The Narmada Group Cooperative Fruit and Vegetable
Society Limited, Panetha
Ajit Kanitkar
Keeping in mind the interests of the farmer-
members, the Chairman of the NGCFVS is
contemplating on the strategies the society
should adopt in order to ensure reasonable
price for the produce of the members if there
is a glut in the production.
Readers are invited to send their responses
on the case to Vikalpa office.
Ajit Kanitkar is Assistant Professor, Institute of
Rural Management, Anand.
Vol. 19, No. 4, October-December 1994
"There are reasons to be happy and at the same time
reasons to be worried about. Our society achieved a
turnover of Rs 1.5 crore last year. You would agree that
it is not a small achievement for a cooperative society
which is just four years old. But our success might also
prove to be a cause for our failure. Many farmers in this
area have switched over to banana cultivation from
other crops. I clearly foresee a glut in the banana crop in
this region. I am afraid if our society fails to offer a
reasonable price for the produce of the members in the
ensuing years, our achievement in the last four years
may just be shortlived." These were the remarks of Shri
Govardhanbhai Patel, Chairman of the Narmada Group
Cooperative Fruit and Vegetable Society Ltd., (NGCFVS),
Panetha, when the case-writer met him in July 1993.
Evolution of the NGCFVS
The NGCFVS was registered as a cooperative society in
1989. The society started functioning in a panchayat
premise offered free of rent. The main activity of the
society was marketing of fruits (bananas and papayas)
of its members though, at the time of registration, the
bye-laws mentioned marketing of vegetables also as
one of the activities of the society. The highlights of the
achievement of the NGCFVS since its inception are
presented in Exhibit 1. In the second year of its operations,
the NGCFVS constructed a two-storeyed building with
loan assistance from a district cooperative bank. It also
installed its own weigh bridge facility. The building was
designed to include the office of the secretary and the
accountant, a small hall for guests, a godown to store
fertilizers, and a weigh bridge. In July 1993, the society
had a staff strength of five comprising of a secretary, an
accountant, a marketing manager, a clerk at the weigh
bridge, and a peon. During the peak procurement
season, it employed four more persons to supervise
loading of bananas. The trading account, the profit and
the loss account, and the balance sheet of NGCFVS for
the year 1992-93 are given in Exhibits 2,3, and 4
respectively.
The Chairman of the society, Shri Govardhanbhai
Patel, explained the circumstances which led to the
49
formation of the society. "Till ten years ago, nobody was
cultivating banana in our village. The main crops were
HYV cotton, wheat, and jawar. I was one of the first few
farmers who had observed how banana was cultivated
in the Surat -Valsad region in South Gujarat and I started
experimenting with its cultivation. Our farmers too
realized that there was money in this crop. Our lands are
black and extremely fertile. Banana requires large doses
of irrigation. Being situated on the bank of the Narmada,
irrigation is easy. The water table is also at a high level
and we get water through our tube wells from a depth
of 100-150 feet. With so many factors in favour of banana
cultivation, farmers slowly switched over to this crop.
Growing cotton had its own problems because of
recurrent attacks from pests known locally as the "white
fly." Thus, the banana plantation that one sees in and
around this village is a very recent phenomenon. Very
soon, however, we faced the problem of marketing of
our produce since farmers went in for banana cultivation
in a big way. Initially, we had to approach the market
through traders but the arrangement proved
dissatisfactory as many of us were cheated by the traders
and payments were irregular. It was at this point of time,
sometime in 1988-89, that we explored the possibility of
forming a cooperative society. However, we proceeded
slowly. Initially, a few of us joined together, formed a
loose group and experimented with what one may call
"joint marketing." It failed. Later, we visited the Sardar
Bag Cooperative Society at village Kamrej in Surat—one
of the oldest and largest cooperative societies dealing in
fruits and vegetables. We studied its functioning and
returned to our village with the conviction that the
cooperative way of marketing would be the best way to
ensure remunerative prices for our farmers."
The Secretary of the society, Shri Ramanbhai Patel,
explained the challenges the society might have to face
in the future. "Farmers are able to earn considerable
revenue by cultivating this crop. One acre of banana
plantation yields an income ranging between Rs 60-80
thousand and the expenses required for cultivation
including fertilizers, irrigation, labour, and electricity
charges total around Rs 20-25 thousand. This year, my
estimate is that the total area under banana cultivation
has risen up to 750 acres in our village. Around the same
time next year, i.e., during 1994-95, we are anticipating
a bumper crop. As a result, prices are going to crash and,
therefore, we do need to think seriously whether our
existing arrangements for marketing are going to be
adequate or not."
Marketing the Produce
Shri Harshadbhai Patel, aged around 35 years, was the
Marketing Manager-cum-Procurement Manager of the
50
society. A dynamic person, he had excellent rapport
with fellow villagers and members of the society.
Harshadbhai explained his style of functioning and his
responsibilities as follows: "The procurement season
has just begun. It would continue till December-January
1994. My job is to coordinate the supplies from the
member-farmers and the demand of the traders. Our
existing selling arrangements have evolved over the
last four years. Around mid-June, traders and
commission agents representing fruit merchants from
Bombay, Ahmedabad, Bharuch, Delhi, and Jaipur start
visiting our society and place their tentative demand.
Simultaneously, the process of monitoring the banana
crop ready for cutting goes on as the members keep
informing me regularly. I record these figures in a
register and try to match the demand and supply
figures. It is important to ensure that the quantity
available for sale is marketed properly. The nature of
the trade is such that prices tend to fluctuate and I have
to keep track of these changes in the market. The price
that we offer to the sellers here in the village is dependent
on the market rates prevailing in Bombay and
Ahmedabad as also the local markets such as Rajpipla,
Rajpadi, and Bharuch. Fixing a particular price is purely
a matter of judgement. For instance, there are some
days when lesser quantities of banana are available
while the demand from the traders is high. On such
occasions, we are in a dominant position as we can
demand cash and also bargain for a higher price. When
our members are unable to cope with the demand, we
buy from non-members in our own village and other
neighbouring villages to meet the demand. On the
contrary, there are some days when there are no takers
for our produce and traders begin to bargain for lowering
the prices. On such days, we are forced to send bananas
to far-away commission agents on "on sale" basis.
Therefore, the rate we receive in such deals is extremely
low and payments are also delayed by these agents.
This is our existing marketing arrangement. I visit
Rajpipla, the nearest market about 30 km from here,
every alternate day to study the market. In addition, we
keep contacting the traders on phone. This arrangement
ensures that our members get an overall better bargain
in the entire season though on any given day, the prices
may be abnormally high or low. The society charges 2
per cent commission on the sale of produce made on
behalf of the members which goes towards the society's
income."
Problems in Dealing with Traders
During the course of his stay at the village, the case-
writer observed that the prices of bananas declared by
the society varied between Rs 350 and Rs 370 per quintal
during the three days. He also observed that prices
Vikalpa
varied drastically across seasons, across months, and
even across markets and regions. For example, the
published records indicated that the price of banana
given to the members of a Banana Growers' Cooperative
Society in Surat district during May 1990 and June 1991
fluctuated between 0.25 paise per kg to Rs 2.30 paise per
kg. The Secretary of the society also confirmed that
there were similar variations in the prices every year,
including the year 1992-93.
The Accountant of the society, Shri Bhalubhai Patel,
pointed out the following aspects on the current
marketing arrangement: "Our existing arrangements of
procurement and marketing would be grossly
inadequate for the future, though these were excellent
when we had a smaller business. In the year 1992-93, we
sold a total output of 4,300 tonne of bananas. In 1994-95
season, beginning July and continuing up to December,
we would need to market bananas planted in 800 to
1,000 acres. In each acre, 1,500 plants or pila (banana-
suckers) are generally planted. Our farmers buy these
roots from Jalgaon in Maharashtra. These roots give
excellent output, up to 20 kg of fruits a plant. In the
financial year that ended, we marketed around 1,000
truck loads of bananas and I expect this figure to go up
substantially. I do not think that our existing
arrangements of sale and negotiating with the traders
would be able to bear this load. We need to think of some
new strategies."
New Marketing Strategies
Shri Bhikhubhai Patel, a member of the Board of
Directors of the NGCFVS and one of the progressive
farmers of the village, spelt out their new marketing
strategies: "The Board of Directors is aware of the
problems involved in marketing and has, therefore,
identified an excellent opportunity. We have recently
visited a public limited company located near Valsad
which is in the business of manufacturing fruit purees
and concentrates. A 100 per cent export business unit
with technical and financial collaboration with a German
firm, the company's requirements are very large, i.e.,
about 65 tonne of bananas every day. The company is
interested in buying from us and would like to procure
their entire raw material from us. However, they are
insisting on three conditions being met: First, they are
very selective about the quality of the fruits. On that
count, we have nothing to worry as our fruits are the
best in the banana growing region of Gujarat. Second,
the society should stop supplying to the traders. This
implies that the NGCFVS has to get tied up with only
one purchaser. Third, the company would fix up a
particular rate at the beginning of each month and the
society would be required to supply the fruits at the
Vol. 19, No. 4, October-December 1994
same rate all through the month irrespective of the price
changes that might be noticed in the market in a given
month. In spite of these conditions, we hope to negotiate
with them on specific details and be able to strike a
deal."
Shri Bhikhubhai Patel shared the correspondence
the NGCFVS had with the company exploring the tie-
up. One of the letters sent by the company mentioned
the delivery schedule for bananas as under:
Months Requirements of the Company
July-August 2 trucks every day
September-November 4 trucks every day
December-January 3 trucks every day
February 1 truck every day
March onwards Depending on the availability
The company had also agreed to advance a sum of
Rs 7,00,000 at the beginning of the season in July and had
indicated that payment would be made at the end of
every week on receipt of the truckload.
The case-writer met Shri D G Shah, Manager
(Purchase) of the company who visited the society to
collect some samples. He confirmed that his company
was interested in locating a supplier who would assure
continuous supply of raw material. He was of the
opinion that the quality of the fruits from the society
was satisfactory though a formal quality control report
from the company's laboratory was awaited. During
the course of the discussion, he informed the case-
writer that there was already a delay of 11 months in the
commissioning of the fruit processing plant for mango
and papaya at Bhilad, Valsad. He hoped that this would
not affect the performance of the company. The company
had recently raised a capital of Rs 10 crore for
implementing this project through a public issue.
Views of Members
There were varied opinions among the committee
members, the employees, and the members of the
society regarding the tie-up with the company. The
case-writer also observed that a sizable group of people
had resigned from the membership of the NGCFVS two
years back and had formed an informal marketing
group called Reva Bagayati Sangh. This group, organized
on cooperative lines, had a sizable membership and had
achieved business to the tune of almost Rs one crore.
The group functioned on an informal basis as the
Registrar's office at Bharuch would not permit two
cooperatives in the same village.
51
 In the annual general body meeting of the NGCFVS
which had taken place in June, the members had raised
the issue of outstanding amounts from the traders. The
Chairman had his own views on the suggestion of
abandoning the dealings with traders and tying up with
a company. According to him, "some members are
unnecessarily getting panicky about the overdues. Yes,
I do agree that the dues are large but where will these
traders go? They have to come to us to buy bananas.
When the season starts, all of them, including the
defaulters, will place their demand. Also, they are not
petty traders. I have seen their business in Bombay. They
own properties in prime localities. Many of them
defaulted because of the riot situation in December-
January. We are initiating court cases against some of
them. Our business is such that we have to extend credit.
This business is similar to selling raw vegetables. A lakh
or two may turn into bad debts. There is nothing wrong
about that."
Addressing the question whether he would be able
to cope with the work load and ensure reasonable price
for the produce if there is a glut in the output, Shri
Harshadbhai Patel remarked, "This is a business where
the traders and the members depend on each other. We
have to ensure that the farmers get remunerative prices.
The society has done an excellent job for the last four
years. We have managed to sell the entire quantity of
bananas received from our members at any point of
time. However, the prices do fluctuate over which we
have little control. On a given day, the Bombay market
may get suddenly flooded with twenty truckloads of
bananas from Jalgaon and the prices would touch rock-
bottom on such days. No trader is willing to transact
business with us on those days. Reversals also do
happen. I agree that there are overdues and some
traders have not kept up their promise. But is there a
guarantee that the company from Valsad would pay us
regularly? In fact, that would increase our dependence.
Currently, we are independent and are in a position to
decide rates. We may get extremely good prices, or
suffer losses. On the whole, we are better-off. Despite
such uncertainties, we have managed to earn decent
profits in all the four years."
Major Disadvantages
Availing the cash-credit facility from the Bharuch District
Cooperative Bank, the society had borrowed to the
extent of Rs 8.18 lakh to enable it to pay the dues to the
farmer-members since a large number of traders had not
paid them. The society owed Rs 1.57 lakh to the members
as per the balance sheet. Against these two major
liabilities, the society expected to receive payment from
the traders to the tune of Rs 17.99 lakh.
52
Shri Bhalubhai Patel agreed that overdues was a
major problem which the society had to face right from
its inception. According to him, "the outstandings for
1992-93 were considerable—the amount ranged from
Rs 3,000 to Rs 3,00,000 per trader." However, he also felt
that there was a need to bring in some kind of certainty
regarding the sale of bananas as over-dependence on
traders might prove harmful.
Another major disadvantage the society faced was
Panetha's location as traders found it difficult to reach
Panetha. During the peak season, if the traders were
unable to visit the society or if there was a glut, the
society had to take the initiative and get in touch with
the traders, commission-agents and transport
contractors. Most of the pending dues were a result of
such "on sale" transactions, wherein the rates were not
negotiated with the traders. Efforts to convince the
farmers that they should space their plantation over a
period of three to four months were not fruitful as they
preferred to plant new roots during the monsoon months
(June-July) thereby increasing the chances of survival of
the roots. Thus, every year, after the June-July harvest,
they had to face a glut in output. Only those who had
invested in irrigation facility could space out the
plantation.
It was evident that certain members were not happy
with the prices the society was able to negotiate with the
traders. According to Shri Manubhai Patel, the Sarpanch
of the village, the prices as seen in the Ahmedabad fruit
market (and printed in Gujarat Samachar, a local
newspaper) on a given day and the prices the NGCFVS
got through their dealings with the-traders and offered
to the members varied considerably. He felt that the
Ahmedabad prices were always higher and that the
society failed to bargain for a better price. Similar
protests were voiced by a few more members of the
NGCFVS individually.
Issues for Discussion
A Board meeting was scheduled in August to discuss
various issues related to marketing of bananas. Shri
Govardhanbhai Patel was wondering whether he should
pursue the following options keeping in mind the
interests of the farmer-members:
1. Should the society think in terms of establishing its
own processing plant?
(The feasibility and economic viability of a
processing unit would depend on the location,
financial position, infrastructure, and managerial
resources.)
Vikalpa
2. Should it also set up a cold storage plant?
(Normally cold storage plants are commissioned
for vegetables such as potatoes and fruits like apples.
According to horticultural experts, the cold storage
facility would extend the life of raw bananas by two
or three weeks. Also, the National Cooperative
Development Corporation has a scheme for
extending long-term loans to such cooperatives.)
Having observed the entire functioning of the society
from close quarters, the case-writer was also concerned
about the financial implications of pursuing these options.
More specifically, he felt that the society had to focus on
the following factors:
• The society seemed to have invested (implicitly) its
own resources since it expected to receive Rs 17.99
lakh from traders. What was the risk of not being
able to recover?
• What are the long-term implications for the survival
of the society?
• What about the society's future profitability?
(The society's net profit in 1992-93 was just about 25
per cent of what it was in 1989-90 and it had
continuously declined.)
• Could NGCFVS pursue these options at all? Are
they financially viable?