Indian Dairy Co Operative by Kisan Forum Pvt. Ltd.

Indian Dairy Co-operatives

Rattan Sagar Khanna Farmer Consultant Department of Animal Husbandry, Dairying and Fisheries Ministry of Agriculture Krishi Bhavan, New Delhi 110 114

ICAR

INDIAN COUNCIL OF AGRICULTURAL RESEARCH NEW DELHI

Printed

September 2009

Dr T P Trivedi

Project Director Incharge (English Editorial Unit) Editor

Dr R P Sharma Arana T Kumar V K Bharti Kul Bhushan Gupta

Chief Production Officer Technical Officer

ISBN : 978-81-7164-095-9

Price

Rs 200

Published by Dr TP Trivedi, Project Director (DIPA), Indian Council of Agricultural Research, New Delhi 110 012, laser typeset by Xpedite Computer Systems, D-20, 2nd Floor, Ranjit Nagar Commercial Complex, New Delhi 110 008, and printed at M/s Chandu Press, D-97, Shakarpur Delhi- 110092 Ph: 22526936

Contents Acknowledgements

Chapter 1:

Dairy Co-operatives in India

Chapter 2:

Principles of Co-operation

Chapter 3:

Dairy Co-operatives: Reformation and Strengthening

Chapter 4:

Organizing and Managing a Dairy Co-operative

Chapter 5:

Cybertechnology in Dairy Co-operatives

Chapter 6:

Operation Flood

Chapter 7:

Milk Production

Chapter 8:

Marketing and Export

Chapter 9:

Impact of Trade Liberalization on Dairy Industry

Chapter 10: Status of the State Dairy Co-operative Federations in India

Chapter 11: Impact of Indian Dairy Co-operatives in Asia

101

Dairy Co-operatives in India Rural Poverty and Human Welfare Broad improvements in human welfare will not occur unless poor people receive wider access to affordable, better quality services in health, education, water, sanitation, and electricity. Without such improvements in services, freedom from illness and freedom from illiteracy â&#x20AC;&#x201D; two most important ways for poor people to escape poverty â&#x20AC;&#x201D; will remain elusive to many. For such services to reach the poor and to reduce poverty, it is important to build institutions that would provide these and other services. Without effective institutions, poor people and poor countries are excluded from the benefits. According to the World Development Report 2004, infrastructure standards and regulations typically exclude small entrepreneurs who lack the capital or technology required. The report has identified four principles for building effective institutions: (a) complement what exists; (b) innovate; (c) connect; and (d) promote competition. The design of any single institution should take into account the nature of the supporting institutions, skills, and technology. Institutions are not immutable and should continue to innovate. They should experiment with new institutional arrangements and continue to modify or abandon those that fail. The institutions must connect communities through open information flows and open trade as well as foster competition between jurisdiction, firms and individuals. Competition creates demand for new institutions, changes behaviour, brings flexibility in markets andleads to new solutions. It is important to install such infrastructure facilities to reach the poor. These infrastructure facilities should convey technology, techniques, knowledge and information to the smallest entrepreneur and the poorest. Otherwise the efforts made and results achieved by research and development would remain confined to the laboratories. One such vibrant service-oriented commercial infrastructure that originated inIndia at Anand in Gujarat was dairy co-operatives. These have brought to the fore and helped the rural poor milk producer to take benefit, raised his status, and helped to reduce his poverty. This structure has integrated the small milk producer entrepreneur to the systems of milk production, procurement, product processing, marketing as well as research and development.

Origin of Dairy Co-operatives in India It is generally, though incorrectly, believed that AMUL is the first dairy co-operative in India. Origin of dairy co-operatives perhaps started with -1-

INDIAN DAIRY CO-OPERATIVES

the formation of the Madras Co-operative Milk Supply Union in 1926 almost 20 years before the first dairy co-operative society was registered in the Anand Taluka of the then Kaira district in Gujarat. There were similar other Milk Supply Unions operating in Coimbatore, Allahabad and Lucknow much before the Kaira District Co-operative Milk Producers’ Union Limited was registered at Poona (now Pune) on 14 December 1946 by the Registrar of Co-operative Societies of the Bombay Presidency. The Kaira District Co-operative Milk Producers’ Union had five co-operative societies and 70 promoters at the time of registration. The major differences in the functioning and structuring of the other co-operative milk supply unions and that of the Kaira District Co-operative Milk Producers’ Union were: (a) the nature of membership; (b) the assurance given to milk producer members that all their milk would be purchased even in flush season; (c) the character of the Gujarati farmer running his village milk society; and (d) the character of the leaders running the co-operative. Setting up of milk producers’ co-operatives in Kaira or for that matter in other parts of India were a necessity bom out of the harassment that the milk producers received on the hands of middlemen and traders. In Kaira, milk was purchased from the farmers on behalf of a private dairy, which had a network of milk contractors who, in turn, employed agents to purchase milk from door to door in the village. Even though the milk contractors were paid by the private dairy on the basis of fat output measured by a separator, the milk producers were actually paid arbitrarily by dipping finger into the milk. The price paid to the producer was also changed frequently depending on the availability of milk and the need of the private dairy. Illiteracy amongst farmers was a basic cause of their getting cheated. It was complicated by the measure (the container used for measuring the volume of milk for purchase was generally of a larger volume than prescribed ‘standard measure’) used for buying milk, accounting of the volume of milk sold. There was also insecurity of the date when he would be paid for the milk supplied by him. Milk contractors and traders were also the moneylenders to the milk producer and invariably kept him debtridden. Milk producer was exploited as there was no alternative for him but to sell his produce. The private dairy was one of the main purchasers of milk in Kaira. It procured, processed and supplied milk to the government owned Bombay Milk Scheme. Imagine the price structure for milk in 1946. For one seer of buffalo milk, the milk producer was paid 2.5 annas (Re 1 = 16 annas), the contractor was paid 4 -5 annas, and the private dairy was given 12 annas for the chilled milk delivered in Bombay (now Mumbai). The Bombay Milk Scheme subsidized and sold at 6 annas for a seer of toned milk (3 % fat and 8.5 % SNF). In equivalent terms it would mean that if buffalo milk were to be purchased from the producer in a Kaira village at Rs 10 a litre, the commercial price for sale of toned milkin Mumbai would beRs 48 per litre. -2-

DAIRY CO-OPERATIVES IN INDIA

Resenting such exploitation, the farmers, the freedom fighters and the politicians got together to organize milk producers’ co-operatives. Under the leadership of Tribhuvandas Patel, the founder Chairman of the Kaira District Co-operative Milk Producers’ Union, two village co-operative societies were registered on 7 October 1946 at Hadgud and Gopalpura. Their collection of 246 litres of milk on that day laid the foundation for the White Revolution in India. Every morning and evening each village milk producers’ co-operative society functioned in its typically characteristic style. A small orderly queue, mostly women and children, formed in front of the collection centre even before it opened. These included the untouchables (low caste Hindus), Hindus, Muslims, Christians, etc., they all stood unselfconsciously awaiting their turn. Each carried a passbook and a milk vessel that was either stainless steel bucket or a ghada of beaten brass. On the raised platform of the building, three employees sat cross-legged and were busy in collection of milk. By turn, each milk producer poured a stream of milk into the collection vat. This could be as much as two litres or as little as half a litre. The co¬ operative employee who graded milk (by smell) and drew a sample for quality and butterfat tests called out the quantity poured in. His colleague, who balanced the ledger on his knees, entered the quantity in his ledger and also in the milk producer’s passbook. The third man had a similar ledger in which he entered the amount due for the previous sale of milk. He also had a copy of the latest ready-reckoner table supplied by the Kaira Co-operative, and out of his cash box he disbursed payments, in coins and in currency notes of small denominations. As the co-operative evolved, the milk collected from the producers was procured, processed, converted into value added products and marketed. It was in 1957 when need arose to adopt a brand name for the many milk products manufactured by the dairy. The brand name “AMUL” was adopted. No one quite remembers who came up with the name AMUL. It was derived from amulya — implying priceless, matchless excellence and associated with swadeshi pride. It continued to serve as an acronym of Anand Milk Union Limited and conveys the true meaning of the co-operative.

Anand Pattern of Co-operatives The Anand Pattern is an integrated co-operative structure. The core feature of this model is the farmer control through the value chain of milk procurement, processing and marketing. Each function is performed by independent legal organization integrated vertically in a three-tier organizational structure. Milk production and procurement is carried out by the primary level village dairy co-operative societies (DCS). The second level is the district co-operative milk producers’ union (DCMPU) which collects milk from each DCS, processes milk and manufactures products. The third level is the state dairy federation that carries out the marketing -3-

INDIAN DAIRY CO-OPERATIVES

function. Supported by professional management, the producers decide their own business policies, adopt modern production and marketing techniques and receive services that they can individually neither afford nor manage. The Anand Pattern succeeds because it involves people in their own development through co-operatives where professionals are accountable to leaders elected by producers. The institutional infrastructure — village co-operative, milk processing plant, cattle feed plant, animal health care facilities, animal breeding services and the state and national marketing network — is owned and controlled by farmers. Anand Pattern co-operatives have progressively linked producers directly with consumers. Maximizing farmer profit and productivity through co-operative effort is the hallmark of the Anand Pattern.

Dairy Co-operative Society (DCS) Any producer, who must essentially own a milch animal, can become a member of a village dairy co-operative society by buying a share and committing to sell milk to it. Each DCS has a milk collection centre where members take their milk every day to sell. Each member’s milk is tested for quality and the payment is based on the percentage of fat and SNF. At the end of each year, a portion of the DCS profit is paid to each member as a patronage bonus based on the quantity of milk poured. To make sure that only genuine milk producers are members of the DCS the bye laws prescribe that a member must supply a minimum volume (say 500 litres) of milk in a year and for at least a minimum period (say 180 days) in a year. These are also requirements for the member’s eligibility to vote and be elected to the management committee of the DCS. A DCS is managed on the principle of ‘one member, one vote’. Depending on its size, business and provisions in the bye laws, a DCS is managed by a 9, 11 or 13-member management committee and all its members including the office bearers work in an honorary capacity. The election to the management committee is conducted through a secret ballot. The chairman of the management committee may retire every year and can seek re-election. One-third of the management committee members also retire every year. The periodicity, duration and methodology of retirement of the members and office bearers of a management committee were those originally followed by the DCS in the Kaira District Co-operative Milk Producers’ Union and incorporated by the NDDB (National Dairy Development Board) as model bye laws. These provisions, nevertheless, vary from state to state depending on provisions in the co-operative society act and bye laws. Responsibilities of the management committee include, amongst others, managing day-to-day business, milk collection, testing, payment to its members on a regular basis, providing such services as selling cattle feed and other milk production inputs, veterinary care for the animals of its -4-

DAIRY CO-OPERATIVES IN INDIA

members, artificial insemination and other services that the DCMPU may seek the DCS to deliver to its primary members. The management committee is responsible for management of funds, accounts, audit, and profitability of the DCS so that the management of the DCS does not slacken. The DCMPU provides training and human resource development to its staff and the elected members of the management committee. The DCS pursuing strict principles of functioning of Anand pattern have been making payment to the farmers twice everyday — payment being made for the milk supplied in the previous shift. In some states, the DCS makes payment for the entire quantity of milk supplied in the previous ten days. It is well known that income from agricultural crops is seasonal and most of it goes in clearance of debts taken for purchase of seeds and crop inputs. The payment received from the sale of milk to the DCS is in sharp contrast, regular even if it is once in ten days. It helps the milk producer to spend about half the money to buy cattle feed and maintain the milch animal and the balance is available for sustenance of the family. This may further supplement the family when the milk producer receives additional income as bonus and dividend at the end of the financial year from the profits of the DCS. This money may be used for various activities including purchasing gold ornaments. Generally the poor families find it as an opportunity to supplement their wealth by purchasing another milking animal. This ensures furthering income and prosperity. Even the poorest of the poor find co-operative dairying as a suitable means of financial viability and social security. Members of the DCS, generally the small milk producers in the rural areas are poor, uneducated, and their animals are maintained on deprived nutrition and unsanitary hygienic condition. The DCS, with the help of the DCMPU, provides facilities for veterinary first aid, artificial insemination, and modem facilities for health management for the member’s animals. The DCMPU trains a local resident of the village as veterinary assistant to diagnose and provide immediate relief to the sick animals. Any sickness for which he is unable to provide help, he contacts the DCMPU for expert veterinary services.

District Co-operative Milk Producers’ Union (DCMPU) A District Co-operative Milk Producers’ Union (DCMPU) is owned by all the member DCSs. The DCMPU buys all the milk offered by the DCS, then processes and markets milk and milk products. It also provides a range of inputs and services to increase milk production, trains the DCS staff and provides other consulting services to the DCS. A DCMPU, depending on the provisions in its bye laws, is governed by 11-17 member board of directors. The directors are elected from amongst the chairmen or nominated representatives of the DCS who constitute the Electoral College. Elections are held through a secret ballot and on the principle of one member one vote. -5-

INDIAN DAIRY CO-OPERATIVES

A DCMPU generally owns the infrastructure facilities to serve the DCS as well as add value to the milk it receives. The infrastructure includes: chilling centres for a cluster of DCS for intermediate cooling of milk before it arrives in the dairy plant; a dairy plant to process the milk received from the DCS; to sell it as liquid milk and its variants, and milk products; a cattle feed plant; a veterinary services headquarter to provide mobile veterinary service, emergency veterinary services and periodic vaccination of animals of the members; a bull station to rear bulls of various breeds as may be required to improve the milk yielding capacity of the animals in its area of operation; a semen freezing station and artificial insemination centre; a training centre to provide field extension services, to train and develop the farmers and the staff in various areas of management and leadership; an applied research and development centre to update its facilities in latest techniques, technologies as well as to undertake in-house research in management, feeding, breeding, healthcare, product-process development and related areas. All the services generated from the infrastructure owned and operated by the DCMPU are provided to the DCS on a regular basis. In addition, the DCMPU continues to search for latest technologies and techniques and transfers these to the DCS to further facilitate its functioning as well as increase the productivity of the animals owned by the farmer and thus improves family viability of the farmer members. Presently, many of the DCS are being equipped with computerized system of milk collection, accounting and some internet facilities to give them access to the world of internet dairying. Milking animal, an asset of the producer, is generally under continuous threat of local and infectious diseases because of the rural conditions of poor sanitation, bad hygiene and ignorance for countering these problems. Occurrence of infectious diseases, epidemics and the vagaries of weather seriously affect the poor by taking a toll on the life of cattle and buffaloes. It is important that farmersâ&#x20AC;&#x2122; animals are insulated from such casualties. The DCMPU generally supports the DCS andits members through a mobile veterinary service sent to the villages on predetermined days and scheduled time. The members are informed well in advance about the date, time and place of assembly by the local veterinary assistant. The DCMPU veterinarian treats all diseases, particularly mastitis, helminthes infestations, microÂŹ mineral deficiencies, parasitic infestations, tuberculosis, paratuberculosis, poxes, etc. The veterinarian provides medicines and gives instructions to the local veterinary assistant for follow up and further treatment. The veterinarian is generally sent in the event of an emergency needing immediate veterinary attention or surgical intervention. The DCMPU, with the help of the state government, may track occurrence of epidemic diseases through the epidemiological surveillance system. Most epidemics are main

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DAIRY CO-OPERATIVES IN INDIA

cause of large-scale mortality and morbidity amongst cattle and buffaloes. It is important to provide regular vaccination to animals against known infectious and contagious diseases e.g., foot-and- mouth disease, rinderpest (now eradicated), hemorrhagic septicemia, brucellosis, anthrax, blackquarter, haematoprotozoan diseases, infectious bovine rhinotracheitis, acute undifferentiated diarrhoea of newborns. For increasing the milk production, the DCMPU may set up a bull farm and semen freezing station. Frozen semen of good quality and tested bulls can be sent over to many DCS for breeding of a large number of females. In collaboration with the state federation, the DCMPU may set up facilities for progeny testing of bulls, implantation of fertilized embryos of high milk yielding females, open nucleus breeding system (ONBS) with multiple ovulation and embryo transfer, etc.

State Dairy Federation The DCMPUs in a state come together to constitute State Co-operative Milk Marketing Federation that is responsible for marketing of milk and milk products manufactured by them. Some state federations also manufacture feed and support other activities of the DCMPU. The state federation is governed by a board comprising the elected chairmen of the DCMPUs. The strength of the board vary from state to state according to the number of DCMPU that are its members. The chairman of the board is elected from amongst the elected directors and may continue for a duration as provided in the bye laws or as long as he continues as the chairman of the DCMPU. The state federation may own such infrastructure as dairy products manufacturing plant; cattle feed plant and other facilities for applied research, product development and training. The primary responsibility of the state federation is to organize the marketing of milk and milk products that its member unions may produce. The federation also maintains a balance between the demand and supply of products through a Programming Committee. The federation is responsible for strategic planning, for short term and long term planning of milk procurement, projected requirement of various products and packages, for undertaking surveys and intelligence to launch new products and for allocation of resources for creation of infrastructure. A major responsibility for the state federation is to continue to help the DCMPU to specialize and expand their product manufacturing facilities in accordance with the market and competition. It may arrange for financial resources and guarantees for funds required for the expansion of milk processing and diversification.

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Principles of Co-operation A co-operative is an alternative form of business organization in a capitalistic economy. The era of co-operatives began in India with rural credit co¬ operatives set up to counter the menace of moneylenders who were exploiting the poor and the weaker sections. In fact when the economically weak get together as a co-operative, their organizational strength becomes a key to counter the competition in the market place, created as a challenge by the capitalist governed economy. Success for development and growth of the dairy industry the world over has been linked to its embracement to the co-operative structure of organization. The leading dairy countries including Australia, New Zealand, the Europian and the North American countries have dairy co-operatives. They provide comprehensive services to their members for increasing milk production, protection to dairy animals against diseases, advisory on nutritional and scientific husbandry practices and above all sales of farmproduced milk. The strength of the farmers have helped them lobby for better price for their produce, efficient services for breeding, feeding, health care, and other allied services. It is true that comparison cannot be drawn between the systems of milk production in developed dairy countries and developing dairy economy of India, yet the co-operative form of governance has many commonalities.

Principles of Co-operation The International Co-operative Alliance in its “Statement on the Co¬ operative Identity” has defined the seven principles on which a co-operative must be based. Co-operatives are grounded in the values of self-help, self¬ responsibility, democracy, equality, equity, and solidarity. The unique structure is largely a result of the first principle - that of voluntary and open membership. Co-operatives do not discriminate on the basis of gender, or on the basis of social, political or religious beliefs. Democratic member control provides for decentralized decision-making reflected in policies by and for the member. The men and women who serve as the elected representatives are accountable to the membership. The basic capital of the co-operative is member economic participation. Equitable distribution of surplus by investing in the co-operative, contributing to reserves and benefiting the members in their way of life are all a healthy sign of the functioning of a co-operative. Autonomy and independence are essential to the co-operative remaining faithful to its values and principles. These -8-

PRINCIPLES OF CO-OPERATION

International Co-Operative Alliance Statement on the Co-operative Identity Definition A Co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointlyowned and democratically controlled enterprise. Values Co-operatives are based on the values of self-help, self-responsibility, democracy, equality and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility and caring for others. Principles The co-operative principles are guidelines by which co-operatives put their values into practice. • 1st Principle: Voluntary and Open Membership Co-operatives are voluntary organizations, open to all persons able to use their service and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination. • 2nd Principle: Democratic Member Control Co-operatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary co-operatives members have equal voting rights (one member, one vote) and co¬ operatives at other levels are also organized in a democratic manner. • 3rd Principle: Member Economic Participation Members contribute equitably to and democratically control the capital of their co¬ operative. At least part of that capital is usually the common property of the co¬ operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes; developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities by the membership. • 4th Principle: Autonomy and Independence Co-operatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operative autonomy. • 5th Principle: Education, Training and Information Co-operatives provide education and training for their members, elected representatives, managers and employees so they can contribute effectively to the development of their co-operatives. They inform the general public, particularly young people and opinion leaders about the nature and benefits of co-operation. • 6th Principle: Co-operation among Co-operatives Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional and international structures. • 7th Principle: Concern for Community Co-operatives work for the sustainable development of their communities through policies approved by their members.

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INDIAN DAIRY CO-OPERATIVES

Rio Co-operative Declaration by the International Co-operative Alliance “Our vision is to contribute to achieving a peaceful society, with a high level of sustainable human development in harmony with nature, with equality, peace and social justice, and with ample space for fraternal relations among people and societies.” Dr Oscar Arias, Nobel Peace Prize Winner declared at the International Co-operative Alliance gathered at RIOCOOP 2000, from December 3-7, under banner “Co-operative Identity for the New Millennium”. CONSIDERING 1. The situation in which millions of human being live who are afflicted by poverty, by lack of employment, and by inadequate social welfare system due to the concentration of wealth, and social exclusion; 2. The growing violence due to weapons trafficking that worsens social conditions and unleashes brutality; 3. The serious degradation of the environment that limits the possibility of life for the present generation and for those not yet born, and that threaten the planet that is our home; and 4. The absence of solidarity that characterizes this era with the proliferation of anti¬ social attitudes and conduct without impunity, and that generates public and private corruption, factors which pose an imminent danger to democratic society.

DECLARES 1. Our willingness to struggle for a more just, transparent and democratic civil society; 2. Our interest in exhorting Government, political parties, organizations of civil society, and all people who love peace to join forces to fight for the reduction of destructive weapons and the elimination of violence and to struggle for social justice. We reaffirm, at the same time, our disposition as a world organization to work to generate more employment and to reduce social exclusion; 3. Our willingness to struggle to build a society in harmony with nature; 4. Our desire is that the co-operative organization shall contribute to a more equitable social, political and economic world order, inspired by the co-operative principles and values, thereby giving effective support to democratic society; and 5. That the international co-operative alliance assumes the commitment to rally the support of millions of members of co-operative and other organizations in the quest for peace, solidarity, justice and environmental protection. THEREFORE The international Co-operative Alliance, in order to achieve these objectives, will present at next year’s meeting of the general assembly of the United Nations, by means of our Director-General, this initiative with the support mentioned in the testimony to our commitment to present and future generations.

Rio De Janeiro, Brazil, December 7, 2000

values and principles are strengthenrd by investing in education, training and information, enriching stakeholders’ understanding of the principles and techniques of co-operation. Co-operation among co-operatives is reflected in everything done by Co-operative milk marketing federation, its constituent unions or the co-operatives. Each one must continually seek opportunities for local, regional national, and international co-operation. -10-

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