Principles of Co-operation Class 11 – Restructured Basic and General Principles Explained

A co-operative society without guiding principles is just another business. What makes co-operatives fundamentally different is their adherence to a set of democratic, ethical, and member-centred principles that determine how they are formed, managed, and operated. Chapter 3 of the Maharashtra State Board Class 11 Co-operation textbook covers two sets of principles — the Restructured Basic Principles (adopted by the International Co-operative Alliance) and the General Principles followed in day-to-day functioning. This guide explains every principle in detail, exam-ready.

Why Do Co-operative Societies Need Principles?

Every institution needs rules to function effectively and achieve its objectives. For co-operative societies, principles serve multiple roles:

• They ensure that the co-operative remains true to its founding purpose — member welfare.
• They provide a consistent, transparent framework for governance.
• They differentiate co-operatives from profit-driven businesses.
• They build trust among members, encouraging participation and loyalty.

Without these principles, co-operative societies risk becoming vehicles for the benefit of a few at the expense of the many — the very exploitation they were created to prevent.

Restructured Basic Principles of Co-operation (ICA Principles)

The International Co-operative Alliance (ICA), established in London in 1895, is the global body representing co-operatives. The ICA adopted and periodically revises the basic principles of co-operation. The Restructured Basic Principles currently in force are seven:

1. Open and Voluntary Membership

Membership of co-operative societies is voluntary — no person is compelled to join. Equally, it is open — membership cannot be denied on grounds of caste, creed, religion, gender, political affiliation, or social status. Any person who can use the services of the society and is willing to accept the responsibilities of membership is eligible to join or leave at will.

2. Members Democratic Control

Co-operative societies are governed democratically. One member, one vote is the fundamental rule — a member holding 100 shares has exactly the same voting power as a member holding a single share. Members elect their representatives (Managing Committee) and have the right to participate in setting policies and making decisions. This is the cornerstone of democratic organisation.

3. Members Economic Participation

Members contribute equitably to the capital of the society by purchasing shares. Surplus generated by the society is allocated democratically — a portion to reserves, a portion as dividend on share capital, and a portion as bonus in proportion to the business transactions of each member. The surplus belongs to the members, not to outside investors.

4. Autonomy and Independence

Co-operative societies must remain autonomous — self-governing organisations controlled by their members. When entering agreements with governments, other organisations, or external bodies, the society must ensure it retains democratic member control and co-operative autonomy. External interference in management is antithetical to co-operative principles.

5. Education, Training and Information

Co-operative societies provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of the society. They also inform the general public — particularly young people — about the nature and benefits of co-operation. An informed membership is an empowered membership.

6. Co-operation Among Co-operatives

Co-operatives serve their members most effectively and strengthen the co-operative movement by working together. At local, national, regional, and international levels, co-operative societies join hands through federations and apex bodies to achieve greater collective impact. This is why three-tier structures (Primary → District → State) exist in Indian co-operative banking and marketing.

7. Social Commitment (Concern for Community)

Co-operative societies work for the sustainable development of their communities through policies approved by their members. While the primary focus is on member welfare, co-operatives also accept responsibility for the well-being of the broader community. Participation in social welfare programmes — rural cleanliness, blood donation, adult literacy — reflects this commitment.

General Principles of Co-operation

In addition to the ICA Restructured Basic Principles, co-operative societies in practice follow six General Principles that govern daily operations:

1. Mutual Co-operation and Self-Sufficiency

"Each for all and all for each" is the motto. Without mutual help, self-sufficiency is not possible. Members support each other, and through this collective action, each individual member — and the society as a whole — achieves development. This mutual interdependence is the philosophical heart of co-operation.

2. Cash Transactions

All business transactions of a co-operative society must be conducted on a cash basis. Since members typically come from economically weaker sections with limited financial buffers, credit transactions can lead to bad debts, overdues, and financial instability. Cash transactions keep the society financially strong and liquid.

3. Religious and Political Neutrality

Co-operative societies are voluntary, democratic organisations. There is no place for political or religious influence in co-operative functioning. The society's doors must remain open to all communities, castes, and political affiliations. Remaining neutral protects the society from divisive external pressures and maintains unity among members.

4. Service Motto

The primary objective of a co-operative society is service to its members — not profit maximisation. The society supplies unadulterated, quality goods at fair prices, provides loans at reasonable rates of interest, and protects members from exploitation. Profit has secondary importance; it is earned only to sustain the society's operations.

5. Economy / Thrift

Co-operative societies must conduct all activities economically and prudently. Unnecessary and wasteful expenditure must be avoided. Members are encouraged to cultivate habits of thrift and saving. Financially disciplined co-operatives are better positioned to serve members sustainably over the long term.

6. Equitable Division of Surplus

The profit earned by a co-operative society is called surplus. At least 25% of the surplus must be transferred to the Reserve Fund. The remaining surplus is distributed equitably — as dividend on share capital and as bonus proportional to each member's business transactions. The rate of dividend must not exceed 15%. This ensures fair distribution without enriching any single group of members disproportionately.

Interactive Practice: Principle Scenario Quiz

Use these scenario questions to test whether you can apply the principles, not just list them.

Question 1: A member with 100 shares demands 100 votes in the annual meeting. Which principle is violated?
Answer: Members Democratic Control — co-operatives follow one member, one vote.

Question 2: A society distributes all surplus as dividend and keeps nothing in reserve. Which principle is affected?
Answer: Equitable Division of Surplus — at least 25% of surplus should go to Reserve Fund.

Question 3: A society refuses membership because of caste or religion. Which principle is violated?
Answer: Open and Voluntary Membership.

Exam trap: Students often write only the name of the principle. In answers, add one explanatory sentence to earn full marks.

Difference Between Restructured Basic Principles and General Principles

Related Posts

• See also: Co-operation Class 11 – Meaning, History, Features and Importance
• Related: Formation of a Co-operative Society Class 11 – Promotion and Registration Stages
• Explore: Credit Co-operative Society Class 11 – Meaning, Features and Functions

Summary & Study Action Plan

The Principles of Co-operation chapter is important for board-style answers because both the seven Restructured Basic Principles and the six General Principles can be asked as short notes or long answers.

📌 Write out all 13 principles (7 + 6) from memory, with a one-line explanation for each. Practice this daily for five days and these principles will be exam-ready permanently.

Frequently Asked Questions (FAQ)

Q1: What is the voting principle in a co-operative society?
One member, one vote — regardless of the number of shares held. This is the Members Democratic Control principle.

Q2: Why does a co-operative society follow cash transactions?
Because members come from economically weaker sections, credit transactions can lead to bad debts and financial instability. Cash transactions keep the society economically strong.

Q3: What is the Reserve Fund in a co-operative society?
At least 25% of the surplus (profit) earned must be transferred to the Reserve Fund — a compulsory allocation for future needs and financial stability.

Q4: What is the maximum dividend rate a co-operative society can declare?
The rate of dividend on share capital should not exceed 15% as per the General Principle of Equitable Division of Surplus.

Q5: What does "Autonomy and Independence" mean for a co-operative society?
It means the society must remain self-governing and controlled by its own members, even when entering agreements with governments or external bodies — external interference in internal governance is prohibited.

Q6: How many principles has the ICA adopted for co-operative societies?
The ICA has adopted 7 Restructured Basic Principles: Open and Voluntary Membership, Democratic Member Control, Members Economic Participation, Autonomy and Independence, Education Training and Information, Co-operation Among Co-operatives, and Concern for Community.