towards better understanding of urban producer organisations in

URBAN AND PERI URBAN AGRICULTURE: TOWARDS BETTER UNDERSTANDING OF LOW INCOME PRODUCERS‘ ORGANIZATIONS:

HYDERABAD – CITY CASE STUDY IWMI-ALCI

URBAN AND PERI URBAN AGRICULTURE:

TOWARDS BETTER UNDERSTANDING OF LOW INCOME PRODUCER ORGANIZATIONS

HYDERABAD – CITY CASE STUDY

G V Krishnagopala and R. W. Simmons

b

aAccess Livelihoods Consulting India Private Limited H.No 12-5-149/14/9/1, Creative Satya Nivas, Flat

No 304 Vijayapuri Colony, Tarnaka, Secunderbad-500017 bInternational Water Management Institute (IWMI), South Asia Regional Office, c/o ICRISAT

Patencheru, A.P., India



ACKNOWLEDGEMENTS

The authors would like to acknowledge the inputs to the report that were generated by the DGIS/IDRC

funded RUAF-CFF (Cities Farming for the Future) Project www.ruaf.org and the BMZ funded project

entitled ―Ensuring Health and Food Safety from Rapidly Expanding Wastewater Irrigation in South

Asia‖ www.iwmi.org. In addition the authors would like to acknowledge the inputs to the project

methodology provided by Dr. Deepa Joshi of IWMI-South Asia Office and to the FAO Project Focal

Point Ms. Clarissa Ruggieri and Dr. Hubert de Bon of CIRAD for their comments during the finalization

of this project report. We would also like to acknowledge the administrative support staff of Access

Livelihoods Consulting India Private Limited and IWMI- South Asia Office.

http://www.ruaf.org/

http://www.iwmi.org/



TABLE OF CONTENTS

PAGE

LIST OF ABBREVIATIONS AND ACRONYMS

KEY TERMS AND DEFINITIONS

EXECUTIVE SUMMARY

INTRODUCTION

CHAPTER 1. CONTEXT ANALYSIS

1.1 Andhra Pradesh and Hyderabad

1.2 Urbanization process

CHAPTER 2. URBAN AND PERI-URBAN AGRICULTURE (UPA) PROFILE

2.1 Historical development and status of UPA and Producers‘ Organizations in the city

of Hyderabad

2.1.1 Horticultural production in Andhra Pradesh and the expansion of informal

perishable vegetable production in Peri-Urban Hyderabad.

2.1.2 Dairy production in Hyderabad: Green fodder producers and informal urban

dairy units.

2.2 Organization of the urban/peri-urban green fodder production and marketing system,

stakeholder analysis and linkages with urban dairy producers.

2.2.1 Attapur, Hyderabad.

2.2.2 Uppal District, Hyderabad

2.3 The organization of the vegetable and fodder chain

2.3.1 Vegetables

2.3.2 Fodder

2.4 Constraint affecting low-income producer groups (Rapid diagnostic technique)

CHAPTER 3. INSTITUTIONAL PROFILE

3.1 Key institutions operating in HUA: Potential role in supporting or constraining UPA

related activities

3.1.1 Hyderabad Urban Development Authority (HUDA)

3.1.2 Municipal Corporation of Hyderabad MCH

3.1.3 Hyderabad Municipal Water Supply and Sanitation Board (HMWSSB)

3.1.4 Department of Agriculture (DOA)

3.1.5 Department of Horticulture (DOH)

3.1.6 Department of Animal Husbandry Dairying and Fisheries (DADF)

3.2 Policies and legal aspects concerning UPA and Producer Organizations

3.3 Overview of UPA innovations in the city

CHAPTER 4. ORGANIZATION PROFILE: PRODUCERS‘ COLLECTIVE

4.1 Context of Origin

4.2 Brief Historical Description

4.2.1 Collective Activity by Paragrass Producers

4.2.2 Producer Organization Profile

CHAPTER 5. CONCLUSIONS AND RECOMMENDATIONS

5.1 Long-term trends in UPA in Hyderabad

5.1.1 Supportive Policies

5.1.2 Access to Credit

5.1.3 Access to water resources

5.1.4 Marketing

5.2 Conclusions and lessons learned

5.3 Recommendations

REFERENCES



ANNEX 1. IMAGES

Figure 1. IRS PAN (Merged) Satellite Image (2002) indicating MCH, HUDA and

Municipal Boundaries.

Figure 2. Peerzadiguda vegetable plots (2002)

Figure 3. Peerzadiguda vegetable plots (2006)

Figure 4. Fodder (Paragrass) cultivation in Attapur, Hyderabad (2006)

Photographs of fodder production, harvesting, transporting, marketing in Hyderabad

ANNEX 2. AREA, POPULATION AND GROWTH OF HYDERABAD URBAN

AGGLOMERATION (1991-2001)

ANNEX 3. THE SUPPLY AND MARKETING OF GRAINS, FRUIT AND FISH IN

HYDERABAD URBAN AGGLOMERATION: DEMAND AND SUPPLY

SCENARIO

ANNEX 4. ANDHRA BARRELA CATTLE MARKET, CHINTALAKUNTA

(VANASTHALIPURAM)

ANNEX 5. PROFILES OF SELECTED URBAN AND PERI-URBAN DAIRY UNITS

IN HYDERABAD

ANNEX 6. SYNDICATE FARMERS‘ SERVICE COOPERATIVE SOCIETY

LIMITED

ANNEX 7. KUSHAIGUDA VEGETABLE MARKET

ANNEX 8. CORPORATE SECTOR IN FRUIT &VEGETABLE BUSINESS: CASE

OF ITC'S CHOUPAL FRESH

ANNEX 9. THE ANDHRA PRADESH MUTUALLY AIDED COOPERATIVE

SOCIETY ACT (1995)

ANNEX 10. THE COMPANIES (AMENDMENT) ACT, 2002.



LIST OF ABBREVIATIONS AND ACRONYMS

HUA Hyderabad Urban Agglomeration

UPA Urban and Peri Urban Agriculture

POs Producer Organizations

SHGs Self Help Groups

PACS Primary Agricultural Credit Societies

LIPOs Low Income Producer Organizations

Rs Indian Rupees

HUDA Hyderabad Urban Development Authority

MCH Municipal Corporation of Hyderabad

HMWSSB Hyderabad Metropolitan Water Supply and Sanitation Board

DOA Department of Agriculture

DOAH Department of Horticulture

KEY TERMS AND DEFINITIONS

# Term Definition

1. Producers Include low-income people whose livelihood depends on UPA-related

activities or the food chain, including people involved in crop, livestock, fish

and forestry production or exploitation, small-scale processing, marketing

and preparation (such as hawking, street food vending, community-based

catering systems).

2. Producer

Organizations

Organizations or Institutional forms which address the constraints of

producers especially the low income producers and decrease their

vulnerability. These could be both formal and informal in nature. Any form

of collectives or groups through which producers are able to derive services

for better arrangements are treated as producer organizations

3. Urban – Peri

Urban

Agriculture

UPA can be defined as: the growing of plants and/or the raising of animals

for food and other uses (eg: recreation, environment improvement) within

urban and peri-urban areas, as well as the related production of inputs and

the processing and marketing of products.

IDRC (International Development Research Centre) Canada gives the

definition of UPA as: ―Urban and Peri-Urban agriculture or UPA is an

industry located within or on the fringe of a town, a city or a metropolis,

which grows or raises, processes and distributes, diversity of food and non

food products, (re) using largely human and material resources, products and

services found in and around the urban areas‖.



EXECUTIVE SUMMARY

Rapid urbanization creates tremendous challenges in the provision of infrastructure, employment,

environmental management, food security, nutrition and health. Among the many challenges, one of

basic and crucial challenge that remains is ensuring food and nutritional security within the urban

zone. In this context urban and peri-urban agriculture (UPA) can make significant contributions by

acting as;

Source of livelihoods for a range of urban and peri-urban beneficiaries

Means of addressing urban and peri-urban food and nutritional security

Viable means of utilizing ‗appropriate‘ bio-degradable urban waste and thus facilitating both an

improvement in the urban environment and a return flow of recycle-able nutrients to UPA

production systems

Effective means of re-cycling urban wastewater (following appropriate pre-treatment, crop

selection and the implementation of strict multi-barrier risk mitigation options to prevent negative

impacts to producers and consumers as well as the sustainable use of soil resources)

Catalyst for micro-enterprise development

Means of achieving gender and social equity

Means of optimizing land utilization

However, currently in Hyderabad UPA and consequently, LIPOs fall outside of conventional research,

institutional and funding support mechanisms. It is practiced without supporting policies or guidelines

by small-and medium scale farmers but contributes to the urban food supply primarily in the form of,

green fodder and dairy products (dominated by fresh milk) and increasingly, perishable vegetables.

This report focuses primarily of green fodder (Paragrass) producers and urban dairies with. In a

broader context, expanding wastewater irrigated leafy vegetable production and the key constraints

and opportunities to the institutionalization and indeed wide-scale adoption of UPA activities in

Hyderabad are discussed.

Several key externalities are directly impacting on the long-term sustainability of peri-urban green

fodder production and small scale urban dairies in Hyderabad. Escalating land prices in the current

green fodder production areas ensure that land is increasingly being purchased for property

development. Linked to the escalating land prices and loss of agricultural HUDA and MCH are

actively implementing the ‗Musi Beautification Program‘ which when completed will encroach on

1,600 acres currently under green fodder production. This is expected to result in a 63% reduction in

fodder (Paragrass) entering the green fodder market. Further, a number of Acts enforced by MCH and

issued as public notifications by the Commissioner of Police, Hyderabad are restricting small scale

urban milk producers. A further externality influencing the long-term stability of urban ‗fresh milk‘

production systems is the Government Policy to promote the ‗branding‘ of milk and

processing/treatment prior to retail as a means of ensuring milk quality and public health. This is

supported by the Prevention of Food Adulteration (PFA) Rules (1995).

With regards supportive policies, there are two key State policies indirectly supporting the formation

of LIPOs namely the AP Mutually Aided Cooperative Societies Act (1995) and the Companies

(Amendment) Act, 2002. Limited water resources, is a key constraint for UPA in Hyderabad. In this

regard in Hyderabad it is mandatory for all new constructions to have a rainwater harvesting structure

either in the form of groundwater re-charge or water conservation. In addition, HMWSSB in

association with the National River Conservation Directorate (NRCD) is undertaking the ‗Musi River

Conservation Project‘. Both these initiatives are managed by HMWSSB. The Musi River

Conservation Project project document clearly states that the “treated sewage (secondary treatment)

from Amberpet and Nallahceruvu STPs (369 MLD) will be discharged into the existing irrigation

channels to support the current agricultural activities”. This is a marked improvement on the current

use of non-treated urban wastewater.



This is a clear indication of institutional support in terms of providing both water quantity and

improved water quality for fodder, vegetable and rice producers along the Musi River. It is strongly

recommended therefore that vegetable, fodder and rice producers along the Musi River form producer

organizations under the aforementioned Acts. It is envisaged that the formation of such cooperative

structures will safeguard their current livelihoods and form a strong basis for direct dialogue with the

HMWSSB and other line agencies. The formation of such producer organizations will also strengthen

their lobbying power for services from government line agencies.

With the increasing pressure on the land available for green fodder (paragrass) production it is strongly

recommended that urban milk producers for a organizational structure to assist the ‗Green Fodder

Association‘ in lobbying for the protection of the existing fodder production area. Further it is

recommended that the ‗Green Fodder Association‘ and the urban dairy farmers and commercial dairy

units partner with consumers buying fresh milk to facilitate official recognition of their trade and

assure safety standards in all aspects of the production and consumption chain.

INTRODUCTION

Hyderabad is the capital city of the state of Andhra Pradesh and is also India‘s 6th largest metropolitan

city with a population in 2001 of 5.716 million registering a growth of 31 % over 1991. Currently in

Hyderabad UPA falls outside of conventional research, institutional and funding support mechanisms.

It is practiced without supporting policies or guidelines by small-and medium scale farmers. This

report will focus primarily on green fodder production, the development of the Green Fodder Farmers

Association and the linkages it has with informal small scale urban dairy producers. Externalities

including rapid urban expansion, urban development programs and policies directly and indirectly

impacting the peri-urban green fodder production - urban dairy system are discussed.



Chapter 1. Context analysis

1.1 Andhra Pradesh and Hyderabad

Hyderabad is the capital city of the state of Andhra Pradesh (5th largest state in India, both in terms of

area and population) located in South India in the heart of the Deccan Plateau is at 536 meters above

sea level. Hyderabad is also India‘s 6th largest metropolitan city and in terms of world ranking

1 stands

at 40th. For 2004-5 the GDP of Andhra Pradesh was US$59.1 billion with a growth rate of 9.8%. Over

49% of the state GDP is generated by the service industry with approximately 25% of India‘s software

professionals based in Hyderabad. The industrial sector in Andhra Pradesh is ranked 2nd

in India in

terms of industrial estates with the industrial sector accounting for 27% of state GDP. Andhra Pradesh

is ranked 4th in terms of Foreign Direct Investment. With regards the agricultural sector, approximately

30% of the land are of AP is under agriculture with 22% under forest cover. Agriculture accounted for

22% of the state GDP in 2004-2005. Horticulture has been identified as one of the growth engines for

Andhra Pradesh. In 2004-2005 the total area under horticultural crops was 1,533,000 ha with an

annual production of 11,364,000 tonnes. Andhra Pradesh is the 2nd

largest producer of fruits and

vegetables in India and 1st in terms of mango, citrus, oil palm, chillies and tumeric. The horticulture

sector in Andhra Pradesh accounts for 4.01% of the State‘s GDP.

In 2001, the population of the Hyderabad Urban Agglomeration (HUA) stood at 5.716 million

registering a growth of 31 % over 1991 (Table 1: Annex 1). However, it is important to note that the

growth rate varies significantly with the growth rate of MCH being 18.7% as compared to growth rates

of 112.2% and 116.8% for Serlingampally and Qutubullapur, respectively. Population densities for the

aforementioned areas of Hyderabad are 20,920, 4,443 and 1,581 person‘s km2, respectively (Table 1:

Annex 1).

Hyderabad Urban Agglomeration is located within Ranga Reddy District. Bordering the peri-urban

limits of HUA north of Ranga Reddy District and towards the east/west of HUA (adjoining

Quthbullapur, Medchal and Shamirpet) is Medak District and towards the east/west of Ranga Reddy

District south of HUA (bordering Ghatkesakr, Keesara and Balangar) is Nalgonda District. The

average daytime temperature in Hyderabad ranges from 25-30oC during November to February and

40-45oC during April-June. Annual precipitation is between 700-1000 mm yr

-1 and falls predominantly

during the 4 months of July to October. Soils are dominated by Red Sandy Soils with areas of Black

Cotton Soil.

1.2 Urbanization process

This consists of the MCH, 10 municipalities and a vast area under Gram Panchayat. In order to plan

for this composite area, the Government of Andhra Pradesh constituted the "Hyderabad Urban

Development Authority" on 2nd October 1975. HUDA has prepared two master plans and 20 Zonal

Development plans for this area of which one master plan and 18 Zonal Development plans are

already notified by law and in force.

The HUA is now spread over the whole of the Hyderabad Urban Development Authority (HUDA)

area of jurisdiction an area of 1348 km2 (Figure 1: Annex 1). HUDA covers the entire District of

Hyderabad and parts of Ranga Reddy and Medak districts, it includes 173 km2 under Municipal

Corporation of Hyderabad (MCH) 416 km2 under 10 Municipalities and 759 km

2 under 105 gram

panchayats (Figure 1: Annex 1). Further, during 1988 to 1999 the built up area increased from 49.3 to

62.4 % of the total geographical area of the HUA. This occurred primarily in Serlingampally and

Qutubullapur, respectively (Table 1: Annex 2).

1Source: Census of India, 2001, Government of India



Agricultural land to the extent of about 128 km2 was converted to residential, commercial, institutional

and industrial purposes during the period from 1973 to 19962. With the urbanization process, the

radius of the HUA has expanded into the surrounding vacant lands and even water bodies. Over the

period from 1973 to 1996, the area under water bodies reduced from 118 to 110 km23

. According to

the 2001 statistics, HUA has a population of 6 million, a 17.2 % increase over the population of 1991

making it one of the fastest growing urban areas in India.

Driving forces for urbanization are the rapid expansion of the service IT sector (including Winpro,

Infosys, Microsoft) and outsourcing of services from the UK (e.g. HSBC Bank). In addition, there has

been a rapid migration of families from rainfed rural A.P. in search of employment opportunities

(primarily as construction labour) and to access government services. The rapid urbanization and

influx of IT companies (and associated IT professionals) has resulted in a concomitant rise in land

prices. The current district wise land prices in Hyderabad range from 85,098 US$ to 638,241 US$ per

acre (Table 2). This has resulted in a rapid decline in area available for Urban and Peri-urban

agriculture. However, the rapid increase in population has also resulted in a concomitant increase in

the demand for food products including perishable vegetables and dairy products.

Table 2. District wise land prices (November. 2006) in and around Hyderabad Municipality Land Prices (Rs) sq

yard

Rs per acre US$ per acre

Serilingampally 6000 29,040,000 638,241

MCH 1500 7,260,000 159,560

Kukatpally 1500-2250 7,260,000 – 10,890,000 159,560 – 239,340

Malkajgiri 4200 20,328,000 446,769

Alwal 1000 4,840,000 106,373

Khapra 3000-4500 14,520,000 – 21,780,000 319,120 – 478,681

L B Nagar 2250 10,890,000 239,340

Qutubullapur 800 3,872,000 85,098

Rajendra nagar 1800 8,712,000 191,472

Uppal 1500-2250 7,260,000 – 10,890,000 159,560 – 239,340

Uppal x road upto Musi

River 60‘depth 5000 24200000 531,868

Source: www.igrs.ap.gov.in

Chapter 2. UPA Profile

2.1 Historical development and status of UPA and Producers’ Organizations in the city

of Hyderabad

With the expected shifts in rural-urban populations (60% of world population in urban centres by

2030) Urban and Peri-urban Agriculture (UPA) is increasingly being seen by city authorities as a

means to address urban ‗food security‘ (encompasses year round availability, accessibility and

affordability of „safe‟ and nutritious food), income generation and a means of effectively utilizing

municipal solid waste and wastewater. However, currently in Hyderabad UPA falls outside of

conventional research, institutional and funding support mechanisms. It is practiced without

supporting policies or guidelines by small-and medium scale farmers but contributes to the urban food

supply primarily in the form of perishable vegetables, green fodder and dairy products (dominated by

fresh milk).

3Source: EPTRI, 1996: 23; The Hindu, 25 January 1997, quoted in Ramachandraiah C. and Prasad S. Impact of

Urban Growth on Water Bodies: The Case of Hyderabad. Centre for Economic and Social Studies, Hyderabad.

Working Paper 60.2004.pg 7 4Ramachandraiah C. and Prasad S. Impact of Urban Growth on Water Bodies: The Case of Hyderabad. Centre

for Economic and Social Studies, Hyderabad. Working Paper 60.2004.pg 7

http://www.igrs.ap.gov.in/



This is also due to the fact that there has been considerable growth in the fodder cultivation and dairy

farming sectors (including small urban producers) in the last 5-10 years. However, a number of

externalities are now putting increasing pressure on the fodder/dairy system and hence chain of

economic beneficiaries which may negatively impact on small urban dairy producers. In addition, a

producer organization (Green Fodder Farmers Association) is already functioning to try to address the

issues of fodder producers in Hyderabad. Consequently, this report will focus on these three

commodity groups namely perishable vegetables, green fodder and dairy products and associated

producer organizations (formal and informal). A summary of the grain, fisheries and fruit food chain is

given in Annex 3.

2.1.1 Horticultural production in Andhra Pradesh and the expansion of informal perishable

vegetable production in Peri-Urban Hyderabad.

In Andhra Pradesh, the successful implementation of Horticulture Department programs has resulted

in the area under horticultural crops being increased from 1.133 million ha in 1995-96 to 1.579 million

ha in 2004-5. A breakdown of the crop type, area under cultivation and annual production is given in

Table 3. This is to a large extent associated with the AP Micro-irrigation Project (Government Orders

G.O. MS. Nos. 1328, 13131, 176, 175, 313 and 08) that was initiated in 2003. Under this scheme

farmers are eligible for subsidies of up to 50,000 Rs (1098 US$) per family. In total between 3-11-03

and 31-03-06, 209.96 Crore Rs (46,145,054 US$) was provided in the form of subsidies to farmers.

This program does not exclude Peri-urban farmers.

Table 3. Horticultural Production in Andhra Pradesh (2004-2005)

Commodity Group

Fruit Vegetables Spices

Crop Type

Area

(ha)

Production

(metric t) Crop Type

Area

(ha)

Production

(metric t)

Crop

Type

Area

(ha)

Production

(metric t)

Mango 391896 3135096 Potato 3787 60592 Chillies 224474 538738

Orange &

Batavia 109316 1421108 Tapioca 18759 375180 Tumeric 61833 241149

Lemon 50791 7000920 Sweet Potato 719 14380 Betelvine 2869 91521

Guava 10064 120763 Cucumber 3943 59145 Coriander 43301 30311

Banana 53465 1229695

Cabbage

(Knol-Khol) 8225 98700 Tamarind 4668 46680

Grapes 1892 37840 Peas 176 1760 Garlic 1336 6680

Papaya 905 69232 Gourds 12817 128170 Arecanut 382 535

Sapota 13973 136935 Carrot 4278 85560 Cocoa 8221 1545

Pomegranate 5761 47816 Tomato 69502 1251036 Pepper 271 300

Custard Apple 908 4812 Egg Plant 24662 493240 Ajwan 1500 450

Others 2538 25380 Okra 24094 301175 Ginger 1608 2894

Total 641509 13229597 Onion 35414 566624 Total 350463 960803

Beans 16781 100686

Greens 9076 63532

Bottle Gourd 718 7180

Others 25494 254940

Total 258445 3861900

Source: Handbook of Horticultural Statistics 2006: Department of Horticulture, Government of Andhra Pradesh.

Note: Table 2 does not include area under cashew, oil palm or coconut which accounted for 328,583ha in 2004-

2005.



The high urban demand for perishable leafy vegetables (including, cabbage, spinach, amaranthis,

fenugreek, mint, coriander and fennel) and limited storage capacity particularly during February to

September is one of the key driver‘s behind the expansion of wastewater irrigated vegetable

production in peri-urban Peerzadiguda, and Parvatapurum, Rangareddy District. Interpretation of time

series satellite images (Figure 2 and 3: Annex 1) indicates that the wastewater irrigated area under

leafy vegetable production has increased from 5.562 ha in 2002 to 16.017 ha in 2006. This

corresponds to a 187.9% increase in leafy vegetable production between April 2002 and April 2006.

2.1.2 Dairy production in Hyderabad: Green fodder producers and informal urban dairy units.

Waste water irrigated fodder (Paragrass: Gramineae Panicum purpurascens) is cultivation along the

Musi River belt primarily in two main areas namely, Attapur and Uppal to Ghatkesar and Hyatnagar

Mandals. During the confined course of the Musi River through urban Hyderabad with the exception

of paragrass cultivation in the Musi River Bed there is no significant level of agriculture being

practiced. Para grass cultivation in the Attapur area occupies an area of 172.75 acres (69.94 ha)

(Figure 4). The primary areas of paragrass cultivation are located in the Uppal area, Ghatkesar Mandal

and Hyatnagar Mandal and are either direct or lift irrigated with marginal quality water from the Musi

River. As of April 2006 the area under paragrass in the Uppal area, Ghatkesar Mandal and Hyatnagar

Mandal 1023.7 ha (2529.6 acres). The para grass grown areas are predominantly falling under

Peerzadaguda, Parvatapuram, Marripalli, Kachivanisingaram, Qutbullapur, Timmaiguda, Pratap

Singaram, Bacharam, Gaurelli, Makta, Korremul villages which are located all along River Musi.

India ranks first in world milk production (Ramnath, 2002). Moreover, the annual rate of growth in

milk production in India is between 5-6 % compared to 1 % globally. The steep rise in the growth

pattern has been attributed to a sustained expansion in domestic demand (India Dairy, 2003). This is a

result of Operation Flood (Phase I-III) which was initiated in the 1970‘s to promote the formation of

organized dairies at a district level and resulted in the establishment of 700+ dairies with a capacity of

200,000- 300,000 l d-1

. However, this has a rural focus and does not take into account ‗urban‘ and

peri-urban milk producers. Andhra Pradesh has seen some dramatic increase in milk production over

the last two decades, based primarily on buffaloes There was a 7.9% increase in the population of

female buffaloes in 1999 as compared to 1993 (Directorate of Economics and Statistics, Andhra

Pradesh, 2001). The milk production of Andhra Pradesh in 1991-92 was 2.9 million tonnes increasing

to 4.9 million tonnes by 2003 (NDDB, 2003). Less than 20% of the milk is produced by industry in

India. The remaining 80% is either for household consumption or is marketed through informal

channels (Staal, 2001). According to the 17th Quinquennial Livestock Census 2003 there were 31,339

Buffalo and 4,357 Cattle within HUA. Dairy Cooperatives of Ranga Reddy District (rural) come under

the jurisdiction of MOTHER DAIRY located at Hayathnagar, Hyderabad. Approximately, 28 dairy

cooperatives supply milk to MOTHER DAIRY.

The total liquid milk consumption in HUA is approximately 1.3 million l d-1

. The contribution of

packed and branded milk is 850-900,000 l d-1

with 400,000 l d-1

sold as ‗fresh‘ milk supplied by

private vendors in Ranga Reddy District (30-40km from HUA) and small dairy farms (<10 head)

located within the HUA. The consumption of other milk products such as butter, ghee, milk powder,

ice cream and curd is a further 100,000 l d-1

. All of the milk products except for curd (which is

supplied by small private dairies and home preparation accounts for nearly half of the curd

consumption) are supplied by the organized dairies. Thus close to 65 to 70% of the city‘s demand for

milk and milk products are met by the organized dairies. Among the packed and branded milk

supplied in the city, there are 4 cooperative dairies selling milk in the HUA with a total market share

of 48% and the remaining 52 % is supplied by private dairies. Taking in to account the milk

procurement area of the cooperative and private dairies, out of the total milk and milk products

consumption, around 40-50 percent is met from the HUA, Nalgonda and Rangareddy districts. The

remaining milk supply comes from other districts and states. While, the cooperative dairies procure

milk from the milk producers in the villages, the private dairies located in the urban and peri-urban

areas have their own dairy cattle for milk. Their procurement from other milk producers is negligible.



In dairy producer households, 25% of the milk produced (assuming a household of 6 members owns

one buffalo) is retained for household consumption and 75% is sold. Dairy producers‘ livestock also

serves as a security asset in times of need (Buechler and Devi, 2003). Ensuring a stable and sustainable

quality fodder supply and efficient marketing structure is an essential component of the dairy industry

(formal and informal) in Hyderabad. This is particularly pertinent for small scale low income urban

producers.

2.2 Organization of the urban/peri-urban green fodder production and marketing

system, stakeholder analysis and linkages with urban dairy producers.

2.2.1 Attapur, Hyderabad.

There is 172.75 acres (69.94 ha) of land belonging to 3 landowners in the Attapur area irrigated by the

Musi River water (Figure 4: Annex 1). There are around 15-20 small sized dairy owners, who have

taken the land on lease as per their fodder requirements. The lease rates are in the range of Rs 1500

(32.9 US$) to Rs 2000 (43.9 US$) per month per acre or 395 – 527 US$ per annum. The term of lease

is for one year. The dairy owners can make the payments in 3 or more installments depending upon the

mutual agreement between the land-owners and the dairy owners taking the land on lease. The land-

owner is responsible for the irrigation of the fields of the different lessees. The irrigation is through

pump sets, which are used to draw water from the Musi River. One caretaker is employed by the land-

owner to take manage the irrigation. However, the salary is paid by the lessees based on the acreage

leased. During the winter season, urea is required for better growth of the paragrass. Around one bag

(50 kg) of urea is required per acre once during the winter season. The lessees purchase the urea and

provide to the caretaker for application on their respective fields. Each of the dairy owners employs 1-

2 persons to cut the fodder daily and transport it to the livestock shed. The transportation is through

bullock carts owned by the dairy owners, or through rented rickshaws. The average distance between

the fields and the livestock sheds is 2-4 km.

In Attapur area, the fodder value chain is as follows4:

As stated earlier, there are around 15-20 dairies in the Kishanbagh area adjoining Attapur. The average

herd size is 13-15 buffaloes of Murrah and Gujjar variety. The dairies procure green fodder from the

leased fields and dry maize stock (Kutti) and feed concentrate or cottonseed oil cake purchased from

the suppliers in the local market. The purchase is both on cash and credit basis. Out of the 4

respondents in the area, one had personally gone to Punjab to purchase the Murrah buffaloes, while the

remaining had purchased the breeds from the local suppliers in Hyderabad city who in turn get the

buffaloes from Punjab. The average yield of milk is 3-5 litres per buffalo per day. The total daily milk

yield of a dairy with 15 head of buffalo is around 45-75 litres. The manual labour required for a 13-15

cattle size dairy is 4 persons. In almost all the dairies, 2-3 persons were employed as external labourers

apart from the household labour. There is no involvement of women in either fodder collection or

animal rearing.

4 Based on interviews and surveys of dairy cattle owners in the Kishanbagh area

Paragrass: Attapur

Agricultural fields leased

by urban land owners to

dairy cattle owners

Landowner responsible for

irrigation of leased fields

Dairy cattle owners (Location:

Kishanbagh)

Pay annual lease of 395-527 US$

to land owners

Responsible for fodder cutting

and transportation

Responsible for fertilizer inputs

Milk Consumers

(Location: Attapur,

Mehdipattnam)

Hotels (70%)

Households (30%)



More than 50 % of the dairies supply ‘fresh‘ milk to hotels and households located in the surrounding

area. There are no middlemen involved in the purchase and supply of milk. Some of the dairy owners

supply to households located as far as the Charminar area (5km from Attapur). The average retail price

of fresh milk is Rs 22 to 25 per litre. This results in a daily income, ranging from 21.7 US$ (22 Rs x

45 l) to 41.2 US$ (25 Rs x 75 l). Assuming that this milk is consistently produced at this rate 365 days

per year this results in a gross income of 7,920 - 15,220 US$ (Note: This does not take into account

(outputs costs such as land rental, labour, feed concentrate, veterinary services etc). Around 5 percent

of the milk is converted into Dahi.

2.2.2 Uppal District, Hyderabad

As of April 2006 the area under paragrass in the Uppal area, Ghatkesar Mandal and Hyatnagar Mandal

was 1023.7 ha (2529.58 acres). Preliminary results of collaborative IWMI-ILRI research indicate an

average yield (n=64 sample plots) of 19.325 (2.87) t ha-1

(FW) or 7.823 t per acre. Paragrass is cut

every 30-40 days (dependent on seasonal yield variations and demand) resulting in 10-12 cuts per

year. With an average yield per cut of 19.325 t ha-1

(FW) for the total area under paragrass (1023.7 ha)

this results in a combined annual fodder production of approximately 197,830 – 237,396 t yr-1

(FW).

The average cultivated landholding by one land owner is 25-30 acres. Once planted annual re-seeding

of paragrass is not required. As a result of the wastewater nutrient load, no external inputs are required

for the growth of the paragrass. Pesticide is applied to control mosquitoes once every three months.

Water supply is derived from the Musi River directly through in-field irrigation channels (previously

established for rice) or via lift irrigation to the aforementioned irrigation channels. The agriculture

labourers are paid Rs 1.5 (0.032 US$) for a bundle of 10 kg. This also requires loading the truck. The

fodder labour consists of 35 % women. There is no discrimination in the rate paid to men and women.

Labour consists primarily of migrants from rainfed areas of Andhra Pradesh. The land owners also

employ a supervisor to manage irrigation and labour.

The average landholding in the area is 2 acres. However, to ensure a profitable turnover, a minimum

of 25-30 acres (10.12 – 12.14 ha) of land should be cultivated to provide regular income. At present

around 40 major land owners cum farmers are engaged in paragrass cultivation in the area. With an

average land holding of 25-30 acres this accounts for approximately 45% of the area under paragrass.

The rest of the former farmers/landowners have leased out their lands to the current practising farmers

who are predominantly migrants from rainfed areas of Andhra Pradesh. Eight cultivators and 8 non-

cultivating landowners were surveyed. All of the 8 cultivators have their own vehicle (2-5 tonne lorry)

or tractor and the average cultivated land area is 28 acres. Five of the 8 are also real estate agents as an

additional non-farm activity. One cultivator also has a family owned Cinema Hall. The age-group of

the para grass cultivators is 28-37 years. The education level is intermediate to graduation level. Three

of them also have livestock ranging from 3-5 buffalo. The remainder have given up dairying as they

consider paragrass cultivation to be a more profitable activity. Labour shortage and low rates of milk

in the Uppal area are stated to be the reasons for moving from dairy to fodder production.

Out of the non-cultivating landowners surveyed, 5 had a household level landholding of less than 2

acres each. The reasons cited for giving up the land on lease were the non-availability of own

transportation vehicle and lack of manpower to oversee the fodder cultivation. These 5 landowners

preferred to work as agricultural labourers themselves earning a daily wage ranging from Rs 60 (1.31

US$) to Rs 100 (2.2 US$). A couple can earn 10.48 US$ (1.31 x 4hrs x 2 persons) to 17.6 US$ (2.2 x

4hrs x 2 persons) together by working for 4 hours in the field in the morning hours. The afternoons are

free to pursue other labour work. The lease rates are Rs 2000 (44 US$) per month per acre.

Agricultural labour followed by income from land lease is the major source of occupation/income.

Two out of the five had two milch animals each. The milk was used for home consumption and

surplus sold to the local traders at Rs 13 per litre (0.28 US$ per litre). Three of the non-cultivating

landowners had around 15-20 acres of land at the household level (the individual landholding is on an

average 2 acres, however in practice, the aggregate ownership for the households interviewed is 15-20

acres).



All of these were in the age group of more than 60 years and stated age and lack of family manpower

to oversee the cultivation (of the three, all have children engaged in real estate or other business and

two have one son each settled abroad) as the primary reasons for leasing the land. All three landowner

families derive around 80 % of the income from the lease of land (15-20 acres at 44 US$ per acre per

month = 660 – 880 US$ per month).

In the Uppal area, the fodder value chain is as follows

5:

2.3 The organization of the vegetable and fodder chain

2.3.1 Vegetables

There are 4 major vegetable belts, which supply vegetables to the HUA namely, Shamirpet-

Vantimamidi, Shamsabad-Shadnagar, Cheverala-Vikarabad and Medchal-Tupram. This vegetable

catchment area meets 75 to 80 % of the demand in HUA in the 4 months from October to January. In

the remaining 8 months, these vegetable production areas are only able to meet 30% of the demand in

HUA. The residual demand in all seasons is met by supply from outside the HUA, from the following

belts namely, Ibrahimpatnam to Chowtuppal, Vijaywada-Mangalgiri and Bangalore-Kolar.

However, Hyderabad is a major trading center for vegetables. There are around 13 AMC regulated

markets in HUA (6 in Hyderabad and 7 in RR district but part of the HUA) for trading of vegetables.

The large number of wholesale vegetable merchants and commission agents cater to the supply of the

HUA and also channel the supply to other districts of the state e.g. Karimnagar and also to distant

places such as Khammam and Chennai for leafy vegetables. The practice is to purchase and load in

own vehicles for transportation to other districts6. There are 6 Rythu Bazaars also established by the

government in different parts of the HUA. The Rythu Bazaars are marketplaces where Rythus or

vegetable producers can sell directly. However, as per an estimate, around 60 percent are non-

producers. In Rythu Bazaars and other vegetable markets, small non-farmer retailers are women.

However, no women are involved in the wholesale purchase activity. For further details of an informal

market association namely Kushaiguda Market is given in Annex 6.

Leafy vegetables produced in peri-urban Peerzadiguda, and Parvatapurum are primarily sold in Uppal

vegetable market. Vegetables are in general harvested in the late afternoon and washed and stored in

the producer‘s household before being sold to wholesalers at the market in the early morning (5am –

6am).

5 Based on interviews and surveys of dairy cattle owners in the Kishanbagh area

6 This is to avoid chances of establishment of direct linkage between vegetable merchants from whom the

Hyderabad based merchants and agents purchase and the merchants to whom they sell.

35-40 Paragrass growers

(Location: Uppal)

Average fodder

cultivation area per

grower is 30 acres

Transportation is through

own lorries of growers

6 Brokers (Location: Golnaka

market, Kacheguda)

Commission of 5% is

charged on the fodder value

Transportation to dairy units

is through bullock carts,

rickshaws, trillers

Dairies (Location: Old city area, main

market and outskirts)

10-12 goshalas (Location: Old city)

Around 75 % supply is through the

brokers and the remaining are direct

contracts with producers



The value chain of vegetables is as follows:

2.3.2 Fodder

Approximately 75 % of the paragrass production is traded in the Golnaka Green Fodder market, while

the remaining 25% is traded directly with both large and small dairy units and Goshalas (Animal

Breeding Units). Assuming an annual fodder production of approximately 197,830 – 237,396 t yr-1

(FW) this means that there is an annual through flow of approximately 148,372 - 178,047 t yr-1

. This

corresponds to a daily through flow of 400 – 487 t day-1

. The fodder harvesting gets completed by 10

am and the trading time in the market is from 10 am to 1.30 pm (though there are no fixed timings).

The rate is decided on the basis of market arrivals of fodder and the demand. Generally, the rate

remains uniform over a period. ILRI-IWMI estimate (value derived from bi-weekly market fodder

sampling Oct 2005 – Oct 2006) that paragrass (FW) is sold to buyers at a rate of approximately 1 Rs

per kg (FW). This corresponds to a financial through flow of 400,000 – 487,000 Rs per day (8,791 –

10,703 US$). There are 6 brokers in the fodder market that receive 5% commission (Section 2.2.2) on

green fodder sales. This corresponds to a daily individual income of per broker of 3,333 – 4,058 Rs

(73 – 90 US$).

Most of the fodder suppliers deal with only one broker. Thus over a period of time long-term

relationships have been formed between the producers and the brokers. This also provided flexibility

in payments. Though the system is that the producers are paid in cash by the brokers, who in turn

supply around 50 % of the fodder to the suppliers on credit basis, one or two days may be delayed in

making payments to the producers. Fifty percent of the cultivators drive their own vehicle to the

market, while others have employed drivers. One person accompanies the driver to unload the grass

bundles at the market. He is paid Rs 10 for unloading of one lorry. There are around 15-20 small

rickshaw pullers, 10-12 bullock carts, 10-12 tangas (horse-pulled cart) and 15-20 auto riskshaw‘s and

4-5 trillers which supply the paragrass to the different dairy units located in the old city area. There are

2-3 buyers (dairy unit owners) who bring their own vehicle to transport the grass. The rickshaw pullers

have linkages with the dairy units in the city area and transport on a daily basis. The payment to such

rickshaw pullers is on a monthly basis.

The cultivators give Rs 50 (1.01 US$) as rent per vehicle daily to the market. The brokers pay around

Rs 350 (7.70 US$) as monthly rent. The average rent paid to the Waqf Board is Rs 17,000 per month

(373.6 US$). There are around 6 brokers in the Golnaka market; all of these have been dealing for

more than 5 years. Each broker has at least two employees, one to make payments and both to keep

track of loading and unloading for different clients. Apart from the rickshaw pullers, bullock cart and

tanga owners around 5-8 hamalis (porters) also find work in the market area. There are 3-4 rooms in

the market premises, which have been leased to one cattle feed trader (dealing in both concentrate feed

and maize stova). It is estimated that over 1,000 individuals are directly related to the fodder market

(Buechler and Devi, 2003). This includes casual farm labour, brokers, land owners and renters. The

formal and informal dairy system is well organised in the city. For a detailed brief on Andhra Barrela

Cattle Market (ABM), Chintalakunta and selected dairy farms refer to Annex 4 and 5.

Producer WH. Traders in wholesale mkts Semi-Retailers Retailers

Rythu Bazaars or Storage for some veg Grading Grading

WH. Traders in nearest town



2.4 Constraint affecting low-income producer groups (Rapid diagnostic technique)

Currently, the existing green fodder and urban dairy system particularly small urban producers is

economically viable and provides an integrated service e.g. procuring inputs, production and

marketing. Inputs are cheap and currently available at the green fodder market. The urban dairy

producers are operating in a high margin market as transport costs (and labour costs) are minimal due

to close proximity of consumers and the fodder market. Consequently, infrastructural bottle necks are

minimal. No reason economically to form a cooperative of ‗urban‘ dairy producers to reduce

production, operating and marketing costs. In addition, the current legal constraints discussed in detail

in Section 3.2 would prevent ‗un-licensed‘ urban dairy producers from highlighting their existence let

alone forming a registered organization.

With regards the wastewater irrigated peri-urban leafy vegetable producers in Peerzadiguda, and

Parvatapurum, Rangareddy District key constraints to the formation of low income vegetable

producers is a paucity of robust scientific evidence of actual risks to producers and potential risks to

consumers. The current vegetable producers along the Musi are operating without institutional support

as the agricultural re-use of marginal quality waters is not covered by the respective line agencies.

However, as stated in Section 5.1, HMWSSB has designed its STPs with agriculture as the end-user.

As stated, the risk to producer, consumer and environmental health and the economic tradeoffs and

benefits of wastewater activities in selected study sites along the Musi River are currently being

investigated by IWMI and collaborating partners. The BMZ funded project entitled ―Ensuring Health

and Food Safety from Rapidly Expanding Wastewater Irrigation in South Asia‖ will develop,

implement, validate and promote the uptake of a set of risk mitigation options (multi-barrier

approaches) based on a comprehensive assessment of risks and benefits associated with wastewater

irrigation. Close collaboration is being established with relevant city partners particularly HMWSSB

and the vegetable producers to ensure input, adoption and institutionalization of project outputs.

A further constraint to the formation of low income vegetable producer organization/s along the Musi

River Belt is public perception of the risks associated with ‗wastewater irrigated‘ vegetables. Even if

risk mitigation options are in place to prevent consumer health risks public perception may negatively

impact sales.



Chapter 3. Institutional Profile

3.1 Key institutions operating in HUA: Potential role in supporting or constraining UPA

related activities

As stated previously, currently in Hyderabad UPA falls outside of conventional research, institutional

and funding support mechanisms. It is practiced without supporting policies or guidelines by small-

and medium scale farmers. However, there are several formal and informal institutional forms

primarily marketing orientated which operate in HUA and surrounding rural districts. These

institutional forms include;

Producer Organizations

Primary Agricultural Credit Societies (PACS)

Marketing Systems

o Agricultural Marketing Committees

o Retail Institutions

o Informal Market Institutions

Farmer Unions and Groups

The most common form of ‗producer organization‘ in rural areas of Andhra Pradesh are cooperatives

which service all the needs of farmers especially small and marginal. These services range from

provision of credit, seed, fertilizer, pesticides, lobbying and marketing services. These registered

cooperatives have proper bylaws and business rules and comply with the requirements AP Mutually

Aided Coop Society Act (1995) Amended 2002. An example of such an organization is the Syndicate

Farmers‘ Service Cooperative Society Limited (Annex 6). Further examples can be seen on the AP

Online Website http://www.aponline.gov.in

Primary Agriculture Credit Societies (PACS) in India were established to provide rural farmers and

rural poor access to finance. Since the inception of central Indian economic planning in 1950, the

government has favored cooperative societies as a channel for providing credit and as a means of

broadening the experience of villagers in such activities as marketing, community farming, and

consumer purchasing. Credit societies were the first to be established and continue to be the most

extensive and important group of cooperatives. Of the roughly 250,000 cooperatives in India in 1980,

about 100,000 were PACS. By the late 1980s, because regional rural banks were doing more lending,

the number of PACS had decreased to 87,300. By 1988 there were 93,000 PACS operating in rural

areas, with a membership of 89.8 million. The societies aimed for universal membership in order that

poorer members of society could join cooperatives and use their services. Total loans advanced by

such societies amounted to nearly Rs 36.9 billion (791, 208,791 US$) during 1987. These rural

agricultural credit societies had a share capital of about Rs10.1 billion (219,780,219 US$) at the end of

June 1988. Thus PACS play a vital role of providing access to credit for rural farmers, producers and

poor. To what extent there is scope to establish PACS for UPA requires further investigation.

Agriculture Market Committees (AMCs) are regulated market yards promoted across the rural areas of

AP to provide just marketing service to the farmers. These are government recognized market spaces

where registered traders (registered as sole proprietary firms) and intermediaries operate and by law

are suppose to follow the minimum support prices announced by the State Government. The AMCs

however tend to be exploitative as traders for cartels to ensure beneficial prices during the

procurement process. Rythu Bazars or ‗Farmer Markets‘ of the vegetables and fruits have been put in

place by the government across Hyderabad (Section 2.3.1). These markets are places where the

farmers can hire space at a nominal cost and sell their produce so that the margins gained by the

market intermediaries are directly realized by the farmers. However, due to poor infrastructural links

with peri-urban and rural areas time and labour constraints farmers end up selling their produce

through intermediaries that occupy the concession market space.

http://www.aponline.gov.in/



Informal structures occur in the aforementioned markets namely informal norms for sharing business,

fixing prices and entry and exit barriers as protective measures for existing traders. Retail markets in

India in the form of ‗Malls and ‗Marts‘ have boomed since 2000. Following the US and European

model, large malls, mega marts, hyper markets and supermarkets are being promoted. In Hyderabad

stores that retail processed and fresh agricultural products include Food World, Trinethra, Ratandeep,

Spencers Supermarkets, Reliance (opened 18 stores in Hyderabad in 2006), 24 Lettered Mantra

(Organic) and Pure and Natural. These stores cater for middle and high income groups. In addition,

there are numerous privately owned fruit and vegetable stores servicing local communities. Farming

Unions and allied groups operate as both formal and informal groups and are primarily established to

very specific temporary needs of farmers including protection of land and fighting for better prices. A

listing of rurally based farmer groups and organizations servicing farmer needs in rural AP can be

found at http://www.aponline.gov.in. Other emerging innovative market systems include Choupal

Fresh details of which are given in Annex 7. In addition to the aforementioned formal and informal

marketing structures several government and municipal agencies operate within HUA namely, HUDA,

MCH and HMWSSB. In addition, the Department of Horticulture, Department of Agriculture and

Department of Animal Husbandry Dairying and Fisheries (DADF) will also be discussed.

As indicated in the following synopsis, UPA is not currently included directly and hence not supported

within the mandate of any of the major line agencies and research and technology institutions,

municipal organizations discussed above. However, there is considerable scope for the recognition and

institutionalization of UPA by the DOH. Strategies to promote the future institutionalization of UPA

in Hyderabad are, outlined in Section 3.3. In addition, potential linkages with HMWSSB will be

discussed in Section 5.1.

3.1.1 Hyderabad Urban Development Authority (HUDA)

The metropolitan area of Hyderabad was notified under the Andhra Pradesh Urban (Development) Act

1975 and termed as "Development Area". This consists of the MCH, 10 municipalities and a vast area

under Gram Panchayat. In order to plan for this composite area, the Government of Andhra Pradesh

constituted the "Hyderabad Urban Development Authority" on 2nd October 1975. HUDA's

jurisdiction extends over an area of 1,348 km2. Covering the entire district of Hyderabad and parts of

Ranga Reddy and Medak districts, it includes 173 km2 under Hyderabad Municipal corporation Area

and 416 km2 under 10 Municipalities and 1273 km

2 under 105 Gram Panchayats. HUDA has four

primary functions namely;

Planning: Preparation and revision of Master Plan and Zonal Development Plans

Regulation and Control: To regulate and control the development through statutory plans and

other measures.

Development: To undertake various developmental projects in the Developmental Area. HUDA

has prepared 2 Master Plans and 20 Zonal Development plans of which one Master Plan and 18

Zonal Development plans are already notified by law and in force.

Coordination: To coordinate with other public agencies (namely MCH and HMWSSB) concerned

with provisions of urban infrastructure, services and amenities.

During 2000-2005 HUDA through Dutch Government Funding undertook the Greening Hyderabad

Environment Program (GHEP) which focused on the establishment of women‘s SHG‘s (+ access to

credit), provision of seedlings and training in the nurturing of tree and ornamental plants to support the

GHEP. Further details can be found at http://www.hudahyd.org.


http://www.hudahyd.org/



3.1.2 Municipal Corporation of Hyderabad (MCH)

Municipal Corporation of Hyderabad (MCH) is a local body established under Hyderabad Municipal

Corporation Act 1955 and covers an area of 169.3 km2. The Municipal Corporation is primarily the

main deliberative organ for Hyderabad. The Corporation meets for the transaction of business at such

time and place as may be fixed by the Mayor, in his absence by the Deputy Mayor, and in the absence

of both by the Chairman of the Standing Committee. Normally the Corporation meets twice in a

month. Usually every meeting is open to the Public. The Obligatory duties of MCH relate to erection

of substantially boundary marks defining the limits of the city; maintenance of public streets, roads,

public health and other matters relating to sanitation and improvement of the city. However, under the

Hyderabad Municipal Corporation Act 1955 MCH is implementing a number of Acts that are directly

impacting on urban and peri-urban dairy producers and hence indirectly on green fodder producers.

This is discussed in detail in Section 3.2. Further details regarding MCH can be found at

http://www.mch.org.

3.1.3 Hyderabad Municipal Water Supply and Sanitation Board (HMWSSB)

Hyderabad Metropolitan Water Supply and Sanitation Board was constituted on 1st November 1989

under the provisions of Hyderabad Metropolitan Water Supply and Sewerage Act 1989 (Act No . 15 of

1989). The functions and responsibilities of HMWSSB in the Hyderabad Metropolitan Area are to

supply potable water including planning, design, construction, maintenance, operation & management

of the water supply system. In addition, HMWSSB is responsible for sewerage, sewerage disposal and

sewerage treatment works including planning, design, construction, maintenance, operation &

management of all sewerage and sewerage treatment works. In this regard HMWSSB will play a key

role in future UPA activities as discussed further in Section 5.1. For further information on HMWSSB

refer to http://www.hyderabadwater.gov.in.

3.1.4 Department of Agriculture (DOA)

The Department of Agriculture (DOA) provides agricultural extension services primarily for grain

crops to rural farmers and transfers the latest technical knowledge to the farming community,

including the introduction of high yielding varieties, laying demonstrations, imparting training to

farmers to improve skills & knowledge to increase agricultural production and productivity. The other

objectives of the DOA are to assess requirements of agriculture inputs well in advance and to regulate

their production and monitor timely supply of seeds, fertilizers and pesticides, farm implements and

credit to farmers. The DOA also performs statutory functions under various acts and regulations to

ensure supply of quality inputs i.e., seeds, fertilizers and pesticides to farmers and quality of outputs.

The DOA also carries out certain other facilitating functions including; soil testing, soil and water

conservation, soil survey, credit assessment/provision, media production, training to farmers,

monitoring and evaluation, disaster management, crop insurance, agricultural mechanization and

extending technical assistance to various agencies. However, it is critical to note that the activities of

the DOA are directed at „rural‟ agricultural production. UPA currently falls outside the mandate of

the DOA.

3.1.5 Department of Horticulture (DOH)

The objectives of the DOH are to provide holistic growth in horticulture through research, technology

promotion, extension and marketing; to enhance horticulture production in Andhra Pradesh to 300

million t yr-1

by 2011-12; to establish convergence and synergy among various ongoing and planned

programs and to promote the development and dissemination of technologies by blending traditional

wisdom and frontier knowledge. Further details can be found at http://www.aponline.gov.in.

The strategies adopted by the DOH to achieve the stated objectives include the adoption of an end to

end approach covering production, post harvest management, processing and marketing; the

promotion of R&D of technologies for production, post harvest management processing in potential

belts/clusters; to enhance acreage, coverage and productivity in potential belts/clusters; to facilitate

capacity building and human resource development and to promote where appropriate, National Dairy

Development Board (NDDB) model of cooperatives among horticultural producers.

http://www.mch.org/

http://www.hyderabadwater.gov.in/




In addition, the Andhra Pradesh DOH has a Horticulture Training Institute the objectives of which are

to; identify the training needs of the department; have a significant impact in service training to

technical staff of the DOH with regards modern technologies in different sectors of horticulture, to

provide high impact training to progressive horticulture farmers of the State of Andhra Pradesh and to

provide professional training to private individuals and businesses on value added ornamental

horticulture. In the 1980‘s the DOH actively promoted UPA at the direct request of municipal

stakeholders including the State Railway Employees and within the Military Cantonment areas. The

DOH provided ‗mini kits‘ including seed and fertilizers and provided training. The key constraint to

the continued (Personal communication with the Horticulture Commissioner Mr. Anil Punetha)

adoption and expansion of this program was the perceived lack of space within urban areas. This is

currently being addressed by the RUAF-CFF Project (Section 3.3).

3.1.6 Department of Animal Husbandry Dairying and Fisheries (DADF)

The Department of Animal Husbandry and Dairying (AH&D) - now renamed as Department of

Animal Husbandry Dairying & Fisheries (DADF) is a Department in the Ministry of Agriculture and

came into existence in, 1991, by converting two divisions of the Department of Agriculture and

Cooperation namely Animal Husbandry and Dairy Development into a separate Department. The

Fisheries Division of the Department of Agriculture and Cooperation and a part of the Ministry of

Food Processing Industries were later transferred to this Department in 1997. The Department is

responsible for matters relating to livestock production, preservation, protection from disease and

improvement of stocks and dairy development, and also for matters relating to the Delhi Milk Scheme

and the National Dairy Development Board. It also looks after all matters pertaining to fishing and

fisheries, inland and marine. The Department advises State Governments/Union Territories in the

formulation of policies and programmes in the field of Animal Husbandry, Dairy Development and

Fisheries. The main thrust areas are:

Development of requisite infrastructure in States/UTs for improving productivity,

Preservation and protection of livestock through provision of health care,

Strengthening of Central livestock farms (Cattle, Sheep and Poultry) for development of superior

germ plasm for distribution to states and,

Expansion of Aquaculture in fresh & brackish water, and welfare of fisher-folk etc.

Registered dairies (under the Hyderabad Municipal Corporation Act 1955 amended under Andhra

Pradesh Ordinance No. 17 of 1996) can avail of the services provided by the DADF.

3.2 Policies and legal aspects concerning UPA and Producer Organizations

Escalating land prices in HUA are ensuring that land is increasingly being purchased by property

developers. As indicated in Section 2.2 small landowners in the green fodder production area in Uppal

are selling their land or leasing their land to migrants from rainfed rural areas of AP. Linked to the

escalating land prices and loss of agricultural land HUDA and MCH is actively enforcing the Urban

Land Sealing Act of 1976 which limits urban plot size to 4,000 sq ft (370 m2). This fall under the

‗Musi Beautification Program‘. Briefly, ‗beautification‘ work is proposed to be taken up along the 15

km stretch of the Musi River by dividing it into two zones – a Garden Zone and a Heritage Zone. The

Garden Zone comprising 1600 acres will be developed into an area with gardens, landscaping, parks,

amusement, art plaza, food courts, open auditorium for cultural events and a golf course. The Heritage

Zone, while protecting heritage buildings like High Court, Salar Jung Museum, City Library and

Osmania General Hospital, will be developed into a tourist spot with shopping complexes. HUDA

acquisition of land to facilitate the ‗Musi Beautification Scheme‘ is set at a rate of Rs 800 per sq yard

(85,098 US$ per acre). This is in contrast to the land prices outlined in Table 2 and has result in

significant conflict between landowners and HUDA. The land designated under the ‗Musi

Beautification Program‘ is currently under paragrass cultivation and provides an input to the green

fodder market. Loss of 1600 acres may result in a potential loss of 125,168 – 150, 201 t yr-1

of

paragrass (7.823 t per acre x 1600 acres x 10-12 cuts).



This accounts for approximately 63.3% of the annual paragrass yield. This poses a significant threat

to the formal and informal urban dairy industry in Hyderabad. A further pressure on the area under

fodder production is the rapid conversion to leafy vegetables as stated in Section 2.1.1 the area under

leafy vegetable production along the Musi River has increased from 5.562 ha in 2002 to 16.017 ha in

2006. (Figures 2 and 3). This corresponds to a loss in the area available for paragrass production of

10.455 ha and an annual loss of 231 tonnes (19.322 t per cut as 12 cuts x 10.455 ha) of fodder entering

the fodder market.

As indicated in Section 3.1 MCH is currently enforcing several Acts under the HMC Act 1955 that

directly impact on small and medium scale urban dairy producers. Specifically, Section 407 of HMC

Act 1955 (amended under Andhra Pradesh Ordinance No. 17 of 1996) animals (Milch Cows and

Buffalos) should not be tethered on streets or other public utility places. Under Section 510/511, no

person shall keep any animal on his premises, so as to be a nuisance or danger to any person or stabled

animals. Section 540 prohibits the import of cattle into the city without prior permission in writing of

the Commissioner.

In pursuance of provisions under section 623, permission is required to run urban dairy units as per by-

laws 1964. Permissions to keep dairy animals are accorded vide a license obtained from MCH which

operates under conditions 1-15 of the 1964 by-law including; prohibition to run dairy or cattle sheds

within 200 m of any human habitation or plot of land approved for residential building construction,

dairy unit must provide sufficient open space within boundary and number of cattle to be kept as per

the prescribed floor space. These conditions are to ensure public safety, health and convenience. If a

dairy owner is unable provide the aforementioned conditions laid down in the 1964 by-laws no license

is issued. Consequently, the owner is called upon to either obtain a license by fulfilling all the

conditions required or to shift the livestock outside the city premises within one month from the date

of receipt of notice. If the owner does not comply, MCH will relocate the livestock at the owners risk

and cost.

In addition in 1996 in support of Andhra Pradesh Ordinance No. 17 the Commissioner of Police,

Hyderabad issued the following notification (No. TR.T5/938/96: Office of the Commissioner of Police

Hyderabad City (Date: 3.4.1996) to persons running private, dairy farms that in order to ensure smooth

flow of traffic and to prevent obstruction and inconvenience to the public the straying of cattle in any

street or trespassing upon any private or government property including on to the roads within the twin

cities of Hyderabad and Secunderabad is prohibited at any time, day or night. Any such cattle found

straying in the streets will be seized by the police and impounded in the cattle pound. Further,

notification in 2004 (No.TR.T5/1761/2004: Office of the Commissioner of Police, Hyderabad City

Date 29.08.2004) specifies the cost of ‗lifting‘ and feeding charges during the 10 day period of

impoundment. Any animal not claimed after 10 days is auctioned and the proceeds enter the MCH

budget. However, it is critical to note that this is a ‗complaint driven process‘ with fines ranging from

300 Rs to 1000 Rs (6.5 – 22 US$) for the 1st to 3

rd offence, respectively. Consumer demand for ‗fresh

milk in HUA is estimated as 400,000 l d-1

(Section 2.1.2) as supplied by private vendors and small

dairy farms (<10 head) located within the HUA. This is a considerable demand that drives the existing

system.

A further externality influencing the long-term stability of urban ‗fresh milk‘ production system is that

the milk is unprocessed and ‗non-branded‘. The Government Policy is to promote the ‗branding‘ of

milk and processing/treatment prior to retail as a means of ensuring milk quality. This is supported by

the Prevention of Food Adulteration (PFA) Rules (1995) which stipulates x7 types of processed milk

for retail. Further, milk/dairy products are covered under the Essential Commodities Act (1955) which

has special provision for milk and dairy products as an essential commodity. The Indian Government

recognizes that in the formal dairy sector, that since the global market has become more demanding in

terms of quality, safety and timely delivery, installation of the ISO 9000 Quality Management System

and HACCP by the food industry is essential for getting a competitive international edge. In addition,

media promotion is targeting housewives to purchase ISO 9000 Quality Assured milk.



There are a two key State policies indirectly supporting the formation of LIPOs in UPA namely the AP

Mutually Aided Coop Society Act (1995) and the Companies (Amendment) Act, 2002. The former act

was formed to provide for the voluntary formation of cooperative societies in the state of Andhra

Pradesh, India. This enactment was the final step in an effort to create a new legislative environment

for cooperatives in Andhra Pradesh. The Act provides for the voluntary formation of cooperative

societies as accountable, competitive, self reliant business enterprises, based on thrift, self-help and

mutual aid and managed and controlled by members for their economic and social betterment and

other matters connected. The latter act actively promotes the formation of ‗Producer Companies‘. Full

details of both the AP Mutually Aided Coop Society Act (1995) and the Companies (Amendment)

Act, 2002 can be found in Annex 9 and 10.

Further, with regards access to credit, all banks in India must follow RBI (Reserve Bank of India)

Rules which stipulate that 30-45% of all funds retained by the bank must be issued as loans to the

agricultural sector and/or though microfinance programs for cooperatives, urban joint liability groups

or SHGs. This is closely supported by the AP Mutually Aided Coop Society Act (1995) and the

Companies (Amendment) Act, 2002 (Annex 9 and 10).

3.3 Overview of UPA innovations in the city

IWMI www.iwmi.org is currently coordinating two initiatives in Hyderabad. The objective of

the IDRC/DGIS funded Cities Farming for the Future programme (RUAF-CFF) is to contribute to

poverty reduction, food security (encompasses year round availability, accessibility and affordability

of „safe‟ and nutritious food, improved urban environmental management (safe reuse of urban organic

waste and wastewater), empowerment of urban and peri-urban farmers and participatory city

governance. This is to be achieved through capacity development of local stakeholders in urban and

peri-urban agriculture and by facilitating participatory and multi-stakeholder policy formulation and

action planning. The RUAF-CFF (Cities Farming for the Future) is a global initiative, which aims to

facilitate the integration of UPA in the policies and programmes of national and local governments,

technical departments, research centers and NGO‘s www.ruaf.org. RUAF-CFF specifically aims to

improve access of local stakeholders in urban and peri urban agriculture to documented

experiences in crop production, forestry, and animal production, improved land use and the re-use of

urban wastes for productive purposes. It also aims to enhance the awareness of international, national

organizations and local governments of the potentials (and risks) of UPA through capacity

development with the objective of enabling practical policy and technology interventions. IWMI is

the South and Southeast Asia Coordinator of the RUAF-CFF Project.

The RUAF-CFF Project will directly contribute to achieving MDGs (1 & 7). To realize this objective,

the programme seeks to apply an integrated approach with six components, which mutually reinforce

each other and in combination will deliver the desired results.

1. Consolidation of the regional RUAF‟s: Strengthen the actual ―regional focal points on UPA‖ in

order to create sustainable and effective Regional Resource centers on UPA that provide

information services, training and policy advice to municipalities, NGO‘s and other national and

local stakeholders in urban agriculture in their region.

2. Capacity Development: Development of required training capacity and organisation of training

activities to enhance the capacities of local stakeholders in UPA (Municipal Departments, farmer

organisations, NGO‘s, research institutes, planners) for the successful engagement in multi-

stakeholder policy design and action planning and implementation on UPA.

3. Knowledge management: Design and targeted distribution of guidelines, information packages,

working methodologies and instruments by the various local stakeholders and improvement of

their access to relevant information as well as maintenance of databases and publication of Urban

Agriculture Magazine.

http://www.iwmi.org/

http://www.ruaf.org/



4. Facilitation of Participatory Policy formulation and Action planning: Assist in the realisation of

processes of multi-stakeholder policy formulation and action planning including the realisation of

policy awareness seminars, participatory appraisals, participatory design and implementation of

pilot projects.

5. Gender mainstreaming: Ensure that training, policy formulation, project development and

monitoring activities are gender sensitive by integration of gender in all RUAF methodologies and

instruments, training activities, and gender differentiated project design and monitoring systems as

well as by commissioning gender case studies and preparation of guidelines and publications on

gender and UPA).

6. Promotion of learning through monitoring: Ensure that all local actors participating in the

programme start using participatory and results oriented process and impacts monitoring methods.

A fundamental component of the RUAF-CFF is to establish a Multi-stakeholder Process for Action

planning and Policy Design (MPAP) that will create an equitable and mutually acceptable policy

environment for UPA. In Hyderabad a series of activities have been initiated to facilitate this process

namely the formation of a UPA Enabling Team, generic and targeted capacity building programs,

exchange visits, policy awareness seminars and formation of actions plans for the implementation of

pilot projects. For further detail refer to the RUAF-CFF South and Southeast Asia website

http://www.iwmi.cgiar.org/southasia/ruaf/about.html.

The risk to producer, consumer and environmental health and the economic tradeoffs and benefits of

wastewater activities in selected study sites along the Musi River are currently being investigated by

IWMI and collaborating partners. The BMZ funded project entitled ―Ensuring Health and Food Safety

from Rapidly Expanding Wastewater Irrigation in South Asia‖ will develop, implement, validate and

promote the uptake of a set of risk mitigation options (multi-barrier approaches) based on a

comprehensive assessment of risks and benefits associated with wastewater irrigation. These options

will be evaluated in the context of WHO and FAO wastewater re-use guidelines. Close collaboration is

being established with relevant city partners particularly HMWSSB (Section 5.1) to ensure input,

adoption and institutionalization of project outputs.

Chapter 4. Organization Profile: Producers’ Collective 4.1 Context of Origin

Till the beginning of the 1960s, the agricultural fields alongside the Musi River continued to grow

paddy, sorghum, millet and vegetables, both for household and market consumption. Three crops were

grown with the help of irrigation water from Musi River. After the mid sixties, as the inflow of

untreated wastewater in the River Musi increased, it became increasingly unsuitable for these crops

particularly in the Uppal area. The affected farmers thus had to search for alternate crops. It was felt

that fodder crops would be the best alternative. Regarding the introduction of paragrass (Gramineae

Panicum purpurascens) variety of fodder on these fields, there are two different versions available

from the farmers interviewed.7 The first indicates that after informal consultations with farmers in and

around city, they came to know that a particular variety of grass was being grown in similar

wastewater irrigated areas in Bombay. Alternatively a group of farmers, while exploring different

fodder grass varieties went to Punjab Agricultural University Campus at Ludhiana and brought a few

samples of fodder grass from there. Out of these varieties, paragrass was discovered to be most

suitable for feeding to dairy cattle, as it gave the best milk yield among the fodder grass varieties tried

out in the area.

7 The versions were provided by elderly farmers, who had witnessed the change from paddy and vegetables to

paragrass. These farmers were also actively involved in the formation of the Green Grass Growers‘ Association,

based at Uppal. It was not possible to validate either of the versions from other members due to the fact that the

farmers from the older generation were not available for comment. Some have died, while others have given up

farming and have settled elsewhere.

http://www.iwmi.cgiar.org/southasia/ruaf/about.html



In addition, it was found to tolerate the declining water quality and require nominal labour inputs.

After successful trials by some farmers, the entire agricultural belt in the Uppal area and also the

Attapur area took up paragrass cultivation on the wastewater irrigated agricultural lands.

4.2 Brief Historical Description

4.2.1 Collective Activity by Paragrass Producers

By the end of the 1960s, the entire Uppal belt had come under paragrass cultivation. While there were

informal consultations and information sharing among the farmers in the entire process of exploration

of new fodder grass varieties and other related areas, there was no formal forum or organization to

undertake these activities. Limited support was provided by government line agencies. Moreover, the

above-mentioned initiatives were taken mostly by the entrepreneurial larger landowners in the area.

The next common concern was to search for a suitable and stable market. As indicated by one dairy

owner, there were more than 40,000 milch animals within HUA at that time. Thus the farmers began

to look for a market place in the city area. After mutual discussions, it was decided that an association

of the fodder producers be formed to take up the activities including the search for a suitable market

place and negotiations with dairy owners and brokers. The ‗Green Grass Growers Association‘ was

thus formed. The market place came to be arranged on an open private land space in Chaderghat area

in what is now known as the old city.

The Association also took up the issue of multiple ‗taxation‘8 of fodder vehicles on their way to the

market. However, once the market was identified and the daily fodder trading process streamlined,

there was no attempt to formally register the Association or to take up any further activities through

the forum. The fodder market continued in the Chaderghat area till 1982, when the land owners asked

them to vacate. The brokers and some of the fodder grass producers searched and held discussions at

several places in the city area for another market place. Finally, the Waqf Board of the Masjid

(Mosque) situated at Golnaka area in Kacheguda agreed to lease the current open space, adjoining the

Masjid to them9 on an annual basis. Since then the fodder grass market has been functioning from the

Golnaka market, on an area of around 2,500 m2. Since 1982 onwards, the fodder producers and

brokers had also been seeking government support for sanction of a permanent market place for the

fodder market in the city area.

Around the mid nineties, the market place again came under threat as a result of a bi-law issued by the

Municipal Corporation of Hyderabad (MCH). This bi-law, prohibits the movement of buffalo, bullock

carts, rickshaws, tongas and fodder transportation vehicles due to their nuisance to traffic and

discharge of manure onto city streets. In the wake of this renewed common threat, the collective action

among the producers and brokers again gained momentum. By this time, most of the farmers who had

been associated with the Green Grass Growers Association had either given up agriculture or had

settled elsewhere. Most of them have sold part of their lands and given the remaining land on lease to

the existing active fodder producers. There were more young producers in the age-group of 22-35,

who were now cultivating their own lands and/or leased lands of other land owners. A high court order

was obtained stayed the pressure imposed by MCH to vacate the existing market location. The group

of farmers obtained formal and informal legal advice and as a result they were advised to form an

organization to collectively pursue their interests. Thus the active producers formed a new

organization named the ‗Farmers Green Paragrass Growing Society‘. It remained active in 1998 and in

1999 was registered under the AP Societies Registration Act. The major objective of the society was

to seek government land for the formal establishment of a green fodder market. The new organization

met and presented their case to concerned government officials in the Agricultural Department and

MCH. Finally, the Agricultural Market Committee agreed to allot a vacant government plot of 2982

m2 adjacent to the Old Slaughter House (known as Kacheguda Kamela) located at Golnaka which

comes under the jurisdiction of Mandal Revenue Officer (MRO) Himayathnagar village.

8 Both toll tax and the bribes collected by police and revenue officials.

9 The area is leased to Mr. Arif, who is a fodder grass broker. However, all the other brokers are equally involved

in the maintenance of the market place and the trading activity.



However, there are several problems associated with the usage of the allotted plot for fodder market.

Firstly, there are municipal pipelines going from below the plot and thus in case if any repairs are

required, the digging up and repair activity would require the stalling of business. Secondly, the

approach road to the allotted plot from the market passes through a Basti whose residents are objecting

to the market place as it would involve heavy traffic of vehicles, rickshaws etc and also leading to

cleanliness problems. Thirdly, with a change in state government, support for the producers declined.

Another recent development affecting the farmer producers in the Uppal area is the threat of land

acquisition by Hyderabad Urban Development Authority (HUDA) as part of the Musi Beautification

Program. This has led to the formation of a new collective association known as the ‗Uppal Raithu

Sangam‘ which is also in the process of being registered under the AP Societies Registration Act

(2001). The objective of the ‗Uppal Raithu Sangam‘ is to represent the interests of farmers who will be

directly or indirectly affected by the land acquisition process and negotiate with the government to

exempt their lands from the acquisition process. The farmers are at present actively involved in

mobilization of public opinion on the issue and highlighting the issue through the media and other

forums.

4.2.2 Producer Organization Profile

Thus since the fodder grass cultivation was introduced along the Musi River three organizations have

been formed at different points in time. The following section attempts to analyze the collective

organizations on different parameters:

Parameter Green Grass Growers

Association

Farmers Green Para

Grass Growing’ Society

Uppal Raithu Sangam

Formation 1968 1996 2005

Legal Status Not registered AP Societies Registration

Act

Registration in process

Membership

profile

Land Owners and Grass

Growers

Grass Growers Small (< 2cres) to large(>5

acres) land owners

Geographic

Location of

members

Uppal area 20 villages in Ghatkesar

Mandal

Land owners affected by the

land acquisition plan related

to the ‗Musi Beautification

Program‘ of HUDA in the

Uppal area

Purpose /

Objectives

-Establishment of a market

place for fodder trading

-Negotiations with brokers

and buyers for terms of

purchase

-Establishing norms for

market operational issues

-Negotiating with

government for tax

exemption and reducing

harassment

-Representation to the

government for

permanent market place

with maintenance

facilities to be provided

by the government

-Lobbying for exemption of

land from acquisition by

HUDA

Activities

undertaken

- Market place established at

Chaderghat

- Fodder trading system put

in place- including no. of

brokers, rate determination,

payments

- Government permission to

pay a monthly charge to the

concerned department in

return for permission to

transport fodder grass daily

- Government Land

allocated for new market

- Further negotiations

stalled due to various

problems and non-

cooperation and delays

from concerned

government departments

and district administration

-Representation made to

ministers and Central

Government (Sri Digvijay

Singh)

- Highlighting the issue in

media through articles and

interviews

Bye Laws or

Norms

-Not made -Not available -Not made till date




Association

Farmers Green Para


Uppal Raithu Sangam

Governing Body - Office bearers elected by

mutual consensus

-No formal or clear definition

of roles and responsibilities

- Office bearers elected

by mutual consensus s

-No formal or clear

definition of roles and

responsibilities

- Office bearers elected by

mutual consensus

-No formal or clear

definition of roles and

responsibilities

Managerial

Structure

-No separate operating or

managerial structure

-All activities undertaken by

the governing body together

as a team



-All activities undertaken

by the governing body

together as a team



-All activities undertaken by

the governing body together

as a team

Decision

Making

mechanisms

Informal consultations among

the active members and the

office bearers

Informal consultations

among the active

members and the office

bearers

Informal consultations

among the active members

and the office bearers

Meetings and

Participation

1-2 meetings held in the

beginning at the time of

formation

-Informal meetings at the

village level and at the

Golnaka market

-Active participation of

brokers also

- No regular meetings

held. When some issue

comes up, members are

informed to come for

discussions

-1-2 formal meetings till date

Involvement of

Women

No women members or office

bearers

No women members or

office bearers or brokers

No women members or

office bearers

Interests-

common and

conflicting,

solidarity

-Group formed on common

interest

- No conflicting interests

among producers came up

during period of active

functioning

-Different political

affiliations were one of the

reasons for not taking up

further activities from the

forum

- Group formed on

common interests

-Formed on common interest

and common political

affiliations

- No involvement of farmers

whose lands not affected and

with different political

affiliation

Funds and

Resources for

the organization

Internally mobilized from

members for expenses. No

formal records maintained

Active office bearers

make expenses. After the

amount becomes

considerable, they orally

detail about the expenses

and collect per head

contribution from willing

members and brokers

No information. As per the

office bearers, they are

bearing the entire expense on

their own

Infrastructure,

inputs and

services for the

organization

-No infrastructure owned or

rented by the org.

-Contribution for

maintenance of premises by

both producers and brokers.

Overseen by the brokers

-No infrastructure owned

by org. or producers

- Contribution for

premises rent and

maintenance of premises

by both producers and

brokers. Cleaning and

maintenance overseen by

the brokers

- Legal services hired

- No infrastructure owned by

the organization services

- Legal services hired from

outside




Association

Farmers Green Para


Uppal Raithu Sangam

from outside

Partnership with

other actors

- For Golnaka market

general maintenance,

contributions are provided

by all shop owners inc.

them

-

-Media and political party

workers and office bearers

Strategies for

future access to

resources/

markets

- Representation to

government

- Follow up with

government departments

- Agitation and lobbying

with the government

- Litigation

Chapter 5. Conclusions and Recommendations

5.1 Long-term trends in UPA in Hyderabad:

As stated previously, UPA activities in Hyderabad fall outside of conventional research and

institutional support mechanisms. It is practiced in small spatially scattered locations without

supporting policies or guidelines by small-and medium scale farmers but contributes to the urban food

supply primarily in the form of perishable vegetables, green fodder and dairy products (dominated by

fresh milk). Key constraints to the institutionalization and indeed widescale adoption of UPA activites

include;

Lack of awareness amongst the public, NGOs, Government Departments and private sector on the

potential benefits of UPA.

Availability of land and escalating land prices

Lack of supporting policies

Intense competition for available water resources

Lack of an institutional home for UPA

Lack of a centralized source of essential resources for UPA namely; seed, fertilizer, growth

medium, tools, no space/low space technologies.

Lack of capacity in line agencies (particularly DOH) directed specifically at UPA

Lack of targeted (targeted to different socio-economic groups) training materials for the

cultivation, value added processing and marketing of UPA commodities.

With the exception of urban dairies, there is a lack of formal/informal locally available (planned

and implemented through multi-stakeholder action planning activities) bright spots demonstrating

the viability of UPA activities.

5.1.1 Supportive Policies

However, there are a number of government policies actively indirectly support the formation of

LIPOs in UPA namely the AP Mutually Aided Coop Society Act (1995) and the Companies

(Amendment) Act, 2002. The former act was formed to provide for the voluntary formation of

cooperative societies in the state of Andhra Pradesh, India. This enactment was the final step in an

effort to create a new legislative environment for cooperatives in Andhra Pradesh. The Act provides

for the voluntary formation of cooperative societies as accountable, competitive, self reliant business

enterprises, based on thrift, self-help and mutual aid and managed and controlled by members for their

economic and social betterment and other matters connected. The latter act actively promotes the

formation of ‗Producer Companies‘. Full details of both the AP Mutually Aided Coop Society Act

(1995) and the Companies (Amendment) Act, 2002 can be found in Annex 8.



5.1.2 Access to Credit

With regards access to credit, all banks in India must follow RBI (Reserve Bank of India) Rules which

stipulate that 30-45% of all funds retained by the bank must be issued as loans to the agricultural

sector and/or though microfinance programs for cooperatives, urban joint liability groups or SHGs.

This is closely supported by the AP Mutually Aided Coop Society Act (1995) and the Companies

(Amendment) Act, 2002 (Annex 9). In India in 2005, 14 million poor families had access to micro

finance through 881,154 SHGs (90% SHGs are all women) linked to over 30,000 branches of 504

banks comprising commercial banks, regional rural banks and cooperative banks (Source:

Presentation of Ms Ranjana Kumari - NABARD Chairperson at Micro credit summit in Dhaka on 16th

February 2004). It is estimated that in 2005, almost 260 million people in India were living under the

internationally accepted poverty line of 1 US$ a day. Adjusted for the purchasing power, some 39% of

India's population would be considered as poor. The Government of India, since independence, has

been making concerted efforts to provide financial services to the poor at affordable cost. Despite all

these efforts, there still exists a massive gap between the demand for credit by poor households and the

supply of credit by formal financial and social institutions.

Of the 75 million poor households in India, (60 million rural households and 15 million urban

households), it is estimated that the total annual requirement of credit for rural households would be at

least Rs. 120 billion (2.6 billion US$) on the basis of Rs. 2000 (43.9 US$) per family. Another

estimate for micro finance services, excluding housing, is Rs. 500 billion (10.9 billion US$) assuming

that annual average credit usage is Rs. 6000 (131 US$) per rural poor household and Rs. 9000 (197

US$) per urban poor household. In addition, the clients require saving and insurance services. The

dependence of poor on informal and non-institutional sources of credit still remains very high. For

further details refer to www.sidbi.com. Concerted efforts are required to ensure that UPA and related

producer organizations are able to access, micro-credit.

5.1.3 Access to water resources With regards water resources, it is currently mandatory in Hyderabad for all new constructions to have

a rainwater harvesting structure either in the form of groundwater re-charge or water conservation.

This is managed by HMWSSB. In addition, HMWSSB in association with the National River

Conservation Directorate (NRCD) is undertaking the ‗Musi River Conservation Project‘. The project

area covers the entire MCH area of 169.3 km2 and Uppal and Malkajigiri Municipalities, Osmania

University and Cantonment Areas in full and part of 5 surrounding Municipalities namely; L.B. Nagar,

Rajendranagar, Kukatpally, Qutubullapur and Kapra Municipalities. The extent of the Musi River

Conservation Project sewerage project area 363.43 km2. Current wastewater generated within the

proposed sewerage project area is 644.2 MLD. Project involves up-grading/construction of 5 Sewage

Treatment Plants (STP) at Jiaguda, Nandi Musaliaguda, Amberpet, Nagole and Nallah Cheruvu.

Design treatment capacities are given in Table 4.

Table 4. Design treatment capacities of the five Sewage Treatment Plants (STP) covered by the Musi

River Conservation Project Name of STP Treatment Capacity

(MLD)

Jiaguda 21

Nandi Musaliaguda 30

Amberpet 339

Nagole 171

Nallah Cheruvu 30

Total 591

The WHO, has ranked the risk of pathogens found in untreated and partially treated wastewater in the

following descending order: helminth infections, protozoa/bacteria and viruses with viruses posing

almost negligible risk. Helminth infections are mainly due to: Ascaris lumbricoides (roundworm),

Trichuris trichiura (whipworm), Ancylostoma duodenale and Nector americanus (hookworms).

http://www.sidbi.com/



However, it is important to note that helminth egg levels were not determined as an indicator of water

quality during the feasibility study for the Musi River Conservation Project and are not included in the

Water Quality Standards for Surface Water Sources (Central Pollution Control Board 2001).

Composite wastewater samples of dry weather flow from all nallahs and the existing Amberpet STP

were analyzed following NRCD guidelines and presented in Table 5. However, IWMI water quality

monitoring at selected points along the Musi River from 2004-2006 are given in Table 6. With the

exception of sampling points at Pillaipally and Battigudem Total (Ascaris, Hookworm and Trichuris)

helminth egg counts exceed the WHO guideline value of <1 egg l-1

. Disposal Standards for the

treatment plants as stipulated by the NRCD are BOD <30 mg l-1

, TSS <50 mg l-1

and Fecal Coliforms

<10,000 MPN/ 100ml. This complies with the revised WHO guideline value of < 104 (MPN per

100ml) for restricted irrigation in labour intensive agriculture (protective of adults and children <

15yrs). This would be a significant improvement on the current water quality parameters measured by

IWMI and NRCD and should have a direct and positive impact on the health of producers, produce

quality and hence consumer health risks.

Table 5. Composite dry weather flow wastewater quality attributes for selected STPs and nallah‟s

covered under the Musi River Conservation Project‘.

Location Parameters

Flow

(MLD) pH

DO

(mg l-1

)

TDS

(mg l-1

)

BOD

(mg l-1

)

COD

(mg l-1

)

Fecal Coliform

MPN / 100 ml 105

Amberpet

Amberpet STP inlet 192.00 7.01 ND 1406 314 602 2.600

Amberpet STP Outlet 7.07 ND 1412 214 458 2.900

Puranapul North 2.50 6.85 ND 1042 191 453 5.625

Puranapul North 12.00 5.98 ND 1186 291 663 5.050

Surplus Nullah 76.00 7.02 ND 1247 246 580 6.700

Afzalsagar nullah 16.00 7.00 ND 1189 180 415 4.700

Patel Nagar nullah 6.00 6.98 ND 984 246 576 6.200

Nagole

Puranapul South 3.00 6.87 ND 1017 151 338 2.950

High Court Nullah 7.00 6.98 ND 1036 198 457 3.575

Muriki Nullah 34.00 6.97 ND 977 240 569 3.725

Nagole Main 8.50 6.95 ND 1073 187 459 4.950

Mansoorabad Main 3.90 7.20 ND 1028 204 499 5.075

SIS Main 42.00 7.30 ND 1224 231 566 4.950

Nallacheruvu

Ramanthapur Nullah 7.00 6.78 ND 1167 303 710 4.325

Peddacheruvu Nullah 12.00 7.12 ND 1431 170 400 2.100

Jiaguda STP ND

Bapughat Nullah 9.00 7.24 ND 1039 159 314 4.975

Mukalla Nullah 5.00 7.00 ND 1240 198 431 6.425

Nandi Muslaiguda

Bahadurpura Nullah 21.00 6.80 ND 1195 243 562 4.525

Kishen Bagh 3.00 6.40 ND 1885 282 576 5.875

The risk to producer, consumer and environmental health and the economic tradeoffs and benefits of

wastewater activities in selected study sites along the Musi River are currently being investigated by

IWMI and collaborating partners. The BMZ funded project entitled ―Ensuring Health and Food Safety

from Rapidly Expanding Wastewater Irrigation in South Asia‖ will develop, implement, validate and

promote the uptake of a set of risk mitigation options (multi-barrier approaches) based on a

comprehensive assessment of risks and benefits associated with wastewater irrigation. These options

will be evaluated in the context of WHO and FAO wastewater re-use guidelines.



Close collaboration is being established with relevant city partners particularly HMWSSB to ensure

input, adoption and institutionalization of project outputs.

Table 6. Water quality attributes at selected sampling points along the Musi River December 2003 –

January 2005 (Ensink, 2006). Sampling

Location

Distance (km)

downstream from

Hyderabada

DO

(mg l-1

)

BOD5

(mg l-1

)

EC

dS m-1

Totalb

Helminth Egg

Count Eggs l-1

E.Colic

(CFU 100 ml-1

)

Amberpet 0

0.1

(0.08)

325

(33.5)

1.52

(0.055)

58.41

(13.15)

8.07 x 107

(4.9 x107)

Nagole 5.2

0.12

(0.07)

317

(39.0)

1.84

(0.085)

53.24

(12.61)

2.94 x 107

(1.6 x107)

Peerzadiguda 9.6

0.12

(0.075)

162

(24.0)

2.03

(0.10)

28.47

(5.20)

3.81 x 107

(2.7 x107)

Mutialguda 13.9

0.12

(0.08)

95

(17.0)

2.00

(0.10)

10.71

(4.26)

2.70 x 105

(1.6 x105)

Gourvelli 17.3

0.23

(0.125)

73

(26.5)

1.96

(0.10)

6.18

(1.60)

1.53 x 105

(5.3 x104)

Koremalla 20.0

1.12

(0.505)

54

(9.0)

1.98

(0.105)

1.88

(2.86)

1.43 x 105

(6.3 x104)

Pillaipally 27.7

3.03

(0.675)

31

(10.0)

1.99

(0.09)

0.41

(0.85)

1.22 x 105

(3.8 x104)

Battigudem 39.7 5.00

(0.82)

15

(6.5)

2.26

(0.175)

0.0

(0.0)

8.67 x 102

(2.3 x102)

aDistance Measured along the river bed

b Ascaris, Hookworm and Trichuris

cSampling undertaken from Jan. –

Jul. 2005. All other values represent mean water quality parameters based on bi-weekly sampling undertaken

from December 2003 – January 2005 (Ensink, 2006). Values in parentheses indicate 1 STDEV.

5.1.4 Marketing

With the exception of the wastewater irrigated leafy vegetables, it is envisaged that the marketing

(formal and informal) of agricultural products generated by urban and peri-urban producers will not be

problematic given the high demand and the existing and emerging market channels outlined in Section

3.1.



5.2 Conclusions and lessons learned

Rapid urbanization creates tremendous challenges in the provision of infrastructure, employment,

environmental management, food security, nutrition and health. Among the many challenges, one of

basic and crucial challenge that remains is ensuring food and nutritional security within the urban

zone. In this context urban and peri-urban agriculture (UPA) can make significant contributions.

However, currently in Hyderabad UPA and consequently, LIPOs fall outside of conventional research,

institutional and funding support mechanisms. It is practiced without supporting policies or guidelines

by small-and medium scale farmers but contributes to the urban food supply primarily in the form of,

green fodder and dairy products (dominated by fresh milk) and increasingly, perishable vegetables.

Several key externalities are directly impacting on the long-term sustainability of peri-urban green

fodder production and small scale urban dairies in Hyderabad. Escalating land prices in the current

green fodder production areas ensure that land is increasingly being purchased for property

development. Linked to the escalating land prices and loss of agricultural HUDA and MCH are

actively implementing the ‗Musi Beautification Program‘ which when completed will encroach on

1,600 acres currently under green fodder production. This is expected to result in a 63% reduction in

fodder (Paragrass) entering the green fodder market. Further, a number of Acts enforced by MCH and

issued as public notifications by the Commissioner of Police, Hyderabad are restricting small scale

urban milk producers. A further externality influencing the long-term stability of urban ‗fresh milk‘

production systems is the Government Policy to promote the ‗branding‘ of milk and

processing/treatment prior to retail as a means of ensuring milk quality and public health. This is

supported by the Prevention of Food Adulteration (PFA) Rules (1995).

With regards supportive policies, there are two key State policies indirectly supporting the formation

of LIPOs namely the AP Mutually Aided Cooperative Societies Act (1995) and the Companies

(Amendment) Act, 2002. In Hyderabad it is now mandatory for all new constructions to have a

rainwater harvesting structure either in the form of groundwater re-charge or water conservation. In

addition, HMWSSB in association with the National River Conservation Directorate (NRCD) is

undertaking the ‗Musi River Conservation Project‘. Both these initiatives are managed by HMWSSB

and will directly address a key constraint to the development of UPA in Hyderabad namely, water.

Access to credit and markets for UPA products is not seen as a constraint to UPA in Hyderabad. The

key constraints are listed in Section 5.1. These are currently being addressed by IWMI and project

partners through the RUAF-CFF Project and the BMZ funded project entitled ―Ensuring Health and

Food Safety from Rapidly Expanding Wastewater Irrigation in South Asia‖. A key lessoned learned in

undertaking this report which reiterates the findings of the aforementioned projects is that a multi-

stakeholder and multi-disciplinary approach which has strong institutional as well as ground roots

support is essential if suitable and equitable policies are to be developed that facilitate the inclusion of

UPA in long-term city planning. This must be coupled with effective knowledge management and

awareness programs that highlight the benefits of UPA as well as any risk mitigation options (where

urban solid waste or treated wastewater are utilized) that are required to ensure the production and

marketing of ‗safe‘ and nutritious food for rapidly expanding cities.

Finally, capacity building at multiple levels (policy, enablers and implementers) is critical if UPA

activities are to be productive, sustainable and adoptable.



5.3 Recommendations

Through the RUAF-CFF Project and it is strongly recommended that;

A strong advocacy and awareness program is continued amongst civil society institutions, NGOs,

Government Departments and the private sector on the potential benefits of UPA.

A suitable and equitable environment in created that will facilitate (through a multi-stakeholder

action orientated process) the development of supporting policies.

An institutional home is found for UPA (It is envisaged that this will be the DOH). Negotiations

have already been initiated with the DOH.

Intense competition for available water resources. Rainwater harvesting and the use of treated

wastewater in associated with appropriate multi-barrier risk mitigation options is being promoted

A centralized source of essential resources for UPA namely; seed, fertilizer, growth medium,

tools, no space/low space technologies etc. is established.

Capacity of various stakeholders (particularly DOH) in UPA and allied activities continues to be

undertaken through ‗Training of Trainer‘ initiatives.

Appropriate targeted training and knowledge materials are developed

Bright Spot examples are developed to demonstrate the potential of UPA in Hyderabad. Currently,

a school garden and terrace garden/household waste separation and composting activity in a

organized colony (8th Battalion Special Police) are planned.

The Musi River Conservation Project project document clearly states that the “treated sewage from

Amberpet and Nallahceruvu STPs (369 MLD) will be discharged into the existing irrigation channels

to support the current agricultural activities”. This is a clear indication of institutional support in

terms of providing water quantity and improved water quality for fodder, vegetable and rice producers

along the Musi River. As stated above, IWMI and collaborating partners will develop, implement,

validate and promote the uptake of a set of risk mitigation options (multi-barrier approaches) based

on a comprehensive assessment of risks and benefits associated with treated wastewater irrigation.

Close collaboration is being established with relevant city partners particularly HMWSSB to ensure

input, adoption and institutionalization of project outputs.

It is strongly recommended therefore that vegetable, fodder and rice producers along the Musi River

form producer organizations. It is envisaged that the formation of such cooperative structures under

the AP Mutually Aided Coop Society Act (1995) and the Companies (Amendment) Act, 2002 (Annex

9 and 10) will safeguard their current livelihoods and form a strong basis for direct dialogue with the

HMWSSB and other line agencies. The formation of such producer organizations will also strengthen

their lobbying power for services from government line agencies.

Currently, the existing green fodder and urban dairy system particularly small urban producers is

economically viable and provides an integrated service e.g. procuring inputs, production and

marketing. Inputs are cheap and currently available at the green fodder market. The urban dairy

producers are operating in a high margin market as transport costs (and labour costs) are minimal due

to close proximity of consumers and the fodder market. Consequently, infrastructural bottle necks are

minimal. No reason economically to form a cooperative of ‗urban‘ dairy producers to reduce

production, operating and marketing costs. In addition, the current legal constraints discussed in detail

in Section 3.2 would prevent ‗un-licensed‘ urban dairy producers from highlighting their existence let

alone forming a registered organization.

However, with the increasing pressure on the land available for green fodder (paragrass) production it

is recommended that urban milk producers for a organizational structure to assist the ‗Green Fodder

Association‘ in lobbying for the protection of the existing fodder production area. Further it is

recommended that the ‗Green Fodder Association‘ and the urban dairy farmers and commercial dairy

units partner with consumers buying fresh milk to facilitate official recognition of their trade and

assure safety standards in all aspects of the production and consumption chain.



REFERENCES

1. Andhra Pradesh Department of Agriculture (DOA) http://www.aponline.gov.in

2. Andhra Pradesh Department of Horticulture (DOH) http://www.aponline.gov.in

3. Andhra Pradesh Department of Animal Husbandry, Dairying and Fisheries (DADF)

http://www.aponline.gov.in

4. Andhra Pradesh Mutually Aided Cooperative Societies Act (1995) www-ilo-

mirror.cornell.edu/public/english/employment/ent/coop/download/india.pdf -

5. Agriculture Produce Marketing Development and Regulation Act (2003)

6. Buechler, S. and G. Devi (2003). Wastewater as a Source of Multiple Livelihoods? A Study of a Rural Area

near Hyderabad City, Andhra Pradesh, India in Rema Devi and Naved Ahsan (eds.). Water and Wastewater:

Developing Country Perspectives. London, U.K.: International Water Association.

7. Department of Horticulture, Government of Andhra Pradesh (2006) Handbook of Horticultural Statistics

8. Directorate of Economics and Statistics, Andhra Pradesh, 2001 http://www.aponline.gov.in

9. Ensink J.H.J., 2006. Wastewater use in agriculture in India; the role of irrigation infrastructure in health risk

reduction. PhD Thesis London School of Hygiene and Tropical Medicine, UK

10. Essential Commodities Act (1955) http://www.indialawinfo.com/bareacts/esca.html

11. Hyderabad Urban Development Authority (HUDA) http://www.hudahyd.org

12. Hyderabad Metropolitan Water Supply and Sanitation Board (HMWSSB)

http://www.hyderabadwater.gov.in

13. India Dairy www.indiadairy.com

14. Municipal Corporation of Hyderabad (MCH) http://www.mchhyd.org

15. National Dairy Development Board, India www.nddb.org.

16. Prevention of Food Adulteration (PFA) Rules (1995) mohfw.nic.in/pfa%20acts%20and%20rules.pdf

17. Producer Companies Act, (Amendment) 2002)

http://www.laws4india.com/corporatelaws/comp_act/ica_idx.asp

18. Ramnath, N. 2002. Indian Dairy Study Opportunities in the Indian Dairy Industry. Special Report.

February. Rabobank International, Food and Agribusiness Research.

19. Reserve Bank of India (Amendment Act) (1967)

20. Staal S. 2001. The competitiveness of small-holder dairy production: evidence from Sub -Sahara Africa,

Asia and Latin America. In (Eds. D. Rangnekar and W. T. Thorpe) Small-holder dairy production and

marketing – opportunities and constraints. Proceedings of the South-South workshop held at NDDB, Anand,

India, and ILRI, Nairobi, Kenya, 538 pp.

21. World Health Organization (WHO). 2006. Health guidelines for the use of wastewater in agriculture and

aquaculture. Technical report series 778, Geneva, Switzerland: WHO.





http://www.hudahyd.org/

http://www.hyderabadwater.gov.in/

http://www.indiadairy.com/

http://www.mchhyd.org/

http://www.nddb.org/



ANNEX 1: IMAGES

Figure 1. LandSat 7 (2000) indicating MCH, HUDA and Municipal Boundaries.

URBAN AND PERI URBAN AGRICULTURE: TOWARDS BETTER UNDERSTANDING OF LOW INCOME PRODUCERS‘ ORGANIZATIONS: HYDERABAD – CITY CASE STUDY IWMI-ALCI



IMAGES OF FODDER (PARAGRASS) CULTIVATION, HARVESTING,

TRANSPORTING, MARKETING AND USE IN DAIRY UNITS IN HYDERABAD

Fodder (paragrass) cultivation at Uppal, Hyderabad

Paragrass harvesting at Uppal, Hyedrabad



Paragrass transport from field to market.

Golnaka Green Fodder Market, Hyderabad



Urban green fodder transporter



ANNEX 2: AREA, POPULATION AND GROWTH OF HYDERABAD URBAN

AGGLOMERATION (1991-2001)

Source: Census of India, Andhra Pradesh & HUDA (2003)

Components of HUA Area (km

2)

2001

Population Growth Rate

(1991-01)

Density-

(Persons km2)

2001 1991 2001

A. Municipal Corporation of

Hyderabad (MCH) 172.68 3,043,896 3,612,427 18.7 20,920

B. Surrounding Municipalities

1. Alwal 26.32 66,471 93,206 40.2 3,541

2.Kapra 43.81 87747 159002 81.2 3,629

3.Kukatpally 43.12 186963 292289 56.3 6,779

4.L.B.Nagar 64.61 155514 268689 72.8 4,159

5.Malkajgiri 16.75 127178 193863 52.4 11,574

6.Qutubullapur 52.02 106591 231108 116.8 4,443

7.Rajendranagar 50.87 84520 143240 69.5 2,816

8.Serlingampally 96.99 72320 153364 112.1 1,581

9.Uppal 21.97 75644 117217 55.0 5,335

10.Gaddiannaram 2.12 35187 52835 50.2 24,922

B. Total 418.58 998135 1704813 70.8 4,073

C. Secunderabad Cantonment 40.17 171148 206102 20.4 5,131

D. Osmania University 2.85 10153 11224 10.5 3,938

E. Other Census Towns

1. Patancheru 15.06 26862 40273 49.9 2,674

2. R.C. Puram 19.28 46129 52363 13.5 2,716

3. R.C. Puram (BHEL) 11.21 17707 14815 -16.3 1,322

4. Meerpet 4.04 5089 12935 154.2 3,202

E. Total 49.59 95787 120386 25.7 2,428

F. Outgrowths (OG) 94.38 44191 62028 40.4 657

Grand Total 778.17 4,363,310 5,716,980 31.0 7347



ANNEX 3. THE SUPPLY AND MARKETING OF GRAINS, FRUIT AND FISH IN HYDERABAD

URBAN AGGLOMERATION: DEMAND AND SUPPLY SCENARIO

Food Grains

Rice is the staple food of Andhra Pradesh with 3,086,202 ha of land under paddy and a state wise

production of 9,601,045 t yr-1

in 2004-2005 (Directorate of Economics and Statistics AP, 2006) As far

as Hyderabad is concerned, the city depends on outside supply for more than 80-85 % of its

requirement. There is no area under paddy cultivation in the HUA. In 2004-2005 season Rangareddy

district had 29,991 ha of irrigated land under paddy cultivation (11.3% of the agricultural land area)

and produced 78,616 t of rice (Directorate of Economics and Statistics AP, 2005).

The value chain of paddy produced in the UPA is as follows:

In the peri-urban areas of Hyderabad (Rangareddy and Nalgonda districts), paddy is grown by the

producer households both for the market and for home consumption. Except for those areas along the

Musi River belt in Nalgonda District where waste water or a combination of and ground water and

wastewater is used, conjunctive rainwater/ground water is the major source of irrigation for paddy.

Fisheries

The city‘s demand for fish is met from outside the district. The supply of fish and other sea-food such

as prawns comes mainly from Machlipatnam and other districts in AP. The major wholesale market

supplying to the various city markets is located in Musheerabad. Retailers from all over the city

purchase from the Musheerabad market. More than 5,000 tonnes of fish arrive in the market daily.

There are around 100 wholesale buyers in the Musheerabad market. They purchase and in turn sell to

local retailers and also consignments are sent (mostly through rail) to different cities as far as Chennai.

Bhongiri, in Rangareddy district also supplies 5-8% of Hyderabad‘s fish demand. The local production

(in the peri-urban areas) from small ponds and local rivers is consumed at a village level. Only less

than 10 percent is taken to the nearest big town.

Fruits As far as fruits are concerned, >90 % of the city‘s requirement are met from outside. Though the

Medchal and Shamirpet belt has been a grape garden pocket for many years, the area under grape

gardens has decreased by around 50 percent. In the Medchal belt, the area is being increasingly

converted to real estate as a result of the proximity of the outer ring-road. Current land prices in

Medchal and Shamirpet are 3,533,200 Rs (77,652 US$ per acre) and 1,331,000 Rs (29,252 US$ per

acre). There has also been a shift from grape to vegetable cultivation. In Shamirpet region, more than

80 % of producer‘s previously cultivating grapes have shifted to vegetable cultivation.

Mozamjahi and Kothapet are the major fruit wholesale markets, from where the fruits are purchased

by second level wholesale agents and retailers who sell in the different markets all over the city.

Price determined by Govt.

Producer Rice Mills Wholesale traders Retailers

Milling, grading and packing Branding



The supply routes for some of the major fruits are shown in the following table;

Fruit Major Supply Centers to Hyderabad city

Banana Nanded (70%), East Godavari, Yellur, Anantapur (Pulinandala)

Mango East & West Godavari, Chittoor

Grape Shamirpet, Medchal (UPA of Hyderabad), Nasik, Chikballarpur

(Bangalore)

Apples Himachal Pradesh, Kashmir

Oranges Nasik and Nagpur

Pomegranates Kolhapur

Other Citrus Fruits Nalgonda, Nellore, Anantapur

Resource Base

Declining Water Table

Increased real estate rates

High cost of labour (due to rural urban

migration)

Product Characteristics: Vegetables vs.

Grapes

Faster turnover period in vegetables (2-3

months as compared to one year)

Regular cash flows

Long-term crop implies greater loss to farmer

in case of adverse climate (high risk)

Same physical structure of grapes can be used

for creeper vegetables

Market Structures:

Grapes

Limited storage facilities

Limited local market (Distance to market necessitates middlemen as self

marketing is not feasible)

Vegetables

High Demand

Greater marketing opportunities with assured market (HUA).

Producers able to bypass many levels of intermediaries & get more returns

Large number of traders facilitating transport

Cost Competitiveness of other production centres

Cost effective grape production in Nasik,

(Maharashtra), Chikballarpur (Bangalore) with better

transportation facilities

Currently, vegetable cultivation in Medchal and

Shamirpet is able to compete favorably with other

production centres

Grape vs Vegetable

Cultivation



ANNEX 4.

ANDHRA BARRELA CATTLE MARKET, CHINTALAKUNTA (VANASTHALIPURAM)

Andhra Barrela Cattle Market (ABM), Chintalakunta is the place where the trade of animals especially

milch animals takes place. The following information is prepared based on the observations and

discussions in the ABM.

# Focus Point Particulars

1 No. of sheds in ABM 50

2 Average no. of animals in

ABM 450-500

3 Main Activity Milch cattle trading

4 Source of the Activity Tanuku, Hundi (West Godavari Dist.), Mandapeta (East Godavari), Haryana are major

source (Krishna and Guntur Dist. Minor Source).

5 Market Season Turnover: Peak Jun – Dec @ 500 - 700 animals/ Month and Lean Dec–Jun @ 300-400

animals per Month.

6 Category of Milch cattle 90% Murra & Graded Murra Buffaloes and 10% Cows (Jersey, HF & Ongole Bred).

7 Selection process of

Source Expertise Personal visits

8 Average duration It will take one week/ 10 days time between purchase and sale of animal.

9 Feeding Para grass 4 lorries per day @ Rs 8 per 8-10 kg, Dhana 5 kg @ Rs 5-7 per kg per animal

per day & paddy straw (source Medak & Miryalaguda) 4-5 kg per day costing Rs 10 per

day per animal.

10 Vaccinations Foot & Mouth disease and de-warming to calves

11 Type of animals sold

300 calved & 200 pregnant animals (4-5 days duration) are sold per month during peak

season. During lean season only calved animals are sold.

50% of animals are sold to nearby villages. Out of this 50% are purchasing with their own

efforts and finance and 50% are for schemes and loaning purpose. The rest 50% are sold to

city market.

12 Milk sales Sold to 4-5 local vendors @ 15-20 per litre for Buffalo Milk (BM) and Rs 10-15 per Litre

for Cow milk. Some portion of milk is sold nearby as retail sales. High flexibility in milk

supply (It varies everyday).

13 Employment 2 – 5 workers per shed depending upon market season. Minimum 2 workers are always

required to carry animals from source, unloading, loading and regular maintenance. They

hire local persons if required. Pay @ Rs 3,000 PM (high due to intensity of work).

14 Regular activity Vigorous activity, at least 3 times washing, regular spot cleaning of animal place (removal

of solid waste & liquid waste), continuous feeding through out the day.

15 Institutional Support

Upto 1990, AH department has given services. After that the Dept. stopped services to

them. Now they are hiring qualified/ retired Vet. Doctors for vaccinations, surgeries,

deliveries of animals on case to case to basis and pay Rs 500- 600 per visit and nature of

service. No Insurance coverage. No support from Legal, Municipal, revenue, banks,

institution etc. (Also not required). They borrow amount if required from private financiers

@ 24% to 36%.

16 Market trends They are doing it from 1970. Now after 30 years they analysed the situation and realised

that among those who are in this business more than 30 years, 80% are losers, 10% are

gainers and remaining 10% are remained as same.

17 Market Place

Private land on hire basis @ Rs 500 per month for big shed and Rs 300 for small shed.

Altogether Rs 22,000 per month. They are able to meet this and other land maintenance by

selling solid waste (dung), price ranges from Rs 600-700-800 per lorry load. This solid

waste is mainly purchased for grape gardens. They use two bore wells (10 HP) for water

requirement for all sheds.

18 Risk Factors

Loss/ Less price in case, due to calf death in transit. (Rs 2,000 per animal)

Damages to animals during transit.

No insurance coverage (insurance companies will not cover during transit of the animal).

They may earn Rs 400 to 500 per animal if they sell it. But if one animal dies it will wash

away profit earnings of 40 animals.

Now the market is decreasing day by day as both ends not showing much interest of this

activity. They have to encash the animal within a week other wise it is a loss for them for

two reasons. One is increase in maintenance cost; decrease the price of animal

proportionately on no.of days after calving.



19 Impact One good thing is that because of this activity they are able to educate their children upto

professional course level and able to send their children upto US.

20 Market tendency

Previously the milch cattle rearing activity was done by Yadava and Gowda community in

Hyderabad city. Now these communities are not showing much interest as now they are

shifted to lucrative real estate business. The other important factor is that previously the

cattle rearing in twin cities was mainly focussed on milk production aspect, now it is

shifted to meat production aspect. In their experience, the activity in previous days was like

this. The Yadava and Gowda community, who rear milch cattle approached them with

dried animal, sell it and buy a new milking animal on mutually agreeable terms and

conditions. The traders in ABM were sent all these dried animals to coastal Andhra to rear

there and after calving, again brought to this place and sell to the local farmers. Now this

tendency has been decreased rapidly and instead of bringing the dried animal to this place

they are selling it their place itself on out right price to the butchers for meat purpose.

Previously upto 4 years back every day at least 4-5 lorries transported animals both ways

between Hyderabad to Andhra area. The other reason for this is due to decrease of interest

on milch cattle rearing by farmer‘s community in Andhra Area. The main reason for this

problem is related to non-availability of labour in coastal Andhra.

21 Collective efforts

No association formed. How ever informal way they are managing some of the activities in

a collective way. One time they approached in a collective way to the then CM of AP Mr

NT Rama Rao due to the harassment they faced by the Market and transport check posts.

The authorities were used to threaten them for bribes. They used to stop the animal transit

vehicles for long hours. Those animals which were under transit are in pregnancy and

unable to stand long hours. Due to this they faced huge losses due to high rate of animal

and calf death during transportation. Then they approached to the CM and explained about

their problem. The then CM was immediately responded and issued an order to exempt

vehicles carrying animals from market and transport check posts. Now they are not facing

this problem.

22 SWOT

High cost of Animal (Increased cost burdening them increased risk)

Market problem

Decrease in source (Difficult to find good animal)

Loss threat always creating tension, pressure

Decrease in market from 500 animals per month to 100 animals per month

Domination of Powder milk in vendor based milk market in city.

23 Other Information

Super Dairy with 700 animals, situated behind Subhash theatre, Charminar chowrastha,

RTC ‗X‘ Roads.

Maskati Dairy with 700–1,000 animals, situated at Turka Yamzil in Sagar Road. Also at

Charminar in old city.

Other dairies having 50 – 100 animals are at Nurkhan Bazar (Jagan) and also Babu,

Lakdikapool near petrol pump (Ice factory).



ANNEX 5. PROFILES OF SELECTED URBAN AND PERI-URBAN DAIRY UNITS IN

HYDERABAD

SUPER DAIRY – SUCCESSFUL DAIRY FARM IN HYDERABAD CITY

Super Dairy, is one of the large dairy farms maintained well within the city limits. The following

points have emerged in the discussions with the various stakeholders -

# Focus Point Particulars

1 Main Activity Rearing of Milch cattle, Bulls, Sheep, Goat, Emoo birds, Turkey birds, Duck,

Dove, Swan, Monkey etc. Milk sales in retail. Other than milch cattle rearing

for development purpose.

2 No. of milch cattle 250

3 Category of Milch

cattle

Buffaloes: 100% Murra only.

Cows: Cross Bred Jersey 14, Ongole 30, Ongole bulls 30.

4 Average Daily milk

production

Direct milk sales 700 Lit., Curd 50 lit. Ghee 10 kg, lactation Milk (Junnu) 30

lit. per day.

5 Milk extraction system Manual

6 Employment 60 workers with one Manager named Mr Syed Mohmood Khundin. He is

working in this as manager since 19 years.

7 History They established this as private limited firm by Golconda Cigarette Co. about

27 years back.

8 Milk Marketing Retail sales by counter within the premises. Price Buffalo Milk Rs 26 per Litre.

For Hotels they charge Rs Rs 23 per Litre. For special order for more than 100

litres they charges Rs 28 per litre.

9 By products Marketing Dung Rs 1,000 per truck, if there is no demand they apply this to their

farmhouse (Mango gardens) at Vikarabad.

10 Fodder & Feeding Para Grass worth Rs 3,000 per day, fodder mix of Jowar & Maize.

Concentrated feed (Own preparation).

11 Milch cattle Source Rohtak, each Murra Buffalo costing Rs 50,000 – Rs 52,000.

12 Vaccinations Foot & Mouth disease and de-warming to calves by AH Department

13 Water Bore water supplied to tanks for drinking, washing, cleaning etc. if shortage is

there then they purchase through tankers.

14 Other establishments Generator, Bulk Milk Coolers 2 no.s with a capacity of 500 lit. & 1,000 lit.

15 Consumers preferences

on milk products

Cow milk generally taken for consumption to children and aged and also for

devotional purposes.

16 Regular activity

Vigorous activity, at least 3 times washing, regular spot cleaning of animal

place (removal of solid waste & liquid waste), continuous feeding through out

the day.

Conduct Regular bull parade. One person is taking care this.

Regular data maintain in computer.

Different works taken care by different workers.

17 Institutional Support

No Insurance coverage.

No support from Legal, Municipal, revenue, banks, institution etc. (Also not

required).

Their experience with animal insurance is not good.

18 Problems &

Suggestions

Not disclosed any problem. He told that workers are key for this activity. They

train workers well. They understand workers problems and cooperate as and

when it is required.



SNEHA DAIRY (Initiated in 2001)

Location: Uppal, located around 3 km from the main road

Area: 5-6 acres.

Proprietor: Nalla Malla Reddy

Herd Size: 250 buffaloes (150 adult females and 110 calves) and 4 bulls. All Murrah buffaloes

purchased from Haryana.

Total Milk Yield: 400 litres daily (yield of 5-6 litres per buffalo in milk)

Milk Marketing: Around 230 litres as raw milk supplied to hotels and local dairy shops

Remaining amount, around 170 litres is pasteurised and packaged and sold under the brand name

of SNEHA10

. Fresh cream is also sold in the market.

Transportation: Through own auto trolleys and vans

Procurement of green fodder: Land taken on lease at Uppal. Also growing 9 other fodders on an

experimental basis including berseem

Other inputs: Dry fooder, groundnut cake purchased from open market

Housing facility: 3 storeyed, with one storey for 120 animals. Separate sections for pregnant

buffaloes, bulls, and children. Also there is a swimming pond for the buffaloes to be used during

summer season. Electric fans are installed in the buffalo sheds.

Number of workers- 27 (4 supervisors, 8 for milking and 15 for feeding). The workers for milking

are migrants from Bihar, while the remaining are local workers.

No employee benefits to either of the workers such as Provident Fund or Medical Facilities.

Small capacity pasteurizer cum chiller and storage tank and a milking machine also.

Water facility: Ground water (3 borewells)

All animals insured. Source of investment for cattle not disclosed (i.e. either from bank or own

investment)

Value addition is being done on animal dung by preparation of vermin-compost from it (for details

see paragraph below)

This is a big dairy unit located on the outskirts of Hyderabad. Spread across an area of approximately

5-6 acres, the dairy is an example of the best animal care practices in the Hyderabad UPA. Unlike

other smaller dairies located in the city or outskirts or unlike the big dairy (SUPER DAIRY) located in

the middle of the city, the animal care practices and the space available within the premises for animal

recreation and movement is good and in sharp contrast with the earlier mentioned types of dairies. The

land belongs to an entrepreneur Mr. Nalla Malla Reddy. He has several businesses apart from the dairy

activity such as an engineering college and real estate business. The dairy farm is located on his own

land. There are separate feed preparation sections with all necessary equipments such as fodder chop

cutter, mixer, trolleys etc. The transportation and distribution of the packaged milk is through their

own infrastructure. Veterinary doctor pays monthly visit (private doctor) for regular animal check up.

The daily feed mix consists of green fodder, dry fodder (2:1 ratio) i.e., around 7-8 kg per day and also

groundnut cake soaked in water (around half kg). For fodder, as already mentioned above, the owners

have leased around 30 acres of land in the Uppal area.

Another unique activity taken up by the proprietor is the utilization of dung in the vermi compost unit

set up at a location of less than 1 km from the dairy unit. Vermi compost is prepared in 7-8 sheds in

the unit and the demand for the organic manure is high. Customers from as far as Vijaywada have

come and purchased in bulk. The owners‘ interest and the availability and willingness for investment

into the entire set up is noticeable. The future plan is to expand to the full capacity of 320-340

buffaloes. Marketing is not perceived to be a problem by them. The current green fodder being fed to

the animals i.e., paragrass is not considered to be a nutritious fodder for the cattle and this is the reason

behind the trial for other fodder varieties on a pilot basis.

10

The pasteurised milk is sold at a price of Rs 7.50 per half litre (MRP), including the commission for the

retailers. The dairy directly supplies to the retailers and has no distributors.



SMALL DAIRY AT MUSHEERABAD (Initiated in 1990)

Location: Behind the fodder market (> 1 km from the fodder market)

Area: 0.2 acres.

Herd Size: 7 buffaloes (6 adult females and 1 calf). All Murrah buffaloes purchased from buffalo

market

Total Milk Yield: 20-25 litres daily (yield of 5-6 litres per buffalo in milk)

Milk Marketing: All the milk is sold in the nearby apartments

No milk products are prepared

Procurement of green fodder: Procured from the brokers in the local fodder market

Other inputs: Cattle feed mix purchased from the market

Housing facility: Shed with mud flooring and no separate feed alleys for the animals. There is a

cement water tank for the cattle

Number of workers- 1. Migrant worker from Bihar incharge for milking, cleaning and milk sales.

The workers has an adjacent room provided.

Water facility: Ground water- borewell.

No insurance of animals.

No loans taken from public institutions such as bank for purchase of animals

Animal dung sold to farms at the rate o Rs 800 to Rs 1000 per truck

There are no regular medical check ups of the cattle. The income from milk is able to recover the

salaries and other running expenses assuring a monthly income of around Rs 3000 to Rs 4000 to the

dairy unit owner. There are no plans of expansion, however. As the owner has other businesses, he is

not able to provide sufficient time for the dairy unit. Cleanliness and hygiene are not maintained even

to a minimum level.

SMALL DAIRY AT KISHANBAGH (I). (Initiated in 1996)

Location: Kishanbagh. Shed in the own premises of the dairy owner

Proprietor: Hashmat Bhai. (No of dependent households-2)

Area: 0.1 acre

Herd Size: 15 buffaloes (13 adult females and 2 calves). All Murrah buffaloes purchased from

Punjab


Milk Marketing: All the milk is sold from the household only

No milk products are prepared

Procurement of green fodder: 2 acres of land is leased in the Attapur area. (Annual lease cost Rs

25000 per acre)

Own bullock cart for transportation of green fodder

Other inputs: Cattle feed mix and groundnut cake purchased from the market on cash and part

credit basis

Housing facility: Shed with paved flooring

Number of workers- 2 self (owner and his brother). One additional worker for cleaning and animal

care. One workers for cutting and transportation of green fodder


No other business of the household

Animal dung not sold, thrown away

No insurance cover taken for animals. Milk income is the only source of income for the 2 dependent

households comprising of 8 members.



SMALL DAIRY AT KISHANBAGH (II). (20 years old)

Location: Kishanbagh. Rented premises

Proprietor: Babulal. (No of dependent households-1)

Area: 500 sq m

Herd Size: 13 buffaloes (10 adult females and 3 calves), and one bull. All Gujjar buffaloes

purchased from Chintalkunta in Sanga Reddy

Total Milk Yield: 40-50 litres daily (yield of 4-5 litres per buffalo in milk)

Milk Marketing: Milk is taken on scooter and motorcycle by the owner‘s son to hotels and to

customers (some of whom are located as far as Charminar from the area). Some milk is also sold

from the doorstep

Curd is also prepared (around 3kgs) and sold to the nearby local dairy

Procurement of green fodder: 2 acres of land is leased in the Attapur area. (Annual lease cost Rs

2000 per acre per month)

Own bullock cart for transportation of green fodder

Other inputs: Cattle feed mix and groundnut cake purchased from the market on cash and part

credit basis

Housing facility: Fully Shed with paved flooring

Number of workers- 2 self (owner and his son). One additional worker for cleaning and animal



No other business of the household.

Animal dung sold to farms at the rate of Rs 1000 per truck

No insurance cover taken for animals. No loans from bank availed for the purpose. Milk income is the

only source of income for the household. After the buffalo becomes dry, it is sold in the animal market

and animals in milk purchased. Earlier, the herd size was around 20, lack of labour availability and

space are cited as the main reasons for now restricting the herd size. However, the next generation also

wants to continue the occupation as it is providing good returns and also lack of other employment

opportunities.

SMALL DAIRY AT ALWAL

Location: Alwal (road side). Rented premises

Area: 400 sq m

Herd Size: 13 buffaloes (10 adult females and 3 calves), and one bull. All Gujjar buffaloes

purchased from Chintalkunta in Sanga Reddy


Milk Marketing: Location is on the highway and milk is sold to the nearby small restaurants and

hotels.

Procurement of green fodder: Some amount is grown on the land near the small pond adjoining

the dairy unit. However, around 70 percent of the fodder is dry fodder purchased from the market.

Food Waste from the nearby hotels is also fed to the animals

Cattle feed mix is purchased from the market. No other cakes such as groundnut cake are fed to

the animals.

Housing facility: Fully Shed with paved flooring

Number of workers- 2 self (owner and his brother). One additional worker for cleaning and animal


Water facility: Surrounding pond

No other business of the household.

Animal dung not sold



ANNEX 6: SYNDICATE FARMERS‘ SERVICE COOPERATIVE SOCIETY LIMITED

The Syndicate Farmers‘ Service Cooperative Society Limited, located at Alwal was established in the

year 1978. As the name suggests, the Cooperative Society was promoted by the Syndicate Bank. Mr.

GS Murthy, a Syndicate Bank official took the initiative to merge 21 Primary Agricultural

Cooperative Societies (PACS)11

in order to form the current Syndicate Farmers‘ Cooperative Society.

The new cooperative society provided a medium through which the Syndicate Bank could channel

finance to the farmers. The objective of merging the PACS societies and bringing them under one

cooperative fold was to centralize operations and governance of such lending institutions. Secondly,

the Bank felt that within usual banking operations, it was not able to provide required attention to rural

lending particularly agricultural lending. Hence a separate set up could serve the purpose more

effectively. The bank charges 2.5 percent commission on all lending activity. Thus the Syndicate Bank

is the financing institution for the society.

Activities

As mentioned above, the primary activity of the society is to provide agricultural loans to the farmers

in the area. The society also provides loans for other productive purposes such as livestock and milch

animal purchase. Savings accounts and fixed deposit facilities are also provided to the members. Gold

loan facility is also available to both the members and the non-members. In the past, the Alwal belt

had a large area under grape gardens. However, during the past 7-8 years, the area under grape gardens

has decreased by more than 80 percent. Due to recovery problems in case of milch animal loans, the

society has now stopped providing loans for milch animals. Gold loans have now become the major

service being provided by the society. Thus, the cooperative society functions like a mini-bank. The

book keeping and accounting practices are similar to any other bank. The accounting system is

partially computerized. As per the Bank officials, the cost of full automation would be not feasible for

the Society.

The cooperative society owns around 9.2 acres of land at Hakimpet. A godown has been constructed at

the land for the storage and sale of agricultural inputs such as seeds, fertilizers and pesticides. The

cooperative society has direct tie-ups with the input supply companies. According the cooperative

employees, input purchase is one of the actively demanded and utilized services of the cooperative

society. Supply of reliable and assured quality of inputs by the cooperative is the major reason. The

members are provided the inputs on credit (adjusted against the loans given to the farmers). A large

number of non-members also purchase the inputs on cash basis.

11

The PACS were village level cooperative societies formed for providing agricultural loans to the farmers. The

PACS were in turn financed by the lead banks in the districts. However, the operational guidelines and rules of

each PACS being different made any combined activity difficult. Moreover, majority of the PACS societies

started making loss after some years. These 21 villages are Alwal, Kowkur, Mahadevpur, Macchabollaram,

Turkapally Bollaram, Jawahar Nagar, Chennapur, Yapral, Khapra, Thumkunta, Yamjal, Pothaipalli, Mandaipalli,

Singaipalli, Anthaipalli, Ammuguda, Farjanguda, Bowenpally, Firozguda, Hasmatpeta and Neredmet.

The OBJECTIVES as stated by the Cooperative in its Annual Reports is as follows:

To provide loans to farmers for agricultural purposes

To supply agricultural inputs at reasonable prices

To mobilize deposits from members by promoting thrift

To generate awareness regarding new farming techniques and usage of inputs

The ACTIVITIES as stated by the Cooperative in its Annual Reports is as follows:

Providing short term, medium term and long term loan for small and marginal farmers

Providing seeds, fertilizers and pesticides at a reasonable cost

Collection of member deposits through different deposit schemes

Organizing of extension programmes with the help of agricultural scientists to make the

farmers aware of new technological interventions

Provision of gold loans and locker facilities



Turnover

As per the annual report 2004-05, the major categories of farmers availing of crop loan facility are

grape farmers. This is followed by loans for petty trades. Some key indicators of the performance and

status of the cooperative society are as follows12

:

Short term crop loans: Rs 5.1 million

Medium and Long Term loans: Rs 15.77 million

Interest Income on Loans: Rs 0.98 million

Sale of Inputs: Rs 4.46 million (with a profit of Rs 0.18 million)

Total Profit: Rs 1.12 million

Administrative Expenses: Rs 0.14 million

Governance

The cooperative society has an 11 member governing body. The byelaws provide for reservation for

Scheduled Caste, Scheduled Tribe and women. The Board has a five-year term. At present, there are 2

SC, 1 ST and 2 women members in the governing board. There is a monthly meeting of the Board, in

which the monthly status report of the Bank operations is presented. Other strategic decisions such as

focus areas of lending, investment in other businesses such as input procurement and sale are also

taken by the Board. The operating body is accountable to the Board members.

Operations

The Society staff is at present comprised of 9 members. Except for the Managing Director, all the

remaining staff are the employees of the society. The MD is a deputed officer from the Syndicate

Bank. All the other employees are quite senior in the Society, each having completed more than 15

years of service in the cooperative society. The MD draws his salary from the cooperative society

when the society is running in profit. In case of loss making by the Society, he/she draws his salary

from his/her parent organization. The MD is accountable to both the governing body of the

Cooperative society and also Syndicate Bank.

Membership

The cooperative society has 5490 members13

spread across 21 villages. A total of 24 members joined

in the year 2004-05. The membership increased by around 300 since the year 1999-2000. As per the

annual report, there are 425 members who have defaulted on society loans.

Assets

The Cooperative Society office is located in its own building at Alwal and it is more than 20 years old.

The land was given as grant by one of the members and the construction cost was also financed by

means of grant. As already mentioned the Society also owns around 9.2 acres of land in Hakimpet

area. Besides its own godown, it also owns another building on the same plot of land, which it has

leased to ITC Ltd, a corporate company to set up its vegetable processing plant in the premises.

12

Based on figures mentioned in the Annual Report: 2004-05 13

Till 31-03-2005



ANNEX 7: KUSHAIGUDA VEGETABLE MARKET

An example of an informal, yet highly efficient form of organization related to UPA value chain is the

association of wholesalers and retailers operating in the Kushaiguda vegetable market in the Kapra

municipality. The Kushaiguda vegetable market is around 13 years old. The vegetable market is

located 200m from Kushiaguda bus stand. The plot of land on which the market is located belongs to

Andhra Pradesh Infrastructure Development Corporation (APIDC).

Market Set Up

Origin, Catchment area, Members’ Profile, Management

In1993, as a result of rapid urbanization in Kapra District, 8-10 vegetable vendors started selling

vegetables in the current area. Gradually, the number of vegetable vendors increased both with the

increase in residing population in the area and also as the market structures to facilitate the

transactions started evolving. As of now, there are around 10 wholesale traders and 200 retail traders

operating in the market. The daily transaction in the market is around 700 to 1,000 t d-1

. The supply

chain in the Kushaiguda market is as shown below;

The farmers in villages within 20 km radius of the market14

, belonging to Kapra and Keesara

municipalities bring their produce to the market daily in auto rickshaws, trolley autos and small trucks.

There are 10 wholesale traders in the market, who purchase from these farmers. Payment is made in

cash to the producers. The wholesalers in turn sell to the 200 retailers. The major mode of transaction

is credit. In 2000, as the number of retailers increased, the current 200 retailers and the wholesalers

decided to form an informal association, the major objective of which was to prevent other vendors

from entering the market and secondly to regularize and streamline the operations in the current

market such as allotment of space for each vendor and maintenance of the market space. Each of the

vendors has been allotted a space in the market. There is no entry provision for a new wholesale trader

or vendor. However, a current member of the market can sell or rent his ‗shop‘ and thereby the right to

purchase or sell in the market to another vendor. The members of the association have elected by

mutual consensus, a secretary to take care of the maintenance of the market place. Each vendor gives

Rs 5 per day as the maintenance fee. However, no fee or rent is given to APDIC (on whose land the

market has been operating for the past 13 years).

There are around 10-15 residential colonies in the Kushaiguda area. There is a weekly market held by

a group of vegetable traders in each of the colonies. These retail traders purchase from the wholesale

agents in Kushaiguda market and then sell in the daily markets in these colonies. The margin of the

retail traders in the Kushaiguda market is 10-15%. Those who sell in the daily markets in the

residential colonies have a margin of 15-20%.

14

Main villages are Yaadgiripally, Turkapally, Rampally, Mespally, Ballaguda,Timaypally and Cheerala

Farm produce

from villages

within 20 km

radius

Transport through auto rickshaws,

trolley autos, mini-trucks

10

wholesalers

200 retailers in

Kushiguda market

Retailers in

10-20

adjacent

Colonies

To other

markets



The members of the market association have agreed to shift alternative designated market place

developed by the State Government. For the new market place, the members of the current informal

association would pay the rent to the government. None of the retailers are primary producers. The

200 members who now sell in the market are local people, who have migrated from the surrounding

villages around 5-10 years back.

Apart from sale in the retail markets in and around Kushaiguda, the wholesalers also sell the produce

to other vegetable markets in the city. The general practice is to dispatch the vegetable supply coming

to the Kushaiguda market and in turn, the vegetables that are not supplied from the catchment area of

the market are purchased from the other markets and brought to the market. This function is also

performed by the wholesale traders. Besides vegetables, there are fruit vendors (who are not part of the

association) who sell produce on the roadside. Some of the retailers in the market also sell fish and

other grocery items. However, the wholesalers in the market deal only in vegetables. The fruit, fish,

flower and meat vendors buy from the wholesale markets located in different parts of the city.

Summary

Kushaiguda market is an example of an informal association operating without any written guidelines

on the basis of mutually agreed norms. It is an example of an association formed to further and protect

mutual benefits by more than one group of market players (in this case the wholesalers and the

retailers). The mutually identified needs which form the basis for such an organization are absence of

legitimate or secure right to land for market, to legitimize the same within the group and to prevent

increase in competition. This form of association also serves the purpose of a common forum to

negotiate with the government for compensation in the form of a new market place, with required

infrastructure developed by the government. The primary need is to get recognition as an entity. The

other services provided are namely, maintenance of the market place and resolution of disputes that

may arise among the members.

ANNEX 8: CORPORATE SECTOR IN FRUIT &VEGETABLE BUSINESS: CASE OF ITC'S

CHOUPAL FRESH

A recent trend in India has been the entry of big Corporatations into the agricultural sector,

particularly agricultural marketing. Apart from contract farming, other business models have also been

developed by some leading corporatations including ITC. ITC is a large Indian Corporate Company

having a turnover of around Rs 5,000 Crores (1,098,901,098 US$). Its much talked and written about

e-choupal venture for sourcing agricultural commodities such as food grain (wheat), spices, soyabean,

chillies and now fruits and vegetables through its own supply chain network is aimed at removing

middlemen from the value chain and in turn providing higher remunerative prices to farmers. By

achieving this type of integration within the value chain, it is able to reduce the cost of raw materials

for its various food processing facilities and also provide the processed or unprocessed commodities at

competitive rates to the customers.

Recently, the company has started its B2B network for vegetables known as Choupal Fresh. The

venture is primarily meant to procure from other regions (the traditional supply belts of fruits and

vegetables) and fulfill the growing demand of the Hyderabad City. A cold storage unit is also being set

up in Deveryamjal in Alwal. Moreover, Hyderabad being a major trading centre, the infrastructure in

terms of roads, power, communication, technology for storage facilities etc is also an enabling factor.

As of now, the major customers include hotels and also to some extent, wholesale vegetable traders

More B2C centers i.e., shops have been planned in different parts of the city in the coming months.



ANNEX 9: THE ANDHRA PRADESH MUTUALLY AIDED COOPERATIVE SOCIETY ACT

(1995)

Andhra Pradesh

Mutually Aided Cooperative Societies Act 1995

[Act No 30 of 1995]

An Act to provide for the voluntary formation of cooperative societies as accountable, competitive,

self reliant business enterprises, based on thrift, self-help and mutual aid and owned, managed and

controlled by members for their economic and social betterment and for the matters connected

therewith or incidental thereto

Be it enacted by the Legislative Assembly of the State of Andhra Pradesh in the forty-sixth year of the

Republic of India, as follows:

1. Short title, extent and commencement (1) This Act may be called the Andhra Pradesh Mutually Aided Cooperative Societies Act, 1995.

(2) It extends to the whole of the State of Andhra Pradesh.

(3) It shall come into force on such date as the Government may, by notification, in the Andhra

Pradesh Gazette, appoint.

[Comment: This Act came into force, on 1st

June 1995, even as the Andhra Pradesh Cooperative

Societies Act, 1964 was and continues to be in force. Obviously, a distinction was being sought to be

made between the cooperatives that were under the purview of the 1964 Act, and those that were to

come under the purview of this Act.

This Preamble helps distinguish between the two types of cooperatives. Not all, but many of the

cooperatives which were registered under the 1964 Act came into existence, not of their own volition,

but as a result of government policy and intervention. They, therefore, had government aid and not

mutual aid as their foundation. They were instruments of government policy, not instruments of their

members, for their own good. They were channels for distribution of scarce resources, and, therefore,

were at times monopolies - not competitive, nor business minded. The Government, and other

financial players were part owners, and, therefore, ownership, management, and controls did not rest

fully with members.

Under the 1964 Act, too, there were cooperatives which were true agents of their members, and that

is the reason why this Act also provides for such cooperatives to choose voluntarily to come under the

purview of this Act. Many court judgements have suggested that cooperatives are not creatures of the

will of their members, and this Preamble makes clear that associations registered as cooperatives

under this Act are indeed creatures of their members, working for their betterment.



2. Definitions In this Act unless the context otherwise requires:-

(a) ―board‖ means the board of directors of a cooperative society;

(b) ―byelaws‖ means the byelaws of a cooperative society as originally framed or as altered from time

to time in pursuance of this Act;

(c) ―cooperative principles‖ means the cooperative principles specified in section 3;

(d) ―cooperative society‖ means a mutually aided cooperative society registered under section 4 whose

byelaws prohibit it from raising share capital from the Government, a cooperative society registered

under section 7 of the Andhra Pradesh Cooperative Societies Act, 1964, if it amends its byelaws where

necessary to reconstitute its capital base and in respect of other relevant aspects to be in accordance

with this Act, and returns to the Government its share capital, if any, and either enters into a

memorandum of understanding with the Government for any outstanding loans due to, or guarantees

given by the Government or returns to the Government of such assistance and further gets itself

registered under section 4 as a cooperative society under this Act;

(e) ―cooperative society with limited liability‖ means a cooperative society in which the liability of its

members for the debts of the cooperative society in the event of its being wound up, is limited by its

byelaws to such amount as they may undertake to contribute to the assets of the cooperative;

(f) ―cooperative society with unlimited liability‖ means a cooperative society the members of which

are, in the event of its being wound up, jointly and severally liable for and in respect of all its

obligations and to contribute to any deficit in the assets of the cooperative society;

(g) ―cooperative tribunal‖ means the tribunal or tribunals constituted under section 32;

(h) ―deficit‖ means the net excess of expenditure over income,

(i) ―delegate‖ means a member nominated by a cooperative society to represent its interests in a

federation;

(j) ―director‖ means a director of the board of directors;

(k) ―federation‖ means a mutually aided cooperative society registered under section 4 whose

members are mutually aided cooperative societies;

(l) ―financial year‖ in relation to a cooperative society means the twelve month accounting period as

provided for in the byelaws;

(m) ―general body‖ in relation to a cooperative society means all the members of the cooperative

society and includes a representative general body of the cooperative society referred to in section 20;

(n) ―general meeting‖ means a meeting of the general body of a cooperative society;

(o) ―Government‖ means the State Government of Andhra Pradesh;

(p) ―member‖ means a member of a cooperative society;

(q) ―office-bearer‖ means an individual elected by the general body or the board of the cooperative

society to any office of such cooperative society in accordance with its byelaws;

(r) ―Registrar‖ means the Registrar of Mutually Aided Cooperative Societies appointed under section

4 of this Act, and includes any other person on whom all or any of the powers of the Registrar under

this Act are conferred;

(s) ―surplus‖ means the net excess of income over the expenditure;



3. Cooperative principles and byelaws Individuals or cooperatives intending to form into a cooperative society under this Act shall frame

byelaws conforming to the following principles of cooperation, namely,

(a) membership of a cooperative society shall be voluntary and available without restriction of any

social, political, racial or religious discrimination, to all persons who can make use of its services and

are willing to accept the responsibilities of membership;

(b) cooperative societies are democratic organisations; their affairs shall be administered by persons

elected or appointed in a manner agreed by the members and accountable to them. Members of

primary cooperative societies shall enjoy equal rights of voting (one member, one vote) and

participation in decisions affecting their cooperative societies. In other than primary cooperative

societies, the administration shall be conducted on a democratic basis in a suitable form;

(c) share capital shall only receive a strictly limited rate of interest, if any;

(d) the economic results, arising out of the operations of a cooperative society belong to the members

of that cooperative society and shall be distributed in such a manner as would avoid one member

gaining at the expense of others, which shall be achieved:

(i) by provision for development of the business of the cooperative society;

(ii) by provision of common services; or

(iii) by distribution among the members in proportion to their transactions with the cooperative

society;

(e) all cooperative societies shall make provision for the education of their members, officer-bearers

and employees and of the general public, in the principles and techniques of cooperation, both

economic and democratic;

(f) all cooperative societies, in order to best serve the interest of their members and their communities,

shall actively cooperate in every practical way with other cooperatives at local, national and

international levels having as their aim the achievement of unity of action by cooperators throughout

the world.

[Comment: The APMACS Act came into force before the General Assembly of the International

Cooperative Alliance met in September 1995 to revise the cooperative principles. As such the

internationally accepted cooperative principles as they existed at the time of enactment of this Act

have been incorporated in the Act. The Statement of Cooperative Identity passed by the ICA in

September 1995, includes all the concepts mentioned above, and has further expanded on them, and

added some new concepts.]

4. Registration (1) Where not less than ten individuals each being a member of a different family intend to form a

cooperative society, or two or more cooperative societies registered under this section wish to form

into a federation, or a society registered under section 7 of the Andhra Pradesh Cooperative Societies

Act, 1964 intends to convert itself into a cooperative society under this Act, they shall frame byelaws

for this purpose in accordance with section 3 in the first instance.

[Comment: The 1995 Act could have provided for any cooperative under the 1964 Act to be deemed

to be registered under the new Act, if it had no government share capital or loan or guarantee.

Automatically, all savings and credit cooperatives, and several other cooperatives would have come

under the purview of the new Act. However, since the Preamble makes it clear that registration under

the new Act has to be the result of the will of the members of a cooperative, and that registration

under the new Act comes with accountability and competitive spirit, the new Act leaves it to each

cooperative under the old Act to choose to remain under the old Act, or to shift to the new one.]



(2) Thereafter an application for registration shall be submitted to the Registrar by hand or by

registered post.

(3) Every such application shall be accompanied by

(a) the original and one copy of the byelaws of the proposed cooperative society as adopted by the

individuals or delegates of cooperative societies who wish to form into a cooperative society under

this Act or by the general body of a society registered under the Andhra Pradesh Cooperative Societies

Act, 1964 which wishes to convert itself into a cooperative society under this Act;

(b) a list of names of individuals or cooperatives who wish to form into a cooperative society under

this Act or of the members of the committee of the society registered under the Andhra Pradesh

Cooperative Societies Act, 1964 which intends to convert itself into a cooperative society under this

Act with their addresses, occupations and their financial commitments to the proposed cooperative

society;

(c) a true copy of the minutes of the meeting at which the byelaws were adopted, duly signed by

atleast a majority of individuals or delegates present at the meeting where the byelaws were adopted,

or by a majority of the members of the committee of the cooperative concerned where a society

registered under the Andhra Pradesh Cooperative Societies Act, 1964, intends to convert itself into a

cooperative society under this Act;

(d) registration fee amounting to one percent of the total authorised share capital by whatever name

called subject to a minimum of one hundred rupees and a maximum of ten thousand rupees; and

(e) in the case of a society registered under section 7 of the Andhra Pradesh Cooperative Societies Act,

1964 and wishing to convert itself into a cooperative society under this Act, evidence to show that the

society is not in possession of any share capital from Government, and evidence also to show that the

society is not in receipt of any government loans or guarantees at the time of applying for registration

as a cooperative society under this Act, or that it has entered into a memorandum of understanding

with the Government for any such outstanding loans or guarantees.

[Comment: The procedure for a new registration and for conversion from the old Act to the new one

is provided for in section 4. Some doubts have arisen on whether the new Act can lay the procedure

for conversion from the old Act, or whether it is necessary for the old Act to have some provisions in

this regard. It must be noted that both the Acts were passed by the Andhra Pradesh Legislature. The

1995 Act was the later Act.

The Legislature was fully conscious of the continuance of the old Act, even as it was ushering in the

new Act. It chose to determine the procedure for conversion only in the new Act, and as such, newly

forming cooperatives as well as cooperatives which are under the 1964 Act need to follow the

provisions of section 4 of the new Act to come under the purview of the 1995 Act.

In particular it must be noted that the use of the term “conversion” in the 1964 Act is quite different

to its use in the 1995 Act. In the 1964 Act it is used in the context of a change in the objectives of a

cooperative, and, therefore, a possible change in membership interests in the cooperative. In the 1995

Act, the term is used merely for change in registration from the old Act to the new one, objectives,

membership, etc, all remaining the same, and the general body choosing greater freedom

accompanied by greater responsibility for their cooperative through “converting” to the 1995 Act. As

such, the provisions relating to conversion under the 1964 Act are not relevant for conversion to the

new Act.]

(4) The Registrar shall, if he is satisfied that

(a) the application is in conformity with the requirements of this Act;

(b) the proposed byelaws are not contrary to the provisions of this Act; and

(c) the name of the proposed cooperative society is not the same as that of a cooperative society

already registered under this section, or the same as that used by a class of societies already registered

under section 7 of the Andhra Pradesh Cooperative Societies Act, 1964,

register the cooperative society and also its byelaws and communicate by registered post a certificate

of registration and the original of the registered byelaws signed and sealed by him, within a period of

sixty days from the date of submission of application, to the chief promoter mentioned in the

application.



[Comment: Under most state cooperative laws, since cooperatives are seen as instruments of

government policy, and as channels for distribution of scarce government resources, the registering

authority has the power to refuse to register a cooperative on the grounds that it might not be

financially viable, or that its existence was likely to affect the viability of another cooperative already

in existence. Under the 1995 Act, since cooperatives are seen as agents of their members, the

registering authority has not been given any discretion in refusing registration. Time limits have been

fixed for registration or refusal to register to be communicated to the applicants.

The Registrar has only to ensure that the provisions of the Act have been adhered to by the applicants

for registration, and that the name they have proposed for their cooperative is not already in use by

another. The right to freedom of association, guaranteed by the Constitution of India, is respected

and provided with the necessary legal framework, where those associating desire such a legal

framework for their association.

Most other forms of organisations, such as, companies, or societies, are not required to declare their

“area of operation”. This concept of area of operation was introduced in mid-60s in cooperative

laws in the country, to ensure that there was no “overlapping or conflict of jurisdiction” between

cooperatives. The very use of the term “jurisdiction” in relation to a cooperative spoke volumes of

the perception of cooperatives as arms of the government. The 1995 Act avoids the use of the terms

“area of operation”, and “jurisdiction” in relation to the functioning of cooperatives. In order to

identify which registering authority, or which tribunal has jurisdiction over which area, the State

Government has clarified that the registering authority and tribunal in the case of any cooperative

will be those who have jurisdiction for the location at which the headquarters of a cooperative is

situated.]

(5) If the conditions laid down in sub-section (4) are not fulfilled, the Registrar shall communicate by

registered post the order of refusal together with the reasons therefor, within sixty days from the date

of submission of application, to the chief promoter.

(6) There shall be appointed a Registrar of Mutually Aided Cooperative Societies for the State and as

many other officers as the Government think fit for the purposes of this Act.

[Comment: The law makers, in their wisdom, have chosen to provide for a separate Registrar of

Mutually Aided Cooperative Societies. It would be best, therefore, if the intent behind this provision is

to be respected, that a person distinct from the Registrar appointed under the 1964 Act were

appointed as Registrar under the 1995 Act.]



5. Registration certificate

Where a cooperative society is registered, the certificate of registration signed and sealed by the

Registrar shall be conclusive evidence that the cooperative society mentioned therein, is a mutually

aided cooperative society duly registered under this Act;

Provided that where a society was earlier registered under the Andhra Pradesh Cooperative Societies

Act, 1964, such registration shall stand cancelled once a certificate of registration under this section is

issued.

[Comment: Where a cooperative registered under the 1964 Act obtains its registration certificate

under the 1995 Act, its old registration stands cancelled. A somewhat similar provision is available

under the Multi-State Cooperative Societies Act, which is applicable to cooperatives whose

membership is drawn from more than one state. If a cooperative registered under a state law chooses

to extend its membership beyond the boundaries of the state, then it needs to amend its byelaws, and

send the proposal for registration of amendment, not to the State Registrar, but to the Central

Registrar. When such an amendment is registered by the Central Registrar, he/she also issues a

certificate to the effect that the cooperative is now registered as a multi-state cooperative, and that

the Multi-State Cooperative Societies Act is now applicable to it, which means that the state law is no

longer applicable to it, and that it ceases to be a cooperative under the state law.]

6. Society to be a body corporate (1) A cooperative society registered under this Act shall be a body corporate by the name under which

it is registered having perpetual succession and a common seal. The cooperative society shall be

entitled to acquire, hold and dispose of property, to enter into contracts, to sue and be sued and to do

all other things necessary to achieve its objectives.

(2) All transactions entered into in good faith prior to registration, in furtherance of the objectives of

the cooperative society, shall be deemed to be transactions of the cooperative society after its

registration.

7. Registration with limited or unlimited liability A cooperative society may be registered with limited or unlimited liability. Where the liability is

limited, it shall have as a suffix to its name the expression ―limited‖ or its equivalent in any Indian

language.

[Comment: Both the 1964 and the 1995 Acts provide for cooperatives to be registered with limited or

unlimited liability. The 1964 Act, however, requires federations to be registered only with limited

liability. In practice, under the 1995 Act, since cooperatives have to recover/recoup deficit (loss), if

any, on an annual basis, from reserves or members‟ accounts, the liability of the members in the event

of dissolution, is limited in fact to meeting the shortfall in assets in the last year of functioning.]

8. Display of name (1) Every cooperative society shall display its full name, registration number and the address of its

registered office in legible characters in a conspicuous position

(a) at every office or place at which it carries on business;

(b) in all notices and other official publications;

(c) on all its contracts, business letters, orders for goods, invoices, statements of account, receipts and

letters of credit; and

(d) on all bills of exchange, promissory notes, endorsements, cheques and orders for money it signs or

that are signed on its behalf.

(2) Where a cooperative society has a corporate seal, it shall display its full name in legible characters

on its corporate seal.



9. Byelaws (1) Except on such specific matters for which this Act has provided, the functioning of every

cooperative society shall be regulated by its byelaws. Subject to the provisions of this Act and the

byelaws every cooperative society shall have regard to the cooperative principles in its functioning.

(2) Subject to section 3, the byelaws of a cooperative society shall be specific on the following

matters, namely,

(i) the name and address of the cooperative society;

(ii) the object of the cooperative society explicitly stated as a common central need of the members

which the cooperative society aims at fulfilling;

(iii) eligibility, ineligibility and procedure for obtaining and retaining membership;

(iv) procedure for withdrawal, cessation and termination of membership;

(v) the services that it intends to give its members;

(vi) fixation of minimum performance expected annually of each member vis-a-vis use of services,

financial commitment and participation in meetings, in order to be eligible to exercise the rights of

membership including the right to vote;

(vii) the consequences of performing below the minimum level fixed;

(viii) the consequences of default in payment of any sum due by a member;

(ix) rights of members;

(x) the nature and extent of the liability of the members for the debts contracted by the cooperative

society;

(xi) the manner of making or amending byelaws;

(xii) the powers and functions of the general body, and the powers and functions and the manner of

constitution of representative general body, if any, and subjects which must be dealt with by the

general body, and by the representative general body, if any;

(xiii) the manner and frequency of convening general meetings and quorum required;

(xiv) the manner of conducting elections and of filling casual vacancies;

(xv) the size and composition of the board of directors;

(xvi) the term of office of the directors;

(xvii) the manner of removal of directors;

(xviii) the manner and frequency of convening board meetings and quorum;

(xix) the powers and duties of the board;

(xx) the powers and duties of the chairperson;

(xxi) the terms on which the cooperative society may deal with non-members;

(xxii) eligibility, ineligibility for becoming and continuing as director;

(xxiii) penalties for acting against the interests of the cooperative society and for non-fulfilment of

duties by members, office-bearers, directors or staff;

(xxiv) the nature and extent of the liability of office-bearers, directors for debts contracted by the

cooperative society;

(xxv) the authorisation of an officer or officers to sign documents and to institute and defend suits and

other legal proceedings on behalf of the cooperative society;

(xxvi) the manner of choosing delegates to higher tier cooperative federations; (xxvii) the rights, if

any, which the cooperative society intends to confer on any cooperative society or other federation and

the circumstances under which these rights may be exercised by the society or federation;

(xxviii) the nature and amount of capital, if any, of the cooperative society;

(xxix) the maximum capital which a single member can hold;

(xxx) the maximum interest payable to members on paid up share capital;

(xxxi) the sources, types and extent of funds to be raised by the cooperative society;

(xxxii) the purposes for which the funds may be applied;

(xxxiii) the constitution of various funds and their purposes;

(xxxiv) the manner of appointment of auditors and their powers and functions;

(xxxv) the manner of appointment of internal auditors and their powers and functions;

(xxxvi) the manner of disposal of funds when the cooperative society is under liquidation; and

(xxxvii) the manner of dissolution of the cooperative society.



[Comment: In keeping with the spirit of liberalisation, the 1995 Act does not give the Government the

power to make Rules. A cooperative under this Act is guided by the provisions in the Act (including

the cooperative principles], its byelaws, and any understanding or contract that it enters into with

various parties including the Government.

The above section, therefore, requires cooperatives to think through a long list of provisions for

inclusion in their byelaws. Keeping in mind other provisions in the Act, the byelaws may additionally

include the financial year which the cooperative wishes to adopt, and also provide for the internal

dispute settlement mechanism.

Model byelaws have not been provided for, as uniformity and standardisation are anathema to

owning of responsibility for one‟s enterprise. In fact, this Act does not provide for the classification of

cooperatives, and every group of cooperators is free to design its cooperative with such objectives,

such activities, and such financial and management structure as appear appropriate to it. Potential

cooperators are expected to think through issues and have byelaws of their choice, so that they can

take full responsibility for the success or failure of their cooperative.]

10. Amendment of byelaws (1) A cooperative society may amend any of the provisions of its byelaws by a resolution of its general

body, or of its representative general body, where this exists;

Provided, that no such resolution shall be passed unless at least twenty clear days of written notice of

the meeting has been given along with a copy of the proposed amendment to each member of the

general body or representative general body, as the case may be, and such notice and proposed

amendment is also displayed on the notice board of the cooperative society for a period of twenty days

immediately preceding the date of the meeting;

Provided further that the representative general body shall not alter any provision in the byelaws

relating to its own constitution and powers.

(2) In the case of amendment of its byelaws with regard to matters relating to items (i), (ii), (ix), (x),

(xi), (xii), (xiii), (xiv), (xv), (xvi), (xvii), (xix), (xxiv), (xxix), (xxxvi) and (xxxvii) of sub-section (2)

of section 9, an application for the registration of the amendment shall be forwarded by the

cooperative society by registered post to the Registrar within a period of thirty days from the date of

the resolution.

(3) Every application forwarded to the Registrar shall be signed by the chairperson and shall be

accompanied by a copy of the resolution adopting the amendment and the following particulars,

namely,

(a) the date of the meeting at which the amendment was approved;

(b) the total number of members on the rolls of the cooperative society who were eligible to vote on

the date of such meeting, the number present at the meeting and the number of eligible members who

voted for the resolution.

(4) If the proposed amendment is in consonance with the provisions of this Act, the Registrar shall

register the proposed amendment within a period of sixty days from the date of receipt of the

application.

(5) The Registrar shall forward by registered post to the cooperative society within a period of fifteen

days after registration a copy of the registered amendment together with a certificate signed and sealed

by him and such certificate shall be conclusive evidence that the amendment has been duly registered.

(6) If the proposed amendment is not in consonance with the provisions of this Act, the Registrar shall

refuse, within a period of sixty days from the date of receipt of the application, to register the proposed

amendment;

Provided that no order refusing to register the amendment shall be passed except after giving the

cooperative society an opportunity of making its representation.

(7) The Registrar shall forward by registered post to the cooperative society, within a period of fifteen

days after refusal, the order of refusal together with the reasons therefor.

(8) Where no order of refusal is received by the cooperative society under sub-section (7) within a

period of seventy five days from the date of submission of application, it shall be deemed that the

Registrar has registered the amendment on the last date of the period specified in that sub-section.



(9) In the case of all amendments to the byelaws other than those specified in sub-section (2),

information about the amendment shall be forwarded by the cooperative society by registered post,

with the enclosures and particulars specified in sub-section (3), to the Registrar within a period of

thirty days from the date of the general meeting at which the resolution was passed, and the Registrar

shall immediately take on file such amendment;

Provided, that such action shall not in any way preclude the Registrar from proceeding against the

cooperative society or its management, where such amendment is found to be contrary to the

provisions of this Act.

(10) An amendment to the byelaws under sub-section (9) shall come into effect only after registration

or on the thirtieth day from the date the amendment has been sent to the Registrar for taking on record,

as the case may be.

[Comment: Most cooperative laws provide for the compulsory amendment of the byelaws of a

cooperative by the Registrar. The 1995 Act does not provide for such compulsory amendment.

Cooperative laws across the country also require the registration of every amendment to the byelaws,

even though laws relating to the registration of societies or to companies do not expect any

amendment to be registered. The 1995 Act has categorised the provisions in the byelaws into two

parts. Amendments to those provisions which it considers to be of strategic interest to members, it

requires registration of. Amendments to all other provisions of the byelaws are to be sent to the

Registrar only for taking on record. A lot of unnecessary wastage of time between the taking of a view

by a general body, and the coming into force of that view has now been avoided, as a result of these

provisions.]

11. Change of liability, transfer of assets and liabilities, division, amalgamation (1) A cooperative society may, by a resolution of its general body,

(a) decide to amend its byelaws to change the form or the extent of its liability;

(b) decide to transfer its assets and liabilities, in whole or in part, to any other cooperative society

which agrees to such transfer by a resolution of its general body;

(c) divide itself into two or more cooperative societies.

(2) Any two or more cooperative societies may, by a resolution of their respective general bodies,

decide to amalgamate themselves and form a new cooperative society.

(3) Every resolution of a cooperative society under this section shall be passed at its general meeting

by a majority of total members with right of vote or two thirds of members present and voting

whichever is less and such resolution shall contain all particulars of the liability, transfer, division,

amalgamation as the case may be.

(4) Before passing a resolution under this section, the cooperative society shall give notice thereof

together with a copy of the resolution to all its members and federations to which it is affiliated, and

creditors who may give their consent. Notwithstanding any byelaw or contract to the contrary, any

member, federation, or creditor not consenting to the resolution shall, during a period of one month

from the date of service of the notice have the option of withdrawing their shares, deposits, loans or

services as the case may be.

(5) Any member, federation, or creditor who or which does not exercise within the specified period the

right under sub-section (4) shall be deemed to have consented to the resolution.

(6) A resolution passed by a cooperative society under this section shall not take effect until

(a) (i) the members, federations, and creditors have consented or are deemed to have consented to the

resolution under sub-section (4) or, as the case may be, sub-section (5); or (ii) all claims of the

members, federations, and creditors who have exercised the option referred to under sub-section (5)

within the period specified therein have been met in full or otherwise satisfied; and

(b) (i) in the case of change of liability, amendment of the byelaws of the cooperative society

concerned is registered or is deemed to have been registered; or

(ii) in the case of division or amalgamation, certificate of registration of the cooperative society or

societies is issued.

(7) When a resolution passed by a cooperative society under sub-section (2) takes effect the resolution

shall be a sufficient conveyance to vest the assets and liabilities in the transferee without any further

assurance.



(8) The registration of a cooperative society shall stand cancelled and the cooperative society shall be

deemed to have been dissolved and shall cease to exist as a corporate body

(a) when the whole of the assets and liabilities of such cooperative society are transferred to another

cooperative society; or

(b) when such cooperative society divides itself into two or more cooperative societies.

(9) Where two or more cooperative societies are amalgamated to form a new cooperative society, the

registration of the cooperative societies so amalgamated shall stand cancelled and they shall be

deemed to have been dissolved and shall cease to exist as corporate bodies.

[Comment: Under the 1964 Act, havoc has been played in cooperatives by reorganisation through

compulsory amalgamation/division/merger/liquidation/transfer of “area” by the Registrar, with or

without the consent of members. The new Act does not provide for any such role for the Registrar.

Most cooperative laws also require the prior approval of the Registrar for any proposal by a

cooperative for amalgamation/division/etc. The 1995 Act recognises that vibrant cooperatives may

choose to change their structure with changing opportunities. It, therefore, simplifies the procedure

for amalgamation, division, etc and leaves all these matters to the will of the members as expressed at

their general body meetings, providing for due procedure.]

12. Promotion of subsidiary organisation (1) Any cooperative society may, by a resolution passed at general meeting by a majority of members

present and voting, promote one or more subsidiary organisations for the furtherance of its stated

objectives, and such organisations may be registered under any law for the time being in force, as

agreed to by the general body.

(2) The annual reports and accounts of any such subsidiary organisation shall be placed before the

general meeting of the promoting cooperative society every year.

(3) Any subsidiary organisation created under sub-section (1) shall exist for only as long as the general

body of the cooperative society deems its existence necessary.

[Comment: Cooperatives sometimes set up educational institutions, research institutions, and

even associated businesses. These may need independent structures and management, and

may even require to have body corporate status, distinct from the parental body. For such

needs, this section has provided for the setting up of subsidiary organisations under various

laws. Such a subsidiary is expected to further the objectives of the cooperative, and, therefore,

the Act provides for it to be accountable to the general body of the cooperative, and to exist

only at its pleasure.]

13. Creation of new organisation with others Where the collaboration between a cooperative society and any other organisation or organisations

requires the creation of a new organisation, the new organisation may be registered as a company or a

public society, as appropriate for the fulfilment of the objective with which it was created, and such

collaboration shall be reviewed every year by the general body of the cooperative society.

[Comment: Under section 4(1), the setting up of cooperatives by cooperatives has already been

provided for. Under this section, the setting up of other forms of organisation by cooperatives has

been envisaged. For example, if a cooperative cannot by itself set up an educational institution or

research station, or a bank, using section 12, it might consider doing that in collaboration with other

cooperatives, under section 13. Such an organisation, set up by two or more cooperatives, if also a

cooperative, would be established under section 4. Otherwise, it would be registered under the

appropriate law.]



14. Mobilisation of funds (1) A cooperative society may mobilise funds in the shape of share capital, deposits, debentures, loans

and other contributions from its members to such extent and under such conditions as may be

permissible under the byelaws of the cooperative society;

Provided that, at the time of dissolution of a cooperative society, the amounts due to the members shall

be settled only after the settlement of dues to others.

(2) A cooperative society may also mobilise funds in the shape of deposits, debentures, loans and other

contributions from other individuals and institutions, to such extent and under such conditions as may

be permissible under the byelaws;

Provided that a cooperative society shall not accept share capital from the Government but may accept

other funds or guarantee from the Government on such terms and conditions as are mutually agreed

upon through a memorandum of understanding.

[Comment: This Act is called the Mutually Aided Cooperative Societies Act. By terming cooperatives

under this Act “mutually aided”, the Legislative Assembly did not intend that cooperatives under this

Act would be financially self-sufficient. It did expect that the foundation for cooperatives would be

mutual aid, in terms of finance, and also in terms of spirit, discussion, discourse.

Therefore, the Act requires cooperatives to raise share capital from members only, and expects only

such persons to be members who need the services of the cooperative and can use it. The Act also

permits cooperatives to raise other funds from members, making it clear that any amounts raised

from members, in any form, will be settled at the time of dissolution, only after all other external

accounts have been settled.

This section also provides for cooperatives to raise funds in all forms other than share capital from

non-member individuals and institutions, and to raise financial support in the shape of loans and

guarantee from the Government, based on a mutually negotiated contract. This is a clear shift from

the 1964 Act and other cooperative laws which incorporate in the law itself several rights and

privileges for the Government and/or the Registrar vis-à-vis cooperatives, regardless of the financial

support provided by the Government.

This Act foresees situations where a cooperative and the Government may wish to collaborate on

issues of mutual interest, and, therefore, requires that they sort out between themselves the terms on

which such collaboration should take place.]

15. Investment of funds outside the business A cooperative society may invest or deposit its funds in any non-speculative manner outside its

business.

[Comment: Cooperatives are businesses which come into existence not because their members have

money to invest, and not because they want a return on that investment, but because their members

have some common economic need which they cannot fulfil individually by themselves, but which they

can through joint enterprise and effort. Since cooperatives come into existence to fulfil needs which

are not being fulfilled by investment driven enterprises, therefore, most cooperative laws have

debarred cooperatives from speculative investment. Sadly, however, most cooperative laws, and in

particular Rules framed under Cooperative Acts, have taken this concept to absurd limits, requiring

cooperatives to seek the Registrar‟s permission before depositing their funds in any commercial bank,

or in any cooperative, or even before investing in their own business! The 1995 Act concentrates on

the essentials, and simply prohibits cooperatives from investing their funds in any speculative

manner. The rest it leaves to their good sense and internal regulations.]

16. Disposal of surplus (1) In any year a cooperative society shall allocate towards a deficit cover fund, reserve funds,

deferred payment to members as patronage rebate in proportion to their use of the cooperative

society's services, and payment on share capital of interest not exceeding the rate of interest paid by

scheduled banks, such percentages of the surplus arising from its business transactions in the previous

year, as may be approved by the general body. (2) Reserves created under sub-section (1) shall be

costed by crediting an annual interest equal to the rate paid by scheduled banks on fixed deposits.



[Comment: Other cooperative laws define quite rigidly the amounts to be set aside from surplus

(profit) each year, towards various funds and reserves. This law appreciates that each cooperative

will have different uses for the surpluses generated, and that each of these uses will change from time

to time in the same cooperative. For example, in a nascent cooperative, members may prefer to

capitalise to enable expansion or absorb future losses, whereas in a well established cooperative,

members may expect more by way of rebate on their patronage of the cooperative‟s services. The

1995 Act leaves the disposal of surplus to the general body. Section 16 also requires that reserves be

costed each year, and not be treated as cost-free funds. The implications of this are (1) that surplus

will be arrived at after costing the reserves; (2) that surplus, if any, will have arisen out of the year‟s

transactions, and not be the interest earned/due on the reserves; and (3) as a result, members who

join when a cooperative is well established, will not automatically benefit from surpluses generated

out of reserves created in the early years by those members.]

17. Management of deficit (1) Where a cooperative society is left with a deficit in any given year, the board of directors shall

place before the general body in the first following annual general meeting, a detailed report on the

causes of deficit and the manner in which the deficit is proposed to be met.

(2) The general body of the cooperative society shall decide to have the deficit covered by setting it off

against the amount available in the deficit cover fund, and/or by debiting the deficit to the account of

the members in proportion to the services they had availed or were expected to avail of the cooperative

society during the year.

[Comment: Having provided for full autonomy to cooperatives under the new Act, the Act also

ensures that management is accountable to members. Deficit (loss) is to be discussed at the general

body, with the board of directors placing a report before the general body on the causes of the deficit,

and on how it is proposed to be covered. The deficit of any year is to be dealt with in the succeeding

year, and so the spectacle of a cooperative having accumulated losses is not provided for. Since

members have the right to decide who they wish to have as their directors, and to recall them if

necessary, and since surplus is available for distribution among members, therefore, deficit, too, is

for sharing by members, to the extent that it cannot be set off against reserves available for this

purpose. In the event of a cooperative registered under the 1964 Act with accumulated losses wishing

to register under this Act, this section would imply that the general body of the cooperative set off the

losses against reserves, or debit the losses to members‟ accounts, when resolving to convert to the

new Act.]

18. Reserve fund A cooperative society may create a reserve for such purpose as may be specified in the byelaws.

19. Eligibility for membership (1) Subject to the byelaws, any person who is desirous of utilising the services of the cooperative

society may express his willingness to accept the responsibilities of membership and fulfil such other

conditions as may be specified in the byelaws of the cooperative society and thereupon he may be

admitted as a member, subject however to the condition that the cooperative society is in a position to

extend its services to the applicant and that the applicant is not already a member of a cooperative

society registered under this Act, or the Andhra Pradesh Cooperative Societies Act, 1964 providing the

same or similar services.

(2) Admission of members and removal from membership shall be made in accordance with the

procedure specified in the byelaws, only by an elected board or by the general body where such an

elected board does not exist for the time being.

(3) A person admitted as a member may exercise the rights of membership, including the right to vote,

only on fulfilment of such conditions as may be laid down from time to time in the byelaws;

Provided that a person shall have been a member for at least one year before being eligible to exercise

the right of vote; Provided further that the above proviso shall not apply to the promoter members in

the first year of registration of a cooperative society.



[Comment: In many cooperatives under most cooperative laws, membership is very heterogeneous,

with a majority having very low financial or other stake in the organisation. The result is that a

majority of the decisions are made by those whose interest in the cooperative is superficial or suspect

or insignificant. The 1995 Act ensures that membership is open only to those who need the services of

the cooperative, can use them, and are willing to be responsible. In particular, it is important to note

that section 9(2)(vi)and (vii) require the byelaws to fix some minimum performance standards for

members to reach in order that they exercise their rights. Election-eve enrolment of bogus members is

addressed by requiring that members vote only after a year of membership and on fulfilment of other

obligations to the cooperative. The Act does not expect a person to be a member of more than one

cooperative for the same services. Section 19 also makes a clear shift from earlier laws which

expected cooperatives to admit members whether or not they were in a position to serve them. The

1995 Act does not expect every cooperative to be the panacea for all problems facing an entire

population in an area, and leaves it to the members to decide how big they wish to grow, and how

much they can handle.]

20. General body (1) Subject to the provisions of this Act and the byelaws, the ultimate authority of a cooperative

society shall vest in its general body;

Provided that where, because of spread of number of members, a cooperative society feels the need for

constituting a representative general body for more effective decision making, it may constitute a

representative general body in such a manner and with such functions as may be specified in the

byelaws.

(2) The following matters, among others specified in the byelaws shall be dealt with by the general

body of a cooperative society, namely, (a) amendments to byelaws;

(b) election and removal of directors;

(c) consideration of,

(i) the long term perspective plan and budget;

(ii) the annual operational plan and budget;

(iii) the annual report of activities for being filed with the Registrar;

(iv) the auditor‘s report and the annual audited statement of accounts for being filed with the Registrar;

(v) special audit report or inquiry report, if any;

(vi) compliance report relating to audit, special audit and/or inquiry, if any;

(d) approval of appointment and removal of auditors;

(e) disposal of surplus;

(f) management of deficit;

(g) creation of specific reserves and other funds;

(h) review of actual utilisation of reserves and other funds;

(i) review of the chief executive‘s report on the attendance at meetings by directors and review of the

business done with the cooperative society by the directors;

(j) appointment, reconstitution and disbanding of the representative general body;

(k) remuneration payable to any director or internal auditor in connection with his duties in that

capacity or his attendance at related meetings;

(l) membership of the cooperative society in federation;

(m) collaboration with other organisations and its review;

(n) promotion of subsidiary organisations and review;

(o) dissolution of the cooperative society; and

(p) all other functions expected of the general body under the other provisions of this Act.



[Comment: The functions of the general body in the 1995 Act are similar to those of the general body

in other cooperative laws. There are, however, a few very important distinctions. The first is that the

1995 Act expects the general body to approve the appointment or removal of auditors. This is the sole

prerogative of the Registrar in other cooperative laws! The second is that election and removal of

directors is the function of the general body, doing away with the elaborate procedure laid down by

other cooperative laws to be followed in cooperative elections as is done for General Elections. The

third is the review of the performance of directors by the general body, vis-à-vis their attendance at

meetings, and their transactions with the cooperative, not provided for by most other cooperative

laws. The last is the provision for setting up a representative general body, provided for in most other

Acts, too, but undermined by corresponding Rules.]

21. Board of directors (1) There shall be a board of directors for every cooperative society constituted and entrusted with the

direction of the affairs of the cooperative society in accordance with the provisions of the Act and the

byelaws.

(2) The size of the board shall be a multiple of the term of office of its directors.

(3) The directors of the board shall have staggered terms such that at any point of time the vacancies,

arising as a result of the terms of directors coming to an end, are less than one half of the total strength

of the board;

Provided that the term of a director shall not exceed five years;

Provided further that at the first election all the directors shall be elected at once, and their terms

staggered by drawal of lots specifying different terms.

(4) In addition to such criteria as may be specified in the byelaws, a person shall be ineligible for being

chosen as a director if such person

(a) has at any time lost the right to vote as a member or to continue as one as specified in the byelaws;

(b) incurs any other disqualification specified in the byelaws.

(5) In addition to such criteria as may be specified in the byelaws, a person shall cease to be a director

if he incurs any of the disqualifications specified in sub-section (4) or,

(a) absents himself from three consecutive board meetings without leave of absence;

(b) absents himself from general body meeting without leave of absence;

(c) is penalised under this Act.

(6) In addition to such criteria as may be specified in the byelaws, the directors of the board shall incur

disqualification for a period of three years for being chosen as directors and shall be ineligible to

continue as directors of any cooperative society if, during their term as directors of a cooperative

society,

(a) they did not conduct elections within the time specified in the byelaws and before the expiry of the

terms; (b) they did not conduct their annual general body meeting within six months of closure of the

cooperative accounting year, or a requisitioned meeting of the general body within the specified time;

(c) they did not place the audited accounts for the preceding financial year along with the report of the

auditors before the general body at its annual general meeting.

(7) In order to be eligible for being chosen as director of the board of a cooperative society which has

been in existence for more than two years a member

(a) shall have been a voting member of the cooperative society for at least two years immediately

proceeding the year of election;

(b) shall have attended the two general body meetings of the cooperative society held immediately

preceding the elections.

(8) Every director and employee of a cooperative society while exercising his powers and discharging

his duties shall, —

(a) act honestly and in good faith and in the best interests of the cooperative society; and

(b) exercise such due care, diligence and skill as a reasonably prudent person would exercise in similar

circumstances.



(9) A director or employee who is guilty of misappropriation, breach of trust or any other omission or

commission, resulting in loss to the cooperative society as a result thereof, shall be personally liable to

make good that loss, without prejudice to such criminal action to which he is liable under the law.

[Comment: The 1995 Act requires every cooperative to have an elected board of directors, whose

members have staggered terms in office. The 1995 Act has sought, through this provision, to prevent

to the extent possible, any vacuum in management, which has been used in the past under the 1964

Act, to bring in the dreaded “Person-in-Charge” for the interregnum. By having less than half the

directors retiring at any time, the 1995 Act has tried to ensure that there is always a quorum, and a

democratically elected body is in position. Nominations to the board are not provided for, and

caste/class/gender based reservations on the board, too, have not been provided for. Since

membership is voluntary, and since multiple cooperatives can be set up for the same purpose in the

same area, and since cooperatives are autonomous and private organisations, however poor or large

their membership, the 1995 Act has left the matter of reservation to the decision of the members. It

may be worth noting that, in practice, there are cooperatives registered under the new Act which

have chosen to have such reservations on their boards, but even more important, there are any

numbers of cooperatives under the new law exclusively of the disadvantaged groups, especially of

poor women, and obviously their entire boards are made of up people of the same category, who

would otherwise have merely had token representation on the board. The Act requires high standards

of the directors, including their presence in meetings, their performance as members of the

cooperative, timely conduct of elections by them, timely conduct of general meetings, timely reporting

to the general body, timely audit, and so on. Directors are also required to make good any loss to the

cooperative arising out of their questionable action/inaction, without prejudice to any criminal action

that could be taken against them.]

22. Powers and functions of the board of directors (1) The board shall, in accordance with the byelaws, be the authority to

(a) admit and terminate membership;

(b) elect the chairperson and other office bearers;

(c) remove from office the chairperson and other office bearers;

(d) appoint and remove the chief executive;

(e) fix staff strength;

(f) frame policies concerning

(i) organisation and provision of services to members;

(ii) recruitment and conditions of service of the staff at the cooperative society;

(iii) mode of custody and investment of funds;

(iv) manner of keeping accounts;

(v) mobilisation, utilisation and investment of various funds;

(vi) monitoring and management information systems including statutory returns to be filed; and

(vii) such other subjects and matters necessary for the effective performance of the cooperative

society;

(g) place the annual report, annual financial statements, annual plan and budget for the approval of the

general body;

(h) consider audit and compliance reports and place these before the general body;

(i) review membership in other cooperatives; and (j) undertake such other functions as may be

delegated by the general body.

(2) The chairperson shall be elected by the board from among the elected members and shall, in

accordance with the byelaws,

(a) preside at meetings of the board and the general body;

(b) have only a casting vote in the event of equality of votes on any matters being decided upon by the

board;

(c) exercise such other powers as may be delegated by the board and specified in the policies framed

or resolutions adopted by the board.



[Comment: The elected board has been given the powers to admit members, to elect the

chairperson and other office bearers, to frame business policies, personnel policies, financial

policies, and to be responsible for all such matters which the board of directors of any

business would normally be responsible for, but which boards under most cooperative laws

are not responsible for. The chairperson, too, is seen not as a contentious person desiring to

thrust his viewpoint on his/her colleagues, but as a mature person who leads a team, casting

his/her vote only in the eventuality of a matter being put to vote and the other directors voting

equally in favour and against the motion.]

23. Elections (1) The conduct of election of directors of a cooperative society shall be the responsibility of the

incumbent board of the cooperative society.

(2) Elections shall be conducted before the expiry of the term of office of the outgoing directors in the

manner specified in the byelaws.

(3) Where a board does not take necessary steps to conduct elections as specified in the byelaws

before the expiry of the term of the directors, or where there are no directors remaining on the board,

the Registrar shall, at the request of not less than twenty-five members or five per cent of the total

members of the cooperative society whichever is less or may suo moto, convene within 30 days a

general meeting for appointing an ad-hoc board for the specific purpose of conducting elections.

(4) The term of the ad-hoc board appointed under sub-section (3) shall not exceed one month over and

above the minimum period required under the byelaws to conduct elections, and the ad-hoc board shall

cease to function as soon as a regular board is elected in accordance with the byelaws.

(5) The directors shall hold office for the period for which they are elected and the newly elected

directors shall assume office at the end of this period.

(6) The directors may be eligible, for re-election, if the byelaws so provide.

[Comment: Elections used to be the responsibility of incumbent boards till mid-60s, and since then

through a series of amendments in cooperative laws across the country, elections became the

responsibility of the Registrar of Cooperatives. Through Rules, again stepping beyond the intent and

content of the Act, the Government acquired for itself the right to postpone elections indefinitely. The

1995 Act once again makes the conduct of elections an internal responsibility, providing space for

limited external intervention only if this responsibility cannot be fulfilled. Directors cannot be re-

elected for a second term, unless the byelaws provide for such re-election. That is, the 1995 Act

expects the members to apply their minds to the advantages and disadvantages of leadership

development and spread vs continuity in leadership, and to arrive at a decision they feel appropriate

in their circumstances.]

24. Meetings (1) The byelaws of a cooperative society shall specify the frequency of and manner in which board

and general body meetings shall be held, so however the board shall meet at least once in every three

months and the general body shall meet at least once a year.

(2) The board shall convene a general meeting within thirty days of receipt of a requisition for

convening a meeting signed by at least one-tenth of members of the cooperative society or as provided

in the byelaws and any such requisition shall contain the proposed agenda and the reasons why the

meeting is felt necessary.

(3) Where the board fails to convene the annual or requisitioned general meeting within due time, it

shall be competent for the Registrar to convene the requisitioned or annual general meeting, as the

case may be.

(4) Every cooperative society shall record in the minutes book, minutes of all proceedings of every

general meeting and of every meeting of its board of directors.

(5) Such minutes shall be communicated to all persons invited for the meeting within thirty days of the

conclusion of the meeting.

(6) The minutes so recorded shall be signed by the person who chaired the said meeting.



[Comment: The Registrar has been given the right to convene a requisitioned general body meeting,

where a board fails to do so. This section also requires every cooperative to record in the minutes

book, the proceedings of all board and general meetings, and to send copies of these minutes to all

those who were invited to such meeting. No other cooperative law requires the minutes to be

communicated, and as a result, the minutes are either non-existent, or a closely guarded secret. The

1995 Act aims at greater transparency in the cooperative, which is essential if it is to be

accountable.]

25. Staff All staff of the cooperative society shall be the employees of the cooperative society and shall be fully

accountable to the cooperative society and be appointed, removed and function in accordance with

such service conditions as may be framed by the board;

Provided that a cooperative society may take personnel on deputation from other agencies including

the Government, on such terms as are mutually agreed upon.

[Comment: Most cooperative laws, including the 1964 Act, have provided for a major role for the

Registrar in setting qualifications, in recruitment, in framing service conditions, in taking

disciplinary action, etc relating to staff of cooperatives. Common cadres of staff, too, have been set

up for certain types of cooperatives. As a result, staff of cooperatives, who are, more often than not,

more privileged in society than most members, do not feel accountable to the cooperatives that they

work with. The 1995 Act makes it clear that the staff is employed by the cooperative and is

accountable to the cooperative. This should help the new generation cooperatives have more

responsible employer-employee relationships.]

26. Accounts and records (1) Every cooperative society shall keep at its office, the following accounts, records and documents,

namely:

(a) a copy of this Act with uptodate amendments incorporated;

(b) copies of other laws and regulations to which the cooperative society is subject;

(c) a copy of its registered byelaws with amendments made from time to time;

(d) the minutes book;

(e) accounts of all sums of money received and expended by the cooperative society and their

respective purposes;

(f) accounts of all purchases and sales of goods by the cooperative society;

(g) accounts of the assets and liabilities of the cooperative society;

(h) a register showing member-wise patronage of various services provided by the cooperative society;

(i) an uptodate register of all members, and a list of members with voting rights for the current year

prepared within thirty days of closure of the cooperative society‘s financial year;

(j) copies of the audit reports and special audit and/or inquiry report, if any, and compliance reports

thereon; and

(k) all such other accounts, records and documents as may be required by this Act or other laws.

(2) The books of accounts and other records shall be open for perusal by any director during business

hours.

(3) Copies of the Act, byelaws, minutes book pertaining to the general body meetings, reports and

compliance thereon of audit, special audit and inquiry, voters‘ list and such accounts as relate

to a member, shall be made available to any member during business hours at a fee to be

decided by the board. In the case of a cooperative society with unlimited liability, in addition, a

member may also have access to all books of accounts during business hours, at a fee decided

by the board.



27. Audit (1) A cooperative society may get its accounts audited by a chartered accountant within the meaning

of the Chartered Accountants Act, 1949, or by any other auditor from the office of the Registrar.

(2) The general body of a cooperative society shall appoint an auditor by a resolution which will be

valid only until the close of the next succeeding annual general body meeting.

(3) The remuneration of the auditor shall be fixed with approval of the general body.

[Comment: Prior to Independence, audit by the department of cooperation was a facility available to

cooperatives, free of cost, as it was felt that cooperatives were useful in that they helped rural people

solve their own problems, but that they may find it difficult to get auditors to check their accounts.

After mid-60s, audit became a monopoly of the department of cooperation, and it had to be paid quite

heavily for. The 1964 Act, and most other cooperative laws, however, do not place any responsibility

on the auditor to complete audit in time for the annual general meeting, and also, therefore, do not

require the presentation of audited financial statements of the previous year to the general body each

year. The 1995 Act leaves the choice of auditors, from among chartered accountants and department

staff, to the cooperatives, and requires timely audit, and timely submission of auditors‟ report and

audited statements of accounts to the general body each year. Again, all these contribute to

accountability and transparency in the cooperative, which were not possible under the older law.]

28. Special audit (1) A cooperative society dealing with funds from the Government or other external individual or

institutions may be subject to a special audit initiated by the Registrar at the request of such creditor,

on such specific terms of reference as agreed to by the Registrar.

(2) The cost of special audit under sub-section (1) shall be met by the creditor;

Provided that where the special audit reveals serious mismanagement in the cooperative society, such

costs may be recovered from the cooperative society or the persons responsible for the

mismanagement.

(3) Every special audit shall be completed and the report submitted to the Registrar within one

hundred and twenty days of its commencement.

(4) The special audit report shall contain a statement of

(a) every payment which appears to the audit to be contrary to law;

(b) the amount of any deficiency, waste or loss which appears to have been caused by the gross

negligence or misconduct of any person in the performance of duties;

(c) the amount of any sum received which ought to have been accounted for but is not brought into

account by any person; and

(d) any material impropriety or irregularity which he may observe in the expenditure or in the recovery

of money due.

(5) The Registrar shall, within a period of thirty days from the date of the receipt of the special audit

report communicate copies of the same to

(a) the applicant-creditor;

(b) the cooperative society concerned; and

(c) the cooperative tribunal where necessary.

[Comment: While the 1995 Act has recognised the autonomous nature of a cooperative, and has

given it full responsibility along with independence of action, it has also permitted it to raise funds

from external sources. Therefore, to protect the interests of the external agent with financial stake in

the cooperative, at their request, special audit by the Registrar has been provided for, and copies of

the report of such special audit are expected to be submitted to the requisitionist, the cooperative

under special audit, and, if necessary, to the Cooperative Tribunal. The 1995 Act does not make the

mistake which most other cooperative laws have made, of converting the one who makes a finding

into the one who stands on judgement on his/her own finding, and then into the one who takes action

on such judgement.]



29. Inquiry (1) Every cooperative society shall furnish any relevant information required by the Registrar in order

to enable him to satisfy whether the cooperative society has conducted its affairs in accordance with

the cooperative principles and the provisions of this Act.

(2) The Registrar may, of his own motion, and shall on the application, of a federation to which the

cooperative society concerned is affiliated, or of a creditor to whom the cooperative society is

indebted, or of not less than one-third of the directors, or of not less than one-tenth of the members,

hold an inquiry or cause an inquiry to be made into the specific matter or matters relating to any gross

violation of any of the provisions of this Act by the cooperative society.

(3) The inquiry shall be completed within a period of one hundred and twenty days from the date of

ordering the inquiry.

(4) If the inquiry is not completed within the time specified in sub-section (3), it shall lapse at

the end of the said period and the Registrar shall refund to the applicants, the fee collected

from them.

(5) The Registrar shall, within a period of thirty days from the date of the completion of the inquiry as

specified in sub-section (3) or of the lapse of the inquiry as specified in sub-section (4), communicate

the report of the inquiry or the reasons for the non-completion of the inquiry, as the case may be,

(a) to the cooperative society concerned;

(b) to the applicant-federation, if any;

(c) to the applicant-creditor, if any;

(d) to the person designated by the applicant-directors, if any;

(e) to the person designated by the applicant-members, if any;

(f) to any person, on payment of fee fixed by the Registrar; and

(g) to the cooperative tribunal where necessary.

(6) The inquiry officer acting under this section shall, among others, specifically state the amount of

deficiency, waste or loss which appears to have been caused by the gross negligence or misconduct of

any person in the performance of this duties.

[Comment: All those with a stake in a cooperative have been given the right to request the Registrar

for an inquiry into any gross violation of any provision of the Act. Again, the Registrar is to submit

copies of the inquiry report to all concerned, but not to directly take action on the findings.]

30. Power to summon and examine persons and documents (1) The person authorised to conduct special audit under section 28 or inquiry under section 29 shall

give the concerned cooperative society not less than fifteen days notice in writing of the date on which

he proposes to commence the special audit or inquiry. Provided that for special reasons to be recorded

in writing, he may give a shorter notice than fifteen days or commence a special audit or inquiry on the

authority of the Registrar without such notice.

(2) For the purpose of any special audit or inquiry under this Act, the person conducting such audit or

inquiry may

(a) require in writing the chairperson or other authority concerned to produce at the head office of the

cooperative society such receipts, vouchers, statements, returns, correspondence, notes or any other

documents as he may consider necessary for the purpose of special audit or inquiry;

(b) require in writing (i) any employee of the cooperative society or other authority accountable for or

having the custody or control of such receipts, vouchers, statements, returns, correspondence, notes or

other documents to appear in person; or

(ii) any person having directly or indirectly any share or interest in any contract with the cooperative

society to appear in person or by an authorised agent; before him at the head office of the cooperative

society and answer any question or sign a declaration with respect thereto;

(c) in the event of an explanation being required from the chairperson or any other authority concerned

invite him in writing specifying the points on which his explanation is required to meet him at the head

office of the cooperative society; or

(d) exercise such other powers as can be reasonably said to be necessary for the purposes of this

section.



(3) The person conducting special audit or inquiry may fix a reasonable period of not less than seven

days for the purpose of compliance of the provisions of sub-section (2), and such compliance shall be

mandatory on the persons required to provide information under sub-section (2).

31. Action on special audit or inquiry report On communication of a special audit report under sub-section (5) of section 28 or an inquiry report

under sub-section (5) of section 29 to the persons concerned, the Registrar may, where the special

audit or inquiry report reveals mismanagement on the part of any or all of the office bearers or

directors, without prejudice to any civil or criminal proceedings to which they may be liable,

(a) direct the board to convene a general body meeting within such reasonable time as he may specify,

to enable him to bring to the notice of the general body, either directly or through his nominee, the

findings of the special audit or inquiry report, for necessary action; or

(b) approach the cooperative tribunal for necessary action.

32. Constitution of tribunals (1) The Government may, for the purposes of this Act, by notification constitute as many tribunals as

may be necessary for such area or areas as may be specified in the notification.

(2) The provisions of section 75 of the Andhra Pradesh Cooperative Societies Act, 1964 shall, mutatis-

mutandis apply for the constitution of cooperative tribunals under this section.

[Comment: The 1995 Act, although providing for the internal settlement of disputes, has also

provided for the constitution of Cooperative Tribunals, for the settlement of internal disputes, for

taking cognisance of violations of the provisions of the Act noticed by the Registrar, for deciding on

action to be taken on special audit, inquiry, etc. The manner in which the tribunals are to be

constituted is as laid down in the 1964 Act.]

33. Power of the tribunal to order recovery (1) A member, director or chairperson of the cooperative society may and the Registrar shall file a

copy of the report of the auditor or the special auditor or the inquiry officer, before the tribunal with an

application for necessary action against the person on account of whose conduct the cooperative

society has incurred loss. The tribunal may on the basis of such report disallow every item of

expenditure incurred contrary to law and order recovery of the same from the person incurring or

authorising the incurring of such expenditure, or held responsible in the said report for any deficiency,

loss or unprofitable outlay occasioned by his negligence or misconduct or of any such amount which

ought to have been accounted but is not brought into account by that person and shall, in every such

case, specify the amount liable to be paid by such person to the cooperative society.

Explanation:- It shall not be open to any person whose negligence or misconduct has caused or

contributed to any such deficiency or loss, to contend that notwithstanding his negligence or

misconduct the deficiency or loss would not have occurred, but for the negligence or misconduct of

some other person.

(2) The tribunal shall state in writing the reasons for its decision in respect of every dis-allowance,

surcharge and a copy of such decision shall be served on the person against whom it is made in the

manner laid down for the service of summons in the Code of Civil Procedure, 1908: Provided that the

tribunal shall not pass any order of recovery under this section unless the person against whom any

such order is passed has had an opportunity of making a representation either by himself or through

the counsel.

(3) Any person aggrieved by an order passed under this section may, within sixty days after the date of

service on him of the order by the tribunal file an appeal against such order in the High Court.

(4) Where an appeal is filed in the High Court under sub-section (3), the persons who filed the

application before the tribunal or, as the case may be, the Registrar shall be the sole respondent

thereto, and the applicant shall not make any other person a party to the proceedings.

(5) Every order passed by the tribunal or an order passed by the High Court shall be executed in the

same manner as a decree of a civil court under the Code of Civil Procedure, 1908.



34. Filing of returns (1) Every year, within thirty days of the conduct of the annual general meeting, every cooperative

society shall file the following with the Registrar, namely:

(a) annual report of activities;

(b) annual audited statements of accounts with auditors‘s report;

(c) list of members as at the close of the year under reporting with services provided to each member;

(d) statement on the disposal of surplus or on the allocation of deficit;

(e) list of names of directors, their addresses and their terms of office; and

(f) compliance reports relating to audit, special audit and inquiry, if any.

[Comment: Every cooperative is expected to file returns with the Registrar. As with the Registrar of

Societies and Registrar of Companies, such filing of returns with the Registrar will ensure that that

copy is taken as an authentic copy in the event of disputes.]

35. Rights and privileges A cooperative society shall have all the rights and privileges available to cooperative societies under

chapter-V of the Andhra Pradesh Cooperative Societies Act, 1964 and the corresponding rules, to the

extent that they are not inconsistent with the provisions of this Act.

[Comment: Cooperatives under the old Act have certain rights and privileges, such as first charge on

the property of their members, exemptions from certain stamps and duties, and obligation on

employers – on request of cooperatives - to deduct from wages their dues to their cooperatives. The

Legislative Assembly, when enacting the new law extended these rights and privileges to cooperatives

registered under the new Act, too.]

36. Execution of decisions, decrees and orders In regard to execution of decisions, decrees and orders, all the provisions of chapter X of the Andhra

Pradesh Cooperative Societies Act, 1964 shall mutatis mutandis apply to cooperative societies

registered under this Act, such however, that all references to the Registrar in the said Act shall be

construed to be a reference to the cooperative tribunal in their application to cooperative societies

registered under this Act.

[Comment: In order to enable credit cooperatives to convert easily to the new Act, all the

mechanisms available to them for the recovery of loans, etc have been incorporated in the new Act.]

36-A. Eligible cooperative banks The provisions of Chapter XIII-A containing sections 115-A and 115-B of the Andhra Pradesh

Cooperative Societies Act, 1964 shall mutatis mutandis apply to all cooperative banks.

Explanation :- For the purposes of this section a ― cooperative bank means a society registered under

this Act, which is doing the business of banking as defined in clause (b) of sub-section (1) of section 5

of the Banking Regulation Act, 1949.‖

[Comment: Deposit insurance and credit guarantee are available only to such cooperative banks as

are registered under a cooperative law which provides for certain rights of intervention to the

Reserve Bank of India at the time of superseding the committee of a cooperative bank, or at the time

of its amalgamation, dissolution, etc. When certain urban cooperative banks were converted from the

old Act to this Act, the RBI raised objections, requiring that either cooperative banks should not be

registered under the new Act, or that similar rights of intervention as are available under the old Act

should be provided to the RBI under the new Act. As a result, in 1998, section 36-A was incorporated

by the Legislative Assembly in the 1995 Act, giving RBI the rights it had over cooperative banks

registered under the old Act.]



37. Settlement of disputes (1) If any dispute arises touching the constitution, management or business of a cooperative society,

and matters connected therewith or incidental thereto,

(a) among members, past members or persons claiming through members, past members and deceased

members; or

(b) between a member, past member or a person claiming through a member, past member or deceased

member and the cooperative society, its board, director, office-bearer or liquidator, past or present, or

(c) between the cooperative society or its board and any past board, director, office bearer, or the

nominee, heirs, or legal representatives of any deceased director, deceased officer, of the cooperative

society; or

(d) between the cooperative society and any other cooperative society; or

(e) between the promoters of a cooperative society and the Registrar; or a cooperative society and the

Registrar; or

(f) between a cooperative society and liquidator of another cooperative society, or between the

liquidators of two or more cooperative societies; such disputes may be referred to the cooperative

tribunal for decision; Provided that no dispute shall be referred under this section to the cooperative

tribunal unless the disputing parties exhausted all remedies that may be available in the byelaws for

the settlement of disputes.

(2) Any dispute relating to elections held to a cooperative society may be referred to the cooperative

tribunal for decision.

[Comment: Till mid-60s, most disputes in cooperatives used to be solved through internal dispute

mechanisms. Later, however, along with government aid came involuntary mechanisms for the

settlement of disputes. Through this section, the 1995 Act has provided for cooperatives to set up their

own internal systems for the settlement of disputes, and to use the Cooperative Tribunal, only after

such remedies have been exhausted. What is also special is that employer-employee disputes are not

covered under this section. In most cooperative laws in the country, a lot of mischief has been created

by trying to take the resolution of employer-employee disputes out of the purview of industrial

disputes, and into the mechanism available for constituents of cooperatives.]

38. Offences and penalties (1) It shall be an offence under this Act, if a cooperative society

(a) fails to give a notice, send a return or document, or fails to do, or allow to be done, any act which a

cooperative society is by this Act or under its byelaws required to give, send, do or allow to be done;

(b) wilfully neglects or refuses to do an act or to furnish information required for the purposes of this

Act or does an act forbidden by this Act, or the byelaws; or

(c) makes a return, or wilfully furnishes information, in any respect false or insufficient.

(2) It shall be an offence under this Act, if any person or cooperative society contravenes the

provisions of this Act or the byelaws of a cooperative society.

(3) An offence by a cooperative society shall be deemed to have been also committed by each office-

bearer of the cooperative society bound by the byelaws thereof to fulfil the duties whereof the offence

is a breach, or if there is no such office-bearer, then by each of the directors, unless the office-bearer or

director proves to have attempted to prevent the commission of the offence.

(4) An offence under this section shall be punishable with imprisonment for a term which may extend

to one year or with fine which may extend to ten thousand rupees or with both;

Provided that where a person is guilty of misappropriation, fraud, breach of trust, cheating or any other

act involving moral turpitude, resulting in a loss to the cooperative soceity, he shall be punishable

under the relevant provisions of the Indian Penal Code, 1860.



[Comment: Several responsibilities have been laid by this Act on several persons – members,

directors, office-bearers, and even registering authorities. The 1995 Act, therefore, makes it clear

that it will consider as an offence any violation of any of the provisions of the Act, by any person on

whom the Act or the byelaws place responsibility. The section above also holds all directors

responsible, if the byelaws are silent about delegating responsibility. Finally, one of the key factors

contributing to fraud in cooperatives has been that those responsible have been protected to some

extent by cooperative laws, from criminal proceedings. The 1995 Act makes it clear that such

protection is not available to such persons.]

39. Dissolution by members (1) A cooperative society may, by a special resolution, authorise its own dissolution;

Provided that a notice of the general meeting shall also be sent with an invitation to attend, to the

Registrar, to any federations of which the cooperative society is affiliated, to creditors and to any

organisation with which a partnership contract has been entered into.

(2) Invitees under the proviso of sub-section (1) shall have the right to make a representation to the

general body, if they so wish to, giving reasons why dissolution is not called for.

(3) Within fifteen days of such authorisation for dissolution, the cooperative society shall send to the

Registrar a copy of the authorisation to dissolve the cooperative society, by registered post.

(4) The authorisation approved in pursuance of sub-section (1) is required to set out the following,

namely:-

(a) the assets and liabilities of the cooperative society;

(b) the claims of creditors, and collaborators and protected share holders;

(c) the number of members;

(d) the nature and extent of the members' interest in the cooperative society; and

(e) the name of the liquidator, if appointed by the general body, or a request to the Registrar to appoint

the liquidator or a request to the Registrar to issue a certificate of dissolution where there are no assets

or liabilities;

(5) Where the Registrar receives the special resolution passed in pursuance of sub-section (1), he shall

cause at the expense of the cooperative society a notice of the special resolution to be published once a

week for two weeks in a newspaper published or distributed in the district where the registered office

of the cooperative society is located.

(6) The Registrar may require from the cooperative society, the liquidator appointed by the

cooperative society or any other person who is required to furnish information, a periodical return

showing (a) the progress of dissolution;

(b) the distribution of any undistributed surplus or reserve; and

(c) any other relevant information that he may require.

[Comment: Neither state cooperative laws, nor the Multi-State Cooperative Societies Act permit the

members of a cooperative to organise the dissolution of their cooperative. They can at most

recommend the dissolution of their cooperative to the Registrar, and it is for the Registrar to take a

decision on the matter. The 1995 Act recognises that a cooperative is a creature of its members, and,

therefore, it provides for the members to choose not to continue their association with one another, to

dissolve their cooperative.]

40. Dissolution by Tribunal (1) The Registrar or an interested person may, after giving the cooperative society ninety days notice

of the proposed application, apply to the tribunal for an order dissolving the cooperative society,

where he has reasonable cause to believe that the cooperative society has no right to be or to continue

to be recognised as a cooperative society, because it

(a) obtained its registration by fraud or mistake;

(b) is serving illegal purposes;

(c) has wilfully, after notice by the Registrar, violated any of the provisions of this Act or its byelaws;

(d) is no longer operating in accordance with principles of cooperation and the provisions of this Act;

(e) has not commenced business within two years of the date of registration; or

(f) has not carried on business for the past two consecutive years.



(2) Where an interested person applies in pursuance of this section, he shall give the Registrar notice

of his application and the Registrar is entitled to appear and be heard in person or by counsel.

(3) Where the tribunal receives an application in pursuance of this section, it may, after giving a

reasonable opportunity to the cooperative society to state its case, order that the cooperative society be

dissolved or liquidated and dissolved under the supervision of the Registrar.

(4) Where the Registrar receives an order made in pursuance of sub-section (3), he shall, (a) where the

order is to dissolve the cooperative society, issue a certificate of dissolution; or

(b) where the order is to liquidate and dissolve the cooperative society under the supervision of the

Registrar, publish a notice in a newspaper published or distributed in the district in which the

registered office of the cooperative society is situated.

[Comment: Since the registration of a cooperative under this Act is quite a simple affair, it is possible

that institutions not intending to function as cooperatives manage to get registered under this Act, in

order to obtain tax and other exemptions sometimes allowed to cooperatives. Although tax and other

authorities do review the nature of transactions in “cooperatives” before allowing for exemptions,

nonetheless, this Act has provided for the Registrar or any other interested person to move the

Cooperative Tribunal against a “cooperative” continuing to be recognised as a cooperative, if

indeed it is not functioning as one, and to seek its dissolution. The Registrar may also seek its

dissolution if it becomes defunct or does not become functional even after registration. The

registering authority has not been given the right to unilaterally dissolve a cooperative on any of

these counts, as such right may lead to unhealthy practices.]

41. Appointment of liquidator (1) Where a cooperative society is to be dissolved and no liquidator is appointed by the general body

or the tribunal, the Registrar may

(a) appoint any person as a liquidator to wind up the affairs of the cooperative society; or

(b) where he is satisfied that the cooperative society has no assets and liabilities, issue a certificate of

dissolution.

(2) The appointing authority shall fix the payment to the liquidator for his services.

[Comment: In cooperative laws across the country, only the Registrar has the right to appoint a

liquidator. The 1995 Act has provided for the appointment of a liquidator by the general body of a

cooperative, or the Cooperative Tribunal, and only where no such liquidator has been appointed, the

Registrar may appoint a liquidator. This provision ensures that the Registrar does not have an

automatic interest in the appointment of a liquidator, or in the liquidation proceedings.]

42. Duties of liquidator On his appointment, a liquidator shall

(a) immediately give notice of his appointment,

(i) in the case of liquidator not appointed by the Registrar, to the Registrar; and

(ii) to each claimant and creditor known to the liquidator;

(b) immediately publish notice of his appointment once a week for two consecutive weeks in a

newspaper published or distributed in the district where the cooperative society has its registered

office and take reasonable steps to give notice of the liquidation in every jurisdiction where the

cooperative society carries on business;

(c) place in the notice mentioned in clauses (a) and (b) a provision requiring any person

(i) indebted to the cooperative society, to render an account and pay to the liquidator at the time and

place specified any amount owing;

(ii) possessing property of the cooperative society, to deliver it to the liquidator at the time and place

specified; and

(iii) having a claim against the cooperative society, whether liquidated, unliquidated, future or

contingent, to present particulars of the claim in writing to the liquidator not later than sixty days after

the first publication of the notice;

(d) take into custody and control the property of the cooperative society;

(e) open and maintain a trust account for the moneys of the cooperative society;



(f) keep accounts of the moneys of the cooperative society received and paid out by him;

(g) maintain separate lists of the members, creditors and other persons having claims against the

cooperative society;

(h) where at any time he determines that the cooperative society is unable to pay or adequately provide

for the discharge of its obligations, apply to the Registrar for directions; and

(i) deliver to the Registrar, periodically as the Registrar may require, financial statements of the

cooperative society in any form that the liquidator considers proper or that the Registrar may require.

43. Powers of liquidators (1) The liquidator may

(a) retain lawyers, accountants, engineers, appraisers and other professional advisors;

(b) bring, defend or take part in any civil, criminal or administrative action or proceeding in the name

and on behalf of the cooperative society;

(c) carry on the business of the cooperative society as required for any orderly liquidation;

(d) sell by public auction any property of the cooperative society;

(e) do all acts and execute any documents in the name and on behalf of the cooperative society;

(f) borrow money on the security of the property of the cooperative society;

(g) settle or compromise any claims by or against the cooperative society; and

(h) do all other things that he considers necessary for the liquidation of the cooperative society and

distribution of its property.

(2) Where a liquidator has reason to believe that any person has in his possession or under his control

or has concealed, withheld or misappropriated any property of the cooperative society, he may apply

to the special court for an order requiring that person to appear before the court at the time and place

designated in the order and to be examined.

(3) Where the examination mentioned in sub-section (2) discloses that a person has concealed,

withheld or misappropriated property of the cooperative society, the special court may order that

person to restore the property or pay compensation to the liquidator on behalf of the cooperative

society.

(4) No liquidator shall purchase, directly or indirectly, any part of the stock-in-trade, debts or assets of

the cooperative society.

44. Final account (1) A liquidator shall pay the costs of liquidation out of the property of the cooperative society and

shall pay or make adequate provision for all claims against the cooperative society2) After paying or

making adequate provision for all claims against the cooperative society, the liquidator shall apply to

the Registrar for approval of his final accounts and for permission to distribute in money or in kind the

remaining property of the cooperative society in accordance with the byelaws.

(3) Where the Registrar approves the final accounts rendered by a liquidator in pursuance of sub-

section (2), he shall,

(a) issue directions with respect to the custody or disposal of the documents and records of the

cooperative society; and

(b) discharge the liquidator.

(4) Where the Registrar discharges a liquidator in pursuance of sub-section (3), he shall issue a

certificate of dissolution.

(5) The cooperative society ceases to exist on the date shown in the certificate of dissolution which

shall not be later than two years after the appointment of the liquidator.

[Comment: In most cooperative laws in the country, liquidators and those who appoint liquidators,

develop a vested interest in not dissolving the cooperative, and in keeping it undissolved for the

length of time that it is in a position to meet their costs and the costs of other officers. The 1995 Act

requires the liquidation proceedings to be completed within a maximum of two years from the

appointment of the liquidator, thus ensuring that liquidation proceedings are conducted briskly.]



45. Fee for services The Registrar may charge a reasonable fee for any of the services provided by him or by an officer

authorised by him under the provisions of this Act.

[Comment: The 1995 Act has created the space for the emergence of strong, vibrant, member-

sensitive, and member-controlled cooperatives, which should be able to pay for the services provided

by the office of the Registrar. In certain countries, the departments of cooperation have managed to

meet their costs through fee raised from services. In turn, they began to provide technical and support

services to the cooperative movement. It should be possible, over a period of time for the government

department dealing with mutually aided cooperatives to play the role of a development department.]

Statement of Objects and Reasons 1. In early 1960s, cooperative legislation all over the country underwent major changes with a view to

enabling State and Union Governments to play an active role in the promotion and development of

cooperatives. Cooperatives were viewed as important tools to be used by the state to ensure that

disadvantaged sections of people could have access to subsidised credit and other production

inputs, especially in rural areas. In Andhra Pradesh, too, at this time, the Andhra Pradesh

Cooperative Societies Act, 1964 was enacted, and although it was introduced as a consolidation of

the two earlier Acts then prevailing in Andhra and Telengana areas, respectively, it was guided by

the findings of the All India Rural Credit Survey Committee (Gorwala Committee 1954), which

recommended an active role for the state in the spread of the cooperative movement.

2. Over the years, however, increased state participation in the financing and management of

cooperatives has led to an unfortunate situation where cooperatives themselves, by and large, have

started to perceive themselves not as member-controlled, member-sensitive business, guided by the

universally accepted principles of cooperation, but as channels for government subsidies and

largesse. Sound and sustainable cooperative business, accountability, responsibility and self-

reliance have taken a back seat.

3. At a time when deregulation and liberalisation are enabling other forms of business to break new

ground, it appears necessary to enable businesses registered as cooperatives also to have at least the

same degree of freedom to conduct their affairs, if these businesses are to have a fair chance of

being able to compete successfully with other business.

4. Cooperative financing organisations, such as the National Bank for Agriculture and Rural

Development, the National Cooperative Development Corporation and the National Dairy

Development Board have also been seeking ways by which they can where possible deal directly

with cooperative societies without necessarily having to involve government.

5. Given, however, the dependence on government of several cooperative societies, either because of

the very objects of these cooperatives or because of their weak nature, it would appear not very

responsible on the part of the Government to withdraw its support and intervention altogether, or

suddenly. In the case of such cooperatives, the provisions of the AP Cooperative Societies Act,

1964 are considered necessary.

6. On the other hand, the Government recognises that there are some cooperatives which may have

some government funds but are not dependent on such funds or on government assistance in other

forms for their survival. These cooperatives need to be given greater autonomy and encouraged to

pursue the legitimate interests of their members in an effective, self-reliant, responsible,

accountable and democratic manner. The Government also recognises that enabling legislation is

required if ordinary people who expect to benefit from the cooperative form of business, without

being dependent on governmental resources, are to voluntarily promote and effectively develop

services for themselves through their own cooperative societies.



7. In the backdrop of the above changed perception, the Government have decided to undertake

legislation in order to promote self-reliant and autonomous cooperative societies and make the

cooperative movement more vibrant in the State. The salient features of the proposed legislation

are,

(1) to enunciate the cooperative principles which primarily place an accent on voluntary, self-

financing, autonomous bodies far removed from state control;

(2) to enable not less than ten individuals belonging to different families to form a cooperative society

and confer on it the status of a body corporate;

(3) to enable the cooperative societies to regulate their functioning by framing byelaws subject to the

provisions of the Act in respect of the various matters specified in the legislation;

(4) to enable the cooperative societies to change the form or the extent of their liability, to transfer

their assets and liabilities, to divide or amalgamate in furtherance of their stated objectives;

(5) to enable the societies registered under the Andhra Pradesh Cooperative Societies Act, 1964 to

become cooperative societies registered under this Act by making a suitable provision therefor;

(6) to enable the cooperative societies to mobilise their own funds;

(7) to empower the cooperative societies to provide for the qualifications and disqualifications for

membership;

(8) to provide for the constitution, powers and functions of the board of directors and for matters

incidental thereto;

(9) to define the powers and functions of the general body, etc;

(10) to make the cooperative societies responsible to hold the elections and to regulate the process

thereof;

(11) to provide for proper accountability and for that purpose to conduct audit, special audit, inquiry

and for the recovery of loss caused to the society by misconduct or otherwise;

(12) to provide for the settlement of disputes by constituting a cooperative tribunal; and

(13) for other incidental and consequential matters.

8. This bill seeks to give effect to the above decisions.

Devendar Goud

Minister for Cooperation

Background note on Andhra Pradesh Mutually Aided Cooperative Societies Act 1995

The Andhra Pradesh Mutually Aided Cooperative Societies Act of 1995 broke new ground in the

history of the Indian cooperative movement. This is a cooperative law which respects the right of

members to fully own and control their own cooperative enterprise. The enactment, an act of political

courage and wisdom by the Andhra Pradesh Government, was the final step in a long effort to create a

new legislative environment for cooperatives in Andhra Pradesh. Between February and September of

1994, cooperators held several workshops in the state on the need for amending the AP Cooperative

Law. These included a workshop of credit cooperative leaders from across the state, one of dairy

cooperative leaders from all the milk unions, another of eminent cooperators, lawyers, administrators

and others, and a fourth of leaders of political parties in the state. In all the workshops, a strong

recommendation was made to the Government of Andhra Pradesh to change the cooperative law. In

mid-1994, the Cooperative Development Foundation (CDF), a Hyderabad-based organisation

committed to strengthening the cooperative movement in Andhra Pradesh, set up a Study Group on

the AP Cooperative Law, with Shri M Ramakrishnayya (former Deputy Governor, Reserve Bank of

India and former Chairman, Nabard) as chairperson, Shri K Pratap Reddy (Senior Advocate, AP High

Court) and Prof GRS Rao (Chairperson, Centre for Public Policy and Systems, Administrative Staff

College of India) as members. The Study Group presented its report to the CDF in the last week of

December 1994. The process adopted by the Study Group was as educative as the report itself. This

Study Group interviewed several cooperators, academicians, legislators, department officers,

development workers, cooperators working outside the formal framework of the cooperative law,

administrators, jurists, lawyers and others during hearings held in Hyderabad, Tirupathi, Vijayawada,

Visakhapatnam and Warangal. It also sent out a questionnaire to several persons associated with

cooperatives in Andhra Pradesh, elsewhere in India, and abroad.



The Study Group reviewed reports of earlier committees on cooperatives mainly the report of the

Choudhury Brahma Prakash Committee and the Model Act drafted by it. It also reviewed judgements

of the AP High Court relating to cooperatives, as well as judgements of the Supreme Court relating to

fundamental rights - the right to equality before the law, the right to form association and the right to

practice any business - as applicable to cooperatives. The report of the Study Group was formally

presented to the Government of Andhra Pradesh on 2nd February 95, at a special function at which

Shri LC Jain, former Planning Commission Member responsible for the setting up of the Brahma

Prakash Committee and Shri Devender Goud, Minister for Cooperation, were the chief guests. The

Secretary (Cooperation) and Registrar of Cooperatives were also present. Shri Jain and Shri Goud had

also met the Chief Minister Shri NT Rama Rao, and discussed with him the need to change the

cooperative law so that cooperatives could enjoy at least the same degree of freedom as available to

other forms of business. The Chief Minister assured them that his government was committed to

guaranteeing cooperatives full autonomy. Dr V Kurien, Chairman, National Dairy Development

Board, and Dr A Appa Rao, President, Cooperative Development Foundation, met and urged the

Chief Minister to amend the cooperative law to be in consonance with the principles of cooperation.

The Chief Minister unequivocally expressed his commitment to freeing cooperatives from oppressive

legislation, and enabling them to function as member-controlled, member-sensitive, competitive,

voluntary, self-reliant business.

Shri Devender Goud, Minister for Cooperation, Shri VS Sampath, Secretary to the Government, Shri

S Bhalerao, Registrar of Cooperative Societies, and Dr N Jayaprakash Narayan, Secretary to the Chief

Minister, held discussions with several well wishers, development financing agencies and constituents

of the cooperative movement within and outside Andhra Pradesh. Thereafter, the AP Mutually Aided

Cooperative Societies Bill 1995 was drafted.

The Chief Minister discussed the draft in detail with the Minister. The cabinet, after careful review of

the draft, gave its approval. On 4th

May 1995, during the debate on the Bill in the Legislative

Assembly, representatives of all parties - Telugu Desam, Congress, CPI, CPM, BJP - stated their

strong support for this initiative, and when the matter was brought to a vote, it was passed without

dissent. The Andhra Pradesh Mutually Aided Cooperative Societies Act 1995 is a milestone in the

history of the Indian cooperative movement, and it needed a government with foresight, a government

with a holistic appreciation of economic liberalisation, of deregulation, of decentralisation, to bring

about this momentous change.



Comparison of AP Cooperative Laws of 1964 and 1995

Andhra Pradesh

Cooperative Societies Act, 1964

Andhra Pradesh Mutually Aided

Cooperative Societies Act, 1995

1. Principles of Cooperation Not stated in the Act Principles of cooperation as internationally

accepted at the time of enactment are incorporated

in the Act

2. Role of Government

Appoints Registrar; can direct Registrar; can postpone

elections; can exempt cooperatives from legal provisions;

can nominate directors to board; can appoint persons-in-

charge for state level federations; frames rules; can

handle appeals, revisions, reviews; can give directions to

cooperatives regarding reservations on staff; can hold

equity in cooperatives; sets up Special Courts and

Tribunals

Appoints Registrar; can not provide share capital,

but may provide other funds and guarantee to

cooperatives based on memorandum of

understanding that it may enter into with

cooperative; sets up Special Courts and Tribunals

3. Role of Registrar

Registers cooperative at his discretion; registers byelaws;

must approve of transfer of assets & liabilities, of

division, of amalgamation; can compulsorily

amalgamate, divide, etc; can classify cooperatives; can

amend byelaws compulsorily; must approve of all bylaw

amendments; can admit members; must approve of

expulsion of members; can disqualify committee

members; can call for special general meetings and for

meetings of no-confidence; conducts elections; can

supersede committees; appoints persons-in-charge; can

give directions for cooperatives; fixes honorarium to

president; approves of bank in which deposits can be

kept; must approve of investments in own business;

audits; inspects; inquires; can summon documents etc;

can surcharge; can suspend officers; settles disputes;

winds up cooperative; appoints liquidator; can cancel

registration; can recover dues; serves on cooperative

tribunal; sanctions institution of prosecution; handles

appeals, revisions, reviews; can appoint supervisory staff

in cooperatives; constitutes common cadres; approves of

staffing pattern; must approve of appointment/removal of

chief executive where cooperative is in receipt of

government aid

Has to register cooperative and its byelaws if they

are in consonance with the Act; registers

amendments to certain bylaw provisions; takes on

record amendments to most bylaw provisions;

convenes general body meeting where a board fails

to do so in stipulated time; receives annual reports

and audited financial statements; inquires; can

conduct special audit where non-member funds are

involved; can recommend dissolution to the tribunal

if a cooperative works in contravention of the Act

and principles of cooperation, etc

4. Rules

The government is empowered to make rules on every

subject covered by the Act

There is no rule-making power. All affairs of a

cooperative are to be regulated by the provisions of

the Act and the byelaws of the cooperative

5. Multiplicity of cooperatives

Registration can be refused because of non-viability,

conflict of area of jurisdiction, for same class of

cooperative

Registration cannot be refused except if byelaws are

not in accordance with Act, therefore, multiplicity

of organisations possible Registrar does not have

the right to classify cooperatives

6. Membership

In matters of admission, disqualification and expulsion

of members, the Registrar has final say

Admission disqualification and expulsion of

members are the exclusive prerogative of the

cooperative



7. Management

Size of board fixed; term of board fixed; composition of

board fixed; elections by Registrar; reservations on board

Size, term, composition of board left to byelaws;

staggered terms; elections by incumbent board

failing which by ad-hoc committee; disqualification

of all directors for not conducting elections in time,

for not conducting general body meetings in time,

for not placing audited accounts before annual

general meeting

8. Staff

Common cadre possible; too little authority with board;

Registrar must approve staffing pattern, service

conditions, salaries, etc; an improve deputationists from

government

All staff fully accountable to cooperative;

deputationists from government and other

organisations possible if a cooperative so deserves

9. Share capital

Government and other non-members may contribute

share capital

Members alone can contribute share capital and

non-member share capital is forbidden

10. Mobilisation of funds

Cooperatives may mobilise funds within the limits fixed

by Registrar

Cooperatives may mobilise funds within the limits

fixed by byelaws

11. Investment of funds

Investment of funds even in own business restricted;

lending limits are fixed by Registrar

No restriction in investment in own business, but

other investments to be in any non-speculative

manner specified by byelaws

12. Deficit

The issue of deficit not addressed; accumulated deficits

are dealt with at the time of liquidation

Deficit is required to be analysed and dealt with on

an annual basis; members have to meet the deficit

in proportion to their actual use or commitment to

the use of the services of the cooperative during the

year, if the deficit cannot be set off against reasons

13. Audit

Audit is the responsibility of audit wing of the

department; choice of auditors not available to

cooperatives; no penalty for non-conduct of audit

Audit is the responsibility of the board; auditor to

be chartered accountant or from Registrar‘s office

at cooperative‘s discretion; non presentation of

audit report to general body in stipulated time

results in disqualification of all directors

14. Subsidiaries

No subsidiary organisation can be set up by a

cooperative

Subsidiary organisations may be set up by a

cooperative

15. Rights and privilages

Exemptions from payments of contains stamps, duties,

etc

Same as available in 1964 Act

16. Disputes

Registrar or his appointee is the sole arbitrator Bylaws must contain manner of settlement of

disputes, only after which Tribunal has been given

role; Registrar has no role

17 Offences

Offences to be tried by Special Courts; several offences

mentioned in detail and their penalties, too; prior

permission of Registrar necessary for prosecution

Special Courts to look at offences; directors and

officers to prove that they tried to prevent offence,

otherwise held responsible for the offence; any

affected party can move Special Court; any persons

entrusted with responsibility by the Act will be

deemed to have committed offences if the

responsibility is neglected



18. Dissolution

Only by Registrar, only in the event of poor functioning;

voluntary dissolution by members is not possible; no

time limit on liquidation proceedings

By members and by Tribunal; not just because of

non-viability, but also because of lack of interest in

continuing cooperative; for not functioning in

accordance with the Act and Principles of

Cooperation; liquidations proceedings to be

completed in 2 years

19. Final disposal of assets

After dissolution, surplus assets of a cooperative will

vest in Registrar

After dissolution, surplus assets of a cooperative

will be disposed of in accordance with the bylaws

of that cooperative

20. Cooperative

Projected as an instrument for public good, as channal

for distribution of government resources

Defined as instrument of its members for their

economic social betterment, based on mutual aid.



ANNEX 10: THE COMPANIES (AMENDMENT) ACT, 2002.

THE COMPANIES (AMENDMENT) ACT, 2002

No 1 of 2003 [31st December 2002]

An Act, further to amend the Companies Act, 1956

Be it enacted by Parliament in the Fifty-third Year of the Republic of India as follows:-

1. Short title and commencement

(1) This Act may be called the companies (Amendment) Act, 2002. (2) It shall come into force on such date as the Central Government may, by notification in the

Official Gazette, appoint.

2. Insertion of new Part IXA

In the Companies Act, 1956, after Part IX, the following Part shall be inserted namely: -

PART IXA

Chapter I. Producer Companies

581A. In this Part, unless the context otherwise requires

3. Definitions

(a) ―active Member‖ means a member who fulfils the quantum and period of patronage of the

Producer Company as may be required by the articles;

(b) ―Chief Executive‖ means an individual appointed as such under Sub-section (1) of section 581

W;

(c) ―limited return‖ means the maximum dividend as may be specified by the articles;

(d) ―Member‖ means a person or Producer institution (whether incorporated or admitted as a

Member of a Producer Company and who retains the qualification necessary for continuance

as such;

(e) ―inter-State cooperative society‖ means a multi-State cooperative society as defined in clause

(k) of section 3 of the Multi-State Cooperative societies Act, 1984 and includes any

cooperative society registered under any other law for the time being I force, which has,

subsequent to its formation, extended any of its objects to more than one State by enlisting the

participation of persons or by extending any of its activities outside the State, whether directly

or indirectly or through an institution of which it is a Constituent.

(f) ―mutual assistance principles‖ means the principles set out in sub-section (2) of section 581G;

(g) ―officer‖ includes any director or Chief Executive or Secretary or any person in accordance

with whose directions or instructions part or whole of the business of the Producer Company

is carried on;

(h) ―patronage‖ means the use of services offered by the Producer Company to its Members by

participation in its business activities;

(i) ―patronage bonus‖ means payments made by a Producer Company out of its surplus income

to the Members in proportion to their respective patronage;

(j) ―primary produce‖ means-

(i) produce of farmers, arising from agriculture (including animal husbandry, horticulture,

floriculture, pisciculture, viticulture, forestry, forest products, re-vegetation, bee raising



and farming plantation products), or from any other primary activity or service which

promotes the interest of the farmers or consumers; or

(ii) produce of persons engaged in handloom, handicraft and other cottage industries;

(iii) any product resulting from any of the above activities, including by-products of such

products;

(iv) any product resulting from an ancillary activity that would assist or promote any of the

aforesaid activities or anything ancillary thereto;

(v) any activity which is intended to increase the production of anything referred to in sub-

clauses (1) to (iv) or improve the quality there of;

(k) ―Producer‖ means any person engaged in any activity connected with or relatable to any

primary produce;

(l) ―Producer Company‖ means a body corporate having objects or activities specified in section

581B and registered as Producer Company under this Act;

(m) ―Producer institution‖ means a Producer Company or any other institution having only

producer or producers or Producer Company or Producer companies as its member whether

incorporated or not having any of the objects referred to in section 581B and which agrees to

make use of the services of the Producer Company or producer companies as provided in its

articles.

(n) ―with held price‖ means part of the price due and payable for goods supplied by any Member

to the Producer Company; and as withheld by the Producer Company for payment on a

subsequent date.

Chapter 2. Information of Producer Companies and other Matters

581B Objects of Producer Company

(1) The objectives of the Producer Company shall relate to all or any of the following

matters, namely:-

(a) production, harvesting, procurement, grading, pooling, handling, marketing, selling,

export of primary produce of the Members or import of goods or services for their

benefit: provided that the Producer Company may carry on any of the activities

specified in this clause either by itself or through institution

(b) processing including preserving, drying, distilling, brewing, vinting canning and

packaging of produce of its members;

(c) manufacture, sale or supply of machinery, equipment or consumables mainly to its

Members;

(d) providing education on the mutual assistance principles to its Members and others;

(e) rendering technical services, consultancy services, training research and

development and all other activities for the promotion of the interests of its

Members;

(f) generation, transmission and distribution of power, revitalisation of land and water

resources, their use, conservation and communications relatable to primary produce;

(g) insurance of producers or their primary produce;

(h) promoting techniques of mutuality and mutual assistance;

(i) welfare measures or facilities for the benefit of members as may be decided by the

Board.

(j) any other activity, anchillary or incidental to any of the activities referred to in

clauses (a) to (i) or other activities which may promote the principles of mutuality

and mutual assistance amongst the Members in any other manner;

(k) financing of procurement, processing, marketing or other activities specified in

clauses (a) to (j) which include extending of credit facilities or any other financial

services to its Members.



(2) Every Producer Company shall deal primarily with the produce of its active Members

for carrying out any of its objects specified in this section.

581C Formation of Producer Company and its registration

(1) Any ten or more individuals, each of them being a producer or any two or more Producer

institutions, or a combination of ten or more individuals and producer institutions,

desirous of forming a Producer Company having its objects specified in section 581B and

otherwise complying with the requirements of this Part and the provision of this Act in

respect of registration, may form an incorporated Company as a Producer Company under

this Act

(2) If the Registrar is satisfied that all the requirements of this Act have been complied with in

respect of registration and matters precedent and incidental thereto, he shall, within thirty

days of the receipt of the documents required for registration, register the memorandum,

the articles and other documents, if any, and issue a certificate of incorporation under this

Act.

(3) A Producer Company so formed shall have the liability of its Members limited by the

memorandum to the amount, if any, unpaid on the shares respectively held by them and be

termed a company limited by shares.

(4) The Producer Company may reimburse to its promoters all direct costs associated with the

promotion and registration of the company including registration legal fees, printing of a

memorandum and articles and the payment there of shall be subject to the approval at its

first general meeting of the Members.

(5) On registration under sub-section (1) the Producer Company shall become a body

corporate as if it is a private limited company to which the provisions contained in this

Part apply, without, however, any limit to the number of Members thereof, and the

Producer Company shall not, under any Circumstances, whatsoever, become or be deemed

to become a public limited company under this Act.

581D Membership and voting rights of Members of Producer Company

(1) (a) In a case where the membership consists solely of individual members, the voting

rights shall be based on a single vote for every Member, irrespective of his

shareholding or patronage of the Producer Company.

(b) In a case where the membership consists of producer institutions only, the voting

rights of such Producer institutions shall be determined on the basis of their

participation in the business of the Producer Company in the previous year, as may be

specified by articles: Provided that during the first year of registration of a Producer

Company, the voting rights shall be determined on the basis of the shareholding by

such producer institutions.

(c) In case where the membership consists of individuals and Producer institutions, the

voting rights shall be computed on the bases of a single vote for every Member.

(2) The articles of any Producer Company may provide for the conditions, subject to which a

Member may continue to retain his membership, and the manner in which voting rights

shall be exercised by the Members.

(3) Notwithstanding anything contained in Sub-section (I) or sub-section (2) any Producer

Company may, if so authorised by its articles, restrict the voting rights to active Members,

in any special or general meeting.



(4) No person, who has any business interest which is in conflict with business of the

producer shall become a Member of that Company.

(5) A Member, who acquires any business interest which is in conflict with the business of the

Producer Company, shall cease to be a Member of that Company and be removed as a

Member in accordance with articles.

581E Benefits to Members

(1) Subject to provision made in articles, every Member shall initially receive only such value

for the produce or products pooled and supplied as the Board of Producer Company may

determine, and the withheld price may be disbursed later in cash or kind or by allotment of

equity shares, in proportion to the produce supplied to the Producer Company during the

financial year to such extent and in such manner and subject to such conditions as may be

decided by the Board.

(2) Every Member shall, on the share capital contributed, receive only a limited return:

Provided that every such Member may be allotted bonus shares in accordance with the

provisions contained in section 581ZJ.

(3) The surplus if any, remaining after making provision for payment of limited return and

reserves referred to in section 581ZI, may be disbursed as patronage bonus, amongst the

Members, in proportion to their participation in the business of the Producer Company,

either in cash or by way of allotment of equity shares, or both, as may be decided by the

Members at the general meeting.

581F Memorandum of Producer Company

The memorandum of association of every Producer Company shall state-

(a) the name of the company with ―Producer Company Limited ― as the last words of the

name of such Company;

(b) the state in which the registered office of the Producer Company is to situate;

(c) the main objects of the Producer Company shall be one or more of the objects specified in

section 581B;

(d) the names and addresses of the person who have subscribed to the

memorandum;

(e) the amount of share capital with which the Producer Company is to be registered and

division thereof into shares of a fixed amount;

(f) the names, address and occupation of the subscribes being producers, who shall act as the

first directors in accordance with sub-section (2) of section 581J;

(g) that the liability of its members is limited;

(h) opposite to the subscribes name the number of shares each subscriber takes: Provided that

no subscriber shall take less than one share;

(i) in case the objects of the Producer Company are not confined to one state, the States to

whose territories the objects extend.

581G Articles of association



(1) There shall be presented, for registration to the Registrar of the State to which the

registered office of the Producer Company is, stated by the memorandum of association,

to be situate-

(a) memorandum of the Producer Company;

(b) its articles duly signed by the subscribes to the memorandum.

(2) The articles shall contain the following mutual assistance principles,

namely:-

(a) the membership shall be voluntary and available, to all eligible persons who, can

participate or avail of the facilities or service of the Producer Company, and are

willing to accept the duties of membership;

(b) each Member shall, save as otherwise provided in this part, have only a single vote

irrespective of the share holding;

(c) each Producer Company shall be administered by a Board consisting of persons

elected or appointed as directors in the manner consistent with the provisions of this

part and the board shall be accountable to the Members;

(d) save as provided in this part, there shall be limited return on share capital;

(e) the surplus arising out of the operations of the Producer Company shall be distributed

in an equitable manner by-

(i) providing for the development of the business of the Producer Company

(ii) providing for common facilities; and

(iii) distributing amongst the Members,as may be admissible in proportion to their

respective participation in the business;

(f) provision shall be made for the education of Members, employees and others, on the

priniciples of mutuality and techniques of mutual assistance;

(g) the Producer Company shall actively cooperate with other Producer Companies (and

other organisation following similar principles) at local, national or international level

so as to best serve the interest of their Members and the communities it purports to

serve.

(3) Without prejudice to the generality of the foregoing provision of sub-sections (1) and (2),

the articles shall contain the following provisions, namely: -

(a) the qualification for membership, the conditions for continuance or cancellation of

membership and the terms, conditions and procedure for transfer of shares;

(b) the manner of ascertaining the patronage and voting right based on patronage;

(c) subject to the provisions contained in sub-section (1) of section 581N, the manner of

constitution of the Board, its powers and duties, the minimum and maximum number

of directors, manner of election and appointment of directors and retirement by

rotation, qualification for being elected or continuance as such and the terms of office

of the said directors, their powers and duties, conditions for election or co-option of

directors, method of removal of directors and the filling up of vacancies on the Board,

and the manner and the terms of appointment of the Chief Executive;

(d) the election of Chairman, term of office of directors and the Chairman, manner of

voting at the general or special meetings of Members, procedure for voting, by

directors at meetings of the Board, powers of the Chairman and the circumstances

under which the Chairman may exercise a casting vote.

(e) The circumstances under which, and the manner in which, the withheld price is to be

determined and distributed;

(f) The manner of disbursement of patronage bonus in cash or by issue of equity shares,

or both;

(g) The contribution to be shared and related matters referred to in sub-section (2) of

section 581ZI;

(h) The matters relating to issue of bonus shares out of general reserves as set in section

581ZJ;



(i) The basis and manner of allotment of equity shares of the Producer Company in lieu

of the whole or part of sale proceeds of produce or products supplied by the Members;

(j) The amount of reserves, sources from which funds may be raised limitation on raising

of funds, restriction on the use of such funds and the extent of debt that may be

contracted and the conditions thereof;

(k) The credit, loans or advances which may be granted to a Member and the conditions

for the grant of the same ;

(l) The right of any Member to obtain information relating to general business of the

company;

(m) The basis and manner of distribution and disposal of funds available after meeting

liabilities in the event of dissolution or liquidation of the Producer Company;

(n) The authorisation for division, amalgamation, merger, creation of subsidiaries and the

entering into joint ventures and other matters connected therewith;

(o) Laying of the memorandum and articles of the Producer Company before a special

general meeting to be held within ninety days of its registration;

(p) Any other provision, which the Members may, by special resolution recommended to

be included in articles.

581H Amendment of memorandum

(1) A Producer Company shall not alter the conditions contained in its memorandum except in

the cases, by the mode and to the extent for which express provision is made in this Act.

(2) A Producer Company may, by special resolution, not in consistent with section 581B, alter

its objects specified in its memorandum.

(3) A copy of the amended memorandum, together with a copy of the special resolution duly

certified by two directors, shall be field with the Registrar within thirty days from the date

of adoption of any resolution referred to in sub-section (2):

Provided that in the case of transfer of the registered office of a Producer Company from

the Jurisdiction of one Registrar to another, certified copies of the special resolution

certified by two directors shall be filed with both the Registrars with in thirty days, and

each Registrar shall record the same, and there upon the Registrar from whose jurisdiction

the office is transferred, shall forthwith forward to the other Registrar all documents

relating to the Producer Company.

(4) The alteration of the provision of memorandum relating to the change of the place of its

registered office from one State to another shall not take effect unless it is confirmed by

the Company Law Board on Petition.

581-I Amendment of articles

(1) Any amendment of the articles shall be proposed by not less than two-third of the elected

directors or by not less than one-third of the Members of the Producer Company, and

adopted by the Members by a special resolution.

(2) A copy of the amended articles together with the copy of the special resolution, both duly

certified by two directors, shall be filed with the Registrar within thirty days from the date

of its adoption.

581J Option to inter-state cooperative societies to become Producer Companies



(1) Notwithstanding anything contained in sub-section (1) of section 581C, any inter-State

cooperative society with objects not confined to one State may make an application to the

Registrar for registration as Producer Company under this Part.

(2) Every application under sub-section (1) shall be accompanied by-

(a) a copy of the special resolution, of not less than two-third of total members of inter-

state cooperative society, for its incorporation as a Producer Company under this Act;

(b) a statement showing-

(i) names and addresses or the occupation of the directors and Chief Executive, if

any, by whatever name called, so such cooperative and

(ii) list of members of such inter-State cooperative society;

(c) a statement indicating that the inter-state cooperative society is engaged in any one or

more of the objects specified in section 581B;

(d) A declaration by two or more directors of the inter-state cooperative society certifying

that particulars given in clauses (a) to (c) are corrected.

(3) When an inter-state cooperative society is registered as a Producer Company, the words

―Producer Company Limited‖ shall from part of its name with any word or expression to

show its identify preceding it.

(4) On compliance with the requirements of sub-section (1) to (3), the Registrar shall, within a

period of thirty days of the receipt of application, certify under his hand that the inter-state

cooperative society applying for registration is registered and there by incorporated as a

Producer Company under this Part.

(5) A cooperative society formed by producers, by Federation or Union of cooperative

societies of producers or cooperatives of producers, registered under any law for the time

being in force which has extended its objects outside the State, either directly or through a

union or federation of cooperatives of which it is a constituent, as the case may be, and

any federation or Unions of such cooperatives, which has so extended any of its objects or

activities outside the State, shall be eligible to make an application under sub-section (1)

and to obtain registration as a Producer Company under this part.

(6) The inter-state Cooperative society shall, upon registration under sub-section (1), stand

transformed into a Producer Company, and thereafter shall be governed by the provisions

of this part of the exclusion of the law by which it was earlier governed save in so far as

anything done or omitted to be done before its registration anything contained in any other

law for the time being in force, no person shall have any claim against the cooperative

institution or the company by reason of such conversion or transformation.

(7) Upon registration as Producer Company, the Registrar of Companies who registers the

company shall forthwith intimate the Registrar with whom the erstwhile inter-state

cooperative society was earlier registered for appropriate deletion of the society from its

register.

581k Effect of incorporation of Producer Company

Every shareholder of the inter-state cooperative society immediately before the date of

registration of Producer Company (hereafter referred to as the transformation date) shall be

deemed to be registered on and from that date as a shareholder of the Producer Company to

the extent of the face value of the shares held by such shareholder.

581L Vesting of undertaking in Producer Company



(1) All properties and assets, movable and immovable, of or belonging to, the inter-state

cooperative society as on the transformation date, shall vest in the Producer Company.

(2) All the rights debts, liabilities, interests, privileges and obligation of the inter-state

cooperatives society as on the transformation date shall stand transferred to, and be the

rights, debts, liabilities, interests, privileges and obligation of, the Producer Company.

(3) Without prejudice to the provisions contained in sub-section (2), all debts, liabilities and

obligation incurred, all contracts entered into and all matters and things engaged to be

done by, with or for, the society as on the transformation date for or in connection with

their purposes, shall be deemed to have been incurred, entered into, or engaged to be done

by, with or for, the Producer Company.

(4) All sums of money due to inter-state cooperative society immediately before the

transformation date shall be deemed, to be due to the Producer Company.

(5) Every organisation, which was being managed before immediately before the

transformation date by the inter-state cooperative society shall be managed by the

Producer Company for such period, to such extent and in such manner as the

circumstances may require.

(6) Every organisation which was getting financial, managerial or technical assistance from

the inter-state cooperative society, immediately before the transformation date, may

continue to be given financial, managerial or technical assistance, as the case may be, by

the Producer Company, for such period, to such extent and in such manner as that

company may deem fit.

(7) The amount representing the capital of the erstwhile inter-state cooperative society shall

form part of the capital of the Producer Company.

(8) Any reference to the inter-state cooperative society in any law other than this Act or in any

contract or other instrument shall be deemed to be reference to the Producer Company.

(9) If, on the transformation date, there is pending any suit, arbitration, appeal or other legal

proceeding of whatever nature by or against the inter-state cooperative society, the same

shall not abate, be discontinued or be in any way prejudicially affected by reason of the

incorporation of the Producer Company under section 581C or transformation of the inter-

state cooperative society as a Producer Company under section 581J, as the case may be,

but the suit arbitration, appeal or other proceeding, may be continued, prosecuted and

enforced by or against the Producer Company in the same manner and to the same extent

as it would have, or may have been continued, prosecuted and enforced by or against the

inter-state cooperative society as if the provisions contained in this Part had not come into

force.

581M Concession etc to be deemed to have been granted to Producer Company

With effected from the transformation date, all fiscal and other concessions, license, benefits,

privileges and exemptions granted to the inter-state cooperative society in connection with the

affairs and business of the inter-state cooperative society under any law for the time being in

force shall be deemed to have been granted to the Producer Company.

581N Provisions in respect of officers and other employees of inter-State cooperative society



(1) Notwithstanding anything contained in section 581-O, all the directors in the inter-state

cooperative society before the incorporation of the Producer Company shall continue in

office for a period of one year from the transformation date and in accordance with the

provisions of this Act.

(2) Every officer or other employee of the inter-state cooperative society (except a director of

the Board, Chairman or Managing Director) serving in its employment immediately

before the transformation date shall, in so far as such officer or other employee is

employed in connection with the inter-state cooperative society which has vested in the

Producer Company by virtue of this Act, become as from the transformation date, an

officer or as the case may be, other employee of the Producer Company and shall hold his

office or service therein by the same tenure, all the same remuneration, upon the same

terms and conditions. With the same obligations and scheme, medical benefit scheme,

insurance, provident fund, other funds, retirement, voluntary retirement, gratuity and other

benefits as he would have held under the erstwhile inter-state cooperative society if its

undertaking had not vested in the Producer Company and shall continue to do so as an

officer or, as the case may be, other employee of the Producer Company

(3) Where an officer or other employee of the inter-state cooperative society opts under sub-

section (2) not to be in employment or service of the Producer Company such officer or

other employee shall be deemed to have resigned.

(4) Notwithstanding anything contained in the Industrial Disputes Act, 1947 or in any other

law for the time being in force, the transfer of the services of any officer or other

employees of the inter-state cooperative society to the Producer Company shall not entitle

such officer or other employee to any compensation under this Act or under any other law

the time being in force and no such claim shall be entertained by any court, tribunal or

other authority.

(5) The officers and other employees who have retired before the transformation date from

the service of the inter-state cooperative society and are entitled to any benefits, rights or

privileges, shall be entitled to receive the same benefits, rights or privileges from the

Producer Company.

(6) The trusts of the provident fund or the gratuity fund of the inter-state cooperative society

and any other bodies created for the welfare of officer or employees shall continue to

discharge function in the Producer Company as was being done hitherto in the inter-state

cooperative society and any tax exemption granted to the provident fund or the gratuity

fund would continue to be applied to the Producer Company.

(7) Notwithstanding anything contained in this Act or any other law for the time being in

force or in the regulations of the inter-state cooperative society, no director of the Board

Chairman, Managing Director or any other person entitled to manage the whole or

substantial part of the business and affairs of the inter-state cooperative society shall be

entitled to any compensation against the inter-state cooperative society or the Producer

Company for the loss of Office or for the premature termination of any contract of

management entered into by him with the inter-state cooperative society.



Chapter 3 Management of Producer Company

581-O Number of directors

Every Producer Company shall have at least five and not more than fifteen directors:

Provided that in the case of an inter-sState cooperative society incorporated as a Producer

Company, such company may have more than fifteen directors for a period of one year from

the date of its incorporation as a Producer Company.

581P Appointment of directors

(1) Save as provided in section 581N, the Members who sign the memorandum and the

articles may designate there in the Board of Directors (not less than five) who shall govern

the affairs of the Producer Company until the directors are elected in accordance with the

provisions of this section.

(2) The election of directors shall be conducted with in period of ninety days of the

registration of the Producer Company:

Provided that in the case of an inter-state cooperative society which has been registered as

a Producer Company under sub-section (4) of section 581J in which at least five directors

including the directors continuing in office under sub-section (1) of section 581N hold

office as such on the date of registration of such company, the provision of this sub-

section shall have effect as if for the words ―ninety days‖ the words three hundred and

sixty five days‖ had been substituted.

(3) Every person shall hold office of a director for a period not less than one year but not

exceeding five years as may be specified in the articles.

(4) Every director, who retires in accordance with the articles, shall be eligible for re-

appointment as a director.

(5) Save as provided in sub-section (2), the directors of the board shall be elected or appointed

by the Members in the annual general meeting.

(6) The Board may co-opt one or more expert directors or an additional director not exceeding

one-fifth of the total number of directors or appoint any other person as additional director

for such period as the Board may deem fit:

Provided that the expert directors shall not have the right to vote in the election of the

Chairman but shall be eligible to be elected as Chairman, if so provided by its articles:

Provided further that the maximum period, for which the expert director or the additional

director holds office, shall not exceed such period as may be specified in the articles

581Q Vacation of office by directors

(1) The office of the director of a Producer Company shall become vacant if –

(a) he is convicted by a Court of any offence involving moral turpitude and sentenced in

respect there of to imprisonment for not less than six months;

(b) the Producer Company, in which he is a director, has made a default in repayment of

any advances or loans taken from any company or institution or any other person and

such default continues for ninety days;



(c) ha has made a default in repayment of any advances or loans taken from the Producer

Company in which he is a director;

(d) the Producer Company, in which he is a director-

(i) has not filed the annual accounts and annual return for any continuous three

financial years commencing on or after the 1st day of April, 2002;or

(ii) has failed to, repay its deposit or withheld price or patronage bonus or interest

thereon on due date, or pay divided and such failure continues for one year or

more;

(e) default is made in holding election for the office of director, in the Producer Company

in which he is a director, in accordance with the provisions of this Act and articles;

(f) the annual general meeting or extraordinary general meeting of the Producer

Company, in which he is a director, is not called in accordance with the provisions of

this Act except due to natural calamity or such other reason.

(2) The provisions of sub-section (1) shall, as far as may be, apply to the director of a

producer institution which is a member of a Producer Company.

581R Powers and functions of Board

(1) Subject to the provision of this Act and articles, the board of directors of a Producer

Company shall exercise all such powers and to do all such acts and things, as that

company is authorised so to do

(2) In particular and without prejudice to the generality of the foregoing powers, such powers

may include all or any of the following matters, namely:-

(a) determination of the dividend payable;

(b) determination of the quantum of withheld price and recommend patronage to be

approved at general meeting;

(c) admission of new Members;

(d) pursue and formulate the organisational policy, objectives, establish specific long-

term and annual objectives, and approve corporate strategies and financial plans;

(e) appointment of Chief Executive and such other officers of the Producer Company, as

may be specified in the articles;

(f) exercise superintendence, direction and control over Chief Executive and other

officers appointed by it;

(g) cause proper books of account to be maintained; prepare annual accounts to be placed

before the annual general meeting with the auditor‘s report and the replies on

qualifications, if any, made by the auditors;

(h) acquisition or disposal of property of the Producer Company in its ordinary course of

business;

(i) investment of the funds of the Producer Company in the ordinary course of its

business;

(j) sanction any loan or advance, in connection with the business activities of the

Producer Company to any Member, not being a director or his relative;

(k) take such other measures or do such other acts as may be required in this discharge of

its functions or exercise of its powers.

(3) All the powers specified in sub-section (1) and (2) shall be exercised by the Board, by

means of resolution passed at its meeting on behalf of the Producer Company.

Explanation-For the removal of doubts, it is hereby declared that a director or a group of

directors, who do not constitute the Board, shall not exercise any of the powers

exercisable by it.



581S Matters to be transacted at general meeting.

(1) The Board of directors of a Producer Company shall exercise the following powers on

behalf of that company, and it shall do so only by means of resolutions passed at the

annual general meeting of its Members, namely:-

(a) approval of budget and adoption of annual accounts of the Producer Company;

(b) approval of patronage bonus;

(c) issue of bonus shares;

(d) declaration of limited return and decision on the distribution of patronage;

(e) specify the conditions and limits of loans that may be given by the board to any

director ;and

(f) approval of any transaction of the nature as is to be reserved in the articles for

approval by the Members.

581T Liability of directors

(1) When the directors vote for a resolution, or approve by any other means, anything done in

contravention of the provisions of this Act or any other law for the time being in force or

articles, they shall be jointly and severally liable to make good any loss or damage

suffered by the Producer Company.

(2) Without prejudice to the provisions contained in sub-section (1), the Producer Company

shall have the right to recover from its director-

(a) where such director has made any profit as a result of the contravention specified in

sub-section (1), an amount equal to the profit so made;

(b) where the Producer Company incurred a loss or damage as a result of the

contravention specified in sub-section (1), an amount equal to that loss or damage;

(3) The liability imposed under this section shall be in addition to and not in derogation of a

liability imposed on a director under this act or other law for the time being in force.

581U Committee of director

(1) The Board may constitute such number of committees as it may deem fit for the purpose of

assisting the Board in the efficient discharge of its functions: Provided that the Board shall

not delegate any of its powers or assign the powers of the Chief Executive, to any

committee.

(2) A committee constituted under sub-section (1) may, with the approval of the Board, co-

opt such number of persons as it deems fit as members of the committee:

Provided that the Chief Executive appointed under section 581W or a director of the

Producer Company shall be a member of such committee.

(3) Every such committee shall function under the general superintendence, direction and

control of the Board, for such duration, and in such manner as the Board may direct.

(4) The fee and allowances to be paid to the members of the committee shall be such as may

be determined by the Board.

(5) The minutes of each meeting of the committee shall be placed before the Board at its next

meeting.



581V Meetings of Board and quorum

(1) A meeting of the Board shall be held not less than once in every three months and at least

four such meetings shall be held in every year.

(2) Notice of every meeting of the Board of directors shall be given in writing to every

director for the time being in India, and at his usual address in India to every other

director.

(3) The Chief Executive shall give notice as aforesaid not less than seven days prior to the date

of the meeting of the Board and if he fails to do so, he shall be punishable with fine which

may extend to one thousand rupees:

Provided that a meeting of the Board may be called at the Board thereof shall record

shorter notice and the reasons in writing.

(4) The quorum for a meeting of the Board shall be one-third of the total strength of directors,

subject to a minimum of three.

(5) Save as provided in the articles, directors including the co-opted director; may be paid

such fees and allowances for attendance at he meeting of the Board, as may be decided by

the Member in the general meeting.

581W Chief Executive and his Functions

(1) Every Producer Company shall have a full time Chief Executive, by whatever name called,

to be appointed by the Board from amongst persons other than Members.

(2) The Chief Executive shall be ex-officio director of the Board and such director shall not

retire by rotation.

(3) Save as otherwise provided in articles, the qualifications, experience and the terms and

conditions of service of the Chief Executive shall be such as may be determined by the

Board.

(4) The Chief Executive shall be entrusted with substantial powers of management as the

Board may determine.

(5) Without prejudices to the generality of sub-section (4), the Chief Executive may exercise

the powers and discharge the functions, namely:-

(a) do administrative acts of a routine nature including managing the day-to-day affairs

of the Producer Company.

(b) operate bank accounts or authorise any person, subject to the general or special

approval of the Board in this behalf, to operate the bank account;

(c) make arrangements for safe custody of cash and other assets of the Producer

Company;

(d) sign such documents as may be authorised by the Board, for and on behalf of the

company;

(e) maintain proper books of account; prepare annual accounts and audit thereof; place

the audited accounts before the Board and in the annual general meeting of the

Members;

(f) furnish Members with periodic information to appraise them of the operation and

functions of the Producer Company;

(g) make appointment to posts in accordance with the powers delegated to him by the

Board;



(h) assist the Board in the formulation of goals, objectives, strategies, plans and policies;

(i) advise the Board with respect to legal and regulator matters concerning the proposed

and on going activities and take necessary action in respect thereof;

(j) exercise the powers as may be necessary in the ordinary course of business;

(k) discharge such other functions, and exercise such other powers, as may be delegated

by the Board.

(6) The Chief Executive shall manage the affairs of the Producer Company under the general

superintendence, direction and control of the Board and be accountable for the

performance of the Producer Company.

581X Secretary of Producer Company

(1) Every Producer Company having an average annual turnover exceeding five crore rupees

in each of three consecutive financial years shall have a whole-time secretary.

(2) No individuals shall be appointed as whole-time secretary unless he possesses membership

of the Institute of Company Secretaries of India constituted under the Company Act, 1980.

(3) If a Producer Company fails to comply with the provisions of sub-section (1), the company

and every officer of the company who is in default, shall be punishable with fine which

may extend to five hundred rupees for every day during which the default continues:

Provided that in any proceedings against a person in respect of an offence under this sub-

section, it shall be a defence to prove that all reasonable efforts to comply with the

provisions of sub-section (1) were taken the financial position of the company was such

that it was beyond its capacity to engage a whole-time secretary.

581Y Quorum

Unless the articles require a larger number, one-forth of the total membership shall constitute

the quorum at a general meeting.

581Z Voting rights

Save as otherwise provided in sub-sections (1) and (3) section 581D, every Member shall have

one vote and in the case of equality of votes, the Chairman or the person presiding shall have a

casting vote except in the case of election of the Chairman.

Chapter 4. General Meetings

581ZA Annual general meetings

(1) Every Producer Company shall in each year, hold, in addition to any other meetings, a

general meeting, as its annual meeting and shall specify the meeting as such in the notices

calling it, and not more than fifteen months shall elapse between the date of one annual

general meeting of a Producer Company and that of the next:

Provided that the Registrar may, for any special reason, permit extension of the time for

holding any annual general meeting (not being the first annual general meeting) by a

period not exceeding three months.

(2) A Producer Company shall hold its first annual general meeting within a period of ninety

days from the date of its incorporation.



(3) The Members shall adopt the articles of the Producer Company and appoint directors of its

Board in the annual general meeting.

(4) The notice calling the annual general meeting shall be accompanied by the following

documents, namely:-

(a) the agenda of the annual general meeting;

(b) the minutes of the previous annual general meeting or the extra-ordinary general

meeting;

(c) the names of candidates for election, if any, to the office of director indicating a

statement of qualification in respect of each candidate;

(d) the audited balance-sheet and profit and loss accounts of the Producer Company and

its subsidiary, if any, together with a report of the Board of Directors of such

Company with respect to-

(i) the state of affairs of the Producer Company;

(ii) the amount proposed to be carried to reserves;

(iii) the amount to be paid as limited return on share capital;

(iv) the amount proposed to be disbursed as patronage bonus;

(v) the material changes and commitments, if any, affecting the financial position of

the Producer Company and its subsidiary, which have occurred in between the

date of the date of the annual accounts of the Producer Company to which the

balance-sheet relates and the date of the report of the Board;

(vi) any other matter of importance relating to energy conservation, environmental

protection, expenditure or earnings in foreign exchanges;

(vii) any other matter which is required to be, or may be, specified by the Board;

(e) the next of the draft resolution for appointment of auditors;

(f) the text of any draft resolution proposing amendment to the memorandum or articles

to be considered at the general meeting, along with the recommendations of the

Board.

(4) The Board of directors shall, on the requisition made in writing, duly signed and setting

out the matters for the consideration, made by one-third of the Members entitled to vote in

any general meeting, proceed to call an extraordinary general meeting in accordance with

the provision contained in sections 169 to 186 of this Act.

(5) Every annual general meeting shall be called, for a time during business hours, on a day

that is not public holiday and shall be held at the registered office of the Producer

Company or at some other place within the city, town or village in which the registered

office of the Company is situate.

(6) A general meeting of the Producer Company shall be called by giving not less than

fourteen days prior notice in writing.

(7) The notice of the general meeting indicating the date, time and place of the meeting shall

be sent to every Member and auditor of the Producer Company.

(8) Unless the articles of the Producer Company provide for a large number, one-fourth of the

total number of members of the Producer Company shall be the quorum for its annual

general meeting.

(9) The proceedings of every annual general meeting along with the Directors‘ Report, the

audited balance-sheet and the profit and loss account shall be filed with the Registrar

within sixty days of the date on which the annual general meeting is held, with an annual

return along with the filing fees as applicable under the Act.



(10) In the case where a Producer Company is formed by Producer institutions, such

institutions shall be represented in the general body through the Chairman or the Chief

Executive there of who shall be competent to act on its behalf:

Provided that a Producer institution shall not be represented if such institution makes a

default or failure referred to in clauses (d) to (f) of sub-section (1) of section 581Q.

Chapter 5 Share Capital and Members Rights

581ZBShare capital

(1) The share capital of Producer Company shall consist of equity shares only.

(2) The shares held by a Member in a Producer Company shall as far as may be, be in

proportion to the patronage of that company.

581ZC Special user rights

(1) The producers, who are active Members may, if so provided In the articles, have special

rights and the Producer Company may issue appropriate instruments to them in respect of

such special rights.

(2) The instruments of the Producer Company issued under sub-section (1) shall, after

obtaining approval of the Board in that behalf, be transferable to any other active Member

of that Producer Company.

Explanation.- For the purposes of this section, the expression ―special right‖ means any

right relating to supply to additional produce by the active Member or any other right

relating to his produce which may be conferred upon him by the Board.

581ZD Transferability of shares and attendant rights

(1) Save as otherwise provided in sub-section (2) to (4), the shares of a Member of Producer

Company shall not be transferable.

(2) A Member of a Producer Company may, after obtaining the previous approval of the

Board, transfer the whole or part of his shares along with any special rights, to an active

Member at par value.

(3) Every Member shall, within three months of his becoming a Member in the Producer

Company, nominate, in the manner specified in articles, a person to whom his shares in

the Producer Company shall vest in the event of his death.

(4) The nominee shall, on the death of the Member, become entitled to all the rights in the

shares of the Producer Company and the Board of that Company shall transfer the shares

of the deceased Member to his nominee: Provided that in a case where such nominee is

not a producer, the Board shall direct the surrender of shares together with special rights,

if any, to the Producer Company at par value or such other value as may be determined by

the Board.

(5) Where the Board of a Producer Company is satisfied that-

(a) any Member has ceased to be a primary producer; or

(b) any Member has failed to retain his qualifications to be a Member as specified in

articles, the Board shall direct the surrender of shares together with special rights, if

any, to the Producer Company at par value or such other value as may be determined

by the Board: Provided that the Board shall not direct such surrender of shares unless

the member has been served with a written notice and given an opportunity of being

heard.



Chapter 6. Finance, Accounts and Audit

581ZE Books of account

(1) Every Producer Company shall keep at its registered office proper books of account with

respect to-

(a) all sums of money received and expended by the Producer Company and matters in

respect of which the receipts and expenditure take place;

(b) all sales and purchase of goods by the Producer Company;

(c) the instruments of liability executed by or on behalf of the Producer Company;

(d) the assets and liabilities of the Producer Company;

(e) in case of a Producer Company engaged in production, processing and

manufacturing, the particulars relating to utilisation of materials or labour or other

items of costs.

(2) The balance-sheet and profit and loss accounts of the Producer Company shall be

prepared, as far as may be, in accordance with the provision contained in section 211.

581ZF Internal Audit

Every Producer Company shall have internal audit of its accounts carried out, at such interval

and in such manner as may be specified in articles, by a chartered accountants as defined in

clause (b) of sub-section (1) of section 2 of the institute of Chartered Accountants Act, 1949.

581ZGDuties of Auditor under this part

Without prejudices to the provisions contained in section 227, the auditor shall report on the

following additional matters relating to the Producer Company, namely:-

(a) the amount of debts due along with particulars or bad debts if any;

(b) the verification of cash balance and securities;

(c) the details of assets and liabilities;

(d) all transactions which appear to be contrary to the provisions of this part;

(e) the loans given by the Producer Company to the directors;

(f) the donations or subscriptions given by the Producer Company;

(g) any other matter as may be considered necessary by the auditor.

581ZH Donations or subscription by Produce Company

A Producer Company may, by special resolution, make donation or subscription to any

institution or individual for the purpose of –

(a) promoting the social and economic welfare of Producer Members or producer or

general public; or

(b) promoting the mutual assistance principles: Provided that the aggregate amount of all

such donation and subscription in any financial year shall not exceed three percent. Of

the net profit of the Producer Company in the financial year immediately preceding

the financial year in which the donation or subscription was made:

Provided further that no Producer Company shall make directly or indirectly to any political

party or for any political purpose to any person any contribution or subscription or make

available any facilities including personnel or material.



581ZI General and other reserves

(1) Every Producer Company shall maintain a general reserve in every financial year, in

addition to any reserve maintained by it as may be specified in articles.

(2) In case where the Producer Company does not have sufficient funds in any financial

year for transfer to maintain the reserves as may be specified in articles, the contribution

to the reserve shall be shared amongst the Members in proportion to their patronage in

the business of that company in that year.

581ZJ Issue of bonus shares

Any Producer Company may, upon recommendation of the Board and passing resolution in

the general meeting, issue bonus shares by capitalisation of amounts from general reserves

referred to in section 581ZI in proportion to the shares held by the Members on the date of

the issue of such shares.

Chapter 7. Loans to Members and Investments

581ZK Loan, etc to Members

The Board may, subject to the provision made in articles, provide financial assistance to the

Members of the Producer Company by way of –

(a) credit facility, to any Member, in connection with the business of the Producer

Company, for a period not exceeding six months;

(b) Loan and advances, against security specified in articles to any Member, repayable

within a period exceeding three months but not exceeding seven years from the date of

the disbursement of such loan or advances: Provided that any loan or advance to any

director or his relative shall be granted only after the approval by the Members in the

general meeting.

581ZL Investment in other companies. formation of subsidiaries etc

(1) The general reserves of any Producer Company shall be invested to secure the highest

returns available from approved securities, fixed deposits, units, bonds issued by the

Government or cooperative or scheduled bank or in such other mode as may be

prescribed.

(2) Any Producer Company may, for promotion of its objectives acquire the shares of

another Producer Company.

(3) Any Producer Company may subscribe to the share capital of, or enter into any

agreement or other arrangement, whether by way of formation of its subsidiary

company, joint venture or in any other manner with any body corporate, for the purpose

of promoting the objects of the Producer Company by special resolution in this behalf.

(4) Any Producer Company, either by itself or together with its subsidiaries, any invest, by

way of subscription, purchase or otherwise, shares in any other company, other then a

Producer Company, specified under sub-section (2), or subscription of capital under

sub-section (3), for an amount not exceeding thirty percent, of the aggregate of its paid-

up capital and free reserves: Provided that a Producer Company may by special

resolution passed in its general meeting and with prior approval of the Central

Government, invest in excess of the limits specified in this section.



(5) All investments by a Producer Company may be made if such investments are

consistent with the objects of the Producer Company.

(6) The Board of a Producer Company may, with the previous approval of Member by a

special resolution, dispose of any of its investments referred to in sub-section (3) and (4).

(7) Every Producer Company shall maintain a register containing particulars of all the

investments, showing the names of the companies in which shares have been acquired,

number and value of shares; the date of acquisition; and the manner and price at which

any of the shares have been subsequently disposed of.

(8) The register referred to in sub-section (7) shall be kept at the registered office of the

Producer Company and the same shall be open to inspection by any Member who take

extracts therefrom.

Chapter 8. Penalties

581ZM Penalty for contravention

(1) If any person, other than a Producer Company registered under this part, carries on

business under any name which contains the words ―Producer Company Limited ― he

shall be punishable with fine which may extend to ten thousand rupees for every day

during which such name has been used by him.

(2) If any director or an officer of a Producer Company, who with fully fails to furnish any

information relating to the affairs of the Producer Company required by a Member or a

person duly authorised in this behalf, he shall be liable to imprisonment for a return

which extend to six months and with fine equivalent to five per cent of the turnover of

that company during preceding financial year.

(3) If a director or officer of a Producer Company-

(a) makes a default in handing over the custody of books of account and other

documents or property in his custody to the Producer Company of which he is a

director or officer; or

(b) fails to convene annual general meeting or other general meetings, he shall be

punishable with fine which may extend to one lakh rupees, and in the case of a

continuing default or failure, with an additional fine which may extend to ten

thousand rupees for every day during which such default or failure continues.

Chapter 9. Amalgamation, Merger or Division

581ZN Amalgamation, merger or division etc to form new Producer Companies

(1) A Producer Company may, by a resolution passed at its general meeting,-

(a) decide to transfer its assets and liabilities, in whole or in part, to any other Producer

Company, which agrees to such transfer by a resolution passed at its general

meeting, for any of the objects specified in section 581B.

(b) divide itself into two or more new Producer Companies.

(2) Any two or more Producer Companies may, by a resolution passed at any general or

special meetings of its Members, decide to-

(a) amalgamate and form a new Producer Company; or

(b) merge one Producer Company (hereafter referred to as ―merging company‖) with

another Producer Company (hereafter referred to as ―merging company‖)

(3) Every resolution of Producer Company under this section shall be passed at its general

meeting by a majority of total Members, with right of vote not less than two-thirds of its

Members present and voting and such resolution shall contain all particulars of the

transfer of assets and liabilities, or division, amalgamation, or merger, as the case may

be.



(4) Before passing a resolution under this section, the Producer Company shall give notice

thereof in writing together with a copy of the proposed resolution to all the Members

and creditors who may their consent.

(5) Notwithstanding anything contained in articles or in any contract to the contrary, any

Member, or any creditor not consenting to the resolution shall, during the period of one

month of the date of service of the notice on him, have the option,-

(a) in the case of any such Member, to transfer his shares with the approval of the

Board to any active Member thereby ceasing to continue as a Member of that

company; or

(b) in the case of a creditor, to withdraw his deposit or loan or advance, as the case may

be.

(6) Any Member or creditors, who does not exercise his option within the period specified

in sub-section (5), shall be deemed to have consented to the resolution.

(7) A resolution passed by a Producer Company under this section shall not take effect until

the expiry of one month or until the assent thereto of all the Members and creditors has

been obtained, whichever is earlier.

(8) The resolution referred to in this section shall provide for-

(a) the regulation of conduct of the Producer Company‘s affairs in the future;

(b) the purchase of shares or interest of any Member of the Producer Company by

other Members or the Producer Company;

(c) in the case of purchase of shares of the Producer Company by another Producer

Company, the consequent reduction of its share capital;

(d) termination, setting aside or modification of any agreement, however arrived

between the company on the one hand and the directors, secretaries and manager on

the other hand, apart from such terms and conditions as may, in the option of the

majority of shareholders, be just and equitable in the circumstances of the case;

(e) termination, setting aside or modification of any agreement between the Producer

Company and any person not referred to in clause (d): Provided that no such

agreement shall be terminated, set aside or modified except after giving due notice

to the party concerned: Provided further that no such agreement shall be modified

except after obtaining the consent of the party concerned;

(f) the setting aside of any transfer, delivery of goods, payment, execution or other act

relating to property, made or done by or against the Producer Company within three

months before the date of passing of the resolution, which would if made or done

against any individual, be deemed in his insolvency to be a fraudulent preference;

(g) the transfer to the merged company of the whole or any part of the undertaking,

property or liability of the Producer Company

(h) the allotment or appropriation by the merged company of any shares, debentures,

policies, or other like interests in the merged Company;

(i) the continuation by or against the merged company of any legal proceedings

pending by or against any Producer Company;

(j) the dissolution, without winding-up, of any Producer Company;

(k) the provision to be made for the Members or creditors who make dissent;

(l) the taxes if any, to be paid by the Producer Company;

(m) such incidental, consequential and supplemental matters as are necessary to secure

that the division, amalgamation or merger shall be fully and effectively carried out.

(9) When a resolution passed by a Producer Company under this section takes effect, the

resolution shall be a sufficient conveyance to vest the assets and liabilities in the

transferee.

(10) The Producer Company shall make arrangement for meeting in full or otherwise

satisfying all claims of the Members and creditors who exercise the option, within the

period specified in the sub-section (4), not to continue as the Member or creditor, as the

case may be.



(11) Where the whole of the assets and liabilities of a Producer Company are transferred to

another Producer Company in accordance with the provisions of sub-section (9), or

where there is merger under sub-section (2) the registration of the first mentioned

Company or the merging company, as the case may be, shall stand cancelled and that

Company shall be deemed to have been dissolved and shall cease to exist forth with as

corporate body.

(12) Where two or more Producer Companies are amalgamated into a new Producer

Company in accordance with the provisions of sub-section (2) and the Producer

Company so formed is duly registered by the Registrar, the registration of each of the

amalgamating companies shall stand cancelled forthwith on such registration and each

of the Companies shall thereupon cease to exist as a corporate body.

(13) Where a Producer Company divides itself into two or more Producer Companies in

accordance with the provisions of clause (b) of sub-section (1) and the new Producer

Companies are registered in accordance with the provisions of sub-section (8), the

registration of erstwhile Producer Company shall stand cancelled forthwith and that

Company shall be deemed to have been dissolved and cease to exist as a corporate body.

(14) The amalgamation, merger or division of companies under the foregoing sub-section shall

not in any manner whatsoever affect the pre-existing rights or obligations and any legal

proceedings that might have been continued or commenced by or against any erstwhile

company before the amalgamation, merger or division, may be continued or

commenced by, or against, the concerned resulting company, or merged company, as

the case may be.

(15) The Registrar shall strike off the names of every Producer Company deemed to have

been dissolved under sub-sections (11) to (14)

(16) Any member or creditor or employee aggrieved by the transfer of assets, division,

amalgamation or merger may, with thirty days of the passing of the resolution, prefer an

appeal to High Court.

(17) The High Court shall, after giving a reasonable opportunity to the person concerned,

pass such orders thereon as it may deem fit.

(18) Where an appeal has been filed under sub-section (16), the transfer of assets, division,

amalgamation or merger of the Producer Company shall be subject to the decision of the

High Court.

Chapter 10. Resolution of Disputes

581ZO Disputes

(1) Where any dispute relating to the formation, management or business of a Producer

Company arises-

(a) amongst Members, former Members or persons claiming to be Members or

nominees of deceased Members; or

(b) between a Member, former Member or a person claiming to be a Member, or

nominee of deceased Member and the Producer Company, its Board of directors,

office-bearers, or liquidator, past or present; or

(c) between the Producer Company or its Board, and any director, office-bearer or any

former director, or nominee, heir or legal representative of any deceased director of

the Producer Company, such dispute shall be settled by conciliation or by arbitration

as provided under the arbitration and conciliation Act, 1996 as if the parties of the

dispute have consented in writing for determination of such disputes by

conciliation or by arbitration and the provisions of the said Act shall apply

accordingly.

Explanation:- For the purpose of this section, a dispute shall include-

(a) a claim for any debt or other amount due;

(b) a claim surety against the principal debtor, where the Producer Company has

recovered from the surety amount in respect of any debtor or other amount due



to it from the principal debtor as a result of the default of the principle debtor

whether such debt of amount due be admitted or not;

(c) a claim by Producer Company against a Member for failure to supply produce

as required of him.

(d) A claim by a Member against the Producer Company for not taking goods

supplied by him.

(2) If any question arises whether the dispute relates to formation, management or business

of the Producer Company, the question shall be referred to the arbitrator, whose

decision thereon shall be final.

Chapter 11. Miscellaneous Provisions

581ZP Strike off name of Producer Company

(1) Where a Producer Company fails to commence business within one year of its

registration or ceases to transact business with the Members or if the Registrar is

satisfied, after making such inquiry as he thinks fit, that the Producer Company is no

longer carrying on any of its objects specified in section 581B, he shall make an order

striking off the name of the Producer Company, which shall thereupon cease to exist

forthwith: Provided that no such order canceling the registration as aforesaid shall be

passed until a notice to show cause has been given by the Registrar to the Producer

Company with a copy to all its directors on the proposed action and reasonable

opportunity to represent its case has been given.

(2) Where the Registrar has reasonable cause to believe that a Producer Company is not

maintaining any of the mutual assistance principles specified, he shall strike its name off

the register in accordance with the provisions contained in section 560 of this Act.

(3) Any member of a Producer Company, who is aggrieved by an order made under sub-

section (1), may appeal to the company Law Board within sixty days of the order.

(4) Where an appeal is filed under sub-section (3), the order striking off the name shall not

take effect until the appeal is disposed of.

581ZQ Provisions of this Part to override other laws

The provision of this Part shall have effect notwithstanding anything inconsistent therewith

contained in this Act or any other law for the time being in force or any instrument having

effect by virtue of any such law; but the provisions of any such Act or law or instrument in

so far as the same are not varied by, or are inconsistent with, the provisions of this Part shall

apply to the Producer Company.

581ZR Application of provisions relating to private companies

All the limitations, restrictions and provisions Act, other than those specified in this Part,

applicable to a private company, shall as far as may be, apply to a Producer Company, as if

it is a private limited company under this Act in so far as they are not in conflict with the

provisions of this part.



Chapter 12. Reconversion of Producer Company to Inter-State Cooperative Society

581ZS Reconversion of Producer Company to inter-state cooperative society

(1) Any Producer Company, being an erstwhile inter-state cooperative society, formed and

registered under this Part, may make an application-

(a) after passing a resolution in the general meeting by not less than two-third of its

Members present and voting; or

(b) on request by its creditors representing three-fourth value of its total creditors.

to the High Court for its re-conversion to the inter-State cooperative society.

(2) The High Court shall, on the application made under sub-section (1), direct holding

meeting of its Members or such creditors, as the case may be, to be conducted in such

manner as it may direct.

(3) If a majority in number representing three-fourth in value of the creditors, or Members,

as the case may be, presented and voting in person at the meeting conducted in

pursuance of the directions of the High court under sub-section (2), agree for re-

conversion, if sanctioned by the High Court, be binding on all the Members and all the

creditors, as the case may be, and also on the company which is being converted:

provided that no order sanctioning re-conversion shall be made by the Court unless the

Court is satisfied that the company or any other person by whom an application has

been made under sub-section (1) has disclosed to the Court, by affidavit or otherwise, all

material facts relating to the company, such as the latest financial position of the

company, the latest auditor‘s report on the accounts of the company, the tendency of any

investigation proceedings in relation to the company under section 235 to 251, and the

like.

(4) An order made by the Court under sub-section (3) shall have no effect until a certified

copy of the order has been filed with the Registrar.

(5) A copy of every such order shall be annexed to every copy of the memorandum of the

company issued after the certified copy of the order has been filed as aforesaid, or in the

case of a company not having a memorandum, to every copy so issued of the instrument

constituting or defining the constitution of the company.

(6) If default is made in complying with sub-section (4), the company, and every officer of

the company who is in default, shall be punishable with fine which may extend to one

hundred rupees, for each copy in respect of which default it is made.

(7) The Court may, at any time after an application has made to it under this section, stay the

commencement or continuation of any suit or proceeding against the company on such

terms as the Court thinks fit, until the application is finally disposed of.

(8) Every Producer Company which has been sanctioned re-conversion by the High Court,

shall make an application, under the Multi-State Cooperative Societies Act, 1984 or any

other law for the time being in force for its registration as multi-State cooperative

society or cooperative society, as the case may be, within six months of sanction by the

High Court and file a report there of the High Court and the Registrar of companies and

to the Registrar of the cooperative societies under which it has been registered as a

multi-State cooperative society or cooperative society, as the case may be.



581ZT Power to modify Act in its application to Producer Companies

(1) The Central Government may, by notification in the Official gazette, direct that any of

the provisions of this Act (other than those contained in this Part) specified in the said

notification-

(a) shall not apply to the Producer Companies or any class or category thereof; or

(b) Shall apply to the Producer Companies or any class or category thereof with such

exception or adaptation as may be specified in the notification.

(2) A copy of every notification proposed to be issued under sub-section (1), shall be laid in

draft before each House of Parliament, while it is session, for a total period of thirty

days which may be comprised in one session or in two or more successive sessions, and

if, before the expiry of the session immediately following the session or the successive

session aforesaid both Houses agree in disapproving the issue of the notification or both

Houses agree in making any modification in the notification, the notification shall not

be issued or, as the case may be, shall be issued only in such modified form as may be

agreed upon by both the Houses.

towards better understanding of urban producer organisations in

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