Whither White Revolution - Coops Fleecing Farmers

It’s well known fact that India is the largest milk producer in the world at an est. 140 MMT in 2014, with little more than 16% of global milk production. However, it may not be well known that India still continues to be one of the least efficient milk producer, despite much touted success of the dairy cooperative movement for long. We are using too large a number of animals (around 300 million in cows & buffaloes combined) to produce this much quantity of milk.

Dairy cooperative movement which started in India in early 1970s under the aegis of Operation Flood, has arguably played a significant role in bringing into mainstream a large number of small and marginal dairy farmers (having 1 – 5 animals or more). At the present moment, dairy cooperatives across India touch base with millions of dairy farmers on a daily basis through thousands of milk societies.

While an estimated 70 million out of a total of 140 million households depend on dairy as their livelihood and it is this segment which has hitherto been untouched by rapid improvements in dairy farming world over and in some parts of India and continues to follow primitive farming practices.

Sadly the dairy cooperatives, conceived with an idea of supporting these very small and marginal farmers has focused largely on milk mop-up and doing too little for improving productivity.

Cooperatives on their own have been fairly successful and have built mega brands of milk and milk products with Amul being among Top dairy cooperatives in the world. Without doubt, cooperatives have established an impressive infrastructure in setting up milk collection centers, bulk milk cooling tanks, refrigerated transport of milk and processing plants for producing a variety of milk and milk products.

However, all the success dairy cooperatives have achieved so far, has come increasingly at the expense of the same small and marginal dairy farmers whom cooperatives were supposed to support and develop as part of their founding principles in the first place.

A mere look at the procurement prices (farm gate price) and the consumer (selling) prices of milk and milk products by cooperatives would establish this fact and hence this growing resentment among a section of this small and marginal dairy farmers..

Despite tremendous progress and improvements in clean milk production, milk prices in India by and large continue to be determined by the fat content and SNF of the milk. At the current prices with average fat content of around 4%, dairy farmer gets around INR 21 - 22 / Liter (USD 0.32 per liter at an exchange rate of 1 USD = INR 65). However, after chilling, transportation and pasteurization, this homogenized milk is marketed to consumers at an average of INR 42 per Liter for 4.5% fat content (eq. to USD 0.64 per liter at an exchange rate of 1 USD = INR 65) in Northern part of India and at INR 38 per Liter for 3.5% fat content in Western Part of India.

This clearly is a case of either fleecing the farmers by underpaying for milk or overcharging the consumers or at its worst - both. The irony isn’t lost when a dairy farmer complains of packaged drinking water available at around INR 20 per liter and milk being procured from him at around INR 21 per liter.

Cooperatives which started with a noble idea of supporting small and marginal dairy farmers are increasingly seen as not doing enough except for milk mop up – since these cooperatives have been doubly quick to increase end user / consumer prices of milk but have so far been steadfastly reluctant to offer better procurement prices to the milk producers. Collusion, incompetence or inefficient management systems could possibly be the reasons why virtually all dairy cooperatives in India offer similarly low procurement prices.

From professionally managed to political fiefdoms now – cooperatives have strayed a lot from the ideals of farmers’ welfare and a reality check in the form of increased competition from private players may well be the prescription. Till then, the dairy farmers may continue to be deprived of the real benefits of the much “touted” white revolution” and consumers may continue to overpay. So much for the cooperative movement.

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