More than 60 years ago, Dr Verghese Kurien penned his vision for dairying in India. At the time scarce foreign exchange was being spent to import dairy products from New Zealand and Europe. He had been working with the Kaira District Cooperative Milk Producers’ Union, building an organisation filled with people of exceptional talent. He was well into his partnership with Tribhuvandas Patel, the cooperative’s first chairman and a man of great integrity, wisdom and faith in rural people. The vision can be found in Dr Kurien’s book, An Unfinished Dream. It was a blueprint for the development of dairying in India, an effort not about dairying, but about people. The book outlines a vision of dairying transforming the lives of India’s rural people.
In those early days, an extraordinary partnership built the foundation for India’s future in dairying. The leadership, vision and wisdom of Tribhuvandas Patel was supported by the professionals on Dr Kurien’s team. Prominent amongst these was HM Dalaya, a dairy technologist who successfully converted buffalo milk into powder, refuting “expert” advice. Dalaya led innovative technology in the manufacture of cheese, butter, baby food and the other products, enabling the Amul brand to become the market leader. Later, Dr Michael Halse, a Harvard Business School graduate assisted in developing the institutional framework for the National Dairy Development Board (NDDB) and training a cadre of highly committed and talented young officers. Operation Flood, launched in 1970, remains one of the world’s largest rural livelihood and development programmes.
Dr Kurien could have chosen the Green Revolution as a model for milk but fortunately he did not. Over the decades, agriculture growth has been an unimpressive two percent or thereabouts, as have been the farm prices, leading to agrarian distress in several parts of the country. In contrast, milk production has consistently grown at over six percent annually ever since the White Revolution, under the impressively named scheme Operation Flood, was launched. What was the difference? The Green Revolution was technology-centric: the infusion of technology and better farming practices increased production substantially, especially of foodgrains. But did it increase farmer well-being? Not necessarily. By contrast, from its beginning, the White Revolution has been farmer-focused, thus ensuring sustainable growth. Dr Kurien recognised that a market pulls production, but production cannot push a market. As he often said, “No Mumbai, no Anand”.
The Amul Trinity—Dr Kurien and close colleague HM Dalaya with their mentor Tribhuvandas Patel, founder Chairman of AMUL (centre)
Sir Richard Trehane, Chairman of the Milk Marketing Board of England & Wales in discussion, on dairy development plans for India, with Dr Kurien and members of the Board of NDDB. (Left to Right – Dr Michael Halse, VH Shah, Dr V Kurien, HM Dalaya, Sir Richard Trehane)
Operation Flood never ignored the consumer but the key drivers were the economic and social empowerment of the milk producer. In fact, Operation Flood created a long-term balance between producers and consumers. We rarely witness extreme volatility in milk prices. Operation Flood was designed and implemented in such a way as to increase rural incomes through a judicious transfer of urban consumers’ money to the rural sector.
The relentless assault of the lethal coronavirus led to extended periods of lockdown in our country and caused massive disruptions in national production and supply chains. However, there is one agricultural commodity that has withstood this unprecedented crisis: milk. If there were any disruptions in milk supply, they were confined to short periods of time in a few isolated geographical pockets. On the whole, this essential food item remained readily available throughout the country. The dairy cooperatives deserve enormous credit for ensuring uninterrupted supply while safeguarding producer interests. In fact, Covid-19 has offered the dairy industry the opportunity to undertake structural reforms to bring about efficiencies, profitability and sustainability across the dairy value chain and introduce innovations.
As we begin the celebrations commemorating Dr Kurien’s Birth Centenary Year, let us pause for a moment to look at the significant achievements, the challenges and opportunities ahead and what Dr Kurien might advise us to do.
Indian agriculture and Indian dairyinG
There is an important difference between Indian agriculture and Indian dairying. Crop production in India depends on monsoons and availability of irrigation. Deficient or excessive rain and other climatic vagaries severely impact crop production and the farmer’s income. Crops have a season and income is seasonal because farmers often cannot hold the crop and must sell at a lower price when there is a market surplus. In other parts of the world, cooperatives hypothecate the crops allowing the farmer to sell when prices rise. As against this, milk production has distinct advantages. First, the household that produces milk has the option to use it for their own food and nutritional security. Second, sale of milk ensures regular income. If their crop fails, farmers cannot repay their loans. Tragically we see suicides in farm families that depend exclusively on crops without milk income to fall back on. If the farm family has even two cows or buffaloes, it is assured of income, food security and continuity of life. It is in this background that one should see that the profile of the dairy sector in India is truly a profile in courage of the poor dairy farmers.
India is now a Milk Country
With increasing incomes, consumers are lapping up all the milk and milk products produced in the country. The milk marketers need to be congratulated on the impressive expansion of a milk marketing system that caters to the consumers in every nook and corner of the country. We are truly a milk country!
India: Still the Price Taker
We account for some 22 percent of global milk production with each year seeing India add more milk to the global pool than the entire European community. Major producers of milk like the EU and US maintain stocks of milk powder and butter oil that ensure that their surpluses don’t depress market prices. These surpluses are used for school feeding programmes, foreign assistance, etc so producers continue to get higher prices than Indian farmers. These surpluses create distortions in the global market leading to lower prices. Rich countries subsidise their milk and poor countries have to take the prices which leads to demand for increased tariffs in developed countries. Today, the whole world is in a protective mode. We should not expose our farmers to the world market in milk. New Zealand gets low global prices for their milk powder. We cannot be the price takers being the largest producer of milk in the world. The price makers are dumping in the market. We certainly do not want millions of our farmers to become price takers. India is not a small market and it cannot be a price taker. Due to its sheer size India should be the price maker.
How did we achieve self sufficiency?
Sufficiency was achieved by improving efficiencies in milk production, procurement, processing and marketing through the Anand Pattern of cooperative dairying planned and executed by the NDDB. Dairy cooperatives provided remunerative prices to milk producers even during the flush season, providing an incentive for increased milk production. Cooperatives also provided inputs and veterinary and AI services to milk producers, increasing productivity, ensuring that dairy farming is a profitable business.
We are not only the world’s largest but also the most efficient milk producer. In the harvest season, the farm price of tomatoes, potatoes and onions can go down to 10-20 percent of the lean season price; a case in point is the berserk pattern of onion prices which have ranged from Rs 10 to 100 per kilogram in the last one year. On the other hand, with milk, the flush season price rarely goes below 90 percent of the lean season price, a price fluctuation that is barely perceptible. This is not only a rarity in the commodity price market but reflects efficiency across the production, procurement, processing and marketing value chain of milk. What is most encouraging is that milk production has been increasing over the decades without significant diversion of land or water from agricultural crops to dairy. In leading milk producing states, there is a shift taking place where some farmers are increasing their herds and replacing unproductive with productive animals, feeding them from fodder produced on their own land.
The primary milk producer, especially in the cooperative fold, receives as much as 70 percent of what the consumer pays, quite a contrast to crop farming where intermediaries corner the bulk of consumer revenues. The food processing industry pays only 50 percent of the Atta price to wheat farmers. The Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF), popularly known as Amul, buys milk at the highest possible price and sells milk and products as cheaply as is possible to ensure that increased milk production finds a market. This is because the milk suppliers are GCMMF’s owners. The market is developed based on the quantum of raw material received. And, the products are sold at such a price that the entire stock is sold and at the end of the day and there is a minimum difference between buying and selling price.
Increasing efficiencies in milk procurement, processing and marketing
Before Operation Flood was launched, one of the first planning exercises done was a review of the state of technology for milk procurement, testing, processing and marketing. That led to standardisation of the feeder/balancing dairy: the Mother Dairy concept, including bulk vending, saved substantial capital investment in plant and equipment. Do we not have better pathways to these processes with the advanced technology available now? Is our milk processing and marketing environment-friendly and sustainable? Are we sufficiently recycling our packaging material? Do we use enough renewable energy and are we maximising its use? Can we not have more efficient pathways to milk procurement, testing, processing and marketing? These questions need to be addressed.
Water will become a major constraint in the growth of milk production. Crop residues are currently the major feed for milk production. Fodder crops can be water guzzlers. Paddy and wheat in Punjab, Haryana are all water intensive crops. A shift to maize, jowar and bajra will provide better nutrition to cattle and cut down water requirements.
Dry and scrub cattle are a drain on our resources. If these are not handled properly through free market mechanisms, unproductive cattle will continue to forage in our crops with a negative effect on farm economies and drain our country’s feed resources. Our agriculture must optimise use of our land, water and human resources. Milk is a vital part of this optimisation process. An encouraging sign is the 20th Livestock Census (2019) data showing a sharp decline in the population of bullocks while the population for better producing indigenous and crossbred cows is increasing.
We have graduated from the tiny dairy plants of 10,000 liters per day capacity (LPD) that we were put up in the sixties to one lakh plants LPD in the seventies to one million LPD plants today. That alone has helped in bringing in economic efficiencies by spreading the overheads to larger volumes. Milk processing has now become a profitable business on the low margin high volume basis.
We now take consistent milk production increases for granted. This growth will pose unprecedented challenges for surplus management. On one hand surplus can cause sharp drops in prices paid to the farmer while creating problems in managing the price line for the consumer. There is need for market intervention during times of dairy commodity surplus, more so when our industry finds international competition difficult. If not handled constructively, surplus milk powder could have a disastrous impact on the long-term growth of the sector.
Reforms in cooperative sector
Cooperative organisations struggle to hold seasonal surpluses of milk powder. As provided for in its Act, NDDB should return to its original brief to set-up and operate a national milk grid buffer stock of conserved dairy commodities. This crucial provision in our policy framework needs to be activated to protect the interests of the milk producers and consumers. The failure of NDDB to play this role has adversely affected our milk producers. Importantly, surplus milk powder can be used for domestic school feeding programmes as well as aid to our neighbouring countries like Afghanistan, Nepal and Bhutan.
NDDB should play a policy making role in these areas and phase out of direct selling of milk. Government Milk Schemes were the vested interest that NDDB fought to free dairying from the grips of bureaucracy. Mother Dairy risks becoming the vested interest in preventing the orderly free market growth of milk sector.
As with milk, there is a need to reintroduce Market Intervention Operations (MIO) in Oilseeds. Importing half our edible oils denies our farmers the right to produce higher value crops. It will also increase feed availability for milk production. Bring back the synergy between the milk and oilseed sector. To ensure that the Indian edible oil is competitive with the imported oil, capital at low interest rates and as well cheaper power must be provided for oilseed processing.
The time has also come for NDDB to assist in setting up dairy projects in developing countries. If done on the Operation Flood model, it provides the opportunity to utilise surplus commodities while strengthening our future allies.
Some state governments have started an anti-dairy development cycle by paying topping up prices to farmer-members of dairy cooperatives—up to Rs 5 per litre of milk—leading to an impression that we are subsidising milk. This is wrong as it has resulted in artificially low consumer prices in some of our richest cities and taken control of the prices from farmer organisations distorting a supposedly free market. This manipulation of the local milk markets allows state governments to play politics in the cooperative sector. It also frustrates the private dairy sector. The role of state governments should be to ensure that milk producers are protected from the regional and seasonal fluctuations in rural milk prices and to only subsidise milk prices for the poorer sections.
Organised dairy sector
Adoption of the Amul model has created a unique dairy cooperative model in the country now linking more than 16 million milk producers in a network of 1.86 lakh village milk societies affiliated to 222 district milk unions and 28 state milk federations. Big as it may appear, this network still manages less than 15 percent of the country’s total milk production. There are some other stark contradictions too: our claim to be the world’s top producer gets soured by our position near the bottom in cattle productivity; high per capita availability does not address the prevalence of malnourishment; most milk still reaches the market unprocessed despite a huge dairy industry.
Cooperatives today collect around 60 million litres of milk every day, with an equal, if not greater quantity handled by private sector dairies. Together, this approximates 25 percent of total milk production. Nationally, some 3.2 lakh villages produce more than 200 litres daily. Cooperatives don’t cover 1.34 lakh of these villages. Coverage of these untapped villages will provide milk producers and consumers with greater access to the organised dairy sector.
The private sector, large MNCs and retail chains are rapidly expanding their dairy operations. This growth, without direct government assistance, demonstrates the free market is working reasonably well and there is place for all the players to grow and help increase milk production and farmer incomes. Amul will, however, continue to dominate as the undisputed market leader.
The important recent initiatives of the government of establishment of the Rs 11,000 crore Dairy Infrastructure Development Fund (DIDF) and the Rs 15,000 crore Animal Husbandry Infrastructure Fund (AHIDF) should be able to address the immense requirements of capital for processing and marketing infrastructure which continues to be grossly inadequate. Dairy indeed would become an attractive and competitive vocation.
Better Product Mix
We must give our milk producers better returns while expanding the market. Our halwais sell milk solids with 15-20 percent moisture and 30 percent sugar at prices far higher than whole milk powder. They are obviously much smarter than the organised dairy sector in terms of making money. It, therefore, makes business sense that dairy processors now graduate to mechanised manufacture of traditional dairy products. Why is the organised sector ignoring this opportunity? The strength of our traditional products lies in their mass appeal, unlike chocolates or pies etc. We must learn from the example of shrikhand, mishti doi and other traditional milk products manufactured by cooperative and private sector dairy plants. The industry has also done very well on lassi, paneer, chhas and dahi. The market, as also the operating margins, for the traditional products far outstrips that of western dairy products. Khoa production should be done on a large scale for more hygienic milk-based sweets as well as to cut down the pollution caused by burning coal/wood to produce khoa in the cottage sector.
Quality: The Achilles Heel
Bad quality milk should be everyone’s concern. Adulterated ghee is a curse on the dairy sector. Adulterated milk-based sweets are giving the dairy industry a bad name that needs to be fiercely protected. We are allowing space for exploitation to unscrupulous operators in this business of dealing with the most revered food in India. We should not take consumers for granted and should strive relentlessly for better quality of milk and milk products.
We should encourage better quality raw milk and that can best be achieved by paying the farmers an incentive price for more hygienic milk. Bacteriological quality is the major problem for milk processors. An incentive of say 10 percent higher price will go a long way to improve the quality of our raw milk. It is seen that cooperatives abroad pay premiums for different levels of bacteriological quality. Technology is now available to have instant indicators of microbial loads to facilitate payment based on microbiological quality of milk. The practical problem, though, is achieving cost-effective scale given the large numbers of producers and village cooperative societies in most states. Rewarding cooperatives for bacteriological quality would put peer pressure on producers to ensure the levels of udder to procurement hygiene that would result in higher quality and safer milk.
It is unfortunate that milk quality, both at the producer level and even at the milk plant level, continues to be lost in this age of increasing throughputs and shareholder returns. We have to show progress in this area in line with the Swachhata Abhiyaan. This will have a positive effect on keeping quality of packaged milk. A consumer should be able to keep milk in the fridge for at least a week from the present 2-3 days. That will also help its marketing in family packs. We can start with cleaner milk by inculcating clean milk production techniques at the farmer level. Clean unadulterated milk should be a part of our mission. To check the spread of synthetic milk and the quality issues raised by the Supreme Court, sale of raw or non-pasteurised milk should be banned in our cities starting with our metros.
Modern technology can help the dairy industry face several challenges particularly with milk packaging. Plastic pollution is a major problem in the dairy sector. With increasing bans on single use plastic, the Government of India has been liberal in allowing the dairy industry to continue with plastic pouches. That however cannot continue. When bulk vending of milk was introduced in 1974, it was a great step to reduce energy consumption in milk processing and distribution. Unfortunately, dairy plant managers have chosen the simpler but more expensive plastic pouches. This has been disastrous and the industry should brace itself to do better in this area. That needs a de novo approach as was done at the beginning of Operation Flood. Should we go back to bulk vending like the Delhi Mother Dairy on a very large scale? There is an urgent need to look at all the technologies the dairy industry uses from the environment angle.
Synergy with fruits and vegetables
The philosophy and approach adopted in the Operation Flood programme is well suited for replication in the fruits and vegetables sector, allowing it to realise its immense potential. Even though fruits and vegetables are less perishable than milk, horticultural growers get less than half the share of consumer’s rupee as compared to the dairy sector. The Delhi Mother Dairy’s Safal project has produced many lessons. With that experience we can venture successfully into the perishable fruit and vegetable sector.
If we are serious about doubling farmer incomes, perishable produce provides the greatest opportunity for productive employment at the farm level. An acre of tomatoes takes ten times more labour than an acre of wheat. Fruits and vegetables use only 10 percent of our land and water, yet they contribute 66 percent of our agricultural income. If the farmers in this sector were to get the same proportion of the consumers’ rupee as our dairy farmers, the growth would be much higher and India could become the fruit and vegetable grower to the world. That surely is the fastest route to doubling farmer incomes.
The dairy industry the world over has led liquid food markets. Fruit juices are often processed and distributed by dairy plants. The dairy processing equipment can handle liquid, concentrated products and powders of all kinds for the food industry. We also have extensive experience in procurement of perishable milk from villages. We have the infrastructure to provide inputs and extension services to farmers, make quality-based payments twice a day, technologies to extend shelf life, cold stores and deep freezes, a cold chain and marketing outlets for perishables. All this experience and infrastructure can be used more efficiently by addition of new product lines. We have 40 percent losses in handling perishable produce, but in milk we have almost nil.
Plant-Based Milk Alternatives
Non-dairy “milks” are becoming a popular option not just with lactose-intolerant and vegan consumers, but for those who want to try out alternatives with perceived health benefits relative to cow milk. Almond, soya, coconut, rice, cashew and hemp milk are among the aggressively-marketed options. Soya “milk” is seen as a top choice to replace cow milk since it is rich in proteins and can help drinkers maintain a balanced diet. However, a major concern with the non-dairy “milk” products is sugar. Most of these products contain substantial sugar additives which, we now know, is extremely unhealthy. This is of real concern given the 11 to 14 percent diabetes rate in our urban areas.
Milk has only one ingredient—MILK. On the other hand, chemically fortified beverages, manufactured in factories, are being marketed after being called “milk”. Such “milk” has ingredients like medicinal products listed on its packs. These ingredients can be high in sugar and thickening agents like guar gum and carrageenan that can often upset digestive systems.
In October 2020, the European Parliament took a landmark decision to protect the interests of dairy milk and milk products vis-a-vis plant based “milk”. The Department of Animal Husbandry & Dairying, Ministry of Health & Family Welfare, FSSAI, NDDB, GCMMF and the Mother Dairy must reassert the fact that Indians have a high lactose tolerance. Proper steps must be taken to inform the consumers about the adverse propaganda that pops up frequently in the press and on social media combined with efforts to educate the public about the adverse health effects from sugar and other ingredients in plant “milks”.
There is no gainsaying the achievements of the dairy cooperative movement. The Gujarat Cooperative Milk Marketing Federation (GCMMF) today handles 21 million litres a day procured from 3.6 million farmers. Registering an impressive annual growth of 17 percent, it recorded a turnover of Rs 38,542 crore in the financial year gone by making it one of the top ten global dairy companies. But we should measure what has been achieved in relation to the potential, and there the cooperative movement has fallen short. Much of the success is limited to a handful of states and districts. We see cooperatives are now being politicised. The self-interest and greed of a few have sown the seeds of future failure. We see a landscape empty of Dr Kuriens and Tribhuvandas Patels. We see farmers who are exploited by cooperative structures that treat them as means, not as the reason why cooperatives exist.
Today, would Dr Kurien turn a blind eye to the political and bureaucratic control that has infected even the finest cooperative institutions? Would he remain silent seeing cooperative institutions exploiting farmers in order to feather the nests of highly-paid executives? Would he sit on his hands seeing that milk packaging was contributing to the plague of plastics that threatens our environment? Would he fail to speak out if his beloved NDDB became another government entity controlled by politicians and run by civil servants? Or would he continue to fight with courage to realise his dream: India’s producers controlling the resources they create, finding their place in the sun of a just and equitable India?
Let us remember that Dr Kurien’s vision was to empower our rural people, to free them of exploitation and to help build a grassroots foundation for our democratic nation. Dr Kurien and those he employed always took decisions with the producers’ interests in full view. A couple of years back there was a wonderful advertisement when Mother Dairy Delhi raised the price of milk: What consumers call the price of milk the producer calls her income.
Source: Indian Dairyman, February 2021.