Varun Nagar Case

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Executive summary: Varun Nagar Agriculture cooperative society (VNACS) has two assets which include, Rs 5, 00,000 in cash and a paddy stock which is worth Rs 5, 00,000. The liabilities of VNACS include, Rs 5,00,000 to be paid for procurement of paddy to farmers, and Rs 5,29,167 to be paid towards over draft amount this also includes the accrued interest over the period of seven months(Rs 29,167 is the interest to be paid for seven months from September 1990 to march 1991) as the over draft has been drawn September last year. Mr. Agarwal the Manager of VNACS has two make decisions about two business proposals in front of him, whether he should retain paddy stock and whether he should buy fertilizer stock. Mr. Agarwal taking all the option available into consideration decides to retain paddy stock and not to buy fertilizer stock this decision will be in the best interest of Cooperative and farmers at large.

Main Report:
1. Situation Analysis:
a) Introduction: The case revolves around Mr. Agarwal, Manager of the cooperative (VNACS), other players include the members of the agriculture cooperative, Mr. Dwivedi, the bank manager. The main functions of VNACS are to procure the agricultural produce from farmer members and market it in the district mandis. The society also procured and supplied inputs (seeds, fertilizers and pesticides) to the farmer members. Mr. Agarwal’s objective is to ensure maximum benefit to the farmers through the cooperative and its operations, and also to sustain the society’s good image. Where as being the members of cooperative, the farmers wish is to gain the maximum return of their produce. The branch manager would like to extend the business with the cooperative in the long run. b) Objectives: Mr. Agarwal’s should make decisions which are in the best interest of all the stake holders, whom include, the Farmer members of the society, the Co-operative society and the Bank. The Farmer members should get best price for their agricultural produce and have access to agricultural inputs like seeds and fertilizers at cheaper prices compared to the market price. The Co-operative society should sustain the good image earned over the years, which helped in ensuring the support of the bank, and support of members of the society. Taking the above into consideration the objectives should be * To meet the expectations and also serving in the best interest of farmer members. * To sustain the good image of the Co-operative society in the years to come. * To maintain good relation with Jaldhara District Cooperative Bank, and to remain credit worthy.

c) Decision problems: Mr. Agarwal has two decision problems which he should confront in the process of working towards the objectives. * Should he retain the paddy stock?
* Should he buy fertilizer?
Mr. Agarwal has these two business decision to make, which can contribute towards VNACS’s larger objective of serving the members interest, and his objective to serve VNACS’s interest in the best possible manner. But due to the limited resources available with VNACS, it gives rise to this situation in which Mr. Agarwal is confronted with these decision problems. His options include holding the paddy for sale in October to get better returns, another option is to buy fertilizer now so that the society can supply fertilizers to the farmer members at a cheaper price in October. The Co-operative is not financially strong to do both, as the payment of Rs. 5, 00,000 to the members towards the procurement of paddy was due by March 31, 1991. Mr. Agarwal’s objective is to serve in the best interest of the farmer members He understands how important it is to make payment to the farmers on time, so he certainly does not want to default on that, come what may. Therefore after the repayment of Rs 5 lakhs to farmer members VNACS is left with the paddy stock which is worth Rs 5 lakhs. Mr. Agarwal under these circumstances should confront...
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