‘Amul, Mother Dairy have not formed a cartel’

The National Dairy Development Board (NDDB) recently saw a change of guard with T Nanda Kumar, the first-ever person from the Indian Administrative Service, taking over as the Chairman of the apex dairy sector body. He replaced Amrita Patel who was at the helm of NDDB since 1998. NDDB is currently implementing the World Bank-funded National Dairy Project that seeks to scale up milk output. It is looking to replicate the dairy co-operative model in the fruit and vegetables segment, Nanda Kumar told Business Line sharing his future plans in an interview. Justifying the recent hike in milk prices, the NDDB Chairman said farmers had to be paid well to remain in dairy business, while ruling out extending financial support to the private sector at this stage. Excerpts:

How is the roll-out of National Dairy Plan progressing?

We started a little late. Initially, there was little difficulty in getting States aligned to the objective. Some parts of the project such as genetic intervention will take time, but I think we will be on target when we finish as we are expediting the roll out this year.

What are your future plans for NDDB?

NDP Phase I is being rolled out. There is one concern on the quality of processing as many of the dairies were set up 20-30 years ago. We need to look at their efficiencies in terms of use of energy and water and in terms of quality of output. The second phase of NDP would have addressed it.

We are now exploring the possibility of advancing it. We would like this INAPH – Information Network for Animal Productivity and Health – a software system to be rolled out across the country, even in regions outside the project.

INAPH will generate animal-specific data such as the milk yields, breeds, calving intervals which would help in genomics. Is there any role for private sector in NDP? Any plans to fund the private companies that are investing in developing the back-end?

We believe that farmers must have a choice to sell where they want to. In NDP, we are confined to co-operatives and producer companies; primarily because that’s the way the project has been designed.

I don’t see that changing during the course of this project. It is still the co-operative sector which provides liquid milk to consumers in large quantities. There aren’t many private players in the liquid milk business. That is largely because the operational margins are lower in milk business compared to dairy projects.

As a national organisation, we have a commitment to consumers to ensure liquid milk supplies. I am not sure whether private producers will really want to do that. NDDB has limited funds and to take private sector as partner in NDP is not feasible.

Inflation in milk has been a big concern in recent times. There is a perception that large players such as Amul and Mother Dairy seem to have formed a cartel?

The problem is even Amul and Mother Dairy are not getting enough milk for liquid milk supplies. The cost of production is going up and farmers are demanding a higher price. It is not really a cartelisation, but responding to farmers’ cost of production. If we don’t increase prices at farm level, they might just give up dairying.

If dairying has to remain a profitable business, then farmers have to get a remunerative price. This is also linked to the income security of farmers. Dairy is the only industry where 75-85 per cent of the consumer rupee goes to farmer.

There is no really a cost of intermediation that we can play around with. If we don’t increase the prices, we might be putting the entire growth of milk in jeopardy.

Will NDDB intervene in controlling the prices considering that Mother Dairy is your subsidiary?

No. We don’t intervene in pricing. Mother Dairy is another commercial company. We don’t subsidise it and we cannot. It has to work on commercial principles.

So, what will be the future role of Mother Dairy?

Mother Dairy is just one dairy which will stay in Delhi.

They may be asked to take a larger role in fruits and vegetables, a new area where we need intervention.

I do not see a possibility of Mother Dairy going to other parts of the country and doing milk business, except for specific interventions. NDDB, on its part, would like the States federation to come up strongly and have their marketing in their States.

There is a demand from certain quarters that the Government should not be in milk business. Will you look at divesting Mother Dairy?

Mother Dairy is not the Government. NDDB also does not have Government money.

We don’t depend on budgetary support. We don’t take any taxpayers money.

As of now we haven’t thought about divesting.

It is just a Delhi-based dairy company and essentially I don’t see a larger role for them in the rest of India except for in fruits and vegetable and edible oil. I don’t see disinvestment in Mother Dairy as something of great importance at this stage. By divesting also, we don’t see a great change happening.

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