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Case Study

Kissan Savera: Tapping Growth Opportunities in Organic Fertilizers Business

Devesh Baid
Associate Professor,
International Management Institute, Bhubaneshwar, Orissa, India.

Demand for organic fertilizer was increasing. Ashok and his brother started using cow excrete in form of urine compound
and compost in their fields which showed beneficial results. This motivated other relatives and villagers to use cow excretes
in their fields. Now the demand was more than supply. Looking at business opportunity, Ashok started making organic
inputs as a seasonal venture. Sales were good and he wanted to extend this as a full time activity. Financial grant was
available from agencies but first he wanted to understand the cost involved and profit made during the last season.

Keywords: Product Costing, Joint Cost Allocation, Profit and Loss, Organic Fertilizers, Cow Excrete, India

Introduction waste was collected every morning and segregated into

With increasing demand for organic farm products, urine and cow dung by a simple process of filtering using
demand for bio-fertilizers was increasing. So Vijay mixed cotton cloth. For dilution approximately 10 litres
Kumar started trading in bio fertilizers in his village. of water was added to 1 litre of filtered urine. Neem oil
These were manufactured by big corporates and sold as was also added to this so that it created a coating and
branded products. Farmer’s response was good and sales stayed on plants for long. Neem has medicinal values and
picked up in short time. When Ashok, his elder brother, was applied as repellent for stem borer in mango trees.
visited home in April 2014 and came to know about This urine compound was sprayed on chilli fields grown
increasing sales of bio-fertilizers, he spoke to his for self-consumption. The sprayer had an agitator to mix
brothers about preparing cow urine compound which can oil in water while spraying. Dry cow dung was broadcast
act as disinfectant for crop protection and compost as as organic matter. All this work was done by helper who
organic manure out of cow dung. looked after the animals and fields and involved no
additional cost.
Vijay, youngest of four brothers has passed high school.
His father was a farmer and the family owned Chilli was sown in March. The first spray of urine
agricultural land in the village. Ashok was doing his B compound was done in May beginning initially with
Tech in bio-technology from an agriculture university. In flowering. It was observed that there were no insects for
his first year, he was taught about controlling insects, around two weeks from the period of spray. During this
bacteria, fungus etc. using bio-fertilizers. He now period there were no rains, so the compound was not
thought it was time to implement his learning. Since washed away. Routine fertilizers and chemicals were
family had a few cows, he decided to start making urine applied as usual. Ashok left for university by mid May.
compound and compost on pilot basis at home. He had asked his brother and helper to continue spraying
urine compound at intervals of fifteen days. Since these
were bio-ingredients they had no negative effect even if
Idea Testing sprayed more, in fact it increased the fertility of soil. It
Ashok got a sloppy pucca (constructed of bricks and was observed that chilli fruit was better and there were
cement) floor with a small pucca pit at one end. It cost Rs fewer incidences of insects this time. The family
1500 approximately. This was done to collect cow continued spraying for other horticulture crops,
excrete (dung and urine). Cows were tied on this pucca especially vegetables such as brinjal, tomato, etc. grown
floor in morning and evening when they usually urinate for self-consumption and it showed similar results.
and excrete so that all waste got collected in the pit. This Soon other relatives also adopted this practice. Ashok’s

BVIMSR’s Journal of Management Research 207 Vol. 9 Issue - 2 : October : 2017

Case Study Kissan Savera: Tapping Growth Opportunities in Organic Fertilizers Business

uncle was highly respected in the village and people urine. Some variation takes place due to food and season.
listened to him. Villagers believed about the benefits of A ratio of 2:1 was considered for cost calculation
urine compound and cow dung as cow is considered holy purposes. One tractor was engaged for bringing cow
in the Indian mythology. They had heard about the excretes from the dairy. Every trip brought around 1000
medicinal benefits of cow urine in old stories. Even litres of excrete. It took on an average three hours a day.
current scientific literature has reported 1 to 1.5 per cent The tractor was engaged at Rs 100 per hour. In all 18 trips
urea and 0.8 to 1 percent phosphorus in urine. It can also were done during the previous season. Blended cloth was
be used as disinfectants. Many villagers who had cows used to filter excrete. If purchased from the market it
also started using urine compound and dry cow dung in would cost Rs 25 per meter. Two meter were used each
their fields. Beneficial effect was observed by all due to day for 18 days to filter excrete into urine and dung. The
this treatment. cloth was later used for other miscellaneous work like
cleaning of floor. This was a very small cost component.

Start of Business Venture Ten litres of water and 100 grams of neem oil were added
to 1 litre of filtered urine resulting in 11.1 litres of urine
After two years, there was enough demand for these compound. However, allowing for wastage and spillage it
products. Requirement was seasonal during flowering was taken as 10 litres of compound for revenue purposes.
and fruiting of horticulture crops especially vegetables Ten kg neem seeds gave 1 litre of oil. Neem seeds were
grown in the area like chilli, brinjal, and tomato. One collected from their orchard which had lot of neem trees.
hundred litres of urine compound was required for one The seeds were crushed and oil was used for urine
spray on one acre plot where these crops were grown. compound. As per Ashoks estimate, this oil could be sold
Spraying had to be done at least twice during flowering in market at Rs 100 per litre. However, family incurred
and fruiting of crop at a gap of 15 days. These are short only crushing charges at Rs 2 per kg. Water was taken
duration crops and normally take 3 to 4 months to grow. from well but it would be good to take water cost at Rs 1
There were many farmers who had no cows and they also for 10 litres. In case of scaling, family may have to use a
wanted to use this. The cost of producing compound and motor pump for drawing water from the well.
compost from cow excrete was very low and it could be
sold at low price compared to other bio-fertilizers Filled containers were sold at Rs 30 in 10 litre packing.
available, and still earning good margins. In 2016 Ashok Containers were returned by customers within two days’,
decided to scale up this as a business venture. Two dairies else their deposit of Rs 10 for containers was forfeited.
in the nearby village were approached for cow excretes. Containers used for delivery of urine compound were
They agreed to supply cow excrete at Rs 1/ litre and were taken from the shop so there was no cost. But if second-
happy to find a market for their waste. hand containers were bought it would cost Rs 10 per
container. Around 200 containers were in use at a time
As of now only material, transport, and labour was paid in and each container was used approximately 18 to 20
cash. Excrete was collected from the dairy by a tractor times before being discarded.
and payment was made immediately. This was brought to
his home where a place was earmarked for filtering, Dry cow dung was put into a large pit created for this
mixing, and packing urine compound. Five people were purpose. After eight to nine months of decaying when the
employed on daily basis for collection, filtration, compost was ready, it was used as manure before crop
packing, and delivery of urine compound. They also put plantation. This acted as organic fertilizers in field. Over
dry cow dung into pit and later compost into fields. Four two years the family has reduced consumption of
unskilled workers were paid at the rate of Rs 150 per day chemical fertilizers, pesticides, and insecticides in their
while one skilled worker was paid Rs 200 per day. In all field. Now they are planning to move towards complete
five people were employed for 18 days during the last organic cultivation. This compost had a ready market and
season. could be sold for Rs 1 per kg. One hundred kg of cow
dung gave 60 kg of compost.
Purchases during the season were 18000 litres. In 24
hours, a cow gives 12 to 14 kg of dung and 5 to 6 of litres Currently a part of the porch was used for purpose of

BVIMSR’s Journal of Management Research 208 Vol. 9 Issue - 2 : October : 2017

Case Study Kissan Savera: Tapping Growth Opportunities in Organic Fertilizers Business

filtration, packing, and pit. If the same land was taken on venture. Sales were good during the previous season and
rent, it would cost Rs 5000 per month. Currently, the Ashok was planning to turn this into a full time activity.
porch was used for purpose of growing vegetables for Financial grant also available from agencies like
self-consumption, play area, etc. It was difficult for NABARD but first he wanted to calculate the total cost
Ashok to quantify the benefit from these activities. incurred and profit made during the last season.
Younger brother Vijay overall looked after the business. Course Positioning - The case can be used in a course on
A full time manager for similar work in village would be managerial accounting or cost accounting to students of
available at a salary of Rs 6000. Other miscellaneous management in agri-business or entrepreneurship. It can
expenses were estimated at Rs 75 for each working day. also be used in executive education programmes targeted
This included tea for employees, electricity, general at bank officers or development sector executives for
expenses etc. evaluating cost and profitability of projects in agriculture
Ten percent of sales was estimated as selling cost if and allied fields. Besides it may be useful in short
Ashok started sales from a separate premises. Otherwise duration programmes offered to farmers and small
his brother would continue selling at 10 percent entrepreneurs for improving their commercial
commission on sales. He was not sure of taxes (both understanding.
direct and indirect) he would have to pay if he started this Teaching Objective - The case focuses on the concept of
as a full time business. He thought of marking 20 percent joint cost (by-product cost), preparation of profit and loss
of profit for this purpose. account of a new enterprise involved in producing urine
compound and compost from cow excretes. Many costs
Way Forward are not incurred in cash and there is self-consumption of
cow dung. In such a situation it takes into account
Last season, the business had done extremely good. Sales opportunity cost of resources consumed to calculate
were expected to grow. Demand for organic manure was actual profit from the venture.
increasing as organic products were getting a premium
price not only in domestic market but were also preferred Concluding Comments - Based on calculations it can be
in the international market. Ashok had enrolled for a post said that the project is profitable. It has earned
graduate programme in agriculture business approximately Rs 40,000 in the last season after taking
management and was planning to start this as a full time into account all cash and non-cash cost and making
business after he graduated in April 2017. He also came provision for taxes. Cash flows generated by the business
to know that government agencies were giving subsidy were above Rs 1, 00,000 as many costs are not incurred in
for setting up dairies and compost manufacturing. But he cash. However, before taking this as a full time activity
wanted to know first the cost and profitability of the Ashok should analyse demand and product shelf life,
business. especially of the urine compound.
Suggested Readings - To have a better understanding of
concepts, students are advised to read chapter on joint
Teaching Note cost treatment and preparing profit and loss account from
Case Synopsis - This is a case of small business activity Cost Accounting: A Managerial Emphasis by Charles T
started in a village by two brothers Ashok and Vijay. One Horngren, Srikant M Datar, and Madhav V Raja
brother started using cow excrete in the form of urine (Pearson, 2015).
compound and compost in fields which showed
beneficial results. So they started this as a seasonal

BVIMSR’s Journal of Management Research 209 Vol. 9 Issue - 2 : October : 2017

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