The Hindu Business Line : Consortium approach to dairy plan opposed

New Delhi June 25 State cooperative dairy federations have opposed the implementation of the 15-year National Dairy Plan (NDP) through a consortium comprising the National Dairy Development Board (NDDB), National Bank for Agriculture and Rural Development (Nabard) and National Cooperative Development Corporation (NCDC).

At a recent meeting convened by the Union Agriculture Minister, Mr Sharad Pawar, to discuss the proposed Rs 15,517 crore plan, the State federations are understood to have vociferously argued against a consortium approach.

According to them, consortium lending made sense for large projects such as petroleum refineries, where the investment requirements were beyond the financial resources of individual agencies.

But since dairy projects were of comparatively smaller scale, there was no need for a consortium. On the contrary, a consortium, by discouraging competition among financing agency, would work against the interest of farmers, the federations claimed.

Disagreement

Those who expressed their views at the meeting on June 13 included the Gujarat Cooperative Milk Marketing Federation (`Amul'), Rajasthan Cooperative Dairy Federation (`Saras') and federations belonging to Punjab (`Verka'), Kerala (`Milma') and Andhra Pradesh (`Vijaya').

The Agriculture Ministry has proposed that the Rs 15,517 crore plan, to be implemented between 2007-08 and 2021-22, would be funded mainly through a special purpose vehicle (SPV) promoted by the consortium. The SPV would raise funds from the market, also receive grants and interest subsidy from the Centre, and further on lend these at 12 per cent interest.

Besides the inherent `anti-competitive' nature of consortium lending, the federations are also irked by the presence of NDDB in the consortium. According to them, NDDB, through its subsidiary company, Mother Dairy Food Processing Ltd, has of late emerged as a direct player in the dairy industry, with its brand competing against `Amul', `Aavin', `Verka' and other cooperative brands.

Against NDDB

"A lending agency should not have any direct or indirect commercial interest in the business of the borrower. By this logic, NDDB cannot be part of the consortium unless it divests itself completely from Mother Dairy," a federation official told Business Line.

The federations have further opposed the move to make available the consortium's funding to companies, trusts, NGOs, farmers clubs, federations of self-help groups and `new generation' cooperatives. This is in addition to the traditional dairy cooperatives registered under the various Central and State cooperative laws, which were the main recipients of funding under the Operation Flood programme.

"NDDB has been mandated by section 16 of the NDDB Act, 1987 to promote the cooperative sector. Financing anything other than cooperatives by NDDB is against the law of the land," the official added.

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