The real homage to Patel would be to carry out structural reforms in agri-markets that can ensure a higher percentage of consumer’s rupee going to farmers.
By Ashok Gulati & Ritika Juneja
All is set for prime minister Narendra Modi to unveil the world’s tallest statue (182 metres)—the ‘Statue of Unity’—constructed in memory of Sardar Vallabhbhai Patel, on October 31, in Gujarat. One may recall that when Narendra Modi started his Parliamentary election campaign in late 2013/early 2014, he appealed to farmers to donate their used farm implements for construction of this statue to remind the country about the role that Sardar Patel played not only in unifying the divided country at the time of independence, but also how he was wedded to the cause of farmers. Notwithstanding the digs that some opposition leaders are having that the statue is not made from the collected iron of farmers’ used implements, but is clad with imported Chinese bronze, we want to focus on the real message of Sardar Patel for farmers, and how his message is relevant even today. If the Modi government can fulfil that, it will be a real tribute to Sardar Patel.
It would be interesting to revisit history to recollect Patel’s contribution to Indian dairy farmers. In 1942, food safety concerns drove the British government to tap a private dairy (Polson) to procure milk from Kaira district in Gujarat and supply it to Bombay (350 kms away) for Britishers stationed there. This marked the beginning of the government’s Bombay Milk Scheme (BMS) and creation of a market for Kaira’s milk producers. On the flip side, this established a monopoly of Polson over the Bombay market as a seller and monopsony as a buyer from Kaira farmers. As a monopolist and monopsonist, Polson extracted large rents by squeezing prices for farmers. Disgruntled farmers approached Sardar Patel for help, who urged them to organise cooperatives and cut the milk supplies to Polson. He asked Morarji Desai (his deputy), who in turn asked Tribhuvandas Patel, to carry the struggle forward. In 1945, even before India’s independence, agitated farmers, under the direction of Patel, held a fifteen-day milk strike against government’s BMS, spilling milk on streets instead of supplying it to Polson. This broke the monopsony of Polson in milk procurement. The Bombay market was thus opened for direct milk supply from Kaira farmers. It is this access to a lucrative market that incentivised farmers, and they formed the first farmers’ integrated dairy cooperative—Kaira District Co-operative Milk Producers’ Union—which was registered in 1946. Intrigued by the tenacious farmers, Verghese Kurien, (the Father of the White Revolution) joined the Cooperative as its general manager and set up the first processing plant at Anand to convert excess buffalo milk into milk powder, cheese, etc., which was a technological wonder at that time.
On Sardar Patel’s birth anniversary (October 31, 1964), the then prime minister, Lal Bahadur Shastri, was invited to inaugurate Gujarat’s first cattle-feed compounding factory. He reached Anand a day before and spent the night among villagers. Impressed by the district’s transformation, he urged Kurien to spread the soul of Kaira’s business model across India. As a result, architecture of ‘Operation Flood’ was laid down, and a new institution—National Dairy Development Board (NDDB)—was formed on July 16, 1965, with Verghese Kurien as its chairman. Kurien spearheaded the operation by compressing the value chain and scaling up the vertical coordination between farmers, processors and consumers through cooperatives. He mobilised funds through sale proceeds of skimmed milk powder and butter, donated by then European Economic Commission, loans from the World Bank, and subsidies from the government and invested them in strengthening the dairy value chain. As a result, cooperatives (especially in Gujarat) managed to ensure highest share of consumer’s rupee (75-80%) to the farmers. ‘Operation Flood’ (1970-96) made a significant impact on milk production—from 20 million metric tonnes (MMT) in 1970-71 to 31.6 MMT in 1980-81, to 44 MMT in 1985-86 and 69.1 MMT in 1995-96—a jump of 50 MMT in 25 years compared to the business as usual scenario! As Kurien often said, organising farmers was the easy job, but accessing lucrative markets remained a challenge. As production expanded, Kaira farmers tapped markets as far as Calcutta (now Kolkata), travelling a journey of 2000 kms by rail through specially designed milk tankers.
But, despite success of ‘Operation Flood’, less than 10% of total milk production was being processed through cooperatives. The success of milk cooperatives remained largely confined to Gujarat, despite preference to cooperatives in allocating licences for dairy processing plants. It was in 2002 that the Vajpayee government fully de-licenced the dairy sector. This created competition, resulting in the processing capacity created by the private sector outstripping the capacity under cooperatives.
Yet, together, in the current years, the organised cooperatives and private sector are still processing less than a quarter of milk production in India. India is now the world’s largest milk producer—176.4 MMT in 2017-18, leaving USA (98 MMT) and China (45 MMT) far behind. However, food safety issues in milk still persist.
Today, farmers are suffering from low prices of farm produce ranging from milk and pulses to oilseeds, cotton, etc. Modi government has announced minimum support prices (MSPs) based on a formula that gives at least 50% margin over A2+FL costs. But, unfortunately, market prices remain 10-50% below these MSPs. The real tribute to Sardar Patel would be to carry out large-scale structural reforms in agri-markets that can ensure a higher percentage of consumer’s rupee going to farmers, be it through cooperatives, or any other marketing channel. If the Modi government can do this, that will be a real farmers’ tribute to Sardar Patel.
- Gulati is Infosys chair professor for agriculture and Juneja is research assistant at ICRIER.