Is there room for a dairy behemoth?

“I expected to see the whole landscape green, with grazing cattle, but the whole place is brown, like the rest of India… I saw your farmers. They are good people – farmers are always good people – but they are not as hardworking as the farmers of Punjab. I can’t find a single reason why Anand is such a huge success. Now, can you tell me what’s the secret?” Shastri asked Verghese Kurien, the then general manager of the Kaira District Cooperative Milk Producers’ Union and the architect of India’s White Revolution, the world’s largest dairy development program launched in the 1970s. Anand Earlier it was a part of Kaira district.

Kurien told Shastri that his comments were correct except for one difference. Anand Dairy was owned by farmers and managed by elected farmer representatives. And Kurien was an employee of the farmers who took his services as a professional manager.

An excited Shastri then remarked that there was no particular reason for Anand to be in Gujarat only. Shastri told Kurien, “From tomorrow, you will make it your business to work for Anand, not only for Gujarat, but for the whole of India… Please replicate Anand all over India.”

In his autobiography, i had a dream tooKurien fondly recalls the incident, including the bureaucratic hurdles he faced in Delhi while setting the plan in motion. Questions were also raised from within the Kaira Milk Union. “By creating more joy, aren’t you creating more competition for us?”

Kurien’s answer was visionary. He told the board of the union that for a country as big as India, one dairy would not be enough to meet its needs. And crucially, Kurian said that “one amul was only a stick – it could be broken – it would be very difficult to break a hundred amuls at once. Therefore, it would be in the interest of the amul to help make more of it.” Kaira Union introduced the brand Amul in 1955 to market its product range.

In the decades that followed, India built one of the most formidable dairy cooperative movements globally. Despite a growing population, per capita availability of milk has more than quadrupled, from 107 grams per day in the 1970s to 427 grams in 2021. Farmer members of cooperatives receive between 75-85% of what the consumer pays for dairy products. This is compared to a 25-50% share in other agricultural products.

Produced by over 80 million rural households, milk is the largest agricultural product with a value of close to 10 trillion annually according to official estimates. India is the largest producer of milk in the world – a fifth of global production – even though productivity per animal is low.

Since the launch of Operation Flood in 1970, successful dairy cooperatives have emerged in various states. Amul is now a household name across India with an annual group revenue of Rs. 72,000 crores in 2022-23. It is also the largest fast-moving consumer goods (FMCG) brand, outpacing giants such as Hindustan Unilever by a wide margin. 58,000 crore in 2022-23).

Apart from Amul, Karnataka has Nandini (the second largest dairy cooperative, with a turnover of Rs. 25,000 crores), Aavin in Tamil Nadu, Milma in Kerala, Gokul in Maharashtra, Verka in Punjab, Saras in Rajasthan and Sudha in Bihar (the largest cooperative society in eastern India).

Still, many are struggling financially. A 2020 research paper on agricultural value chains, published by the Indian Council for Research on International Economic Relations (ICRIER), Delhi, found that 95 of the 175 milk unions studied were loss-making. The bulk of loss-making cooperatives—55 out of 95 unions—were from Uttar Pradesh, the largest milk-producing state.

The authors of the report noted that no effort has been made to restructure these cooperatives to make them efficient and accountable to farmers. This led to the decline of cooperatives in states like Uttar Pradesh. Successful ones such as the Gujarat Cooperative Milk Marketing Federation (GCMMF) – which now markets its products under the Amul brand and comprises 18 milk unions in the state, including Kaira – have entered other states but have not followed the Anand model. Since farmers from other states could not be members of the GCMMF, it behaved like a charitable private sector body outside Gujarat.

White Revolution 2.0

In this backdrop, Union Home and Cooperation Minister Amit Shah’s remarks on December 30 last year created a furore. Inaugurating a dairy project in Karnataka’s Mandya, the minister said Amul and Nandini would jointly set up a dairy in every village of the state in three years. The brand Nandini is owned by the Karnataka Milk Federation, which comprises 16 milk unions in the state.

Opposition political parties took this as a sign of a future merger – despite a quick denial issued by the state’s chief minister. Nonetheless, a political lull continued ahead of the state elections on 10 May. The incumbent Bharatiya Janata Party (BJP) lost to the Congress, whose leaders were often seen frequenting the Nandini Milk Parlor during the election campaign.

An ongoing process of amending the Multi-State Co-operative Societies Act, 2002, tabled in Parliament in December 2022, on how board members can be elected by a process managed by a central election authority, added to the confusion. Apprehension: Once amended, it will be easier to merge state cooperatives.

In March this year, Amit Shah unveiled the government’s plan to set up rural dairies in 200,000 panchayats across states – paving the way for White Revolution 2.0. But what will be the size and nature of these rural dairies is not clear. So far, a multi-state cooperative with an export focus – which will be linked to these newly created rural dairies – has been set up.

Experts and Industry Insiders Peppermint Those spoken to are reading these developments as a pivot towards greater central control of cooperatives, a strategy that could bring rich political dividends to the ruling BJP by nurturing vote banks of farmer-members in states Can give A pan-India mega brand could also undermine the spirit of decentralization and detract from Kurien’s idea of ​​hundreds of Amul-like brands across India, some feared.

Peppermint Sent a list of questions to Ministry of Cooperation but did not receive a response.

Amul Managing Director Jayan Mehta said in a written reply that there is no plan to merge Amul with any other dairy cooperative. But Amul along with six other national level organizations will promote a set of multi-state cooperatives focusing on exports, seeds and organic products.

“This will usher in a new era of cooperation across the country for the benefit of lakhs of growers organized under such cooperatives,” Mehta said.

small vs large

Whether or not India changes its approach to how milk cooperatives are managed, there is another sore point in the search for policy reform: what happens when a cooperative brand becomes too big? Should it be allowed to capture markets in other states and compete with smaller brands? The question took a controversial turn recently, when Amul announced that it would be entering Nandini’s turf in Bengaluru.

“If it is possible to turn Amul into a multi-state cooperative that allows membership from other states, there is a better case for it to go elsewhere… Otherwise, it is becoming a giant corporation with a national presence.” Only the farmers of Gujarat benefit,” said C Shambhu Prasad, professor at the Institute of Rural Management, Anand.

And if public sector banks can be merged, why not cooperatives to make them national brands, asks Prasad.

“For farmers, the entry of Amul or Mother Dairy is generally good from an economic point of view – it ensures better prices when the cooperative structure is weak. But if that is the model we want to follow, then the entire cooperative movement (designed on Anand) goes for a toss,” said T Nand Kumar, former chief of the National Dairy Development Board (which owns the Mother Dairy brand). Said, and lead author of the dairy sector report cited earlier.

The basic idea was that village and district level milk unions would join hands to form a state level federation that would market dairy products under a common brand. Value-added products such as butter and cheese, sold under brand names, ensured higher margins and better returns to farmers, as liquid milk is a low-margin product.

“There is no problem when Amul enters a milk-scarce state to sell its surplus milk. But, for example, in Maharashtra, where the state dairy brand failed to take off, multiple players including Amul and private dairies procuring milk resulted in lower milk prices for farmers than in Gujarat, where Amul managed a strong procurement mechanism. together is a strong institution,” Kumar said.

“So, can a national level cooperative body ensure a strong procurement mechanism for farmers? Kurien did not believe so and hence pressed for state-level federations. The question to ask is, do we allow brands like Amul or Nandini to fight with smaller brands like Sudha or Aavin? Or should the Center help states build strong local brands?”

The counterargument, Kumar said, was why should Amul have objection to entering another state as it could lead to increased competition, transparency and efficiency in the dairy value chain. “I have no problem with that argument. But I’m not sure it can be used as an excuse to build a multi-state cooperative.”

Amul’s Jayan Mehta denied any threat to the cooperative brands from each other. Mehta said, “The presence of more than one cooperative in a state is beneficial for the farmers as they will be dependent on the prices of private and multi-national players.”

The new Cooperation Ministry (set up in July 2021), Mehta said, would help usher in the next White Revolution by setting up cooperatives in 200,000 of the 500,000 untouched villages.

‘Easy to destroy’

A former executive of a dairy cooperative, on condition of anonymity, said that the One India-One brand is a thought process linked to current political realities. “But creating a national-scale mega-brand runs the risk of political and bureaucratic capture.”

The multinational dairy giants were unable to break into India’s dairy market because of the strength of successful cooperatives. That could change, too, if the current structure is beefed up, said the person cited above.

Sudha from Bihar offers the perspective of a smaller brand. Together 5,000 crore turnover, it lacks the strength to compete with Amul. “Amul offers 25-50 paise more (per litre) to our farmers to capture liquid milk supply in some area. We spend money and effort to develop dairy sector in Bihar whereas Amul is only interested in gaining market share. This unfair competition will ultimately harm the farmers. Besides, it is a waste of state funds meant to be used to support local dairies (for fodder, artificial insemination and veterinary services),” said Sanjay Kumar, president of Sudha Dairy.

“We have not received any proposal on the creation of a multi-state cooperative. But I don’t see any reason to end the system where it is working well,” Kumar said.

Former Punjab Farmers Commission chief Ajay Vir Jakhar said that merging strong local brands into one national brand seems practically impossible as the states would strongly oppose it. “But I consider Amul a state-sponsored monopoly. It went to states (outside Gujarat) and destroyed local cooperatives by predatory pricing. And then when there was a glut in supply and prices fell, they went with the farmers. We have seen in Punjab.”

Professor of Public Policy M.S. at the Indian Institute of Management, Bangalore.

“The larger a cooperative, the less accountable it is to its members … and the more vulnerable it becomes to a technocratic occupation with select few decision-making. Building a successful cooperative is difficult. , But it is easy to destroy.”