Companies are investor-owned entities that exist primarily to maximize their return on capital. This is reflected in the value of their shares, whether traded on an exchange or not. The investor-owner ultimately seeks capital appreciation and the highest possible price for the shares he wishes to sell or pledge to raise further funds.
Cooperatives, on the other hand, are organizations owned by members who can be producers or consumers. These members may own shares, but value the cooperative primarily for the services it provides. Such services, if it is a producer-owned cooperative, would include procurement, processing and marketing of their produce or supplying them with inputs used in production. The success metrics in this case are not earnings per share or dividend payout ratio, but purchase price of produce and timeliness of payment or quality animal feed, farm expansion and animal health support, fertilizers and least cost credit.
However, both companies and cooperatives are, at the end of the day, business enterprises whose purpose is – or should be – to provide value to their owners. Take the case of the Gujarat Cooperative Milk Marketing Federation (GCMMF). An apex organization of dairy cooperatives in Gujarat, ultimately owned by 36.4 lakh farmers, supplies milk to 18,154 village-level societies across the state.
Has the GCMMF provided value to these “shareholders”? By all indicators, it is. Between 2001-02 and 2021-22, GCMMF’s sales turnover increased from Rs 2,336 crore to Rs 46,481 crore and average daily milk procurement increased from 47.32 lakh liters to 263.66 lakh litres, which included 42.68 lakh liters from outside Gujarat .
But for the farmer-owner, what really matters is the price paid for his milk, just as for the investor-owner the price of a company’s stock is. In the last 20 years, the average purchase price paid by GCMMF’s district milk unions to producers has increased from Rs 184 to Rs 820 per kg of fat. Amul full cream milk, which contains 6 per cent fat, currently costs Rs 63 per liter Delhi, The manufacturer’s share of this is Rs 820/kg fat and 1.03 kg per litre, which is around Rs 50.7 or more than 80 per cent. In other words, GCMMF is not only helping farmers process and marketing milk, but also getting them the highest possible share of consumer money.
How is this possible? The simple answer is professional management. From the time of Verghese Kurien to BM Vyas and RS Sodhi, the Amul organizational model has been based on an elected board of directors, which functions through a chief executive and his team, which includes marketing and finance professionals, project engineers, veterinarians, Agricultural scientists are included. Nutritionist.
This model sets GCMMF apart from other state dairy cooperative federations, whose managing directors are usually Indian Administrative Service officers who report to secretaries of the animal husbandry and dairy departments. It is not surprising that neither their boards nor managers are accountable to the farmers; These milk producer cooperatives are only in name.
is in this regard Recent departure of Sodhi as MD of GCMMF raises troubling questions. These are not related to party politics, which is not new. Gujarat’s milk unions were traditionally controlled by the Congress, which is now effectively ruling Bharatiya Janata Party, But Amul founder Tribhuvandas Patel, a Congressman, had laid down a golden rule that political calculations should not be allowed to interfere in the business operations of cooperatives, let alone affect the interests of their farmer-members. thing is. There was a lakshman rekha that protected the professional manager, encouraging him to do his job.
Sodhi was no ordinary manager. During his 12 years as MD, GCMMF’s turnover grew nearly six-fold (from Rs 8,005 crore in 2009-10) and milk procurement nearly tripled (from 93.02 lakh liters per day). Under his leadership, the federation started procuring from farmers in other states as well, and Amul became the liquid milk market leader in Delhi-NCR as well (where it sells about 40 lakh liters per day today as against Mother Dairy’s 30 lakh litres).
It is not clear whether Sodhi resigned or was asked to leave. Letter addressed to him by President and Vice President of GCMMF dated 9th January – “Your services as MD are hereby terminated with immediate effect…It is ordered that you step down immediately and COO (Chief Operating Officer) hand it over to” – seems to suggest the latter. Sodhi, undoubtedly, was already on a two-year extension and his departure should not have normally come as a surprise. but the tone
The letter marks a departure that is far from dignified – for someone who had given the organization over 40 years and clocked a compound annual revenue growth of 15.8 per cent during his tenure as MD.
The decision to relieve Sodhi is reportedly taken at the political level and apparently “to protect the Amul brand”. The first part, if true, reduces the GCMMF to a government departmental undertaking and a board that is neither independent nor accountable to its ultimate farmer-shareholders. This is completely against the ideas and principles of cooperation of Tribhuvandas Patel and Kurien. As far as the Amul brand is concerned, nothing can be more ridiculous than imagining threats from a person who took its equity and status to a completely different level.
The Amul model has been about farmer empowerment and giving importance to professional management in organizations controlled by and working for producers. It is perhaps a sign of the times that the National Dairy Development Board, which spearheaded India’s White Revolution, has become insignificant. Today it does not have a full-time chairman, despite being headed by IAS officers after 2014.
It can be expected that GCMMF does not face such a crisis in the days to come.
Source : Bharat Times Jan 16th 2022 by Harish Damodaran