IIMB Managerial Communication Case Handout

Varun Nagar Agricultural Cooperative Society

The Varun Nagar Agricultural Cooperative Society (VNACS), located in Jadhara
District, was a village level agricultural cooperative society. The Society started
unctioning in !"#$ with %& 'e'(ers. )n !""!, the Society had *&& 'e'(ers.
The 'ain unctions o the Society were to procure agricultural produce ro' the
ar'ers and 'ar+et it to the district mandies. The Society also procured and
supplied agricultural inputs (seeds, ertili,ers and pesticides) to ar'er
'e'(ers.
)n Septe'(er !""&, the Society had drawn ro' the Jaldhara District
Cooperative -an+ an overdrat o .s. % /a+h under its cash credit
arrange'ents
!
, and this was yet to (e repaid. )n the irst wee+ o 0arch !""!,
when 0r. Agarwal, 0anager VNACS, 'et 0r. Dwivedi, 0anager Jaldhara District
Cooperative -an+, 0r. Dwivedi had indicated that he considered VNACS to (e a
well1'anaged cooperative society, secure in its operations. Thereore, he would
(e willing to allow the Society, i it re2uired, to continue the use o the overdrat
o .s. % /a+h. The -an+, o course, charged an annual interest o !&3.
)n 'id10arch !""!, the Society reviewed its operations or the year. The Society
had with it !&& tons o paddy, in storage or a 'onth now, waiting or disposal.
4ay'ent o .s. % /a+h to 'e'(ers towards this procure'ent was due (y 0arch
*!, !""!. Ater 'eeting all the e5penses o the operations o the Society, and
(eore repaying the overdrat ro' the -an+, the Society had a cash (alance o
.s. % /a+h.
0r. Agarwal was planning to sell, in a ew days ti'e, the !&& tons o paddy in
storage, at a(out .s. %,&&& per ton. 6e +new that this would 'ean the
reali,ation o 7ust the procure'ent price.
To review the operations o the Society or the year, the 85ecutive Co''ittee o
the Society 'et on 0arch 9&, !""!. During the discussions, 0r. Shar'a, one o
the 'e'(ers o the Co''ittee, pointed out that i the Society waited or $
'onths to sell the paddy, it could get (etter returns. 0r. Shar'a said that he
had e5a'ined the price 'ove'ent over 'any years and had ound that in a(out
one season in our, the price increased ater $ 'onths to .s. #,%&& per ton. 0r.
Shar'a suggested that 0r. Agarwal could use the cash (alance o .s. % /a+h the
Society had to pay the 'e'(ers, so that the society could store the !&& tons o
paddy or a urther $ 'onths to get (etter returns. 0r. Agarwal re'e'(ered
that in the last two seasons the price per ton o paddy did go up to .s. $,9&&
and .s. $,*&& (y :cto(er.
As 0r. Agarwal was conte'plating the suggestion 'ade (y 0r. Shar'a, he also
thought that the 'e'(ers, when they turned over their crops to the Society or
sale, entrusted hi' with the result o their whole season;s hard wor+. 6e elt
1
Under the cash credit arrangements, the society could borrow up to ten times of its deposits at any
given time. The overdraft was over and above this borrowing limit.
Test case prepared by Prof. S. Vathsala, Indian Institute of Management, hmedabad.
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IIMB Managerial Communication Case Handout
that ater all, the 'e'(ers 7oined a cooperative society (ecause they (elieved
that it would (e (etter to (uy their inputs together, and sell their outputs
together, rather than each individual (uying and selling as (est as he could. )n
this process, he urther 'used, that it was necessary to sustain the good i'age
his society could earn over the years, which helped in ensuring the support o
the (an+ and o the 'e'(ers o the society.
The ne5t day, 0r. Agarwal received a letter ro' the National <ertili,er
Corporation oering 9,&&& (ags o ertili,er, the Society;s nor'al annual
re2uire'ent. This oer was at a special price o .s. 9%& a (ag i delivery were
accepted within 9 wee+s. The ertili,er would not (e needed (y the ar'ers or $
'onths, at which ti'e it would cost .s. *&& a (ag. -ut i the Society decided to
ta+e advantage o the special price, it would have to ta+e delivery o the ertili,er
and pay or it (y the irst wee+ o April !""!.
The space used now or storing the !&& tons o paddy could not (e used or
storing the ertili,er. The Society did not have any other storage space o its
own. ) he could ind a space or storage, 0r. Agarwal esti'ated that it would
cost .s. %&& per 'onth. 0r. Agarwal ound out that la(our and e2uip'ent or
storing the ertili,er would cost a(out .s. 9%,&&&= the annual insurance charges
or storing either paddy or ertili,er would (e a(out .s. 9&,&&&. 0r. Agarwal also
learned that a(out %3 o the ertili,er stoc+ would (e lost in storage during the
$ 'onth period, (ut that there would not (e any deterioration in the 2uality o
ertili,er.
0r. Agarwal thought that whatever he decided within the ne5t one wee+ should
(e in the (est interests o the 'e'(ers o the society.
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