefly in their motives and organisations.
Definitions of the Co-operative Marketing:
The Royal Commission of Agriculture (1928) stressed the need for group marketing instead of individual marketing. The Central Banking Enquiry Committee (1931) also underlined the need for organised marketing. The XI Conference of Registrars of Cooperative Societies (1934) emphasised the importance of Cooperative marketing.
In 1945, the Cooperative Planning Committee recommended that at least 25 per cent of the marketable surplus should be channelized through Cooperative Societies within the next 10 years by forming one society for a group of 200 villages. The All India Rural Credit Survey Committee (1954) brought to light the dismal performance of the existing marketing cooperatives. In a sample of 75 districts surveyed, there was no cooperative marketing society in 63 districts.
In remaining districts only around one per cent of the total sale of rural produce was done through the societies. The committee suggested the establishment of primary cooperative marketing societies and linking of credit with marketing. The First Five Year Plan (1951-56) laid stress on the establishment of rural marketing and processing cooperative societies.
In 1958, the National Agricultural Cooperative Marketing Federation (NAFED) was established as the apex body of cooperative marketing. In 1963 the National Cooperative Development Corporation (NDC) was set up for promoting programmes relating to processing storage and marketing of rural produce through cooperative markets.
The Mirdha Committee (1965) recommended that the membership of Agriculture marketing societies should be restricted to the agriculturists and traders should not be allowed to join agricultural marketing societies.
The Dantwala Committee (1966) stressed the need for cooperation and integration among the various cooperative organisations after reviewing the pattern of cooperative marketing, distribution of inputs to producers and supply of consumer products.
Based on the survey of the co-operative marketing societies in 1968, the Reserve Bank of India recognised that effective linking of credit with marketing was necessary. The All India Rural Credit Review Committee, 1969 also recommended the strengthening of cooperative marketing, with a view to helping the government agencies in the execution of price support programmes and thus fulfilling the interests of the producers.
Co-operative – the word ‘co-operation’ is derived from the Latin word “co-operari”, which means working together.
It is an organisation or an association of persons who voluntarily associate together for the promotion of their common economic interest and is based on the principles of unity, economy, equality and liberty etc.
According to Dr. A. P. Gupta, – “Co-operative marketing is the formation of an association by producers for self-help in marketing their produce collectively and securing economies emerging from large scale business.”
According to K. R. Kulkarni – “Co-operative marketing is the marketing for the producers and by the producers that aims at eliminating the chain of middlemen operating between producers and the ultimate consumer and thus securing the maximum price for their produce.”
In India, the need for co-operative marketing arises from a variety of factors, such as malpractices in the existing agricultural marketing system, excessive middlemen charges and the major factor is a large number of farmers are indebted to the traders, who are often money lenders, in this situation the farmer is literally at the mercy of the village trader. Often the farmer at the harvest time is forced to sell the produce to the village trader at relatively low price.
Thus, the establishment of co-operative marketing societies is another step which has been taken to overcome the problems of existing agricultural marketing system.
Cooperative Marketing – Need
1. To Eliminate Malpractices:
Different malpractices prevailing in the system of rural marketing, and such as arbitrary deductions from the price manipulation of weights and measures, collusion between brokers and the business buyers, are of special mention. These malpractices were regarded as nothing less than scientific theft by Royal Commission.
The impact of these was further aggravation by critical financial position where producers are indebted to traders or money-lenders. In such a situation, co-operative marketing can help the producers to reduce, if not to eradicate malpractices to a greater extent.
2. To Establish Appropriate Reward for the Efforts:
There exists a large army of middlemen participating, with deep interest in collection, storage, financing insuring grading, scale and transportation of rural produce. One must appreciate their services that are vital victorious marketing. However, their charges for such services are not proportionate and hence not appropriate.
In some case, such charges are not only prohibitive but exorbitation. As a result poor producers do not get their due share in the price paid by the ultimate users. Co-operative marketing, if efficiently and honestly organised, will be able to reduce the ‘price spread’ between the producer and the consumers, thereby giving fair return to the producers, without affecting the interests of the consumers.
3. Concomitant of Integrated Programme:
Co-operative marketing has developed as concomitant of large scale expansion of co-operative credit. Co-operative marketing societies will be acting as the agents to collect or to recover the loans advanced by cooperative credit societies.
Therefore, the successful working of credit co-operatives, depends largely, on the development of marketing societies. That is, only co-operative marketing societies constitute a vital feature for integrated programme of co-operative development, envisaged in this country.
4. To Stabilise the Agricultural Price:
If the market mechanism is completely left to the sweet will and caprice of the private intermediaries, one can hardly expect price stabilisation, which is essential ingredient of a balanced economic development.
So longer private sector dominates; “profit motive” wilt have upper hand, where normal market conditions deviate from healthy practices to the unwanted practices of speculation; hoarding will be resorted to, resulting in price manipulation and reflection of undesirable price fluctuations.
Cooperative Marketing – Structure
In India, the co-operative marketing societies have both two-tier and three- tier structure. At the national level NAFED serves as the apex institution.
At the base level, there are primary co-operative marketing societies. These societies market the product of the farmer members in that area. They are located at the primary wholesale market.
At the district level, there are Central Co-operative Marketing unions. Their main job is to market the produce brought for sale by the primary cooperative marketing societies of that area. These are located at the secondary wholesale markets. The members of these unions are primary co-operative marketing societies and individual farmer members. In the two-tier structure, the state level societies perform these functions through their branches throughout the state.
At the state level, there are apex State Co-operative Marketing Societies or Federation. Their members are both the primary co-operative marketing societies and the Central or District Cooperative Unions of the state. Their basic function is inter-state trade, procurement and distribution of inputs, and export-import, dissemination of market information and rendering professional service for the agricultural marketing system.
For Example, in milk production and distribution, NDDB (National Dairy Development Board) operates at national level. At state level KMF (Karnataka Milk Federation), at districts level they have BAMUL (Bangalore Milk Union Ltd.), and at village level they have a number of village level co-operative societies.
In India, the network of co-operative marketing structure now comprises over 6,000 primary marketing societies. At the district level, there are 170 Central Marketing Societies. At the State level, there are 29 general purpose state level Marketing Federations and 16 special commodity Marketing Federations, and at the All India level there is National Co-operative Development Corporation (NCDC), the National Agricultural Co-operative Marketing Federation (NAFED).
The co-operative marketing presents a pyramid structure. At the primary level, Primary Marketing Societies are operated at the intermediate level Central Cooperative Marketing Societies are functioning and at the top level State Marketing Societies are working.
The co-operative marketing societies have both two and three-tier structure. In the states of Assam, Bihar, Kerala, Madhya Pradesh, Karnataka, Orissa, Rajasthan and West Bengal, there is a two-tier pattern with primary marketing societies at the taluka level and state marketing federation as apex body at the state level.
In other states, there is three-tier system with district marketing society in the middle. At the national level, NAFED serves as the apex institution.
The pattern of the three-tier structure has been described as follows:
1. Primary Co-Operative:
At the base level there are primary cooperative marketing societies. These societies market the product of the producer members in that area. They may be single commodity or multi-commodity societies depending upon the production of the rural products in the area.
Primary marketing co-operatives are those which are operating in the small and limited area, may be either a taluka or a block. The members are the producers engaged in production of rural produce. These co-operatives will either buying from members or acting as agents for the grower producers to sell, on behalf of them.
They sell the members’ produce directly to consumers or industrial users. They make advances of loans to the members on the security of their produce. They also provide for manures, fertilisers, equipment etc.
2. Central or District Level Co-Operative Societies:
After the primary co-operative societies operating at block level, there are cooperative marketing societies covering a larger area or a district. These district level co-operative societies are called federations or marketing unions. These are engaged in the task of buying selling and extending credit facilities to primary cooperative societies.
Their main job is to market the produce brought for sale by the primary cooperative marketing societies of the area. These are located in the secondary wholesale markets and generally offer a better price for the produce.
The primary cooperative marketing societies are members of these unions in addition to the individual producer members. In the two-tier structure, the state societies perform the functions of district level societies by opening branches throughout the district.
3. State Marketing Societies:
At the State level there are apex body that is State Co-operative marketing societies which serve the state as a whole. Their members both the primary co-operative societies and the Central Cooperative Union of the State. They are above the level of central co-operative marketing societies which is grown as a provincial society.
The basic function of these is to coordinate the activities of the affiliated societies and conduct such activities as inter-State trade, export-import, procurement, distribution of inputs and essential consumer goods, dissemination of market information and rendering expert advice on the marketing of rural produce.
They undertake the task of granting credit that facilitates needy and deserving co-operatives, whether primary or central.
Further, membership is extended to individuals of repute. These societies are to act as the lenders of last resort. In addition, the State Marketing Co-operative Society is expected to co-ordinate the activities of different societies at the primary level and bring about, overall sound development of co-operative structure. It is at commanding height to watch the activities of primary and central co-operatives.
. In fine, we conclude, that unfortunately, the pyramid structure is neither well-knit nor well developed because all co-operatives are not co-operating with one another. This is the sorry state of affairs, as there prevails ‘step mother policy’ in business relations which is acting as the strong impediment for the success of co-operative societies.
At present, the co-operative marketing is having 30 state level co-operative societies, 180 District level societies and 2900 primary co-operative societies and 3490 Special Commodities Societies.
Cooperative Marketing – Outstanding Features of Co-Operative Marketing Societies
The marketing co-operatives have certain special features of their own, which distinguish them from other concerns engaged in the marketing of the rural produce. These co-operative marketing societies are formed, with a view to assist their members to maximise their income.
Following are the outstanding features of co-operative marketing societies:
1. Membership:
(i) Ordinary Members:
Individual farmers, co-operative farming societies and service societies of the area may become the ordinary members of the co-operative marketing society. They have the right to participate the deliberations of the society, share in the profits and participate in the decision making process.
(ii) Nominal Members:
Traders with whom the society establishes dealings are enrolled as nominal members. Nominal members do not have the right to participate in decision making and share in the profits.
2. Sources of Finance:
In 1966, the Dantwala estimated a capital base of Rs. 2.00 lakhs for a co-operative marketing society. At 1991 prices, it should be at least Rs. 14,000 lakhs.
The following are the major sources of finance of a co-operative marketing society:
(i) Share Capital:
Farmer-members and the State Government subscribe to the share capital of co-operative marketing societies. Members may purchase as many shares as they like. They are encouraged to invest sufficiently in the share capital. They are also persuaded to invest their dividend and bonus in the shares of co-operative marketing societies.
(ii) Loans:
Co-operative marketing societies may raise their finance by way of loans from the Central and State Cooperative Banks and from commercial banks by pledging and hypothecation and also by clean credit to the extent of 50 per cent of onward capital.
(iii) Subsidy:
The co-operative marketing societies get a subsidy from the government for the purchase of grading machines and transport vehicles to meet their initial heavy expenditure. They also get a subsidy for a part of the cost of the managerial staff for a period of 3 years to make them viable.
3. Service Motto:
The co-operative societies are formed, mainly for the purpose of providing and extending various services, to the members and not to earn maximum profits. The service facilities, like providing seeds, manures and fertiliser, grading and standardization, selling the members’ produce at prices that are favourable.
Therefore the co-operative marketing societies are organised for the purpose of providing services and not for making profits, solely.
4. One Man One Vote:
Irrespective of the shares held by the members of the co-operative societies, each member has a right to vote as a single unit of a ‘single’ vote so one man one vote is the principle of co-operative marketing societies. This is based on the democratic principles and freedom.
Nobody is to become the thumb rule of few people as is in the case of joint stock companies where the right to vote given to the members in proportionate to the number of shares held by them. It is free from the practices of discrimination among the members of the co-operative marketing societies.
5. Open Membership:
In co-operative marketing societies to become a member is open for all. Any person can become a member of the society provided he is a producer of the rural product. Any time he can enter or exit the membership as per his desires and convenience. Moreover, the procedure to become a member is very simple, free from the complications and formalities.
6. Reasonable Reward to Capital:
The practices of tile cooperative marketing societies are very genuine and based on the principle of equality and fraternity. The capital invested by the members and paid at the rate of 6% or the loans and advances enjoyed by the members are also charged with the same rate of interest.
This is so because the capital is degraded and hence the human race is elevated. The capital investment is not rewarded properly and the return in the form of interest is given at the rates mentioned above. This makes the profitability of the marketing societies a limited one.
7. Teaching the Principle of Co-Operation:
The basic principles of co-operative movements are “One for all and all for one” “self help, through mutual help”. The existence of co-operative marketing societies is based on these principles. It creates the sense of co-operation and mutual help. These things are helpful in better marketing, better business, better living, and better citizenship of the societies. All this education is imparted through cooperative marketing societies.
8. Self-Government:
The management of the co-operative societies is kept in the hands of its members. Every member is to take part in the management, functioning and proceedings of a cooperative society. He exercise these powers by using the right to vote. The government of the cooperative marketing societies is called a self-government because it is of the members, for the members and by the members of the co-operative societies.
This government is totally based on the principle of democracy where the government is of the people, by the people and for the people. Thus it is following the sound principles of democratic practices.
9. Distributive Justice:
Unlike the principle of one mart one vote, the members are distributed the share of profits in proportion with their contribution in the total network. More the contribution of the members, higher the dividends they will get and vice-versa. The profits of the cooperative societies are the result of the contribution made by the members. So they must be rewarded according to their contribution in total network.
Cooperative Marketing – 10 Main Functions of Co-Operative Marketing Societies
The main functions of Co-operative Marketing Societies are:
1. Purchase and Sale of Produce – The marketing co-operatives purchase the produces from their member growers and sell it in bulk quantities, which enables them to reduce marketing cost and earn fair returns.
2. Distribution of Agricultural Inputs – The co-operatives supply the agricultural inputs such as seeds, fertilizers, pesticides, agricultural implements etc., the supply of quality materials at reasonable prices save cost of the member producers. Sometimes these inputs may be also given on credit basis.
3. Providing Storage Facility – To provide storage facilities, the societies may have their own godown or hired godown.
4. Supply of Agricultural Implements – They supply the needed agricultural implements like tractors, tillers, power sprayers etc., on rent basis to the cultivators for the purpose of production.
5. Provide Financial Assistance – They make credit facilities to the members against the security of the produce brought for sale. Members get advances up to 75 percent of the market value of the produce deposited.
6. Processing of Produce – Some societies undertake processing of agricultural produce, which ensures high prices to the producers after processing.
7. Providing Transportation Facility – The co-operative societies make arrangements for the transport of the produce of the members from the villages to the market on collective basis, which reduces the transportation costs for its members.
8. Providing Market Information – They provide latest information about the new techniques of production as well as the market information about the market prices from time to time, which will help the members to get a good price for their produce.
9. Stable Price – The societies adjust the supply of commodities according to the market demand. In this way, in long run the prices get stablised, which helps the farmers from the evil effects of the seasonal price fluctuations.
10. Participation in Foreign Trade – These co-operative societies participates in the export trade of the country, which helps to get better prices for the growers. Through export trade, the marketing co-operatives provide wide market to the agricultural produce. The share of agricultural exports in India’s total exports is around 16 percent.
Cooperative Marketing – Progress and Types in Co-Operative Marketing Societies
Under the active encouragement of the Government and the RBI, cooperative marketing has made great progress in Maharashtra, Andhra Pradesh, Tamil Nadu, Uttar Pradesh and Bihar. There are co-operative societies in Maharashtra specialized in the sale of tobacco, fruit, vegetables etc.
The network of co-operative marketing structure now comprises over 6,000 primary marketing societies, of which 3,500 are special commodity marketing societies. At the district level, there are 160 Central Marketing Societies, covering nearly all the important mandis in the country. At the state level there are 29 general purpose state level co-operative marketing federations and 16 special commodity marketing federations, and at all India level, there are the National Co-operative Development Corporation (NCDC), the National Agricultural Cooperative Marketing Federation (NAFED), National Co-operative Tobacco Growers Federation Ltd., the National Consumers’ Co-operative Federation and the Tribal Co-operative Marketing Development Federation of India (TRIFED) – all these are working in the field of agricultural marketing.
Types of Co-Operative Marketing Societies:
On the basis of the commodities dealt in, the co-operative marketing societies may be grouped into two types:
1. Single Commodity Co-operative Marketing Societies – These type of societies deal with only one agricultural commodity for example, Cotton Co-operative Marketing Society, Oilseed Growers’ Co-operative Marketing Society etc., Areca nut co-operative marketing society, etc.
2. Multi-Commodity Co-operative Marketing Societies – These societies deal with more number of commodities produced by the members such as oilseeds, cotton, food grains etc.
Co-Operative Marketing Societies:
Co-operative marketing is the co-operative venture or an association designed to perform one or more marketing functions, relating to the rural produce of its members. In a broad sense, cooperative marketing implies both buying and selling of rural products. To be more appropriate, co-operative marketing confines itself with the selling functions related with marketing of produce, such as, acting as selling agent, supply of market information, standardisation, storage, assembling, processing, packing etc.
There is only one main objective of co-operative marketing and that is, to maximize the income of members of the extent possible and feasible. To fulfil this objective, co-operative marketing has provided two sets of factors viz. to get higher prices for the produce of its members and to cover the cost of marketing.
These can be achieved with the development of orderly marketing, better selling methods, improving the quality of the produce through standardisation and grading, eliminating the trade abuses and improved bargaining position of member-sellers; costs can be reduced by adopting improved methods of marketing.
Cooperative Marketing – Methods of Operation Adopted by Marketing Co-Operatives: With Merits and Demerits
The following are the important methods of operation of Co-operative marketing:
1. Outright Purchase and Sale:
Outright purchase and sale implies the actual buying of commodities by paying cash at the ruling prices in the market and then reselling to others. Here, the Marketing co-operatives buy the product of their members, at the prices prevailing in the marketing and make them payment of cash immediately; hence the section afford all the risks of storing the goods and fluctuations of prices.
The society deducts all the expenses involved in buying and selling and the specified dividend to be declared amongst the members on the basis of the amount of business done with the society or through the society. Mass marketing co-operatives handle the produce of their members by this methods.
This method has the following merits:
Merits:
There are advantages that are enjoyed by the producers through this method are as:
(i) Immediate requirements of cash is assured
(ii) The immediate payment made by the marketing co-operatives, helps the farmer- members, to tide over their financial difficulties and
(iii) Other obligations with social and psychological stings. Therefore, the producers can sell their produce only to the society and thus secure better prices because of co-operatives; moreover there is no cheating as it is their own organisations
(iv) Co-operatives are following the usual practices prevalent in the market and therefore, the producers are conversant with them.
Demerits:
As per the opinions of experts, this method has three defects too.
Such as:
(i) The co-operatives have to take for granted the risks along with the purchase; that is to say, the market risk of price fluctuation is to be shouldered by the society itself, which sometimes proves to be costlier. At times, they have to assume the risk of piling up of stocks, as the demand pattern is not encouraging,
(ii) Moreover, working capital is warranted to make the purchases as immediate cash is to be paid. This brings pressure on the working capital position, and more, in the off seasons
(iii) Co-operatives have to appointed skilled managerial personnel for carrying on such a business acumen will be available only at higher salaries. This increases the overall cost of management.
2. Agency Method:
The relationship of members and society is that agency, wherein the society buys and sells the produce of its members as an agent. That is, it does not take title to the goods nor pays cash immediately.
For performing the services of an agent, these Agencies charge certain commission; thus it collects the produce of the member-farmers and remits the amount to the members, just after the sale by subtracting some commission and other incidental charges. This method has its own advantages and disadvantages.
Merits:
It has three merits:
(a) The producers obtain the prices which the quality of their products can fetch in the open market. The marketing cooperatives, however, help the members to obtain higher prices with wider contacts working with the least developments in the markets;
(b) As the co-operatives are acting only as the agents of the members, they are not to make the payment for the price immediately; they pay only when they sell and collect the bill from the buyers;
(c) As they are acting as only intermediates they are not to assume the risks which are botheration of the farmers themselves; thus the risks associated with the price fluctuations of even stocks piling are avoided.
Demerits:
The disadvantages are two, in number:
(a) The marketing co-operatives are compelled to charge, higher rate of commission, since the cost of maintaining records and keeping of accounts and conducting actual ‘business is more,
(b) As the societies are interested only in getting commission, they may fail in obtaining higher prices for the members’ produce.
3. Pooling:
The third method of handling members, produce by the marketing co-operatives is pooling. Poolings is defined by Bakken and Schaars as the commingling of products of many producers and after deducting average expenses, paying the average price received for the same, usually on the basis of established grades.
From this definition, it is clear, pooling may involve the physical mixing of the products of different members; however, in actual practice, it does not imply only the mingling of the produce but the delivery of the produce of products by the members and the sale of the same by the co-operatives separately also.
Of the products, that are delivered to cooperatives, are in small lots, in that the societies may commingle the products so as to make it convenient to self on the basis of the grades already established. On the contrary, if they are in sufficiently larger quantities, they need not be mixed and therefore may be sold distinctly.
The payment to the members, under the method is made in three distinct ways.
If the product pooled by the members are sold without grading, the societies realise the sale proceeds and distribute the same amongst the members as per the quantity delivered by each member, after deducting the expenses there to- (a) If products are graded and pooled in a single pool, payment is made on the basis of quality of the products or on the basis of quantity; (b) if they are put in a separate pool after grading (c) If the products are sold separately without mixing, the co-operative collect the sale proceeds and deduct the proportionate share in the common expenses and pay the remaining to the individual members.
This method has the following merits and demerits:
Merits:
The merits accruing to the members are:
(a) It helps in minimising the risk to loss due to fire, theft, damage etc. The pooling method, provides for the loss arising out of price fluctuation.
(b) Orderly marketing of products is facilitated by this method. The surplus quantities are stocked and the quantity demanded in the market is released, thus encouraging the better prices,
(c) On account of orderly marketing, the bargaining capacity of producers, also increases via co-operatives, as the pooling facilities standardization, and grading
(d) Pooling also results in reduced cost of transportation, grading and storage, as they are in larger quantities. It assists in finding out new markets for the members’ produce and expanding the operations of existing markets.
Demerits:
That way, every method has its own laxities, which cannot be plugged completely. The demerits of pooling system are not very severe and therefore, we have conveniently left. It can be said that the merits outweigh, the demerits and therefore, the defects are not being given hair splitting importance.
4. Sales Policies of Marketing Co-Operatives:
In order that the marketing co-operatives become real success, they have to follow, design and develop sound sales policies. The aim of obtaining higher prices for members produce can be achieved by pursuing sound sales policies.
The co-operatives sell the produce to the wholesalers in central markets or through the brokers or commission agents or auction companies that are working in central markets.
Majority of societies, sell directly to the manufacturers or the buyers who are desirous of purchasing in larger quantities. Such as large scale retail organisations and public institutions.
5. Members’ Contract with Co-Operatives:
The success of marketing co-operatives lies in the regular and continuous business that it transacts. Regular supply of products can be assured by the members to the society, through the execution of a contract. In this contract, the member assures and gives guarantee of the delivery of produce to the co-operative only.
Further, the contract specifies are to be paid by the members if the contract is broken.
Thus, members’ contract ensures steady, regular and continuous business to the marketing co-operatives.
6. Advancement of Credit and Procurement of Foodgrains:
Cooperative marketing societies advance finance to producers against their stock of foodgrains in the godowns of the societies. This increases the holding power of the producers and prevents distress sales. Generally, societies advance credit to the extent of 60 to 75 per cent of the value of the produce stored with them.
The recoveries are effected from the sale proceeds of the produce of the producer. This function involves no risk to the society. Moreover, it increases the business. Co-operative marketing societies act as agents of the government in the procurement of foodgrains at the announced procurement prices.
Cooperative Marketing – Top 8 Merits
Co-operative venture has its own set of merits:
Merit # 1. Development of Orderly Marketing:
Development of orderly marketing implies, establishing balance between the demand and supply forces, to better the position of the farmers, which is the need of the hour. Our farmers, do sell, in villages especially at the time of harvest, that results in dumping and creation of glut in the markets, whereby, the price level swings down to the bottom, thus leaving nothing but pessimism.
Cooperatives by buying or collecting produce, from farmers would be able to regulate the demand and supply position. The supply is made as per the needs and moods of the market. Thus, co-operatives will stabilize the prices over longer periods. Thus, seasonal fluctuations are avoided for safeguarding the interests of the producing units and ultimately the consumers.
Merit # 2. Realisation of Higher Prices:
Maximization of income to the farming class is the objective of co-operative marketing. This can be attained only when price that the farmer gets is higher. By cooperative efforts, they will get better prices for their produce, provided they sell to the co-operative societies and not to the private dealers.
It is because, the price for the produce is realized by the cooperatives on behalf of the members. It is mainly due to the united effort, where bargaining capacity improves and gets stronger. Individual effort, to sell will bring him down where he is pulled down. However, co-operative attempt is the fine answer to this sort of exploitation.
Merit # 3. Lower Cost of Production:
These marketing co-operatives are rendering valuable service to the class of producers by providing the requisites of better farming. They buy and provide better seeds, fertilizers, and implements at economical rates, as they enjoy the benefits of large scale units, operating in the market. Such benefits are not available to farmers as individuals.
Merit # 4. Elimination of Trade Abuses:
The malpractices which are common in private trading centres are not resorted to, because cooperatives will be rendering the service, rendered by the merchant middlemen. As it is a common approach strengthens the bargaining capacity. The ‘Scientific theft’ is no more there. This is another reason to increase earning to our farmers.
Merit # 5. Better Selling Methods:
Co-operatives, apply better methods to push the agricultural products. Even they resort to advertising, branding, to claim superiority in the market. Such efforts are beyond the reach of individuals.
Merit # 6. Control of Quality and Better Grading:
To make greater success, better seeds are provided, farmers are advised to produce or grow only certain breeds, which makes grading more easy and economical. Here, the fanners are better rewarded as quality results in higher prices. Since individual production is limited, he cannot resort to grading, but co-operative will make him to have his cake and eat it too.
Merit # 7. Essence of Integrated Programme of Credit:
The programme of credit expansion, as a part of integrated approach on the part of Government of India, is going to the greatest success, provided marketing co-operatives are married to credit co-operatives. Collection or recovery of loans granted is done easily by marketing co-operatives.
If other agencies are employed, the recovery remains a dream. Hence, marketing co-operatives should be given the role to play in the collection of loans and they should become part and parcel of the overall co-operative structure.
Merit # 8. Instrument of Education:
Farmers can better appreciate their problems and difficulties as they are made to govern themselves. They learn as to what problems are practically faced, and how to solve them. Thus, this society becomes a training ground. They are bound to get enlightened on the importance of co-operation that is based on “one for all” and “all for one” “self-help through mutual help”.
Cooperative Marketing – Limitations of Co-Operatives
1. Disloyalty of Members:
The affection and attachment of farmers is lacking where farmers are having misunderstandings. Again they expect too much from co-operatives. They feel they are exploited indirectly.
2. Lack of Scientific Management:
This is the greatest limitation that impedes the growth of co-operative sector. The managing body does not consist of enlightened experienced people. The office bearers be polite, trained, and experienced who must know the basic principles of co-operation.
If good managerial staff is required for efficient management, the society is to pay better price for the services of these people with knowledge, experience and business knack.
3. Rivalry from Private Traders:
Since private sector is dominating the scene of business, co-operative child is nowhere, which is ill-treated. Private sector is deadly against, to be the cause of its collapse. Thus, everybody except Government, hates cooperative societies. Traders compete away the business by offering temporarily favourable terms.
Since they cannot afford to pay reasonable price for the efforts of other agencies like warehousing, transportation, banks manufacturers etc., they hesitate to have trade relations.
4. Defective Business Techniques:
The major factors of successful business are adequate finance and better management. In these societies, cannot find providing for future contingencies and for programme of growth and expansion. Personal interference, favouritism will have upper hand where syndicate and indicate will make their headway.
Cooperative Marketing – Suggestions for Strengthening of Cooperative Marketing Societies
(i) In the selection of the officials of co-operative marketing societies, weightage should be given to business experience and qualifications. After their selection, the officials should be given proper training so that they may deal efficiently with the business of the society. The efficiency should be rewarded, wherever possible.
(ii) There is a need for bringing about a proper co-ordination between credit and marketing co-operative societies to facilitate the recovery of loans advanced by credit societies, and make available sufficient finance for marketing societies.
(iii) The area of the operations of the societies should be large enough so that they may have sufficient business and become viable. Most of the societies at present are not viable because of the small volume of their business.
(iv) The societies should acquire the transport facility to bring the produce of the members from the villages to the mandi in time and at a lower cost.
(v) The public procurement and public distribution programmes should be implemented through co-operative marketing societies to increase their business turnover.
(vi) Co-operative marketing societies should develop sufficient storage facilities in the mandi as well as in the villages.
(vii) Co-operative marketing societies should diversify their activities. They should sell the produce and inputs, and engage in the construction of storage facilities.
(viii) Marketing societies, like the private traders, should provide accommodation and the drinking water facility for their members when the latter come to the mandi.
(ix) The societies should give adequate representation to the small and marginal producers in their organisational set-up.
(x) The co-operative feeling among members should be inculcated by proper education by organising seminars and by the distribution of literature.