The Hindu Business Line : Ventures with State coops — NDDB refutes Kurien's allegation

THE National Dairy Development Board (NDDB) has refuted Dr Verghese Kurien's allegation that its setting up of joint ventures (JVs) with individual State dairy cooperative federations - through its subsidiary, Mother Dairy Foods Ltd (MDFL) - would undermine the country's cooperative dairy movement.

"The JVs are purely in the nature of marketing arrangements. There is no question of undermining the cooperative movement because the procurement, processing and packaging of milk will continue to remain with the cooperatives,'' a top NDDB official told Business Line.

The objective behind the entire exercise, he added, was to `professionalise' the marketing set-up of the cooperatives to enable them to gear up to competition from multinational and Indian private companies.

"Today, only the Gujarat Cooperative Milk Marketing Federation (GCMMF or Amul) is really well-equipped to face the challenges of liberalisation and globalisation. We want to assist other federations as well to market their products in a more effective manner,'' the official said.

According to him, the proposed JVs were no different from the marketing tie-ups that Amul - which Dr Kurien heads - had forged, in the past, with private companies such as Voltas or with the Kaira Can Company Ltd since 1992.

"Kaira Can Company is currently processing, packing and marketing over one lakh litres per day (LLPD) milk for Amul in Mumbai and its suburbs. This is despite Amul having a mere 22 per cent stake in the company. If Amul can have such marketing arrangements, why can't Milma or Vijaya enter into JVs, where they, at least, hold 49 per cent stake and the other 51 per cent partner is not a private entity'', the official pointed out.

The official also denied that the formation of the JVs would open the floodgates to the eventual privatisation of cooperative dairies.

Detractors of the JV concept have been highlighting the case of Metro Dairy Ltd (MDL), the Kolkata-based capacity dairy that has a milk handling capacity of six LLPD and enjoys a 40 per cent share of the city's ice cream market.

MDL was originally a JV project in which the West Bengal Dairy Federation had a 47 per cent share, with the private sector Keventer Agro Ltd holding 43 per cent and NDDB the remaining 10 per cent stake.

In March 2001, NDDB sold its strategic 10 per cent holding to ICICI, which, in turn, has proposed to offload this to Keventer, giving the latter effective control over the company and reducing the West Bengal federation to a junior partner.

"If NDDB can sell its 10 per cent stake in Metro Dairy, what prevents its subsidiary (MDFL) from selling its 51 per cent stake in its JVs with federations to say, Britannia or Nestle and, in the process, handing over their entire marketing infrastructure to private players. And since the societies or cooperative unions will have no control over their brand or marketing, they will end up as contract manufacturers and milk suppliers to the privatised JV,'' said an official with a leading State federation.

The NDDB official, however, ruled out this possibility by noting that the shareholders agreement in the JVs explicitly barred sale of equity by either NDDB or the federation to a third party.

"The moment NDDB decides to pull out, the JV ceases to exist and the brand originally owned by the federation would revert to it. Vice versa, the federation will not be able to market its products under our Mother Dairy brand. The fear of Metro Dairy being replicated on a national scale, therefore, has no basis,'' he said.

Even with regard to ICICI's planned sale of its 10 per cent stake in MDL (acquired from NDDB) to Keventer Agro, the official said that it was yet to be ratified.

"NDDB continues to be represented on MDL's board, by virtue of it having extended Rs 15 crore worth loans to the project under Operation Flood. And we will certainly block any attempt by ICICI to offload its stake to Keventer,'' the official asserted.

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