Shri Ramchandra Sarvottam Dubhashi Memorial Lectures
DAIRY DEVELOPMENT THOUGH CO-OPERATIVES IN INDIA
By V. Kurien
National Dairy Development Board, Anand 388 001
Board of Extra-Mural Studies
University of Poona, Pune – 411 007
Mr. Chairman, honoured guests, Ladies and Gentlemen, it is indeed an honour and a great privilege, to have been invited to this forum to deliver the Seventh Annual R.S. Dubhashi Memorial Lecture. I did not have the privilege of knowing Dr. Dubhashi personally, however, Dr. Dubhashi was well known to all of us for his love for living things, for his keen interest in horticulture and in the ways of using horticulture to restore our declining nutritional standards.
I am sure that Dr. Dubhashi would have approved while expressing my views on the prospects of our dairy development. I should also talk to you a little about Operation Flood, the world’s largest dairy development programme, which has sought to modernize India’s Dairying by enabling rural producers to play an increasing role in the processing and marketing of the milk they produce. This should be in the fitness of things particularly because by making increasing quantities of rurally produced milk available to our urban populations, Operation Floor, also contributes to raising the nutritional standards of our people, a cause which was very dear to Dr. Dubhashi.
I also believe that had he been in our midst today, Dr. Dubhashi would have certainly been happy to learn that the Government of India have recently invited the NDDB to apply the Anand pattern to restructure Delhi’s fruits and vegetables business on cooperative lines just as we have been doing in our dairy sector. However, before I describe to you how Operation Flood has modernized India’s dairying and, indeed, why it has been able to do so. I should like to briefly talk to you about the conditions which led to the formulation of Operation Flood.
All of us know from our folklore and mythology that several centuries ago India had the history of a traditional but very well developed dairying. There used to be entire communities whose main occupation was dairying, who bred high producing pure breeds of cows and used land exclusively for raising cattle. Over time, however, as the pressure of growing human population increased the feeding of cattle suffered because more and more land had to be used for producing staple food and fibre. The breeding of cattle also suffered because more and more bullocks were required to till the new. Inferior land being brought under cultivation and, as a result, cattle came to be bred for producing strong fast bullocks rather than good cows.
In more recent times, these retrograde tendencies were only further reinforced because there did not develop an appropriate marketing structure which would link the rural milk producer with the consumers in our burgeoning towns and cities. Instead of transporting rurally produced milk to the towns, the traditional milk traders chose to take the milk animals to the towns. As a result, rural milk producers had no incentive to increase milk production.
The efforts of the Central and State Governments to rectify this situation also did not come to much. The milk commissioners and dairy development departments were swayed by their political masters’ concern to keep the vocal urban population happy by supplying them low price milk by using cheap, imported dairy products. This, no doubt, served as a disincentive to indigenous milk production. On the other hand, the animal husbandry departments evolved schemes to supply production enhancing inputs to milk producers, especially in the ICDP areas. I have always wondered why milk producers should ever want to increase their milk production if they do not have access to a remunerative market for their surplus milk.
While milk producers all over the nation’s milksheds gradually resigned themselves to their fate and, the milk merchants had a free run, the farmers of Kaira, a milk surplus district in Gujarat, took an entirely different path. In 1946, they struck against Polson Dairy and their exploitive milk contractors who had the monopoly to collect milk from the villages of Kaira and supply it to the Bombay Milk Scheme of the then British governed Bombay. Instead of living at the mercy of Polson, the farmers, under the leadership of Sardar Vallabhbhai Patel decided to form their own co-operative and supply milk directly to the Bombay Milk Scheme. The Kaira Co-operative which is now popularly known as Amul made a modest beginning with two village co-ops collecting about 250 litres of milk per day. This cooperative grew rapidly from strength to strength and emerged as the largest dairy in India. Its products marketed under the trade name Amul because famous throughout India. It became a Co-operative with 330000 farmer members and a turnover of nearly Rs.100 crores ! More importantly, it showed what the farmers themselves could achieve, give the encouragement.
Most young professionals today would pride themselves in being managers in an organization of farmers like Amul. I may, however, point out that most of them would have strongly detested the prospects of working in a place like Anand in 1949 as, indeed, I did when, I first came to Anand, much against my own volition and better judgement. Anand, which was truly God-forsaken, used to be little more than a muddy road, a small railway station and, an antiquated government dairy where I was to do my six months’ stint as part of a five year bond that I had signed with the Government of India. While I kept looking for a good enough excuse to run away from Anand, I was befriended by Tribhuvandas Patel, the young co-op. chairman, and unknowingly began to share his dream of building a strong organization which would rid the farmers of the clutches of the middlemen. In one of those weaker moments I accepted Tribhuvandas Patel’s suggestion that I work for the nascent Kaira co-op. I have never regretted that decision in my 33 year career as an employee of the farmers.
Against heavy odds and stiff resistance from private traders and milk commissioners alike, Amul became one of the largest farmers’ organization in the country towards the close of the 50’s. The growth of Amul triggered off the mergence of dairy co-ops of the same pattern in the neighbouring districts – Amul actively helped to nurse the upcoming co-ops to strength and maturity. Together, all these six co-ops tested various managerial practices, bye-laws etc., evolved first by the Kaira co-op. and developed a set of principles which would ensure proper functioning of a dairy co-op: these principles came to be known as the Anand Pattern.
While dairying in most milksheds of the nation continued to stagnate through the 50’s and the 60’s, in Kaira and its neighbouring districts, milk production registered rapid increase. Once the farmers were assured a reliable, year-round market and stable prices for their marketed surpluses through their own organization, they started making increasing demands on their co-ops which, happily enough, complied first, by starting mobile veterinary clinics, then by supplying balanced cattlefeed, extension etc. and then by artificial insemination etc. Thus it did not come as a surprise to us that while dairy departments everywhere spent enormous resources and effort on cross-breeding to increase milk availability without much success, milk production in Kaira and other co-op districts of Gujarat increased on its own, just because farmers had access to a new and more responsive institutional structure for procurement, processing and marketing of their milk.
When Shri Lal Bahadur Shastri, the then Prime Minister visited Amul in 1964, he was greatly impressed by what he saw in the Kaira villages. He realized that Amul’s was one of the most effective ways of dairy development in our country and suggested that Amuls be created in all the milkshed districts of the nation.
The National Dairy Development Board of which I was appointed the ‘honorary’ chairman and which, at my request, was headquartered at Anand, was created in 1965 for the explicit purpose of replicating Amul in different parts of the country. After making infructuous efforts to sell the Anand Pattern to state governments for five years, the NDDB conceived Operation Flood which was to create Anands in 17 milkshed districts selected from all parts of the country. The programme was to cost Rs.97 crores; the funds for the programme were to be generated by sale of donated milk powder and butter-oil in the form of recombined milk to the consumers of four metropolitan cities namely, Bombay, Delhi, Calcutta and Madras,
This operation was also to help us prime the pump, as it were and, to give the nascent co-ops and the mother dairies their much needed experience of urban milk marketing.
Delayed though it was, for reasons that I shall describe later, Operation Flood achieved most of the targets it had set for itself. Like all ambitious development programmes that work, it generated great expectations-fair as well as unfair ! Soon we began to be criticized for not doing what we had never set out to do. However, those who followed the programme closely enough could easily see the good that Operation Flood was doing to our hinterland milksheds. And, therefore, even before Operation Flood was formally closed, NDDB was asked to implement Operation Flood II which proposed to cover 100 lakh rural milk producers in 150 milkshed districts in the country and which proposed to improve the supplies of milk to 150 major towns and cities. Thus, the programme would involve some 500 lakh rural people and some 1500 lakh urban people.
I may now tell you briefly about what has already been achieved under these programmes. Already, we have some 26000 village societies enbracing some 28 lakh milk producer families. These village societies are operating in 94 milkshed districts; in each of these districts, an Anand is emerging. Some of these Anands are in advanced stages of growth; A majority, which are young, are in early stages of growth. Granted that an Anand now need not take 30 years to build an Amul. The first model did. But at the same time, an Anand, like Rome, can also not be built in a day !
Be that as it may, between them, these 94 unions own over 60 lakh litres per day of rural milk processing capacities; their total procurement peaked at some 63 lakh litres last year and they have maintained an average of 40 lakh litres daily since then. Then flow of wholesome milk by modern dairies to our cities and town has increased from 7 lakh litres/day to 34 lakh litres/day since 1970 when Operation Flood began. If we consider the fact that over Rs.500 crores of government investments in animal husbandry and dairying in the pre – 1970 years could not yield any significant results nay, not even arrest the rapid decline in our per capita milk availability, I am sure you will agree that what Operation Flood has been able to do is no mean achievement.
And yet, Operation Flood has been criticized bitterly by some people just as it has been admitted by many others. While I am not saying for a moment, that the planning and implementation of Operation Flood has left no scope for improvement, nevertheless I do feel that a majority of criticisms leveled so far against Operation Flood are unfounded. They have arisen either from the very personal pre-dispositions of the critic about the nature of social processes, or from the Ideological differences between the programme and the critic or more importantly, from the critic’s inability to understand the fundamental principles which, in my opinion, constitute the vision of Operation Flood. Since nothing can be done about the first, and, very little about the second, I should now request your indulgence to a brief discussion of the third namely, the principles underlying Operation Flood.
The first of these principles is : in order to create an Anand, you must have access to a market like Bombay, for only a good market will enable the Anand to offer a remunerative price to the rural producers by the same token. You can never create an Anand in Delhi city, for the dudhias can bring milk from nearby villages at much lower cost and without any processing overheads and cost of a dairy plant that an Amul implies. This explains the absurdity of the Delhi Milk Scheme’s efforts to collect milk from villages within a radius of 30 miles of Delhi.
The second principle to recognize is that our milch animals are very poor milk yielders but have great potential for increasing milk production simply by better feeding and management. This potential is left largely untapped because milk producers do not have access to a stable, remunerative market for their surplus milk. Establishment of an appropriate institutional structure for marketing itself would unleash the producers’ desire to make the most of the economic opportunity through increased milk production obtained by better feeding and management of the animals. It may come as a surprise to many scientists that several researches have shown that wherever co-operative have worked, the breeding efficiency in village dairying has increased just because the access to a market has increased the opportunity cost of letting an animal remain unproductive longer than is necessary. Thus, in my opinion, cross-breeding is not required to increase milk production from the present level although I do believe that the advantages of modern science that cross-breeding and AI represent should certainly be made available to our farmers through their own organizations.
The third, principle, which follows from the second is : there is a natural sequence in which different interventions in dairy development need to be made. I have mentioned earlier that if a milk producer is satisfied with getting one litre of milk from a cow which can yield three just because he cannot market the additional two litres at a price which covers his cost, then, he is unlikely to accept a cross breed which is a far more difficult and delicate an animal to maintain until he is assured of a fair reward for all the trouble he takes. Now, all the government efforts violate this simple logic : in my opinion, they all seek to put the cart before the horse. They give the farmer animals which will produce ten litres of milk without helping him market this milk.
The fourth principle, which explains the establishment of Mother dairies and the use of donated SMP and butter-oil is : capturing a commanding share of milk market must precede and not follow the growth of Anand Pattern co-ops in their surrounding hinterland. We learnt this precious lesson almost accidentally when in its early years the infant Baroda district co-op approached Amul lamenting that they could not procure enough milk to meet the increasing summer demand in Baroda city. Amul generously offered to top up the Baroda co-op’s summer procurement with some 25000 litres daily of its own milk. And, to behold, in a few days’ time, Baroda co-op’s own procurement had increased by over 20000 litres daily, to our great surprise and elation.
What had really happened was : when Baroda co-op increased its sale of milk in Baroda city with Amul’s milk, all the milk that the traditional trade could not sell in Baroda had nowhere to go but to the cans of Baroda co-op’s village societies. In the case of Operation Flood, this outside milk to be used for pump-priming in metro-cities was obtained from the World Food Programme. Not only did it enable the Mother dairies to capture commanding shares in the milk markets of the cities, but it also generated Rs.100 crores which enabled us to build four Mother dairies and 17 Anands complete with processing facilities, cattle feed plants and other infrastructural facilities without putting any strain on the public exchequer.
The fifth principle is : in order to enable a new Anand to grow in a healthy manner, it must be provided with facilities to conserve seasonal surpluses of milk in the form of commodities. You can sell only what you collect; and, in case of perishable commodities like milk you must sell what you collect. If a co-op does not have conserving facilities, its procurement is rigidly linked to its marketing. Most government milk schemes, which do not have conserving facilities, are doomed to failure for this reason; since it assumes that as you collect more milk, your market will expand only that much no more, no less. A ridiculous assumption to make in the best of times. Further in the case of Operation Floor, the milk that we obtain from outside provides an additional buffer between procurement and marketing.
Finally, the last and the most important principle that I would like to mention is that no amount of technological change or tinkering with the tax-subsidy mechanism is likely to have significant impact on our agricultural and rural development until we can reform the institutional structure linking the producer and the consumer such that it becomes more responsive to the needs of rural people and, this is best done by creating farmers’ organizations owned and managed by them in a manner that is subservient to their larger interests. This can happen only if all those who work in such organizations are employees of farmers and not government officers on deputation ! You cannot develop rural people unless you give them responsibility and, one such responsibility is to let them market their own product through organizations that they themselves own. One of India’s biggest assets is its people and true development must mean development of these people, by placing in their hands the instruments of development.
However, in order to have these co-ops run honestly and efficiently, professional managers must be brought in to work as farmers’ employees. In order to enable them to operate effectively and manage these organizations well, we must given them the necessary authority so that the co-operative can depoliticize atleast, to some extent, if not entirely.
Ironically, one of the major reasons why it is so difficult to depoliticize the co-operatives and, indeed to clean them up in various ways is the co-operative act itself framed nearly a century ago. The colonial government had little faith in Indians, and, therefore, the act stipulated that the registrar of co-operatives should be a member of the Indian Civil Service and, therefore, an Englishman. The registrar was also given enormous powers. He could, for example, supersede the elected board of any co-operative.
Unfortunately, this act continues to remain in force even today when the entire context has changed. The brown sahibs of today who have replaced the white-men of the alien ICS have, however, continued to use their enormous powers, usually at the behest of their political masters, to make a mockery of the basic principle of cooperation which is that they are people organizations.
Many of us may not be able to imagine the dimensions of this problem for co-operative organizations. If, for example, the registrar of companies had half the powers of the registrar of co-operatives, then, the registrar of companies of Bihar state would have long since superseded the board of Tata Iron Steel & Co. and appointed, say, his deputy registrar or, indeed, his deputy’s deputy as the administrator of the plant ! It can be appreciated, I believe, how impossible it is to run a steel plant in the shadow of such an omnipotent but ignorant administrator ?
And, after all, a co-operative is also as much of a business organization as a company. The only differences are that in the case of say a producer co-operative the shareholder has to be a producer and, that irrespective of the number of shares held, he has only one vote. Such being the case, I sometimes wonder if we should not think in terms of having a co-operative registered under a special section of the company’s act. The entire dairy industry of New Zealand is in the cooperative sector. They have cooperative companies registered under their company’s Act, which register them under a particular section as I have mentioned earlier. In my opinion, therefore, now that the country and the government are one, and since there is no substantive difference between a company and a cooperative as a business organization, there is a strong case for reducing the profile of the registrar of cooperatives to that of the registrar of companies. Why should the professional managers of those co-operatives which abide by their by-laws have to bother about the registrar ? After all, New Zealand has neither a registrar of co-operatives nor a cooperative act, and yet, the whole of its dairy industry is organized on cooperative lines !
I trust you will appreciate that getting such changes implemented in India is a very difficult task. The biggest obstacle would be the cooperative departments themselves and their political masters. What will happen to their enormous powers if their profile is reduced to that of a company registrar. Right now, the jobs of registrars of co-operatives are very pleasurable jobs and, the brown sahibs holding these jobs are virtually the Gods of the cooperatives. The position of their political boss is even more pleasurable; he is the boss of God ! Dethroning these Gods and super-Gods and giving power to the people is not going to be easy.
Lest my stance should be misunderstood, as it often happens, let me make one thing clear. My quarrel is not so much with people who occupy those seats of power as the seats of power themselves. My fight is not against individuals who fill the roles of bureaucrats but with bureaucracy as an institution and the pettiness that it epitomizes. My fight is for new order an order in which instruments of development are placed in the producers’ hands through their own organizations. My fight is for an order in which these organizations are managed by professional managers who are hired by the farmers themselves and who are loyal to the wider interests of rural producers alone and are free from the ambivalence of government servants. In my opinion, creation of such an order alone will provide a long term solution to the problems of not only our dairy development but also our overall development.