Our dairy sector is no pushover

Over the last decade all this began to happen in the so-called backward areas. Milk and its products started growing fast, not just in Gujarat, where it all began, or in Maharashtra, Karnataka and Andhra, but in Bihar, West Bengal, Madhya Pradesh and Orissa. Now this was truly remarkable and last week, in Midnapur, in the village of Kaspal, I could convince myself that the statistical growth of 6 per cent plus in the eastern region was real in this sector. Milk prices ranged between Rs 7 to Rs 9 per litre and milch cattle were a part of most farm households—unheard of even a decade ago.

All this is under pressure. Domestic demand growth which leveraged the process, since the early eighties, is levelling off. As India opens up its agriculture, global competitive pressure is increasing. The animal husbandry economy is facing tremendous pressure in the global bazaar. For reasons unknown, perhaps incompetence, we had negotiated very low bound rates after Marrakesh on dairy products.

Meanwhile, after the East Asian meltdown, as income growth levelled off in the fast-growing East Asian markets, animal husbandry demand that was growing at twice the rate of cereal demand in the past decade, stopped growing or even declined. The pressure is now on India. Britannia, for example, has signed up with Fonterra, the largest New Zealand cooperative, to sell dairy products in India. This year, according to available trade statistics, imports will equal almost the entire growth in vegetable and fruit demand and while imports may only be less than 5 per cent of the marketable surplus, prices and incomes are determined by the margin. Dairy products will be next, as exporters get pushed out of their traditional markets.

This is the time for India to gear up and fight. After all, the Indian milk and product economy is no pushover. We are the global giant producer and Amul and Mother Dairy are truly accepted pan-Indian brands. That is why the fratricidal — or shall we say patricidal? — wars within these organisations are truly depressing. Last October I gave the World Food Day Lecture at Bangkok. At a lunch arranged for me at that occasion I was asked by Siamwalla, one of the outstanding experts on these issues, if the Indian dairy cooperatives were gearing up to meet the challenge.

On the same day, animal husbandry farmers were protesting on Bangkok streets against low prices. He was happy when I told him that a cooperative reform movement was underway and to the query on strategic organisations to fight the global challenge, I told him that a Producer Company Bill may become law in India soon. I said I expected cooperatives in India to form their own professional companies and fight rather than enter into alliances with multinationals. Siamwalla felt this was terribly important, because dairy cooperatives were reorganising with strategic alliances, globally. In the West, he said, coops had regrouped into smaller, leaner units with strategic alliances. This was important because if they did not survive, a lot of work showed that the poverty removal agenda in Asia would receive a major setback.

The marketing joint venture between the National Dairy Development Board (NDDB) and dairy cooperatives was a ray of sunshine. The demand for liquid milk was almost constant since 1998. Some dairy coops had eaten into their working capital. Many had politico-administrative chiefs and reorganising the sector to stand up and fight seemed to be the order of the day. Of course, when reform is slated, my experience is that all kind of stories are conjured up. When the Producer Company Bill was introduced in Parliament I was asked why I had introduced capitalism into the cooperative movement. But the Bill was actually based on the essential cooperative law by providing a one-vote rule irrespective of the shares held. The professional support of the NDDB in marketing is absolutely critical. This is particularly so for the poorer states whose stakes on the milk route are now the largest.

A last word on the politicisation of the debate. Since the mid-sixties, serious parliamentary committees have taken the view that Parliament is supreme and will determine the principles and policies of the public sector but that an arms’ length relationship requires that day-to-day decisions are left to the professionals concerned.

If coops and the public sector are to play their role, this will have to be respected.