Business Today – August 25, 2019

CORPORATE>DAIRY COOPERATIVES

The Karnataka Milk Federation’s Singh admits that most bureaucrats
consider dairy a punishment posting. “I was in Delhi. When they told me I am
getting posted as MD of Nandhini, I thought I had had enough and I should
resign from the service. However, within two hours of taking over, I realised
there couldn’t have been anything better.” Singh, who has spent over three
years in this role, considers himself a shield between the elected representa-
tives and his colleagues at Nandhini.

Lack of Professionalism
The role model for Indian dairy cooperatives is Amul. It’s Founder Chairman,
Kurien, not only helped 3.6 million farmers find a market to sell their produce,
he also invested in building a long-term brand equity. Amul has also been con-
sistently investing in technology and distribution. But other cooperatives, even
successful ones like Nandhini, lack this kind of professional thinking.
“We don’t have the resources,” says Singh of Nandhini. Most of our plants
are outdated and should ideally be phased out or run in partnership with a
private company, he says. Despite having 250 value-added SKUs, Nandhini
products are available only at its own booths as it does not have the expertise
to market and distribute.
Since cooperatives are farmer-run organisations, the focus is more on the
farmer’s betterment than brand building. “To build a professional business,
one needs to take risks, and over here I am not even expected to take risks,”
explains Singh.
Most dairy cooperatives are also weighed down by extra manpower, which
has not been trimmed due to fear of political repercussions. “Our cost of pro-
duction is 7 per litre. For private players, it is around1.50 per litre. Our big-
gest cost is employees,” says Mishra of OMFED.
The decision-making process is slow too. “During f lush (periods), private
players give five packets free for every 50 packets; we can’t do that. If we do, we
will need to pass a resolution, and get the Board’s permission. By the time we

do all this, the f lush season is over and

the loss has been incurred.”

The Subsidy Issue

Subsidies form an important part of the

cost equation. The government of Kar-

nataka gives a `6 subsidy to a farmer

for every litre of milk procured. In all,

around `1,500 crore of subsidy is doled

out every year in the state, as a result of

which milk production has gone up to

8.4 million litres per day. But the state

needs only five million litres per day.

So, the milk federation either converts

its milk into powder or sells pouch milk

in states such as Maharashtra.

The retail price of milk in Karna-

taka is among the lowest in India – ` 35

per litre – while Amul sells at `46 per

litre. But the cooperative is not allowed

to increase milk prices. “Subsidy is

good but the money should be used for

the development of the dairy sector,”

says Sodhi of GCMMF.

Mishra of OMFED says, “The last

time we increased prices was in 2014.

The government gives us `2 subsidy

per litre of milk for seven months, but

not during the f lush season. That’s not

enough.” She adds that if the (Odisha)

72 IBUSINESS TODAYIAugust 25 I 2019

The MD is usually a

bureaucrat

Lack of professional

thinking and planning

Short of resources

Plants are outdated

No expertise avail-

able to market and

distribute

Has 250 value-added

products but these

are available only at

Nandhini booths, and

only in Karnataka

Has excess milk

production, which has

lowered retail prices

(`35/litre; among the

lowest)

Is not allowed to in-

crease milk prices

WORK IN PROGRESS

RAKESH SINGH

MD, Karnataka

Milk Foundation

Nandhini is one of the

better run dairy coopera-

tives but has limited reach

REVENUE:

`15,000 crore

STRUGGLING

SAROJINI MISHRA

Chairperson, Orissa

Milk Federation

(OMFED)

REVENUE:

` 500 crore

The dairy cooperative is

among the laggards

Lack of stable leadership; at one point,

had two-three MDs in one year

Is not allowed to increase prices; the

last increase was in 2014

Has not been able to increase procure-

ment from 5,00,000-6,00,000 litres

per day for past few decades

Government subsidy of `2 per

litre is inadequate

Presence of other dairies, including

Amul, is curbing its opportunities