For 15 years already the EEC is supplying India with
large amounts of dairy aid for the national dairy development programme called Operation Flood. The official aim of this programme is to make the country self-sufficient in milk production. At the same
time India is exporting even larger amounts of highly nutritive concentrate feed to the EEC, while there is a serious shortage in India itself. With this feed India could produce many times the amount of milk that it has received as dairy aid for Operation Flood. One of the reasons for this strange situation is that dairy aid is depressing the local milk price for producers and because export is sending up the price of concentrate feed exports. Dairy aid also plays an important
role in the production of babyfood, to the detriment of hundreds of thousands of babies. As part of Operation Flood a cross-breeding programme of Indian cows with Western dairy animals is being implemented. The programme will lead to a reduced availability of coarse foodgrains, concentrate feed and animal draught-power.
The donated milk powder and butteroil is recombined in India into milk and sold in the cities. The proceeds of this are being used for building dairy and cattle-feed plants, transporting milk to the cities, developing improved dairy-cattle and other expenses. AII of it is being handled through a system of village cooperatives, cooperative unions and state-level federations of unions (the so-called Anand model of Gujarat). The Operation Flood II programme has recently been extended to 1990, because of considerable delay in the implementation. It is not yet sure whether EEC dairy aid for Operation Flood will be extended after 1985 as well.
Compared with the way EEC dairy aid is often used in other developing countries Operation Food certainly has positive aspects. In India the donated dairy products are not dumped indiscriminately: revenues are being used to expand the indigenous Indian dairy industry. Also the cooperative approach has clear advantages for milk producers, because it gives them a guaranteed outlet for their milk against a stable price.
As a whole the results of Operation Flood are nevertheless disappointing, especially judged against the original objectives. The target of providing more milk to the rural poor in order to improve their protein-intake, has been tacitly discarded. For more than half of the city population milk is too expensive as a food product. Not so for higher income-groups in the city who can now buy milk for a price reasonable for them.
In the rural areas it is especially the bigger farmer and to a much lesser extent the small farmer who profit from the project. For landless labourers it hardly offers any perspective, primarily because they lack their own animal feed resources.
Women, who usually take care of the cattle, are rarely members of the cooperative. The village cooperatives are mostly dominated by the (relatively) rich in the villages. About two-thirds of all the funds for Operation Flood were spent on building large-scale dairy plants. This has caused loss of gainful employment in the villages. For increasing milk production NDDB and IDC have also chosen a capital-intensive strategy of exotic cross-breeding and growing green fodder on irrigated land.
The EEC constantly praises Operation Flood as an exemplary dairy project. That claim turns out to be a considerable exaggeration. It is even more important to look much closer at the role the EEC is playing in India's dairy development.
One of the main objectives of Operation Flood II was to create a self-sustaining dairy industry by mid-1985. Instead India is now more dependent on imports than ever. The Operation Flood dairy plants in New Delhi are still making 55% of their total milk output out of skimmed milk powder and butteroil. In Calcutta this is 74%.
Between 1979 and 1985 India received 20,000 tons of Skimmed Milk Powder (SMP) in excess of the earlier agreed amount for that period. In 1975 commercial imports of SMP stopped but in 1984 India imported more than 25,000 tons of SMP from the USA. More than three-quarters of this were commercial imports at dumping prices and the rest was donated. For the period 1986-1990 India has again asked the EEC for dairy aid. An internal EEC note states: "The Operation Flood system itself appears largely dependent on the EEC food aid."
An important "cause" of the continuing dependence on dairy imports is the political importance of supplying relatively cheap milk to the middle and higher income-groups in the cities. EEC dairy aid and cheap American milk powder are used for this. The imported milk powder and butteroil is being resold by the IDC from a national bufferstock to the Operation Flood dairy plants for a price which makes recombined milk cheaper than fresh milk. The National Cooperative Dairy Federation of India, the umbrella organization of federations and unions under Operation Flood, has condemned this because it depresses the price of milk for the local producers (especially in the northern and eastern parts of India). This reduces the supply of milk to cities like New Delhi and Calcutta which in turn necessitates dairy imports. The circle is closed.
A second cause of import-dependency is the fact that most of the indigenously produced milk powder and butteroil is used for manufacturing luxury dairy products like table butter, chocolate and in particular, babyfood. This milk powder and butteroil is officially meant to supply the cities with extra milk. Now imported dairy products are used for this.
Continuing dairy aid or cheap imports is also attractive for the project-authorities because reselling these products brings in money for further investments in Operation Flood.
Because of the created dependency, Indian dairy imports can probably not be done away with immediately. The EEC is now in the process of reducing its dairy surpluses. Five more years of unconditional dairy aid will probably confront India with a situation in 1990 in which dependancy on imports has again increased, dairy aid is no more available and the world market price for dairy products has risen considerably. At the same time this aid will keep on depressing the milk price for the local producer.
Instead, phasing out dairy aid and stopping all commercial dairy imports within a few years, in the meantime taking care that it does not compete with fresh milk, will very probably lead to a higher producer price in the north and the east. This could cause an increase in the milk supply to the cities and a better capacity utilization of the dairy plants. Whether to subsidize specific groups of producers or consumers a clear matter of internal political choice, where it now is a more or less 'covert consequence' of the way dairy aid is being used.
[Circulated by India Committee of the Netherlands]
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