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Vinod Mathew

Dr Verghese Kurien appears all set to stir the hornet's nest by educating the farmers on what he calls the undermining of their rights by such deals as the one Mother Dairy had struck with Kerala's Milma. According to him, not only would the Indian farmer no longer control his own produce, but this arrangement was also loaded against the co-operatives. An update from Vinod Mathew.

India's milkman, Dr Verghese Kurien... Stirring up a hornet's nest.

IT MAY be too late in the day for another project of the scale of Operation Flood, but Dr Verghese Kurien, Chairman, Gujarat Co-operative Milk Marketing Federation (Amul), does not agree. If the architect of the Indian milk revolution has his way, it may be time — not to enhance milk produce in the country, but to mount another offensive — to galvanise the milk-producing farmer against the threat of increased government control.

True, he did kick off his campaign against the efforts of the government-owned National Dairy development Board (NDDB) to piggyback on the co-operative milk unions and federations to push its brand, Mother Dairy, in mid-January from Anand, the milk capital of India. But, then, many thought that would be his final shout. Dr Kurien had other ideas when he chose Chennai later in the month as his next venue to criticise the NDDB subsidiary, Mother Dairy Food Ltd's (MDFL) outright wooing of State co-operative milk federations in a bid to access their massive retail reach.

Not content with his foray into the South, Dr Kurien now plans to take the battle to the opposite camp by holding forth on his views this weekend in Delhi. But what is likely to really stir the hornet's nest is a meeting slated for February 22 in Kerala where one of the chief invitees would be the Leader of the Opposition in the State Assembly, Mr V. S. Achuthanandan. Being hosted by the Malabar Co-operative Milk Producers Union at Palakkad, the meeting is expected to raise much heat as the Kerala Co-operative Milk Marketing Federation (Milma) is the only State body to forge a joint venture tie up with MDFL till date.

Readying for a new launch with Mother Dairy... The Kerala Agriculture and Dairy Development Minister, Ms K. R. Gowri, and the Milma Chairman, Dr P. T. Gopala Kurup.

The political twist to an issue, that had hitherto largely remained a debating point between Dr Kurien and the NDDB Chairperson, Dr Amrita Patel, is very much on the cards as the other participants include Ms K. R. Gouri, Minister for Agriculture and Dairy Development, and Dr Gopala Kurup, Chairman, Milma. Given the penchant of the Kerala politician to join issue with any controversy, one may well look forward to much soul searching in the coming days as to whether the State's home grown co-operative milk brand, Milma, did well to get sold to a government organisation.

Meanwhile, Dr Kurien has urged the State milk federations to be wary of the government-owned Mother Dairy brand using them to access thousands of co-operative milk retail outlets. That too at a negligible cost of Rs 51 lakh, being the equity of MDFL in the JV; its paid-up capital is to be Rs 1 crore. The 51:49 equity ratio in favour of MDFL also translates into three representatives on the five-member JV board for the NDDB subsidiary. Talking to Business Line, Dr Kurien said that not only would the JV ensure that the Indian farmer no longer controlled his own produce, but this move would also result in his hitherto loyal clientele being given on a platter to sell products of an outsider. There would be only a single gainer in this arrangement, which was loaded against the co-operatives, and that certainly was not the farmer.

"I strongly object to the fact that Mother Dairy, which is not a co-operative brand, but one owned by the government, will use the JV to tap the existing co-operative retail chain to push itself. There is an inherent contradiction that the government-owned NDDB, through its subsidiaries, is getting into fresh business activities at a time when the Centre is considering further divestment in all existing areas including those in the dairy sector such as the Delhi Milk Scheme," Dr Kurien said.

There was a need to educate the Indian farmer about the JV and the Centre must take note of these developments which tantamount to the "undermining of the farmers' rights", he said. Though the entire equity investment in the JV, including the Rs 49 lakh on behalf of the State federation, would be borne by MDFL, this was in lieu of the existing equity of the State milk brand as also as compensation towards using its vast retail network. "By no means a remunerative return, given that one is talking of some of the strong co-operative brands," he said.

While the JV company would use the existing brand name — whether it be Milma, Verka, Parag, Saras, Vijaya or Nandini — in some cases even a hybrid brand name may be used exclusively for marketing liquid milk and identified milk products in the State; the MDFL would be free to market other milk products nationwide either directly or through its subsidiaries, using the Mother Dairy brand name.

What is more, these products are to be sourced from the State federations/unions as per the JV terms and conditions. The JV clause on retail sales outlets enjoins upon the State federations to ensure that all outlets owned or held on lease by it or the co-operative unions — both existing and future — shall be leased or licensed to the JV company exclusively. All decisions regarding the management and operations of these outlets are to be taken by the JV company.

Further, the day-to-day running of the State federation and the co-operative unions would henceforth come under the control of the JV company. The business plan, including the sales targets, would be decided by the company which would enjoy the final word on issues pertaining to pricing, product design, distribution, sales promotion, consumer research and other marketing activities. Towards this, the federation and unions would provide all information on milk procurement and other financial data to the JV company. Also, the federation has to ensure that all the unions sell their entire milk only to the JV company as sale to any other entity is prohibited.

The supply of milk and milk products by the federation/unions would be governed by a supply agreement that will comprise aspects such as pricing and quality. Clearly, the endeavour of the JV company is a gradual raising of the quality benchmark so as to meet the international Codex standards. For the JV company, the expertise of MDFL in sales and marketing, distribution, quality management and financial management would be available.

The one worrying aspect of the agreement may be that the entire workforce, existing and newly recruited, becomes employees of the JV company, provided they fit into the organisation structure, especially in the marketing division. The rest are to be offered VRS by the federation/ unions and the expenditure towards this would be borne by the JV company.

It is with a view to educating the co-operative unions and the State federations on some of these issues that Dr Kurien feels justified in crusading against the NDDB, whose recent actions, he feels, have been far from transparent. The `milk man of India' also points out that there is no guarantee that the government will not privatise either the NDDB or some of its brand portfolios that include Mother Dairy and Dhara, given the privatisation breeze wafting across the various departments at the Centre.

In the final analysis, Dr Kurien admits that the crown of the largest milk producing country in the world may have come for India with its share of thorns.

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