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Cooperative Marketing

Booklet No. 110 Agricultural Cooperation: ACS-13


Contents Preface I. Introduction II. Meaning and Definition of Co-operative Marketing III. Activities Involved in Agricultural Marketing IV. Basic Features of Agricultural Marketing V. Indian Farmers & Marketing Difficulties VI. Importance and Need of Co-operative Marketing VII. Role of Co-operative Marketing VIII. Aims & Objectives of Co-operative Marketing IX. Structure and Organization of Co-operative Marketing X. Financial Structure of Co-operative Marketing XII. Management of Co-operative Marketing Societies XII. Evaluation of Co-operative Marketing Societies XIII. Suggestions for Improvement Preface Marketing is one of the major problems of Indian agriculture. Owing to lack or shortage of suitable market , infrastructure, farmers are compelled to dispose off their produce at very low prices and, thus, they are deprived of the real income which they should get out of their venture. At this condition, co-operative marketing can prove very beneficial and, of course the only solution. This booklet describes an in-depth study about the co-operative marketing. Dr. K. T. Chandy, Agricultural & Environmental Education I. Introduction Efficient and organized marketing is essential for the healthy growth of any community. It benefits the producer as well as the consumer. Unregulated markets involve a long chain of intermediaries before the commodity reaches the final consumer, with the result that the cost of the commodity becomes exorbitant. This sort of arrangement is neither in the interest of the producer nor the consumer. In an agricultural economy the private marketing system leads to economic exploitation. In our country, the advantages of land reforms and cheap credit facilities, increased technical knowledge and lowered cost of goods and service cannot be available to the farmers unless they receive the full process of their produce and this can be achieved only through co-operative marketing. II. Meaning and Definition of Co-operative Marketing Marketing is a comprehensive term covering a large' number of functions. Recently the concept of marketing has broadened considerably. It includes not only purchase and sales of goods, but also the various business activities and process involved in bringing the goods from the producer to the consumer. According to the Reserve Bank of India a co-operative marketing society is an association of cultivators formed primarily for the purpose of helping the members to market

their produce more profitably than possible through the private trade". According to Margaret Digby: "co-operative marketing is the system by which a group of farmers or market gardeners join together to carry on some or all the processes involved in bringing goods from the producer to the consumer". Thus, co-operative marketing may be considered as a process of marketing of producer which enables the growers to market their produce at better prices, followed by the intention of securing better marketing services, and ultimately contributing to improvement in the standard of living of members. It is significant to note that a society consisting of a group of people simply for the purpose of selling commodities produced by other cannot be called a co-operative marketing society. A co-operative marketing society must be a society of agricultural producers joining together with the object of selling their own produce. III. Activities Involved in Agricultural Marketing Marketing begins at the farmers field. Activities included in it are discussed below briefly. A. Information and extension It informs and helps the farmers about the world and domestic market so that they can adjust their production according to the demand. It also informs them about the quality, variety, whole-sale and retail prices of commodity. B. Assembling the produce The produce may be assembled either through personal delivery at the society's office or society may collect it from the farms. The society may establish collection centres in outlying areas or may set up mobile collection services which may visit the various collection points according to a fixed schedule. C. Grading Through grading, the society sorts out the produce into lots of uniform quality and characteristics. It would be advantageous to the society if it makes use of standard grades recognized by national or even international trading customs. D. Storage The store houses, go downs or warehouses must be well planned in their size and design, which will largely depend upon the form in which the produce is to be sold. The go downs should be such as not to allow the goods to be spoiled, deteriorate in quality or weight and to be pilfered. The responsibilities involved in the operation of a ware-house are enumerated below. 1. Prevention of infestation through regular cleaning I and spraying, testing or fumigating with chemicals. 2. Storage of the commodities according to its grade I and varieties separately. 3. The planned storage of perishable goods. 4. A regular and daily check on the quality of the produce stored. E. Packing For the prevention of loss in handling in transit, the agricultural products, particularly fruits and vegetables must be properly packed.

F. Processing Processing is done either to make the produce marketable or to avoid loss in quality before it reaches the consumer. This can be done by (1) changing the appearance or substance of the produce and (2) increasing durability through application of modern methods of preservation. G. Selling In selling the agricultural produce, co-operative societies can act either as an agent or as an independent trader. H. Transportation Transportation of agricultural produce from the farms to the buyers, marketing centres or processing centres is full of risks. The success of a marketing society will depend to a large extent on how it is able to solve its transport problems. IV. Basic Features of Agricultural Marketing According to the committee on co-operative marketing, there are certain special features attached to agricultural marketing which is different from that of manufactured goods. They are explained below. 1. Perish ability of the product Most of the farm products are perishable in nature, the period varying from a few hours to few months. Their perish ability makes it almost impossible for producers to fix !he reserve price for their farm-grown produce. The extent of perish ability of farm products may be reduced by the processing function. 2. Seasonability of production Farm products are mostly seasonal and cannot be produced throughout the year. Thus the prices fall in the harvest season. However, the supply of manufactured products can be adjusted or made uniform throughout" the year. 3. Bulkiness of products The characteristic of bulkiness of most farm pro- ducts makes their transportation and stroage difficult and expensive. This fact also restricts the location of production to somewhere near the place of consumption or processing. The price range in bulky products is higher because of the higher cost of transportation and storage. 4. Variation in quality of products There is a large variation in the quality of agricultural products which makes their grading and standardization somewhat difficult. 5. Irregular supply The supply of agricultural products is uncertain and irregular because of the dependence of agricultural ! production on natural conditions. With varying supply, the prices of agricultural products fluctuate substantially. 6. Small size and scattered production Farm products are produced throughout the country and most of the producers are of small size.

7. Processing Most of the farm products have to be processed before their consumption by the ultimate consumers. This processing function increases the price spread of agricultural commodities. V. Indian Farmers & Marketing Difficulties The malpractice in the present system of agricultural marketing in India are very known. In 1928, the Royal Commission on Agriculture referred to these malpractice as nothing le3s than theft. Since then conditions have improved on account of various measures that have been taken, one of them being, introduction of statutory regulations of markets. Some of the malpractices in the present system of agricultural marketing reported recently by the Dant- wala Committee on co-operative marketing are mentioned below. 1. Multiplicity of market charges The producer is required to pay a large number of market charges, without any justification and often for no services rendered. Charity charges and storage charges without produce having been stored are the few examples. 2. Trade allowance Sometimes unnecessary and unjustified trade allowances have to be paid even when the produce is not kept properly or systematically. 3. Adulteration and lack of grading The producers of agricultural commodities and the traders have not yet realized the importance and advantages of grading the produce, with the result that the transactions take place on a sample basis and the producer does not get the full worth of his produce. 4. Method of sale The under-cover system of sale is widely prevalent in many of the unregulated markets. This system is open to various malpractices because only the negotiators know the price negotiated. 5. Weight In many markets the weights used are not correct. Besides, there is no supervision over the personnel engaged in weighing, who are mostly employees of the trader and who often manipulate the sale. 6. Delayed payment of sale proceeds The producer, in most cases, is not immediately paid the full value of his produce sold. Advances are made and final settlement is made after some delay. 7. Large samples Frequently, large samples are also taken by the various buyers without payment. 8. Low marketable surplus One of the important factors which has credited a number of problems for agricultural marketing in India is that the marketable surplus is low. It has been estimated to be 30-35 % in case of food grains and 90-95 % in case of cash crops. The agricultural production should be made so efficient that there is more marketable surplus with the farmers.

9. Superfluous middlemen The agricultural marketing, due to the ignorance, illiteracy and poor financial conditions, small and medium size producers cannot individually undertake most of the activities involved in the marketing system. Hence the middlemen play an important role in India. These comprise village 'beopari', local landlords and big cultivators, wholesalers, commission agents and retailers. Broadly speaking about 70 % of the produce is handled by the producer themselves and the balance by the trade comprising a long chain of middle men. There exists as many as 10 to 12 intermediaries, who function at various stages in the process of assembling and distribution of the produce. 10. Inadequate storage facilities In most of the villages there is hardly any suitable provision for adequate and efficient storage facilities. The loss due to inadequate storage has been estimated Ito be about 5 % which in terms of value would come to over Rs. 4,000 millions. 11. Defective transport The transport system in the rural areas is also a bad state. It is a well-known fact that good transport system and communication are pre-requisites for efficient marketing. 12. Lack of market information There are hardly any suitable agencies providing reliable information about prices in rural areas. 13. Absence of regulated markets As many as 2,000 out of 3,400 important markets have not been regulated so far. Even in the regulated markets, rules and regulations are not properly enforced by officials, with the result that the same malpractice are continuing in one form or the other. 14. Financial problem The agricultural co-operatives require two types of finances. One relating to production requirements of the member farmers and the other to support the business activities of the societies. The flow of production credit through institutions to the member farmers for raising crops remains insufficient in most of the cases. 15. Lack of integration The vertical integration existing between production and marketing and also between primaries and their federations is not sufficient. 16. Inefficient management The directors of the societies who are expected to promote the growth of the movement are generally uninformed and are not conversant with business methods. There is, therefore, no initiative in them for taking to modern marketing techniques. In most of the cases, the managerial staff too do not possess adequate skills in business management, and consequently try to follow the conventional method of marketing. Where the managers are recruited from the open market, the salaries paid are often too small to attract experienced and talented persons. VI. Importance and Need of Co-operative Marketing

Organized marketing is of considerable significance to the economy of a country. This is because the imperfections in the marketing system constitute a major constraint on the production. Efficient marketing organization is, therefore, vital to the health and well ,being of a community. The whole programme of production individually or collectively, with all our national effort in planning would be of no value if it is not followed by a sane and sound marketing policy. In fact, a well organized co-operative marketing structure is an essential pre-requisite for large scale increase in co-operative credit. Under the "crop loan system" there is a shift in the emphasis from land to 'crop' as the main security, and linking of credit with marketing would provide a built-in mechanism for recovery of production loans also. Due to the small holding and scanty output of our farmers it is difficult as well as expensive to sell any commodity in small lots. Secondly the smaller the amount of produce for sale, the larger will be the number of hands through which it will pass, which if not unproductive is surely uneconomical. In such circumstances, the principal hope of the small producer lies in organizing co-operative societies and thereby joining hands with his fellow producers to undertake the marketing of his produce. There are number of reasons which justify the establishment of co-operative marketing structure. Some of them are discussed here. 1. The malpractices existing in marketing system can be removed to a great extent through the introduction of co-operative marketing structure. 2. There exist a large number of middlemen who take part in collection, storage, financing, grading, sale and transportation of agricultural produce. Their charges are out of proportion and producers do not get their due share of the price paid by the consumers. Co-operative marketing, if efficiently organized, can help in reducing the price-spread between the producer and the consumers. 3. Co-operative marketing is an essential prerequisite for large scale expansion of co-operative credit. Co-operative marketing societies are expected to l ensure a better return to the farmer of the produce raised by him with the assistance of loans from co- operative sources. 4. The marketing system integrated in a co-operative manner would perform functions of assembling, grading, processing, storage and transportation, insurance financing, etc. 5. Co-operative marketing of agriculture produce is necessary not only for the attainment of maximum efficiency but also for improving the economic conditions of the producers by strengthening his bargaining power. 6. Co-operative marketing would educate the cultivator in the production, preparation for market of his produce, provide sufficient volume of produce to make efficient grading possible and bring the Indian producer into direct contact with export market and with large consumers in India. The necessity of co-operative marketing in India is also increasingly felt as the future of co-operation depends to a large extent on its development. Co-operative opinion is fast molding to the fact that the credit movement would hardly succeed unless it is linked effectively with marketing. The co-operative credit movement has not succeeded in India due to absence of any link with marketing. Co-operative marketing is now considered to be a logical corollary of cooperative credit and one without the other is incomplete and imperfect. VII. Role of Co-operative Marketing

It has been recognized that co-operative form of organizations can playa significant and predominating\role in improving the system of agricultural marketing. Co-operative marketing plays a significant role in the following area. 1. Optimization in resource use and output management An efficient co-operative marketing system can con- tribute to an increase in the marketable surplus by reducing losses arising out of inefficient processing, storage and transportation. 2. Increase in farm income An efficient co-operative marketing system guarantees the farmer better price for farm products and induces them to invest their surplus in the purchase of modern inputs so that productivity and production may increase. 3. Widening the markets An organized and well-knit co-operative marketing system widens the market for the products by taking them to remotest corners of the country i.e. to areas far away from the production points. 4. Growth of agro-based industries The improved and efficient system of agricultural marketing helps in the growth of agrobased industries and stimulates the overall development process of economy. 5. Employment A well integrated co-operative marketing system provides employment to millions of persons engaged in various activities, such as packaging, transportation and processing. These co-operatives can render efficient and useful coordination between producer and consumer which will counteract the exploitation tendencies of the greedy , traders. VIII. Aims & Objectives of Co-operative Marketing The broad aim of co-operative marketing societies is to rationalize the whole marketing system so that it may be beneficial to the producer. Its immediate objective is to strengthen the bargaining capacity of the cultivator so as to secure him better price and eliminate the superfluous middlemen. The chief objects and aims of co-operative marketing society are briefly given below. 1. Strengthen the bargaining capacity of the cultivator. 2. Secure the member a better price for their produce. 3. Eliminate superfluous middlemen. 4. Provide members the needed finance. 5. Persuade the farmer to grow better quality goods. 6. Stabilize the price. 7. Develop fair trading practices. 8. Provide the facility of grading and transportation. 9. Act as an agent of government for procurement and implementation of price support policy. 10. Promote the economic interest of its members by encouraging self help, thrift and better farming among members. 11. Act as a distributive center for agricultural requisites such as seeds, implements etc.

12. Help in the expansion of co-operative credit programme by linking marketing with credit. A. Control of market The marketing society will be in a position of control of a large column of business, it will succeed in effecting real economics in services like assembling, grading, storing, risk bearing etc. B. Better prices The marketing societies will enable the farmer to get more prices for his produce as they will strengthen his bargaining capacity. C. Safeguards against price rise A co-operative society will not speculate and will be a safeguard against price rise, as its object is not to increase prices but to keep them steady. D. Credit facilities As a marketing co-operative society is in a position to obtain finance at lower rate of interest from central co-operative banks and other agencies, it would be possible for it to provide credit facilities to farmer at reasonable terms. E. Supply of quality goods The consumers will also be benefited by the marketing societies. At a fair price, they will get better quality goods which have been properly graded and tested by these societies. F. Help in growing better crops By providing agricultural requisites like fertilizers, seeds, pesticides, etc., a marketing society also helps its members to grow the best crops and thus to increase its yields. G. Division of surplus The profit of a marketing society becomes the property of members and the same is divided in proportion to the contribution they have made to the co-operatives. H. Educative value Co-operative marketing has been strongly advocated because of its highly educative influence. No influence is so important in the economic education of farmers as their own efforts in co-operative marketing. They also serve an important function in supplying information on many issues which affect the economic status of farmers. IX. Structure and Organization of Co-operative Marketing The pattern of organization of co-operative marketing societies is not uniform throughout the country. In some states like Assam, Bihar, Madhya Pradesh, Karnataka, Orissa, Kerala, Rajasthan and West Bengal, there is a two tier pattern of organization, namely primary marketing societies at the level of the secondary market and apex marketing society at the State level. In other states, there is a three-tier system consisting of primary marketing societies at the base, i.e., secondary markets, the central marketing societies generally at the district level and the apex marketing society at the state level. There has often been a controversy whether there should be a two-tier or three-tier pattern. In this connection, the Committee on co-operative marketing re- commended that "the future pattern of organization of marketing co-operatives should be a two tier structure, with the

apex society at the state level, primary marketing society at the mandi level and branches of apex societies at the district or regional level. Regarding the states, where a three-tier structure already exists, the arrangements need not be disturbed. But the district society should gradually divest itself of all functions which legitimately fall within the purview of primary marketing societies. The structure of co-operative marketing societies in India consists of: (A) National Agricultural Co-operative Marketing Federation (NAFED) at the national level, (B) State Marketing Federation at state level, (3) District or Regional Marketing Societies at the intermediate level and (D) Primary Marketing Societies at base level. All these marketing societies are discussed here in brief. A. National Agricultural Co-operative Marketing Federation (NAFED) The NAFED is a federal organization of state level apex co-operative marketing societies in India. It was established in 1958 with its headquarters in New Delhi. Its chief function is to coordinate the activities of state federations, and render advice and technical guidance to them. The federation also undertakes export and inter-state trade. About 2,937 primary marketing co-operatives are affiliated to the federation. It has established 20 offices within country and has business contact in over 50 countries throughout the world. During 1985-86, NAFED's total exports were of the order of Rs. 79.42 crores. The same year NAFED earned a net profit of. Rs. 377.72 lakhs. However in 1986-87, the business of NAFED was estimated to be Rs. 135.35 crores including foreign trade of Rs. 63.87 crores. B. State marketing societies These federations function at. the state level and are intended to serve as apex institutions on behalf of the affiliated society members. They are also expected to procure agricultural inputs and other goods required by the farmer for distribution through co-operative agencies within the state. They are mainly engaged in wholesale or monopoly distribution of chemical fertilizers, con- trolled commodities like iron and steel, and consumer goods like cement, sugar, kerosene, wheat, rice, coffee, seeds, agricultural implements, insecticides, milk powder, etc. They also process agricultural produce, undertake construction of go-downs, processing units, and manufacturing plants for fertilizers. They also co-ordinate the work of cooperative marketing societies and work in close collaboration with government department concerned with marketing of agricultural produce, agricultural inputs, civil supplies, etc. On 30th June 1986, there were 29 state level apex marketing societies one in each state (except in Nagaland). In addition, at the state level there were two fruits and vegetables federations. The Committee on Co-operative Marketing has recommended that membership of the apex marketing societies as well as processing societies in the state so that the apex society can effectively represent them and co-ordinate their activities. The apex federation had a total membership of 10,242 societies, 592 growers and others as regular and 3,449 nominal members. The average share capital per apex society worked out to be Rs. 318 lakhs and produce sold by all the apex federation amounted to Rs. 466 crores (in 1981-82).

C. District or regional marketing societies The central or district marketing societies existed only in few states. These societies are expected to co- ordinate the functions of primary marketing societies both in regard to marketing of agricultural produce and distribution of agricultural requisites and consumer goods and also undertake processing, and where necessary inter-district trade etc. In actual practice these societies are mostly engaged in the distribution of agricultural production requisites like fertilizers and essential consumer articles. In many cases, they function at places such as district headquarters which are not mandi centres. At the end of June 1982 there were 309 district or regional level societies. Of these, 138 were dealing in sugarcane supply, 3 in cotton, 16 in fruits and vegetables, one each in coconut and areca nut 3 in tobacco and 4 in other specialized agricultural commodities, the remaining being general purpose societies. D. Primary marketing societies The primary marketing societies are by and large located at the secondary market (mandi) or wholesale assembling centres. However, in few states, marketing societies were organized at the headquarters of the block or taluka with their jurisdiction extending to the block or a taluka as the case may be, irrespective of the existence or otherwise of a market at those places and their natural catchment areas. 1. Location and operational area The location and area of operation of a primary marketing society are of considerable importance for its success. The general experience indicates that there is considerable operational advantage in the headquarters of a marketing society being located at a market center already established in accordance with the normal trade channels. The area of operation of these societies should extend to villages, the produce of which tends to go to a mandi, irrespective of the fact whether they are situated in one administrative unit or other. It is highly imperative that the question of location and area of operation of marketing society is decided according to the needs and requirements of business rather than administrative convenience and should not be artificially pegged to some administration unit. 2. Functions of a primary marketing society A primary co-operative society is expected to perform the following functions. a. Arrange for the sale of agricultural produce of the members and for this purpose. i. ii. prepare the produce for markets by sorting, grading and packing; and transport the produce from member's residence, farms or go-downs to the market.

b. Encourage members to grow improved and standardized varieties of produce. c. Accept deposits and to borrow from the co-operative central banks to which it is affiliated. d. Rent or own go downs processing yards and cold storage to facilitate storage, processing and sale of goods. e. Process raw material belonging to the members I or purchased by the society. f. Procure and supply to members fertilizer, manures seeds, implements etc. and essential domestic requirements.

g. Act as an agent of the government for the procurement of agricultural produce and supply of requisites of agricultural production. h. Encourage thrift, self-help and cooperation among its members. i. Work in collaboration with the central co-operative bank and rural co-operative credit societies so as to link up supply. j. Act as warehousemen under the warehousing Act. k. Undertake all activities calculated to further the objects of the society. 3. Membership Membership of a primary society is generally open both to the agricultural credit societies and the individual grower in the operational area of the marketing society. 4. Business practices a. Commission agency Following are the practices involved in the Co- operative marketing societies. The majority of marketing societies are functioning as commission agents. Under this practice a cultivator may bring the produce at the mandi where the headquarters of a marketing society is situated or may arrange to send the produce through service co-operative of which he is a member. The marketing society then arranges for the sale of the produce. The marketing society retains a small amount (25 paise per 100 rupees) as commission. The payment is made to the cultivator immediately after the auction. The system has the following limitations: i. A farmer with small marketable surplus rarely come to co-operative market for sale. Rather he disposes of his produce in his own. ii. In regard to certain crops, such as jute, the normal trade practice at all level is to make outright purchase. iii. Since the farmers sell their produce at the village itself the recovery of production credit granted by the credit co-operatives through sale of the produce through marketing co-operatives is not possible. b. Outright purchase To facilitate the marketing of the produce of farmers with limited marketing surplus and to over-come limitations of commission agency system as mentioned earlier, the marketing societies also have to undertake outright purchases of agricultural produce. In such cases the goods are either purchased in the mandi when brought by the cultivator or in the village itself by the marketing societies own agents or through the agency of village societies. The payment is made on the spot. It was observed that the marketing societies were not very willing about such outright purchases because, of the risk involved in the disposal of such produce due to fluctuations in prices. c. Pledge advance A marketing society usually advances pledge loans in the cases where a cultivator feels that the prevailing market price is not favorable to him while he needs some money for his domestic needs urgently. Such advances are generally to the extent of 75 % of the value. The object in providing such advance is to strengthen the holding power of the cultivator so as to prevent distress sales immediately after the time of harvest and thus secure a fair price for his agricultural produce. However, the quantum of pledge advance was comparatively low. The

slow growth of pledge business has been one of the major factors adversely affecting the increase in the volume of marketing business of the marketing societies. Following are the few factors which hinder the developing of pledge business; i. The pledge business of the marketing societies is generally restricted to members at the societies headquarters and in few surrounding villages. ii. These 1oans are being advanced without ensuring that the pledge produce is borrowers own. iii. The marketing societies also provide loans other then pledge loans. iv. Competition from credit societies which also advance pledge loans. v. While sanctioning pledge loans, a good deal of favoritism, inefficiency and irregularities are noticed which shake the cultivator's confidence in the marketing societies. d. Trade credit In most of the market it is customary for the marketing societies like other dealers to allow trade credit to the whole sale buyer of agricultural produce sold by the society. The period of such trade credit generally ranges between 2 to 15 days. To avoid the risk, of civil litigation in case a merchant fails to pay the amount within stipulated time, he is enrolled as a nominal member of the market society. . The All India Rural Credit Review Committee has stated that the facility of trade credit has often been abused by traders and several marketing societies have long-standing overdue from traders. The practice has also led to the infiltration of traders in the marketing societies for availing the interest free credit facilities from the society. e. Provision of storage facilities Co-operatives provide storage facilities to their members by renting or owning go-downs and thereby facilitate grant advances against pledge of produce and sale of members produce. But co-operatively owned go-downs are very few and most of then are reported to be only makeshift structures, hardly fit for conversion into warehouses. X. Financial Structure of Co-operative Marketing The need for the expansion of business activities .of the co-operatives is keenly felt. Marketing societies are also handling various agricultural commodities and business. This is possible only with adequate finance. So credit is an inevitable factor for the development of cooperative marketing society. A. Linking of credit with marketing It is now increasingly realized that co-operative credit movement would not succeed in India unless an organic link between co-operative credit and marketing is properly established. This will reduce the domination of the private trader and money-lender over the Indian marketing system. The members of the credit society should be able to sell their produce through marketing society, and the primary credit society should act as the agent of the marketing society and assemble and arrange transport to marketing society. The first step in the process of linking of credit with marketing is the application of agricultural credit societies to marketing societies. Now, the primary credit society advances crop loans to the member on the understanding that they would sell their produce through the marketing society. This system of mutual assistance was expected to ensure better recoveries for the primary societies and better business for the marketing societies.

B. Recovery of loans Even though 90 % of the agricultural credit societies have been affiliated to the marketing societies, only a few societies have arranged for collection and sale of their produce through the marketing societies. Only 582 out of 4,328 primary marketing societies assisted in the recovery of Rs. 53 crores on behalf of 17,047 primary agricultural credit societies during 1981-82. a. The slow progress in matters of recoveries has been attributed to the following reasons. I. The apathy of the village co-operative in making recovery of loans in kind. 2. The central cooperative banks do not take ample interest in the scheme and are content so long as recoveries are made on time. 3. Loans are given even to those persons who do not sell their produce through the marketing societies. 4. The production credit given to the producers is not adequate and generally not advanced at the proper time. 5. Practically, no arrangement existed at the village level for the collection of the produce from the members. 6. The members are not confident about the effective- ness and competence of marketing cooperatives, to render the required service. b. In view of the above mentioned problems the following steps have been suggested for bringing about an effective link between credit and marketing. I. All credit societies should not only become members of the marketing societies, but also agree to con- tribute at the rate of 2 % of their loan turnover to the share capital of marketing societies. 2. Stipulation may be made under which every borrower from the primary credit society is compulsorily required to repay a proportion of the loan taken by him in kind through sale of the requisite quantity of produce to or through the marketing society. 3. Specific sanctions in the form of penal interest, loss of eligibility for loan for the next season etc. should be laid down against breach of obligation. 4. As an inducement to the cultivator to sell his produce through the marketing societies, encouragement in the form of additional loans up to 5 to I. 10% of recoveries out of sale proceeds during the previous year may be advanced. C. Finance for co-operative marketing Like any other economic aspects, a marketing society requires short and long term finances for performing marketing functions. The requirement of finance of a marketing society depends on a variety of factors such as its turnover, training practices followed by it and the traditional market practices prevalent in the area. The requirement of finance of a primary marketing society for meeting its needs for working capital and other fixed assets is classified as follows: 1. Short term finance Short term finance is used for a. Advance to its members on pledge of their agricultural produce pending for its sale; b. Providing the customary trade credit to the buyers of the produce. c. Making, where necessary, outright purchase of agricultural produce from its members. d. Undertaking purchase under government procurement or price support schemes.

e. Stocking agricultural inputs fertilizers, seeds, insecticides, implements, etc. to the extent they are not available on credit or consignment from government. f. Stocking essential consumer articles in common demand for distribution in rural areas through village societies and for its running, expenses on staff, hiring of building and go-downs, contingencies, etc. 2. Long term finance a. purchase of initial equipment, furniture, etc.; b. investment in the shares of the co-operative central banks, apex or district marketing societies, processing societies, wholesale consumer stores, etc.; c. payment of security deposits to government or other suppliers for supply of goods; d. purchase of transport vehicles ; e. towards capital cost of establishing processing units; and f. construction of go-downs for storage of agricultural produce, consumer goods and agricultural regulates. 3. Sources of finance The marketing societies raise funds in the following ways; a. share capital contribution from members and state government; b. deposit from members; c. reserves created out of profit earned; , . d. borrowing from co-operative financing agencies or State Bank of India and; e. loans and grants from state governments. The contribution of state governments in the share capital of the marketing societies has been more than the share of their members. In 1981-82 it was 63 % of the total share capital. To carry on the marketing and processing operations, the co-operative marketing societies have to depend largely on the short term credit from various agencies in the form of clean hypothecation and pledge loans. The bank of the credit for working capital is obtained from the co-operative banks and the government. Though the central banks account for more than one-half of the borrowing of primary marketing societies, the bulk of the funds so advanced are raised from the Reserve Bank and State Bank. Reserve Bank provides common credit limits to apex banks at a confessional rate of 2 % below the bank rate for financing agricultural operations and the marketing of crops. So far as marketing is concerned, the funds borrowed from the Reserve Bank can be utilized by cooperative banks for the reimbursement of the pledge loans granted by marketing societies to their members by them on an outright basis. The State Bank of India provides pledge or hypothecation advances both directly to marketing societies and indirectly through co-operative banks. XII. Management of Co-operative Marketing Societies Managerial personnel of the right caliber and experience have a crucial role in the successful functioning of co-operative marketing and processing societies. At present most of the managers of the marketing societies are either officials of the co-operative department on the pay roll of the government or government officials on deputation with the societies.

Survey and experience have shown that many of the marketing societies have not been able to attract the ii right type of managerial staff for various reasons. In II the case of government officials working with marketing Ii societies, their selection in some cases is made to suit administrative convenience, irrespective of the aptitude, training and competence of the officers concerned. In case of recruitment by the marketing societies themselves the ability to attract talent is rather limited. Thus, the problem of staffing co-operative societies with the right type of personnel has become very important. I A study in this regard reveals the following facts. 1. There is rather heavy dependence on officials of the co-operative department for running the marketing societies. 2. In case of localized recruitment, the right type of people are not coming forward on account of absence of suitable scales of pay, prospects of further promotion and security of the tenure. 3. Most of the managers of the marketing societies are not experienced and properly trained and lack business perception and managerial efficiency. It is necessary to secure the services of professionals and competent managers who are familiar with practices and problems of relevant trade. Therefore, first of all services of such managers will have to be paid for adequately if men of the right quality are to be attracted. Secondly the paid manager will increasingly have to be given a position of sufficient independence and status in the working of the society if he is to show results. XII. Evaluation of Co-operative Marketing Societies The marketing of agricultural produce on co- operative basis has not, however, achieved success to the extent desired. This was also felt by the "Dantawala Commission" though the growth has been striking in terms of their numbers and coverage of mandis and villages, the input made by the marketing societies on the trade in agricultural commodities has not been significant barring a few notable exception. The expert Committee on Assessment and Evaluation in its final report, has observed that the main area where cooperation is at its : weakest at present is with respect to co-operative marketing. A recent follow up survey conducted by the Re- i serve Bank of India with regard to the working of marketing cooperatives has stated. Considering the three main objectives for which they were organized namely advancing of pledge loans, marketing of agricultural produce and distribution of supplies, the actual performance of the marketing societies was not too encouraging. The survey has further revealed that marketing societies has made a negligible impact on the cultivators about their ability and scope as good marketing institutions. Most of the primary societies did not effectively cover all the villages in term of membership of growers and collection of agricultural produces. They confined themselves only to a few members and a few villages. Most of the marketing societies did not make any attempt to grade or pool members' produce. Many of the state-level societies did very little marketing business and they were mostly involved in distribution and supply functions. Their role in promoting an inter-state or inter district trade and in helping the primary society in disposing of their produce was negligible. The main reasons why members do not sell their produce through the marketing societies are as under;

1. Dealing with the co-operative marketing societies resulted in much botheration and there were serious delays. 2. The marketing societies did not make any arrangement for lifting the stock from the villages and they found it costly to take produce from their fields to the co-operative marketing societies. 3. Many members did not have adequate knowledge of the functioning of the co-operative marketing and therefore, they did not know as to what were the advantages in selling their produce to the societies. 4. The price offered to the members in the open market was generally more than offered by the societies. 5. Members have little confidence in the co-operative societies and their personnel. 6. There is no personal contact and care on the part of the managers of the co-operative societies. One of the questions confronting marketing societies is that of loyalty of the members to the organization as the success of society will largely depend on it. If members are lured away by tempting offers made by traders and other outside dealers even the strongest organizations will wave. It is imperative, therefore, that members should be educated in co-operative principles so that they may remain loyal to the society. A. Defects and difficulties 1. Marketing societies are working with inadequate working capital so the societies are not efficient and viable. 2. Methods and practices existing in marketing societies differ from general prevalent trade outside. So producers are not offered inducement to bring their produce to them. 3. The marketing societies have not been able to provide reasonable marketing service to enable the grower to obtain a fair price for his produce. 4. Certain practices (like credit facilities) are not entertained by marketing societies. -5. The marketing societies hardly provide any facility for undertaking processing of agricultural produce. 6. Producers with a small surplus produce will more than often be inclined to sell the produce outright rather than entrust it to the marketing society for sale on agency basis. 7. The area of operation of many a marketing society is unnatural as it coterminous with some administrative unit like a tehsil, block or a district and not to village from which the produce is ordinarly brought for sale in the mandi. 8. In spite of liberal financial assistance given during the last few years, the position of go-downs is far from satisfactory. 9. Large amount of loans .are given as production loans by the marketing societies. This has resulted in high over dues. 10. Many of the marketing societies are being exploit- ed by vested; interests like commission agents, trader etc. 11. The operational cost of the marketing societies is abnormally high. The proportions of cost of management to total working capital moved from 4 % in 1958-59 to 9% in 1981-82. 12. Most of the staff of the marketing societies are untrained, unqualified, incompetent and inefficient. They lack requisite business experience and training. 13. An important handicap of primary marketing societies has been the lack of support and guidance from apex marketing societies. B. Causes of poor performances A survey conducted by the Reserve Bank of India has pointed out the following causes for the poor performance of the co-operative marketing societies in India. 1. Result of official initiative.

One of the basic weakness of the marketing society has been that they have been organized on the initiative of departmental officials and not through the efforts of the cultivators. 2. Target hunting There is a wide gap between the targets and the actual achievements due to unrealistic nature of the former and inadequate planning. Moreover, the plans provide only for the number of marketing societies to be set up, share capital contribution, managerial subsidy, loans, etc. But target fixed for some concrete action programmes are negligible. 3. Unplanned set-up Very little attention is paid to evolving appropriate norms with regard to the coverage of area, the volume of agricultural produce to be handled, the number of credit societies to be affiliated, the financial resources etc. As a result the performance of the marketing societies has suffered a lot due to lack of action programmes. 4. No Integration of tiers The work of marketing societies has also been hampered, because no serious attempts have been made to link them properly with the district apex or regional marketing society on the one hand and the primary credit societies on the other. In many cases credit societies were also not affiliated to marketing societies. 5. Weak organizational links The adequate attention has not been paid to forging an organizational link between the district apex marketing societies and the primary marketing societies and between the marketing societies and the credit societies. 6. Competition from credit societies The work of marketing societies has also been retard- ed because of competition with the credit societies. Instead of working in coordination, the credit societies in some cases, show a tendency to compete with the marketing societies in their marketing business activity. 7. Bias towards individual membership The marketing societies instead of establishing an organic link with credit societies, directly enroll individuals. It is true that such direct membership of individuals in marketing societies has to be permitted so long as all credit societies are not affiliated with the marketing societies and the credit societies do not effectively cover all cultivating families. It has been reported that individual membership tended to facilitate concentration of urban interests in the management of marketing societies particularly because it confined itself mainly to headquarters of the marketing societies and a few villages surrounding them. 8. Poor management The management of the marketing societies in most cases does not come up to the standard necessary for the conduct of such varied functions as are assigned to them under the bylaws. Many of the state-partnered societies did not have state nominees. Even where they were nominated, they were irregular in attendance and indifferent to developing the business of the society. 9. Malpractice Most of the marketing societies suffer from a number of malpractices. Cases of favoritism in granting pledge loans, misuse of funds, false entries of sales, etc., are the common malpractices existing in marketing societies.

10. Unregulated markets The absence of regulation of marketing also affected the working of these societies. As many as 2,000 out of 3,400 important markets are not registered in India. Even where the markets have been regulated, their operations have not contributed to the development of marketing business societies. II. Concentrations of distribution activities. Another reason for poor performance of the marketing societies is that these societies devote their energies and resources largely to distribution function. Profitability in supply activities made the societies unnecessarily self-complaint and at the same time the real objectives for which they set up were ignored. 12. Lack of supervision and audit Supervision in most cases is only a formal checking and verification of records. The authorities pay little attention to irregularities in the management or working of these societies. The Reserve Bank Survey reports that, on the whole, supervision, inspection and audit degenerated into a routine check of financial and another business activities of the marketing societies; , they failed to provide in most of the cases, the requisite guidance and encouragement to marketing societies in developing their pledge business or marketing activities which are, indeed, their main objectives. 13. Purchase through private trade General co-operative marketing societies are expected to have direct contact with the farmers, however, there have been instances where co-operative marketing societies have also made purchase in the mandis through private trade, which defeats the very objectives of cooperative marketing of produce. XIII. Suggestions for Improvement In order to strengthen the co-operative marketing system some points are taken into consideration. A. Requisites of success of marketing 1. Do not start marketing co-operative until a definite economic need is established, or some improvement in the existing system of markets is required to be brought about. 2. Keep a definite objective in view before starting a marketing co-operative and base your organization, as far as possible, on community principles. 3. Let no one except the growers of a particular crop for whom the society is set up be admitted to membership. 4. Do not expect miracle in the first year. There are many things like weather, foreign markets, politics etc. over which you have no control. Do not lose heart. 5. Do not sell all the produce at one time nor to any one purchaser. Do not make outright purchases for an amount which exceeds your own resources. 6. Do not try to operate on a large scale at the very commencement before proper experience is gained, nor should you separate with too small a margin of profit. 7. Bind all the members by enforceable contract and be sure that your society controls enough of the community so that it becomes a factor to reckon with in the market. 8. Keep in touch with your members, apprising them of your activities from time to time by such means and measures as are practicable. 9. Keep the management in the hands of efficient persons having business experience, and having influence in the locality so that loyalty of the members can be ensured through them.

B. General suggestions Growers with common interest should combine together and form a co-operative marketing society, in the area where such society does not already exist. The immediate purpose should' be to get better prices for their produce to secure better marketing services and the ultimate purpose should be to contribute to improvement in the standard of living of members. In order to enable the members to understand the working and significance of the cooperative marketing, education of the members propaganda and publicity are the real instruments for any success of such societies. 1. The membership of the marketing societies should consist of agricultural producers including agricultural credit societies. Traders should not be allowed to become members. 2. The area of operation of co-operative sales scarcity should be widened. 3. The co-operative societies must have proper pooling and storage facilities in order to spread the sales over the entire period of demand which is in the interest of both the producers and consumers. 4. In order to speed up the construction of go-downs, efforts must be made by the state government to provide the supply of cement, iron and steel to these societies. 5. Provision should be made for the marketing finance to the agriculturists at as Iowa rate as possible. The rate of interest should not exceed the rate at which production credit is made available to them. 6. For carrying out the activities of primary marketing societies and the large sized societies effectively, the two fold division of functions between them should be adopted. a. The credit society. should be made responsible for giving production loans in cash or kind. b. The credit society may also collect the produce icon behalf of the marketing society and even store it temporarily until it is sent to the marketing societies. 7. Proper co-ordination of functions between the primary marketing societies and similar organizations at higher levels should be involved. 8. Co-operative marketing should be clearly integrated with credit processing and distribution through consumers stores. Besides, undertaking sales on commission basis marketing societies must arrange to make outright purchases particularly from small grower members. 9. As far as possible apex marketing co-operative societies should be organized along with the primary marketing societies so that arrangement for the supply of production requisites may be facilitated. 10. The quality of management should be considerably improved in order to make the societies purposeful. C. Specific suggestions 1. Marketing societies should be located at the mandi centres and their area of operation should be co-terminus with the hinterland of the markets concerned. 2. Efforts should be made not only to get affiliated with all agricultural credit societies but also establish an effective link between credit and marketing. 3. The supervisory staff of co-operative department should see that the marketing societies are not dominated by traders. 4. In order to attract competent managerial personnel common managerial cadres should be created for the co-operative marketing societies. 5. Existing untrained managers should be trained. The state government should provide training facilities to the trainers immediately after their recruitment.

6. As an average primary marketing society will need a capital base of about Rs. 2 lakhs systematic effort should be made to arrange the share capital of primary marketing societies by enrolling more individuals as members. 7. The State Bank of India should give high priority to the requirements of co-operative marketing societies. 8. Marketing societies should endeavor to undertake the sale of their members' produce after grading and processing. 9. The consumer and the producers co-operatives should have an effective link with marketing societies. 10. The marketing societies should establish their own go downs. The government should provide them finance for this purpose. 11. For ensuring that only confide producers elected to the managing committees of primary marketing societies that the member should have sold a sizeable share of the marketing surplus of his produce through the marketing society during the two preceding years. 12. Directors of marketing societies should lay down broad policies and principles and should not ordinarily interfere with day-to-day working of the society which should be the responsibility of manager. 13. The state government should take immediate steps for creating promotional and assessment cells. The Registrars should evaluate the working of these cells and take steps to ensure that these cells function effectively and serve the desired purpose. Conclusion Development of co-operative marketing deserves to be given highest priority as it offers built-in mechanisms with the co-operative structure which would not only assist the cultivators in obtaining a good price for their marketable surplus but would also facilitate recoveries of expanding quantum of production credit provided by primary credit societies. %%%%%%%%%%%%%%%