As Tamil Nadu reels under a drought, dairies are helping farmers with a steady income, says RG Chandramogan, Chairman and Managing Director, Hatsun Agro Products Ltd, India’s largest private dairy. In an interview with BusinessLine, he spoke on a range of issues, including the possible fallout of controversial comments by the State Dairy Minister on private dairies. Here are the excerpts.
How has the extended dry spell affected the dairy sector?
Drought in recent years has hit agricultural output but dairy has done well.
When crops fail, milch cows help farmers generate cash flow. So, farmers will focus their resources, including water and feed on livestock. Dairy farming weathers drought better than crops.
But dairying is still a supplemental activity for farmers. How much of a support is it?
Milk production in Tamil Nadu is about two crore litres daily. Of this, about 80 lakh litres, or 40 per cent, is organised under the State-run cooperative, Aavin, and the corporate sector.
Look at what this means. Over ₹50-55 crore daily or ₹18,250 crore a year cash flows to farmers. This is bigger than major crops, and is steady income as milk prices are stable, the market is assured and payments are made once in 10 days. This is true of the entire dairy sector.
What are the relative roles of cooperative and corporate sector players such as yourself?
The private sector entered the Indian dairy scene just two decades back, while cooperatives have been around for over 70 years. Now, the corporate sector accounts for 52 per cent and cooperatives for 48 per cent. Just two cooperatives, Amul in Gujarat, and Nandini, Karnataka, account for more than half the cooperatives’ share.
In Tamil Nadu, Aavin’s capacity is about 30 lakh litres per day at the most. Corporates handle about 50 lakh litres a day, a part of which goes to meet half of Kerala’s needs. Hatsun Agro alone handles between 28 to 33 lakh litres daily.
Has the corporate sector grown at the cost of cooperatives?
No. The private players helped expand organised dairy farming by drawing farmers from the unorganised sector. India’s organised dairy sector is about 35 per cent and in Tamil Nadu it is 40 per cent. The government had no role in the growth of the private dairy segment except for the initial policy to free the industry.
Hatsun has emerged the largest private sector dairy…
By the year end our capacity will be about 45 lakh litres a day...
That will make you one and a half times the size of Aavin…
Yes. It will.
What are the factors that have contributed to your growth?
Hatsun Agro works closely with farmers, and has built modern infrastructure for procurement, processing and marketing to ensure superior quality of milk and products.
A feature unique of Hatsun is that it procures milk directly from farmers. Over four lakh farmers get paid directly through their bank accounts. So, they cannot be exploited by middlemen financially, or be shortchanged on quantity or quality.
We worked with Tamil Nadu Agriculture University to develop fodder crops such as CO3, CO4 and CO5. The company also supplies balanced cattle feed made at its own 900-tonne-a-day plant. A dedicated veterinary team helps with animal care and educates farmers on hygienic practices.
What is the employment generated in this sector?
Hatsun Agro alone supports 8,000 jobs. If you include its 10,000 milk procurement centres, each of which needs one full-time and one part-time assistant and 3,500 selling centres, it adds up to 50,000 jobs directly or indirectly.
The other private sector players in the State will together account for over 30,000 jobs.
The replacement cost of private investments in dairy infrastructure in Tamil Nadu will be over ₹ 6,000 crore.
In this context, are the recent accusations by State Dairy Development Minister Rajenthra Bhalaji a concern?
The unsubstantiated comments by the Minister are very unfortunate considering he handles the dairy development portfolio. Maybe those working for him have misguided him. First he generalised that private brands sell adulterated milk, then he said barring a few, the rest adulterate, and then he again said a few adulterate. He also claimed results of milk tests are awaited from a Pune Lab. But later reports indicated samples had not been sent after 2016.
Even the Health Secretary’s report submitted to the High Court in this context has clarified that packaged milk from the organised private sector is not adulterated.
Does that mean that there is no adulteration in Tamil Nadu?
Cold chain infrastructure is the lifeline for milk. Once milk is procured it has to be chilled in 4–6 hours, and again on the sales side, temperature control is critical. Tamil Nadu’s organised milk sector has adequate infrastructure for milk. Some complaints occur in loose milk sales and in States where infrastructure is weak.
But in packaged milk such occurrences are rare. Some unscrupulous elements may always be present in any State.
Speaking for ourselves, Hatsun Agro introduced refrigerated trucks much before other cooperatives or corporate players. This ensures excellent quality when milk reaches customers.
How have the Dairy Minister’s comments affected the industry?
The Minister’s comments are against the interests of the State. He has passed very general comments accusing the private sector. It hurts consumers, private processors and farmers alike. Consumers are confused on who is wrong. Excess milk from Tamil Nadu goes to Kerala, will they not be worried?
The Minister is shooting himself in the foot. He can disrupt the growth momentum of the only agricultural commodity that is supporting farmers in the State, hurt customer sentiment and threaten investments.
Look at adjacent Andhra Pradesh and Telangana, which give a red carpet welcome to industries. Even in Andhra Pradesh, where Chief Minister Chandrababu Naidu’s family is in the dairy business, all industries, including competitors, are welcomed and encouraged. This spirit is missing here. If the government cannot help, it should at least not undermine development.
Why is the industry not responding?
Unfortunately, the Dairy Development Minister is not only a competitor, as he controls Aavin, but is also the regulator. Most companies are naturally scared to give a statement against the competitor and regulator.There is a conflict of interest in the competitor being a regulator. That has to be corrected.
Can Aavin cater to the entire State as the Minister said?
Aavin’s milk sales are an estimated 22 lakh litres per day, with peak procurement at 31 lakh litres and an average of 28 lakh litres. The balance 6 lakh litres is converted to milk powder, ghee and other products. It cannot in any way replace 50 lakh litres managed by private sector as of now.
On the quality front, I can speak for Hatsun Agro’s milk Arokya. Its quality is of international standards. Let reputed institutions such as the National Dairy Research Institute, Karnal, or an independent panel of experts assess its quality. Arokya will outmatch any brand, including Aavin.
Hatsun’s products are exported to 38 countries including Singapore and Canada which have strict quality norms.