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Application / Case Study · Q13

Q.Ten small vegetable farmers of a village find that middlemen pay them very low prices and sell to consumers at high prices. They wish to join hands to sell their produce together and share the benefit fairly among themselves, keeping equal say for each. Which form of business organisation should they choose, and why?

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Recommended form: a Co-operative Society (specifically a marketing / agricultural co-operative).

Reasons, matched to the farmers' needs:

  1. Exactly 10 members of small means — a co-operative can be formed with a minimum of 10 members, and it is designed for people of limited means, which fits the small farmers precisely.
  2. Equal say for each — the farmers want equal control; a co-operative works on 'one member, one vote', giving each farmer the same voice regardless of how much he contributes.
  3. Fair sharing of benefit — surplus is distributed mainly as a bonus in proportion to each member's dealings (the produce he sells through the society), so the benefit is shared fairly among those who actually use it.
  4. Eliminating the middleman — by selling their produce together through the society, the farmers cut out the exploiting middlemen and get better prices, raising their real income — this is precisely the service motive of a co-operative.
  5. Limited liability and stability — being registered, the society is a separate legal body with perpetual succession and limited liability, protecting the farmers' personal property. …

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