New Milky Way : Private Players in The Dairy Market: Civil Services Mentor Magazine - March 2014


Private players are entering the Indian dairy market in a big way. Dairy cooperatives, which ushered in the White Revolution, need to expand and strengthen their network to protect the interests of small dairy farmers.
But the cooperatives are hampered by political interference, unsustainable subsidies and poor marketing strategies. In such a scenario, the National Dairy Development Board is promoting a model—milk producer companies—to compete with private companies. Is it the right strategy?

Chinanibhai Jivabhai Patel of Sandesar village in Gujarat has done well for himself. He owns a two-storey house, a car, keeps 15 heads of cattle and employs two workers to look after them. In fact, all the 300-odd dairy
farmers in this small yet prosperous village in Anand district are equally well-off. Sandesar symbolises the success of India’s White Revolution that transformed the country from milk-deficient to the world’s leading milk producer. Along the way the revolution, which continued for 26 years till 1996, pulled millions of rural dairy farmers out of poverty.

At the helm of the revolution were milk producers’ cooperatives. Devised by Verghese Kurien, popularly known as the Milkman of India, these cooperatives allow dairy farmers to run everything themselves, from collecting and processing milk to marketing it and other dairy products. It is done through a democratic set-up. Anyone with a cow or buffalo can join the cooperative body and elect its office bearers (see ‘What’s a dairy cooperative?’). “The model has been a boon to dairy farmers like me. I had just two cows when a dairy cooperative was organised in my village some 40 years ago and a milk collection centre was set up,” says Patel, now the chairperson of Sandesar Village Dairy Cooperative Society. The cooperative has also funded much of the village development work, including construction of roads, village school and primary health centre, he adds.

There are other benefits of being part of a cooperative. “You have a veterinarian on call; artificial insemination is done at a nominal rate or for free, depending on the society; you get cattle feed at factory prices and can avail interest-free loans from the cooperative. What more could a dairy farmer ask for?” says Chaman Patel of Mogri village in Anand who sells three litres of milk a day. The icing on the cake is the annual bonus that the cooperative shares with its members. Last year, he got around Rs.50,000 as bonus.

Small wonder then that from 1946, when the first dairy cooperative was formed in Kheda district of Gujarat, their number has increased to 155,634 in 2012-13, according to the National Dairy Development Board, the apex body for promoting the dairy sector in the country (see ‘Making every drop count’). The Gujarat Cooperative Milk Marketing Federation (GCMMF), which owns the iconic Amul brand of dairy products that spurred the White Revolution, is the country’s leading cooperative with three million members and collects 3.6 million litres of milk a year. In 2012-13, it registered a turnover of Rs.11,668 crore. In contrast, multinational company Nestle, which has been operating in the country for over 50 years, collects 1.3 million litres of milk a year from 0.1 million farmers.

Across the country, there are 24 state-level federations of dairy cooperatives, which have brought 15.11 million dairy farmers—21 per cent of the country’s dairy farmers—into their fold, and scripted an extraordinary success story not seen in any other sector. Even states like Jharkhand, Nagaland, Assam, Sikkim and Tripura, which produce negligible amount of milk as compared to other states, have the cooperative system in place. The saying in the dairy cooperatives is, “Every drop counts.”

And it does. Together, these cooperatives have helped transform India from being a country dependent on imports of milk and dairy products, from baby food to butter, to a growing exporter of dairy products. In 2012-13, the country produced 132.4 million tonnes of milk (15 per cent of the global production), worth Rs.270,000 crore, making it one of the world’s largest milk producers, and exported 87,824.21 tonnes of dairy products, worth over Rs.1,412 crore. Most of the exports are to Bangladesh, Egypt, UAE, Saudi Arabia, Algeria and Yemen.

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