Cooperatives : Cause & Effect
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In the forties the contractors and distributors of milk made all the profit while the farmers were left with almost nothing. The Kaira cooperatives began as a response to this exploitation and put a end to it. Today the experiment has been replicated in different parts of the country and the results are astounding.
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Cooperatives and Economic Development

Before the cooperative movement began, the dairy industry in the Kaira District was being exploited by middlemen who supplied milk to the consumer. It began as a response to this exploitation and put a end to it. It grew because it responded to the farmers financially as well as with services. It has thrived because it is owned by farmers who have a stake in its success. And because it has been managed by capable professionals and strengthened by dedicated scientists, technologists and workers, it has forged ahead. Today in India, there are 75,000 dairy cooperative societies, spread all over the country with a membership of 10 million. The farmer in the village is now assured of a better future thanks to these cooperatives. Recently one of the European Embassies in Delhi requested us for information on the five biggest "companies" in the dairy business. The first three are in the cooperative sector - The Gujarat Cooperative Milk Marketing Federation (GCMMF). The Kaira District Cooperative Milk Producers' Union Limited and The Mehsana District Cooperative Milk Producers' Union. The Kaira District Cooperative is the second best in the country. It helped to create GCMMF, the apex body of all cooperatives in Gujarat.

The Root Cause

In the forties the dairy industry was dominated by one firm - Polsons. Established by a rather enterprising gentleman who discovered that Kaira District, of what was then Bombay Presidency, produced a good deal of milk. He established a creamery and for a while the name Polsons was synonymous with butter - much as Amul is today.

One of Polson's business was to supply milk to Bombay. As Kaira district was an abundant source of the commodity, Polson was chosen to procure it from there. He in turn, entered into an arrangement with a number of contractors who actually went to the villages and collected the milk. Everyone was happy. Bombay received reasonably good quality milk and Polson made a handsome profit. The contractors too managed to earn large margins by overquoting the farmers. It was only the poor farmers who were unhappy for it. They invested in the animal feed and fodder and they put in their labor. Yet, it was they who received the smallest share of the Bombay consumers' rupee. The arrangement benefited everyone but them.

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The First step: formation of Kaira union

Realizing that something needed to be done about the unequal balance of wealth, they turned to Sardar Vallabhbhai Patel for advice. Sardar Patel knew that their only chance of earning a decent income was when they themselves gained control over the resources they created. He also knew that the cooperatives offered them the best chance of gaining that control. So he advised them to stop selling milk to Polson and form a cooperative of their own. In his opinion they were to own their own dairy unit. He said, "Throw out Polson and his milk contractors". They followed his advice and the Kaira District Cooperative Milk Producers' Union (AMUL) was born, in 1946. By good fortune, they could get as Chairman - Shri Tribhuvandas Patel, an equally remarkable man. He understood the concept of cooperation and he understood people. His integrity was absolute. Because the farmers of Kaira district trusted and respected Tribhuvandas Patel, the cooperative was able to pass through some very difficult times and eventually become a model of cooperative dairying throughout the world.

The Kaira Union began with a clear goal, to ensure that its producer members received the highest possible share of the consumers' rupee. This goal itself defined their direction. The focus was on production by the masses, not mass production. By the early 'sixties, the modest experiment in Kaira had not only become a success, people began to recognize it as such. Farmers came from all parts of Gujarat to learn. They went back to their own districts and started their own cooperatives. The result - Together, the district milk producers unions of Gujarat own the Gujarat Cooperative Milk Marketing Federation which markets the milk and milk products manufactured by its owners. Last year the Federation's turnover was over Rs. 1700 crore making it the largest in the food industry.

In 1964, the then Prime Minister Shri Lal Bahadur Shastri came to inaugurate a cattle feed factory owned by Amul near Anand. Impressed by the cooperative's success, he expressed his wish to "transplant the spirit of Anand in many other places". He wanted the Anand model of dairy development replicated in other parts of the country. With institutions owned by rural producers which were sensitive to their needs and responsive to their demands, it was an ideal tool for progress. The National Dairy Development Board was created in 1965 in response to this call.

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The next achievement: Operation Flood

In the late sixties, the Board drew up a project called Operation Flood (OF) - meant to create a flood of milk in India's villages with funds mobilized from foreign donations. Producers' cooperatives, which sought to link dairy development with milk marketing, were the central plank of this project. Operation Flood which started in 1970, concluded its third phase in 1996 and has to its credit these significant results:

  • The enormous urban market stimulus has led to sustained production increases, raising per capita availability of milk to nearly 200 grams per day.
  • The dependence on commercial imports of milk solids are done away with.
  • Modernization and expansion of the dairy industry and its infrastructure, activating a milk grid.
  • Marketing expanded to supply hygienic and fair priced milk to some 300 million consumers in 550 cities and towns.
  • A nationwide network of multi-tier producers' cooperatives, democratic in structure and professionally managed, has come into existence. Millions of small producers participate in an economic enterprise and improve the quality of their life and environment.
  • Dairy equipment manufacture has expanded to meet most of the industry's needs.

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Effect on Rural Development

A number of field studies conducted by independent researchers emphatically confirm the role played by milk cooperatives the progress of the dairy industry. Millions of small farmers isolated in various parts of the country have gained the strength to sustain their livelihood. The cooperatives have provided gainful employment and brought them close to the market. When cooperative dairying started in Gujarat, the dairy industry was in the doldrums. Production had stagnated and per capita consumption was falling. Farmers were at the mercy of the middlemen. Today, with about 100 lakh farmer producers, Indian dairy farmers have been shown the way to prosperity and health. The ideal conditions for long term growth in procurement have been created.

  • Modern technologies in animal breeding and feeding have been adopted by a significant number of farmers.
  • Modern consumer processing and marketing facilities have been created all over the country.
  • Technical input services including animal insemination, balanced cattle feed / bypass proteins feed, better fodder varieties and emergency  veterinary health services - have not only helped in raising and sustaining milk production but have also ensured a better quality of life in the villages.

Besides creating urban employment in dairy plants, marketing, transport and distribution, these dairy cooperatives have helped to provide farmers with a sustainable rural employment program. A majority of the cooperative members are landless, marginal or small farmers who contribute their produce of milk at the cooperatives. For these contributors, the income derived from milk provides their only regular cash flow, transforming dairying into an economic activity.

The village cooperative is a clean well lit and orderly place. The villages have gone through a similar transformation ever since the cooperatives began to operate. When the people of a village see cleanliness, sanitation, hard work and discipline in the cooperative. When they know that the cooperative serves them well. It probably inspires them to bring more of these qualities into their own lives.

The women members of out dairy cooperatives visit our dairies. They are shown the mysteries of artificial insemination under a microscope. Does not their knowledge of conception in animals help them to better understand their own lives and to begin to control what was simply assumed as a matter of fate?

When out villages people see a veterinarian cure an animal that would have otherwise died, they learn about the efficacy of the modern medicine. When they see their income from milk increase as their animals improve, an the farmer produces better feeds as they ensure better housing and care, they learn hope. And they learn that it is not fate that determines their future, but they can take control of their own destinies. In a nation like ours, democracy whether it be in Delhi or in State capitals rests on a fragile foundation. We must underpin that democracy with a plurality of rural institutions that involves direct control of individuals over matters that have immediate effect on their own lives. They dairy cooperatives of India are such institutions.

Dairy cooperatives are giving a fresh lease of life to farmers in drought-prone areas. Milk production and unexploitative marketing through the cooperatives is providing an assured source of income to farmers helping them sustain themselves against recurring drought. The migrating population is settling down. About Rs 2,000 crores is being paid to the farmers in their villages daily -- morning and evening -- which constitutes a large portion of their income. Operation Flood has, therefore, emerged in India as the largest rural employment scheme. It has been able to modernize the dairy sector to a level from where it can take off to meet not only the country's demand for milk and milk products in the next century but can also exploit global market opportunities. Thereby capitalizing on the inherent production advantages that India has, provided that the right policy options are exercised to overcome some already visible signs of market disorder in the post-liberalization period. Among them are:

  • Over-capitalization in the private dairy sector
  • Ineffective enforcement of standards of processing, hygiene and quality
  • A near absence of any monitoring mechanism to enforce market discipline.
    These threats need to be countered to protect the long-term interests of milk producers, their organizations, as well as of the consumer.

When producers have such structures at their command, they have the means to ensure that the fruits of science and technology reach all those who benefit. It is only when such structures exist that farmers develop confidence in getting an assured remunerative price for their produce. This, in turn stimulates investment in productivity. Further, farmers also demand the delivery of services and inputs they need to realize returns on their investments. Such structures can perhaps educate farmers to the fragile nature of the environment and the need to conserve it.

One big lesson learnt is that farmers must be respected and trusted. They may not be educated, or even literate, but they possess common sense and even wisdom. Frequently, they have shown the ability to rise above narrow self-interest to act together in pursuit of long-term goals and the common good.

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