Chairman's Speech: 31st Annual General Body Meeting
31st Annual General Body Meeting on 23rd June 2005
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.
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 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.
I am now pleased to present to you your Federation's Annual Report and Audited Accounts for the year 2004-2005.
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.
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 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.
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.
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.
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 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.
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
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.
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.
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.
Before closing, I would like to thank all those who have helped to make your Federation's operations successful.
The National Cooperative Dairy Federation of India had been providing us with invaluable support in coordination with other agencies and organisations. The National Dairy Development Board had played an important role in our growth and development.
The Institute of Rural Management, Anand, as always, has contributed to the perspective building and professionalisation of the management of the co-operative sector. We express deep gratitude for its support.
Our advertising agencies, bankers, insurers, management consultants, suppliers and transport contractors have been of great help to us in managing our growth and are partners in our success. We acknowledge their contributions and commit ourselves to continue and strengthen this fruitful alliance in the times to come. We depend on the efficiency of our distributors, retailers and most important of all, the patronage of our consumers, who have come to regard our brands as synonymous with quality and value. While thanking them for their support, we assure them that we shall strive endlessly to delight them.
Our Member Unions are our strength. We thank them for their guidance, support and co-operation without which we would not exist. The Government of India and the Government of Gujarat have continued to offer support and encouragement, for which we are grateful. Lastly, we thank the officers and staff of your Federation for their continued perseverance, loyalty and unflinching efforts devoted to our cause.
For and on Behalf of Board of Directors