Varun Nagar

Varun Nagar Agricultural Cooperative Society

The Varun Nagar Agricultural Cooperative Society (VNACS), located in Jadhara District, was a village level agricultural cooperative society. The Society started functioning in 1976 with 50 members. In 1991, the Society had 300 members. The main functions of the Society were to procure agricultural produce from the farmers and market it to the district mandies. The Society also procured and supplied agricultural inputs (seeds, fertilizers and pesticides) to farmer members.

In September 1990, the Society had drawn from the Jaldhara District Cooperative Bank an overdraft of Rs. 5 Lakh under its cash credit arrangements[1], and this was yet to be repaid. In the first week of March 1991, when Mr. Agarwal, Manager VNACS, met Mr. Dwivedi, Manager Jaldhara District Cooperative Bank, Mr. Dwivedi had indicated that he considered VNACS to be a well-managed cooperative society, secure in its operations. Therefore, he would be willing to allow the Society, if it required, to continue the use of the overdraft of Rs. 5 Lakh. The Bank, of course, charged an annual interest of 10%.

In mid-March 1991, the Society reviewed its operations for the year. The Society had with it 100 tons of paddy, in storage for a month now, waiting for disposal. Payment of Rs. 5 Lakh to members towards this procurement was due by March 31, 1991. After meeting all the expenses of the operations of the Society, and before repaying the overdraft from the Bank, the Society had a cash balance of Rs. 5 Lakh.

Mr. Agarwal was planning to sell, in a few days time, the 100 tons of paddy in storage, at about Rs. 5,000 per ton. He knew that this would mean the realization of just the procurement price.

To review the operations of the Society for the year, the Executive Committee of the Society met on March 20, 1991. During the discussions, Mr. Sharma, one of the members of the Committee, pointed out that if the Society waited for 6 months to sell the...