The Hindu Business Line : Jt venture issue blown out of proportion: NDDB chief

THE Chairman of the National Dairy Development Board (NDDB), Dr Amrita Patel, has said that there was ``nothing controversial'' in its move to set up joint venture (JV) companies with State-level cooperative dairy federations and ``the whole issue has been blown out of proportion''.

Dr Patel told Business Line that the JVs were being established primarily to enable cooperative dairies to market their products better and ``it is not at all an approach to weaken the movement''.

Between 1990-91 and 2001-02, total average milk procurement by cooperatives has gone up from 97.02 lakh kgs per day (LKPD) to 175.96 LKPD — a compounded annual average growth of 5.4 per cent — whereas their marketing of liquid milk has correspondingly grown by only 4.6 per cent, from 80.46 lakh litres per day (LLPD) to 133.92 LLPD.

``It would not be possible to sustain growth in procurement without a matching growth in marketing of milk and milk products. Marketing is going to be the single biggest challenge for cooperatives in the coming years'', Dr Patel said.

Lending urgency to the situation was the increased competition from multinational and private Indian companies, which was no longer confined to just premium products such as cheese, condensed milk or dairy whiteners, but even to liquid milk — a segment that was hitherto the sole domain of cooperatives.

``We have so many private brands for liquid milk now, something that was hardly the case till 4-5 years ago. Unless cooperatives get their marketing act together — and here speed is of the essence — they may find it difficult to even hold on to their existing market. And remember, unlike in the era of Operation Flood, we are no longer operating in a protected market'', she warned, adding that the JV route was meant mainly to address this challenge.

NDDB will be setting up the JVs with federations through its recently floated marketing subsidiary, Mother Dairy Foods Ltd (MDFL). MDFL is in the process of finalising a JV with the Kerala Cooperative Milk Marketing Federation (Milma), in which it will hold the majority 51 per cent stake and the latter, the remaining 49 per cent. Besides, it is in talks with the federations in Andhra Pradesh (Vijaya), Punjab (Verka), Karnataka (Nandini), Uttar Pradesh (Parag) and Rajasthan (Saras) for establishing similar marketing JV companies.

Under the proposed arrangement, the functions of procurement, processing and packaging of milk will remain with the primary village societies and district dairy unions affiliated to Milma, even as the marketing of products would be handled entirely by the new JV company. The federations will also relinquish their rights over the use of brands (Milma, Vijaya, etc) in favour of the JVs.

Dr Patel held that the transfer of the federations' marketing functions to the JVs was necessary, considering that the federations were largely creatures of the Government and were ill-equipped to perform this role in an effective manner. ``There is not a single federation today, apart from Gujarat and Karnataka, which has a professional chief executive. Most of them are run by common cadre bureaucrats who are transferred every 3-4 months'', she noted.

According to Dr Patel, the proposed JVs will be relatively insulated from political pressures and unnecessary government interference, which will also give them the flexibility to hire professional managers. ``The chief executive of a federation is supposed to be a trustee of the farmer, who supplies his raw material in the hope that it will marketed to fetch the best possible return. But this cannot happen unless he is a professional and is accountable to the farmer. And accountability comes only if a person is put in a responsible position long enough and not transferred every three months'', she pointed out.

Dr Patel said that the JVs were no different from the Mother Dairy in Delhi, which was also a company floated by NDDB mainly to market the surplus milk procured by the northern federations (Rajasthan, Punjab, Haryana and UP) in the national capital. ``Nobody had problems when we set up Mother Dairy up as a company. Why are fingers being raised against the JVs, which are also purely marketing arrangements that ultimately seek to help the cooperatives to expand their own business? Is this not NDDB's mandate'', she quipped.

The NDDB Chairman drew attention to the growing phenomenon of individual cooperative dairies tying up with private companies to dispose of their surplus milk.

``Today, there is a milk union in Baramati supplying its milk to Dynamix, a private dairy, which, in turn, produces products for Brittania. We have also heard reports about Nestle approaching the federations in Karnataka and AP for similar sourcing arrangements. We want to pre-empt a situation, where the absence of concerted marketing efforts by federations will force more and more unions to tie-up with private companies'', she added.

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