Several state milk cooperatives are becoming unhealthy as a result of populist, consumer-focused incentives. Wealthy Amul may probably gain.
The Union Home Minister and Minister of Cooperation, Amit Shah, received a letter from Tamil Nadu Chief Minister MK Stalin protesting Amul’s purchase of milk from the state’s northern areas. He pointed out that Amul had installed chilling centres and a processing plant in the Krishnagiri district using their multi-state cooperative licence, and they had plans to purchase milk through FPOs and SHGs in and near the districts of Krishnagiri, Dharmapuri, Vellore, Ranipet, Tirupathur, Kancheepuram, and Tiruvallur.
Spilling the Cooperative Milk
This, he contended, would promote unhealthy rivalry among milk cooperatives in India, and he requested Shah to instruct Amul to suspend all purchase from the milkshed region of the Tamil Nadu Cooperative Milk Producers’ Federation or Aavin’s (its commercial brand).
“In India, it has been the practise to allow cooperatives to prosper without interfering with each other’s milkshed. Such cross-procurement goes against the spirit of ‘Operation White Flood’ and would worsen concerns for customers given the country’s current milk crisis scenario,” he noted.
Concerned about a local giant
The Congress and Janata Dal (Secular) alleged that Amul’s move to sell fresh milk and curds in Bengaluru was part of the Centre’s plot to undermine Karnataka’s famous cooperative milk brand Nandini, allowing Amul to eventually buy it out.
This comes only a month after the Congress utilised Amul’s decision to offer fresh milk and curds in Bengaluru to smear the electoral milk in Karnataka. The depiction of Amul as a corporate marauder disguised as a cooperative member is a recurring motif here. While Amul’s commercial heft and war chest for growth offer plausibility to such a caricature, it would be a simplistic explanation to avoid a thorough assessment of India’s dairy sector and the cooperative movement becoming a player in populist politics.
The beginnings of a revolution
The Green Revolution and the White Revolution are two of the most significant events in contemporary Indian history. The White Revolution, which began in 1970, has now rendered India the world’s greatest milk producer, with 220 million tonnes of milk produced in 2022.
Milk is by far the most valuable component of Indian agriculture, accounting for about 5% of the country’s GDP. In 1970, the National Dairy Development Board (NDDB) initiated Operation Flood with the objective of transforming India’s dairy sector from a drop to a flood.
Operation Flood would be totally decentralised, with milk collected by village residents, dairies managed by district unions, and marketing handled by marketing federations. Its purpose was to keep the full value chain in the hands of small farmers. The “Anand/Amul Model” was replicated across India during the White Revolution.
This entailed establishing a state-wide network of milk-specific cooperatives capable of sourcing milk from a network of millions of small farmers. This allowed the cooperatives to invest in substantial processing facilities and establish modest rural collecting centres equipped with milk chilling and rudimentary quality control equipment.
It also introduced new technology that increased milk yield, such as cross-breeding Native American cattle breeds with European Jersey, Brown Swiss, and Holstein-Friesian cows, and connecting farmers’ highly perishable food to urban markets. All regional cooperatives branded their dairy products, and a national marketing effort centred on milk and its advantages contributed to long-term demand.
Retreating milk
The lack of attention paid to breeding projects, along with thoughtless populism, has brought India to the end of the White Revolution’s successes. There are valid fears that India’s milk output would stagnate as a result of a lack of focus on breeding plans and thoughtless populism.
Aavin in Tamil Nadu, for example, buys cow milk from farmers for around Rs. 34/litre and sells it at Rs. 40/litre, the lowest in the country alongside Karnataka. Keeping consumer prices artificially low reduces farmer revenue and stifles the private sector. Rahul Gandhi promised dairy farmers during the recent Karnataka election campaign that the state procurement subsidy for milk will be increased from Rs. 7 to Rs. 5. Annually, such subsidies amount to more than Rs. 5000 crores.
Subsidy is a curse
Subsidies are a cancer that affects the whole business, accounting for 7-20% of milk prices between states. This subsidy does not even benefit farmers; instead, it benefits consumers. Farmers’ income is greater in states such as Maharashtra, Gujarat, and Punjab, where the retail price of a litre of milk is at least Rs. 15 more than in Tamil Nadu or Karnataka. With increasing competition, farmers in Tamil Nadu stand to benefit at least Rs 2/litre if Amul purchases from them. Instead, Amul should speak with state cooperatives and reassure them about how they would enhance local milksheds. This is in the spirit of collaboration.