EEC Report Vindicates Critics
In its highly critical evaluation report on Operation Flood II, the Joint Review Mission of the EEC and the World Bank has come to the conclusion that ".... at present the imports of dairy products (either donated, subsidised or commercial) should be substantially reduced or terminated. In the presence of growing indigenous stocks, imports would tend to negatively influence the producer's market and damage the transition to a viable co-operative industry" (p 19)*. It, therefore, recommends that ".... deliveries of milk powder and butteroil should take place only if and when a substantial and documented deficit shows up" (p 11).
This eagerly awaited report which was submitted in December 1986 is yet to be made public. All that is available are 23 pages of extracts released in March 1987. In striking contrast to all previous evaluations of Operation Flood, this summary confirms and substantiates most of the criticisms about the project's design and achievements made by dairy experts, social scientists, and NGOs in India and abroad.
The main findings and recommendations of the mission may be summarised here.
(1) Official data on the growth rate of milk production appears to overestimate real growth. The figures presented by the project authorities on increasing procurement over the last four years should be interpreted with caution as they refer to a growing number of districts from which milk is collected.
(2) In a number of important areas, there is an absence of reliable data collection and monitoring systems at the project and governmental levels, e g, lack of 'farm system' analysis and monitoring programme; lack of financial management data on which to judge the cost effectiveness of input programme outlays; absence of a statistical apparatus to monitor the evolution of milk production.
The present system of monitoring project impact is not satisfactory. The absence of bench-mark surveys makes any ex-post evaluation very difficult.
(3) The imposition from above and strict replication of the co-operative model in varied ecological and structural conditions has led to the development of a high-technology dairy industry operating at high costs. Often the inappropriateness of the model or its rigid application have led to delays and failures. Given the size and diversity of the Indian milk market, there is room for the development of alternatives to the Anand pattern. Labour intensive alternative organisations adapted to local ecological, socio-economic and political conditions should be encouraged so as to provide competition to the organised co-operative sector.
(4) The modern organised sector (public, private, co-operative) controls around 11 per cent of the total milk production. Better organisation of the traditional raw milk trade is important as it continues to provide essential services to producers and
(5) The marketing organisation of the project is unable to cope with the present and future needs of milk dairy product marketing in the country. It cannot deal effectively with problems like product selection, pricing, R and D organisation of the retail sector, etc.
Concern is expressed about the lack of co-ordination among sister organisations and the disruptive competition between them. A more balanced regional division of labour is recommended in order to counteract the present unequal share of the various dairy co-operatives in the product market.
Instead of the manufacture of dairy products, priority be given to the sale of liquid milk. Strategies for increasing rural employment through the manufacture of traditional Indian milk products at the household level in villages should also be encouraged.
(6) The cross-breeding programme shows only limited success. It would be more advisible to genetically improve indigenous livestock as well as concentrate on upgrading of buffaloes.
(7) The present policy to decrease the organisational and financial support for the input services programme is inadvisable. On the contrary, veterinary services should be made cheaper and more effective.
(8) Animal feed resources are scarce and of poor quality. Development of fodder production has been negligible. Future efforts in this sphere should avoid any competition between food and fodder production.
The feed component in cash expenses and in the total cost of milk production is fairly high and proportionally higher for landless households. Moreover, there are indications of a progressive erosion of profitability as cash expenses tend to increase, thus making
milk production even more unremunerative for the small farmer and landless labourer.
(9) It is admitted that attempts to reach specific target groups of poor and landless milk producers through dairy development projects is a difficult task. Credit facilities are necessary for these groups to acquire milch animals, if they are to be able to break out of the vicious cycle of poverty. NGOs should be put in charge of programmes to organise, educate and help these groups to form co-operatives. It is recommended that the social stratification of milk producers and their level of institutional organisation should be taken into consideration in order to minimise the inevitable unequalising income effects accompanying major technological changes.
(10) The existing disparities in milk consumption between rural and urban areas, between various income groups and regions should not be increased. It is, therefore, necessary to subsidise milk for vulnerable groups through direct governmental subsidies and cross-subsidies from luxury products for the rich.
(11) Planning of a national milk pricing policy is a matter of social responsibility. Leaving the prices to market forces may be both socially undesirable as well as economically inefficient. Milk prices should be co-ordinated with those of other agricultural products as recommended by the Jha Commission as well.
(12) The method of accounting used by the IDC prevents internal cost monitoring and carrying out of ex-post cost effectiveness analysis.
When adjustment is made for subsidies given by the IDC, almost all the operations show a repeated annual loss and some of them are in an alarming financial situation.
Finances for the IDC should also be used to support state dairying projects in non-Operation Flood areas. Reduction of the state dairy policy to being only a supplement to Operation Flood, in those districts not covered by the programme, may prove to be harmful to dairy development in India in the long run.
(13) Milk should be produced as near as possible to the centres of demand. Thus it is necessary to re-examine the policy of long distance transportation of milk which at present is technically and financially viable only because of open as well as indirect subsidies.
(14) Male dominance in the organisation and implementation of Operation Flood is a feature that makes the project similar to many other Indian programmes. There are indications of the danger that as dairying becomes a source of cash income, public status and power, women will tend to lose their share of the ensuing benefits. It is urgently necessary to take innovative steps to counteract these trends at all levels from the village co-operative upto the project authority level. The role of women's organisations is of importance in this respect.
Thus the mission is of the opinion that ".... the planned and approved scale of Operation Flood II project was too ambitious" (p 1) and that "the scope of the project remained quite unrealistic" (p 2). On the whole, it concludes that "the quality of achievement is quite uneven across India and the states, ranging from very satisfactory to disappointing" (p 2). Apart from the remark that the IDC was an extremely strong financial institution by 1985-86, the available
pages contain only a single point of unqualified praise for the project. This is reserved for the technical aspects of milk collection and processing which are judged to be competent and effective.
In March 1986, the EEC had postponed its decision on a proposal of the government of India, seeking extention of dairy aid for a further five-year period, i e, Operation Flood II (1986-90). Partly in response to the growing national and international criticism, a team of experts was sent to India to evaluate the project anew. The European Commission (the executive body of the EEC) decided to base its decision on the recommendations of this mission.
European commissioner Claude Cheysson released an interim report on Operation Flood II in March 1986. Although a number of shortcomings of the project were admitted to for the first time, on the whole it was judged to be a success. Nevertheless, commissioner Cheysson announced that dairy aid to India would be continued only on a multi-annual basis for consideration of the new report. It was made clear that the EEC could not give any more aid on a year-to-year basis, as had been the case in 1984 and 1985. Thus ended the policy of tacitly prolonging dairy aid for the project each year in spite of the fact that the allocated amount of free dairy products for Operation Flood II had already been supplied.
In view of the controversy generated by the project, the European parliament had also sent a delegation last summer to India for an independent evaluation. A number of NGOs in Holland, West Germany, Belgium, France and the United Kingdom have jointly been advocating a reorientation of the programme in favour of the rural and urban poor and a restructuring of Indian dairy development policy based on utilisation of indigenous resources rather than imported technology and foreign aid. Their two-year campaign led the general assembly of European NGOs to adopt a resolution on this issue in April 1986 which was presented to the Development Commission of the European parliament. It called for:
(a) A shift from capital-intensive to labour-intensive dairying;
(b) Promotion of developmental models adjusted to the socio-economic conditions of producers and regions, instead of a replication of the Anand model;
(c) Use of the proceeds from EEC dairy aid to promote the organisation and training of small farmers, especially women, enabling them to join and influence milk co-operatives;
(d) Improvement of indigenous livestock rather than cross-breeding;
(e) Curtailing the exports of animal feed from India;
(f) Setting up of better follow-up and guarantee mechanisms involving NGOs to ensure that the original objectives of the programme are respected.
In its forthcoming meeting, the general assembly of European NGOs is likely to reiterate its demands and recommendations especially in view of the positive echo these found in the report of the Joint Review Commission.
It is the findings and recommendations contained in this report which will determine the proposal to be put by the European Commission to the European parliament and the council of ministers in the coming weeks. It is hoped that the suggestions of the mission will be implemented as soon as possible, though a sudden withdrawal of dairy aid is likely to be problematic as well.
* All page-numbers refer to the "Extracts from the Review Mission Report about India's Operation Flood II Activities (December 1986)".