NDDB arm to take its success story to regions where co-op model has failed

NDDB Dairy Services has clocked a combined turnover of Rs 4,564 cr from 15 milk producer companies that it helped set up in 69 districts across eight states

After clocking a combined annual turnover of Rs 4,564 crore from 15 milk producer companies (MPC), NDDB Dairy Services (NDS) is now planning to replicate the model in regions where cooperative structure for milk producers has not worked.

A not-for-profit subsidiary of National Dairy Development Board (NDDB), NDS has so far helped set up 15 MPC covering 69 districts across eight states. Of these, while six are being supported under National Dairy Plan (NDP), five are getting support from Tata Trusts and four by national rural livelihoods mission (NRLM) and state rural livelihood mission (SRLM).

NDS functions as a delivery arm of NDDB for field operations relating to promoting producer companies and productivity services. Having been set up in mostly areas with zero or inadequate coverage by milk cooperatives, MPCs under NDS have succeeded to cross average daily milk procurement beyond three million kg.

What's more, total milk payment to producers since inception of these milk producer companies has crossed Rs 17,000 crore to touch Rs 17,192.41 crore.

Now, NDDB is looking to replicate the success in more potential areas.

"NDS promoted Milk Producer Companies are in the areas where the cooperatives are not present or coverage by cooperatives are inadequate. Currently, about 24 per cent of villages are covered by dairy cooperatives. There is a lot of scope for inclusion of more milk producers under producer owned enterprises... Based on requests from organisations like NRLM/SRLM or Tata Trusts, NDS will undertake promotion of more milk producer companies in such potential and needy areas," NDS told Business Standard.

Unlike a milk cooperative, a producer company is a business enterprise registered under the Companies Act. While including institutional and ideological strengths of cooperatives, MPCs include voluntary membership, voting rights independent of shareholding, an elected board, distribution of surplus on patronage basis, limited dividend, education of own members and co-operation with other organisations. This way, a producer company aims to combine the ethos and working style of the cooperative principles with the liberal regulatory framework of company law.

Under MPCs, milk producer members get standard benefits of a fair and transparent system of milk collection, with competitive price and timely credits to bank accounts, as well as incentives and patronage-linked bonuses.

According to Dilip Rath, Chairman, NDDB, "Milk producer companies are farmer owned & controlled organisations, which combine the institutional strength of mutual assistance, principles of cooperatives and liberal business framework of the companies. They have the potential to function as autonomous & democratic business enterprises and can contribute to alleviating agrarian distress in many parts of the country."

"It is possible to achieve growth in milk business if an integrated approach in securing market access for dairy farmers through organisations owned and controlled by them, is adopted," Rath added.

NDS provides support to the producer companies in strategizing marketing and sales. By December 2019, the MPCs under NDS are having an average sales of about 500,000 litres per day of poly pouch milk and other value added products such as buttermilk, curd, ghee, and flavoured milk.

With a total base of 515,000 members, of which 49 per cent are women, MPCs under NDS have seen small holders, having upto three milch animals, constitute 61 per cent of them.

Among the 15 MPCs, five including Paayas in Rajasthan, Maahi in Gujarat, Shreeja in Andhra Pradesh, Baani in Punjab, and Saahaj in Uttar Pradesh, which are operational for more than four years, have made profit every year and passed on dividend to its shareholders.