Working Paper - Series on Dairy

Aid and Development No. 30.

THE GUJARAT COOPERATIVE MILK
MARKETING FEDERATION:
AN APPRAISAL OF ITS FUNCTIONING
AND ORGANIZATION
Dr Dilip Shah
South Gujarat University
ISS ltJorking Papers represent
research work in progress.
Comments and sugges tions for
improvement are invited.
Paper pr epar ed in cont ext of
Research Proj ect on Operation
Flood: Origins and Impact,
executed with IDPAD support by
the Institute of Social
Studies in collaboration with
the Centre for Development
Planning, Erasmus University,
Rotterdam, and the Kosambi
Research Institute for
Scientific Investigations into
Society, New Delhi.
November, 1986.
Introduct i on
This report aims to give an analysis of the Gujarat Cooperative Milk
Marketing Federation (GCMMF) fS origin, evolution, functioning and internal
It also reviews its performance. It may be noted that a study of
GCMMF is important for understanding the background of the proposed strategy
of developing a "National Milk Grid System" under Operation Flood II. This
is so because GCMMF has provided a model of a regional milk grid system
which has become the foundation for developing a "National Milk Grid System"
in India.
The study is divided into the following sections:
The first section provides a background of the Gujarat dairy economy. The
second section discusses the theoretical rationale behind the idea of
a milk grid system and its place in the strategy of Operation
Flood II. The third section examines factors leading to the development of
the Federation. It also discusses the organisational structure and opera-
tional system of the Federation. The fourth section is an attempt to
explain aspects of the dynamics of the Federation. It throws light on some
important factors such as:
1. Sales composition of the Federation.
2. Participation of the member Unions.
3. Sales spread of the Federation in India.
4. Price Policy of the Federation.
5. Milk support to Metro cities by the Federation.
6. Relationship between GCMMF and Indian Dairy Corporation (IDC).
The fifth section reviews the performance of Gujarat Cooperative Milk
Marketing Feder2tlon. The report ends with some concluding observations.
Y)a,',y 3spects or' the stuc:y such as the review of the Gujarat dairy
ecor:omy, the history of the GCMMF, the theoretical base of the milk grid
system
0;, secondary data and studies and documents of
of Indi'3. NDDB, :;DC, reAR, uni versi ty departments, research
2
institutes etc.
The discussions concerning the internal dynamics of the
Federation and the data relating to that section are based on interviews
with the officers of the Federation including the Managing The
assessment of its performance is based on the analysis of the balance sheets
and annual reports publ ished by the GCMMF d.uri ng the period of 1974-1982.
The background
The Gujarat dairy economy,
The dairy sector occupies quite an important place in the agricultural
economy of Gujarat State.
This is evident from the fact that "the total
milk production in the state is 22 lakh tonnes a year, the value of which is
about 20% of the value of major crops produced in the state".1 This share
of the dairy sector was less than 17% of total agricultural production in
1970-1971,2
Reviewing the dairy development, the sixth plan states that out of 19
districts in the state, 13 distr'icts have modern dairies. In the remaining
six districts except Dangs district, viz. Valsad, Panchmahals, Kachha,
Surendranagar, and Gandhinagar dairies are at different stages of construc-
tion under the Gujarat State Dairy Development Corporation. Apart from 13
modern dairy plants and milk product manufacturing factories, Gujarat also
has 7 cattle feed factories with an installed capacity of 900 tonnes per
3
day.
In the overall organised modern dairy sector in India, the Gujarat co-
operative dairy sector occupies a preponderant position. This is evident
from table 1. It shows that while the share of Gujarat in co-
operativisation of the dairy sector is just 14% and 16% in terms of
cooperative organisations and memberships respectively, its share in milk
products and liquid milk sales in India in 1975-1976 was 97% and 49%
respectively. Gujarat's share in total national assets of the co-operative
4
dairy industry was around 58%.
M
State
Guj arat
All India
PCl'cent
Ri1are of
Guj arat
Notes:
Table
The share of Gujarat in the cooperative dairy industry of India (1975-1976)
(Units in amount of '000 Rs.)
No. of milk
cooperati ve
organi sations
3,018
21 ,047
14.33%
No. of members
of all types
of milk
cooperati ves
2,60,617
16,69,843
15.60%
Fixed assets
of the coop.
or gani sat i on
2,71,519
4.73.952
57.28%
Total value
of milk
purchased
9,05,745
22,25,032
40.70%
Total value
of sales of
milk
11 .95,304
24,30,467
48. 11%
Total Value
of sales of
milk products
10,95.680
'11.30,467
96.92%
, - - - - , ~ - - , - - - - - - - - - - - - -
1. Number of cooperative dairy organizations cover state unions, district unions and cooperative societies.
2. Members refer to all types of members of cooperative dairy organisations in cooperative dairy industry of India.
3. Fixed assets include land. buildings, processing machineri es, appl iances, and e qu ipments.
4. Milk products cover butter, ghee, cheese, condensed milk, milk powder, baby food, casein, lactose, cattle feed etc.
Source: Reserve Bank of India - Tables relating to the Cooperative Movement in India, Part II,
Non-Credit SOCieties. April 1976 (published in 1983/84).
Year
1960
1965
1968
1973
1974
1975
1976
1977
1978
1979
1980
No. of
Dairi es
2
5
8
10
12
1 4
1 4
1 4
1 4
1 4
1 4
1 4
4
Table 2
Dairy development in Gujarat
Installed capacity
of dairy Clakhs
litres of milk
per day)
3
2.25
3.40
6.33
12.00
15.80
15.80
18. 12
18. 12
18. 12
18. 12
20.28
Quantity of milk
handl ed
Cl akhs 1 itres of
milk handled per
day)
4
0.70
1. 85
3.10
8.85
10.23
7.96
12.03
12.04
14.23
18.29
17.23
Source: Gujarat Development Stat i sti cs 1980, p. 62,
Centre for Monitoring Gujarat Economy, Bureau of
Economics and Statistics, Gujarat, 1983.
Percentage
of capaci ty
util ization
5
31
55
41
74
64
50
66
66
79
100
70
Although the seeds of organized modern dairy industry were planted by
the Kaira District Milk Producers Cooperative Union already at an early
stage, one may see from table 2 that the co-operative dairy development
picked up its momentum only after 1970-71. The following observations based
on table 2 could be of some use:
5
1. There were only 5 dairy plants in 1960. This number increased to 14
which comes to roughly one plant in each district.
2. Similar:y, the installed capacity of milk plants in 1960 was just 2.25
lakh liters increased to 20 lakh litres per day in 1982-83.
the last two decades the installed capacity of the cooperative
dairy industry has increased by about eight times over 1961-62.
3. It is significant that its performance of capacity utilization has been
progr'essi vely improving during the period 1960-1979.
4. The fall in the capacity utilization in the year 1980 is the conse-
quence of expansion of the capacity in that year. It is well-known
that there is always a gap between capacity build up and its
utilization.
The development of the cooperati ve dairy industry in Gujarat must obviously
be attributed to the major share of Gujarat in the disbursements of the
::-;::c.:-'ation Flood Project. This can be seen from table 3.
It may be noted that the original allocation was about 9% of the
project funds. However, Gujarat received almost double i.e. 16.64% of the
:otal IDC sanctioned funds. But it must be noted that other states like
Mahar2shtra with 16.92% and West Bengal with 13.50% also received quite a
significant share in the Operation Flood aJlocation. However, to be fair to
Gujarat, it must be said that it was also very succesful in the implementa-
tion of the project. This can be seen fr'om table 4. In fact, considering
its very important share (i.e. 30% to 85% in various action items of the
pr::;ject) one could justifiably attribute the overall success of the
Oper'2tion Flood project primarily to its pE:rformance in Gujarat.
Let us attempt to review the qualitative changes in the size and com-
position of livestock, milk production and per capita availability of milk
and income and employment provided by the cooperative dairy industry in
Gujarat to its producer members.
6
Tabl e 3
Statewise allocation, IDC sanction and utilisation of
Operation Flood I funds.
(in Rs. crores)
State original IDC's
allocation sanction
Andhra Pradesh 2.46 7.33
Bihar 3.99 3.85
Delhi 5.08 15.65
Gujarat 8.94 25.32
Haryana 3.82 5.07
Mahar as ht ra 17.25 25.76
Punj ab 3.82 5.45
Rajasthan 3.82 4.97
Tamilnadu 8.87 18.58
Uttar Pradesh 3.82 7.96
West Bengal 18.92 20.64
IDe direct
14.61 11 .58
expendi ture
Total
95.40 152.06
utilisation by
the states
5.041
3.236
9.034
21 .882
3.742
18.050
5.286
3.997
1 4.270
5.765
1 4.897
11 . 370
116.550
Source:
Operation Flood - A reality,
Indian Dairy Corporation, 1984.
Tabl e 4
arat in achievements of ect: some selected indicators
2 3
4 5 6 7 8 9
,,--,,---..
No. of Farmer Milk pro- Average Milk Production enhancement
functional members cured annual under es M ts No. of
village (annual through- ani mal treated supplied feed cases of
dairy co- lakh kg) out (lakh health by ( '000) manufa- artificial
operati ves 1 i tres cover mobile ctured insemi-
per day) (no. ) vans ('000) (metri c nation
tonnes

Gujarat 6,216 990.47 17.48 15. 10 4219 335.57 98.76 185.043 3,49,051
All India 19,499 2620.04 44.17 43.31 1 4301 1772.03 58.035 218.645 7,65,464
r- Gujarat
(% share) 3'1.87 37.80 39.57 34.87 29.50 18. 17.01 84.83 45.49
Rest of
India 68.13 62.2 60.43 65.13 70.05 81.96 82.99 15.37 54.41
(% share)

Source: Calculated from the 13th Annual Report of Indian Dairy Corporationn! 1983.
8
1. Trends in livestock population in Gujarat
Since 1961-62 the livestock situation has been reviewed through four
censuses. Livestock figures of cows and buffaloes over 3 years are compiled
and presented by the Directorate of Dairying. They are stated below in
tabl e 5.
Tabl e 5
Trends in livestock population in Gujarat
(figs. in Lakhs)
Item 1961-62 1966-67 1972-73 1977-78
Cattle 18.37 17.79 18. 12 16.92
female -( 3.15) ( 1 .85) ( 7.89)
over 3 years
i ) Ani mals in milk 8.05 8.12 9.02 8.34
0.86) ( 11. 00) - ( 7.53)
ii) Dry animals 8.72 8. 12 7.44 7.03
- ( 6.88) - (8.37) - (5.51)
Animals in milk
as % of milch 43.82 45.08 48.68 49.18
animals
Buffaloes 15.33 18. 19 20.47 20.92
female -( 0.97) -(12.63) -( 2.19)
over 3 years
i) Animals in milk 8.99 10. 15 10.95 12.23
-(12.99) - ( 7.88) -(11.68)
ii) Dry animal 6.54 6.38 7.79 6.84
-( 2.44) (22.00) -(12.19)
Animals in milk
as % of milch 48.33 55.83 53.48 58.47
animals
Change
between
1961-77 ( %)
7.89
+ 3.60
- 20.99
- 5.36
13.88%
36.04
4.58
10.26
Note: Figures bet ween brackets gi ve the percentage of changes over the
previous census.
Source: Direct orate of
Animal Husbandry, Gujarat State.
9
A comparative study of the livestock data gives sane interesting observa-
tions and reveals the impact of modern dairy development on the size and
composition of livestock in Gujarat. One would like to make the following
points on the basis of table 4:
i) It is immediately possible to see that in a modern dairy system where
a better price is assured for milk with a richer fat content,
preference for buffalo is obvious. As a result, while the cow popula-
tion has shown a declining trend over the period 1961-1977 with a fall
in its population of about 8%, the buffalo population has increased by
almost double that rate. The buffalo population during 1961-1977
increased by nearly 14%.
ii) An equally important observation is that of changes in the composition
of livestock. The percentage of animals in milk shows a moderate
increase both' for buffaloes as well as for cows. Thi s may be at-
tributed to production and distribution of technical inputs and
improved animal husbandry practices.
2. Trends in production, product i vi ty and per capi ta
availability of milk
One should be extremely careful in discussing the changes in production of
milk and the productivity performance, because not authentic time series
data is available. Estimates of the Government suffer from a number of
methodological limitations. Despite these limitations one may attempt to
analyze the available data. Table 6 shows the production trend in Gujarat
State from 1965-66 to 1982-83. This table shows a continuously rising trend
of milk production, recording a rise of about 52% between 1965-1982.
Regarding this production performance, how far is it possible to at-
tribute this rise in production to productivity change? Let us examine the
productivity trend which is given in table 7.
From the table it can be observed that the increase in productivity is
insignificant and irregular (particularly in case of buffalo milk which is
the major source of milk supply) and does not match with production
Reference year
1965-66
1971-72
1977-78
1978-79
1979-80
1980-81
1981-82
1982-83
10
Table 6
Trend of Production of Milk
(Base year 1965 100)
Production of Milk
(Lakh metric tonnes)
16.20
17.86
21.88
21.65
22.00
22.88
23.76
24.66
Index of production
100
110
135
1 3lJ
136
147
153
Source: Compiled from the State Plans and Livestock Census.
Table 7
Trend in productivity of Milk
( Average 11 tres of mil k per day per ani mal)
Average yield per Year
an i mal pe r day --:-:1 9"""7""'0--=71-:-----:-1 =97::-:3:---=7"""4 --71"""'9=7 """4 --=7=5:---'::-;9=7=7--7=-8...----..,..1 9=7="'8"....--=7"='9----
Cow 1.90 1 ,98 1 ,86 2 11 2. 11
Index '00 104,42 97.89 111.42 111.21
Buffalo 3.00 3,22 3.05 3.36 3.21
Index 100 107,36 101.66 112.00 107.00
Source: Vaisnav, T.N.: Trend of Milk Production in Gujarat, (mimeographed)
presented in XVII Dairy Industry Conference, Ahmedabad, 1981.
11
performance.
Therefore, one must look at the rise in the number of milch
animals.
However, one may attempt to provide some evidence of the increase
in productivity in a different way. Table 8 shows the inter-state com-
parison of production of milk and milch animals. It reveals that while
larger states like U.P. and M.P. with 17% and 14% shares in total milch
animal population of India could contri bute only 18% and 7% of total milk
production, Gujarat with hardly 5% share in milch animals could contribute
7.22% of total milk production of India. However, its production share has
declined by about 1% between 1971-1981. At the micro level, some studies
which have been conducted by IRMA in Sabarkantha district milk shed area of
Operation Flood, show that milk production per animal in milk in cooperative
villages was 79 liter per month while in control villages it was 53 litres
5
per month.
One could state that the impact of Operation Flood at the macro-level
is still not too clearly visible in Gujarat because of inter-district dif-
ferential status of dairying as well as very unequal implementation of the
production enhancement programmes. In fact, we have seen that in case of
r
some district unions, there has occurred a reversal,o It is interesting to
note that a regression exercise conducted by IRMA7 shows that the difference
of production between cooperative and non-cooperative villages could be best
explained in terms of (increased) size of bovine stock in the cooperative
villages.
InCidently, per capita availability of milk which is a function of both
production and population, has shown a continuous rise from 184 grams per
capita per day in 1965-66 to 205 grams average daily per capita, This
provides for more than the medically prescribed minimum level of milk con-
sumption per capita for adults.
3. Benefits to producers of Gujarat dair'y economy
Dairy
helped
number
cooperativization on the lines of Anand pattern has tremendously
the producers. This aspect has been quantified and analysed by a
8
of researchers including the present author. These benefits arise
States
12
Table 8
Inter-state compari son of production and milch animals
(Milk production in '000)
(Milch animals in '000)
1971-72 1981 -82 milch animals
1977-78
Andhra Pradesh 1125 5.31) 24:-'0 7.35) 6425 ( 8.53)
Assam 151 O. 17) 522 1 .58) 661 2.20)
Bihar 1741 8.22) 2035
( 6. 18) 5521
(
7.35)
Gujarat 1786 8.22) 2376
( 7.22) 3447
( 4.58)
Haryana 1506 7. 11) 2100 6.38) 2129 2.82 )
H. P. 265 1 .25) 331
1. 00) 964
( 7.28 )
Kerala 284 1 .34) 950 2.88) 1432
( 1. 90)
Karnataka 762 3.59) 1250
(
3.79) 4798
(
6.37)
Maharashtra 1186 5.60) 1639
( 4.98 ) 6026
( 8.00)
Punj ab 2142 (10.11) 351 4 (10.68) N.A.
Ori ssa 336 ( 1 .58) 258 ( 0.78) 3787 5.03)
Raj as than 2539 (11.99) 3300 (10.03) 6976 9.26)
Tamilnadu 926
( 4.37) 1840 ( 5.59) 4023 5.34)
U .P. 4299 (20.20) 5953
(18.09) 12664 ( 1 6. 82)
J & K 234
( 1 10) 270
( 0.82) 999
( 1.32)
M.P.
1165 5.50) 2390 7.26) 10434 ( 13.86)
West Bengal 485 2.29 ) 1331
4.04) N.A.
NagaI and 3
0.004) 3.45( 0.01 ) 25 0.03)
Tri pura
14 0.06) 17.5
( 0.05) 166 0.22)
Meghalaya 13
0.06) 58 o. 17) 166 0.22)
Mani pur
6 0.03) 62 0.18 ) 1295 1.72)
Sikkim
N.A. 18 0.05) 45 0.05)
All India
21171 32901
75258
Source: Mini stry of
Agr i cuI tur e, Government
of India.
Note: 1. Figures in
brackets indicate the share of each state in total
production of milk, c.q. milch animal population in
India.
2.
All India data includes Union territories also.
1 3
out of the regular market, a rational pricing system, a reasonable price
level and the increase of value added due to the processing and manufactur-
ing facilities of the dairy plants and cost saving inputs etc. The price
and income benefits recei ved by the cooperati ve village producers are better
than those derived from dairying by non-cooperative producers.
9
Table 9
gives evidence of such benefits.
Table 9
Comparison of villages with and without a milk cooperative:
Sabarkantha district
Des cr i pt ion Type of villages
Cooperative Control
1. Milk product ion per animal in 79 53
milk (1 i tre/month)
2. Milk sold as per cent of producti on 62 24
3. Gross income from dairying 102 29
(per household month (Rs)
4. Contri buti on per animal mil k 1.77 1.17
(Rs. per day)
5. Average sell ing pri ce (Rs.l1itre) 1. 82 1. 71
Source: Tushar Shah, Impact of cooperative dairying, IRMA, 1983.
All these parameters show that producers have benefitted. However, more
important than the rate at which they have benefitted, is the 'direction' of
change.
The incentives of a better and stable price are working as
'carri ers of change' to take off from traditional animal husbandry to scien-
tific herd management.
This is a fundamental and central aspect of the
evolution of the cooperative dairy economy of Gujarat.
14
4. Consumption trends in Gujarat
An important question has been raised with regard to nutritional conse-
quences of the development of dairying in Gujarat today.
A lot of
satisfaction is drawn from the picture of better per capi ta availability of
milk in Gujarat in comparison to the past. Even some micro-level studies
conducted at different times such as R.K. Srivastav (1965), Narayan Nair
(1975), V.S. Vyas (1965), D.K. Desai (1975), D.S. Thakur (1976), S.M. Patel
(1977) and Tushar Shah (1983) have consistently shown 'that in comparison of
dairy clusters and non-dairy clusters, per capita consumption of milk in
dairy clusters has increased due to better income on account of dairy
cooperati ves I. The per capita protein and energy was also found higher in
the case of households owning cattle rather than the non-cattle owning
10
households.
However, some important facts regarding the milk consumption situation
in Gujarat are in complete contrast to the findings of the above stated
research studies.
(a) According to 10th, 20th and 28th round of National Sample Survey
data relating to consumers expenditure and data collected by the Nutrition
and Protein Food Association of India, the expenditure on milk products in
the expenditure classes up to Rs.55 per capita per month has gone down in
rural as well as urban areas. Moreover. the bottom one-third of the rural
producers in most states gets a highly inadequate quantity of milk for
consumption.
(b) Similarly. clinical data available do not correlate well with the
available milk intake. This is evident from table 10.
This table shows that the milk consumption among the most needy group is
less than the available average in Gujarat. Average per capita availability
is far lower in case of Maharashtra, but over there children do have better
access to milk than adults.
(c) Although data are not available, it is the experience recorded by
many rural journalists in our country that a drop of milk is not available
States
Gujarat
Maharashtra
15
Table 10
Milk Consumption in Gujarat and Maharashtra
(Per oapita gramme of milk/day)
All
persons
132
89
6-12
48
87
Children
12-36
123
119
36-60 months
96
95
Souroe: Protein Food
(Gujarat) .
Association of India: Food habit Survey ORG
for the preparation of tea after oolleotion of milk by the oooperative
society. Those who do not own animals, are faoed with great diffioulty for
procuring milk from the looal milk producers who are used to selling milk to
the oooperative society after retaining a part of it for the purpose of own
home consumption. It seems quite logical that on acoount of the higher
level of the milk price and the assured market, even in the flush season,
non-milk producing households are likely to be adversely affected on account
of the cooperative dairy development in Gujarat. It is difficult to see if
any solution is in sight to overoome this baokwash effect of the modern
cooperative dairy development strategy.
Thus, the review of the dairy economy of Gujarat reveals both its
strengths and weaknesses. However, it is possible to be optimistic for its
rapid development in the next decade, beoause its weakness oan be oorreoted
and it will also receive a big push of financial and technioal assistance
under the Operation Flood Project II.
16
5. Inter-di stri ct differences of dairy development
Although the cooperative dairy development in Gujarat enjoys the largest
chunk of progress, this growth is highly uneven among the districts of
Gujarat. It is for this reason that a preparatory paper for the Seventh
Plan of the State also expressed concern in the following words:
"Only si x di stri cts of southern and of central Guj arat handl ed
82,8% of the total milk handled in the state leaving negligible
shares for the di stri cts in Saurashtra and Kuchh well-known for
high yielding breeds of cattle. More attention to some of these
districts under cluster II of Operation Flood II may be necessary
during the Seventh Plan ~ 9 the interest of balanced development
of dairying in the State".
Inter-district differentials in dairy development could be seen in
table 11, where the position of each district is shown.
Table 11 clearly shows that the unbalanced development of the coopera-
tive dairy industry in Gujarat is a matter of fact. It may be noted that
apart from concentration of cooperativization in six districts or even three
districts, only Kaira is the most prominent among them. Next to Kaira
(Kheda) is Mehsana district, but it is a poor second if its achievements are
compared with the Kheda district.
Thus a sharp regional inequality could be regarded as a unique feature
of Gujarat dairy economy.
17
Table 11
Canparati ve district-wise performance of cooper at 1 ve dairy development in Gujarat
Village No. of Annual Raw milk Annual Health Mini-kits Cattl e A. I. Female
level milk members average in take milk cover di stri- feed perf or- calves
producers' of the milk capac! ty through- (cases buted manu- med born
cooper a- Village procured (lakh out dur- treated (no.) factured (no. of (no. )
the milk (in lakh l1tre ing by mobile (M.T. ) cases)
l)istri ct soc1et1 es producer kg. per per day) 1982-83 c1 ini os
soc1eti es day) (lakh (000) )
(000) litre per day)
1. Ahmedabad 310 19.11 0.55 4.90 5053
4.98) ( 3.14) (51.16)
2. Banas kantha 744 75.20 1.17 1. 75 1. 14 32.34 1463 6611 3489 1423
(11. 96) ( 7.67) (6.68) (7.50) (7.54) (0.93) (14.81) (3.37) ( .99) (2.34)
3. Bharuch 230 20.00 0.23 0.40 0.26 2.38 39 518 01
3.70) ( 2.02) (1. 31 ) (1.69) (1.72) (0.45) (0.39) (0.14)
4. Bhavnagar 113 5.32 0.15 0.20 0.20 1. 00 112 158
1.81 ) ( 0.53) (0.85) (0.84 (1.05) (0.19) ( 1.13) (0.04)
5. Gandhi nagar 010 2.71 0.01
0.06) 0.27) (0.05)
6. Junagadh 125 7.05 0.16 0.25 0.15 1.20 75 4552 320
2.01) 0.71 ) (0.91 ) (1.00) (0.99) (0.22) (0.75) (13.05) (0.52)
7. Kheda 868 339 5.10 8.80 4.90 197.63 85755 305544 54730
(13.96 ) (34.24) (29.17) (37.36) (32.45) (37.69) (46.34) (91.65) (90.00)
8. Kutchh 55 1.80 0.08 0.10 0.09 3.32
( 0.85) ( 0.18) (0.65) (0.42) (0.59) (0.63)
9. Mehsana 876 182 4.72 4.50 4.59 154.86 2291

(14.09) (18.30) (27.00) (19.10) (30.03) (29.55) (23.19)
10. Panchmahals 270 40.50 0.33 0.30 0.36 1. 41 2531
4. ( 4.09) (1. 86) (1. 28) (2.38) (0.26) ( 0.72)
11. Raj kot 141 9.05 0.23 0.40 0.23 500
2.26) 0.91 ) (1.31 ) ( 1.69) ( 1.52) (5.06)
12. Sabarkantha 930 109 2.97 4.40 0.18 29.00 8376 4990 281
(14.96) (11.01) (16.99) (18.68) (1. 19) (5.53) (4.52) (1.42) (0.46)
13. Sur at 523 88.57 1.26 1.50 1. 45 47.25 33
24512 4284 295
8.41) ( 8.94) (7.20) (6.36) (9.60) (8.96) (0.30) (13.24) (0.03) (0.48)
14. Sur en dr an agar 208 6.57 0.17 0.25 0.30 4.39 10 22
3.34) 0.68) (0.97 ) (1.06) (1. 98) (0.83) (0.10) (0.03)
15. Vadodara 651 34.95 1.62 0.80 1. 15 44.66 150 9178 10273 1178
(10.47) (70.76) (5.83) (3.39) (7.61 (8.52 (5.51) (4.95) (3.42) (1. 94)
16. Valsad 161 9.46 0.13 0.30 0.14 150 296
2.59) ( 0.95) (0.74 ) (0.38) (0.32) (5.51 )
Gujarat 6261 990.47 17.48 25.55 15.10 524.34 9876 1850113 349051 60506
Source: Compiled from the 13th Annual of Indian Dairy Corporation, 1983-84.
Between brackets percentages of total Gujarat.
18
II
THEORETICAL RATIONALE OF MILK GRID SYSTEM AND ITS STRATEGIC PLACE IN THE
PROJECT OPERATION FLOOD II
1. Factors leading to the logic of milk grid system
The set of factors leading to the development of the milk grid system are
the nature of the product and its producers, limitations of the traditional
milk market and regional imbalances of production and consumption in our
country.
1.1 Nature of the products and its producers.
India's dairy industry is subject to severe and sharp seasonal fluctuations
on account of its dependence on the buffalo as the mil k machine. It con-
tri butes 55% of the total milk production in India. In case of buffaloes.
calving generally starts in July-August and goes on till the end of October.
Because of this major calving period, production is higher in the winter
season than during the lean months, which begin after February-March every
year. This seasonal variation is reflected in the seasonality ratio which
has been estimated to be around 1:3 indicating a three times higher supply
12
of milk in the flush season as compared to the lean season.
This seasonal fluctuation has an adverse impact on the economic ear-
nings of
opportuni ty
the producers. It causes price fluctuations, giving the
of exploitation to the traditional middlemen in the unorganised
sector.
Another peculiari ty on the side of producers is that the largest
portion of the milk production and surplus is contri buted by small and
marginal farmers and landless labourers who constitute the core of rural
poor classes. 13 Moreover, these production acti viti es are organi sed on a
very small scale. For example the average milch animal holding per family
14
is around 0.99 and the average yield 0.92 litre per capita pel" day.
19
1.2 Drawbacks of the traditional unorganised market.
The drawbacks of the traditional sector are reflected in the exploitation of
tiny producers and consumers. The traditional sector is characterised by
a high trade margin and poor quality of the product. The traditional dairy
sector on an average charges at least around 5% to 10% more to the consumers
15
and pays 10% to 25% less to the producers.
Another drawback of the Indian fluid milk market in the traditional
sector is that substantial increases in the earning of milk marketing agents
can be achieved by 'watering the milk', since 10% water is not detectable by
tests.
16
Milk has a very high unit value and therefore a 10% of watering of
20 litres of milk is equivalent to one day's wage of an unskilled
labourer. 17
Finally, extensive expansion of the milk market is limited by the small
size of the quantities traded and the perishability. When milk production
is distant from residential areas, time becomes an important factor and
transport by head load is too slow. Bicycle or passenger transport is used.
In such cases, unit costs are relatively low but this type of trade could
serve only a limited quantity of milk. As a result, an assured market and
stable price are never made available to producers by trading agents and
milk contractors.
1.3 Regional imbalances in production and consumption.
The Indian milk economy is characterised by vast differences in production,
marketable surplus, procurement and demand. This could be seen in table 12.
This table depicts the regional inequality. It also brings out the
paradoxical difference between organised procurement and production.
Actual per capita availability of milk varies sharply by region from 426
grammes daily per capita to 11 grammes per capita per day.18 Within each
20
Table 12
Regional imbalances of production and consumption of milk
(Percentage)
Region
North
South
East
West
All India
Production
of milk
57.02
17 .10
12.86
13.02
100.0
Marketable
milk
procuf'tion
43.72
23.03
17.22
16.03
100.00
Procurement of
milk of coopera t i ve
sector
21 .14
33.44
1.60
43.82
100,00
Source: NDBB New thrust in the marketing strategies of the dairy plants -
role of the milk grid (unpublished), 1979.
state, the average urban dweller probably consumes 5% more milk than his
rural counterparts.
expenditure on milk
In
and
fact, the 4 major cities account for 10% of the
19
products in the economy. This sharp inter-
regional and intra-regional inequality leads to the logic of a milk grid
system.
2. Evolution of the concept of the milk grid system
A full scale analysis
attempted during three
of the different approaches to dairy development
20
decades is presented elsewhere. It may be ~ o t e d
here that the central and state governments made efforts through the
departmental administrative system and with a schematic approach to develop
21
dairying within a rigid bureaucracy and without any involvement of dairymen
and integration of modern marketing and modern production systems. In fact,
69 urban milk plants, 31 milk schemes, 3 rural dairy creameries, and 7 milk
products factories together having a market share of 3.5% of country's milk
production
21
dualism.
formed a very inefficient dairy system characterized by
However, one of the most remarkable events of the early period
prior to 1970 was an institutional innovation in the form of a farmer con-
trolled cooperative dairy structure. This so called 'Anand' model was able
to achieve wide-spread acceptance on account of its ability to integrate
modernization at the level of production as well as processing and manufac-
turing of
structure
milk
of the
and products and thus gave a 'Big Push' to end the dual
22
tradi tiona 1 dairy economy. It was possible on the one
hand to assure a regular demand and a renumerative price throughout, and on
the other hand to produce and distribute technical inputs needed by milk
producers such as artificial insemination, cattle feed concentrates, and
green fodder seeds at reasonable prices, particularly to those 'tiny
producers' who otherwise would never have considered dairying as a viable
economic activity.
It is well known that NDDB was established and it designed the world's
largest dairy development programme, namely 'Operation Flood'. This aimed
at a flood of milk from major rural milk sheds in which 'Anand I pattern
dairy cooperatives were to be set up. Operation Flood Project I was basi-
cally a programme of creating the required infrastructural facilities to
flood milk from rural milk supply centres to urban demand centres.
Noticeable efforts are reflected in Operation Flood I to develop a base for
a milk grid system. This is indicated by the fact that about 68% of the
Operation Flood I funds were invested to develop the infrastructure essen-
tial for a modern marketing system.
The targets for the build-up of rural processing capacity were more
than achieved.
During the project period of Operation Flood I, long dis-
tance milk movement fac i Ii tips were also cy'eated.
22
Moreover, facilities were created to conserve milk in the form of milk
powder Le. 282.50 MT per day capacity and also storage facility was created
to store 5300 MT of SMP, 700 MT of butter oil and 500 MT of butter.
Another great development leading to the concept of a national milk
grid occurred in the form of an extension of the original Anand model of a
two tier pattern of organization.
The original model dairy cooperative
union at Anand joined with the five sister unions to form a cooperative milk
marketing federation which enabled all its member units to benefit from a
jOint marketing programme covering the whole of India organised and imple-
mented by expert and experienced marketing executives equipped with modern
marketing facilities.
In fact, during the Operation Flood Project I milk from Anand, Jalgaon and
Dhulia to Bombay. from Anand, Vijaywada and Guntur to Calcutta, from Anand,
Ajmer, Jodhpur and Bikaner to Delhi and from Erode to Indore was transported
through railway tankers.
Thus, during the Operation Flood I seeds of a new system were planted
and a well conceived idea became an operational concept.
3. Concept and operational functions of national milk grid system
The developments during the Operation Flood Project period led to the con-
cept of a national milk grid system. Such a system is conceived as a
network of rural dairies buying milk from rural milk producers and process-
ing it into milk of various types, milk products and conserved products for
storing milk solids during the period of excess supply. All rural dairies
in a given area are linked through transportation routes on which milk and
products can move from one dairy to another and from rural dairies to the
city dairies.
Thus, this grid was envisaged as a 'logistiC and information system!
which would link the major milksheds, their dairy plants and the ~ r b 2 ~
dairies using
fac ilities. 23
long distance transportation and medium term storage
2-:<
-'
The milk grid is capable of rendering a great deal of support to the
industry by the following operational functions:
1. It will enable concerned policy makers and management to monitor milk
production in selected milksheds, milk consumption in selected cities
and the price of milk and products in the concerned milk sheds and
cities.
2. It will enable policy makers and managers to predict the shifts in
supply, demand and prices for milk and products in the milksheds and
cities covered by the grid.
3. It will enable the deployment at any time, of available supplies of
milk and products, dairy processing storage and transport facilities as
well as export-import possibilities in the best interest of milk
producers and consumers.
4. It will enable the planning of future investments (for a larger
perspective period) in the production, processing, marketing, storage,
transportation and export-import of milk and products.
Thus, the National Milk Grid will provide a strong urban-rural linkage for
flooding the milk from rural milksheds to urban milk markets. It is the
latest institutional innovation developed in recent times.
4. The milk grid system and Operation Flood II
Operation Flood II had developed its strategy on the basis of the foundation
created during Operation Flood I and some lessons learned out of the ex-
perience of its implementation. Under the Operation Flood II the regional
milk grids already established during the Operation Flood I were planned to
be merged into a 'National Milk Grid! "Ihich would connect the 25 clusters of
milksheds to the 4 metropolitan cities and cities which had a population of
over 100,000 in 1971. Thus supported by the grid system, by mid-1985, the
modern dairies would have increased their share of the major urban liquid
milk marketing in the four metropolitan cities from the current 30% to 80%
and in the cities of over 100,000 from the current level of 10% to 70%. The
24
cluster federation will also market liquid milk directly to towns of less
than 100.000 population in and around the milksheds obtaining a 60% share of
these markets. Thus, access to a planned milk f,rid will provide the cluster
federations with a remunerative year-round market for 70% of the milk which
they handle.
To assure the smooth and sustained flow of milk through the grid system
it will be supported by the provision of a 'pooled buffer stock' which will
include both imported and indigenous dairy commodities. Projection of
indigenous production of commodities for recombining indicates that 'by the
end of the operation Flood II, the buffer stock can be supplied wholly out
of indigeneous production.
24
During the first six years of the programme,
however, commodities will be supplied through donated imports. The total
size of the pooled stock will permit recombination of approximately 10% of
the total liquid milk to be marketed under the Operation Flood Project. It
is assumed that this will be adequate to stabilize liquid milk supply to
urban demand centres connected by the milk grid. Adequate storage
facilities to store the stock of dairy commodities and suitable long dis-
tance milk transport systems by a number of insulated road and rail tankers
are also developed on a larger scale. In addition to that, to provide the
cluster federations with direct access to urban liquid milk markets, they
will be equipped with aseptic milk packaging capacities. The process in-
volved permits the packaging of 'long life milk' which can be stored,
transported and retailed, without refrigeration over a period of 3-6 weeks.
Thus, the development of the milk grid system is a very important
programme in Operation Flood II and therefore quite significant amounts of
direct investment are allotted for the development of this milk grid. For
example, 20% of the investment is directly allocated to this action item.
In fact, if we also include 60% of the investment in assistance to cluster
federations along with Rs. 7 million for the funding of pooled buffer stock
of the commodities, then the gross investment allocated to national milk
grid system amounts to Rs. 1644 million leading to something like 53% of the
total investment.
25
5. Review of the progress of implementation under OF II
It is too early to evaluate the performance of the milk grid system as the
Operation Flood II Project has started only since October, 1979. However,
its implementation until now could be reviewed in the light of available
data.
About 31% of the funds are already disbursed, out of which about 6% has
been alloted directly to the milk grid system. If we look at it from the
standpoint of total allocation during the total period of project then we
find that out of allocated 3451 lakh rupees it received about 872.89 lakh
rupees and thus 26% of the fund is already invested. It is to be seen how
the project authority will achieve the physical targets against the infla-
tionary spiral without substantial changes in the allocation for this item.
The project still seems to be at the preparatory stage and the process
is delayed on account of the delays on the part of the state governments to
undertake the necessary technical and legal agreement with project implemen-
tat ion agencies. The following list
Operation Flood II on June 30, 1983.
26
shows the status of progress under
1. Signing of Operation
Flood II agreement
2. Apex level of
Number of
States
25
federation union formed 21
3. Preparation of
perspective dairy
development plan 20
4. Plan appraisal
carried out
20
5. Completion of sub-
project details 14
Number of
States
6. Agreed to provide
government guarantee
7. Guarantee deed executed
in the prescribed format
8. Loan-cum-grant agreement
signed
9. Agreed to sign loan-cum-
grant agreement
(addi tional)
10. Release of funds
11. Field programme initiated
14
7
13
5
21
19
26
III
ORIGIN, STRUCTURE AND OPERATIONAL SYSTEM OF GUJARAT
COOPERATIVE MILK MARKETING FEDERATION
1. Factors behind the birth of the cooperative milk marketing federation
The original Anand pattern dairy cooperative structure had only a two-tier
system where a milk producers' cooperative society worked at the village
level and a milk-producers' cooperative union at the district level. The
federation of district unions as an institutional form emerged on account of
a variety of factors which started operating in the early 1970s.
It may be noted that as many as 12 cooperative dairies were working in
Gujarat in the early phase of the Operation Flood Project. Therefore, there
was a possibility of severe competition among the dairy cooperatives. A
sharp age difference among dairies like Banas-Sabar and Kheda would have
created a situation where the 'big' could have swallowed the smaller ones,
but fortunately those who were in decision-making positions were good
cooperative leaders and therefore they thought of an organisation which
could allow the growth opportunities to even the smallest ones without
hampering the growth of the larger ones.
It was then to harness the
cooperatives through optimization of brand popularization and of the
capacity of specialised production of each dairy union.
Another set of factors related to distinct regional peculiarities.
Some district unions like that of Surat en Baroda helVe always had a problem
of sustaining the supply of milk to ci ty consumers,
while other district
milk unions have a milk surplus. Therefore, a need for a balancing agency
led to the organisation of a milk federation.
Thirdly, milk was supplied to cities like Ahmedabad and even Bombay and
New Delhi by more than one dairy. It was necessary to have an agency which
could adopt a uniformity in fixation of prices for the whole Gujarat dairy
industry, so that the interests of all dairies could be promoted without
27
loss to a single district dairy cooperative union. To ensure proper plan-
ning and better coordination it was then decided to pool the price realised
for sending milk outside the district.
Fourthly, with the increasing strength of dairy cooperativization, it
was found that some kind of aspiration for higher price for milk on the part
of farmers went on increasing even ignoring the long term interest
threatened by competitive forces emerging out of the Operation Flood Project
I, as well as the interest of consumers. It was required to moderate these
price aspirations limiting them within the realities of market prices. So
some kind of price coordination was called for.
Fifthly, effective utilization of plant capacity was also a crucial
problem and some kind of production planning was very much required. To
rationalize the production of milk products, it was necessary to make op-
timum use of popular brand names such as Amul butter, cheese, whole milk and
baby food powder, etc. Federation of the district unions (to establish
such a centralized marketing agency) was necessary.
Pooling resources of the dairy cooperatives increased the strength and
stability of the cooperative dairy industry. This was possible only by
developing a federation.
Finally, the increas ing need for r'esearch and deve lopment, the new
product mix, expansion of the marketing network, and high selling and dis-
tribution cost, etc. were all well realized and as a result, the concept of
centralized marketing became built into the cooperative structure in the
form of Gujarat Milk Marketing Federation in the year 1973-74.
2. Structure of organisation
The organizational structure of the federation evolved out of its needs.
The sources of organizational changes are experience, maturity, size of the
operation, and production mix. Some important organizational components of
structure are as follows:
(I) Board of Directors.
28
The main executive agency is the Board of the Directors of which the chair-
man of each member union is a member. This Board of Directors meets once in
a month.
Dr. V. Kurien is its Chairman. He does not sit anymore in the
'Programming Committee' which is headed at present by the managing director.
However, until recently Dr. Kurien was the Chairman and Managing Director of
the Federation both. At present there are six ordinary member unions whose
chairmen are the directors of the board and in addition to that there is an
ex officio-member, namely the registrar of cooperative societies of Gujarat
State.
(II) Programming Committee.
The real executive and operating body of decision making is the 'Programming
Commi ttee I The managing directors of each member union are its members
under the Chairmanship of the Managing Director of the Federation. Through
this committee the benefits of experts and technologists are made available
to the federation which is the real strength in the successful operation of
the Gujarat Cooperative Milk Marketing Federation. Until recently the
functions of the Managing Director of the Federation and of the Chairman of
the Federation were both performed by one person and there was a great
harmony. However, now the situation has changed. The main policy decisions
approved by the Board of Directors are supposed to be implemented by this
programming committee; its main task is to meet every month and to review
the (a) market situation and (b) supply situation and on that basis to
decide about the issues relating to production and price of the products.
(III) Associate and nominal membership
Apart from 6 ordinary members who were initiators of the Federation, i.e.
District Cooperative Milk Producers Unions of Banaskantha, Baroda, Kheda,
Mehsana, Sabarkantha and Surat, recently there has been a new provision of
introducing Nominal Members and Associate Members. The district unions of
Bharuch, Panchmahals, Rajkot and Valsad are the Nominal members. Associate
29
members are the district unions of Ahmedabad, Gandhinagar, Kutchh,
Surendranagar, Bhavnagar and
These nominal and associate members are getting all benefits of market-
ing federation except participation in the 'decision making' on account of
their nominal and associate membership. They possess liquid milk markets
and get the help of federation to stabilize the supply in the lean period by
getting milk from the federation at a reasonable price. Except for Dangs,
the Gujarat Cooperative Milk Marketing Federation has become a state level
organisation in every sense of the term.
3. Structure of marketing network
The network of distribution from the production point to the final consumer
can be described as follows.
At the top there are the six main production units (dairies of ordinary
member unions).
There are 16 branch offices allover India with an adequate field
staff. They conduct market surveys on a continuous basis and the findings
are conveyed to the head office. The programme committee uses such reports
as the guiding signal for the efficient centralized market system with
equally efficient production rationalisation and price pooling policies.
A third component of the marketing network are the wholesale dealers.
Each regional branch appoints wholesale dealers on certain terms and condi-
tions along with some 'margin' payable to the wholesale dealers. There are
at present 750 wholesale dealers allover India. Their appointment is based
on their capacity. credit insurance and infrastructural facilities such as
transport and storage facilities for the perishable products.
Followed by each wholesale dealer in the major cities, in almost all
cities and towns of India there are 80.000 retail dealers. Though they are
directly
staff of
related to wholesale dealers they are also appointed by the field
the branches with the approval of the head office. They work as
retail outlets and have a direct link with the final consumer.
30
Every care and caution is taken in appointing these wholesalers and
retailers, because very high reputation and tremendous good-will earned by
some very popular brands of Amul are required to be protected and promoted.
Thus a strong market network has been developed to distribute the
products across the frontiers of the country. In fact some marketing ar-
rangements have also been made to 'export' milk products. For example,
something like Rs. 75 lakh worth of exports was already reported in the year
1982-83.
4. Operational functions
The functions of the main body of the organisation at the head office are
carried out by the main executives. These functions could be divided into
two parts:
(a) Technical daily functions.
(b) Functions relating to policy.
At least eight functions could be grouped under the heading of technical
functions, namely:
(a) Administrative functions.
(b) Account and audit functions.
(c) Project design and implementation.
Cd) Management information services.
(e) Research and development.
(f) Quality control.
(g) Distribution.
(h) Purchases or raw milk and related inputs, etc.
There are at least five functions under the heading of policy, namely:
(a) Selection and recruitment of the staff.
(b) Sales promotion i.e. advertising.
(c) Pricing.
Cd) Trade servicing.
31
(e) Communications.
(f) Development of resources for the benefit of member unions.
The main emphasis on the functional system is to direct the federation to
maximum returns on the products. For this, a continuous effort is required
to be made by the marketing federation, because marketing strength is to be
ahead of production possibilities. At the national level the Gujarat
Cooperative Milk Marketing Federation plays also an important role as a part
of NCDFI.
32
IV
INTERNAL DYNAMICS OF THE FEDERATION
This section is devoted to understand some internal relationships and impor-
tant decision making processes. We intend to reflect on the following
selected aspects of the Federation:
1. Sales composition of the Federation.
2. Participation of the member unions.
3. Sales spread of the Federation to states of India.
4. Price policy of the Federation.
5. Milk supply to metro-cities by the Federation.
6. Relationship between the Federation and Indian Dairy Corporation.
1. Sales composition of the Federation
An established pattern of analysis in industrial economic studies is to
analyse the production composition of the unit to get an idea of its
capacity to fulfill the economic and social objectives. The case under
review is the marketing federation which is not producing itself but market-
ing the production of its members. Therefore, the analysis of its sales
composition could give us a clear picture about the internal dynamic of its
changing policy and its capacity to fulfill the objectives of promoting and
stabilizing the cooperative structure without loss of consumers' interest.
Table 13 shows the composition of sales for the two years 1981-82 and 1982-
83. For the purpose of cross checking we have taken 'sales composition'
over two years.
The importance of the products in total production and total sales
reveal quite important facts dismissing popular beliefs such as dairy
cooperatives earn huge profits by having concentrated on luxury products
like cheese and chocolate etc. A close look at table 13 shows that (a) Amul
33
Table 13
Sales Composition of the Federation.
(Unit: Metric Tonnes).
% age 1981-82 Percent- Percent- 1982-83 % age
share to Quanti ty age in age share share
Product total of the total into total in total
products product sales products sales
Amul spray 56.63 25,780 15.43 54.94 28,185 16.02
ABF
1.53 700 0.42 1. 12 575 0.32
A. Butter 17.90 8,200 4.90 19.24 9,805 5.60
S. Butter 0.57 260 0.15 0.35 180 0.10
A. Cheese 2.07 945 0.56 2.06 1 ,060 0.60
WMP (CP) 10.90 4,975 2.97 12.27 6,290 3.57
WMP (BP) 0.19 90 0.05 0.09 50 0.02
SMP (BP)
1. 83 835 0.49 0.74 380 0.21
S. SMP (CP) 2.06 945 0.56 1. 75 900 0.51
A. Ghee (CP) 0.70 320 0.19 1.22 630 0.35
S. Ghee (CP) 2.19 1 ,000 0.59 3.28 1 ,685 0.95
Ghee (BP) 0.006
3 0.01 0.02 11 0.006
Balamul 0.027 125 0.07 0.11 60 0.03
Nutramul 2.36 1,080 0.64 1.61 830 0.47
Chocolate 0.54 250 0.14 0.43 225 0.12
A. Shrikhand 0.21 100 0.05 0.65 335 0.19
Total sa les of
Milk products 45,603 51.261
Total milk
sales 1 ,21 ,430 1,24,340
Source: Data collected from the Gujarat Cooperative Milk Marketing
Federation.
34
Cheese has just 2.07% share in total sales of milk products. Similarly,
chocolate constitutes just 0.54% of the total milk products sOld.
Amul spray and Amul baby food constitute the largest share in products
i.e. 58% and if we include Balamul and Nutramul under the 'infant food'
items then, as much as 60% of the total products sold is contributed by this
category of products. This shows how 'baby food' constitutes a basic place
in the business of the Federation. So far this strategy of marketing with
the major thrust on infant foods has remained a success. However, now
external forces have started operating calling for a change and this is not
neglected by the Federation.
27
Tinned baby foods have been the subject of controversy since the recommenda-
tion of WHO/UNICEF-meeting on infant and young child feeding held in Geneva
on October 9-12, 1979. There can be no denial that breast milk is superior
to infant formulae in many ways. However, in the interest of more and more
mothers having employment or going out in pursuit of education or some on
account of health, it would be incorrect to deny them this product. Baby
food, though not better than natural feeding, is a necessary alternative.
The federation in its annual report of 1982-83 also makes its stand
clear as follows:
11 We have of course, all along assumed the responsibility and our
advertising supports the practice of breast feeding and is educa-
tive in helping mothers to decide on how best to meet the
nutritional requirements of the infants".
The Government has imposed a ban on advertising on Government media and
is apparently bent on a total ban on all forms of advertising.
However, in case the proposed legislation comes into force, the
Federation will need to consider an alternative strategy to ensure that the
interests of the milk producers are safeguarded from the adverse impact of
the legislation on an already captured infant food market.
Milk powder is a strategic commodity from the point of view of increas-
ing the milk handling capacity of plants and of discouraging imports of milk
powder.
The only alternative to feed the plants in the lean period and
35
during years of slack of production is to use milk powder. However, the
sales data collected from the Federation reveal that milk powder gets less
importance than even butter. Butter accounts for 18% of product sales.
Against that, WMP (whole milk powder) has 11% of the sales of products. Such
importance to the butter production is possibly due to brand popularity or
even profitability.
Finally, it is quite interesting to observe that despite the easy
marketing of a product like 'ghee'. because of its low capacity to provide
profits, this traditional product has been given a very insignificant place.
Its share in total products sold is just 3% to 4%.
2. Participation of the Member Unions
It may be noted that few data could be collected from the Federation.
Therefore we attempt to examine the participation of the member unions in
terms of the purchase of products from the member union by the Federation.
In view of the contribution of liquid milk in the total sales structure of
the Federation, obviously this participation in products marketing does not
reveal the full picture. Let us observe the following points on the basis
of the tables 14 and 15.
(1) When we consider the total products sold by each member union, the
share of each member union appears to be exactly in accordance to its age.
Obviously, Amul with 42% followed by the 34% share of Mehsana is the largest
participant. This difference between Amul and Mehsana is not very large,
while the gaps between the second and third, and the third and fourth par-
ticipants are much larger. The last two members find almost no place in
product sales participation in Federation.
(2) A product-wise participation analysis reveals some kind of
specialization; for example, high margin and luxurious products like
Balamul, Nutramul, cheese, baby food and chocolate are exclusively produced
by Amul alone. This may be due to the high quality standard required.
36
Table 14
Participation of the member unions in terms of productive
purchases made by the Federation from different member unions,
(1980-1981)
(Quantities in metric tonnes)
Product Amul Mehsana Sabar Banas Baroda Surat Total
Amul Spray
ABF
Amul Butter
Sagar Butter
Amul Cheese
WMP (CP)
SMP
S.SMP (CP)
A. Ghee (CP)
S. Ghee (CP)
Ghee (BP)
Balamul
Nutramul
Chocolate
Total
10,790
<37.83)
525
(100 )
3,930
<39.79)
1 ,020
(100 )
3,728
(58.95)
25
2.80)
365
(70.87)
3
(25.00)
60
(100 )
830
(100 )
200
(100 )
11,825 5.900
(41.46) (20.69)
3,150 1 ,930 865
(31.89) (19.54) 8.75)
65
(21 .66)
1 ,1 60
(69.87
2,590
(41.04)
105
(35.00)
150
(29.12)
9
(75.00)
200
(100)
40
( 13.33)
915
(97.20 )
150
(30.12)
21,518 16,200 10,684 2,520
(42.18) (31.75) (20.94) (4.94)
90
(30 )
28,518
(100 )
525
(100 )
9,875
(100)
200
(100 )
1 ,020
(100)
6,310
( 100)
300
( 100)
940
(100 )
515
(100 )
1 ,660
(100)
12
( 100)
60
(100 )
830
( 100)
200
(100 )
90 51 ,012
(0.17) (100)
Note: Figures in the bracket indicate the percentage share of the member
Unions in particular product purchased by the Federation.
Source: Data collected from the Federation.
37
Table 15
Participation of the member unions in terms of productive
purchases (quantity in metric tonnes) made by the Federation
from different member unions,(1981-1982).
Product Amul Mehsana Sabar Banas Baroda Surat
Amul Spray 9,300 11 ,670 4,895
(35.95) (45.11 ) (18.12)
ABF 770
(100 )
Amul Butter 3,745 2,725 1 ,600 415
(44.13) (32.11) (18.85) 4.89)
Sagar Butter 285
( 100 )
Amul Cheese 985
( 1 00 )
WMP (CP) 2,995 2,020
(59.72) (40.27 )
SMP (BP) 5 630 240 140 175
Total
25,865
(100 )
770
( 100)
8,485
( 100)
285
( 100)
985
(100 )
5,015
( 100 )
1 ,190
0.42) (52.94) (20.16) (11.76) (4.70) (100)
S.SMP (CP) 940 940
( 100)
(100 )
A. Ghee (CP) 280 200
480
(58.33)
(41.66)
(100)
S. Ghee (CP) 640 360
1 ,000
(64.00) (36.00)
( 100)
Ghee (BP)
2
2
( 100)
(100 )
Balamul 125
125
(100 )
(100)
Nutramul 1 ,150
1 ,150
(100 )
( 100)
Chocolate 240
240
(100 )
(100
Total 19,675 15,675 8,975 2.140 175
46,622
(42.20) (33.62) (19.21) ( 4.49)
(0.37) (100)
Note: Figures in the bracket indicate
the percentage share of the member
Unions in total purchase of the product
by the Federation.
Source:
Data collected from the Federation.
38
(3) Products like Amul spray and butter are almost equally shared between
Amul and Mehsana along with a quite significant share of Sabarkantha dairy.
(4) The highest participation of dairies other than Amul we find in the
case of skim milk powder where except Baroda all the members have par-
ticipated and the share of Amul has remained at a very insignificant level,
while Mehsana with a 52% share enjoys half of the cake.
(5) Finally, the city based district unions like Baroda and Surat obviously
do not have any participation in product sales to the Federation, because
they are largely 'buyer' members rather than selling participants. As they
sell
the
away 80% (or even more) of procured milk in the form of liquid milk in
local
products,
market, they do not have any surplus milk left for manufacturing
and in the lean season they face a critical shortage of supply
over demand. Then the Federation is extremely helpful in stabilizing the
supply and the price of milk.
There are no substantial changes in the above stated situation between 1982
and 1983.
39
Table 16
Product-wise sales in each state (union territorl) durin!a 1981-82 (figures 1n metric tonnes)
States/Union Butter Cheese Chocolates Alnul milk Sugar skim Bal Alnul Nutramul Babyfood Ghee Shri- Total sal
Territories powder milk powder khand of product
(consumer) (consumer) to State
pack) pack)
2 3
lj
5
;
7 8 9 10 11 12
Gujarat 380 75 22 120 40 10 70 705 955 2377
4.48) 7.88) 8.66) 2.40) 4.27) .80) 6.51) 2.00) (72.34) 5.31)
Madhya Pradesh 50 10 3 150 1 25 890 15 1144
.59) 1.05) 1.18 ) 3.01 ) .08) ( 2.33) ( 3.36) 1.13) 2.56 )
Rajasthan 115 15 3
40 4 15 520 15 727
1.35 ) 1.57 ) 1.18 ) 0.80) 3.20) 1.39) 1.95) 1.13) 1.62)
Maharashtra 2590 280 53 425 140 15 120 1630 335 100 5588
1nol. Goa (30.59) (29.47 ) (20.86) ( 8.53) (14.97) .80) ( 11.60) ( 6.15) (25.28 ) (100) ( 12.50)
Delhi & Others 3120 300 71 320 25 4 45 890 4775
(38.03) (31.57 ) (27.95) 6.42) 2.67) 3.20) 4.18) ( 3.36) (10.68)
Uttar Pradesh 470 40 16 115 20 7 25 1310 2003
( 5.55) 4.21) ( 6.29) 2.30 ) ( 2.13) ( 5.60) ( 2.32) ( 4.94) ( 4.48)
West Bengal 915 75 32 1245 275 4 110 7520 10170
( 10.80) 9.98) ( 12.59) (25.00) (29.41) 3.20) ( 10.23) (28.39 ) (22.77)
Orissa 165 10 4 00 1805 2094
3.31) 1.06) 3.20) .93) ( 6.81) 4.68)
Assam incl. 240 15 10 145 15 42 25 3085
~ 5 7 7
N.E. States ( 2.83) 1.57 ) 3.93) 2.10 ) 1.60 ) (33.60) ( 2.32) 11.65 ) ( .00)
Bihar
115 15 !j
185
65 11
30
1.35 ) 1.57 ) 1.57 )
3.71)
2350
2775
6.95)
( 2.79) 8.87)
6.21)
Tamil Nadu
150 40
12 545 105 4
1.77) 4.21) 4.72) (10.94)
270 2130
3256
( 11.22)
3.20) (25.11) 8.04 )
( 7.28)
Karnataka
150 40 14
450 60
1.77) 4.21) 5.51)
9 105 1360
2188
( 9.11) ( 6.41)
7.20) ( 9.75) ( 5.13)
( 4.89)
Kerala
70 15 4
695 115
0.82)
2 90 790
1781
1.57 ) 1.57) (13.95 ) (12.99 ) 1.60) ( 0.09) ( 2.99)
( 3.98)
Andra Pradesh
100
30 10
380 65
8
1.18 ) 2.14 )
3.97) ( 7.63) 6.95)
135 1495
2223
6.40) (12.35 ) ( 5.64)
( 4.97)
All Ind ia
8465 950 254 4980
935 125 1075 26480 1320 100 44684
~
1. Delhi
includes Haryana, Himachal Pradesh, Punjab and
2.
Figures 1n the brackets indicate percentage of the
J & K.
~ Data collected from Federation.
State 1n total sale of the products.

""\.-'

40
Table 17
Product-wise sales in each state (union territorl) 1982-83 (Oct.-Scet. ) (figures 1n metric tonnes)
States/Union Butter Cheese Chocolates Alnul milk Sugar skim Bal Alnul Nutramul Babyfood Ghee Shri - Total sal
Territories powder milk powder khand of product
(consumer) (consumer) to State
pack) pack)
2 3 Ii 5 6 7 S 9 10 11 12
Gujarat 410 85 16 205 25 9 70 860 1290 2970
( 4.08) 8.01) 7.17) 3.26) ( 2.76) (16.77) ( 8.43) 2.98 ) (55.84 ) ( 5.88)
Madhya Pradesh 75 15 4 265 1 20 910 50 1339
0.74) 1.41 ) 1.79 ) 4.21) 1.78 ) 2.40) ( 3.16) 2.16) 2.65)
Rajasthan 180 20 5 70 2 15 620 115 1036
1.79 ) 1.88) 2.24 ) 1.11) 3.57) 1.80) ( 2.15) ( 4.97) 2.05)
Maharashtra 2840 290 43 455 90 6 86 1560 725 335 6094
incl. Goa (28.32) (27.35) ( 19.28) 7.23) 9.00) (10.71) (10.84) 5.42) (31.38) ( 100) (12.07)
Delhi & Others 3810 340 69 350 50 45 1195 55 5914
(38.00) (32.07) (30.94) ( 5.56) 5.52) 5.42) ( 4.15) 2.38) (11.71)
Uttar Pradesh 590 50 16 165 45 3 30 1390 25 2165
5.88) 4.71 ) ( 7.17) ( 2.62) ( 4.97) 5.35) 3.61 ) ( 4.83) 1.08) ( 4.28)
West Bengal 990 80 23 1240 225 4 70 8425 20 11077
9.87) 7.54) (10.31) (19.72) (24.88) 7.14 ) 8.73) (29.28 ) ( 0.86) (21.94)
Orissa 10 155 25 1 20 2075 2285
0.09) 2.46 ) ( 2.76) 1.78 ) 2.40) ( 7.21) ( 4.52)
Assam incl. 395 25 9 310
( 3Jg)
21 25
( ( o.
(
N.E. States 3.94) 2.35 ) 4.03) ( 4.93) (37.50) 8.01 )
2 5
2180
20
3363
190
20 4 285 50
( 7.57)
( 0.80)
6.66)
Bihar
4.53)
( 5.52) 3.57>
( 0.60)
1.89) 1.88) (10.79 )
1
205 2230
3322
45 11 575
90
( 6.58)
Tamil Nadu 165
1.78)
(24.69 ) ( 7.75)
1.64) 4.25) 4.93)
9.14 )
( 9.94)
75
1550
2536
570 95 3
( 5.02)
Karnataka 175
45 12
5.35)
( 9.03)
( 5.38)
1.74) 4.25) 5.38)
0.08) (10.49)
60 790
2174
75
15
4 1115
115
( 2.74)
( 4.30)
Kerala
(17.74) (12.70)
( 7.22)
1.74) 1.41) 1.77)
105
1620
2470
525
60 3
4.60)
Andra Pradesh
120 30 7
5.35 )
(12.66 )
( 5.63)
1.19 ) 2.38 ) 3.13)
8.30)
6.62)
56
830
28770
2310 335
50467
All India 110025 1060 223
6285 905
Note: Delhi includes Haryana.
punjab, Himachal Pradesh. J & K.
state in the products sold by the Federation.
Figures in the brackets indicate the percentage share of the
Source:
Data collected from the Federation.
41
3. Sales spread of the Federation to States of India
The analysis of the sales spread of the Federation can give us an idea of
the sales concentration and product-wise market concentration of the
Federation. The tables 16 and 17 show the sales spread of the products to
states in India. The last column gives the percentage share of each state
in total sales of products of the Federation. It is notable that (against
the general impression) a state like West Bengal, with about 22% of the
total sales of the products, ranks top followed by Maharashtra (including
Goa) and Delhi and other Union territories. The sales of milk products in
states like Rajasthan and Madhya Pradesh have remained quite low. It may be
on account of relatively greater economic backwardness. However, why other
states like Orissa and Bihar which are also quite backward, have neverthe-
less significant shares in the purchase of products is difficult to
understand.
The product-wise analysis of the sales of products reveals even more
interesting facts and explains the share of the states in the total purchase
of the products. It shows that:
(1) The market for butter, cheese, chocolate, etc. is highly concentrated
in relatively rich states and union territories like Maharashtra and Delhi.
For example, 78% of the butter is sold in Maharashtra and Delhi alone.
(2) Surprisingly, the market for Amul milk powder is highest in the states
like Kerala and Tamil Nadu.
(3) Similarly, the highest concentration of the sales of a product like
Nutramul in a state like Tamil Nadu is difficult to understand.
(4) The sales of a product like baby food is almost equally spread over all
states wi th an unexpected high share of 29 % in 1,IJest Bengal followed by Assam
(11%) .
42
These facts show that milk products are used by all the states. It
also gives an impression that relatively rich states like Maharashtra, and
Delhi, including Pundjab and Haryana, do not necessarily have a high con-
centration of the share in the consumption of the milk products of the
Federation.
(5) Finally, in the case of a traditional product like ghee, the sales are
highly concentrated in the home state Gujarat; 97% of the ghee sale is just
concentrated in Gujarat en Maharashtra only.
On account of a lack of adequate data, no strong explanation could be
provided to explain the share of the states in purchase of products.
Thus the analysis shows at least that:
(a) Sales spread is reasonably balanced over all states.
(b) Product-wise concentration of the sale does exist.
(c) The markets for the milk products are generally outside Gujara t excep t
for a traditional product like ghee.
4. Price policy of the Federation
There are two dimensions of the price policy, namely the producers' price
and the sales (or consumers') price. A maximum remunerative procurement
price and a maximum sales price of liquid milk and products are obviously
basic objectives of the Federation. However, along with these two objec-
tives, it has also remained the objective of the federation to develop a
model of "co-operative marketing" where consumers get the benefi t of the
fair price. There are three main considerations in fixation of price of the
liquid milk and products.
Although directly the federation has nothing to do with fixing the
procurement price of milk (this is a question of the individual dairy union)
nevertheless, milk purchase cost accounts for an overwhelming percentage of
total sales proceeds. Therefore, member unions are persuaded to examine the
issue of the procurement price of milk in greater depth. While a remunera-
tive price to the producer is one of the accepted objectives, the member
43
union also bears a responsibility to act in the interest of milk producers
affiliated to other district unions. Member unions must understand and
accept the fundamental principle involved in centralised marketing and
accept the discipline imposed by such a principle.
Secondly, the expectations with regard to the purchase price of milk
will have to be moderated by the "realities of the market", The growing
competition arising out of an increasing number of new district unions and
product factories on account of Operation Flood could be an important con-
straint in maximization of sales and price of the products in the market.
And as a result, this also becomes a constraint in providing greater
procurement price to milk producers at the district level.
It may be noted that the Federation does not buy commodities from the
member unions but arranges directly to sell by charging some margin for the
marketing service between 3.5% to 7% of the sales.
To ensure proper planning and coordination for selling milk outside the
district, the principle to pool the price realised for selling milk outside
the district has been applied. "Pooling the price" means that a uniform
price is charged by the federation for liquid milk of all the members of the
federation sold outside their district areas. This policy of price pooling
was tried in 1980-81 and was found so successful and helpful that it was
thought appropriate to extend this concept of pooling of price for milk
products as well.
The federation has pursued a pricing policy by which milk producers
through their unions are assured of a regular and steady market throughout
the year. Table 18 shows prices of federation products and the prices of
the products of competing units. The federation has deliberately resisted
the temptation to avail of opportunities to capitalise in the short run by
exploiting the extra-large or excess demand for some products or where there
is relative scarcity of products,
44
Table 18
Competitive Price Structure of the Milk Products
Prices Max. % age of
Product Brand effective Pack consumer difference
from price (excl. over Amul
local taxes price
Rs.per pack)
2
3
4 5 6
Brown Nutramul 10-10-83 500 gm tin 13.34
Beverages 1000 gm tin 25.57
200 gm tin 6.86
Bournv i ta 28- 3-83 1000 gm tin 39.10 53
500 gm tin 20.48 54
500 gm refill 19.08 43
200 gm tin 9.59 40
Boost 1-10-83 500 gm bottle 20.70 55
500 gm refill 19.32 45
160 gm jar 8.44 54
Maltova 15- 3-83 500 gm jar 19.70
48
500 gm refill 18.30 37
200 gm jar 9.25 35
Weaning Balamul 10-10-83 500 gm tin 8.81
Food Farax 1 - 1 -83 400 gm tin 16.06 128
Nestum 26- 3-83 300 gm tin 11.33 115
Cere lac 26- 1-83 400 gm tin 14.69 109
Baby Amulspray 10-10-83 500 gm tin 17 .23
Food A.B.F.
1000 gm tin 33.26
Glaxo 1- 1-83 500 gm tin 21 .20 23
1000 gm tin 40.71 22
Lactogen 1 - 1 -83 500 gm tin 22.58 31
Babyfood
1000 gm tin 43.63 31
Vijayaspray 5-11-83 500 gm tin 16.78 - 3
1000 gm tin 32.41 - 3
Lactogen 1 - 1 -83 500 gm tin 23.56 37
1. F.
1000 gm tin
45
Table 18 (cont. , . , )
Prices Max, % age of
Product Brand effective Pack consumer difference
from price (excl. over Amul
local taxes price
Rs.per pack)
2
3
4 5 6
Milk Amul 10-10-83 500 gm tin 17 .84
Powder Vijaya 12-10-83 500 gm tin 16.87 - 5
Indana 500 gm tin 20.00 12
Nespray 500 gm tin 20.74 1 6
Avin 500 gm pack 14.43 - 19
Skim Milk Sagar 10-10-83 500 gm pkt 13 .91
Powder Vijaya 500 gm pkt 14.74 6
Avin 1- 5-83 500 gm pkt 12.47 - 10
Sneha 500 gm pkt 14.28 3
Sap an 400 gm pkt 14.00 26
Indana 30- 5-83 500 gm pkt 14.95 7
Anik 1- 7-83 400 gm poly pk 15.31 38
Butter Vijay 5-11-83 100 gm pkt 3,56 - 3
200 gm pkt 6,75
500 gm pkt 17.00
- 2
100x10 gm chip 44.29 4
Sneha 100 gm pkt 3.45
4
200 gm pkt 6.47
500 gm pkt 15.99
8
Verka 1-11-83 100 gm pkt 3.51
4
200 gm pkt 6,82
500 gm pkt 16.56
4
Amul 1-11-83 400 gm tin 17.05
10x25 gm chip
11 ,26
8x18 cheese
spread 8.57
Cheese
Vijaya
200 gm tin 9,43
500 gm tin 22.94 8
8x25 gm chip 10.54 17
Verka
200 gm tin 9.05
200 gm cheesing 8.38
400 gm tin 17 .14
46
Table 18 (cont ... )
Prices Max. % age of
Product Brand effective Pack consumer difference
from price (excl. over Amul
local taxes price
Rs. per pack)
2
3
4
5 6
Chocolates Amul -7-83 80 gm milk 5.63
40 gm (all
variety) 2.91
18 gm
II
1.45
18 gm Trix 1.40
Cadbury 80 gm milk 6.54 1 6
40 gm milk 3.55 22
40 gm Bournv i tle 3.74 29
35 gm Five star
& DD 2.71
19 gm milk
13 gm milk
Ghee Amul/Sagar 21-12-83 1 kg tin 45.51
(prices incl.
2 kg tin 89.85
local taxes
4 kg tin 178.51
in greater
Bombay) Vijaya 15-12-83 1 kg tin 46.67 3
2 kg tin 90.58
1
4 kg tin 180.60
Indana 1-12-83 1 kg tin 50.99 12
2 kg tin 99.78
12
4 kg tin 195.39
9
Sapan 18-10-83 1 kg tin 46.50 2
2 kg tin 92.00
4 kg tin
181.00
Anik 11-11-83 1 kg tin
47.20
4
2 kg tin 93.28
4
4 kg tin 182.06
Source:
Collected from the Federation.
47
By improving the market returns for milk while at the same time offer-
ing the consumers the benefits of reasonable price, the federation has
proved that these two objectives are compatible.
Thus, pricing policy is designed so that economic objectives and social
accountability both could be achieved without sacrificing one for the other.
5. Milk Support to Metro Cities by the Federation
The real issues to examine with respect to the internal dynamics between the
Federation and the urban dairy plants are (a) does the Federation sell the
milk at a higher price than others? (b) does this supply discourage the
procurement of milk from nearby areas? Although a full scale data is not
yet available certain collected data do provide some evidence.
(a) A study published in the latest volume "Dairying in India" (1984)
at the time of the Calcutta Dairy Conference reveals that, out of
the 2,46,08,228 litres of milk handled by Mother Dairy of
Calcutta, the contribution of Gujarat was just 12% in total col-
lection, the Calcutta based milk producers 'Cooperative Union'
contributed about 42% of the total collection in the year 1983-84.
Therefore, to state that the GCMMF discourages the other agency is
not appropriate. Similarly, even in the case of the Delhi Mother
Dairy the contribution of GCMMF is just 16% of the total collec-
tion of milk.
(b) The question of the price received by the Federation for its milk
supply to these Mother Dairies was discussed with the officials of
NDDE and GCMMF and it was found that the idea that the Federation
was paid a higher price by the Delhi Mother Dairy than the dairies
in D.P . Haryana, Punjab, etc. seems to be unfounded. In fact,
Delhi Mother Dairy had to procure fresh milk from the Federations
of the northern milkshed areas. Since these Federations are
unable to supply an adequate quantity of milk during the lean
period, the Gujarat Federation has sometimes been approached to
48
meet the requirements. The Gujarat dairies are part of the west-
ern milksheds and supply liquid milk to Bombay and Ahmedabad where
prices are higher than in Delhi. In spite of these factors the
Gujarat Federation supplies milk to Delhi Mother Dairy.
Also the pricing of milk is linked with its availability. For these
reasons, the basic prices paid to the Gujarat Federation as well as the
basic prices paid to Federations in U.P., Haryana and Punjab fluctuate. The
variations, however, are marginal and do not exceed 15 paise per kg milk.
The basic price being paid to the Gujarat Federation is less than what is
being paid to the Federations of Uttar Pradesh, Haryana and Punjab.
In fact, supply of milk by the Gujarat Federation to the Mother Dairy
is a favour done to the Mother Dairy in order to ensure a stable supply of
milk to Delhi consumers.
6. Relationship between Gujarat Cooperative Milk Marketing
Federation and the Indian Dairy Corporation (IDC)
The relationship between the IDC and the Gujarat Cooperative Milk Marketing
Federation is as follows:
(1) IDC has entered into an agreement with the Federation regarding
financial assistance to the Unions in Gujarat under the programme
as per the approved plan. Under this agreement the Federation is
responsible for utilisation of the funds through the member union
and for repayment to IDC as per the term and conditions.
(2) The overall responsibility for achieving the targets mentioned in
the programme and for monitoring programme implementation is
vested in the Federation.
(3) With the help of the NDDB, the IDC makes bulk purchases of dairy
equipment, helps in setting up dairy plants, chilling centres,
cattle feed plants for the different milk unions under the Gujarat
Cooperative Milk Marketing Federation.
49
(4) The NDDB, on behalf of IDC, provides faoilities like disease
prevention through diagnostio laboratory, training of the manpower
for the key personnel, least cost formulation for oattle feed
production, preparation of the perspeotive dairy development plan
and sub-projeot detailing of the various projeots in the state.
(5) IDC also purohases the conserved oommodities from different milk
unions of the Federation as part of buffer stooking operations.
(6) IDC, at the oentral level, monitors the projeots being implemented
by the Gujarat Cooperative Milk Marketing Federation as also of
other Federations.
(7) Representatives of IDC are on the Board of Direotors of the dis-
trict unions and help them in policy decisions.
Thus, the relationship between the IDC and the Federation is very close
and complementary.
V
PERFORMANCE AND PROBLEMS OF GUJARAT COOPERATIVE MILK
MARKETING FEDERATION
(A) Performance
The Gujarat Cooperative Milk Marketing Federation has completed a decade in
1982-83. This decade was really an important period in the process of
building organisations. Today it has 6 ordinary members, 4 nominal members
and all the other district dairy unions under Gujarat Dairy Development
corporation are associate members. In 1973 there were only 2594 village
societies in its area of operations. By 1982-83 it was covering 5000
villages. It could cover 8,82,246 producers in 1982-83 while that number in
1973 was 4,06,874. The milk collection in 1973 was just 2,19,221 lakh
litres. It increased to 5,463,88 litres in 1983. Thus, it has made remark-
able general progress.
50
Another way of looking at the performance is by examining the change in
selected indices of the performance. One such set of indices is shown in
the following Table 19.
Table 19
Important indices of performance of the Federation
Paidup Fixed Invest- Sales No.of No,of Net
Year capital assets Ments bran- employ- Profit
ches ees
1973 30.00 19.06 2.64 2014 03 55
(100 ) (100) ( 100) ( 100) ( 100) ( 100)
1974-75 50.00 21 .81 23.75 6327 03 73
10361
(1 66) ( 144) ( 142) (314) ( 100) ( 133) ( 100 )
1975-76 50.00 31. 76 3.75 5816 05 87 298850
( 1 66) ( 167) ( 142) (289 ) ( 166 ) ( 158) (2884)
1977-78 70.00 54.83 9.19 8934 05 167 813425
(233) (288) (348) (438) ( 166 ) (303) (7851)
1978-79 100.00 80.03 9.19 10745 05 218 875038
(333)
(405 ) (348) (853) <337 )
(472) (8445)
1979-80 100.00 80.25 9.19 13905
10 331 1457057
(333) (405 ) (348) (853) <376 ) (472) (14063)
1980-81 100.00 80.25 9.19 13905 11 331 1457057
(333)
(421 ) (348 ) (690) (367) (601 ) ( 14063)
1981-82 100.00 84.18 11 .70 16360 13 367
1518040
(333)
(442 ) (443 ) (812) (433 ) (667 ) ( 14651)
1982-83 150.00 87.81 14.20 18593
1 6 383
1731742
(500) (460) (538) (923) (533 )
( 696) (16714)
Note:
Figures in the bracket show the index.
Source:
Compiled from the Annual Reports of the
Federation.
'-
51
It may be noted that the criterion of net profit as an indicator of the
performance has very limited significance because the Federation is not a
manufacturer but a marketing service organisation aiming at directly helping
to acquire price benefits to producers by a number of ways such as develop-
ment of new products with much less operating costs. For these services it
charges some standard trade margins. However, one could see clearly that
its performance measured in the term of profit was also quite impressive.
The other indicators also show qUite a big jump, for example sales increased
by 9 times during 1973-1982.
It is also interesting to note that when the Federation expanded sales
by nine times it increased the number of persons employed by only about 6
times in 1983 over 1973. It shows that the operations of the Federation are
very efficiently handled.
However, the real criterion for assessment of the performance could be
its capacity to develop an efficient milk grid system within the Gujarat
State. This achievement has been notably recorded in the latest annual
report of the Federation where it has been stated that the inter union sales
jumped up by 100% demonstrating the efficiency of the smooth functioning of
the Gujarat Milk Grid System. Without this system of balancing within the
grid developed and established by the Federation, it is quite possible that
in some milkshed areas the plants would not have been able to receive all
the milk offered by the producers during the flush period and the lean
period would not have adequate milk to meet consumer demand. Thus, improved
capacity utilisation which has been shown in the early part of this report
could be attributed to the performance of the Gujarat Co-operative Milk
Marketing Federation as the regional milk grid which has made the concept of
grid as the actual system in operation.
(B) The Problems
For the Federation the next decade will not be smooth and at least the
following problems will have to be faced. The first and foremost problem
52
will arise from effective implementation of Operation Flood which will
expand new technology and new competitors. A large number of milk product
manufacturing plants are coming up which will confront the Federation with a
high degree of competition. In order to retain its position, it will have
to make efforts on co-operative lines from producer to consumer with em-
phasis on the best possible consumer service and on good marketing of
quality products.
Second, again on account of dairy co-operativisation and the effective
implementation of Operation Flood-II in the milkshed areas, the procurement
of milk from indigenous sources will increase and dependence on a Federation
such as Gujarat supplying milk over a long distance will decline. As a
result, the Federation will have to find a market for disposal of liquid
milk or will have to develop new product lines.
Third, the purchasing power of the average consumer's household is not
likely to increase rapidly. The objective of a high price for milk will
have to be balanced to maintain the market as well as to develop it.
Fourth, since marketing of the product provides limited means to assure
high remuneration to the producers, it will have to increase efficiency not
only in manufacturing and marketing chains but in every stage of the entire
procurement chain as well.
Fifth, and finally. as shown in the early part of the analysis, infant
milk food constitutes a very high proportion of sales. If the Government
decides to ban the entire production, it will have to develop new product
lines which would not only assure sales but provide remunerative prices for
products and compensate for the loss arising out of this closure.
Looking at the record of the Federation it seems quite possible that it
will be successful in overcoming all the challenging problems and convert
them into an opportunity for progress,
53
REFERENCES
1. Centre for Monitoring Gujarat Economy Bureau of Economics and
Statistics, Development Statistics, 1983. p. 60.
2. General Administration Department, Gujarat State, Draft Fifth Five Year
Plan, p. 13.
3. General Administration Department, Gujarat State, Draft Sixth Five Year
Plan, 1980-81, p. 89.
4. Dilip Shah: An Economic Analysis of Cooperative Dairy Industry in
GUjarat, p. 105 (unpublished Ph.D. thesis)
5.
6.
Tushar Shah:
(unpublished) .
Impact of Cooperative Dairies in Gujarat. IRMA, 1982
For example, see: Dilip
Dairy Milk Price Problem,
Shah: (1)
Vishleshan,
An Economic Analysis of Baroda
March, 1980. Ci1) General
EValuation Report of Banaskantha District Cooperative Milk Producers'
Union, 1984 (unpublished).
7. Ibid. Tushar Shah, pp. 51-52.
8. See for example, (1) Dilip Shah: !IAn estimate of employment generation
by Dairy Plant, a case of Amul - Anveshak", Quarterly journal of SPIESR
Gujarat: March, 1982. (2) D.K. Desai and K.V. Patel, "Dairies - As an
instrument of change, a case of modern dairies - Amul and Dudhsagar. II
International Dairy Congress, 1974. (3) V.S. Vyas: Economics of
Dairying in Mehsana
Patel and D,S. Thaker:
1978.
District. Artha Vikas, April, 1978. (4) S.M.
"Impact of Cooperative Dairies", ICSSR project,
54
9. Ibid.
10. N.D.B.B.:
1982.
A note on Impact of Operation Flood Project (unpublished),
11. Planning Division, Gujarat State: Towards the Seventh Plan 1985-1990 -
an Approach Paper, 1983. p. 22.
12. P.H. Bhatt, Milk Pricing, Economic Times, December 5, 1983.
13. S. Swaminathan, "Recent Development in Agriculture wi th reference to
dairy development." International Dairy Congress, 1974-1975.
14. National Dairy Development Board - Dairying in India. (1983) (Mimeo).
15. R. Nightingale: The Modernization Decision in India Urban Fluid Milk
Markets, New York Cornell University, p. 19.
16. Ibid., p. 20.
17. Ibid., p. 20.
18. National Dairy Development Board: Development of a Milk Grid System
for Ind ia, p. 5.
19. Ibid., p. 6.
20. Dilip Shah:
Three decades of dairy development in India, Yojana,
November, 1980.
21. Y.K. Alagh, "Dualism in Dairy Industry", International Dairy Congress
Lecture, 1974.
. ,
22.
55
See for details: (0 Manubhai Shah: Integration of District Dairy
Cooperatives in GUjarat, S,P. University (17) (ii) Singh and Kelly:
.:..;A.;.;n.;.;a.;.;n..::.d__ Macm illan , New De lh i ,
1981
23. Ibid., N.D.D.B. Development of a milk grid system, pp. 17-18.
24. National Dairy Development - Operation Flood-II, A proposal,
25. Indian Dairy Corporation: Twelfth Annual Report, 1981-82.
26. Indian Dairy Corporation, Quarterly - Progress Report. 1983.
27. Gujarat Cooperative Milk Marketing Federation - Annual Report, 1982.