The Telegraph
Since 1st March, 1999
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- Verghese Kurien’s cooperative model suits the Indian milk-producer

India’s “white revolution” was the result of the Kaira cooperative model with products under the Amul name, and was nurtured by Verghese Kurien. Private dairy companies, and especially multinationals, opposed this model. Amul innovated a baby food based on buffalo milk. Multinationals mocked this effort and implied that it would harm infants. Kurien, in turn, made life as difficult as possible for the multinationals in milk.

The “white” revolution brought millions of small milk producers together to supply milk to the collection centres. From there, the milk was transported to dairies for processing, standardizing the fat content, using the surplus fat to make butter, ghee and other value-added products. The surplus milk in the flush season was converted into milk powder that could be reconstituted or mixed with liquid milk in the lean season. This ensured an uninterrupted flow of milk to consumers.

The cooperative model helped the cattle-owners to develop a sense of participation and ownership. They got a guaranteed price in cash every day for all their milk supply. They were not cheated and paid no bribes. Comprehensive surveys show that the milk revolution has significantly added to the incomes of landless peasants. It has bettered the diets of most Indians. It has made fresh liquid milk available through the year in urban centres and in milk-short areas, like Tamil Nadu, where families in the past substituted skimmed milk powder, baby food and Horlicks for milk.

Could the milk producer have got a better price from private dairy companies than from the cooperatives' Perhaps. But cooperatives give a consistent price through the year. None of his production goes waste. He gets help to keep his cattle healthy and to improve the breed. These benefits are unlikely from a profit-oriented company.

After the success of the Kaira cooperative milk producers union and their Amul brand, the milk cooperative movement was helped to spread by the National Dairy Development Board headed by Kurien, with support from the European Union. The EU countries had an unusable milk mountain resulting from the large subsidies to their farmers. Some of this milk powder and butter fat was given to India through the NDDB. The sales proceeds were used to build infrastructure for milk collection and processing and help in setting up milk cooperatives, dairies, veterinary centres, and the like. Kurien’s leadership, single-minded determination, willingness to battle with anyone, management and communication skills made it possible.

Concurrently Amul was built to become a well-loved brand standing for a range of milk-based products of high quality and low price. Kurien demonstrated to the multinational companies that the cooperative principle, rather than the profit motive that drives companies, was what would benefit consumers and milk producers alike. The NDDB established cooperatives in many states. These developed their own brands of milk products — Vijaya, Verka, Milma, Sudha, Nandini and the like. They competed in some markets with each other. But the nationally dominant brand was Amul. The marketing expertise behind Amul was given through the NDDB to the other state cooperative brands.

Kurien strongly supported the appointment of his chief lieutenant for many years as the chief of the NDDB. She proposed to establish two joint ventures with cooperatives with 51 per cent equity to the NDDB. Each company would function independently to promote its brands. The NDDB would give marketing support earlier supplied by Amul. It would continue to fund newer cooperatives.

The corporatization proposals are said by Kurien to be a betrayal of the cooperative principle. He would prefer the NDDB to hold the minority share at 49 per cent in order to safeguard the cooperatives since the NDDB might in future offload its equity in the market.

What are the issues' The companies formed for marketing dairy products might go into private and even multinational hands. The search for productivity and cost improvement might lead to the corporatization of the supply cooperatives. The corporate model has helped both for-profit and not-for-profit organizations. It has optimized return from limited resources. A company works for the maximization of profit and efficiencies for shareholder value and corporate growth. The cooperative shares the available surplus among very poor, largely landless peasants. The company strives for the maximum possible premium price. The cooperative charges the lowest price possible consistent with the interests of the producers.

The majority of the milk producers supplying milk to the cooperatives are owners of one or two cattle. Their methods cannot be as efficient in maximizing productivity (in milk yields) of cattle. The corporate model in dairying, as it has developed in the West, puts hundreds of cattle together in one tightly packed shed, ensures minimum exercise to the cattle so that they can grow quickly, feeds them with carefully planned nutrient mixes, growth hormones and animal matter to improve milk yields and keep costs low. The results have been sometimes disastrous for infants. The “mad cow disease” resulted from feeding vegetarian cattle with animal matter to lower feed costs. The small and poor Indian milk producer cannot dream of any of these techniques. They demand size.

A private marketing company for the cooperative will put pressures on cost even on the cooperative dairy supplier. It might even import the cheap milk available in more efficient producing countries where there are huge subsidies to the producers. Such cheap imports could spoil the Indian market for the milk produced by the small owners.

The cooperative model suits the nature of the milk producer in India. Large numbers of very poor landless labour and limited cattle ownership by many such people make it inevitable. It supplements their poor incomes. The cooperative has harnessed these many producers into a wondrous whole and a consequent white revolution. Corporatization of dairy products marketing might lead to this being introduced in milk supply as well. The corporate model enables substantial cost reduction. It will also dislodge millions of small cattle owners. This is a danger that we must not allow the Indian milk producer to face until he has many other options to improve his income.

There are many other things that the cooperative dairy movement can do with the help of the NDDB. It could, through central marketing support, considerably improve the marketing and brand-building. For this it has to develop its own strong marketing expertise. The NDDB could promote cooperation in marketing by specializing in selected products where possible. It should continue to promote the training and restructuring of existing cooperatives. Dairies could use each other’s production facilities to label each other’s brands to save on avoidable transportation and holding of extra stock. The cooperatives could develop grameen banks for women who are the principal family members looking after the cattle. They take the milk daily to the collection centres. They could supply liquid milk and powder on contract to the companies that want to process them further into milk products. The NDDB has a major role to play in strengthening the milk production and marketing infrastructure and capabilities. Kurien is right in objecting now to the entry of corporate cultures, even into milk marketing, for fear that it might enter into milk collection and processing.

The public criticism by Kurien of his protégé, the chief of NDDB, must cease. The basic issues must instead be debated in public. Kurien deserves the nation’s gratitude and obeisance but he must allow his successors to adapt to new and changing environments. If public debate leads to the conclusion that NDDB can safely experiment with corporatization, it should do so. But it is essential that Kurien’s legacy be nurtured. That requires transparency and consultation in major policy decisions.

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