How Milk and Socialism reduced Poverty in India
If you’re from India, Amul is a very recognizable brand. Amul is synonymous with Dairy in India and we consume many of their products from plain milk to cheese to chocolates. Amul is almost as old as Independent India and its story is a fascinating insight into the growth of the country since Independence in 1947.
Agriculture has been and is a major occupation in India. For a majority of Indians in rural India, it’s their main source of income. Agriculture in India is seasonal and is very dependent on the Indian monsoon rains. A bad year in post-independence India would lead to famines and suicides. Young India in the early 1950s was nowhere close to being able to sustain its population with enough food. We had to depend a lot on international aid and the blessings of the Gods. As a way to make more money and have more food, Animal Husbandry was the second largest occupation in rural India. Every family would try to have a cow or buffalo in addition to the farms they took care of.
The Anand Model
In 1945, the milk producers in Anand, a village in the state of Gujarat in India, were being exploited by a private company called Polsons Ltd. The farmers of Gujarat took their grievances to Sardar Vallabhai Patel, a stalwart of the Indian National Movement, a disciple of Gandhi and future Deputy Prime Minister and Home Minister of Independent India. In line with his Gandhian beliefs, he advised the farmers to form a Co-Operative Society. The farmers conducted a protest and ended up establishing the Kaira District Co-operative Milk Producers’ Union Limited, Anand, Gujarat. By 1953, the Bombay Milk Scheme couldn’t absorb all the milk being produced by the Society. The solution was to process the excess milk into other dairy products like Butter and Cheese. In 1955, the Co-Operative Society would rebrand themselves into Amul — derived from the Sanskrit word ‘Amulya’ which means ‘priceless’ or precious.
In 1964, Lal Bahadur Shastri, the prime minister of India, during a visit to inaugurate a plant, decided to spend a night in Anand, Gujarat, where Amul is based. Inspired by what he saw, he set up the National Dairy Development Board (NDDB) in 1965. In 1970, the NDDB came out with a program for the Dairy Industry of India called ‘Operation Flood’ or popularly known as the ‘White Revolution’. Varghese Kurien, the Chairman of Amul, was named the Chairman of NDDB. Varghese Kurien took the ‘Anand Model’ and replicated it across the country. Milma, a similar Co-Operative Dairy Society in Kerala, is an example. One of the innovations he would bring to the table is discovering the technique to convert Buffalo milk to milk powder. This was thought to be impossible at the time by the community. This was crucial since most Indian farmers owned more buffaloes than cows, and the ability to store it as a powder helped improve the longevity of the excess milk produced.
The white revolution, along with the green revolution, propelled India to self-sustenance in food and improved farmers’ incomes, thus lifting a significant portion of the country out of poverty. In 1997, India surpassed the United States as the largest producer of milk.
What is a Co-Operative Society?
According to the United Nations Department of Economic and Social Affairs,
Cooperatives are business enterprises owned and controlled by the very members that they serve. Their member-driven nature is one of the most clearly differentiating factors of cooperative enterprises. This fact means that decisions made in cooperatives are balanced by the pursuit of profit, and the needs and interests of members and their communities.
I’m sure that flew over your head. To understand the model, let’s take a look at how Amul is organized. Amul consists of three tiers,
- The first tier is the Village Cooperative Society, of which Amul has 18000 across India. Anyone can become a member as long as they own a cow/buffalo and pays a nominal fee. Membership is voluntary. Each member is awarded shares of the company based on their output with a minimum of one share per member. The members elect a nine-member management committee that collects the milk and sells it to the District Co-operative.
- The second tier is the District Co-operative, a.k.a the Milk Union, of which there are 18 in India. They are each managed by a 15 member board elected by representatives from the Village Cooperative Society. They process the milk and sell it locally and pass on any excess to the State level Co-operative.
- The third level is the State Co-Operative, the largest and most dominant being the Gujarat Co-operative Milk Marketing Federation (GCMMF). It’s managed by a board elected by the Chairmen of the District Co-operatives. They are primarily in charge of the supply chain, promotion, and marketing for the entire company. They sell milk and milk products nationally and export them internationally.
The milk producers in the first tier are paid in two ways. Firstly, based on the quality and quantity of the milk they produce, they are paid within 15 days of procurement. They also get a second payment in the form of dividends according to the number of shares they hold. According to Amul’s annual report, shareholders get 15% of the profit and further benefits in the form of social security provided by the company such as education, pensions, etc.
Impact of Amul and the White Revolution it inspired
Amul by the numbers, 2018–2019,
- Number of Milk Producers : 764,954
- Total Milk Handling Capacity : 5 Million liters per day
- Sales Turnover: 69660 million INR or ~$1 billion
- 15% of profits goes as dividend to the shareholders
According to the present Managing Director of Amul, RS Sodhi,
80 to 82 percent of the price of the milk they sell goes back to the farmer and farmers supplying milk have witnessed a four-fold increase in their income between 2010–17.
The company aims to become the largest FMCG organization in India by 2020–21. Amul also wants to eventually establish itself as the largest dairy organization in the world. They are currently ranked thirteenth.
The White Revolution has resulted in India being the largest milk-producing country in the world, producing more than 150 million tons of milk in 2017–18, which accounts for about 17% of the world’s total milk production. The White Revolution is also considered more equitable than the Green Revolution since the distribution of animals that produce milk is more equal than land that produces cereals. One of the positive impacts of the White Revolution that is often quoted is the empowerment of women. Women who traditionally had to stay at home and maintain the house while their husbands tilled the fields could generate a source of income for themselves through milk production. Singh and Das (1984), in their study of the Impact of Operation Flood at the Village Level, compared three villages in Bikaner, in Rajasthan, Sabarkantha, in Gujarat, and Periyar, in Tamil Nadu, to control villages that were not touched by the White Revolution. They observed that the average milk yield, price, and production and the average per capita daily intake of calories and protein from milk and milk products were all substantially higher in the co-operative villages than in the control villages.
In 2011, the Indian Government passed the 97th Amendment to the Indian Constitution, which,
- Made the right to form Co-operative Societies a fundamental right. This means that if anyone stops you from doing so in India, you can directly move the Supreme Court for help.
- Asked States to ‘endeavor’ to promote voluntary formation, autonomous functioning, democratic control, and professional management of co-operative societies.
Co-Operative Societies as an Economic Model
I see many ‘woke’ people on Social Media, in their ignorance, using Capitalism as an umbrella term for any form of economic inequality or exploitation that they see around them. Despite its many flaws, the truth is that Capitalism is still the most efficient economic model that humans have devised to date. The only significant alternative, Communism, in the forms that we have seen to date, still has to prove itself.
From a socialistic perspective, I believe Co-operative societies such as Amul offer us something to learn how to structure businesses more equitably. Co-operative societies tick some of the main characteristics in an egalitarian society as envisioned by Karl Marx — the workers have more significant control over the modes of production, there is less alienation of work, and the worker is proportionately compensated for the fruits of his labor — labor that is the source of the wealth the company produces.
For a simple comparison, let’s apply the Amul Model to Facebook. Facebook had a net profit of $18,485 million and 44,942 employees in 2018–2019. Assuming each employee had equal shares in the company as part of the Amul model, each employee would get $61,682 in addition to their annual salary and additional social security benefits. Differences in the pay structure will also be lesser since their pay would be directly linked to their output. Such a redistribution of wealth is desirable and might be possible without sacrificing efficiency and competitiveness.
There are criticisms against Co-operatives as well. The traditional argument against any Socialist idea of economic organization is the inefficiency or cost or lack of sustainability of such business or model that allegedly gives things for almost no cost. However, Amul’s $1billion turnover and position as the world’s thirteenth largest milk producer provides hope that the Co-operative model can be successful while still being efficient, showing healthy growth and remaining competitive. Global giants like Nestle and Danone have tried getting a foothold in the lucrative Indian market but haven’t been able to do so successfully.
Some might also contest me referring to the Co-operative model as Socialist. Rosa Luxemburg in Reform and Revolution describes Co-operatives as “as small units of socialized production within capitalist exchange”. Co-operatives through socialist in nature, still compete in a Capitalist System and are influenced by what their competitors do. Karl Marx himself was suspicious that Co-operatives were a distraction used by the Bourgeoisie but acknowledged that Co-operatives might be a step in the right direction for the social revolution. Critics also point their fingers at Amul, who has behaved like traditional MNCs in undercutting competitors’ milk prices by offloading their excess milk to other retail markets.
Even after taking the criticisms into account, I believe that there is more to gain than lose from trying to understand and recreate the Amul model in other industries and businesses. The impact of Amul also extends beyond its own success — it inspired and enabled the White Revolution that led to a reduction in poverty in India and a better-off society. Instead of viewing it as a radical shift, I prefer to see it as an incremental change in the right direction towards a more egalitarian society.
Amul — The taste of India
The founding fathers of our country, especially Nehru, were influenced by Socialism and the ideas emanating from the Soviet Union. Gandhian values were also often socialist in nature. India turned out to be not just a melting pot of culture and religions but also of ideologies — from the socialism of Nehru to the capitalism of Mumbai to the Communism in Kerala and West Bengal. Amul is a by-product of this diverse thinking and is representative of the myriad influences that have made India today. Its own growth mirrors the progress that India has made in all spheres of life. Just as India adapts to the ever-changing world, I am curious to see how Amul adapts to the Indian market, where one day, like our comrades in the west, we also decide to reject animal milk for plant milk.
References
1. http://www.amuldairy.com/index.php/about-us/history
2. http://www.amuldairy.co m/pdf/FY%2018-19%20Chairman's%20Speech.pdf
3. https://www.amul.com/m/a-note-on-the-achievements-of-the-dairy-cooperatives
4. http://www.amuldairy.com/index.php/faq
5. https://www.financialexpress.com/archive/corporate-social-responsibility-the-amul-way/112172/
6. https://www.jstor.org/stable/4376123
7. https://www.business-standard.com/article/companies/amul-raises-farmers-income-four-fold-in-seven-years-117061500587_1.html
8. https://www.civilsocietyonline.com/interviews/if-we-earn-more-at-amul-we-pay-the-farmer-more/
9. https://isreview.org/issue/93/are-workers-cooperatives-alternative-capitalism
10. https://www.un.org/development/desa/cooperatives/what-we-do/55-2.html
11. http://documents1.worldbank.org/curated/en/748851468771700148/pdf/308270IN0Milk01ion01see0also0307591.pdf
