Case Study on:

Varun Nagar Agricultural Cooperative Society

for the course

Written Analysis and Communication.

-Nidhi Dhokare, 2210117

1. Understand the problem.
Varun Nagar Agriculture Society (VNACS) has 3 major conflicting issues. The focus
of this case that they have to take the decision in the best interest of the members of
the society i.e. the farmers. The 3 major conflicting issues are:
 If the society should pay the farmers now, or after 6 months.
 If they should procure the fertilizers now at the cheap price or purchase it
after 6 months at a higher price
 If they should sell the paddy now or after 6 months because they know the
price of the paddy is going to increase in 6 months.

2. Generate alternative options

Following are the possible alternative decisions the society can take:
 Buy fertilizers now: The society can purchase the fertilizers now for the 5-
lakh cash balance they have. They can at the same time sell paddy and pay the
overdraft of the bank.
 Do not buy the fertilizer now: They society should not buy the fertilizer now
and pay the farmers from the cash balance that they have. Also, they do not
sell the paddy now and sell it later at higher price.

3. Evaluate the options

 Buy the fertilizers now:
Purchase now and store it Cost: 2,000 bags x Rs. 250 = 5,00,000
Storage cost: 6 months x Rs. 500 = 3,000
Labour and equipment cost for storing fertilizer: 25,000
Insurance: Rs. 20,000 annually = Total 10,000
Lost in storage: 5% of fertilizer stock = 25,000
Interest on overdraft: 10% on Rs. 5,00,000 for six months = 25,000
Total Expenses: 5,88,000
Total Savings from purchasing now 12,000
 Buy the fertilizers after 6 months:
Cost: 2,000 bags x Rs. 300 = 6,00,000
 Total saving from the fertilizer plan: 600,000 – 5,88,000 = 12,000
 Selling paddy now:
100 tons x Rs. 5,000 = 5,00,000. This selling price is same as the purchasing
cost of the paddy.
 Selling paddy 6 months later:
Insurance cost: Rs. 20,000 annually = 10,000
Interest on overdraft: 10% on Rs. 5,00,000 for 6 months = 25,000.
Minimum selling price after 6 months will be the sum of procurement cost,
Insurance, Interest i.e. 5,35,000.

We should not buy the fertilizers now because 12000 rupees is a small amount
to lose. The main focus of the society is to see the best interest of the farmers.
So, they should prioritize paying the farmers first. Mr. Agarwal also had the
liberty to use the overdraft taken by the bank for the next six months. They
can use the money from the overdraft to store the paddy for the next 6 months
 and sell it later at the higher price. The minimum price of the paddy after 6
months is 5,35,0 per ton. But the price of the paddy definitely will go higher
than this giving them profits.

4. Choose the best decision alternative

The best decision alternative for the society will to do the below mentioned ways.
 First is to pay the farmers now using the cash balance of 5 lakh that they have.
 They should not buy the fertilizers now.
 They should not sell the paddy now and sell it after 6 months at higher price.