“Maybe it’s a fear of the unknown,” says RG Chandramogan, Chairman of India’s largest private dairy company, Hatsun Agro Product Ltd, on the recent pushback again alleged attempts by Gujarat-based cooperative Amul to procure milk in Karnataka and Tamil Nadu. Local brands Aavin and Nandini are strong in Tamil Nadu and Karnataka, respectively. While it will be difficult for Amul to penetrate these two markets, its entry into Tamil Nadu will not have any major impact on the Chennai-based Hatsun, he said in an interview with businessline.
Edited excerpts:
How do you see the controversy surrounding Amul’s ‘alleged’ milk procurement plans in Karnataka and Tamil Nadu?
Maybe it’s a fear of the unknown. But, technically speaking, the State has a point in objecting; as Amul is objecting to a foreign player invading India and competing with them, why not local State cooperatives object to Amul’s entry in both milk procurement and sales. Amul, by size, is the biggest cooperative in the country. The GCMMF [Gujarat Cooperative Milk Marketing Federation Limited, which owns Amul] is run by Gujarat farmers and the ultimate profit of the organisation is also shared among Gujarat farmers as shareholders, irrespective of whether they buy or sell milk in Tamil Nadu.
Being a market leader in the private sector, how do you view Amul’s entry into Tamil Nadu?
Amul is a good brand. Beyond that, we compete with Amul in Mumbai as well as in Hyderabad. In Mumbai, they are bigger than us; and in Hyderabad, we are bigger than them. So we don’t find anything different, or anything difficult in competing with Amul. They don’t subsidise their product. For example, the toned milk of Amul is sold in Delhi at ₹54 per litre. But in the subsidised states of Karnataka and Tamil Nadu, the same milk is sold at ₹40 a litre. Though cooperatives say it’s a farmer subsidy, at the end of the day it turns out to be a consumer subsidy. With these types of subsidised milk, it will be difficult for Amul to compete. States also provide kiosks free of cost, on the roadside, for the local cooperatives.
Some sections worry that if the State cooperatives are not strong, then the corporate sector will exploit the situation. What’s your view?
The allegation is baseless.. Would the country have benefited if (state enterprises) Air India and Indian Airlines reduced the cost per passenger or provided efficient service and timely arrival? BSNL, when it was a monopoly organisation of the government, was charging a lightning call eight times the cost of an ordinary call. We do call everybody today with a lightning call at 1/100th the cost, without the assistance of an operator. Is it initiated by state or central monopolies or competing corporates that innovated and brought down the cost, enhancing the quality of service?
So, for Hatsun, Amul is just another competing brand?
Yes. Amul is one more brand and we compete with them nationally. Amul is not a subsidised cooperative. In prices, they are more or less on par with us. We don’t see them as a major threat or something to be scared of. In Hyderabad we have coexisted for more than 10 years. Among the cooperatives, the number one is Amul; second is Nandini, which is only 40 per cent of the leader, and third is Mother Dairy. Hatsun is a corporate but ranked the fourth largest dairy company in India. The second private dairy is 40 per cent of us. We have our own established share of the market in different states and we have a basket of products — milk, curd, ice creams and others — to market.
Will Amul’s entry put pressure on you to increase milk procurement cost?
We are also paying a good price… We don’t have any problems because it’s not a subsidised cooperative.
What’s your view on state subsidies?
The biggest threat or cancer for the future growth of the dairy industry are the subsidies given by different States. This may affect the milk industry in the middle to long run. Karnataka or Tamil Nadu giving subsidies is finally benefiting consumers in urban cities. The average procurement price subsidy is 7-20 per cent of purchase value, which is the real threat of the future. It creates an unfair competition. States are using taxpayers’ money, which is not benefiting the respective state too.
Why?
The states that gave out subsidies earlier, say for the last 10 years, the losses from what they gave back to cooperatives, even 20 per cent of that value was not invested in future infrastructure. This is not good for the industry. And with subsidies, they are not even allowing the private sector to sell at a fair price, so the private company is also affected (and cannot) invest for the future.
So, who is going to invest for the future?
A subsidised state is covering the losses and not making enough investments into new infrastructure. And the second thing is the affected private players will also not have resources to invest for the future. The third is that a state that is subsidising also dumps its products in other states that are not subsidised. So, when the selling price is reduced, the farmer in that state is also affected. These are three major viruses. If a foreign country dumps its product, which is subsidised in that country, into India, we call it dumping. This too is dumping.
What’s the option?
I think that a coordinated opinion to get away from subsidy is needed from the stakeholders of different states. Abolishing subsidy is the right direction.
