India opted out of the Regional Comprehensive Economic Partnership (RCEP) negotiations last month, citing the possible adverse impact on its 100 million dairy farmers. RS Sodhi, managing director, Gujarat Cooperative Milk Marketing Federation (GCMMF), popularly known as Amul, spoke to Sandip Das, senior consultant with ICRIER, on the issues that will be faced by the Indian dairy industry post-RCEP. “Those countries that demanded reduction of import duties by India on dairy products have not allowed the uninterrupted flow of labour across RCEP member states,” he says. Excerpts:
What are the key issues you thought India might have considered before it withdrew from RCEP negotiations?
RCEP is a trade agreement. You have to separate issues associated with trade and livelihood. Dairy and agriculture are livelihood issues in India. Those countries that demanded reduction of import duties by India on dairy products have not allowed the uninterrupted flow of labour across RCEP member states. If RCEP wants to include agriculture or dairy in trade negotiations, it must first include free flow of manpower resources across countries. In India, around 50% of the population depends upon the agriculture sector for sustenance.
Any country’s economy consists of three things: capital, natural resources and manpower. If you want to have a free trade agreement, allow free flow of labour. All RCEP countries want to have things that are their strength. We are strong in our manpower resources, so allow the unrestricted flow of manpower. If you want to export agricultural products to us, please allow exports of agricultural labour. In India, trade comes after the government has provided livelihood opportunities to its people. Without taking care of the livelihood of people, how can you get into the trade?
In addition, let them (New Zealand and Australia, milk-surplus countries) come here and invest. We will even provide support and facilitate their presence.
Post-RCEP, how do you see the domestic dairy industry responding to the need for improving efficiency in the milk value chain?
The organised dairy sector has become efficient in the last decade. When we are talking of the manufacturing industry, you have to deal with the level of automation; in India, providing employment is a critical aspect. Like in textiles, a manufacturing unit that is fully automated will be more efficient than, say, a power loom that provides employment opportunities. More than 100 million families are dependent on the dairy sector in India. What are the alternatives you are providing to these families before opening up the dairy sector? Small dairy farms that are not fully automated can’t compete with, for example, Fonterra (New Zealand’s multinational dairy cooperative). Fonterra has only around 10,000 farmers as members, and it’s a business for them. The purposes of a dairy cooperative in India and New Zealand are different. We are aiming at opening up the dairy sector, although India is not deficit (in terms of milk production) and countries that are importing right now and members of RCEP are not allowing India to export to them. RCEP was an unfair trade negotiation. Indian negotiators should have been brought these unfair trade practices during RCEP negotiations.
How do you anticipate the growth and development of the Indian dairy sector in the next decade?
The total value of the dairy products market is estimated at `7 lakh crore. Overall, the dairy sector is witnessing 5% growth annually. The organised sector is growing at 12-13% annually. Nowhere in the world, the dairy industry is growing like in India. The reason is simple: As India moves from a carbohydrate-consuming country to more protein-consumption nation because of rising disposable incomes, the demand for dairy products is going to rise further. Milk is considered as the best form of protein. There has been wide diversification in varieties of products. There is a large number of private sector players who have entered the market. At present, the farm gate price of milk is 40% more than in the previous year. Cow milk price last year at this point of time was Rs 18-21 per litre, while today it is Rs 30-33 per litre. Over the last few years, we were able to export as global prices were low. However, we paid prices to farmers that were unviable. Now, viability is there. Now, the flush season has started.
What are the expansion plans of the GCMMF?
We are setting up processing plants in Kolkata, and have already entered Guwahati, Siliguri and other places like Varanasi. Annually, we invest Rs 600-800 crore for expansion of our processing facilities. This year (2019-20), we will achieve Rs 40,000 crore turnover. Another Rs 12,000 crore turnover we will achieve through the Amul brand (which is not reflected in the GCMMF balance sheet). Gujarat district unions sell products directly in the state, in Banas, Surat, etc, and it does not reflect in the GCMMF balance sheet. We will be more than a Rs 52,000 crore turnover enterprise by FY20. In fact, we will be the biggest Indian FMCG brand.
What has been GCMMF’s strategy for the Indian market? You also pay differential prices for milk procurement from farmers in Gujarat, Rajasthan, Punjab and Uttar Pradesh…
We provide the best quality at an affordable price and are a trustworthy brand. People have blind fate in the brand. We pay more to farmers compared to other cooperatives in the country. We have to pay farmers the market price, wherever we procure milk. We are, at present, paying more to farmers from Rajasthan and Punjab compared to Gujarat farmers for milk procurement. It’s all market-driven. Even in Gujarat, all the district unions do not provide uniform prices for milk procurement to farmers.
How do you visualise the Indian dairy sector, say, after a decade?
India’s organised dairy sector, which is currently estimated at Rs 1.8 lakh crore, is expected to reach a size of Rs 6 lakh crore in 10 years. The organised sector (includes cooperatives and private players) is, at present, procuring 90 million litres of milk, which is expected to increase to 300 million litres in 10 years.