IS AMUL MODEL BETTER THAN RETAIL FDI?

In the thick of the retail FDI debate, General VK Singh made a statement that went by largely unnoticed. Pitching Amul model against FDI in retail, he said the former is an excellent model to empower farmers.

The statement warrants a closer study of the Amul model for more reasons than one.

First and foremost, it seeks to compare the co-operative model with the corporate-run, contract farming model.

Amul is a network of 31 lakh dairy farmers, who are members of more than 15,000 village co-operatives. Milk producers sell their produce to village co-operatives, which is affiliated to district milk co-operative union and then in turn to the state level milk marketing federation. The model essentially helped farmers to end the strangle hold of the middlemen.

As opposed to this, corporate contract farming is likely to facilitate the role of middlemen for the reason it is impractical for these companies to directly buy commodities from farmers. (Read an earlier Firstpost article here)

On the brighter side, an NDTV report said farmers in Deesa, Gujarat, who had a contract with global major McCain Foods, the supplier to McDonalds, have enjoyed better yield, better production and better profits. Deesa accounts for 40 percent of the country’s potato output.

Those farmers, who are under McCain contract, are assured of a Rs 8 per kilo price, irrespective of the prevailing market price, the report said.

Better yield and quality of the produce is the company’s prerogative and so farmers are provided with technology and expertise, the report said.

A comparison of both the models makes it clear that the element of farmer empowerment is missing in corporate contract farming, while the Amul model is only about that.

So General Singh is right in pitching the Amul model against retail FDI. But it doesn’t mean that the Amul model had no problems at all.

The Gujarat Co-operative Milk Marketing Federation (GCMMF), the owner of the Amul brand, too has the ailments that have eroded importance of the co-operative sector in general.

An earlier report in the Economic Times said the GCMMF has by and large lost its power to keep away from political interference.

The reason, the report said, is its vast reach. It members form about one-third of the voters in Gujarat, a fact that makes the co-operative a target of politicians’ ambitions.

Its founder chairman Dr Veghese Kurien was ousted after he criticised the Narendra Modi government’s policies, the report says.

After Kurien’s ouster, the board of GCMMF is full of politicians, who take decisions that make no business sense, the report said.

If the BJP had not been able to take the complete control of the co-operative, it is only because of the strict constitution put in place by its Kurien.

The backbone of the farmer empowerment aspect of the GCMMF is its unique voting pattern. Chairman of each district union’s votes are directly proportional to the milk procured by their respective district union.

This rule has also kept the co-operative out of the reach of politicians.

But danger is that the rule is now being challenged by the BJP in the Supreme Court. If the court decides in favour of the BJP, the consequences are going to be disastrous.

The moral of the success story of GCMMF is that for such initiatives to bear fruit politicians have to be kept at a distance.

After all, the moot question is will Wal-Mart do the job we don’t want to do ourselves?