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Saturday, September 19, 2020

Explained: Why India’s largest milk cooperative is returning to edible oil business

After a 15-year hiatus, the country's biggest milk cooperative, which is Amul’s parent company, has now acquired a closed edible oil plant at Palanpur in north Gujarat that will tap locally grown oilseeds.

Written by Avinash Nair , Edited by Explained Desk | Ahmedabad | Updated: July 20, 2020 8:28:54 am
GCMMF, Gujarat Cooperative Milk Marketing Federation Limited, Gujarat Cooperative Milk, Gujarat Cooperative Milk Marketing Federation Limited edible oil business, Express Explained, Indian Express GCMMF is first targeting the Gujarat market and has introduced the product in Ahmedabad, Vadodara and Anand.

The Gujarat Cooperative Milk Marketing Federation Limited (GCMMF) had faced a serious crisis in the 1990s — when it was selling edible oil under the brand name ‘Dhara’ and adulterated oil led to dropsy epidemic in which lives were lost. GCMMF eventually exited the oil business in 2004.

After a 15-year hiatus, the country’s biggest milk cooperative, which is Amul’s parent company, has now acquired a closed edible oil plant at Palanpur in north Gujarat that will tap locally grown oilseeds.

A look at why and how GCMMF is returning to the edible oil business, and its learning from the previous setback.

What is GCMMF’s edible oil project and what are its expansion plans?

“We have launched a pilot project in Gujarat on a very small-scale. Our Banaskantha district’s Cooperative Milk Producers’ Union Limited has acquired an edible oil plant with a 250-tonne per day capacity at Palanpur. We have started processing three types of oil — groundnut, mustard and cotton seed — at the plant,” said managing director, GCMMF, R S Sodhi.

Also read | Gujarat: GCMMF begins selling dairy products to RWAs in 7 cities

The milk cooperative is currently targeting the Gujarat market and has introduced the product in Ahmedabad, Vadodara and Anand. It plans to expand to the neighbouring Rajasthan. Shankar Chaudhary, a BJP leader and chairman of Banaskantha District Cooperative Milk Producers’ Union Limited, said the project would mean extra remuneration for farmers. “Farmers of Banaskantha already grow mustard, groundnut and cotton in large quantities. So, the way we have created value-added products for milk, we plan to create similar products for farmers growing oil seeds. A team had been researching on value-adding agricultural commodities for two and a half years. The edible oil project is a result of this project,” said Chaudhary, who heads the Banas Dairy.

Chaudhary said the edible oil plant acquired for the project was lying closed for the last 7-8 years.

Why did GCMMF venture into selling edible oil in the first place?

When Dr Verghese Kurien was at the helm of affairs at GCMMF and NDDB — both headquartered at Anand town of Gujarat— NDDB (National Dairy Development Board) had launched edible oil in 1988 under the brand name ‘Dhara’ as part of its Golden Flow operation aimed at curbing the sale of loose oil in the market. GCMMF was appointed as the sole selling agent and the milk cooperative union continued to distribute it till March 31, 2003.

Read | ‘50% jump in sales of Amul products during lockdown’

“Dhara was launched under the edible oil marketing intervention scheme on the request of the Government of India. We used to sell Dhara on behalf of NDDB. Dhara became number one brand under Dr Kurien. It became so big that about 35 per cent of our Rs 1,000-crore revenue in 1994-95 came from the oil business,” said Sodhi, who was the branch manager for GCMMF in Ahmedabad, when Dhara was launched in the city.

What led to GCMMF suspending the edible oil business?

In 1998, adulterated mustard oil had led to dropsy epidemic which left several dead and ill in many parts of the country. Several state governments even banned mustard oil after argemone oil, an adulterant, was found in several oil brands that were tested. Dhara was one of the affected brands. A Delhi court had in 2017 fined both NDDB and GCMMF in the matter.

Five years after dropsy surfaced, GCMMF exited from selling Dhara on March 31, 2004. Mother Dairy Fruit and Vegetable (MDFVL) took over the marketing of the brand and it currently manufactures edible oil in Rajasthan, Gujarat, Madhya Pradesh and Tamil Nadu.

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What are the lessons that GCMMF learnt from the dropsy episode?

“Oil is no doubt a slippery business. So we are very cautious. Dropsy was a very serious issue. One has to be very careful of the source of raw material. We are not using the Amul brand anywhere. Nowhere on the edible oil pack Amul is mentioned,” says Sodhi.

For the new launch, GCMMF will be using the brand name “Janmay”, which means “newly born” or “fresh”.  The product will be made available in Amul parlours.

“This is a learning curve for us. We have placed the product in the open market. Edible oil is a different sector altogether for us and we are also learning. We will scale up gradually,” he added.

Read | Withdraw concession on skimmed milk import: Co-op dairies to Centre

How is the raw material being procured for producing the oil for the new GCMMF venture?

Banaskantha grows groundnut, cotton and mustard and so GCMMF is sourcing the oil seeds locally. It plans to tap farmers in its milk production network who also grow these crops in their farms. “The farmers who are selling milk are the same.” GCMMF plans to tap 3.6 million milk producers in its network who are also farmers cultivating oil seeds like groundnut, cottonseed and mustard.

How competitive is the edible oil market in India now?

When GCMMF began selling Dhara, there was hardly any organised player in the packaged edible oil market. “Only a couple of brands like Marico were around. Now, the situation is different. Today there are four big national brands. These are well-entrenched brands. We do not want to go there. Our main focus remains the dairy business. We do not have big plans for edible oil and non-dairy products. We do not want to make big investments,” says Sodhi.

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