Chairman's Speech: 33rd Annual General Body Meeting held on 14th June, 2007
Madam and Gentlemen,
Our nation has always been a manifestation of diversity and a balance of seemingly irreconcilable contradictions. With our GDP surpassing one trillion dollar, we have emerged as the eleventh largest economy in the world. We are poised to take our rightful position as one of the world’s largest economy within the next few years. In sheer contrast, we continue to languish at the 126th rank, among 177 countries on the Human Development Index, even behind Sri Lanka and the Maldives. While our economy might be growing at more than 8% per annum, our performance on poverty alleviation, life expectancy and educational attainment needs considerable improvement.
This situation can be rectified only when our policy makers realise that rural development is a sine qua non of overall development in India. With more than 70% of our population residing in rural areas, no strategy of socio-economic development of India can be successful if it does not place adequate emphasis on rural India. Only when our villages witness favourable impact on their real per capita income, political & economic freedom, education, healthcare and employment opportunities, shall we achieve our cherished goals of national development. Therefore, the ultimate index of India’s progress is improvement in ‘quality of life’ of our rural population.
The founding fathers of our nation were well aware of this reality. Mahatma Gandhi had repeatedly asserted that the ‘real India’ lives in its villages. He stressed emphatically on leveraging the ‘cooperative form of organisation’ as an effective instrument of rural development. Sardar Vallabhbhai Patel had great faith in co-operation as a means of promoting farmer’s well-being. He was the prime source of inspiration behind our ‘Amul’ model of dairy cooperatives, which had a revolutionary impact on the socio-economic condition of rural India.
Cooperatives have historically played a significant role in promoting agricultural and rural development. Cooperatives enable farmers to retain control on the value chain for their own agricultural produce. A cooperative form of organisation, not only helps in reducing transaction cost, it also enhances the bargaining power of producers’ vis-à-vis their customers as well as input-service providers. Cooperatives have several inherent advantages over other forms of organisations in terms of ensuring members’ participation, mobilizing people’s resources and in securing integration of various functions. They also effectively ensure equitable distribution of benefits of development. Dairy cooperatives across India and Sugar cooperatives of Maharashtra are prime examples of organisations, which have promoted and sustained rural development.
Amul Pattern of dairy cooperatives have contributed immensely to the fact that India has progressed from a milk-deficit country to emerge as the largest milk-producing nation in the world. In the process, they have generated millions of days of employment for the rural poor and improved their socio-economic condition. It has been observed that dairy cooperative movement has resulted in significant improvement in ‘quality of life’ parameters, which form a part of UNDP’s ‘Human Development Index’.
Any visitor to rural India can perhaps observe that on parameters such as ‘literacy levels, ‘life expectancy at birth’ and ‘per capita income, those rural areas which have dairy cooperatives, seem to have done much better, as compared to other rural regions. The vulnerable section of rural populace, including children, expectant and nursing mothers in villages having dairy co-ops, have much better nutritional status than their counterparts in other villages (Singh & Das, 1984). Even the landless households in cooperative villages have significantly better ‘quality of life’ than their counterparts in other villages. Farmer-suicides are unheard of, in districts where dairy cooperatives flourish.
The World Bank in its evaluation of our Amul model has rightly concluded that dairy cooperatives have shifted dairying from a sideline activity to a serious economic enterprise, making it the major source of farm income (Candler & Kumar, 1998). This report also emphasised that dairying has given women, some measure of economic independence, thereby empowering them to participate more actively in household decision-making. Cooperatives have indeed done more for the emancipation of Indian women than centuries of social reforms. While ensuring that women are able to work from home, the withdrawal of females from farm labour also created ample employment opportunities for landless labourers.
Today, in the era of globalisation, privatisation and liberalisation, cooperatives are facing a new set of challenges. It is true that cooperatives need a supportive environment, in order to flourish. At the same time, cooperatives should also address their own unique set of issues and prove to the world that they are worthy of support. The quality of leadership in cooperatives has to be dedicated, mature, committed and loyal to the cause of farmers. While the central and state government have done their best to help the cooperative sector, their continuous support is essential for cooperatives to continue their lead role in rural development. The various state governments should ensure that they provide complete autonomy to cooperative organisations and avoid intervening directly in their affairs through deputations.
With one-third of our rural population, living below the poverty line and with most of the rural producers surviving at the mercy of market intermediaries, it is unlikely that any free market model of development will help them. Under the new world trade regime, ushered in by WTO, only cooperatives can protect the poor farmer and the consumer, from the adverse effects of free world trade. In the absence of a strong cooperative sector, both the producers and the consumers would be subjected to exploitation by the private sector, as used to happen in the pre-cooperative days. Unbridled privatisation is likely to have an adverse effect on the weaker sections of milk producing population in terms of reduced employment opportunities and higher cost of inputs.
The weaker sections among consumers may also be placed at a disadvantage, as a consequence of uncontrolled privatisation, as they may find dairy products being priced out of their affordability limits. It is quite apparent that only producers’ cooperatives, which have the benefit of enlightened leadership and professional management, are capable of promoting socio-economic development in the country.
The cooperative sector has a bright future in India, if they retain their core identity as member-owned autonomous organisations governed by truly elected representatives, managed professionally and led by visionary leaders. Today, cooperatives have to strengthen and intensify their competitive advantages to retain their foothold in the fiercely competitive world economy. An enabling legal framework would go a long way towards facilitating cooperatives in enhancing their contribution towards national development.
We understand the government’s priority to keep inflation in check, keeping in mind the interests of our consumers. We would, however, submit for the government’s kind consideration, the fact that the recent ban on export of milk powders, has resulted in opportunity loss for our poor farmers. While inflation will definitely affect our urban consumers, however, the impact of the ban on our farmers is much more severe. The purchasing power of an urban consumer is definitely much more than that of purchasing power of our poor farmers.
The Amul model came into existence, to protect the farmers from economic exploitation by our middle-men. I recently read about dairy farmers in Europe, who went on strike, because they were not getting sufficient price for their milk from large retail chains. After the strike, the same supermarket chain was forced to increase the price to farmers, without increasing the price to consumers. Similar cases have been reported from UK and other developed countries. The experience from western world clearly demonstrates that large retail chains may not serve the interests of the farmers. If due care is not taken, even the Modern Format Stores will end up exploiting the rural producers, as middle-men had done in the past. Objective examination of data available across the world will reveal that organised retailing has only served to reduce farmer’s share of consumer’s dollar. In US alone, the share of farmer’s in the consumer price for dairy products has reduced from 47% in 1971, to only 34% in 2001. In other agri-business sectors, such as fruits & vegetables, meat products and cereals, the situation is even worse. Traditional retailing has always been one of the few available sources of employment for our economically disadvantaged masses. Growth of organised retailing may well result in massive unemployment across the country, with severe economic and political consequences.
We do understand that even traditional retail sector needs to reform itself. In order to compete effectively, small retailers have to become more organised, efficient and professional. Store layouts, ambience, hygiene, housekeeping and customer-services will have to be modified. We have already made a start in this direction by creating our own retail stores in the form of Amul parlours, which will enable us to interface directly with consumers. This will not only help us to ensure that 100% of value-chain is in the hands of farmers, it will also enable us to counter the might of organised retailing. Dairy cooperatives inspired by our ‘Amul model’ have already transformed the lives of 12-million farmer households, in more than one lakh villages across India. We have succeeded because we have placed the instruments of development in the hands of the farmers, themselves. An enabling environment will enable our organisation to continue playing a lead role in ensuring sustainable socio-economic development of rural India. I now present to you, our Federation’s Annual Report and the Audited Accounts for the year 2006-2007.REVIEW OF OPERATIONS
Total milk procurement by our Member Unions during the year 2006-07 averaged 67.25 lakh kilograms (6.7 million kg) per day, representing a growth of 4.5 per cent over 64.38 lakh kilograms (6.4 million kg) per day achieved during 2005-06. The highest procurement as usual was recorded during January 2007 at 84.09 lakh kilograms (8.4 million kg) per day. This increase in milk procurement is very impressive, keeping in mind the massive loss suffered by our farmers due to floods during the monsoon season, specially in Surat district.SALES
During the year, sales of our Federation registered a growth of 13.4 per cent to reach Rs. 4,277.84 crores (Rs. 42.77 billion). This is an extremely impressive growth, when viewed from the perspective of 29 per cent growth that we had achieved last year. In global terms, we have now become a billion dollar organisation.
I am also pleased to note that our Federation has done remarkably well in most of the value-added consumer packs. Sales of Amul Milk in pouches have grown by 40% in value terms. Similarly, sales of Ghee in Amul and Sagar brands have also grown by 28%. UHT Milk has also shown an impressive value growth of 25%. With the highly successful launch of Amul Kool Café, our sales value in the Flavoured Milk segment has seen an exponential increase of 55%. We reaffirmed our status as the undisputed leader in Ice-cream segment, by registering impressive growth in sales. In line with our policy of continuous innovation, we have launched Probiotic and Sugar-free Ice-cream to cater to the growing health conscious segment.
Our sales in Amul Processed Cheese have shown consistent and very impressive growth, year after year. In 2006-2007, we recorded 20% growth in value sales for Cheese, yet again. We managed to register double-digit value growth in Butter and Milk Powders, despite intense competition in these categories. We have introduced an entirely new range of chocolates in world-class packaging, under the brand name Amul Chocozoo. In the health-spread category, Amul Lite and Delicious Margarine have performed extremely well, with a combined growth of 58% in sales value.RETAILING
The advent of modern format retailing has led to a sea change in purchasing behaviour of consumers. While large retail chains do provide some convenience to consumers, historically they have rarely had any beneficial impact on farmers who supply agricultural produce to them. Across the world, it is observed that the farmer’s share in the consumer’s rupee, keeps on declining due to the rising bargaining power of supermarket chains. This phenomenon will definitely take place in India, as well, within the next few years. To counter this, we have decided to set up our own Amul Preferred Outlets (APOs), all across the country.
GCMMF ventured into organised retailing in 2002 with a view of getting closer to the consumer and provide her the complete brand experience. We have made our presence felt by creating several strategically located parlours, in a short period of time. The entire expansion drive is based on the franchisee route adopted by GCMMF, which means an employment opportunity for thousands of enterprising Indians. The Retailing operations would not only help farmers and small time entrepreneurs to counter the onslaught of Modern Format stores but would also help consumers to relish complete Amul brand experience.EXPORT
As you are aware, the Government of India has recently banned export of milk powders till 30th Sept 2007 and also does not allow exports based on the Letter of Credit received by us prior to the ban. In today’s global economy, ban on exports would definitely be considered a retrograde step.
As you are aware, the milk producers of Gujarat and neighbouring states of Maharashtra, Madhya Pradesh and Rajasthan have suffered immensely due to heavy rains and floods in June – August period last year. This had not only reduced their income levels but had also made them suffer losses due to death of cattle and damage to farms and property.
Despite these hardships, our milk producer members have continued to make their efforts in maintaining milk supply which has helped to tide over the crisis period. The only ray of hope has been the hope of realisation of better prices for their milk since international market prices have increased due to removal of subsidy in Europe and drought in Australia in the last few months. Since the ban in February this year, the international SMP prices have increased from US$ 3000 per MT to US$ 5000 per MT. Our milk producers are obviously sustaining an opportunity loss of US$ 2000 per MT in terms of additional realisation that we could have obtained.
Further, the Ministry of Agriculture and Ministry of Commerce have been fighting very hard since last more than 10 years at WTO to ensure that Europe removes agricultural subsidy, which results into better prices and market access to our Indian farmers. The Indian farmers have barely started to realise the fruits of removal of subsidy on SMP by EU as they have seen rise in milk procurement prices and increase in India’s presence in global dairy market.
The move to ban exports of milk powder is hurting us since India shall not be able to export part of surpluses at the prevailing international prices that are marginally better than the current domestic prices.
The notification is also not allowing exports under para 1.5 of Foreign Trade Policy and hence the buyers, who have made 100 % advance payment or have established Letter of Credit before the date of ban, are also not able to import milk powders, which has tarnished India’s image as reliable supplier.
Many of our dairies have invested in better plant and machinery by importing Capital goods under EPCG licenses and thereby entering into export obligations. With force of ban on milk powder, the plants will not be able to fulfil their export obligations.
Since the existing system in place for milk production encourages income generation for millions of milk producers, it is important that the Union Government should have policies that facilitate dairy development consistent with this profile. Equally important, the Union Government must take necessary measures to ensure that the Indian milk producer gets a fair chance to sell his produce in global market, which has historically been having a lot of subsidy in milk products, and he does not face threat or erode India’s comparative advantage in dairying as well as its competitive strengths in the sector.
We have met the Hon. Prime Minister of India, Hon. Commerce Minister and Hon. Agriculture Minister and have urged the Union Government to withdraw the ban on exports of milk powders, in the interests of not just India’s farmers and milk producers but also in the national interest.
During the year, our export turnover has decreased from Rs 134 crores in 2005-06 to Rs 60 crores this year. This is due to the export ban in the last couple of months. However, I am pleased to inform that the consumer pack exports has increased by 32% over the previous year. Our Kool Café and Buttermilk have got excellent response in UAE, Singapore and Australian markets. We have also started exports of Amul Ice-cream to Dubai this year. We expect our consumer pack business to help in further improve our brand presence in our target export markets and reinforce our position as ‘Asia’s largest milk brand’.DISTRIBUTION NETWORK
Overall economic growth, higher disposable incomes, changing attitude of consumers towards spending, various alternative consumption forms, and emergence of Organised Retail throws up challenges and also opportunities to the Distribution function of Federation. To keep pace with the changing market scenario, in the previous years, we have increased our distribution network in small towns. During this year we have divided markets into 14 segments to ensure improved availability of our products. Improved distribution focus on newly launched products was on top of our agenda. Our product lines were divided into Main Line and New Line. Separate distributors were appointed during the year exclusively for New Line. For specific product categories also exclusive distributors have been appointed. Separate manpower has been earmarked for each line.
To impart concepts of modern marketing amongst our distributors an initiative of Marketing and Sales Management Programme of our distributors have been taken. In collaboration with a premier business school, a 2 days workshop has been designed. All distributors of Federation will undergo this Training Programme.
Amul Yatra programme has been continuing to bring our channel partners to Amul to give them an exposure to our cooperative institutions. This year our emphasis was upon our newly appointed distributors and channel partners from various business segments like Organised Retail, Caterers etc.COOPERATIVE DEVELOPMENT PROGRAMME
During the last seven years, our Member Unions are implementing Internal Consultant Development (ICD) intervention for developing self leadership among member producers and thereby enabling them to manage their dairy business efficiently leading to their overall development.
During the year, Member Unions continued to implement the module on Vision Mission Strategy (VMS) for primary milk producer members & Village Dairy Cooperatives. Facilitated by specially trained consultants, 901 Village Dairy Cooperative Societies (VDCS) have already conducted their Vision Mission Strategy Workshops, prepared their Mission Statements & Business Plans for next five years. Till today, a total of 4,428 VDCS have prepared their mission statement and business plan. Member Unions are reviewing this business plan every year under VMS annual revisit programme and facilitate VDCS to prepare action plan for next year to propel the momentum gained through VMS.
The VMS module has prompted milk producers to initiate activities at villages such as Water management, Planned Animal Breeding, Animal Feed management, Improved member services management, Information Technology Integration and Networking, which has very far reaching and long-term effects on the milk business. This planned management of milk production and VDCS will not only help producer members to increase economic returns from their milk business but also help VDCS management to face the fierce competition ahead. Continuing the Cleanliness drive at village level, till March 2007, Member Unions have identified & imparted training to 8,774 Core groups formed of milk producers and Management of the VDCS. To enhance the level of Cleanliness this year 7,313 VDCS celebrated Red Tag Day on “Gandhi Jayanti” - 2nd October and the Unions also awarded best performing VDCS.
As a part of the Breeding Services Improvement Programme, during the year, Member Unions have continued implementation of the module of Improvement in Artificial Insemination Services and imparted training to 212 Core groups at village level and have decided to cover all the VDCS under Breeding Services with this module over the next year. To boost this movement, Member Unions are also conducting Mass De-worming campaign. Further, Member Unions implemented the AI Audit Competition during the year and in the process, identified & awarded the best performing VDCS & AI Workers of these Societies in order to motivate them to further improve their work.
In order to increase awareness about dairy industry scenario and impart leadership skills to the Chairmen & Secretaries of the Village Dairy Cooperatives, Member Unions in collaboration with Federation, are conducting Chairmen & Secretaries’ Orientation Programme at Mother Dairy, Gandhinagar. During the year 1,114 Village Dairy Cooperative Societies have been covered under this programme involving 2,150 Chairmen & Secretaries of the Village Dairy Cooperatives.
During the year, our Member Unions continued to encourage increased participation of women milk producers in the Dairy Cooperative Societies. To develop their skills and enhance leadership qualities, Member Unions organised Self Managing Leadership (SML) Programme at Prajapita Brahmakumaris, Mount Abu for 1,660 women resource persons along with Chairmen and Secretaries of 282 VDCS.
In order to strengthen knowledge and skill base of young girls and women of the villages about milk production management and to motivate them to implement scientific milch animal breeding, feeding and management methods for their animals, Federation, with technical collaboration and resources of Anand Agriculture University, has initiated “Mahila Pashupalan Talim Karyakram” for women resource persons of the Member Unions. It is envisaged that women resource persons trained through this programme would lead the torch light in villages to facilitate women milk producer members to increase productivity per milch animal and in turn improve the livelihood of their fellow milk producers household. During the year, 99 women resource persons have been trained under this programme.
To meet the differential nutritional requirement of animals, we have started marketing of cattlefeed in four different variants under Amul Super dan, Amul Power dan, Amul Josh dan and Amul Purak dan brand names. During the year, total sale of cattlefeed under these brands is 50,060 MT which is 22% higher compared to previous year.
On the basis of results of Animal Survey carried out by MUs, it is observed that there are large number of NPG - NECO (Non Pregnant Not Even Calved Once) animals in milkshed area of MUs. Therefore with an objective to reduce NPG – NECO animal population and to improve productivity of milch animals it is envisaged to initiate Fertility Improvement Programme (FIP) and Productivity Enhancement Programme (PEP) in village dairy cooperative societies affiliated to member unions in coming years.
In our sustained effort to professionalise the dairy cooperative sector and create a pool of talented manpower to serve the rural producer, we continue to support the Institute of Rural Management, Anand in several ways. We provide financial assistance to 15 deserving students in form of Amul scholarship, with a financial outlay of Rs. 15 Lakhs per annum. We have already decided to continue this support for another five years.INFORMATION TECHNOLOGY INTEGRATION
GCMMF has further advanced its Information Technology solutions by enhancing its customised ERP System (EIAS & Web EIAS) to improve its operational efficiencies.
“Communication” is the key word to achieve highest level of performance in today’s competitive business environment. To strengthen the Business Linkages with the business partners of GCMMF, we have deployed “Amul e-Groupware System”. The said system facilitates two-way Online communication with the business partners and helps in improving the performance.
It has also successfully deployed Customer Relationship Management (CRM) solution with a personalised mailing list manager. The said system helps us in informing a large number of customers about our product launch, consumer schemes, recipes etc. instantly and get their feedback.
Your Federation has also further advanced its Geographical Information Systems by implementing the same at all Milk Marketing Offices to smoothen its supply chain management and to improve operational efficiencies.MOVING TOWARDS A GRAND FUTURE
It does not require a crystal ball to sense that dairy cooperatives in India have a gruelling & arduous journey, ahead of them. The phenomenon of liberalisation and globalisation cannot be wished away and we have to prepare ourselves for the future, by leveraging on our inherent strengths. The core foundation of co-operation is the principle of ‘mutuality’ and pooling of resources. The very nature of the dairy industry ensures that an organisation, which wishes to grow exponentially, has to make the best use of all available resources. Our scope of operations will have to be streamlined, in a manner that will enhance our cost-competitiveness and effective customer servicing in all parts of India and abroad. Our Federation and all our Member Unions will have to work in tandem to achieve this cherished desire.
Our Member Unions have taken a revolutionary step forward, by integrating liquid milk marketing operations in all districts of Gujarat, under the common ‘Amul’ brand. This has enabled all Member Unions to benefit immensely from the substantial investment that your Federation has made in advertising ‘Amul Milk’ on national media. Consequently, ‘Amul’ has now possibly emerged as the largest milk brand in the world and has become a force, so potent, that even the largest multinational would hesitate in taking on our might.
It is obvious that if our nation is to witness true development, then dairy cooperatives will have to play a vital role in transforming the socio-economic landscape of rural India. It will not be sufficient for dairy cooperatives to enjoy outstanding success only in isolated pockets within the country. We have been serving as the ‘role model’ for dairy cooperatives across India, for more than half a century. We need to ensure that we continue to inspire other dairy cooperatives in a manner, which will enable them to play a lead role in socio-economic development of their respective regions. A strong dairy cooperative movement in the country will generate a momentum so powerful, that it will propel Indian economy and society to occupy centre stage in the global scenario. It would definitely enable the Indian farmer to emerge as a powerful social, economic and political entity.
The new generation of cooperative leaders from Gujarat will have to demonstrate exquisite leadership qualities and display a rare level of maturity. We need to master the art of managing contradiction and skillfully resolving conflict within the democratic framework. We need to ensure that we project an identity which is in tune with the image of brand ‘Amul’ as perceived by consumers. We also need to personify the core values of our organisation, such as integrity, commitment to farmers, customer-orientation, excellence, innovation, belongingness, quality, co-operation and employee-satisfaction. Effective leadership skills will also help us to tide over any manpower crisis in future, since enhancing employee motivation can minimise employee turnover. We need to evolve a code of conduct for governance and ensure strict adherence to the same.
These measures will certainly help to fructify the dreams of Dr. Verghese Kurien, Shri Tribhuvandas Patel and Shri Motibhai Chaudhary; whose vision it was to make ‘Amul’ an instrument of national development.ACKNOWLEDGEMENTS
Before closing, I would like to thank all those who have helped to make our Federation’s operations successful.
The National Cooperative Dairy Federation of India has been providing us with invaluable support in co-ordination withother agencies and organisations. The National Dairy Development Board has played a role in our growth and development. I am very grateful to them.
The Institute of Rural Management, Anand, as always, has contributed to the perspective building and professionalisation of the management of the cooperative sector. We express deep gratitude for its support.
We are indebted to Vidya Dairy for having organised training programmes on dairy technology for our employees. We are also grateful to SMC College of Dairy Science, Anand, for strengthening the dairy cooperative sector, by providing technically skilled manpower. We express our sincere thanks to the College of Veterinary Science and Animal Husbandry, Anand, for creating a talent pool of veterinary doctors to serve our milk producers.
Our advertising agencies, bankers, insurers, management consultants, suppliers and transport contractors have been of great help to us in managing our growth and have been our partners in our success. We acknowledge their contributions and commit ourselves to continue and strengthen this fruitful alliance in all times to come. We depend on the efficiency of our distributors, retailers and most important of all, the patronage of our consumers, who have cometo regard our brands as synonymous with quality and value. While thanking them for their support, we assure them that we shall strive endlessly to delight them.
Our Member Unions are our strength. We thank them for their guidance, support and co-operation without which we would not exist. The Government of Gujarat has continued to offer support and encouragement, for which we are grateful. Lastly, we thank the officers and staff of our Federation for their continued perseverance, loyalty and unflinching efforts devoted to our cause.
For and on Behalf of Board of Directors
P G Bhatol
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