Role of Co-operatives in Rural Development

Role of Co-operatives

A co-operative society is a voluntary association of individuals — typically small farmers or rural households — who pool their resources to achieve, collectively, what they could not achieve individually: cheaper credit, better prices, or shared processing facilities. The co-operative movement has historically been especially strong in Maharashtra, which is closely associated with the growth of co-operative sugar factories and co-operative dairying in India.

Areas in which rural co-operatives function

• Credit — Primary Agricultural Credit Societies (PACS), providing short-term and medium-term loans to member farmers (discussed in the rural-credit section above).
• Marketing — co-operative marketing societies that pool members' produce for collective sale, improving bargaining power against traders.
• Processing — co-operative sugar factories and cotton/spinning mills, in which farmer-members are also shareholders, allowing the value added in processing sugarcane or cotton to be shared with growers rather than captured entirely by a private processor.
• Dairying — village-level milk co-operative societies that collect, chill and market milk, federated into district and state-level dairy co-operative unions/federations.
• Input supply — co-operative societies that distribute seeds, fertiliser and other farm inputs to members, often at more favourable terms than an individual farmer could negotiate alone.
• Irrigation — water-users' co-operatives that manage and distribute water from a common source (canal, lift-irrigation scheme) among member farmers.

Advantages of the co-operative approach

• Gives small and marginal farmers, who individually have little bargaining power, collective strength in credit, purchase and sale.
• Achieves economies of scale in processing and marketing that an individual smallholding cannot.
• Runs on the principle of democratic member control (one member, one vote), in principle keeping the society accountable to its farmer-members rather than to outside shareholders.
• Retains a larger share of the value generated within the local rural economy.

Problems and limitations …