Amul’s architect-in-chief Verghese Kurien is not around to spearhead the milk cooperative revolution any more, especially at a time when private dairies are claiming, in a first, that their milk procurement is higher than the cooperatives’. The latter, however, dispute this.
Brands such as Reliance Dairy, Hatsun Agro Products, Gopaljee Ananda, Paras Dairy, and Kwality Dairy say the private sector is nosing ahead of the cooperatives in the organised milk trade.
Industry players say of the 130 million tonnes (mt) of milk produced in the country annually, 11 mt is procured by cooperatives and 15 mt by private players. The rest is kept for self-consumption, or purchased by milk suppliers, referred to as ‘doodhwallahs’.
“Of the 130-mt milk produced in the country, the organised sector procures 20-21 per cent annually, of which the cooperatives' share is 8.5-9 per cent, while the private sector’s is 11.5-12 per cent,” R G Chandramoghan, managing director of Hatsun Agro Products, a large, listed dairy company, which procures 0.75 mt annually, said.
He said the share of cooperatives in India’s annual milk procurement has risen from 8.5-9 per cent in the last 10 years, while that of the private sector’s has risen from 6.5 per cent to 12 per cent. “This shows the private sector has grown at a rate much faster than the cooperative sector’s, as far as procurement is concerned,” said Chandramoghan.
No official numbers
The data provided by private companies is not backed by official numbers, and is disputed by the cooperatives. "Procurement by private dairies should not be more than 10 mt. In contrast, co-operatives procure 14 mt. If the private sector is procuring so much, where are their products? State co-operatives are the market leaders, be it in Karnataka or Gujarat or Rajasthan or Bihar," said R S Sodhi, managing director, Gujarat Cooperative Milk Marketing Federation (GCMMF), Amul’s parent.
The annual procurement of cooperatives, as listed by National Dairy Development Board, or NDDB, in its annual report, was 9.56 mt in 2010-11.
Private players say their success owes to a slew of factors such as ploughing in investments back to the farmers.
“The cooperative sector is riddled with politics, and in many cases has scant regard for the farmers’ interest, as it runs like a government organisation,” said a senior executive of a large cooperative milk production company, who did not wish to be named. In the last 10-15 years, many milk cooperatives have been behaving like an extended arm of the government, he said, and are running huge losses.
This view echoes that of milk farmers, especially in states where the cooperatives have failed to live up to expectations. “There was a time when farmers preferred giving their milk to cooperatives, but in recent years, cooperatives are fleecing them by paying less and charging more from consumers,” said Mohan Singh Ahluwalia, president of Gwala Gaddi, a group of independent milk producers, and a leading milk seller himself.
He said, in an ideal situation, a cooperative should not be making more than Rs 3-4 profit a litre, but, in many cases, they make margins of over Rs 20.
Different strategies
In Hatsun’s case, as also in many others’, Chandramoghan says the key has been the focus on developing the infrastructure and the investments made in back-end development. “Earlier, the farmer did not have a choice, but he has (now). Also, in many states, cooperatives do not put adequate funds for back-end development, but the private sector does,” he said.
Experts said except the cooperatives in Gujarat, Karnataka and, to some extent, Bihar, most do not invest adequately.
In prices paid to farmers, too, cooperatives differ from the big corporates. Across the country, no uniform price mechanism is followed. In Gujarat, cooperatives pay much more than the corporates, while in southern India, companies pay more. In the north, particularly in UP, Punjab, Rajasthan and Haryana, the prices paid for procurement by both the cooperatives and corporates are similar.
“In Gujarat, cooperatives pay Rs 29 a litre, the highest, while in north India, both cooperatives and companies pay Rs 26,” Chandramoghan said. In the south, predominantly a cow-milk producing region, cooperatives pay Rs 18-19 for a litre of milk, while the companies pay Rs 20-21.
Experts say no single model of milk sales can work in India, and both cooperative and private milk producers can co-exist.
“Kurien’s model has not failed despite the steady growth of the private sector, as in India no single model can be the best,” said Ramesh Chand, director of National Centre for Agricultural Economics and Policy Research.
The co-existence of the two models is important because, despite the ‘white revolution’, India suffers from a milk shortage. It produces a sixth of the world’s total milk, but retail prices have galloped. Since 2002, prices have doubled, rising close to 30 per cent in the last three years. Annual milk demand is set to touch 180 mt by 2021-22, an increase of 38 per cent.
“Today, the cooperative sector is the biggest processor of milk. Its annual procurement might still be less in proportion to India’s production, but it still has a share of 60 per in this sector, and Amul is their biggest brand,” said Yogendra Alagh, former union minister, and a close associate of Verghese Kurien.
A leading player from the milk trade, who did not wish to be quoted, said the Kurien model will always remain relevant, but, over the years, it has been sullied by corruption.
Amul has drawn up a plan to take on the private players. Alagh said the National Dairy Plan, run by NDDB, will venture into districts which don’t have milk cooperatives, located in north-east, Jharkhand and Jammu and Kashmir.
“Private companies are mostly located in and around cities, but it is the cooperative dairies that serve the interest of the lowest denominator of the society. This is where Kurien’s relevance comes in ,” Alagh sums up.
