Professional Documents
Culture Documents
Bhavna Ghatge1
Diganta Chakrabarti2
Shilpa Shinde1
Abstract
This case highlights the noteworthy success of a cooperative organization located in a small and
undeveloped village Ajara in the Kolhapur district of the state of Maharashtra (India). It traces the prog-
ress of this small cooperative sector spinning mill from its conception in the late 1970s to its successful
transformation as a profitable export oriented unit in 2014. The case underlines the diverse challenges
the organization faced and the initiatives taken by the government to overcome those. It is an important
account of how a combination of visionary leadership coupled with strategic decision-making enabled
a struggling organization to establish itself into a distinguishably successful one. The application of
progressive management policies and practices are documented. This case also illustrates the role of a
cooperative organization in the context of socio-economic development of rural India.
Keywords
Transformation of a cooperative, leadership, high-performance organization, management practices
Disclaimer: Bhavna Ghatge, Diganta Chakrabarti and Shilpa Shinde have written this case solely for class discussion for
programmes in management education. The authors do not intend to illustrate either the effective or ineffective handling of a
managerial or an administrative situation. The case study does not represent or endorse the views of the management about
the issues in the case. The author may have disguised certain names and other identifying information to protect confidentiality
where needed. The case has been compiled from field data, information in the public domain and primary sources of the
organization studied.
1
Assistant Professor of HRM & OB, Flame School of Business, Pune.
2
Associate Professor of HRM & OB, Flame School of Business, Pune.
Corresponding author:
Diganta Chakrabarti, Associate Professor of HRM & OB, Flame School of Business, Vadzai, Pune.
E-mail: iganta.chakrabarti@flame.edu.in
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88 South Asian Journal of Business and Management Cases 4(1)
Introduction
For Ajara, a small village in the Kolhapur district of Maharashtra, 26 June 2013 was a day of achievement
and celebration, as the National Co-operative Union of India (NCUI)1 formally awarded Anna Bhau
Ajara Shetkari Co-operative Spinning Mill (referred to as ABASCOSM henceforth) as one of the
best cooperative organizations in the country. Mr Ashok Charati (chairman), Mr Anil Deshpande
(deputy chairman) and Mr Chandrashekhar Phadnis (managing director) received the Award of
Excellence from the president of India, Mr Pranab Mukherjee.2 For a cooperative mill located in a
remote, isolated village like Ajara, this was a significant achievement. It was a success story with which
the people of Ajara identified strongly. It was an official recognition of ABASCOSMs continuous effort
towards attaining higher goals.
This was, however, not the first time that ABASCOSM was recognized for its distinguished
performance. The Maharashtra State Cooperative Textile Federation Ltd.,3 Mumbai, awarded the
organization five times for its achievements between 2009 and 2012. The Maharashtra Energy
Development Corporation in 20112012 awarded ABASCOSM the Best Organization for Energy
Consumption and Energy Management. All these achievements and awards belonged not only to
ABASCOSM but also to the entire population of Ajara.
About Ajara
Ajara, located in the taluka ofAjara in the district ofKolhapur, Maharashtra, is flanked by two rivers,
Chitra and Hiranyakeshi. It is located 76 km towards the south from the district head quarter Kolhapur.
It produces Ghansal rice (a high-quality variety of rice) because of its high rainfall. Census of India
(2011) reports the population of Ajara to be 18,000. The majority of the villages population is agrarian
cultivating cashew nuts and paddy, with a few small-scale cashew-processing and rice-processing units
as an additional source of employment to the landless. A section of the population earns its living from
the tourism business.
the earlier initiatives in banking and education cooperatives provided them the required confidence and
motivation to look at solving the problem of unemployment of the rural youth of Ajara. With a vision to
start a cooperative business organization, they decided to apply for permission for a cooperative spinning
mill.4
However, the idea of starting a spinning mill at Ajara was met with scepticism by industry experts,
citing the relatively high climatic temperature and heavy rains of Ajara. Charati and Deshpande were
advised against setting up a spinning mill at Ajara. Moreover, the process of procuring a license for a
cooperative mill used to be long and tedious in those days due to the regulatory and operational obstacles
in the government departments. The problem was aggravated by the absence of significant political
patronage and strong financial background. However, Charati and Deshpande were strong-willed people,
who were not dissuaded by such hurdles. They strived relentlessly to procure the formal clearance
for starting the cooperative spinning mill. People aware of the experience of the founders fondly
recount how they used to frequently travel to Mumbai and virtually lived in a transport truck, for
procuring the licence.
Mrs A.K. Charati, the chairman of the mill and wife of founder Kashinath Charati recalls:
They had passion and would go and sit at the government offices for days as they did not have any political
contacts. But they were determined to start the mill.
They finally obtained permission from state government of Maharashtra authorities and ABASCOM
formally came into existence on 11 October 1979.
I will not die before I see the yarn manufactured at our mill.
Destiny played its role; both the founders passed away within the span of a month in 2008, in the same
year Mr Phadnis joined the organization as the managing director.
The new managing director knew that the mill was in a difficult condition with practically nothing
more than a license and a small building to call its own. He admits that he had no intention to stay with
the organization for more than one year.
Mr Phadnis says,
I was influenced by the dedication and passion of the two founders to start manufacturing yarn at Ajara.
Non-disbursement of funds by the government created a big deficit. Everything had to be done from scratch.
Turnaround of the mill into a successful organization was a challenge.
He was absolutely clear that ABASCOSM had to be run like a business unit to be profitable and
sustainable. The first challenge was to get the sanctioned government funds disbursed. He organized the
annual conference for Maharashtra Textile Federation at Ajara in 2008. This highlighted the existence of
the mill as part of textile industry in Maharashtra. The funds were finally disbursed in 2008 after a long
struggle of pursuing the deputy chief minister. This propelled the establishment process. New machinery
was installed and production started in 2009 with a capacity of 9,072 spindles. During the economic
recession, it was difficult for most of the organizations to sustain. The industry was facing an absenteeism
rate of 20 per cent and high fluctuation in the rates of cotton and yarn. There was no source of uninterrupted
power at the factory location. It led to production losses. To add to the woes, the mill workers were
generally untrained. In 2009, there were 220 workers and 24 staff members at ABASCOSM.
After facing multiple challenges for many years, the management was determined and focused to
make all endeavours towards growth and sustainability of the mill. They identified that a deep asymmetry
existed between the environmental demand and the institutional capacity of ABASCOSM. It was
necessary to develop the overall capacity of the organization. The management decided to develop
organizational policies that would help them be flexible and selective to respond to the environmental
change in the long term. While their competitors were expanding fast using bank credits, they aimed
towards a conservative and self-sustained business model. They did not diversify their fund base and
relied heavily on reinvesting of the profits. Organizational capacity for high quality was achieved through
the careful and stringently monitored production process. It was aimed at maintaining the best fit between
the supply of quality raw material and the final product. The first lot of yarn produced fetched a premium
price. Improvement in product through continuous research and development (R&D) initiatives through
machine settings, layout and maintenance has been followed with lot of seriousness. Strong initiatives
were taken, which helped in conserving energy and the cost of production.
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Ghatge et al. 91
A vision for self-sustenance and development was strengthened through a disciplined and team-
oriented organizational culture, which has led to high commitment amongst the workforce. The leadership
believed in developing a stimulated workforce that acted as a source for energy. Over the last five
years (20092014), these endeavours have lead to an expansion of organizational capacity to 13,104
spindles. By the end of 2014, there is a plan for expansion of 7,200 more spindles (refer to Appendix 1,
Organization Chart).
Local newspaper Pudhari reports:
Anna Bhau Ajara Shetkari Co-operative Spinning Mill as an organization which has been a nucleus for develop-
ment of a small village like Ajara.7
From its modest beginning in production more than five years ago, ABASCOSM has come a long
way. At present, the mill runs from an area of 85 acres with a production capacity of 13,104 spindles/day
of 20 s32 s carded8 warp /hosiery yarn as per the requirement of the customers. The average count of
yarn produced is around 24 s carded. The mill runs at its full capacity to produce 9,000 kg of yarn with
high utilization of 97 per cent. Seventy per cent of its product is exported to various South Asian and
some European, African and American countries. The remaining 30 per cent is absorbed by the local
players in the west Maharashtra regions of Kolhapur and Ichalkaranji. The mills product sells under the
Ajara brand, known for its quality and consistency. This brand fetches them premium rates in the market.
The product is exported through brokers and export agents bringing in repetitive orders while dominating
the 20s21s carded count market.
Devanand Patil, production and quality supervisor at ABASCOSM, says,
Ajara brand has created a good name for itself. It has become a benchmark for rate fixation in the western belt of
Maharashtra. Yarn is known for its consistent strength, colour and elongation.
As of now, the cooperative has member strength of 11,989. It has around 350 workers and 40 staff
members to run the show. The board of directors is a team of 16 with Mrs A.K. Charati as the chairman.
It is presently being spearheaded by Chandrashekhar Phadnis acting as its managing director.
and adore him. He is also a member of the happy thoughts association and counsels people towards
a stress-free happy life. He is personally involved in conducting career-counselling sessions with
school and college students in and around Ajara. He also invites these children to visit the mill campus
to create awareness and learning. All the above initiatives by Mr Phadnis have won him the support of
all his employees and their families. He is also responsible building a sense of family among the
employees.
His efforts have been rewarded at the state and national level. He follows a transformational leader-
ship style, aiming towards building a high-performance organization out of a cooperative mill in a
small village. According to most of his immediate reports, he is known to be task driven, disciplined
and systematic at his work. They feel he has been an effective strategic planner. They appreciate him for
taking care of the three crucial aspects for any businessoperations, finance and human resource.
Mr Phadnis, reflecting on his role at ABASCOM during the last six years, says,
I had been very sure that I wanted to run the mill as a business unit not like a typical co-operative unit. I put in
all work life experience to bring up this organization, focusing on three prime areasoperations, finance and
human resource.
He proudly discloses that their mill has surpassed the benchmarks subscribed by the South India
Textile Research Association (SITRA) norms.
Operations Management
The production process has been at the heart of the spinning mill business (refer to Appendix 2: Production
Process). The transformation of the mill involved high quality and maximum customer satisfaction. The
managing director and the production manager with their training and experience in the textile sector
have developed a process that has given extraordinary results. While utilizing the benefits of automation,
they researched on the machine settings which will produce the best results.
Production manager Mr Ammogh Waggh proudly talks about exceeding the SITRA norms. He says,
at our mill, we are far ahead of the SITRA norms.9 Our productivity (40s conversion) is 115gms while that laid
down by SITRA is just 110grams. (refer to Appendix 3: SITRA Norms)
To maintain appropriate temperature and humidity levels at each department, plywood partitions have
been used. It has also improved the efficiency of the air conditioning plant and fans, thus leading to
saving of energy. Turbo ventilators installed in the plant have helped in reducing the temperature of the
shed by providing fresh air throughout the year. The turbo ventilator is a zero operation cost arrangement
without any maintenance. This has led to a reduction in the plant temperature by 2 C and an increase in
the efficiency of the air conditioning and fans.
Quality is a big challenge in the spinning industry and has been stringently maintained at the Ajara
mill (refer to Appendix 4: Quality, Energy Management and Environment Policies). Most of the mills in
western Maharashtra follow the SITRA norms for quality. There is a well-developed quality laboratory
in the mill premise that helps in continuous monitoring of the process and the product manufactured.
There is a quality check at every level of the production process. The raw material that fulfils the
subscribed parameters of strength, colour and thread length is only accepted for further processing.
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Ghatge et al. 93
Once the raw cotton is put in the automated process, there is a quality check at every step against
the benchmarked standards. This helps to curb the imperfections in the yarn early on, thus improving
the quality of the final product and getting premium rates. As cotton is hygroscopic,10 the settings
of the machine are even changed based on the climatic changes to maintain consistent quality of
production.
Machines are well maintained on a regular basis for proper drafting, twisting, roving and spinning
activities, which help in maintaining consistent quality of the product. The cleanliness of the shop floor
is also stressed on and strictly maintained to avoid settling of the waste on the yarn. This prevents
imperfections such as uneven yarn with continuous neps11 and increases the strength of the final yarn.
The process of spinning has been re-engineered to batch/block creeling12 rather than being conti-
nuous at main frame. This has been done after considering the practical problems in handling work in
continuous processes. It also helps to reduce the manpower requirement as one man can be trained to
efficiently handle one block. Numbering of carding cans was introduced so that they can be matched
with the number of the machine, which finally helps in maintaining the homogeneity of maintaining
good quality of the product in terms of colour and strength.
Financial Management
A no-loan policy has been strongly followed for management of the mill. It has made the mill self-
sustainable. The initial establishment was done through either the funds from government or the
investments from the members. As the mill achieved its break-even rapidly and started producing profits,
the further expansion was done by reinvesting the profits. Most of the earnings in initial years were
ploughed back for installing new machinery and as working capital.
Vishnu Powar, chief accountant, says,
the vision in terms of procurement and utilization of funds has been very clear since the beginning. Good
financial planning and professional attitude towards managing a co-operative mill like a corporate unit has led to
self sustainability and growth. We have orders for three months in advance.
The delay in disbursement of government aid was the biggest challenge in running the mill in
earlier days. The final instalment of government funds will be disbursed in 2015, which will help
ABASCOSM reach their maximum permitted establishment capacity of 25,000 spindles. The mill
will have to start making provisions for the repayment of government funds after 5 years of disburse-
ment of the final instalment and the actual repayment starts after 20 years. The financial planning
and conservative approach towards the borrowed funds has made the mill self-sustained and profitable.
This will also help the shareholders reap good benefits and easy repayment to the government (refer to
Appendix 5Financial Results).
Generally, the cooperative sector organizations in India survive using the funds from the government.
In spite of losses, most of them are never shut down due to the social commitment. At ABASCOSM,
by contrast, self-sustenance was a top-priority goal and steps to achieve that goal have been taken.
Cost effectiveness has been achieved through the maximum utilization of the raw material, efficient
energy utilization, quality control, high level of customer satisfaction and high employee engagement.
Strong steps were taken to develop very good relations with raw material suppliers, who gave raw
material on credit.
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94 South Asian Journal of Business and Management Cases 4(1)
The substantial profits in the last four years due to these initiatives have been judiciously ploughed
back. The mill does not have accumulated inventory of finished goods. The goods are manufactured on
demand.
The small loans taken from banks were paid back very efficiently. Impressed by their banking
behaviour, KDCC bank, Kolhapur, referred to ABASCOSM in its advertising campaign stating that
every customer should be like ABASCOSM.
Ajara mill is the only mill which is giving such high bonus of 15 per cent continuously for last two years. Most of
the other mills in the area have either shut down or have been giving the minimum bonus. We have good relations
with the management. They take care of the employees well.
It was identified that the rural youth was unemployed but could be trained to be employed in the
mill. The employees recruited from the local population are initially taken as trainees and trained for
one to three months. A trained or skilled employee is taken up for a trial for one month after which
his employment is confirmed as a skilled employee. Generally, the employees are trained to be multi-
skilled.
The present management believes in the value of the human resource as a crucial resource for
organization. They are focused on providing benefits to all the employees of the organization, as well as
the villagers of Ajara. Employees are given some benefits beyond the monetary compensationthat
employees enjoy, ranging from accidental insurance, free medical check-ups, easy credit through the
employee credit society, tea coupons, etc. This has developed highly engaged employees forming a
competitive advantage for the mill.
Megha Batkadali, assistant at the personnel and time-keeping department, says
employees are very happy with the management. Our mill runs all 365 days for 24 hours, employees work on
festivals too willingly.
There are activities where the families of the employees are also involved, which make them all close
knit towards a social development cause. It has also created a strong sense of belongingness.
Acknowledgements
The authors acknowledge the support extended by the Anna Bhau Ajara Shetkari Cooperative Spinning Mill, Ajara,
for the collection of data from within the organization, the preparation of this case study and consent for the case to
be published in an academic journal.
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Appendix 1. Organization Chart
Quality Policy
ABASCOSM is committed to produce international quality yarn. Customer satisfaction by understanding expec-
tations is the prime motto. Strict policies are laid, regarding selection of high-standard machines, raw material,
reduction of waste and good maintenance of machines.
Environmental Policy
ABASCOSM is committed to be eco-friendly and ensures that through stringent policies like developing plantations
in and around plant premises, use of plant waste as manure, using proper pollution control measures, usage of
masks and cleanliness maintenance at the plant premises.
Source: Anna Bhau Ajara Shetkari Cooperative Spinning Mill.
Notes
1. The National Cooperative Union of India (NCUI) is the apex body representing all the cooperative organizations
in the country. It was established in 1929. Details about NCUI are found at http://www.ncui.coop/welcome.html
2. Source: Ajara Spinning Mill wins best organization award Dainik Punya Nagari (a newspaper published in
Marathi language from Maharashtra) reported on 2 July 2013.
3. The Maharashtra State Cooperative Textile Federation, Mumbai, is a multifaceted apex organization for the
cooperative textile fraternities in the state of Maharashtra (http://www.texcofed.com/about.html).
4. Spinning is a major part of the textile industry. It is part of the textile manufacturing process where three types
of fibre are converted into yarn, then fabrics, which undergo finishing processes such as bleaching to become
textiles. Source: http://en.wikipedia.org/wiki/Spinning_(textiles)
5. A spindle is a straight spike usually made from wood used for spinning, twisting fibres such as wool, flax, hemp
and cotton into yarn. Source: http://en.wikipedia.org/wiki/Spindle_(textiles)
6. 1 crore = 10 millions.
7. Reported on 5 September 2014.
8. Carding is a mechanical process that disentangles, cleans and intermixes fibres to produce a continuous web or
sliver suitable for subsequent processing (source: http://en.wikipedia.org/wiki/Carding).
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Ghatge et al. 99
9. http://www.sitra.org.in/index.php/sitra-publications
10. Definition of HYGROSCOPIC: (a) readily taking up and retaining moisture, (b) taken up and retained under
some conditions of humidity and temperature (source:- http://www.merriam-webster.com/dictionary/
hygroscopic).
11. A small knot of entangled fibres commonly regarded as a fault but sometimes introduced as an effect.
Small knots of fibre embedded in the yarn, may be intentional or unintentional (source: http://www.textile
glossary.com/terms/nep.html).
12. Creeling: Creeling is the placement of full packages in position ready to be unwound as part of the transfer
operations. An alternative meaning is the removal of the exhausted packages and their replacement with full
ones (Source: http://textilelearner.blogspot.in/2012/03/auxiliary-function-of-winding.html).