amul - a social development enterprise

8/9/2019 AMUL - A Social Development Enterprise

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Dr. Verghese Kurien reflected upon his longinvolvement with the cooperative movement in dairy.Progressive challenges guided the development of Amul thatbegan as a small movement to overcome the exploitation ofthe rural farmers. Farmers were satisfied due to the progressthat had been feasible through the trials and tribulations,efforts and accomplishments of Amul. Consumers acrossIndia were pleased with the widespread availability ofdairy products at reasonable prices. This effort eliminatedthe abusive intermediaries, provided appropriate benefits to

the farmers, which led to rural development and altered thevery nature of this business and village dynamics.What led to this revolutionary transformation? What

were the characteristics of this cooperative that definedits success? The three phases of evolution offered newchallenges, trials and tribulations, while revealing newopportunities prospects and potential. What were thecritical elements of its sustained success over the course ofits journey? How did leadership respond to the changingdynamics of the industry and the cooperative? Moreover,what was the secret of amicable human relations amongst

the farmers and management? How can a cooperativebecome the catalyst for social change and rural development?In brief, what was the rationale of its success?

IDEOLOGICAL LEADERSHIP

The rural folk appealed to Sardar Vallabhbhai Patel for hisassistance against the detrimental and exploitative Polson.His recommendation for the cooperative was pursued and

Tribhuvandas Patel was appointed chairman. Over thecourse of the developments, Sardar Patel resolutely repeatedan indispensable question for Tribhuvan as the metric forprogress, Are the farmers happy? With the same passionand spirit, Tribhuvandas and Kurien led the cooperative todecimate competition and overcome numerous challenges,ensuring that the farmers are happy and benefiting.

The year was 1946. India was soon to becomeindependent of British rule. India was searching for a model


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AMUL INDIA: A SOCIAL DEVELOPMENT ENTERPRISE 295

that would integrate economic prosperity with the imminentpolitical freedom. Espousing a deep-rooted love and under-standing of rural India, Sardar Vallabhbhai Patel, son ofa farmer, had an appreciation for the evolved structuresand systems that define village life. His knowledge of theeconomics of farming combined with his native sagacityprovided him with an unrivalled comprehension of theworkings of the Indian peasants mind.

Indian village structures and systems exemplifiedresilience and social integrity that withstood foreign inva-

sions and social disruptions. Sardar Patel committed thatfor democratic republic of India to thrive it must be rootedin its organic continuity instead of following the conceptof industrialization. Raised in a village community himself,Sardar Patel understood the trials and tribulations, concernsand challenges of rural societies. He desired an evolutionarychange in the rural communities that would not upset itssolidarity.

A prominent element of Vallabhbhai Patels strategywas to organize producer cooperatives to augment ruralincome while developing local industry. There was con-

tinuous exploitation of the farmers, and Vallabhbhai believedthat cooperation was the desired and optimal solution. Heinitiated his experiment in the district of Kaira, the region heknew and loved most. He recognized the need for someoneto lead the cooperative, as his aging physical strength couldnot complement his aspirations for a free India.

Cooperative societies do not emerge without visionaryleadership. Furthermore, they are imperiled with selfishdesires of individuals within and without the cooperative.Tribhuvandas, a young freedom fighter, was identified and

asked to instigate the cooperative movement.Tribhuvandas Patel was influenced by many altruisticand devoted fine men since a young age. These mendepicted moral courage to fight for their beliefs, challengedstatus quo, and in this course sacrificed their lives. MahatmaGandhi himself was a role model for young Tribhuvan, whoattended many of his public meetings.

The visionary zeal and enthusiasm of Sardar Patelcaught Tribhuvan in 1938. The latter was overwhelmed by


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Sardar Patels ideals for rural development. Sardar Patelinstructed Tribhuvan to return to his village of Anand andwork for the people. Over the course of his activities thathad included Civil Disobedience and Quit India movements,Tribhuvan had proven himself as a worthy leader. He wasnothing if not tenacious once convinced of his rightness ofaction. Without any selfish or vested interests, Tribhuvanaccepted the responsibility to organize the milk producerscooperative in 1946. Thereon, working with the cooperativeremained his goal as India struggled for freedom and

economic prosperity. He was unaware of the intricacies ofdairy technology, thus he sought the assistance of Kurien.Verghese Kurien, a Malyali Christian, was looking

for a career in engineering, with intentions of inhabitingthe metropolis of India. Destiny brought him to Anandin return for a government scholarship he had received tostudy abroad. Self-confident and determined, his versatilityallowed him to engineer a comfortable living on his ownaccord. His independent spirit, creativity and drive forperfection persistently clashed with the submissive behaviourof the other government employees at the creamery. Though

Kurien found himself placed in this unhappy situation, hewas determined to find productive pursuits. This is whatanyone with a good education would do; otherwise theso-called good education is worthless,bhe contended.

Tribhuvan offered young Kurien the opportunityto be part of the cooperative that was much in need of hisprofessional expertise. Tribhuvan, an exceptional man withtremendous integrity and commitment to the cause of thefarmers, was a difficult man to refuse. His vision motivatedKurien to contribute his services to build the farmers

cooperative. He was delighted to get the opportunity towork with Tribhuvan, and in 1950 accepted the positionof general manager of the cooperative. The challengesof the cooperative consumed the young engineer. Thisdenoted his lifelong commitment to this movement for ruraldevelopment.

bI Too Had A Dream, p. 22.


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Kurien was initially focused on the operations ofthe plant, which was followed by comprehending marketdynamics and establishing relationships with potentialcustomers. Tribhuvan gradually involved him deeper intothe internal functioning of the cooperative. Kurien de-veloped skills to listen and communicate, accept criticismand suggestions from the farmers, while assisting to developa profitable cooperative. He resonated with the visionof Tribhuvandas and Sardar Patel to bring economicindependence to the dairy farmers of Kaira.

DAIRY KING OF KAIRA

Pestonji Dalal (Polson) built his enterprise during the warfootings, initially supplying coffee followed by butter andcheese to the British army. Recognizing the benefits ofestablishing his plant closer to where cream was collectedbrought Polson to Kaira, the region where milk wasoverflowing. His model dairy was setup in Anand in1930, modern, well equipped and highly automated. With

limited alternatives for the housewives, Polson becamesynonymous to butter, as Xerox is interchangeable tophotocopy.

Polson had established a milk collection networkin Kaira district. With the end of World War II, milk wasdiverted from butter and cheese to supplying pasteurizedmilk to the bustling city of Bombay, through the BombayMilk Scheme (BMS).c Over the years, the plant capacityof the dairy enterprise grew, as it was handling therequirements of the army, government and high-income

customers. To ensure consistent supply to Bombay, Polsonobtained an executive order sanctioning monopolisticpractices in Kaira, i.e. only Polson, the shrewd businessmen,would be allowed to purchase milk from 14 villagessurrounding Anand. Hereon, Polson would set the purchaseprice of raw milk and the selling price to the market,

cThe Bombay State Government established BMS to ensure a steady supply of milkfor its residents.


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practically reigning as the Dairy King of Kaira. The dejectedfarmers received a small part of the selling price, whilePolson and his contractors pocketed the lions share.

Polsons iniquitous and cunning practices resulted inthe ill treatment of the dairy farmers. Unscientific methodswere employed to determine fat-content and quality ofproduce for payment practices. Polson would pay less forthe milk claiming it to be sour. Lack of alternatives and hismonopoly over procurement rights became unbearable forthe producers and small traders. They voiced their troubles

to Sardar Patel, who reiterated his recommendation of thecooperative society. Collaboration had become the meansfor self-defense against the unjust practices of Polson.Tribhuvandas Patel, under the guidance of Sardar Patel, leda 15-day boycott where no milk was supplied to Polsonsagents. Succumbing to the pressure, BMS withdrew itsearlier order, eradicating the monopolistic practices. Thiswas the first victory of the Milk Producers Cooperative.The signs of change were evident, and the cooperative wasestablishing itself in Kaira district.

AMUL: SERVING FARMERS

Following the proposal of Sardar Patel, multiple village milkcooperatives were established. The overarching producerscooperative owned and operated a milk-processing plant tochallenge Polsons dominance and eliminate intermediaries.Kaira Milk Cooperative expanded its functions to includeprocuring, processing and selling dairy products to Bombay,a close and vibrant market. January 1946 marked the birth of

the milk cooperatives in India, and on October 7, 1946 milkcollection began in the first two registered villages. This wasthe beginning of rural renaissance in Kaira.

A cooperative is an autonomous association of personsunited voluntarily to meet their common economic, social and

cultural needs and aspirations through a jointly owned and

democratically controlled enterprise.d The common need

dThordarson, Bruce, The Lessons of Amul for Cooperative Development.


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to fight the abusive practices of Polson was the primaryforce for establishing the cooperative. From the outset, itwas expected to be an autonomous organization with nointerference from the government. The spirit of democracywas at the helm with the belief of joint ownership by thefarmers. Finally, entrepreneurial in nature, the cooperativewas expected to function as an efficient enterprise.

Objectives/Principles

The ideology of Sardar Patel was the source of inspirationfor the emerging milk cooperative. Economic liberation fromthe exploitation of moneylenders and intermediaries wasthe primary objective for establishing this enterprise. Thissystem would provide control over their resources, thusdeveloping economic and social sovereignty.

The ideological commitment, the fundamental prin-cipal of the cooperative was to Serve the Farmers. Thiswas a way of life for the members and workers of thecooperative, encompassing values of modesty, diligence,

perseverance, and frugality. Farmers were the primarystakeholders. Consumers were equally important in thisstructure, as without a market the cooperative would notexist. Belief in fairness towards the producers and con-sumers ensured that the cooperative kept prices low andquality high. This led to the second principle: QualityTakes Precedence. Quality control had the final decision.

Democracy and fairness were at the helm, theideological value that penetrated the organization structurein its daily affairs. This was reinforced by transparency at all

levels, with the principal that audit can access the Chairmanany time it considers necessary.

The Anand Pattern

True to its belief, the organizational structure was estab-lished with the farmers at the helm, the owners and primarystakeholders of the cooperative. Pursuant to the federal


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system of representation, Amul established a three-tierstructure that comprised village cooperative societies, districtlevel dairy unions and state-level federations (Exhibits 3 & 4).

The Village Dairy Cooperative Society (VS), theprimary tier, comprised of milk producers, residents of thevillage who have committed to sell to the cooperative at amutually determined price. Nominal membership of Rs.10was their equity stake in this enterprise. Annually, the VSmembers elected a managing committee, which thereonvoted for a chairperson for each VS. In 2004 there were

1017 village cooperative societies registered in the state ofGujarat.To ensure freshness and quality of raw milk, the

market came to the village doorsteps in the form of villagemilk collection centers. Producers delivered milk twice a dayto the collection centers, which was then transported to theunion dairy plant. Collection centers scientifically tested themilk for fat content and weight, and accordingly paid a fairprice to the producers. Villlage Societies are profit centersthat derive earnings from the sale of milk to the union.

The second tier in this structure was the district union

processor, which collected, processed and marketed the milk.The district union board is composed of the chairpersonrepresenting each Village Society. These board memberselected a chairman and vice-chairman and appointed amanaging director who administered the operations of themilk union. Each district had an independent milk union.Kaira Union was one of 12 district unions in Gujarat (1998).

Gujarats district unions banded together in 1973 toform the apex marketing federation, the Gujarat CooperativeMilk Marketing Federation (GCMMF). This was the third

tier of the Amul Structure. It was established to operate itsown marketing and distribution network for the Cooperativedairy products across India under a single brand name Amul. The word came from the Sanskrit word amulyawhich means priceless and denoted and symbolized thepride of swadeshi production.e By 2004 India boasted 22state federations across the country.

eI Too Had A Dream, p. 55.


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The system had internal controls and measures toensure quality and fairness. Payment was made on the basisof fat content, a disincentive to adulterate. The VS milk wasfurther tested when it reached the union plant, and if foundcontaminated or spoilt, the whole society suffered throughlost payment for the milk. These measures complementedby community supervision, restrained and disciplined eachmember without external controls. On the positive side, fairprices, ownership of the enterprise and a transparent systemwere incentives for the farmers to increase production and

partake in the profits and annual bonuses.Confidence in the efficiency, honesty, transparencyand fairness of the system brought these humble villagersto the cooperative. The policies and procedures remainedtransparent and endeavored to provide benefits to thevillage producers. Bringing the marketplace to their villagesand accepting all the milk produced are examples where thecooperative exemplified its values, objectives and focus onthe farmers.

DIVERSIFICATION

Membership in the Kaira cooperative was increasing, whilemilk production was also on the rise. Surplus milk collectionin the winter needed to find new markets or be directedtowards new products. The urban middle and upper classresidents of Bombay were unable to change their demandbased on ever-increasing and fluctuating supplyf. Kurienrecognized the need to diversify operations. With thesupport of HM Dalaya, the dairy technologist, they decided

to venture into manufacturing butter and milk powder,vertically integrate into dairy products.In 1953 UNICEF proposed to donate eight lakh

rupees (Rs.800,000) to the Bombay government in returnfor distributing 12 lakh rupees (Rs.1,200,000) of free milk toundernourished children. The finance minister of Bombay

fCattle produce more milk in the winter compared to the summer, thus fluctuations

in supply.


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approached Kurien and asked for his consideration andresponse. The farmer-members recognized the challengeof surplus milk, while also looking for additional meansto augment their income. The terms of the proposal wereaccepted and Kaira Cooperative decided to venture intoproducing milk powder with the provided funds.

The Milk Commissioner of Bombay, Khurody, was nottoo friendly towards the cooperative. He had equal interestin the funds proposed by UNICEF for establishing milkproduction facilities in Bombay. During discussions with

Sabin, the senior UNICEF personnel, Khurody insisted thatmilk powder could not be produced from buffalo milk.gHis tenacious argument was anchored on the fact thatdeveloped countries produce milk powder from cowsmilk. Furthermore, Khurody obtained feedback from dairyprofessionals, William Riddet of New Zealand and HD Kayof U.K., supporting his stand.

Kurien found himself cornered. Was Khurodyundermining the cooperatives ground? UNICEF wouldnot provide the funds for the milk powder equipment ifKhurodys statement were true. Nevertheless, the dairy

technologists, Kurien and Dalaya, believed it possible toproduce milk powder from buffalo milk. They would haveto demonstrate the same in a conclusive manner.

Taking calculated risks, they borrowed spray-dryingequipment from Larsen & Toubros factory in Bombay.The group consisting of the UNICEF men, Khurody,Kurien and Dalaya, gathered around the laboratory tablein Andheri, Mumbai. The tension was palpable as Dalayapoured skimmed milk into the feed vat and threw on thepower switch. The humming of the machinery disrupted

the silence before the first snowy flakes of powder milkentered the glass-receiving chamber. This was the momentof vindication for the cooperative. Yet unsatisfied, Khurodyinsisted on testing its solubility and taste. It has nowbeen proven that milk powder can be produced from

gMilk was primarily produced from buffaloes, as they were more dominant in

numbers. Buffalo milk is much higher in fat quantity, thus the challenge of producing

dairy products in India.


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buffalo milk. UNICEF will assist Kaira Union to set up thepowder plant,h an excited Sabin announced. The Bombaygovernment finally approved the project. The cooperativewas victorious yet again. It had identified profitable marketsfor surplus milk. Kurien contemplated that at times expertadvice can be biased towards the economic interests of advanced

nations, not for the needs of developing economiesi.On 31 October 1955, which is Sardar Patels birth

anniversary, then Prime Minister Pandit Jawaharlal Nehru,inaugurated the countrys most technologically advanced

dairy plant. As they demonstrated production of milkpowder, Pandit Nehru praised the efforts, Kurien, Im soglad that our country has people like you people whowill go ahead and achieve that which seems unachievable.j

Amuls growth had picked up, as diversification intoother products was rising. Market research and marketanalysis activities led to additional product introductions.Kurien recognized the high demand for baby food andcheese. Manufacturing of cheese and baby food frombuffalo milk was also unheard of by the developed dairyindustries, and refuted by the experts. Amul, nevertheless,

pioneered this technology through persistent research andexperimentation. An FAO expert, Dr. Wilster, assisted in thisproject and Amul cheese was made available to the marketin 19631964. Production leaped to 41,000 kg within oneyear.

Glaxo had market dominance in baby food, enteringthat market niche appeared daunting. Kurien, with hisproficient and adept management skills, approached theGovernment of India requesting the cancellation of Glaxosunused import licenses. The socialist government was

well disposed towards Kurien, trusting his judgment andreputation. Glaxo licenses were cancelled and Amul wasable to enter this niche. Yet another vindication for theprofessional management and Amuls credibility. Research,development and technology enabled leap in growth, a real-life illustration that success begets success.

hI Too Had A Dream, p. 45.iRefer to Robin, Broad, Washington Consensus Meets the Global Backlash.jI Too Had A Dream, p. 53.


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STAGED PROGRESSION

During the establishment of the cooperative, sale ofliquid milk was the primary focus, the profit center. KairaCooperative attempted to maximize production and saleof milk to Bombay through the BMS. This policy requiredarduous competition against predominant rivals. Thereappeared no apparent reason to invest in new technology,capital, research and training, thus innovation was on hold.Establishment of the system and basic survival defined the

first stage.The government had kept the price of milk stablewhile prices of dairy products soared. This became anincentive for transitioning into the manufacturing of dairyproducts. The Cooperative built a dairy to manage thesurplus production of milk while enhancing its profits fromsales of dairy products. Basic dairy products such as butterwere initially produced that did not require considerableinnovation. Product diversification was the second stage ofthe cooperative effort.

The third stage led to extensive innovation, as the

Kaira Cooperative embarked on a range of new productsduring the 1950s. Processing facilities were expanded, newtechnologies researched and processing activities broadened.

The production of dairy products was initiallyto balance and find new sources for the surplus milk.Marketing activities of the fourth stage played a centralrole in dairy development due to its unexpected success.Demand was booming from various segments. Defenseservices also procured their requirements from Amul.

Kaira Cooperative intended to utilize its plant to

capacity and provide for the increasing demand, whichrequired a significant rise in milk production. In 19611962, Kaira Cooperative initiated a program to double milkproduction in the district. Rupees four crore were markedfor this investment directed towards improving cattle feed,cattle health care and hygiene and improved breeding.

The effort did not provide the results within theexpected duration. In 1964 a cattle feed factory wascommissioned to provide better nutrients and concentrate


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feed to the cattle. Earlier, cattle were primarily fed straw andfeed concentrate in the form of cottonseed. This assumed6070% of the total cost of milk. As the price of cottonseedwas on the rise, a substitute was required; otherwise itwould have a depressive effect on milk production. TheCooperative sought a balanced feed manufactured fromnutrients and grains available locally.

Feed-grains were ground and mixed with localsupplies, while accounting for price, availability and abalanced nutrition for the cattle. The cooperative established

the factory producing composite cattle feed, Amuldan, whichwas provided to the farmers at cost price and availablethroughout the year. This met the producers need perfectlyand resulted in a gradual increase in milk productionwithin the district. Prime Minister Lal Bahadur Shastricommissioned the cattle feed factory on October 31, 1964.

NATIONAL DAIRY DEVELOPMENT BOARD

Within 20 years of its establishment, the Kaira cooperative

attained national eminence and recognition for its work inGujarat. Anand had gained a reputation as a place wheresomething different was happening in the dairy industry.Various awards and recognition were bestowed upon Dr.Kurien and Amul, which included the Magsaysay Award,and Padma Bhushan to mention a few.

The Indian government had established a fewcooperatives in different parts of the country, but none ofthem enjoyed the success comparable to Amul. Puzzled,Shastri desired a first-hand perspective. He requested Kurien

to organize his stay in one of the cooperative villages,without the fanfare and security. Analyzing the farmersand farm conditions in its natural condition was essential.For that one night, Shastri had deep conversations withthe villagers, asking questions and listening attentively. Helearnt about their lifestyle, their farmlands, buffaloes, milkproduction, incentives to increase production and theirrelationship with the cooperative. Shastri was impressedto learn about this system that provided additional income


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to the farmers and raised their standard of living. To hissurprise, this all was done without any direct financialassistance from the government. Though governmentfacilitation through public-private partnership was funda-mental and critical in the growth and expansion phases.kIt was a taxing but an informative evening for the PrimeMinister.

The following afternoon, Shastri, still perplexed, askedKurien why this particular dairy succeeded while all othersin India had failed. He iterated his observations. The soil

was good, but not as good as the Indo-Gangetic plains. Theclimate was similar to most other parts in India cold inthe winter, very hot in the summer with thirty inches ofrainfall during the three months of monsoon, just like otherparts of the country. The buffaloes were healthy, but not asgood as the ones found in Uttar Pradesh, which were ableto provide more milk. The farmers were good people, butnot as hardworking as the farmers in Punjab. I cant finda single reason why Anand is such a great success, themystified Prime Minister questioned.

While Shastri was able to observe and comment on the

apparent observations, the subtleness of the Anand structurewas overlooked. The solitary, yet most vital differencebetween Anand and the other cooperatives was that Amuldairy was owned by the farmers. The elected representativesfrom among the farmers managed it. These electedrepresentatives had employed Kurien as the professionalmanager to run the dairy, who was thus an employee ofthe farmer. Ownership of the cooperative and the farmer-professional management relationship provided the impetus.This was a dairy sensitive to the needs and responsive to

the demands of the farmers. He further explained that therecould be an Amul because Bombay was not too far away.Impressed and satisfied, Shastri requested Kurien to

work not just for Anand, nor only for Gujarat, but for thewhole of India. An Anand should be established in everystate of India. This led to the creation of the National DairyDevelopment Board (NDDB) in September 1965. Its objective

kReinventing Government by Osborne & Gaebler.


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was to establish milk production, procurement, processingand marketing in the country by making available theneeded support services technical, manpower, consultationetc. NDDB developed audacious plans of genetic upgradingof milch cattle, scientific breeding processes, and significantincrease in milk production. Organization of dairy programsacross the country would cost a whopping Rs.650 crore(Rs.6.5 billion). Funding from the Government of Indiawould come with many demands and strings attached,making the whole effort bureaucratic and slow. Thus, an

alternate source of funding was required.

GUJARAT COOPERATIVE MILK MARKETING

FEDERATION

Over the course of Operation Flood, district unions (tier 2of Amul structure) multiplied within the state of Gujarat:Baroda, Surat, Banaskantha, Sabarkantha, Bharuch, Valsad,Rajkot and others. Each district union was independentlyresponsible for its production, marketing and sale of dairy

products. Kurien recognized that there could arise a situa-tion where the milk cooperatives would compete with eachother. This was not acceptable, and countered the objectivesof cooperation.

Kurien suggested developing agreements where alldairies in Gujarat would employ a common distributorand a common brand name. Thus, instead of competingwith each other, the district cooperatives would integrateforces and expand markets while saving on advertising andbrand building. This led to brand-integration and formation

of the marketing federation, the third tier in the coopera-tive structure. The Gujarat Cooperatives Milk MarketingFederation (GCMMF) was established in 1973, and Kurienwas elected as the first Chairman and Managing Directorof the federation, at which time he quit his position as theGeneral Manager of Amul.

GCMMF brought about economic and politicalbenefits to its cooperative members, specially benefiting thesmall ones, further encouraging growth of more cooperative


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societies. Concentrating on developing and implementingmarketing initiatives, the federation ensured full utilizationof capacity, formulated production priorities, standardizedsystems and ensured greater consumer acceptance bystrengthening the brand image. GCMMF was requiredto accept all the milk produced, assuring the members ofstability and long-term growth. This effort was an importantachievement of Operation Flood, borne out of the need forintegration.

In 2005, GCMMF was Indias largest food products

marketing organization with an annual turnover of Rs.30billion. Twelve district cooperative unions, 2.12 millionproducer members, 10,411 village milk societies comprisethis organization. The average daily milk collection ofthe GCMMF was about 4.5 million liters. This effort ofintegrating the cooperative unions was merely an extensionof the cooperative philosophy, of bringing value to thefarmers through mutual collaboration. The federationhad ensured remunerative returns to the farmers whileproviding consumers with high quality products under thebrand names of Amul and Sagar. Exhibits 6 and 7 illustrates

the growth of the federation over the years. The federationconcerted in marketing and sales activities, developingnew markets and determining higher valued products.Sales revenue leaped and Amul entered another level ofexpansion, the second phase of the enterprise lifecycle, thegrowth phase.

TEAMWORK

Tribhuvandas Patel, unselfish, sincere and unassuming,promoted the cooperative structure and challenged Polsonsdominance. He was a benign, thoughtful and a seriousobserver with strong links to the farmers as he was one ofthem himself. Tribhuvandas was a man of steadfast loyaltyand integrity, with a relaxed style that got results withdeceptive ease. Over the course of his journey throughoutKaira, the growth of cooperatives and their relationshipwith GCMMF is an indication of his abilities to effectively


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manage people. Tribhuvandas had the charisma to mobilizerural milk producers and convince them of the power of thecooperative, its democratic principles and the overwhelmingvision of rural development. His unimpeachable personalityand integrity earned him the affection and trust of thefarmers. Here was a leader who had wielded powerthrough the strength of his ideals and an example of hisservice to his fellow men. He is the kind of person thatmakes you feel happy to be a fellow human being. l

Initially taking pride in the engineering and

technology aspects of the dairy business, Kurien becamegradually involved in all aspects of Amul, to the point whereit became an integral part of his life. Kurien, the extrovert,was appointed General Manager of Amul, who learnt toshare and appreciate the belief that he was an employeeof the farmers. He strategized the battle against Polsonbutter, innovated the manufacturing of milk powder andcondensed milk from buffalo milk and found other meansof using the surplus produced by the cooperative. Schooledin adversity, challenged at every stage of the progression ofthe cooperative, Kuriens creativity and ingenuity always

found a way out of the prevalent tribulations. As the tough-minded and innovative manager of Amuls development, hechampioned the producers cooperative against threats fromthe urban bureaucracies and politics.

Amul was, after all, a for-profit business enterprise,thus he needed professionals to run the factories effectively.Recognizing the need for a dairy technologist, Kurien re-quested HM Dalaya, a college friend from Michigan, toparticipate in this dream. The drive for changing societyand village communities, the idealism and commitment of

the other two led Dalaya to stay with Amul till his retire-ment. This brilliant dairyman innovated on dairy productiontechniques and methods to meet the need of the Kairacooperative. He was tasked to work while Kurien did thetalking.

These three men, with clear objectives and adisciplined attitude, formed a formidable team where rights

lThe Amul India Story, p. 277.


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and responsibilities were tacit yet shared. They maintaineda compliant countenance without challenging another inpublic. Private discussions were the opportunity to argueand learn to iron out uncertainty and possible differences.Each had their set of expertise, where they were notchallenged, but allowed to work independently. Mutualtrust that each is focused towards the collective objectiveincreased motivation, cultivated better communication andunderstanding amongst the team. Respect for the others wasa fundamental force, which enabled them to work effectively

and achieve impossible heights.The shared vision and commitment towards alarger cause ensured that the principal of economic ruraldevelopment is preserved.

when you work merely for your own profit, thepleasure is transitory; but if you work for others, there

is a deeper sense of fulfillment and if things are handled

well, the money, too, is more than adequate.m

DEVELOPING PEOPLE

The primary objective of the Amul dairy is the well-being and development of its owners, the milk producersthemselves. The dairy is the means and not the end in itself.The primary philosophy of the Anand model is to connectthe producers directly to the consumers, ensuring that thelargest share of the customers rupee is transferred to theproducer. This provides an incentive for the farmer-producerto increase the quantity and quality of their production.The Anand pattern coalesces the power of the people with

professional management in the integrated cooperativestructure. The farmer is the owner and intimately involvedin the production. Thereon, he also becomes involved in theprocess of development through observations and workingwith professional management. The democratic system ofthe Cooperative provides the underpinnings for democracyin the country. A visiting economist in the 1960s commented,

mI Too Had A Dream, p. 28.


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Democracy seems to be growing here as fast as the milksupply.

The producers have been able to develop managerialskills and familiarity with technology through their ob-servations, association with professional management andexperience with the managing committees of primary co-operatives. As milk cooperatives are established, producermembers tend to sell more milk. They benefit from thebetter price and swift monetary distribution, while realizingthat the cooperative must be financially viable in order to

succeed. For the villagers of Gamadi, milk sales provideda steady and increasing income, which significantly helpedin the support and development. Traders, who earlier didnot provide them credit, extended them support for seedsand fertilizers. The banks loaned them money to buy cowsand buffalos. As villagers worked harder and prospered,alcoholism declined. Hope and self-respect enlightenedtheir lives as they found more opportunities for growth anddevelopment.

Another shining example of the effects the cooperativesystem can be found in the village of Khadgodhara, about

72 km from Anand. This village was two km away from acollection center, thus did not have a cooperative societyof its own. The women would trudge the distance twice aday, against the wishes of their husbands. When a womensarpanchn was elected, she organized the women to forma cooperative society in their village, requesting Amulheadquarters to take note of their effort. The women weredisciplined and developed self-confidence. Within thefirst year they boasted annual revenue reaching Rs.1.5lakhs (Rs.150,000) one and a half times the earnings of the

entire village through farming. With the women headingthis effort, schools were established in the village, betterhomes constructed, electricity was brought and other ruraldevelopments were observed. The need for family planningwas recognized, as education had become a necessity.

The battle against apathy, suspicion to change, andundesirable traditional practices continue, though the

nHead of Village Community.


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villagers have become more aware and receptive. Positivechange is apparent as the growth and development of thepeople is observed. The village cooperative societies havebecome dynamic institutions that have led to economic andsocial welfare activities, stimulating educational, health andintegrative development of their community.

Kurien repeatedly stated that the underlying goal isnot the development of dairies or cows, but the developmentof people and rural neighborhoods.

LOOKING AHEAD

The illustrious journey of Amul began some sixty years agoin a small shady town of Gujarat. Its overarching objectiveof serving the farmer and catering to the consumer hadremained unaffected through the course of its evolution.For the farmers, Amul reflected the power to direct theirdestinies, secure a stable livelihood through assured employ-ment, empowerment for the village folk, most specificallyfor the women. For the girl, Amul implied education and

consequent emancipation. Amul represented high quality forthe consumers, a name they could trust and depend on, anassurance of wholesome milk. India takes pride in Amul asa successful model for self-reliance and rural development, amodel depicting that hard work, management expertise andcapable leadership could achieve miracles.

Amul Member Unions procured an average of 5.9million kg of milk per day in 20042005, which rep-resented a growth of about 15% from the previous year.Sales reached Rs.29.22 billion, where most dairy products

indicated an increase, depicting the strength of the Amulbrand nationwide. Distribution network expanded intosmaller towns as the emergence of markets in smaller townswas observed. As of 2005, there were about 1059 villagesocieties as part of the Amul network, comprising 600,000members.

Since its inception in the late 1940s, Amul had ex-perienced the different stages of an enterprise lifecycle. Theestablishment marked the initiation, which was followed


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by growth through diversification and employing newtechnology. Innovation, structural change, replication of themodel and renewing its vigor has enabled Amul to soarits growth instead of stagnating into maturity. Exhibit 9illustrates the periods of growth, including its most currentchallenge of direct sales and marketing, i.e. widening itsdistribution network and establishing Amul outlets acrossthe country. The consistent growth indicates the visionaryleadership that is in constant pursuit of expansion, alignedto its mission of serving the farmer.

While Dr. Kurien reflects on the successes of Amul,he realized that the effort and task at hand are ongoing.Business opportunities are expanding with the growth ofthe Indian economy. Disposable income at the hand of theconsumers is keeping pace. The challenge ahead of GCMMFis to reach the most remote markets with innovativeproducts and services such that more consumers benefit. Toachieve this challenge, Gujarat cooperatives need to increaseproduction and productivity, requiring better managementpractices in the village.

An incessant initiative of Amul had been vertical

integration of the value chain. Member unions added valueby moving from procurement and processing towardsbranding and marketing. The predominant need was directcontact with the customer, practically to their doorsteps.This was also in accordance with the Amul philosophy to eliminate intermediaries between the producer and con-sumer. Amul faced this competitive challenge through aforay into retailing and e-business. Amul envisions openingup retail outlets across the major cities in India, bringing therange of Amul products directly to the consumer. Providing

the branded dairy products under one roof was their attemptto broach themselves even closer to the valued customer.While Amul has enjoyed decades of success, the

challenges continue with the fast changing marketplace. Dr.Kurien, nevertheless, does not overlook the strength whichhas brought Amul so far.

We are in the business of development; not just

marketing. Development, be it of products, people or

processes. The spirit of development can be seen and


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314 ACRJ

felt in everything we do. Marketing is simply our tool toachieve our ultimate objective Human Development.o

PERSISTENT CHALLENGES

This system was not flawless, Managing Director Mr. Vyasreminded. It encompassed real challenges within the systemand in relation to the external world. As in any democracy,if the voting members were not informed but ignorant the

entire elections process becomes a farce or the electionscould be hijacked. This had been observed in the past at theVillage Society level elections. Education of the members,solidarity and integrity would enable to keep the membersinformed and thus reduce the potential of ignorant voting.

Another commonly observed pattern was conflictsbetween the farmer-members and professional managers.As each adopted a different perspective, and as theirsophistication of comprehension differed, these groupswere unable to communicate effectively, lending to greaterconfusion and misunderstanding. Though all had the same

objective in mind, the lack of leadership skills burnt bridges.The conviction and leadership were what the foundersportrayed, which appeared to be absent in the currentgeneration of professional managers. The farmer-managerrelationship was equally essential for the system to progressand expand.

During its early startup and growth phase, thegovernment bureaucracy was critical for the success ofAmul. Various services and favors were forwarded asthe objectives of the socialist government and Amul were

aligned. As India transitioned towards open capitalism,there was a growing splinter between the two philosophies.Constant pressure to introduce government representativeson the Anand Dairy board was observed. Other forms ofinterference were equally vulnerable for the institutions.India had decreased its tariff structures after the 1991liberalization process, and considered reducing it further.

oAmul Annual Report 2000.


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This would be detrimental for the milk industry, as it wouldnot ensure an equal playing field for all dairy economies.

When the White Revolution was ongoing in the1980s, critics, skeptics and opponents were voicing theirapprehension. They did not appreciate the manner in whichKurien handled the expansion of the industry. General beliefamongst the critics was that milk grant would be the betteralternative, not assuming the milk powder for sale. Kuriensplans were termed the White Lie. The media carried outsignificant coverage of both sides of the story, and it had

become an internal crisis for Amul. Though Amul came outof this with stronger determination and courage, challengesfrom the external environment were another threat to theirexistence.

While it is easier to create a manager, developing aleader is a much more complex process. This is true at thegrassroots level as well as at a professional managerial level.Amuls focus had been in developing managers, not leaders.This aspect challenged the system, with limited innovationin their product line, systems and processes in the last 510 years. Leaders could think differently, plan differently,

and strategize differently. NDDB was in the process of atransition in 2005 as Dr. Kurien resigned and appointedhis apprentice as chairperson. Transition of leadership inGCMMF would be observed in the near future also. Whatare the associated challenges with transitioning of leadershipin a social enterprise? Is it possible to sustain the cooperativeobjectives after the original/founding leadership shifts toother pastures? Or should the objectives change with a newbreed of leaders? Amul is facing these challenging questionstoday, and is unsure of the parameters/characteristics in

determining and preparing for new leadership. Is leadershiptransition actually possible in an ideology based, for-profitorganizations?


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316 ACRJ

RESOURCES

Carter, Thomas, They Shaped AMUL, Senior FAO Advisor,

NDDB, Amul 50th Celebration Address, 1996.

Halse, Michel, Talent and Character: Sources of effectivemanagement at Amul, Amul 50th

Celebration Address, 1996.

Heredia, Ruth, The Amul India Story, Tata McGraw-Hill

Publications, 1999.Kurien, Verghese, I Too Had A Dream, Lotus Collection, India, 2005.

Mittal, S.P., The Eventful 50 Years, Amul 50th Celebration

Address, 1996.

Patel, Tribhuvandas, Cooperative movement and its role in thedairy industry of India, Speech, 1963.

Thordarson, Bruce, The Lessons of Amul for Cooperative

Development, Amul 50th Celebration Address, 1996.Amul Annual Report, 1996 & 2000.

Kaira District Cooperative Milk Producers Union Limited, Anand,

Annual Report, 20042005.


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Exhibit 1

Location of Anand, Gujarat in India


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318 ACRJ

Exhibit 2

Amul India Timeline

Kurien becomes General Manager of Kaira Union. Sardar Patel passes away

2 6- Ma r- 06 2 4- Se p- 06

1900

First dairy plant in Kaira established1930

1944

1945

Oct. 7, 1947

Dec. 14, 1946

1948

May 1949

1950

1951

1952

Oct 1952 -

April 1953

1953

1954

1957

1958

1961

1964

1965

1968

1970

1973

1973 - 1989

1975

1981

1985

1994

Polsons model dairy established in Anand

Govt. creamery in Anand reopened for research work

Polson establishes a plant to process & transport milk to Bombay

Executive order from Bombay giving Polson monopolistic powers

First disorganized strike by farmers fails

Sardar Patel suggestion 2nd15-day boycott.

Govt. withdrew exec. Order. Tribhuvan appointed chairman

First milk collection fro Hadgud village

KDCMPUL registered

Inaugurated first processing plant

Kurien arrives in Anand

Dalaya joins as assistant manager, dairy technologist

Kaira Union receives exclusive distribution from BMS

Kurien studies dairy technology in Australia & NZ

UNICEF proposal for milk powder donation received.Dalaya sent to Denmark to study dairy technology

PM Nehru inaugurates new dairy plant for milk powder manuf.

Amul brand name registered

Manuf. Condensed milk from buffalo milk

Cheese added to product line

Cattle feed factory commissioned by PM Shastri

NDDB Registered with Govt. of India

EEC Surplus stock offered as free aid

WFP accepts Kuriens proposal. Billion Liter Idea launched. OF I initiated

GCMMF Established

New Product Innovations continue

Tribhuvandas Foundation established

Phase II Operation Flood commences

1996

Phase III Operation Flood commences

1998Operation Flood successfully completes

Kurien resigned from NDDB

1946

IRMA Established1979

Tribhuvandas Patel passes away

EXPERIMENT BEGINS

IN 1946

P H A S E -- O N E

START UP

GCMMF ESTABLISHED

P H A S E -- T W O

G R O W T H

OPERATION FLOOD COMPLETES

P H A S E -- T H R E E

M A T U R I T Y


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Exhibit 3

Amul Cooperative Structure

2.4 million in

Gujarat12 million in

India

1,08,574Villages in India

11,615 Villagesin Gujarat

12 DistrictUnions in

Gujarat

176 DistrictUnions in India

GCMMF inGujarat 22 State

Fedns. inIndia

AMUL MODEL

SALESREVENUE

SALESREVENUE

BONUS

DIVIDENDON

SHARES

ADDL.PRICE

DIFF.

CATTLEFEED

VET. & AHSERVICE

RURALHEALTH

SCHEMES


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320 ACRJ

Exhibit 4

From the Farmer to the Consumer


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Exhibit 5

Salient Features of Operation Flood

Features OFI OFII OFIII

Period 19701981 19811985 19851996

# of milksheds covered 39 136 170

# of Amul Pattern Centers setup (000) 13.3 34.5 72.7

# of Members (millions) 1.8 3.6 9.3

Average milk procurement (million kgper day)

2.6 5.8 10.9

Processing capacity in rural dairies(million ltrs per day)

3.6 8.8 19.2

Drying capactiy (MTS per day) 261 508 842

Liquid milk marketing (million ltrsper day)

2.8 5 9.9


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322 ACRJ

GCMMF: Mission Statement

We, at GCMMF, endeavour to satisfy the taste and nutritional requirements of the customers ofthe world, through excellence in marketing by our committed team.

Through co-operative networking, we are committed to offering quality products that providebest value for money.

GCMMF: Business Philosophy

To serve the interests of milk producers To provide quality products to consumers Value for money

Exhibit 6

Gujarat Cooperative Milk Marketing Federation

GCMMF Sales Turnover Rs (million) US $ (in million)

199495 11140 355

199596 13790 400

199697 15540 450

199798 18840 455

199899 22192 493

1999

00 22185 493200001 22588 500

200102 23365 500

200203 27457 575

200304 28941 616

200405 29225 672


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Exhibit 7

GCMMF/India Trends in Milk Production & Cooperative Societies

GCMMF Member Village District Coop Societies GCMMF Milk Producer Members (Million)

GCMMF: Average Milk Procurement(Million kgs. per day)

Milk Production: India (Million Metric Tons)

55806240

8690

10180 10852 11200

11400 11615

0

2000

4000

6000

8000

10000

12000

84-85

88-89

93-94

97-98

'01-02

'02-03

'03-04

'04-05

1

1.23

1.67

2.22 2.27 2.36

2.4

0

0.5

1

1.5

2

2.5

84-85

88-89

93-94

'01-02

'02-03

'03-04

'04-05

1.7

2.53

4

4.6

5.2 5.15.7

0

1

2

3

4

5

6

84-85

89-90

93-94

97

-98

'01-02

'02-03

'03-04

'04-05

17 20 21.2

23.2

31.6

53.9

66.370.8

74.3 78.1

84 88 91

0

10

20

30

40

50

60

70

80

90

100

1950 1968 1980 1995 1997 2002 2004

Phase I Phase II Phase III


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324 ACRJ

Animal Breeding Amul owned a semen production center withhigh-pedigreed buffalo, the Holstein-Friesian. Amul providedartificial insemination, which enabled it to control the supplysurplus and deficit. A cluster of villages had available AI sub-centers. This crossbreed bull enabled the increase of the quality andmilk productivity of the members herds.

Veterinary Services In 1950 the concept of veterinary serviceswere introduced to the cooperative. Farmers were not educated in

this respect, and on many occasions would simply commiserate theillness or loss of their buffalo. A team of dedicated veterinarians wasassembled who visited every village twice a month to treat the sickanimals free of charge. Moreover, the vet services were availableon call for immediate attention. In 1997, Amul operated 16 mobileveterinary dispensaries with radio telephones, providing emergencyservices on call. Subsidized medicines were also provided withinthe village society first-aid offices.

Cattle FeedNutritious cattle feed developed from local producelends to improved milk quality and productivity. Amul setup itsfirst cattle feed plant in 1964, and its second in 1981. Balanced cattlefeed is sold to the villagers at cost. The village collection centers are

the point of sale, facilitating and encouraging the farmers to use thenutritious cattle feed.

Value Addition & MarketingAs milk production increased, Amulhad to find new methods of utilizing the produce. New dairyproducts were introduced, though branding was the solution thatdifferentiated Amul from competition. Vertical integration intoprocessing, packaging and marketing was followed. GCMMF wasestablished to develop the markets and provide the services to thecooperatives. By 1980, Amul was the most recognized brand inIndia, primarily due to its slick, snappy and contemporary billboardcommercials.

Education Amul performed educational and training activities

to ensure that its cooperative members exercised their rights andresponsibilities prudently. Women members were provided specialattention, as they were typically responsible for the animals in thehouse while the men tended the farms. The constant interactionwith the members ensured that Amul remained responsive to theneeds of the farmers.

Institute of Rural Management, Anand As a professional himself,Kurien observed the growth in rural enterprises without a parallelincrease of professional managers capable of serving the rural

Exhibit 8

Amul Support Services


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poor. He found that too many managers had knowledge withoutvalues; intellect without wisdom; understanding without empathy;information without communication; skills and techniques withoutpractice; and work without commitment. Recognizing the immenseneed for relevant management education and a training groundfor professionals, IRMA was established in 1979. The professionalgraduates would pursue rural based opportunities. IRMA was alsotraining managers to lead the Amul system into the future.

Rural Health As Dr. Rajendra Prasad, the President of India,inspected the veterinary van in 1950, he was amazed and impressedby the large, spanking new van, gleaming with modern equipment.Round-eyed, he exclaimed In Bihar we dont have anythinglike this for humans! Yet you have it for your cattle.p This wasthe impetus, which led to the endeavor of the TribhuvandasFoundation, providing healthcare programs for the villagers,especially for the women and children. This program initiatedintegrated rural development activities across India as part of thecooperative efforts.

pThe Amul India Story, p. 247.


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326 ACRJ

The diagram below illustrates the growth and expansion phases of Amul over its last 60 years ofillustrious journey.

Growth Phases due to technology, marketing or operational improvements/innovations.

Exhibit 9

Growth and Expansion PhasesAmul

T I M E

G

R

O

W

T

H

&

E

X

P

AN

S

I

O

N

STARTUP

1946

Milk Powder Prodn

1952

Amul Brand Name

Selected -- 1957

GCMMF Established

1973

Product Diversification

1980's

Technology Upgrades

1990's


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amul - a social development enterprise

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