Dairy cooperative Amul came in for high praise from Prime Minister Narendra Modi on Sunday.

Talking to a gathering of farmers after inaugurating the cooperative’s new chocolate factory in Anand in Gujarat, Modi said the organisation represents a viable alternative to capitalism and socialism. According to a report in The Hindu, he also said, “It fills me with pride that it is the result of a farmers’ cooperative movement of over seven decades that Amul has become an identity, inspiration and necessity in the country.”

What does one make of these words? Several publications, including Scroll.in, have reported on the rot setting into Amul, one of independent India’s greatest achievements. The latest instance of institutional decay came in March when K Rathnam, managing director of the first Amul milk union, Kaira Union, resigned after some members of the union’s board alleged a Rs 450-crore scam had unfolded during his three-year tenure.

As Scroll.in reported in April, among the concerns raised by the board members was a Rs 262-crore transaction by the Kaira Union with an Erode-based private dairy called Milky Mist. Between January 2015 and December 2017, the union bought 8,700 tonnes of Cheddar from Milky Mist even though both Kaira and its sister dairy at Banaskantha could have supplied the cheese at cheaper rates. The deal hurt the nearly seven lakh farmers who are part of the Kaira Union’s milk procurement societies. According to the Gujarat Cooperative Milk Marketing Federation – which regulates the 18 unions under the Amul brand – 80% of the value of finished products goes back to farmers. Had Kaira bought locally, the income of the dairy farmers would have gone up by Rs 210 crore, that is, each of them would have earned about Rs 3,114 more.

The transaction also violated the federation’s principles that require members to purchase raw materials from sister unions. And yet, despite four levels of checks and balances extending upwards from Kaira Union’s internal auditors, monthly meetings of its board, monthly planning and coordination meetings of the federation and the state audit, the transaction continued for three years. This raised, among other things, questions about checks and balances within the Amul system.

In other dairies, other troubles

In November, Scroll.in flagged similar concerns of financial mismanagement at the biggest milk union in the Amul family, Banas Dairy. A look at the dairy’s annual reports showed its financial health was eroding. One reason was that electoral candidates were spending large amounts of money on their campaigns to become chairman or director at the dairy and then trying to recover their investment from the dairy’s operations.

These are not new allegations. In 2013, similar charges of financial impropriety surfaced against Vipul Chaudhary, who was the chairman of the milk cooperative in Mehsana – the Dudhsagar Dairy – at the time. Board members charged him with selling 7,000 tonnes of milk powder at low rates to private buyers, resulting in losses for the dairy. It was also alleged that Chaudhary had created excess manufacturing capacities without taking the federation’s permission. This had led to a higher interest and depreciation burden, resulting in huge losses, alleged RS Sodhi, the managing director of the federation.

It is a remarkable tableau. Amul has four large district unions and 14 small ones. The big ones are Banaskantha, Sabarkantha, Mehsana and Kaira. Over the last five years, three of these four unions have faced charges of financial impropriety.

There have been several charges of financial impropriety at Amul's dairy unions. (Credit: Amit Dave / Reuters)
There have been several charges of financial impropriety at Amul's dairy unions. (Credit: Amit Dave / Reuters)

A weakening cooperative

That said, the problems at Amul go beyond financial chicanery. For decades now, the cooperative principles along which the unions should be run are being violated.

As Scroll.in reported in December, Amul has lived through three leadership transitions. It was founded in 1946 by Gandhian freedom fighters such as Tribhuvandas Patel. Around the 1990s, control of the cooperatives went to regional satraps such as Banaskantha’s Parthi Bhatol. These men were not members of political parties but used the cooperatives, often the biggest economic engines in their districts, to gain power.

How did they retain power? Mostly by manipulating elections to the unions. As Scroll.in reported, incumbents and aspiring chairpersons alike began creating panels of loyalists who stood for elections to the union’s board. At the same time, businessmen, attracted by the size of the dairy, entered the fray. The amount of money spent on election campaigning rose. Most farmers could no longer afford to contest elections. It got to a point where, as Rasulbhai, a middle-aged dairy farmer who supplies milk to the Banas Dairy, told Scroll.in last year, “Before polling, for three weeks or a month, candidates take village chairmen away for a tour. They are brought back only on the day of voting.”

With the rise of the panels, dairy farmers lost their say on whom to appoint. They could only choose between rival candidates – each of them loyal not to the farmers but to candidates vying to be the chairperson.

In the late 1990s, Amul saw a third leadership transition. The Bharatiya Janata Party gradually established its control over credit cooperatives in the state before moving on to the milk unions. This article describes the strategems the party followed to gain control. For the party high command, taking control of the cooperatives was one way of weakening both the Congress and local power structures. At the same time, its leaders saw a chance to consolidate their own positions in the districts.

Between the credit and milk cooperatives, the latter were more attractive, Gujarat Congress leader and dairy manager Arjun Modhwadia told Scroll.in last year. “Credit cooperatives are not as big financially as the dairy cooperatives,” he said. “Anyone who wants long-term power has to control people institutions. And dairy is the biggest in Gujarat. Of the 17,000 villages in Gujarat, 16,500 are covered by dairies.”

What politicisation has meant for Amul

Today, the chairmen of all 18 Amul district unions belong to the BJP. Contrary to what senior officials at Amul told Scroll.in last year, this is not a benign development. Some of these leaders have serious criminal records. Amul’s former chairman Jetha Patel was arrested in a rioting case in the communal violence of 2002. The charges were later dropped, with the police citing insufficient evidence. Vice-chairman Jetha Bharwad faced charges of rape, extortion and kidnapping, according to his affidavit for the 2012 Assembly election. The same year, Banas Dairy chairman Shankar Chaudhary submitted an affidavit that listed three charges related to murder, four to rioting and two to criminal intimidation.

The damage inflicted on Amul by politicisation is not limited to moral collapse. Political imperatives have also entered the dairies’ functioning – like hiking milk procurement rates before elections. Another fallout is eroding the cooperation between dairies. Kaira Union tied up with a private company to procure cheese instead of striking a symbiotic agreement with Banas Dairy. And Dudhsagar Dairy chairman Vipul Choudhary was accused of selling 7,000 tonnes of milk powder to private buyers.

Politics is a part of the explanation. If two milk union leaders see themselves as competitors – for, say, the post of chairman of the Gujarat Cooperative Milk Marketing Federation or a plum political appointment – would they be enthusiastic about a transaction that also helps their rival grow? Take the case of Dudhsagar Dairy in Mehsana. A senior official in the federation told this reporter last year that a couple of years ago, milk sourced from Mehsana was sent for processing to Sabarkantha and Banaskantha in an apparent bid by BJP chairmen of other cooperatives to marginalise Choudhary. Choudhary had become unpopular in the BJP after he met Congress leader Rahul Gandhi in 2013.

As a consequence, the official said, capacity utilisation at Dudhsagar fell to almost 50%, reducing its capacity to pay attractive rates to farmers. This compelled Dudhsagar to put its dairy in Dharuhera, Haryana, up for sale. Scroll.in’s requests to Vipul Choudhary, the Gujarat Cooperative Milk Marketing Federation’s RS Sodhi and Banaskantha chairman Shankar Chaudhary for their response to the allegations went unanswered.

Prime Minister Narendra Modi spoke to dairy farmers at the inauguration of Amul's new chocolate factory in Gujarat on Sunday. (Credit: @narendramodi / Twitter)
Prime Minister Narendra Modi spoke to dairy farmers at the inauguration of Amul's new chocolate factory in Gujarat on Sunday. (Credit: @narendramodi / Twitter)

Left unsaid

This is the brief backdrop against which the prime minister’s words should be viewed. The articles hyperlinked to this report paint a more complete picture.

He is right when he says that Amul is a viable alternative to capitalist and socialist models. He is also correct when he says Amul is the fruit of seven decades of dedicated work by a farmers’ cooperative. But it is also true that Amul is being used to meet narrow political ends – and is decaying as a result. And this is being done by none other than Modi’s own party members. Yet, none of this featured in his remarks at Sunday’s event. The old Indian saying about elephants having different sets of teeth – one for showing, one for eating – comes to mind.