Home Feature Value Chains for Primary Producers… 3 Cheers for Amul

Value Chains for Primary Producers… 3 Cheers for Amul

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Conscious Incrementalism – 3

By Sanjeev Chopra
This week, the column will take up the issue of procurement of a range of primary commodities – from milk to cereals to pulses, oilseeds, apples and copra – and examine why certain transactions leave the producer satisfied and convinced that she has been given the fair price, whereas others leave her in a ‘complaint mode’. This has less to do with the people involved in the transactions: it’s more about the systems, processes, procedures and technology.

When a dairy farmer takes her produce (milk) to the collection centre, the milk is weighed and tested on the spot in front of everyone present. Not only does the producer get the receipt of quantity, the quality is also checked for the fat and the ‘solids’ content of the milk. The rates are displayed prominently, and the milk society has a fixed date for the payment to avoid any confusion whatsoever. There is no limit to how much milk is offered – rather there is an incentive for the highest producer. Payment is made on a weekly basis, but in some societies affiliated to AMUL, it is transferred to the bank account daily. These societies give the cashless option as well.

Before contrasting milk procurement with that of paddy, wheat and pulses by FCI, Nafed and the state procurement agencies, a caveat is in order. Taking Amul as the exemplar, one has to note that Amul intervenes in the entire value chain – from pre-production to processing and marketing, and therefore it is connected both with the producer as well as the consumer. FCI, and till recently NAFED, did not have a direct connect with the consumer. While Nafed is trying to gear up its value chain, and the Nafed Bazaar today tries to offer a ‘farm to fork’ solution, it has many miles to go, but is on the right track. Most other procurement agencies, on the other hand, intervene on behalf of the state ‘season to season’ and operate on fixed quotas. State governments across the country – from MP to WB- offer procurement on MSP for specified quantities. The difference between the price offered by the state procurement agency is significantly higher than the ‘market’, and this is the first and foremost reason for ‘rent-seeking’ and ‘non-transparency’. The problem with this is that there is a perverse incentive for both the producer and the procurement agency to ‘beat the system’, and even when one tries to make it Aadhar card or KCC linked, it is never fool proof. Secondly, as most procurement agencies are not selling the produce directly to the market, there is no scope for a ‘consumer feedback’ and therefore price differentials on the basis of ‘quality of produce’ are not part of the conscious design. Another factor was that, when the state procurement system (principally the FCI) commenced operations, we were living in an economy of scarcity, and it was a “sellers’ market”, unlike in the case of milk, when even in the midst of shortages, there were multiple players – from the milk maid on her two feet to the milk man on the cycle and organised players like Polson and Nestle!

However, the basic strength of the Amul pattern was that the management and control of the basic unit was in the control of the producers themselves. Dr Kurein and the NDDB system stipulated that the milk producer’s society would be responsible for the collection – and the payment was made by the society to the producer. With each transaction, the society deducted a token amount – one to two percent – to strengthen the corpus fund of the society which was used to pay the supporting staff and strengthen the infrastructure, and make the society self-sufficient. The strength and value of Amul is therefore based not just on the management strength of the apex cooperative, but because the primary units form the basic building block.

(Sanjeev Chopra is a historian, public policy analyst and the Festival Director of Valley of Words, an International Literature and Arts festival based out
of Dehradun. He was a member of the IAS, and
superannuated as the Director of the LBS National Academy of Administration).