The Co-operative Movement.

Sir

The Need-More than seventy per cent. of called the Nidhi, corresponded in some respects the vast population of India subsist on agricul- to the provident funds and friendly societies ture and the majority of these millions in European countries. Though these Nidhis generally live, under present conditions, from provided cheap capital to agricultarists the hand to mouth. The ryot's occupation is spirit of co-operation was lacking in tuom. healthy and productive, and he is proverbially Frederick submitted an exhaustive report to honest and straightforward in his dealings, Government suggesting that the formation of except when years of famine and hardsuip co-operative societies afforded an excellent make him at times crafty and recalcitrant. means for relieving rural indebtedness. UnOwing to his poverty, combined with want of fortunately, the report was not received education and consequent lack of fore favourably either by the non-official public or sight, he has to incur heavy debts to meet by the Government of Madras, and no action occasional expenses for current seasonal pur- was taken on the recommendations made in it. poses, the improvement of his land, or for The next few years saw two of the worst ceremonial objects, and he has therefore to famines from which India had ever suffered, seek the assistance of the local money-lender, and in 1901 Lord Curzon appointed a Comknown as the Sowkar or the Mahajan. The mission to report on the measures to be adopted rates of interest on such advances, though in future to protect the ryot from the ravages of varying from province to province and even famines and to relieve distress. The Commission in different parts of a province, are generally laid stress on the proper working of the Agriculvery high. In addition to charging excessive turists' Loans and the Land Improvement Loans rates the Sowkar extorts money under various Acts under which takavi advances are made by pretexts and oftentakes from the needy borrower Government to cultivators. This system was bonds for amounts in excess of those actually given a long trial in the years previous to the advanced. One of the chief causes of the great famines as well as during the years sucryot's poverty is, that owing to the absence ceeding the 1899-1900 famines. But it is ackof security and his short-sightedness due nowledged on all hands that the system has not to want of education, he did not as been successful in solving the problem of rural a rule collect and lay by his savings but stagnation, as it is clear that it is not facility for frittered away his small earnings in extra- obtaining cheap capital alone which will raise the vagant and unproductive expenditure, on the agriculturist and relieve him from his debts, but purchase of trinkets and ornaments, and on the provision of capital combined with the marriage and other ceremonies. Tradition says inculcation of habits of thrift and self-help. that he hoarded coins under the ground with the This Commission also recommended that the likelihood that on his death the money was lost principal means of resisting famines was by to his family for good. This absence of thrift strengthening the moral backbone of the agriand the habit of dependence, in case of difficulty, culturist and it expressed the view that the on the Government or on the Sowkar are the introduction of co-operation in rural areas bane of his life. There is besides a general ab- might be useful in securing this end. gence of ideals or desire for progress. A cooperative society changes all this, inasmuch Co-operative Credit Societies' Act.-These Lord Curzon to as it provides him with a suitable institution recommendations induced in which to lay by his savings and teaches appoint a Committee with Sir Edward Law at him the valuable lesson of self-help through its head to investigate the question and a report was submitted to Government recommending the sense of responsibility he feels in that co-operative societies were worthy of being its member. Thus the chronic poverty and indebtedness of the Indian agriculturist every encouragement and of a prolonged trial. afford a very good field for the introduction of co-operative methods, especially as his work is of a productive character likely to enable him to earn a better living under circumstances more favourable than they are at present.

Sir Anthony (now Lord) Macdonell and others were at the same time making experiments on similar lines in the United Provinces and the activities, however, took an organized shape only Punjab with satisfactory results. All these when Lord Curzon's Government introduced in the Imperial Legislative Council a Bill to provide for the constitution and control of co. operative credit societies. The main provisions of the Bill which became the Co-operative Credit Societies' Act (Act X of 1904) were:—

Genesis of the Movement.-The question of improving rural credit by the establishment of agricultural banks was first taken up in the early nineties when Sir W. Wedderburn, with the assistance of the late Mr. Justice N. G. Ranade, prepared a scheme of agricultural banks which was approved of by village or town or belonging to the same class (1) That any ten persons living in the same Lord Ripon's Government but was not anctioned by the Secretary of State. The or caste might be registered as a co-operative matter was not again taken up until about society for the encouragement of thrift and fifteen years later when Lord Wenlock's Gov- self-help among the members. ernment in Madras deputed Mr. F. A. (now Sir Frederick) Nicholson, to report on the advisability of starting agricultural or land banks in the Presidency for the financing of the agricultural industry. There was in existence in Madras an indigenous system of banking available for persons of small means. This institution,

(2) The main business of a society was to raise funds by deposits from members and loans from non-members, Government and other co-operative societies, and to distribute the money thus obtained in loans to members, or with the special permission of the Registrar, to other co-operative credit societies.

(3) The organization and control of cooperative credit societies in every Presidency were put under the charge of a special Government officer called the Registrar of Co-operative Credit Societies.

(4) The accounts of every society were to be audited by the Registrar or by a member of his staff free of charge.

(5) The liability of a member of society was to be unlimited

a rural

(6) No dividends were to be paid from the profits of a rural society, but the profits were to be carried at the end of the year to the reserve fund, although when this fund had grown beyond certain limits fixed under the bye-laws, a bonus might be distributed to the members.

(7) In urban societies no dividend was payable until one-fourth of the profits in a year were carried to the reserve fund.

Soon after the passing of the Act, the local Governments in all the Presidencies and major provinces appointed Registrars with full powers to organise, register, and supervise societies. In the early stages of the working of this Act, Government loans were freely given, and the response to the organising work of the Registrars was gradual and steady throughout most parts of the country.

a more scientific division in accordance with the form of liability adopted.

(d) It facilitated the growth of central agencies by insisting on limited liability, by means of a special clause about the registration of a society one of whose meinbers is a registered society.

(e) It empowered Local Governments to frame rules and alter bye-laws so as to put restrictions on the dividends to be declared by societies and allowed to societies with unlimited liabilty the discretion to sanction distribution of profits to their members according to principles land down by the Local Governments.

(f) It allowed societies with the permission of the Registrar to contribute from their net profits, after the reserve fund was provided for amounts up to 10 per cent. of their remaining profits to any charitable purpose as defined in the Charitable Endowments' Act. (This kept the movement in touch with local life by permitting societies to lend assistance to local educational and charitable institutions.)

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(g) It prohibited the use of the word operative" as part of the title of any business concern except a registered society.

Composition of the Capital of Agricultural Societies. On the organization of agricultural credit was necessarily concentrated the attention of the promoters, Co-operative Societies' Act.-As co-opera- for it presented a far more important and far difficult problem than urban credit. tion progressed in the country,defects were notic. more ed in the Co-operative Credit Societies' Act and There was a great variety of types among the these were brought to the attention of Govern- agricultural societies started in different proment by the Conferences of the Registrars which vinces, and some Registrars adopted the "Raiffewere for some years held annually. In two isen," and some the "Luzzatti" methods in directions the need for improved legislation their entirety. The commonest type, as prewas especially felt. In the first place, the vailing in the Punjab, Burma, and the United success of credit societies had led to the intro- Provinces, and now extended practically all duction of co-operative societies for distribu- over India-is the unlimited liability society tion and for purposes other than credit for with a small fee for membership and a share which no legislative protection could be se- capital, the share payments to be made in ancured under the then existing law. And, nual instalments. In some places, the bye-laws secondly, the need for a free supply of capital insist on compulsory deposits from members beand for an improved system of supervision fore entitling them to enjoy the full privileges of had led to the formation of various central membership. The system in Bombay and some agencies to finance and supervise primary parts of the Central Provinces is different, there credit societies and these central agencies ran being no share-capital but only an admission fee. all the risks attendant on a status unprotected Part of the working capital is raised by deposits of India from members and other local sympathisers, by legislation. The Government recognising the desirability for removing these but the bulk of it in all provinces is obtained co-operative defects, decided to amend the old Act, and a by loans from central and other Bill embodying the essential alterations pro-societies. In all the Provinces, the Governposed was introduced in the Imperial Legis- ment set apart in the initial stages every lative Council, and after a few amendments year a certain sum to be advanced as loans it emerged from the Council as the Co-operative Societies' Act (II of 1912) replacing Act X of 1904. The outstanding features of the new Act were as under:

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(a) It authorised the formation of societies for purposes other than credit, which possible under the old Act only with the special permission of the Local Government. (This extension of co-operation to purposes other than credit marks an important stage in its development in India.)

(b) It defined, in precise terms, the objects for which co-operative societies could be orga

nised.

(e) It removed the arbitrary division

of

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newly started co-operative societies, an amount equal to the usually up to deposits from members, raised by a society. State aid in the form of direct money doles to agricultural credit societies has now become an exception rather than the rule, and this withdrawal in no way hampers the development of the movement on account of the rapid increase of co-operative financing agencies and the growth of public confidence primary societies. Out of a total working capital of 23 crores, 2 crores were shares, 3} crores reserves, 1 crores deposits of members, 11 crore deposits from non-members and socie

in the

ties and 14 crores loans from central societies. In Bombay, since 1923, Government place at societies into rural and urban and substituted the disposal of the Provincial Bank an allotment

for distribution as advances to agriculturists usually supplied from the Registrar's office or under the Land Improvement Loans Act, such the central organizations referied to above to advances to be made through the primary simplify the work of the secretary. The books societies and the central banks to which these are kept according to the rules framed by the are affiliated. Local Governments and are open to inspection by important local officials and the Registrar and his staff. The accounts are audited, at least once a year, by the auditors working under the Registrars of Co-operative Societies, and the societies are inspected from time to time by honorary or paid inspectors. In Burma and Madras, the inspection is carried out by unions, while in the United Provinces, Bihar and Orissa, Ajmere-Merwara and Bengal the responsibility for supervision rests mainly with the central banks. In the Central Provinces, the inspection is controlled by the Provincial Federation working through the central banks. In Bombay, supervision is exercised partly by unions, partly by central banks and partly by honorary societies, the inspecting staff works under the organizers. In the Punjab, while paid for by direct orders of the Provincial Union with the

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Constitution of Agricultural Credit Societies. The typical agricultural credit society in India corresponds to the "Raiffeisen society," the management being gratuitous, the profits indivisible, and the area of work limited. In the Punjab, the United Provinces and Burma where shares form an integral part of the system, the distribution as dividend of a portion of the profits after ten years' working is permitted under certain restrictions, although in the Punjab the tendency now is to make the profits wholly indivisible and the shares non-withdrawable. In several parts the country there are villages where a few literate agriculturists may be found, but many of these are hardly fit enough to undertake the responsible work of a secretary, being practically ignorant of account keeping. In such villages either the village school-master or the village accountant is appointed secretary. In some places, where a suitable person is not available on the low pay a single society can afford, neighbouring societies are grouped together with a whole-time, well paid secretary. In the Central Provinces, especally and to a certain extent in Bihar and Orissa, Bengal and the United Provinces, the accounts are written up by group secretaries, clerks or Moharrirs, controlled more or less by the inspecting staff of central banks to which societies are affiliated. As the work of societies develops, the need for trained secretaries is being felt more keenly, for it is now realized that the function of a secretary does not consist merely in writing the accounts cor rectly. With a view to meet the demand for trained secretaries, training classes have been organized in Bombay, in the Punjab, in Burma and elsewhere during the last few years, and efforts have been made to provide education in co-operation through the new educational and propagandist associations which have been started in some of the major provinces. Arrangements have also been devised in some provinces to educate the members of managing committees in the principles of the movement through peripatetic instructors and courses of simple lectures delivered at central villages. In Burma, the system of guaranteeing unions has been utilized to promote co-operative education among rural workers.

Internal Management of Societies-The managing committee of a society consists of five to nine members, the chairman being usually one of the leading person in the village. The daily work is carried on by the secretary, but the managing committee supervises this and has alone the power to admit new members, to receive deposits, to arrange for outside loans, to grant loans to members and to take notice of defaulters. The practice is now growing of fixing the normal credit of every member once or twice in the year at a general meeting and the committee can sanction loans only within the limits so fixed. The accounts of the society are kept by the secretary and the necessary forms, papers, and books are

Registrar as its president.

in

societies is the entire body of members as-
The supreme seat of authority in co-operative
sembled in general meetings at which every
member has one vote and one only. At the
annual general meeting held at the close at the
co operative year the accounts are submitted,
the balance-sheet passed, and the managing
committees with the chairmen and secretaries
are elected. The general meeting fixes
individual members, lays down the maxi-
some provinces the borrowing limit of
mum amount up to which the managing con-
mittee may borrow during the ensuing year,
dismisses members for misconduct or serious
default, and settles the rates of interest for
loans and deposits. All the net profits
of a society are annually carried to the reserve
fund, which is indivisible, that is, incapable
of distribution as dividend or bonus, which
cannot be drawn upon without the sanction
of the Registrar, and which must be invested
in such a manner as the rules framed under
the Act may prescribe. It is intended
meet unforeseen losses and to serve as
an asset or security in borrowings. Except
in the Central Provinces and Madras,
and to some extent in a few other provinces,
the reserve funds of primary societies are
generally utilised as an addition to their working
capital, unless they have considerable
outside deposits and have to make special
arrangements in respect of fluid resource to
cover such borrowings.

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Main defects.-The main defects of primary societies may be summarized. The most prominent is the evil of unpunctuality. The percentage of over dues to total outstandings was a little over 18 for all the provinces and States, but was as high as 30 in one province. These arrears are due more to easy going ways of life and the narrowness of margin between income and expenditure than to recalcitrancy. Next is the frequent apathy of the members in the work of the societies owing to their lack of education and an absence of higher ideals. The general body very often leaves affairs wholly to the discretion of the committee and the committee transfers its powers to the chairman, secretary or some other member. Then there is the