AMULAMUL THE TASTE OF INDIA THE TASTE OF INDIA

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A MUL PRODUCT’S

AMUL means "priceless" in Sanskrit. The brand name "Amul," from the Sanskrit "Amoolya," was suggested by a quality control expert in Anand. Variants, all meaning "priceless", are found in several Indian languages. Amul products have been in use in millions of homes since 1946. Amul Butter, Amul Milk Powder, Amul Ghee, Amulspray, Amul Cheese, Amul Chocolates, Amul Shrikhand, Amul Ice cream, Nutramul, Amul Milk and Amulya have made Amul a leading food brand in India. (Turnover: Rs. 29 billion in 2004). Today Amul is a symbol of many things. Of high-quality products sold at reasonable prices. Of the genesis of a vast co-operative network. Of the triumph of indigenous technology. Of the marketing savvy of a farmers' organization. And of a proven model for dairy development.

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A MUL EXPORT

Exports of your Federation have performed creditably during the year. We have become the first Indian dairy products exporter to achieve a mark of Rs 100 crore in revenues. The year ended with an export turnover of Rs 115 crore (Rs.1.15 billion)-more than trebling our export turnover as compared to the previous year. The reduced subsidies in EU have given us excellent opportunities for export of SMP and FCMP. We have shown that if a level playing field is granted, Indian dairy products would be successful in the global market. We have also grown by 40 percent in consumer pack exports and consolidated our exports of UHT Milk, Ghee and Paneer in particular.

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A WARDS

Ramkrishna Bajaj National Qality Award-2003 Amul - The Taste Of India (Gcmmf)Receives International Cio 100 Award For

Resourcefulness

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T HE AMUL INDIA STORY

"So persevere, if necessary. For success attends only those who persevere, who see their

goal steadily and aim for it unswervingly... who persevere with dedication and faith in

the cause they are fighting for..."

The author, Ruth Heredia's connection with Amul dates back to the inauguration of the

Amul Dairy when, aged four, she presented a bouquet to the guest of honour, Pandit

Jawaharlal Nehru. She and her family have sampled the taste of Amul Condensed Milk

and Amul Cheese through their various progressive stages.

Ms Heredia is an occasional writer, and sometimes lectures on her favourite subjects:

music, literature and history. She has a post graduate degree in English, has been a

librarian, loves animals (especially dogs), and enjoys a good movie or a tennis match.

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The Amul India Story is a stimulating excursion into a dream that is now reality. Blessed

with the vision of Sardar Vallabhbhai Patel, a patriot, the book traces the birth of a small

movement in Gujarat, the Kaira District Cooperative Milk Producer's Union and its

evolution into a fantastic new paradigm of development. A fast-paced narrative, laced

with several fascinating anecdotes, the book chronicles the daring initiatives and

dynamism displayed by a team of committed individuals - a farmer, Tribhuvandas Patel,

a professional manager, V.Kurien and a technologist, H.M.Dalaya. This is a story of

faith, empowerment, and dream realization, with all the elements that make a story more

interesting - passion, humour and the thrill of anticipation...

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A MUL PARLOURS

"Amul Utterly Delicious" parlours are an excellent business opportunity for investors,

shopkeepers and organizations. In order to come closer to the customer, we have decided

to create a model for retail outlets, which would be known as "Amul Preferred

Outlets"(APO).

To have a better idea please go through the following:

1. The criteria for selection of APOs would be - a. Visibility - How prominent is the location of your shop?

b. Shop area: 100 - 300 sq. ft.

c. Good Business potential

d. Exclusive Amul outlet - no other products

e. Willingness to sell the entire range of Amul Products

f. Creditworthiness and past business experience

2. On your inquiry - our Field force would visit your site. He/She would fill the APO proposal form with your passport size photograph. You would require:

i. Shops and Establishment license

ii. Layout of the shop and frontage - The layout of the shop designed by a local architect/local contractor.

iii. 2 Passport size photographs

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2. Renovation Work of the Shop to give it a standard look - would be done to meet the design and specifications at your cost. The cost of renovation of a typical shop would normally be between Rs. 60,000 to Rs. 1 lac.

3. Branding- The APOs would be branded as "Amul Utterly Delicious". The cost of the signage fabrication and installation would be borne by GCMMF office operating in your region.

4. Equipment- You would require the following equipment: a. 1or 2 deep freezers can be purchased through Hamara Apna Deep Freezer

Scheme

b. 1 Refrigerator through Hamara Apna Refrigerator Scheme

c. 1 pizza oven

d. 1 Chest Milk Cooler for Pouch Milk

2. Security Deposit- You would be required to furnish an interest free refundable security deposit of Rs. 25,000 to us. An amount of Rs. 5000/- would be deducted towards refurbishing the signage, in the event of closure of APO before 3-year of operation.

3. Supplies- The delivery of products would be done through our wholesale dealers 4. We feel that the shop has good potential, and needs support in the initial days, we

can offer additional margins upto maximum of 1% on dairy products and 2% on Ice cream. The additional margin shall be target based and shall be given in kind. The support at best would be given only for he first year of business.

Agreement- An agreement bringing us together would be signed

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C HAIRMEN’S SPEECH: 31 ANNUAL GENERAL BODY MEETING ON 23 rd JUNE 2005

Gentlemen,

I feel privileged to welcome you to the 31st Annual General

Body Meeting of your Federation.

It is with great sadness that I have to mention the recent

passing away of one of the pillars of the Amul Pattern-Shri

Motibhai R Chaudhary. Motibhai had played a crucial role at

every stage in the evolution of your Federation. His

complete dedication to his work, his unyielding adherence to principles and his strong

will power made him a true champion of farmers, especially of milk producers. We will

all miss him as a wise leader, as our colleague and friend.

Looking back, I cannot but recall the last 30 annual meetings that have been witness to

the firm establishment of the 'Amul Pattern' as a uniquely appropriate model for rural

development. The success of this model has attracted its own share of admirers,

emulators-and even mudslingers. But I am happy that the Amul Pattern, and the

associated institutions that reflect it, have risen to a level where neither adulation nor

censure need affect us. Rather, we must remain true to our principles and our mission.

I have always been a firm believer of the dictum that 'Brand is power'. A cooperative

without a "brand" can never aspire to survive-let alone thrive-while marketing

commodities in today's competitive environment. Only by nurturing its marketing skills

and building solid brands can cooperatives make their own growing space in the market.

And we must never forget that quality and value are the foundation for successful brands.

It should be a matter of both pride and satisfaction to all of us that the Amul pattern has

helped various state federations in India to acquire and nurture this soft asset.

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State Federations are responsible towards their member unions-their owners-for

profitable and timely disposal of surplus milk procured during flush seasons. If

federations are unable to face the price and demand shocks inherent in a commodity

market, they will most certainly fail. Again, we can take considerable pride and

satisfaction in having helped make available to Federations the production planning and

marketing skills they need to serve their members. Rural managers from the Institute of

Rural Management, Anand (IRMA)-an integral part of the Amul Pattern-have been

instrumental in building these capacities in the Federations. I personally draw immense

satisfaction from my association with the progress of this unique institution. Your

Federation, which has supported IRMA from the outset, should share that satisfaction.

A large proportion of rural livelihoods in India are at the mercy of the law of diminishing

marginal returns from land. This has led to the bleak phenomena of rural-urban

migration, casualisation of urban labour and feminisation of agricultural labour etc. with

the net effect of extremely insecure rural livelihoods. A successful rural development

programme must help rural people stay on voluntarily and profitably in the villages.

Cooperative dairy development on the Amul Pattern has been instrumental in securing

rural livelihoods in many parts of India through income generation, agricultural

diversification, risk distribution, female empowerment and assured employment.

Consider for a moment the case of a subsistence farmer blessed with just a pair of

buffaloes. At an average yield of 5-6 liters daily from each animal, an additional income

of almost Rs.5000 per month is assured for 300 days in the year. This does not compare

too badly with any rural employment programme implemented by the government.

When we talk of assured employment in the context of cooperative dairying, it is very

easy to underestimate the reliability of this economic activity. Employment generation in

India has seen a spurt even through the much vaunted Business Process Outsourcing

(BPO) organizations and Information Technology (IT) setups. However, one must never

forget that these activities suffer from the inherent disadvantage of working under

business cycles. Further, the underpinning of these businesses is cheap and skilled

manpower that is both highly mobile as well as susceptible to replication by other

nations. Thus, even were outsourcing and information technology to reach our rural poor,

they can never offer our country a sustainable competitive advantage, leaving us

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vulnerable to massive disruption should the business move on to other countries where

skilled labor is less costly. On the other hand, the underpinning of a successful

cooperative dairy business is comprised of farmers who have a collective consciousness

and a shared vision towards the domain centrality of milk and the need for cooperation in

dairying. Neither they nor their milch animals can be relocated or replicated in the short

or medium term by any other nation. I therefore put forward my case that cooperative

dairying on the Amul Pattern forms a source of assured employment and a sustainable

basis of competitive advantage for India. Here, I quote Dr. William Lewis of Mckinsey

Global Institute from his book 'The Power of Productivity': 'Hours worked producing

milk in India are equivalent to 45 million full-time employees. That means dairy in India

has more employment than any other sector in any economy in the World'.

Apart from being a source of assured employment and competitive advantage, a successful cooperative movement also instills the self-confidence and self-respect that spring from self-reliance. These qualities are reflected in the better deals for electricity and irrigation water that Gujarat's farmers have negotiated when compared with what has been imposed by authorities on the less-well organized farmers in other states

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AMUL MILK

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AMUL MILK PRODUCTS

This is the most hygienic milk available in the market. Pasteurised in state-of-the-art processing plants and pouch-packed for convenience.

Amul Fresh Milk

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A MUL ORGANISATION

Gujarat Cooperative Milk Marketing Federation

GCMMF: An Overview

Gujarat Cooperative Milk Marketing Federation (GCMMF) is India's largest

food products marketing organisation. It is a state level apex body of milk

cooperatives in Gujarat which aims to provide remunerative returns to the

farmers and also serve the interest of consumers by providing quality

products which are good value for money.

Members: 12 district cooperative milk producers' Union

No. of Producer Members: 2.41 million

No. of Village Societies: 11,615

Total Milk handling capacity: 7.4 million litres per day

Milk collection (Total - 2004-05): 2.08 billion litres

Milk collection (Daily Average 2004-05):

5.71 million litres

Milk Drying Capacity: 511 metric Tons per day

Cattlefeed manufacturing Capacity:

2340 Mts per day

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A MUL MILK SALE TURNOVER

Sales Turnover Rs (million) US $ (in million)

1994-95 11140 355

1995-96 13790 400

1996-97 15540 450

1997-98 18840 455

1998-99 22192 493

1999-00 22185 493

2000-01 22588 500

2001-02 23365 500

2002-03 27457 575

2003-04 28941 616

2004-05 29225 672

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MILK PROCUREMENT

Total milk procurement by our Member Unions during the year 2004-05 averaged 58.89

lakh kilograms (5.9 million kg) per day, representing a growth of 15.2 percent over 51.13

lakh kilograms (5.1 million kg) per day achieved during 2003-04. We look forward to an

even better procurement during the current year owing to expectations of a good

monsoon this year.

SALES

During the year, your Federation's sales registered a growth of 1.4 percent to reach Rs.

2,922.53 crores (Rs.29.22 billion) including consignment sales of Rs.1.53 crores (Rs.0.02

billion). This lower than expected overall growth was owing firstly to low procurement of

milk during the first half of the year, and secondly to unfavourable commodity market

prices when procurement normalized. However, I am pleased to note your Federation has

done remarkably well in most of the consumer packs. As I have stated earlier, a

cooperative must increasingly rely upon branded products-rather than upon commodities-

to achieve power in the market. Thus, the dairy line in consumer packs grew by 11.8

percent during the year. Sales of Amul Milk in pouches increased by 36 percent in value

terms. A notable development in the area of liquid milk in pouches has been the

successful launch of Amul Milk in the Kolkata market during December 2004. UHT Milk

has grown in value terms by 23 percent. Amul ice cream achieved a sales value growth of

10 percent, and has strengthened its position as the undisputed market leader. Despite

intense competition, sales value of Amul Butter grew by 4.5 percent. The sales of the

Amul Cheese range increased by 21 percent. Products like Flavoured Milk, Amul Fresh

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Cream, Paneer, Mithaimate, Softy Mix, and fresh curd demonstrated their potential to

become dominant brands in the coming few years. We have launched a promising new

product called Amul Masti Spiced Buttermilk during the year.

DISTRIBUTION

Alignment of our four Distribution Highways of fresh, chilled, frozen and ambient

products was a major development during the year. This was a significant achievement in

order to develop synergies amongst all our product lines so as to leverage these highways

to introduce and increase the reach of new products as per market demand. I am happy to

say that today you will not find a comparable distribution set up in any other organization

in the country.

This year our major initiative was to further increase our Distributor Network in smaller

towns. It was in line with the fast changing market scenario resulting from rise in

household incomes leading to metamorphosis of rural and smaller markets, significant

increase of middle class families and migration from rural areas to smaller developing

towns. This has resulted in the emergence of growing markets in smaller towns all across

the country. An addition of almost 900 distributors in small towns was undertaken on a

Time Based Military (TMT) technique. This initiative has already started yielding results

in the form increasing availability of our products in smaller towns and thereby

generating additional business.

Amul Yatra programme is conducted to bring our channel partners to Amul so that they

get an exposure to our cooperative institutions and also come to know about our

achievements. This year our emphasis was upon top retailers from across the country. So

far, 1406 retailers from all over India have visited Anand out of which 950 top retailers

came during this year. This also included a group of top retailers from Bhutan.

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COOPERATIVE DEVELOPMENT

During the year, Member Unions continued to implement the module on Vision Mission

Strategy (VMS) for primary milk producer members and Village Dairy Cooperatives.

Facilitated by specially trained consultants, 1313 Village Dairy Cooperative Societies

(VDCS) have conducted their VMS workshops and prepared their mission statements and

business plans for the next five years.

Continuing the cleanliness drive at village level, Member Unions identified and imparted

training to 8474 Core groups comprised of milk producers and representatives from the

Management of the VDCS during last five years. To enhance the level of cleanliness,

4386 VDCS celebrated Red Tag Day on 2nd October with awards for the best performing

VDCS.

As a part of the Breeding Services Improvement Programme,training was imparted to

3451 Core groups at village level in improvement in Artificial Insemination (AI)

Services. Member Unions implemented the AI Audit Competition during the year and in

the process, identified & awarded the best performing VDCS and AI Workers of these

Societies.

During the year, 2311 Chairmen and Secretaries from 1201 VDCS have been covered

under the Chairmen and Secretaries' Orientation Programme at Mother Dairy,

Gandhinagar-so as to bolster their leadership skills and knowledge of the dairy industry

scenario.

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Our Member Unions continued to encourage increased participation of women milk

producers in the Dairy Cooperative Societies. To develop their skills and to enhance their

leadership qualities, Member Unions organised Self-Managing Leadership (SML)

programmes at Prajapita Brahmakumaris, Mount Abu. 3189 women resource persons

along with Chairmen and Secretaries of 500 VDCS were involved.

EXPORTS

Exports of your Federation have performed creditably during the year. We have become

the first Indian dairy products exporter to achieve a mark of Rs 100 crore in revenues.

The year ended with an export turnover of Rs 115 crore (Rs.1.15 billion)-more than

trebling our export turnover as compared to the previous year. The reduced subsidies in

EU have given us excellent opportunities for export of SMP and FCMP. We have shown

that if a level playing field is granted, Indian dairy products would be successful in the

global market. We have also grown by 40 percent in consumer pack exports and

consolidated our exports of UHT Milk, Ghee and Paneer in particular.

POUCH MILK

Amul pouch milk has become the largest contributor to our turnover with annual sales of

about Rs.626 crores (Rs.6.26 billion) during 2004-05 as against Rs. 462 crores (Rs.4.62

billion) during the previous year implying a growth of about 36 percent.

During last year we had surveyed major markets for exploring possibility of opening new

markets. Taking into consideration our strong brand equity, experience of milk marketing

and our association with milk in the consumer's mind, we are planning to open several

new markets and will focus on distribution expansion in the existing metro markets.

INFORMATION TECHNOLOGY INTEGRATION

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Your Federation has further advanced its Information Technology solutions by

implementing Geographical Information System (GIS) with digital city maps at major

cities of India so as to excel in distribution planning.

It has also taken a major initiative in deploying process driven Enterprise Resource

Planning (ERP) software systems at its member unions in order to bring efficiency in

manufacturing processes.

AMUL AND THE COOPERATIVE MOVEMENT

Amul embarked upon its illustrious journey as a beacon for the Indian cooperative

movement in 1946. Since then, it has been undergoing a multidimensional evolution

whose overarching objective has been the same throughout: serving the farmer and

catering to consumer requirements. A structural landmark in this evolution process was

the formation of the GCMMF in 1974. Throughout these last 31 years, we have

demonstrated-again and again-that Amul both represents and reconciles diverse

expectations and aspirations.

For the farmers, Amul brings the power to direct their own destinies. Membership brings

them the freedom that arises from secure livelihoods. For our women members, Amul

means assured employment, additional income in the household kitty and the growing

empowerment from creating and controlling that income. For the girl child, Amul

translates into education and consequent emancipation. The consumer sees Amul as a

guarantor of assured quality and of value for her hard earned money. For cooperatives

across India, Amul is an inspiration to excel in procurement, processing, marketing and

brand building. Finally, our nation takes pride in Amul as proof that our own Indian

vision, backed by hard work, management skill and honest capable leadership can

achieve miracles.

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Notwithstanding the achievements of Amul and the Amul Pattern, their true essence

remains elusive to most who are outside the cooperative movement, and to some who had

seemed to comprise an integral part of it.

Amul is the epitome of a unique model of cooperative development called the Amul

Pattern. It is also the spearhead of the cooperative movement in India. Starting with

Polson, it has decimated the evil presence of rent-seeking middlemen from dairy business

in India. It has empowered farmers through skills of procurement, processing, marketing-

and more recently-of being in direct touch with the customer through retailing. This

ensures not only fair returns for milk produced, but also a never before closeness to the

market facilitating a real time feel of its pulse. The diffusion of this visionary experiment

has ensured the proliferation of numerous Amuls across India. Thus, Aavin, Him,

Mahananda, Milma, Nandini, Omfed, Parag, Sanchi, Saras, Snowcap, Sudha, Verka,

Vijaya, Vita-all are manifestations of Amul in its regional avatars. All of these brands and

the cooperatives that produce them serve their farmer members while growing steadily in

size, strength, expertise and market presence.

Our fledgling cooperatives have often been derided as innocent of marketing skills.

While the marketing of high profile products like ice cream may be seen as glamorous

and enviable, the achievements of the cooperatives that do not make it regularly to the

news are not less than miraculous. A massive network collecting milk from almost 12

million farmers, testing it, grading it, transporting it twice a day from 100,000 villages

over 10000 routes to about 200 dairy plants, processing it, packing it and sending it to the

market in almost 800 big and small towns every single day of the year-I hope you will

agree that this is no mean task in marketing. Further, the vision that gave this network a

solid shape and the management skills that keep it running like a well-oiled machinery

are hard to underestimate. Delivering wholesome nutrition to the consumers at the most

reasonable prices to be seen anywhere in the world, while transferring the bulk of the

value realized back to the farmer is a feat both in marketing as well as in social

development. Yet, I will not claim that every task that our cooperatives perform is

performed in the most efficient manner possible. Scope for improvement is there, and

certain antecedent conditions are required to achieve these improvements.

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Cooperatives must be headed only by professionals armed with tenures long enough to

achieve meaningful changes and to put in place comprehensive systems. An officer

deputed with ad hoc powers and subject to sudden transfers to head a cooperative can

hardly be expected to measure up to the task. As a corollary, no political consideration

must colour the policies, objectives, strategies and functioning of a cooperative. The

Prime Minister of India has made a significant contribution to this end by announcing

that after bringing about progressive amendments to the Multi State Cooperative Act, the

government was also working on suitable constitutional amendments to ensure autonomy

for cooperatives in India. Needless to say, we would look forward eagerly towards

developments in this regard.

A lot has been achieved and a lot is being achieved in the arena of cooperation. However,

a painful paradox stares at us today in the form of the very organization set up by an Act

of Parliament with a mandate to replicate the Amul Pattern doing everything in its power

to subvert it-and thereby converting its institutions into Public Sector Undertakings. A lot

of avoidable controversies and confusions have been kicked up in this regard. So I must

make a small point in clarification: it is my firm and unshakeable belief that the entire

Amul Pattern dairy value chain from procurement through marketing-along with the

associated brand-is the sole and exclusive domain of the farmer. The moment the farmer

loses or dilutes her right over it, being a small producer of perishable commodity, she

becomes nothing better than a contract labourer. A great opportunity lies in letting the

farmers own and operate their own cooperatives. They will surely make mistakes. And

they will learn to do it in a better way every time. This will be true development for our

people.

Finally, I shall make a small observation on an institution that has been quietly serving as the intellectual and managerial backbone of the Amul Pattern for the last 25 years. The Institute of Rural Management, Anand is the soul of the Amul Pattern. IRMA lives in the collective consciousness of the farmers of Amul Pattern cooperatives and in the success of Amul. It represents the very spirit of Amul. Maintaining and defending its essence is the responsibility of every person who has a stake in the development of rural India

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I NDIA MILK REVOLUTION

India’s White Revolution, which has quietly swept the country during the past few

decades, deserves attention equal to that given to the better-known Green Revolution.

The White Revolution holds the promise of raising the nutritional status of

underprivileged sections of our people. With a production forecast of 74 million tonnes in

1998-99, India has become the largest milk producer in the world. From being a major

importer of dairy products in the 1950s, India has now become an exporter. Milk has

become India’s most important farm commodity, the value of its output (in 1994-95) of

Rs 500,000 million exceeding that of paddy. These achievements have been realised

against great odds: a national herd of poor yielders, crop residues and agricultural by-

products as the main feed, and a lack of adequate marketing support and finance. The true

heroes of our rural transformation are not the grain or oil seed farmers, they are the

women and men who have raised the productivity of our nation’s cattle and buffaloes.

Present Scenario

The success achieved in the augmentation of milk production in the country is reflected

by the fact that milk production has risen from a mere 16 million tonnes in 1950 to 74.3

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million tonnes in 1999. As against a per capita availability of 132 g per day in 1950, the

present per capita availability is almost 214 g per day, despite tremendous increase in

population in the last 50 years. This milk was produced by 70 million dairy farmers from

a milch herd comprising 57 million cows (31 million in milk) and 39 million buffaloes

(25 million in milk) with an average milk yield of 1,250 kg. Almost the entire quantity

(98 per cent) was produced in the rural sector. Only 10 per cent of the milk produced (20

million litres per day) was processed in dairy plants. The value of the output of the dairy

plants was Rs 1,050,000 million. On the consumption side, 44 per cent of the total

production was consumed in the rural sector either as liquid milk or after local conversion

into products; the remaining 56 per cent was consumed in the urban sector.

By far the major part (84.3 per cent) of the liquid milk consumed in urban areas is

supplied by the traditional or unorganised sector of dudhiyas and milk shops. In the

organised sector, while cooperative dairies sell 90 per cent of the milk they process as

liquid milk, the private sector converts 80 per cent of its throughput into products. The

organised sector processes milk in 370 milk plants and product factories and is growing

at an average annual rate of 10 to 15 per cent. In the last 25 years, its throughput has

increased by six times. The average installed capacity of dairy plants has also increased:

from 10,000 to 20,000 litres per day in the 1950s, it climbed to 100,000 litres per day in

the 1970s, to 500,000 litres per day and finally to 1 million litres per day (mlpd) in the

1980s and 1990s. India’s first automated dairy plant of 1 million litres per day capacity,

the Mother Dairy at Gandhinagar in Gujarat, was commissioned in 1996. Amul-III,

which with its satellite dairies has a total installed capacity of 1.5 mlpd, was

commissioned in 1997.

Of the liquid milk consumed in India, a substantial part is used for whitening coffee or

tea. For the economically weaker sections, this use accounts for almost all milk

consumed. The fat content of milk is not of much consequence for this usage, hence the

sizeable demand for lower cost toned and double-toned milks.  

India has made praiseworthy innovations in liquid milk distribution systems. Sachets and

bulk vending have replaced bottles, lowering and eliminating packing costs. Currently,

sachets account for 82 per cent and bulk vending for 14 per cent of the milk sold.

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, 95 per cent of the organised sector products are accounted for by liquid milk, ghee,

butter, dahi, khoa and paneer, all being traditional. The remaining 5 per cent of the

‘western’ type of products such as table butter, cheese, baby food and milk powders are

gaining importance, especially among urban consumers. These products also have export

potential.

Amul And The Anand Pattern

India’s White Revolution had its origin in a single small enterprise started in Gujarat

State. In 1946, at the suggestion of Sardar Vallabhbhai Patel, the farmers in Kaira district

formed a cooperative union to supply milk directly to the Bombay Milk Scheme (BMS),

cutting out private dairy and middlemen who were then supplying to BMS. The Karia

Union began with two societies and a daily milk collection of not more than 200 litres of

milk, under the chairmanship of Shri Tribhuvandas Patel6. Right from the inception of the

dairy cooperative itself, a vital link was established between the producer and Bombay’s

market, ensuring the incentive of a stable and remunerative price to the farmer. The bulk

of the milk is produced during the winter flush season while demand remains relatively

constant throughout the year, peaking in the summer when production is lowest. The

trade exploited this situation by paying the producer 50 per cent of the summer prices

during winters thus taking away the incentive to produce more milk. By installing drying

equipment, the cooperative was able to conserve surplus flush season milk, marketing it

during the lean season. In winter, the cooperative paid the farmers 80 per cent of the lean

season price, which meant they earned 50 per cent more for their year’s production7. As

the demand grew, the cooperative installed processing facilities to match it. The basic

principle of matching the rising demand by enhancing supplies has characterised pre- and

post-Operation Flood  developments. In fact, the shift in the supply function from the

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policy changes introduced with OF resulted in an even larger shift in the supply function

and stable real consumer prices8.

The structure of the Anand pattern was established from the beginning. Initially it

included two tiers, the primary village Dairy Cooperative Societies (DCS) of milk

producers at the base, with a cluster of such societies forming a District Milk Producers’

Union entrusted with procurement and processing. As Kaira District was joined by other

unions in Gujarat, an apex Federation of Unions was created to market their milk and

milk products. The organisations at each level are governed by their own bylaws and are

managed by democratically elected boards. The facilities at all levels are entirely farmer

owned9. By appointing qualified technologists and professional managers, the

cooperatives also made sure that the farmers’ productive genius was linked to modern

management and technology6.  I consider myself fortunate to have had the opportunity of

being associated with this cooperative enterprise almost at the beginning and working

with Shri Tribhuvandas Patel and to lead the team of highly-skilled and dedicated

professionals that we were able to assemble.

From the modest beginning in 1946, Kaira District Cooperative Milk Producers’ Union,

or Amul as it became popularly known, has made exceptional progress. Virtually every

village has a cooperative to which members bring their milk every morning and evening.

The quantity of milk is measured (or lately, weighed) and a sample is drawn from each

farmer to test the fat content of his supply. In tune with its policy of bringing the latest

technological advance to the doorstep of the farmer, each society is provided with an

electronic fat tester. Based on the quantity and fat content the amount to be paid is

calculated. Payment for morning milk is made in the evening; that for evening milk is

made the following morning. With the introduction of computers, many societies weigh

and measure fat simultaneously and milk is paid for immediately on receipt. The Union

has always ensured that productivity enhancement measures are available to its members.

Modern plants produce high protein concentrate feeds and make them available at the

cooperatives. The Union provides animal health care and breeding facilities. Artificial

insemination service with good quality semen was introduced through trained village

society workers. A mobile veterinary service was provided for veterinary first aid. Above

all, the best incentive for enhanced production was the Union’s undertaking to buy the

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entire quantity offered by the farmer irrespective of the season. By the year 1965-66,

Amul had 518 DCs with 110,000 members. It collected 65,905 tonnes of milk and could

process 500,000 litres of milk a day. It sold products of a total value of Rs 92.2 million 2.

These products ranged from milk to baby food, whole milk and skimmed milk powders,

condensed milk and cheese.

Operation Flood

In contrast to Amul’s remarkable progress, the government tried various animal

husbandry and dairy development schemes during the period 1951-70 at a total cost of Rs

11,400 million, but none of them yielded the desired results; many were dismal failures 10.

It was at this juncture that the then Prime Minister of India, late Shri Lal Bahadur Shastri,

paid a visit to Kaira district on October 30-31, 1964. He came at Kaira Union’s invitation

to inaugurate a modern cattle feed plant, then -- as now -- the largest in the country.

Spending a night in a village in the company of farmers and unaccompanied by officials,

the Prime Minister saw and heard first hand from the farmers the transformation brought

about by the Anand pattern of milk cooperatives. On his return to Delhi, he set in motion

the effort to create Anands in all parts of India. The National Dairy Development Board

(NDDB) was formed in 1965 and was charged with the responsibility of building

cooperative dairies in India on the Anand pattern.

In the beginning, the NDDB faced many obstacles. The Dairy Board had few financial

resources; state governments and departments had little interest in turning over their

responsibilities to farmers and, even more, in becoming employees of farmers. In Gujarat,

farmer initiatives, supported by the Kaira Union, resulted in significant progress;

elsewhere little change occurred. It was about this time that mountains of powder and

lakes of butter oil were accumulating in Europe. It was, we feared, just a matter of time

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until some kindly European gentleman decided that this should be donated, or sold at

subsidised prices, to help the ‘poor people of India’. Were that to happen, it would have

been the death knell of our nascent dairy industry. It was to face this potential threat that

the idea arose of using food aid to generate the financial resources necessary to create

Anands throughout India. Fortunately there were individuals of wisdom and foresight in

both India and Europe who supported the idea. So, donated commodities were

reconstituted as liquid milk and sold at prices comparable to those in the domestic

market. The funds that were generated were used to finance the development of our

cooperative dairy industry. Thus, what was a serious threat was successfully turned into

an asset6.

Operation Flood, the programme to replicate Anand and create a flood of milk in India’s

villages, was launched in 1970. The Amul experience had established, tested and proved

the guiding principles for dairy development: a three-tier cooperative structure owned

and controlled by farmers, professionally managed, providing the inputs for production

enhancement, purchasing all the farmers’ milk, processing and marketing it in urban

markets. As the World Bank recently acknowledged, there was thus already a model in

place to implement dairy development and the programme involved institution building

as distinct from institution creation8.

The targets for the first phase of Operation Flood included:

organising village-level dairy cooperatives with the required physical and institutional infrastructure to support production and procure milk

creation of union-owned and managed modern production enhancement, processing and marketing facilities

establishment of metro dairies. The thrust was to link Bombay, Calcutta, Delhi and Madras with the country’s 18 best milksheds, capturing commanding shares of these urban milk-markets.

Operation Flood’s second phase, implemented during 1981-85, targeted a rapid

expansion to 136 milksheds linked to over 290 urban markets with a total population of

over 15 million. The numbers of societies, members and volumes of milk procured, all

more than doubled. The third phase, implemented during 1985 to 1996, involved

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strengthening the basic infrastructure and measures for production enhancement and

animal healthcare and nutrition and thus consolidating the gains of the first two phases.

linked to over 290 urban markets with a total population of over 15 million. The numbers

of societies, members and volumes of milk procured, all more than doubled. The third

phase, implemented during 1985 to 1996, involved strengthening the basic infrastructure

and measures for production enhancement and animal healthcare and nutrition and thus

consolidating the gains of the first two phases.

In the 25 years since the launch of Operation Flood, national milk production has more

than trebled and per capita availability almost doubled. A robust infrastructure with rural

processing capacity of 19.4 mlpd and 6.7 mlpd equivalent of chilling capacity to ensure

good quality of milk has been set up. For the urban consumers, milk marketing facilities

of 7.2 mlpd are in operation. The entire Operaton Food programme was financed by

funds generated from the gifts of butter oil and SMP from the World Food Programme

and the European Economic Community, supplemented in the last phase by World Bank

loans. The internal resources employed increased from phase to phase. Future dairy

development will be self-financing without dependence on external aid or loan11. Today,

OF is a huge undertaking involving (in 1998-99) 10.1 million farm members supplying

an average of 13,659 metric tonnes of milk per day through more than 81,000 cooperative

societies to 170 milk producer unions who process and market it as liquid milk and

processed products. In 1997-98, the system included 13,377 Artificial Insemination

Centres and 787 mobile veterinary clinics.

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Support Role Of NDDB

As the prime mover of the OF programme, in addition to financing the unions on a grant-

cum-loan basis, NDDB provides extensive support for their successful performance. It

coordinates its activities with those of the Technology Mission for Dairy Development

and other government agencies. NDDB assists the unions in recruitment and training of

personnel; technical help is provided in design and selection of equipment as well as in

construction of dairy plants on a turnkey basis.

Research in products, processes and biotechnologies, both in-house and in collaboration

with other government and non-government agencies, supports the cooperative dairy

industry. Product research is aimed at diversification, extension of the product range and

shelf life through suitable packaging. Frozen sliced paneer and continental cheese are

recent additions to the long-established product range of baby food, processed cheese,

condensed milk, milk powders and a number of traditional milk products. Processes have

been established for the mechanised and hygienic production of traditional products

including ghee, paneer and lassi, and sweets such as peda, gulab jamun, shrikhand, and

mishti dohi, as well as flavoured milk drinks12. These products are now marketed in long-

life packaging.

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We have come a long way from the early days of Amul when some multinationals and

exporters of milk products to India, with vested interests, declared that buffalo milk was

unsuited even for powder production, let alone baby food and condensed milk. Amul met

that challenge and proved them wrong13. It has been amply demonstrated that the Indian

dairy industry is capable of making products of a standard equivalent to the best in the

world2. In fact, based on this performance the Codex had to amend its definition of milk

from the mammary secretion of the cow alone -- as was the case till recently -- to that

adopted in the Indian Prevention of Food Adultration (PFA) Rules, namely, the

mammary secretion of milking animals14. International Dairy Federation has approved

cow and buffalo milk as raw material for a variety of cheeses.

Research in biotechnology has yielded valuable results, in all the three areas of

production enhancement, namely, feeding, animal health and breeding. Simple and

inexpensive innovations such as bypass protein feed, urea molasses blocks and the urea

treatment of straw, all improve the nutritional quality of the animals’ normal feed.

Through the Foot-and-Mouth control project 42.1 million vaccinations have been carried

out.

Indian Immunological, a subsidiary of NDDB, produces a variety of vaccines including

rabies and theileriasis as well as a number of veterinary formulations2. Upgrading of Surti

and Murrah buffaloes as well as cross-breeding of Bos zebu with Bos taurus is being

undertaken in a number of research institutions. DNA finger printing is used to select

bulls with desirable breeding traits. Field-based techniques such as embryo transfer are

adopted for the rapid multiplication of breeding stocks. Farmers are progressively

investing in crossbred cows because of their high yields. Increase in the supply of cow

milk is having the salutary effect of an even intake of milk by the dairies throughout the

year15.

Milk production in India is subject to not only seasonal variations but also to regional

disparities . The National Milk Grid (NMG) is designed to move milk from surplus to

deficit areas. Adequate storage facilities for frozen butter and milk powder have been set

up at strategic locations. India’s achievement in dairy development has attracted the

attention of other developing nations who are dependent on imports and are keen on

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indigenous dairy development. Sri Lanka has set up Kiriya Milk Industries of Sri Lanka

in collaboration with NDDB.

Looking Ahead

India enjoys a competitive advantage due to the low farm gate price of milk. In much of

India, milk production is symbiotically integrated into agriculture. The farming system

provides low cost residues as feed and fodder for animals. Milk production, in turn,

supports draught power and organic fertilisers. For two-thirds of the 280 million rural

Indians engaged in agriculture, the farming system generates employment for only a

minor part of the year. Dairying sets right the imbalance in employment. It assures a

regular income to landless as well as small and marginal farmers. The buffalo is an

efficient converter of low-grade fibrous feed into high value milk4. Economic

liberalisation and the dairy industry’s rapid growth has attracted Indian business and

multinationals. Their entry carries the risk that big business will transform the dairy

industry production by the masses to mass production2.

Operation Flood has been one of the largest and most successful rural employment

schemes in the world. Cooperative dairying means regular income to lakhs and lakhs of

small farmers. Cooperative dairying has not been merely the modernisation of milk

production but has larger technological, economic and social dimensions. It has created

and nurtured democratic structures at grass root levels6. Such gains should not be

endangered. Above all, the future of India’s dairy farmer is a trust that each of us holds.

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We cannot and must not let them down2. The dairy industry’s future depends on

expanding and meeting the domestic demand and carefully building a sustainable export

for Indian milk and milk products. The tendency to exploit our competitive advantage by

unbridled emphasis on exports should be curbed.

Though, thanks largely to Dr Kurien’s efforts, India today is the largest milk

producer in the world, milk production still falls far short of national

requirements for adequate nutrition. As against the present production of

about 74 million tonnes, national requirement will be as high as 173 million

tonnes by 2020. Milk productivity per animal in India (1,250/lactation) is still

very poor compared to international levels (2,038 kg/lactation) due to gradual

breed deterioration.

Amul Dairy - a farmers' success story

Amul is an embodiment of faith – faith in the ability of our farmers to break the shackles of poverty and oppression and to create a socio-economic revolution in rural India. At the same time, it had multidimensional impact on rural economy and society: - generating higher income and employment opportunities, facilitating education, enhancing nutrition levels, addressing gender issues and contributing to village-level social amenities. Through the “Anand Pattern” diary cooperatives, our farmers demonstrated to the world, the key to successful “Management of Development”. Diary cooperatives have provided the farmers, a steady source of income, enhancing their earning and enabling them to improve their standard of living.

Operation Flood, which was perhaps, world’s largest development programme, was based on the rich experience gained from the Amul model, also popularly known as ‘Anand Pattern’. ‘Anand Pattern’ is an innovative three-tier organisation structure combines the productive genius of farmers with professional management and modern technology. The facilities at all levels are entirely farmer-owned. The cooperatives are able to build markets, supply inputs and create value-added processing. Prompt and

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remunerative payment for produce of good quality has ensured the best incentive for the farmer to increase production and quality.

The three-tier “Anand Pattern’ structure consists of a Cooperative Society at village level affiliated to a Milk Union at District level and they are further federated into a Milk Federation at State level. The above three-tier structure was formed in order to delegate responsibilities at various levels such that there is no internal competition and economics of scale is achieved.

The Village Cooperative is the primary society under the three-tier structure. It has membership of milk producers of the village (approximately 200 member milk producers per village) and is governed by an elected Management Committee consisting of 9 to 12 elected representatives of the milk producers. The main function of this cooperative society is to collect surplus milk from the milk producers of the village and make payment based on quality and quantity. It also provide support services to the members like Veterinary First Aid, Artificial Insemination Services, Cattle-feed sales, mineral mixture sales, fodder & fodder seed sales, conducting training on Animal Husbandry and Dairying, etc.

The district-level Milk Union is the second tier under the three-tier structure. It has membership of Village Societies of the District and is governed by a Board of Directors consisting of 9 to 18 elected representatives of the Village Societies. The main function of the Milk Union is to process milk into various milk and milk products as per the market requirement. The Union procures milk from the Village Societies of the District and arranges for the transportation of raw milk from the villages to the Milk Union. It also provides input services to the producers and other support to the village level societies.

The State-level Federation is the apex tier under the three-tier structure. It has membership of Milk Unions of the State and is governed by a Board of Directors consisting of one elected representative of each Milk Union. The main function of the Federation is to market the milk and milk products, manufactured by Milk Unions. The Federation establishes distribution network for marketing of milk and milk products and maintains the supply chair network. It also provides support services to the Milk Unions and members like Technical Inputs, Management support and Advisory services.

As a direct consequence of ‘Operation Flood’ and the Amul model, India is now the leading milk producer in the world, with a milk production of 91 million MTs/ annum. The cooperative structure now touches the lives of 11 million farmer households across India. In Gujarat itself, 2.4 million farmer households form a part of the large Amul family. Dairying has now become an attractive source of livelihood; bring prosperity and economic development to rural India.

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