Features of a Processing Co-operative Society

2. Features

A processing co-operative society shares the general features of every co-operative (voluntary membership, democratic control, registration, service motive) but adds features that arise from the fact that it runs an actual processing plant. Its main features are:

1. Voluntary association. Membership is open and voluntary. Any eligible producer of the relevant raw material (a cane-grower for a sugar factory, a milk producer for a dairy union) may join by buying at least one share and agreeing to abide by the bye-laws; no one is forced to join or to remain a member.

2. Membership of producers. The distinctive feature is that its members are the producers of the raw material the society processes — they are simultaneously the society's raw-material suppliers and its owners. A sugar co-operative's members are cane-growers; a dairy processing union's members are milk producers.

3. Object of processing raw produce. Its central purpose is to convert members' raw produce into finished goods — this is what sets it apart from a credit society (which lends money) or a consumers' society (which sells goods to members).

4. Registration and legal status. It must be registered under the Maharashtra Co-operative Societies Act, 1960, after which it becomes a body corporate with perpetual succession, a common seal, and a separate legal identity from its members.

5. Democratic management — 'one member, one vote'. It is managed by a managing committee elected by the general body, and every member has one vote regardless of how many shares or how much cane/milk he supplies. Control rests on membership, not on the size of a member's shareholding or supply.

6. Service and mutual-benefit motive, not pure profit. Its primary aim is to benefit its producer-members by giving them a fair, remunerative price for their produce; earning a surplus is a means to that end, not the sole end in itself.

7. Large capital requirement. A processing plant — a sugar factory, a dairy, a ginning-pressing unit — needs heavy investment in machinery and buildings. Members' share capital alone is rarely enough, so processing co-operatives typically depend on loans and share-capital participation from the State Government and financing agencies such as co-operative and development banks.

8. Distribution of surplus. After meeting expenses and setting aside statutory reserves, the surplus is used to pay members a better price for their produce and, where bye-laws permit, a limited dividend on shares — the benefit flows back to the producer-members in proportion to their dealings with the society. …