Opinion Why the government ought not to intervene with Amul

Both companies and cooperatives, however, at the end of the day are business enterprises whose raison d’être is — or should be — to deliver value to their owners. Take the Gujarat Cooperative Milk Marketing Federation (GCMMF). An apex organisation of dairy cooperatives in Gujarat, it is ultimately owned by 36.4 lakh farmers pouring milk to 18,154 village-level societies across the state.

Has GCMMF delivered value to these “shareholders”? From all indicators, it has. Between 2001-02 and 2021-22, GCMMF’s sales turnover rose from Rs 2,336 crore to Rs 46,481 crore and average daily milk procurement from 47.32 lakh litres to 263.66 lakh litres, which included 42.68 lakh litres from outside Gujarat.

But for the farmer-owner, it is the price paid for her milk that really matters, just as a company’s share price is for the investor-owner. In the last 20 years, the average procurement price paid to producers by GCMMF’s district milk unions has gone up from Rs 184 to Rs 820 per kg of fat. Amul full-cream milk, containing 6 per cent fat, currently retails at Rs 63 per litre in Delhi. The producer’s share of that, at Rs 820/kg fat and 1.03 kg to a litre, works out to about Rs 50.7 or over 80 per cent. In other words, GCMMF is not just helping process and market the milk of farmers, but is also getting them the highest possible share in the consumer rupee.

How has this been possible? The simple answer is professional management. The Amul organisational model, from the time of Verghese Kurien to B M Vyas and R S Sodhi, has been based on an elected board of directors operating through a chief executive and his team, which include marketing and finance professionals, project engineers, veterinarians, agronomists and nutritionists.

This model has made GCMMF different from other state dairy cooperative federations, whose managing directors are usually Indian Administrative Service officers reporting to secretaries of animal husbandry and dairying departments. It’s not surprising that neither their boards nor managers are accountable to farmers; these are milk producers’ cooperatives only in name.

It is in this context that Sodhi’s recent exit as MD of GCMMF raises disturbing questions. These relate not to party politics, which isn’t new. Gujarat’s milk unions were traditionally controlled by the Congress, which has now effectively passed to the ruling Bharatiya Janata Party. But a golden rule that Amul’s founder Tribhuvandas Patel, who happened to be a Congressman, had established was not to allow political calculations to intrude into the business operations of cooperatives, leave alone affect the interests of their farmer-members. There was a lakshman rekha that protected the professional manager, emboldening him to do his job.

Sodhi was no ordinary manager. During his 12 years as MD, GCMMF’s turnover went up nearly six times (from Rs 8,005 crore in 2009-10) and milk procurement almost trebled (from 93.02 lakh litres per day). It was under him that the federation also began procuring from farmers in other states and Amul became the liquid milk market leader even in Delhi-NCR (where it today sells around 40 lakh litres per day, as against Mother Dairy’s 30 lakh litres).

It’s not clear whether Sodhi resigned or was asked to go. The letter addressed to him by GCMMF’s chairman and vice chairman on January 9 — “your services as MD are being terminated with immediate effect…it is ordered that you relinquish charge immediately and hand over the same to the COO (chief operating officer)” — seems to suggest the latter. Sodhi, no doubt, was already on a two-year extension and his going shouldn’t have in the normal course come as a surprise. But the tone
of the letter points to a departure that is far from dignified — for someone who gave 40-plus years to the organisation and delivered a compound annual revenue growth of 15.8 per cent in his term as MD.

There are reports of the decision to relieve Sodhi being taken at a political level and apparently “to safeguard the Amul brand”. The first part, if true, reduces GCMMF to a government departmental undertaking and with a board that’s neither independent nor accountable to its ultimate farmer-shareholders. This goes totally against the very idea and principles of cooperation that Tribhuvandas Patel and Kurien stood for. As regards the Amul brand, there can be nothing more ridiculous than imagining threats from a person who took its equity and positioning to an altogether different level.

The Amul model has been about both farmer empowerment and valuing professional management in organisations controlled by and working for producers. It’s probably a sign of the time that the National Dairy Development Board, which spearheaded India’s White Revolution, has paled into insignificance. It does not have a full-time chairman today, even while having IAS officers heading it after 2014.

One hopes the same misfortune does not befall GCMMF in the coming days.

harish.damodaran@expressindia.com