India’s largest dairy company plans to double its output in ten years

“It’s an oasis in the desert,” says the enthusiastic PR officer, and we can only agree. The view from the spray tower is overwhelming. Far below, we see milk tanker trucks on their way to the collection centre from the arid plains beyond. The Banas Dairy Cooperative is India’s biggest.

The dairy is situated outside the city of Palanpur in north Gujarat in western India. This is an enormous facility that can be seen from afar, but it is not all that easy to get to, and it is definitely not easy to get inside. Due to its proximity to the Pakistani border, it is surrounded by fences and patrolled by security guards.

We are referred to a visitor centre on the site, where the PR officer, Hemendra Joshi greets us. He has made a film about the dairy. It’s like a Bollywood production, with a theme song he composed himself.

Joshi tells us the history of Banas and all the good things the cooperative does for the farmers in the villages, how much they invest every year and all about the latest technology.

It’s obvious that this is the slanted PR version, but it is nevertheless significant that he can give us this information. That he is able to boast about the efficiency of Banas. That the dairy takes responsibility for the welfare of the farmers and is still at least as efficient as the private and transnational dairy corporations.

After the Indian government opened the market for private enterprise, the cooperative model has been challenged.

In the state of Uttar Pradesh the model has collapsed under the pressure of competition and corruption. The cooperatives have been unable to collect milk from farmers who have turned to private collectors, and the dairy workers lost their jobs and livelihood.

What happened in Uttar Pradesh is disastrous for the workers and the dairy unions. This can be contrasted against the successful cooperatives in Gujarat. It was here that the cooperative movement began in the 1960s, and this is where it still has its stronghold. 14 cooperatives share the brand name Amul, which is sold throughout India and is owned by a joint umbrella organisation. These are efficient cooperatives, where the farmers have a strong ownership position.

Production to double

Joshi is certain that the dairy can achieve the targets set up by the Indian government, that is, to double production by 2020. By then, India’s population is expected to increase to more than 1.3 billion.

He lavishes historic and current facts and figures on us. He is proud of what they have achieved. A great deal has happened since the cooperative was started in 1966. In those days, there were eight dairy associations. Now there are 1,361, with 297,510 members. Most of today’s dairy associations have their own premises, milking machines and cooling centres.

Kamraj Chaudhary, who is an engineer, takes us on a tour of the dairy that is more or less the same as a Swedish dairy. It turns out that this engineer has been on a study tour to Sweden to visit Arla Foods’ production facilities. They use the same equipment supplier, GEA Process Engineering, with its head office in Copenhagen and subsidiaries all over the world, including in Gujarat. This was the main contractor that Arla Foods used for its enormous powdered milk plant in Vimmerby. The cooperative’s dairy technicians have visited that plant too.

GEA will be called in for the construction of Banas’ large, new powdered milk factory. The same dairy technology is used all over the world. The packaging line comes from Tetra Pak. Alfa Laval also has a finger in the pie, along with German, French and a few Indian companies. The cooling facilities for collecting milk in the villages are an example of Indian technology that was developed to adapt to local conditions with many small producers.

Even if the farmers still only have two or three cows each, the next stage in dairy production is by no means small-scale. On the contrary, processing is large-scale, and the trend is to increase productivity and volumes, but there is still a great difference between the scale Banas is striving for and that of the transnational corporations.

The new powdered milk factory will be India’s biggest, but its capacity corresponds to less than one-tenth of the Arla Foods facility in Vimmerby.

The same applies to the cows. Banas is working to find cows that are adapted to conditions in India. This endeavour is based on Indian breeding projects, and the cows will not produce as much milk as Danish or New Zealand cattle, which produce around 29 litres per day or more. These extreme levels will not be achieved.

Banas will apply a model which is subsidised by the Gujarat state government, which involves building dairy farms for at least 50 cows outside the villages. Here, interested farmers can place their cows, and the livestock will get better fodder and veterinary services. This is vastly different from the current situation. But it is miles apart from what the New Zealand dairy company Fonterra is currently establishing in India. Together with the Indian Farmers Fertilizers Cooperative, IFFCO, Fonterra has registered an Indian company, Global Dairy Health. The management has been recruited from transnational chemical and food giants such as BASF, Hindustan Unilever and Reliance. 

Global Dairy Health plans to build dairy farms for 3,000 cows in the state of Andhra Pradesh. The cows will be imported from New Zealand. The most advanced and labour-saving technology is to be used in a country that has a dire shortage of both jobs and income security.

The transnational companies’ investments should be seen in relation to the fact that India is the world’s largest milk producer and that it has a growing consumer market.

Milk in the form of powder is a global commodity. The world’s first global internet auction for dairy products, the Global Dairy Trade, was started by Fonterra three years ago. Competitors have been invited to use this platform, which makes the dairy industry a part of the commodity securities market. They want to create a powdered milk exchange similar to the existing one for cereal.

The Australian cooperative Murray Bouldburn, and Dairy American, which represents four American cooperatives, have joined this platform. As from April 2012, Arla Foods will be selling powdered milk via the auction website to reach emerging markets.

An important person

Before leaving Banas, we have the opportunity to put a few questions to Parthi Bhatol, president of the dairy for the past 20 years, and also the president of the Gujarat cooperatives’ umbrella organisation, the GCMMF. His importance is unmistakable. Outside his office is a queue of farmers. We take a seat at his desk. Along the walls, other farmers are seated listening with interest to our conversation, which is interpreted between English and Hindi.

He tells us that they have started buying milk from neighbouring states, including Uttar Pradesh, where the cooperatives collapsed. All with the goal of helping farmers get more money and to provide consumers with milk that fulfils the Amul brand’s quality requirements.

He does not think that this expansion to the neighbouring states will cause any conflicts between the cooperatives. He also says that he welcomes competitors such as Fonterra-IFFCO, and claims that there is already competition from companies such as Nestlé India, which has its own milk collection and seven dairies.

We end by asking him for his views on the large number of contract workers, but he declines from answering. This is obviously a sensitive topic.

By Gunnar Brulin and Malin Klingzell-Brulin