Chairman's Speech: 29th Annual General Body Meeting
29th Annual General Body Meeting on 24th June 2003
I believe that all of us present here are blessed to be part of one of the most ambitiously idealistic movements witnessed by human civilisation-the movement called cooperation. Cooperation is first and foremost a philosophy. It is a faith that human beings are capable of transcending narrow self interest to work together to achieve a common and higher goal. However, the magic of cooperation is seen when this philosophy is translated into business and economic success.
There are three ways in which a nation may establish policies to allocate its resources. First, following the doctrines of Adam Smith, the corporate sector may be given a free hand in a nation's economy so that nothing but market forces determine the fate of all socio-economic segments. All of us know, however, that when a nation's fate is left to market forces, the economy becomes skewed in favour of the rich, leaving the poor to the mercy of an unkind fate.
Second, a nation may entrust all its resources to the public sector, the purely socialist approach. But all of us have witnessed the debilitating inefficiencies and lack of accountability that are inherent in this system.
The third method in which the nation can create and distribute wealth is through cooperation. The performance of India's milk cooperatives -- and particularly those in Gujarat -- provides compelling evidence of the superiority of cooperation over unadulterated capitalism, or socialism. We believe that through cooperation we can create and deliver value to both the producer and the consumer. Cooperation avoids the inequities of unadulterated capitalism and the inefficiency and unaccountability of the socialist system - while serving as an instrument of development. It is not a coincidence that throughout the world, cooperation has proven to be the first choice of those involved in the primary sectors, especially agriculture and dairying. It is in the fitness of things as both agriculture and dairying- involving mass production and mass consumption - provide livelihoods to millions of common people in most countries of the world.
However, for a cooperative to deliver value, it needs to remain true to its values, be clear in its mission and run as a highly competitive business. It should be able to create and seize opportunities, to react decisively to events, to anticipate and act to take advantage of future trends. To serve its members - which is the reason why cooperatives exist - every cooperative must have obtained the maximum advantage from procurement, processing and most importantly, marketing and branding. Every cooperative needs to strengthen its core competencies because unlike in the private corporate and the public sectors, they cannot be outsourced without risks. The 'Amul Pattern' of cooperatives has been a model that has stood the test of time and adversities with flying colours. Developed over more than a half century the Amul approach has been successfully replicated in other states over the last quarter of a century. This model has made an enormous difference in the lives of millions of farmers, bolstering their livelihoods and offering steady income in regions where the best part of agriculture is still rain fed and a gamble on the monsoons.
Amul is a matter of faith. It is faith that has proven to be an instrument of development that has given a new dimension to the practice and discourse of development in the country. It is a living example of the truth that farmers should learn to be independent. They should manage their own affairs without interference. As Nehru once said, they will make mistakes while they are learning, but these are only stepping-stone to success as manifested in the experience of Amul.
However, despite the proven success of the Amul Model, it is being threatened by unsolicited attention. It is common knowledge that there is a movement afoot for creation of joint venture companies with various state cooperative federations. The putative objective of these ventures is to offer marketing support to the so-called 'weak' federations. For this purpose, it is deemed necessary to offer a minority stakeholder status to the client federations, while reserving the majority stakeholder status for the NDDB subsidiary. For one who has been associated with and worked for cooperatives for most of his life, it saddens me to witness this colossal blow to the philosophy and practice of cooperation. The unkindest cut of all is that it should come from an organization that was meant to nurture the cooperative movement in India. You may take my word for it that while it is extremely arduous and takes years of dedicated hard work to create a successful organization or model, it is very easy to whimsically destroy the same.
I feel hard pressed to find any justification for the trust that the authorities are bestowing upon the new NDDB model. The key risk in the joint venture model is that it will dismantle the existing marketing federations all over the country. If the Joint Venture model fails, then there will be no organization or skill left in the farmers' organizations to fall back on for the marketing function. Thus, the experiment with joint ventures is well poised to emasculate the healthy cooperative movement and create dependents out of self-sufficient farmers. The weak need to be protected and nurtured, not converted into parasites.
I believe that the forgoing observations prove beyond doubt the suspect architecture of the joint venture company concept.
The silver lining in all the recent events is the continued good showing by your Federation. The success of the Gujarat Cooperative Milk Marketing Federation in not only defending its market, but in taking away market share in almost all dairy products categories from the best of the Multi National Corporations shall act as beacon to other cooperatives in these troubled times.
I now present to you your Federation's Annual Report and Audited Accounts for the year 2002-2003.
The total milk procurement by our Member Unions reached an average of 52.35 lakh kilograms per day, a 10.6 percent increase over the 47.32 lakh Kilograms per day, achieved in 2001-2002. Peak procurement touched a high of 67.52 lakh kilograms in a day. This is an all time record of milk procurement.
During the year, your Federation's sales registered a growth of 17.5 percent increase to reach Rs. 2,745.74 crores including consignment sales of Rs. 404.53 crores. In addition your Federation coordinated Rs. 34 crores in product sales to the Defence services. This year, Amul ice cream achieved record sales, with volume growth by 29 per cent. Sale of Amul Milk in pouches increased by seven percent in value terms. UHT Milk has grown in volume terms by 56 percent, which is a very encouraging market response. Amul and Sagar brand pure ghee sales in volume increased by 27 per cent over the previous year. Despite intense competition and a market recession, sales of Amul Butter grew by seven percent and milk powders remained steady. The sales volume of the Amul Cheese range increased by 15 per cent. This is particularly pleasing as it demonstrates our ability to resist MNC competition. New products like Paneer, Mithaimate, Softy Mix, and fresh curd demonstrated their potential to become dominant brands in the coming few years.
The year 2002-03 saw Dhara turnover grow by 18%, retaining, and reinforcing Dhara's consumer loyalty. This growth was achieved despite a steep rise in market prices of edible oils, in excess of 40%, over the past year. Keeping in tune with the market, the year also saw the launch of Dhara FitnFine, refined soybean oil targeted to the mass consumption segment. The product received a good response wherever it was launched and helped boost volumes.
Amalgamation of the distribution networks carried out in the previous year continued to yield results in terms of vast improvement in distributor infrastructure including cold rooms, computers, bank guarantees and deep freeze storages. Our Amul Yatra programme has already covered 80% of the distributors and 60% of the distributor salesmen, who carry the philosophy of all that Amul stands for, to the market. Over 200 Amul Quality Circles continue to be steered month after month with a national perspective and local focus. The annual business plan for each product is now broken up town-by-town and distributor-by-distributor, thus making the entire planning process thoroughly focused.
I am pleased to inform you that this year your Federation's export turnover has grown by 17 % in terms of volume. As you have witnessed, European Union declared heavy subsidies during last year and as a result international prices have remained at very low level as compared to previous year. As a result, the export turnover in value terms has declined by 6 % in spite of good growth in volume.
We are proud to inform that our Long Life milk has been very well accepted in the UAE and Singapore markets. In the International Market we have grown at a rate of 34% in consumer packs reflecting growing consumer faith in the Amul brand. We have opened a warehouse in Dubai to better serve customers in the region.
Total Quality Management
In 1994, your Federation had embarked on the Total Quality Management journey and in 1999 received the Rajiv Gandhi National Quality Award for the year, 1999, India's premier recognition for quality. Continuing to learn, your employees have consistently striven to maintain improved product and service quality at each stage of the value chain.
More than 25,000 Kaizens -- small improvements in work areas -- were made by your employees in different areas like cost cutting, time saving and process improvement. To ensure minimum wastage and maximum productivity and quality, housekeeping initiatives have been zealously pursued at the Federation offices, warehouses, and distributor points.
Learning from employing Total Quality Management principles have been cascaded to both the Member Dairies as well as distribution channel members. Workshops on Statistical Quality Control have been conducted across the member dairies to achieve Total Quality in the production process.
One of your Federation's most remarkable achievements has been creation of more than 225 Amul Quality Circles across the length and breadth of the country. The Federation's wholesale dealers meet every month in these quality circles and discuss and resolve distribution problems and improve their distribution process.
Your Federation continues its commitment on improving the competency of its professional managers through its Competency based Training Programme which builds both generic and functional skills through in-house, customized training programmes.
Information Technology Integration
At an early stage, your Federation recognized the IT excellence was essential to retaining our competitive edge. During the year, we completed the web layering of our customized ERP-EIAS, linking our member unions and business partners. In the coming year, your Federation will implement Virtual Private Network (VPN) connectivity to facilitate "on-line" information exchange with business partners and monitoring production and sales in order to improve the quality of services and optimisation of resources across supply points.
As recognition of IT excellence, your Federation has been selected for a 2003 International CIO 100 Award.
We believe that your Federation has achieved recognition as one of the world's leading co-operatives, in keeping with which we are promoting the .Coop TLD-- Top Level Domain-- project. To this end, we have incorporated the .Coop logo in our website www.Amul.coop, which has enhanced the Amul brand across the world, giving us another vital business advantage.
Cooperative Development Programme
During the last three years, our Member Unions have implemented an Internal Consultant Development (ICD) intervention, addressing the needs to strengthen the business of dairy farmer members and dairy cooperative societies. Members and societies are the foundation on which your Federation rests.
During the year, Member Unions continued to deliver the Vision Mission Strategy (VMS) module for primary milk producer members & Village Dairy Cooperatives.
Recognizing that good leaders are essential to face growing challenges, your federation has initiated a Chairman and Secretaries orientation program, held at Gandhinagar Mother Dairy, which is focused on strengthening leadership skills and values.
As envisaged in last year's Annual Report, your Federation has opened Amul 'Utterly Delicious' retail outlets across the country to enhance visibility and brand equity while making Amul products available under one roof in a pleasant environment to the consumers.
As of today we have opened parlours in Ahmedabad, Bangalore, Hyderabad, Delhi, and Mumbai. Our commitment to get close to the consumer with good quality, nutritious, ready to eat food at 'value for money' prices will continue with the opening of more number of parlours across the country.
What The Future Holds
There is a plan afoot for systematic enervation of cooperative organizations in India. Milk Cooperatives have been the silver lining in the country's fight against poverty-especially where all other poverty alleviation programmes have achieved limited success. It becomes our duty as practitioners and proponents of cooperation to ensure that cooperation thrives. The only way in which this may be ensured is to make the cooperatives strong and independent organization. What the farmers need today is a mentor-not a tormentor. I have been an advocate for millions of farmers and have devoted my life to ensuring that our farmers- the very backbone of our nation - are not the victims of urban colonialism.
One of the problems of liberalization in India -- unlike in China -- is that the reforms have benefited only the 30 percent of people who live in urban areas. The entire rural economy is still waiting for its share of liberalization. Economic reforms and a fair market price for their products is still beyond the reach of India's farmers who get fixed price for their produce irrespective of the international prices or what market forces could have determined for this country.
Our farmers have to operate within these constraints and work towards getting their fair share of the developmental cake-without suffering from the new colonialism of the better educated, the media and the market savvy urban forces who treat our rural producers only as hewers of wood and drawers of water.
The proposed JVCs are detrimental to the long-term interests of our farmers and the cooperatives they put their trust in. We need strategic partnerships, contractual supply or marketing arrangements and joint ventures that give the farmers enhanced democratic control over their own cooperatives-not domination by government organizations under the guise of expertise.
Cooperatives comprise a special category of business organizations, because their raison d` etre is not profits for shareholders, but returns to the farmers who invest in land and animals. Therefore, they need to be treated differently and with care. Foisting discordant and capitalistic decisions on them will only weaken them. This gains all the more importance because cooperatives are going to be the most significant instrument of development in the future.
Finally, no modern nation can afford to ignore cooperatives that can determine the strength of its democratic fiber. The Indian farmers are deprived, oppressed and with an uncertain future. Our farmers have few resources at their command. Ignoring this important community can only breed restiveness that may turn into a powder keg threatening our nation's very existence. However, when farmers are helped to become self-reliant, to managing their own affairs and to manage their livelihoods, they become the strong spine of nation's democracy. Therefore, it becomes the prime responsibility of the government to nurture cooperatives. I have fought this for all my life and I will continue to do-unless someone shows me a better way of serving our nation's producers to become productive members of our society.
Before closing, I would like to thank all those who have helped to make your Federation's operations successful.
We are thankful to the National Co-operative Dairy Federation of India for their support during the year. The National Dairy Development Board has played a shining role in our growth and development, in more ways than can be expressed. We thank them.
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 their 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