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Private cos claim supremacy in milk market

Private sector production has risen from almost 6.5% to nearly 12% now

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’s chief architect – Verghese Kurien – is not around to spearhead the co-operative milk movement which could do with his help. Private milk companies claim, for the first time, that their procurement of milk is now higher than that of the cooperative sector.

Brands such as Reliance Dairy, Hatsun Agro Products Ltd, Gopaljee Ananda, Diary, and Kwality Diary say the private sector is ahead of the cooperatives in the organised milk trade.

Industry players say of the around 130 million tonnes of milk currently being produced in the country annually, around 11 million tonnes is procured by cooperative agencies and around 15 million tonnes by private milk companies. The rest is either kept for self consumption or purchased by the private milk supplies, commonly known as ‘doodhwallas’.

“Of the almost 130 million tonnes of milk produced in the country, the organised sector procures around 20-21% annually, of which cooperative sectors share is around 8.5-9%, while the organised private sector’s share is around 11.5-12%,” R.G. Chandramoghan, managing director of Hatsun Agro Products Ltd, a large listed dairy company, which procures 0.75 million tonnes annually.

He said the share of cooperative sector in India’s annual milk procurement has risen from 8.5-9% in the last 10 years, while that of private sector has risen from almost 6.5% to nearly 12% now. “This clearly shows that private sector has grown at a rate which is much faster than the cooperative sector as far as procurement is concerned,” said Chandramoghan.

No official numbers

Though the data provided by is not backed by any official numbers, they claim they have been inching towards higher milk procurement, the backbone of the milk business, for some time. The annual procurement of cooperatives, as listed by National Diary Development Board or NDDB in its annual report, was 9.56 million tonnes in 2010-11. 

Private companies say their success owes to a couple of factors such as ploughing in investments back to farmers.

“The cooperative sector is riddled with politics and in many cases have scant regard for farmers interest as it is run as government organisation,” said a senior executive of a large cooperative milk company, who did not wish to be named on this sensitive matter. In the last 10-15 years many milk cooperatives are just an extended arm of the government, he said, and are running into huge losses.

This view finds resonance among milk farmers especially in states where the cooperative sector has failed to live up to expectations. “There was a time when farmers preferred giving their milk to cooperatives then to the private companies, but in the recent years, cooperatives are fleecing the farmers by paying them less, while charging more from consumers,” said Mohan Singh Ahluwalia, president of Gwala Gaddi, a group of independent milk producers and leading milk seller himself.
He said in ideal situation a cooperative should not make more than Rs 3-4 profit in per litre milk sales, but they can make astronomic margins of over Rs 20 in each litre of milk sold to consumers.

Different strategies


In Hatsun’s case as also in the case of many others, Chandramoghan explains, the game changer has been the focus on developing the infrastructure and additional investments for back-hand development. “Earlier, the farmer did not have a choice, but he has (now). Also, in many states milk cooperatives do not put adequate funds for backend development, but private sector does,” he said.

Experts said except milk cooperatives in Gujarat, Karnataka and to some extent in Bihar, most cooperatives do not invest adequately.
In prices paid to farmers, too, cooperatives differ from the big corporate, though, across the country no uniform price is followed by cooperative milk federations.In Gujarat, cooperatives pay a price which is much more than the corporate, while in southern India, big milk companies pay more than the cooperative sector. In the north, particularly, in UP, Punjab, Rajasthan and Haryana, the price paid for milk procurement by both the cooperatives as well as corporate is similar.

“In Gujarat, cooperatives pay around Rs 29 per litre of milk procured from farmers which is the highest, while in north India, both cooperatives and companies pay around Rs 26 per liter,” Chandramoghan of Hatsun said. In the south—which is predominantly a cow-milk producing region -- cooperatives pay around Rs 18-19 for every liter of milk purchased from farmers while companies pay around Rs 20-21.

Experts say no single model of milk sales can work in India and both cooperative and private milk producers can co-exist.
“Kurien’s model has not failed despite the steady growth of the private sector as in India no single model can be the best,” said  Ramesh Chand, director of National Centre for Agricultural Economics and Policy Research (NCAP).

The co-existence of the two models is important because despite the ‘white revolution’ India suffers from a milk shortage. It produces one-sixth of the world’s total milk but retail prices have galloped. Since 2002, milk prices have almost doubled, rising close to 30 percent in last three years. Annual milk demand will touch 180 million tonnes by 2021-22, an increase of almost 38%.  The rising demand has created an added pressure on prices as supplies have failed to keep pace.

“As of today, the cooperative sector is biggest processor of milk, yes, its annual procurement might be still less in proportion to the production, but it still has a share of around 60 per in this sector and Amul it their biggest brand,” said Prof Yogendra Alagh, former union minister and a close associate of Verghese Kurien.

A leading player from the milk trade, who did not wish to be quoted on this sensitive matter, said that 'the Kurien model' of cooperative movement will always remain relevant, but over the years its name has been sullied by rampant corruption creeping into cooperatives societies.

Amul has drawn-up a plan to take on the private players. Alagh said that National Dairy Plan, run by NDDB, will venturing into those districts which don’t have milk cooperatives, located in North East India, Jharkhand, Jammu and Kashmir.

“Private companies are mostly located in and around cities, but it is the cooperative milk diaries that serve the interest the lowest denominator of the society and this is where Kurien’s relevance comes,” Alagh said.

(With inputs from Kalpesh Damor in Ahmedabad)

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