Changes in the political economy of the dairy industry may not result in immediate decline in the income of farmers. But the shift from cooperative to corporate will make the sector susceptible to vagaries of the neoliberal market.
On December 30, 2022, Union Home Minister Amit Shah, who is also the country’s first Minister of Cooperation, declared, “Amul and KMF together will work towards ensuring a primary dairy in every village of Karnataka.” He was speaking at the inauguration of the mega dairy at Mandya district when he pushed for cooperation between the Karnataka Cooperative Milk Federation (KMF) and Gujarat’s Anand Milk Union Limited (Amul). The statement triggered an immediate backlash, not only from opposition parties and farmers’ groups, but also from the common citizens of Karnataka.
The backlash was not surprising, given that KMF provides livelihood to more than 25 lakh farmers in the state. The proposed merger is being seen by opponents as an attempt to destroy the cooperative enterprise built brick-by-brick since 1974. The anxieties of the people were justified, given the Modi government’s history of encroaching the powers of state governments, its centralising and authoritarian tendencies, especially its intrusions into the cooperative sector. Without understanding the changing political economy of the cooperative dairy sector under the Modi regime, one cannot understand the impending threat to the Indian cooperative sector in general, and to the federal nature of milk cooperatives in particular.
The Ministry of Cooperation, with Shah at its helm, was created in 2021 with an aim to gain control over state-level cooperatives through carrot-and-stick policies. Moreover, before coming to Karnataka, Shah had declared in Sikkim in October 2022 that the process of forming a multi-state cooperative society (MSCS) by merging Amul and five other cooperative societies had been started. He had also said that the MSCS will ensure the export of products in such a manner that profits will directly go to the bank accounts of farmers. Elaborating about MSCSs in the dairy sector, Shah had even said, “We have a huge opportunity to deliver milk to countries like Bhutan, Nepal, Bangladesh, and Sri Lanka. To explore this world market, the government is setting up a multi-state cooperative which will act as the export house.”
A few weeks before he came to Mandya, Shah had introduced in Parliament the Multi-State Cooperative Societies (Amendment) Bill, 2022, enabling the Union government to control autonomous cooperative organisations. It has enabling provisions that would reduce the member cooperatives to adjuncts of the Union government. For example, the Bill empowered the Union government to establish a Cooperative Election Authority to conduct elections; supervise, direct, and control the preparation of electoral rolls; and perform other prescribed functions. The Authority would consist of a chairperson, vice-chairperson, and up to three members appointed by the Union government on the recommendations of a selection committee. Apart from this, the authority for auditing accounts and initiating penal action against violations would be transferred to a body in which the Union government will have overwhelming power. The MSCS would, in essence, cease to be cooperative and become a body administered by the Union Government. Further, to make these non-cooperative agendas clearer, the Modi government announced on January 11 that it has decided to form three national level MSCSs — Multi State Cooperative Seed Society, Multi State Cooperative Organic Society, and Multi State Cooperative Export Society.
It is in this background that Shah’s proposal for joint cooperation between Amul and KMF caused resentment in Karnataka. The Union government’s focus is on using the cooperative base at the ground level for collection and distribution of milk, while corporatising the marketing and exports, with private participation at the apex level. Since the milk industry is worth Rs 15 lakh crores and has great export potential, the government is evolving new hybrid cooperative structures where corporates will also have a say in administration and investment opportunities. Farmers producing organisations and companies as envisaged in the now annulled Agricultural Produce Market Committee (APMC) Act was one such hybrid measure.
According to government estimates, India’s per capita availability of milk is far above the international average at 427 gms/per day. Hence according to the NITI Aayog, as described in its ‘Strategy For India at 75’, production for exports by deregulating the dairy industry and corporatizing the Cooperatives are the way forward in making maximum benefits. NITI Aayog envisaged a major role for corporates in the dairy sector. Atul Chaturvedi, Secretary, Department of Animal Husbandry and Dairying recently said that investments made in this sector can give better returns than manufacturing or services. Private industrial houses have identified upstream supply management, milk processing opportunities, and downstream supply management as the main areas that will drive private investment.
While Amul is the biggest milk cooperative in the country with Rs 65,000 crore turnover in 2022, KMF comes second with a Rs 25,000 crore turnover and a huge cooperative network of milk production, processing, and distribution. The very nature of milk production and collection in India is still small-farmer-based. Corporatisation of the production and collection hence demand huge investment. The private sector’s aims to tap the potential of the dairy industry are encouraged by the proposed centralisation of cooperatives through national-level MSCSs controlled by the Union government. This business model was also the demand of both the federations of Indian big businesses, namely Confederation of Indian Industry (CII) and Federation of Indian Chambers of Commerce and Industry (FICCI).
The CII had suggested, “To give an additional impetus, a targeted approach ensuring higher public-private partnership would be needed. Access to concessional institutional credit to farmers and greater participation of the private corporate sector may help in enhancing private investment in the dairy vertical. Strong tie-ups between farmers and processing players along with enhanced uptake of new technology would be key to ensure efficient farm management.” FICCI, in its 2020 paper “Development Of Dairy Sector In India” had suggested the same. According to it, the export of milk and milk products have been consistently expanding. During 2020-21, India exported 54,762.31 million tonnes of dairy products worth Rs 1,491.66 crore. The major export destinations were UAE, Bangladesh, USA, Bhutan, and Singapore.
Exports of milk and milk products lie at the heart of the next phase of dairy development. Modi government’s Atmanirbhar Bharat Abhiyan says that it is looking to produce 330 million tonnes of milk by 2024, and expand its share in global dairy exports from the current 0.36% to 10%. The Union Government’s Rs 8,004-crore Dairy Development and Infrastructure Development Fund, which can be accessed by state federations, dairy unions, milk producer companies, multi-state cooperatives, and National Dairy Development Board (NDDB) subsidiaries, coupled with the Rs 15,000-crore Animal Husbandry Infrastructure Development Fund for the private sector, is set to finance the expansion of dairy procurement, processing, cold-chains supply chains, value added products, and animal feed infrastructure.
As Sagari Ramdas of Food Sovereignty Alliance, India, has observed, the objective is to integrate producers and milk markets still operating in the ‘unorganised sector’ into India’s corporate dairy agribusiness. This will be done by aggregating farmers into Farmer Producer Organisations (FPOs), equipping them with bulk milk chilling infrastructure to store milk, and vertically linking them to integrated dairy companies, be it Amul, Lactalis, or any other.
This is the new political economy of milk cooperatives in the neoliberal Moditva regime. The cooperative sector brings in daily, commanding contact with more than 10 crore milk producers in India. This control over the income generating activity also provides huge potential for building political clout. The emergence of the BJP and Shah can be traced to their political investment in the cooperative sector. This is also true for cooperatives in other sectors and in other states. Cooperatives also have been used as the breeding ground for political clientelism of Hindutva in Gujarat.
These changes in the political economy of the dairy industry may not result in immediate decline in the incomes of milk producers, but since the cooperative structure of the economy and administration is being changed to corporate capitalist, the whole sector becomes susceptible to vagaries of the neoliberal global market. Such susceptibility has already taken tolls on the economies of many nations and sectors.
The anxieties and resentment of the people of Karnataka against the Amul-isation of KMF is real and serious. Though the Bommai government has said that no such proposal of merger is before the government, the declaration of national level MSCS of milk cooperatives by the Modi government belies the statement of Bommai. In fact, in the neoliberal world led by corporate giants spreading their tentacles to all sectors, the cooperative sector is either being destroyed or amalgamated into the corporate sector, as its ancillary. This process is accelerated in India under the Modi regime. Thus it has also become a political question of welfarist democracy v/s authoritarian corporate capitalism.