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Professional summary: Varun Nagar Culture cooperative contemporary society (VNACS) provides two assets which include, Rs 5, 00, 000 in cash and a terme conseillé stock which can be worth Rs 5, 00, 000. The liabilities of VNACS incorporate, Rs a few, 00, 1000 to be taken care of procurement of paddy to farmers, and Rs your five, 29, 167 to be paid towards above draft amount this also contains the accumulated interest within the period of eight months(Rs up to 29, 167 is the interest to get paid for eight months by September 1990 to mar 1991) as the above draft have been drawn September last year. Mr.
Agarwal the Manager of VNACS has two make decisions about two business plans in front of him, whether he should maintain paddy stock and if he should buy fertilizer stock. Mr. Agarwal taking all of the option offered into consideration determines to retain terme conseillé stock rather than to buy fertilizer stock this kind of decision will probably be in the best interest of Cooperative and farmers at large. Main Survey: 1 . Circumstance Analysis: a) Introduction: The case revolves around Mister. Agarwal, Supervisor of the supportive (VNACS), other players range from the members of the agriculture cooperative, Mr. Dwivedi, the bank manager.
The main functions of VNACS are to obtain the agricultural produce by farmer members and market it in the section mandis. The society as well procured and supplied inputs (seeds, manures and pesticides) to the farmer members. Mister. Agarwal’s aim is to guarantee maximum benefit to the farmers through the cooperative as well as its operations, and to sustain the society’s good image. While being the members of cooperative, the farmers desire is to gain the maximum come back of their create. The branch manager would like to extend the organization with the supportive in the long run. ) Objectives: Mr. Agarwal’s should certainly make decisions which are ideal of all the stake holders, who include, the Farmer members of the culture, the Co-operative society and the Bank. The Farmer users should get finest price for his or her agricultural create and have use of agricultural advices like seed and fertilizers at cheaper prices in comparison to the market price. The Co-operative culture should sustain the good image earned over time, which helped in ensuring the support of the lender, and support of associates of the contemporary society.
Taking the over into consideration the objectives ought to be * To fulfill the objectives and also portion in the best interest of farmer people. * To sustain the favorable image of the Co-operative contemporary society in the a long time. * To keep up good regards with Jaldhara District Cooperative Bank, and to remain credit worthy. c) Decision concerns: Mr. Agarwal has two decision challenges which he should face in the process of working towards the objectives. * Should this individual retain the terme conseillé stock? 2. Should this individual buy fertilizer? Mr.
Agarwal has those two business decision to make, which can contribute to VNACS’s greater objective of serving the members curiosity, and his objective to provide VNACS’s interest in the best possible way. But because of the limited solutions available with VNACS, it gives climb to this condition in which Mr. Agarwal is usually confronted with these kinds of decision challenges. His options include having the terme conseillé for sale in August to get better results, another option is always to buy fertilizer now so that the society may supply manures to the farmer members for a cheaper price in October.
The Co-operative can be not financially strong to complete both, since the repayment of Rs. 5, 00, 000 towards the members for the procurement of paddy was due by March 23, 1991. Mr. Agarwal’s goal is to provide in the best interest from the farmer users He is aware of how important you should make repayment to the farmers on time, therefore he absolutely does not need to standard on that, come what may. As a result after the repayment of Rs 5 lakhs to farmer members VNACS is left with the paddy stock which can be worth Rs 5 lakhs. Mr.
Agarwal under these kinds of circumstances should certainly confront the above mentioned decision concerns. d) Requirements for making decisions: As discussed above, the payment needs to be made to the farmers upon or prior to the due date, at any cost. He should certainly make a decision which usually would lead to maximum benefit to get farmer associates in financial terms, as that was the target with which VNACS was build. In the presented scenario it is extremely difficult pertaining to the society to get a mortgage of considerable amount, though society can easily ask for a small additional mortgage given the good terms which society has with the lender.
Taking over discussed conditions into consideration we could prioritize all of them as * Payment intended for the procured paddy ought to be made to the farmers in or prior to the Due date 5. Maximum benefit to the farmers, if in terms of obtaining higher selling price for their farming produce of providing use of agricultural inputs at a cheaper price. * To take care of credit worthiness with bank. Contemporary society has already considered an above draft of R a few lakhs, it is therefore likely that just small amount could be sought since loan through the banks. * To maximize the whole revenue for the Cooperative society. Decision process: a) Generating Alternatives: Mr. Agarwal has two confront with two decision problem, Will need to he retain paddy share? Should he buy fertilizer? From both of these decision concerns we can generate four different alternatives. We. Sell paddy stock at this point and do not purchase fertilizer. II. Retain paddy stock right up until September/ October, and purchase fertilizer now. 3. Retain paddy stock till September/ March, but usually do not purchase fertilizer. IV. Promote paddy share now, and buy fertilizer at this point. b) Evaluation of Alternatives: I.
Sell paddy inventory now and do not buy fertilizer: In this substitute buy providing 100 plenty of paddy inventory at market price of Rs a few, 000 per ton, means that purchase this sales Society will only be in a position to repay the procurement expense of paddy i actually. e. Rs 5 lakh to the maqui berry farmers which is thanks for 31st march. Culture has an additional cash stability of Rs 5 Lakh, which would go for the repayment of over draft taken from the financial institution in September 1990. Nevertheless the interest pertaining to seven months on over draft of Rs 5 lakh, which in turn accounts to Rs 35, 000, must be paid to the bank.
Net Result can be described as loss of Rs. 30, 000 In this alternative we are able to meet the first conditions, i. e. the repayment to the maqui berry farmers, but we could not able to fulfill the rest standards II. Keep paddy inventory till September/ October, and purchase fertilizer today: This standards can give all of us good income, but taking current condition of VNACS which has previously taken an over draft of Rs 5, 00, 000 the lender is most likely is not going to provide an added loan. The estimated extra cost to look ahead with this alternate is Rs 5, 68, 000. Believed additional expense in Rupees|
Cost to get 2000 luggage of fertilizers = a few, 00, 000| Cost to insure both fertilizer and paddy inventory = 40, 000| Labour and tools cost sama dengan 25, 000| Rent taken care of storage of fertilizer stock = several, 000| Total = a few, 68, 000| Even though we are able to gain very good returns from this alternative, it is quite improbable to mobilize such huge amount, provide the conditions. 3. Retain terme conseillé stock till September/ October, but usually do not purchase fertilizer. In this substitute the cash hold of Rs 5 lakh will be used to settle the procurement cost of terme conseillé i. e.
Rs 5 lakh to the farmers which can be due for 31st mar. We will retain the paddy stock until September/ August, and we will not buy any fertilizer. The minimum safe estimated market price of 90 tons of terme conseillé stock can be Rs 6th lakh. Quick cost from this alternative will be to insure the paddy inventory for the coming year, which will cost all of us Rs 20, 000. This amount may be easily agreed with the traditional bank, as Administrator of the lender was happy with the businesses of the Co-operative. Expenditure in Rupees| Expense of procured terme conseillé = your five, 00, 000| Insurance expense = twenty, 000|
Interest payable to bank = 29, 167+ 26, 000| Total expenses = five, 76, 000| Minimum predicted market price of 100 plenty of paddy in September/ October is Rs 6, 00, 000. Net Result is actually a profit of Rs twenty four, 833 With this alternative we can easily meet the first criteria, i actually. e. the repayment to the farmers. We can meet the second criterion that is to provide maximum benefit to the farmers, by providing the fertilizers by a cheaper price. The industry price of fertilizer in September/ March will be Rs 300 per bag, plus the society’s annual requirement is usually 2, 000 bags, we could ubsidize every single bag of fertilizer by Rs 15, which will expense the culture Rs twenty, 000 that could met in the profit manufactured, and staying Rs four, 833 could be carried for next year in society’s funds account. A significant point to always be noted is definitely we are thinking about the minimum market price observed at that time of the yr, if the market price per load of paddy is Rs 7, 500 which has a probability of 25% the contemporary society would make enormous profits, this profit work extremely well to provide more benefits for the farmer associates.
Some quantity can be salvaged for future operations from the cooperative. IV. Sell paddy stock right now, and purchase fertilizer now: From this alternative the cash reserve of Rs your five lakh will be used to repay the procurement cost of paddy i actually. e. Rs 5 lakh to the farmers which is due for 31st march. Offer the terme conseillé stock in current market cost hence the current cash harmony is Rs 5, 00, 000 following selling paddy stock. The expenditure incurred to buy the fertilizer can be Expenditure in Rupees| Expense to buy 2000 bags of fertilizers = 5, 00, 000| Insurance cost sama dengan 20, 000|
Labour and equipment cost = twenty-five, 000| Interest payable to bank sama dengan 29, 167+26, 000| Total expenditure sama dengan 6, 00, 167| The marketplace price of fertilizer carrier in September/ October is usually Rs 300, so the total revenue could be Rs 6 lakh, yet during this period of six months you will discover losses of 5% inside the total inventory. The total revenue considering the failures is Rs 5, seventy, 000. Net result is actually a loss of Rs 30, 167 In this alternative we are able to meet the first criteria, but screwing up to meet the remainder all requirements. C) Decision: The 3rd alternate i. elizabeth. o retain paddy stock and not to buy fertilizer fulfills all the criteria, this substitute earns earnings while the others alternatives decide to make losses. Therefore the 3rd option should be the decision of Mr. Agarwal. 3) Implementation: The 3rd alternative meets the objective of contemporary society with which it was formed the larger intrest of the stakeholders should be offered. This way culture is able to spend the farmers the value to its generate as well as build corpus from the society without the significant risk involved. As discussed in the 3rd alternative Mr. Agarwal will retain the paddy stock till September/October
