Case D: public-private cooperation in India

[Joitske Hulsebosch]

This case from India can be downloaded here. The case is prepared by Lucy Maarse in cooperation with Dr. Patil and Dr. Pande of BAIF. The service provider BAIF deploys an extension model for high potential dairy areas and relatively resource richer farmers. Dilemmas refer to smallholder inclusion and their linkages in the dairy chain. Lucy will be available to discuss the dilemma of smallholder inclusion with you.

[William (Bill) Thorpe]

It's very interesting reading about this case drawing on the valuable experiences from an area with a very strong dairy tradition. Questions that occur to me include:

• How did the current cooperative linkages amongst the public-private partners develop or, rather, did they evolve in response to marketing, institutional and/or political forces?
• Is it expected that the relative roles of the public and private partners will change and how might the projected changes differentially affect resource-poor households (HH)?
• What are the performance estimates for the various socio-economic HH groupings and are there targets with financial incentives set by the PPPs to stimulate improved productivity and profitability? If not, how might such a system be developed?
• The case study text mentions COW MILK; does that mean that buffalo milk is not produced in this area?

Best regards, Bill Thorpe

[Lucy Maarse]

Dear Bill,
It is a pleasure to receive your questions and thanks for expressing your appreciation. BR Patil and I decided to keep the answer short and as much as possible understandable for persons not familiar with the Maharashtra setting. Additional information is provided in the attachments.

1. How did the current cooperative linkages amongst the public-private partners develop or, rather, did they evolve in response to marketing, institutional and/or political forces?
They merely evolved through political forces well known to insiders coupled with market situation (demand and supply). It concerns very much an outlet for their surplus milk. In addition, the rather enabling Cooperative law in this State enables cooperatives to operate as a business organisation (Mutually Aided Cooperative Society (MACS), while use is also made of registration as ‘Producer Company’ under the centrally controlled Company Law.

The cooperative linkages are successfully sustained, because of professionalism on the side of Dynamix (living up to contractual agreements).

2. Is it expected that the relative roles of the public and private partners will change and how might the projected changes differentially affect resource-poor households (HH)?
In the current situation, relative resource rich farmers (farm size: 25+ acres against average of 1-2 acres) do benefit but large number of beneficiaries are from small and medium farmers (1-10 acres), some resource-poor do succeed too especially when provided intensive extension support. The system is nevertheless relative risky for resource-poor farmers.
On longer term, we foresee that few resource-poor can benefit unless specific measures are undertaken; a question as important is whether it is advisable to promote a high input high output dairying system when a household has little land, no irrigation facilities, etc. Next, one needs to consider issues of ‘water scarcity – growing Napier or Lucerne implies high water demands’, ‘environmental implications – manure management implies investments and know how’ etc.
As a follow-up of a field visit, we prepared a simple SWOT analysis; i.e. the enclosed Word file presents the SWOT.

3. What are the performance estimates for the various socio-economic HH groupings and are there targets with financial incentives set by the PPPs to stimulate improved productivity and profitability? If not, how might such a system be developed?
Dairy farmers from this area are relatively well off; their income is almost double the national averages, however the large strata of producers belong to category of small and medium farmers with crop livestock mixed farming.
The incentives are; - assured quality services aiming at enhanced clean milk production that include breeding, health and management at cost that is recovered from milk. Monitory incentive is based on quality of milk and is uniform for all categories. Above incentives are for every one.

For those who invest in a collection centre, the more milk collected, the lower the storage costs per litre and hence a higher return. These investors (dairy farmers) are thus motivated to stimulate others to join the collection centre (referring to units promoted by Dynamix Dairy). In short, there are different incentives but as important is that each collection unit is an independent entity; i.e. owner is also the decision maker. In practice, he works closely with the Veterinarian / Vet. Assistant assigned to the area.
Enclosed file provides an example of a (resource-rich) dairy farmer cum owner of a milk collection centre.
Regarding primary dairy cooperatives, the National Dairy Board has in place a detailed grading system and annually awards are given; the one who has received a B grade (very good) feels proud and rewarded.

4. The case study text mentions COW MILK; does that mean that buffalo milk is not produced in this area?
Actually as elsewhere in India, the buffalo population is increasing while cow population stagnating. Thus, there is plenty of buffalo milk in this area but Dynamix aims at production of premium milk products based on pure cow milk.
It is also common practice that Cooperatives and other agencies procure cow milk and buffalo milk separately and market it separately unless the collection centres are very small; i.e. in remote areas milk of goat, buffalo and cows is stored in the small cooler.
Rightly said so, Dynamix is procuring only cow milk.

With warm regards,
BR Patil & Lucy M.

[Lucy Maarse]

Herewith the attachments.
Lucy

[Lucy Maarse]

B-ground Inf- Model-Farmers-CVCP.docxThe second one. Sorry, something tricky is happening with up-loading the attachments. Rgds, Lucy

[Alex Kirui]

Dear Lucy Maarse,

I read the case study which has similarities with some of the cooperatives which operates milk collection centres in Kenya.
I have one question. Reading through the case, I did not get clear understanding of the different roles of the partners in this case: private- public partnership.

Can you by way of summary show the roles of private and those of public in this dairy enterprise?

Alex Kirui, Heifer Kenya.

[Lucy Maarse]

Dear Alex and Bill,
I am currently liaising with Dr. BR Patil to provide comprehensive answers to your questions. We will submit these soonest.
Knowing Kenya myself (referring to the early 90's), I am not so sure whether a comparison is realistic, because in case of Baramati and Solapur cooperatives it actually concerns so called producer companies. Notwithstanding excellent exceptions (sugar co-operatives in Maharashtra, Mumbai Dabba walas, Amul, Mother Dairy, etc.), cooperatives have not been very successful for a variety of reasons. For those interested, I herewith enclose a one page file providing a comparison of these two types of legal entities.

[Lucy Maarse]

Dear Alex,

I hope that with replying the questions of Bill Thorpe as well as the attachments yours is answered too (at least partially).

Rgds,
Lucy

[Inge Jansen]

A summary of the online discussion made by the case reporter in preparation of the learning event:

In Western India a system was set-up for procurement, quality improvement, production and marketing of milk products. Centre of the system is Dynamics Dairy, a private company that procures milk, produces dairy products and sells through multinationals. The milk is supplied by a producer company that is promoted by Dynamics and by 2 milk co-operatives. An NGO (BIAF) supports farmers for 700 Rs per cow with extension, health and breeding services. BIAF-supported farmers have to sell to Dynamics.

The system deploys an extension model for high potential dairy areas and relatively resource richer farmers. Dilemmas refer to smallholder inclusion and their linkages in the dairy chain. The discussion focussed on how the system came into being and on access for poorer households.
• The development of the system was triggered by political forces, by marketing needs (there was a surplus) and by government policies that allowed co-ops to act as businesses
• The incentives for individual farmers are quality improvements. For those farmers which also serve as collection points there is an incentive to growth because of efficiency gains of economics of scale.
• Even though some smaller farmers succeed (if supported sufficiently), the access for poorer farmers is risky. Bottlenecks are area size and access to water.
• It is not clear whether the case is comparable with Kenya. Crucial is whether cooperatives can really act businesslike, as is the case with the Indian milk cooperatives

[Lucy Maarse]

Dear All,
Herewith the orginal PowerPointPresentation prepared for the Heider Day of 2nd July 2009.
With friendly regards,
Lucy M.

[Lucy Maarse]

Dear All,
Please receive additional information as per request of the participants:
- Original PowerPointPresentation without pictures,
- Information on Producer Company
- Speeches delivered by chairman of NDDB, Dr. Amrita Patel, on future comparatives and prospectives for dairying in rapid changing environment,
Rgds,
Lucy

[Lucy Maarse]

- continuation previous email -

Remaining files are enclosed.

Rgds,
Lucy