WRITTEN ANALYSIS AND COMMUNICATION

CASE ANALYSIS REPORT

VARUN NAGAR AGRICULTURAL COOPERATIVE SOCIETY

Submitted to:
Prof. Sunitha T.

Submitted by:
Srishti Jain (2210058)
11th January 2023
Step 1 : Understanding the conflicting situation
The Varun Nagar Agricultural Cooperative Society (VNACS) has two main assets and liabilities:
assets include Rs. 5,00,000 cash balance (taken as loan from the Jaldhara district cooperative bank)
and paddy stock worth Rs. 5,00,000 (as of Mid-March 1991). Liabilities include the loan to be
repaid to the bank (at a rate of 10% interest) and Rs. 5,00,000 which was to be repaid to the members
of the society (Due March 31, 1991). Along with this, VNAC will be required to use 2000 bags of
fertilizers 6 months from now. If VNACS purchases fertilizer today, it will get it at a rate of Rs. 250
per bag, whereas 6 months from now on the fertilizers will be procured at a rate of Rs. 300 per bag.
Additionally, while the cooperation has 100 tons of paddy, currently the price of paddy is Rs. 5000
per ton but this price of paddy is expected to go up to Rs. 7500 per ton in the next 6 months. Last 2
seasons, this price went up to Rs. 6200 and 6300 per ton respectively.
Hence, essentially the conflicting situations which need a decision here are as follows:
• Should the paddy be sold now, or 6 months later?
• Should the fertilizers be procured now or 6 months later?
• Should the members of the society be paid now or 6 months later?
Step 2: Identifying the problems
VNACS has a good reputation. It has good relations with the bank as well as the cooperative
members of the society. Hence, the problem statement in this case is to take decisions related to the
paddy, fertilizers and repayment that satisfies the stakeholders (i.e. bank as well as cooperative
members of society) in a way that the society gains the maximum surplus.
Step 3: Analysing the problem (i.e. stating the objective)
The main goal of VNACS is to uphold the positive reputation that society has built through time. For
doing that, it needs to do the following:
1. Uphold positive connections with the cooperative bank for the Jaldhara district.
2. Maintain the societal members' trust
Step 4: Developing criteria and constraints for the problem
Constraints:
The constraints in this case are the resources available for storage, as well as the capital available for
investment. If the fertilizer is to be bought at a rate of Rs. 250, additional storage will need to be
bought. Capital available for doing so, however, is limited. Hence there is a trade-off between the
price of fertilizer and storage space.
Criteria:
The criteria for this case, in order of priority are given below:
1. Repayment to members of the society
2. Repayment to the bank
3. No shortage to VNACS
4. All the members of the society must derive maximum benefit
Step 5: Generating options
Since the society members are one of the main stakeholders in this case, and the priority is to repay
the society members. Hence, while listing the options, the option of not paying the members is not
considered. The options in which the society members are not paid is given in the figure 1 of
Annexure 1. There can be 4 options, as given in the flowchart below:

Step 6: Evaluating the options

Options 5 & 6, in which the society members are not paid have not been evaluated in this section
because they violate the criteria 1 mentioned above.
• Option 1 is to immediately sell paddy and pay the bank. By March 31st, 1991, sell the paddy
at the current rate of Rs. 5000 per tonne and pay the money to society's stakeholders. In
March 1991, the bank may be paid from the cash balance. The seven-month interest must be
paid in addition to Rs. 5 lakhs. According to Annexure-1's table 1.1, the society will suffer a
shortage of INR 30,000. It is necessary to ensure that there is no shortage to society in
accordance with criteria 4. As a result, the choice is not a good one.
• Option 2: Sell the rice immediately and purchase fertiliser by March 31st, 1991, sell the
paddy at the current rate of Rs. 5000 per tonne and pay the money to society's stakeholders.
The fertilisers may be purchased with remaining cash. The seven-month interest must be paid
in addition to Rs. 5 lakhs. According to table 1.2 from Annexure-1, the society will lose INR
5,85,000 as a result. It is not viable to raise these amounts given the state of VNACS. In
accordance with criteria 3, it is also necessary to guarantee that society won't suffer any
shortage. As a result, the choice is not a good one.
• Option 3: Don't purchase fertilisers and sell the paddy after six months. One society member
claimed that every fourth season, the price jumped to Rs. 7500 per tonne. Statistics from prior
years show that by October, the price of paddy has increased by between Rs. 6,200 and Rs.
6,300 per tonne. calculating the price of paddy at Rs. 6,250 per tonne by taking the average of
the two. The entire surplus made, according to table 1.3 from Annexure-1, is Rs. 65,000. This
choice satisfies all requirements and benefits society.
• Option 4: After six months, sell the paddy and purchase fertilisers. According to table 1.2
from Annexure-1, selling paddy today and purchasing fertiliser results in a shortage; hence,
selling paddy after six months and purchasing fertiliser results in an even greater shortage.
Therefore, selling the paddy after six months to purchase fertilisers is not advised.
Step 7: Choosing the best option
As observed from the evaluation of the options, the best option is option 3, i.e. Don't purchase
fertilisers and sell the paddy after six months. It fulfils our criteria as desired.
Step 8: Coming up with a plan of action
The plan of action is to use the INR 5,00,000 in cash on hand to pay the society's contributors. To
pay the bank by October 1991, sell paddy in October for an estimated price of Rs. 6250 per tonne.
Surplus can either be shared among society's members or utilised to pay for costs. The fertilizer can
be bought after 6 months, so no additional storage space will be required. The timeline of events is
given in figure 1.2 of annexure 1.
Step 9: Coming up with a contingency plan
Given that the paddy price is an estimate, the paddy stock must be sold at breakeven to make a
Surplus if the projection is incorrect. The breakeven price for selling the paddy stock is Rs 5400 per
tonne, according to table 2.1 from Annexure-1.
When the price of paddy exceeds Rs. 5400 per tonne over time, VNACS can keep an eye on it and
sell the paddy. The repayment to society members and fertilizer purchase timeline remains the same.
Annexure – 1

Figure 1.1: Options 5 & 6

Figure 1.2: Timeline of events to be followed

Table 1.1: Evaluation of option 1

Table 1.2: Evaluation of option 2

Table 1.3: Evaluation of option 3

Table 2.1: Calculation of breakeven price