Varun Nagar Consultant Report

Varun Nagar Consultant Report

Varun Nagar Agricultural Cooperative Society was stared in 1956 with the aim to procure agricultural produce from the farmer members and market it to mandies and to procure agricultural inputs (seeds, fertilizers and pesticides) for its members.

The Society after reviewing its operation for the year has 100 tons of paddy waiting for disposal and a payment of 5 lakh to members was due by March 31.The price of the paddy is Rs 5000 per ton. The Society has also taken a loan of Rs. 5 lakh from the Jaldhara District Cooperative Bank at annual interest of 10%. The Society has an offer from National Fertilizer Cooperation offering 2000 bags of fertilizer at a discounted price of Rs 250 bag each if the Society buys it within 2 weeks. The society has a Cash Balance of Rs 5 lakh. During the review operations of the society the executive committee member Mr Sharma pointed out that the price of the paddy increases to Rs 7500 per ton after 6 months every one season in four. Mr Agarwal the manager of VNACS has to take a decision which is in the best interest if all its members.

Mr Agarwal the Manager of VNACS has the following options with him. To sell the the paddy now or later. To pay the farmers now or later and whether to buy fertilizers.

Mr Agarwal on doing Cost Balance Analysis of Fertilizers found out that if the Society buys the fertilizers within a week the storage, labour and equipment, insurance would cost the society Rs. 48000 and also that 5% of fertilizer would be lost in storage, Thus there was no good benefit in buying the fertilizer.

The conundrum the society face is whether to sell the paddy now or 6 months later. Mr Agarwal realizes that the price of the paddy in the last two seasons went up to Rs. 6200 and Rs. 6300 by October. Thus. there are implications that the price may also go up this season in October. Performing the Cost Analysis and forecasting analysis it would be beneficial to sell the paddy later.

The objective of the society is to take to the best decision in the interest of its members. The society realises that it has a duty to pay its farmer members their due within the season so as to ensure the trust of its farmers. Mr Agarwal decides to use the Cash balance of Rs5 lakh to pay the farmers their due.

Thus, the Society decides on selling the paddy later of paying the farmers now and of not buying