Milk Co-ops to the Rescue of Marginal Farmers

Milk procurement prices have fallen by at least 10 per cent since the start of lockdown in end-March, delivering a blow to this key source of additional income, in both good and bad times, for marginal farmers. What is more, further down the year, supply is likely to go up with animal calfing and higher lactation marking the flush season. Against this, demand is down as a result of low offtake by restaurants and hotels, which have seen a catastrophic fall in customer traffic as a result of the lockdown. Worse still, the festival season, usually a time of high demand because of increased sweets consumption, is likely to be subdued this year. Farmers co-operatives, accounting for 40 per cent of the marketable surplus for milk, are particularly hard-hit as they do not change procurement prices easily so as to protect the interests of their member farmers. Private and unorganised sectors, on the other hand, freely change the price they pay farmers depending on market conditions.

Milk co-operatives convert the excess milk on their hands (they don’t like to cut down procurement volumes either) into skimmed milk powder. Stocks of this are now 60 per cent higher than the same time period last year. Hence the co-operatives have come up with two solutions. One, they have moved the government for incentives to export more. They have further proposed that the government procure and distribute milk through anganwadis, schools and among Covid patients in hospitals.

Two, the milk co-operatives are hawking a proposal taken from the sugar sector. Cane growers share the proceeds from the sale of sugar according to a 70-30 formula. The growers get to keep 70 per cent and the mills 30 per cent. Sugar co-operatives in Maharashtra have adopted this formula in principle. But this can happen only if all the stakeholders in the sector agree to it. Right now, such an agreement is not in sight. A certain amount of push from the government will definitely be necessary for an acceptable formula to emerge. The sugar economy was highly regulated, with mills having to deliver a levy sugar quota, but it is no longer so.

Anand Model

There is bound to be a degree of uncertainty and fluctuation in the country’s milk scenario, akin to agriculture, in which the milk sector is firmly embedded. But India has been a global leader in organising farmers into successful milk co-operatives, now known as the Anand-type co-operatives, grouped foremost under the banner of the Gujarat Cooperative Milk Marketing Federation (GCMMF). The GCMMF is the model at the core of the white revolution akin to the green revolution which has made India self-sufficient in milk and provided a degree of stability to the income of even marginal farmers who have a very small amount of milk to offer everyday. The uniqueness of the Anand model is its ability to organise collection from a large rural area, aggregate, process and then sell in urban centres. Farmer distress is far lower in areas where milk co-operatives are well organised.

The stabilising role milk co-operatives play has been illustrated again with the GCMMF not just sticking to its procurement plan (in fact, exceeding it) through April and May  increasing its spend by ₹800 crore to ₹8,000 crore. This is when private sector dairies had virtually stopped procuring and processing milk.

A further fillip has been given to the milk sector by the government in May earmarking a ₹15,000-crore package for dairy infrastructure development in the large stimulus package. This will enable handling of 15 million litres of milk per day and create a source of livelihood for three million rural families. The investment will be particularly useful in States like Bihar, Jharkhand and West Bengal, which are low on milk production.

Expand co-op movement

There are two ways in which the milk sector can be taken forward: expand the co-operative movement in geographies where it does not have a strong footprint; and encourage co-operatives to go in for more value-added products. The States which have a strong cooperative movement in milk can be identified by the prominence of their overarching brands. Like Amul, whose home base is Gujarat, Nandini in Karnataka and Milma in Kerala are brands owned by their respective apex co-operatives. The reach and power of an overarching brand can be seen with Amul achieving a turnover of ₹52,000 crore in 2019-20 when the GCMMF’s own turnover was ₹38,500 crore.

The difference between the two is accounted for by entities outside the GCMMF umbrella which used Amul.

Amul has been ranked as the second-most powerful consumer goods brand in the country after Parle, followed by Clinic Plus. Media campaigns by Amul are widely noticed and periodically provoke controversy, attracting further attention. As for value addition, Amul is already into products like ice cream, cheese and chocolates, patronised by the middle class and above, apart from more traditional products like curd, ghee and paneer. Like many others, Amul has also sought to jump onto the currently sought-after bandwagon of immunity-boosting products. Particularly novel is its just announced haldi ice cream, with social media wondering how on earth it would taste!

Source: The article is extracted from The Hindu BusinessLine, August 05, 2020.