Seventeen years ago, the National Dairy Development Board launched its highly ambitious milk programme, Operation Flood, based largely on imports of milk powder from Europe. Eight years ago, Operation Flood moved into Phase Two to cover more states. And now, as the NDDB is preparing to launch the controversial Phase Three, Operation Flood itself has come under a welter of criticism from the World Bank and the EEC.
Claude Alvares, whose cover story, The White Lie (Weekly, October 30, 1983) triggered off a crtical evaluation of the milk programme, reports on the latest indictment.
The World Bank/European Economic Community (EEC) Joint Review Mission that visited India late last year has released its report on
Operation Flood. The report reads like an obituary. Its impact, coming at a time when the European Parliament is scheduled to discuss approval for the 'final' phase of the project (OF-III, 1986-1990) can only be disastrous for the Operation Flood authorities, particularly Verghese Kurien, chairman of the National Dairy Development Board, who had always assumed that they would get unstinting support and praise from their European friends. The review mission report indicates, if anything, that the project has lost support in Europe, and that the financiers of the scheme, both the World Bank and the EEC, are now willing to admit, not only that the project has not met any of its significant objectives, but that some other developments associated with it are to be deplored as well.
The main findings of the report lend support to every significant criticism made of the project by independent observers and experts since the project began in 1970. In its totality, it is the first major indictment of the project at the international level since Shanti George's major analytical study published by Oxford University Press, Operation Flood.
The report is blunt in many places: '... the planned and approved scale of OF-II was too ambitious... the scope of the project remained quite unrealistic.' Then, almost in bewilderment it states: 'The quality of achievement is quite uneven across India and the states, ranging from very satisfactory to disappointing. The situation has become very complex and very demanding in terms of rationalising present operations and building on them. Major issues of research and marketing strategies are not at present given the proper organisational attention and co-ordination.'
It is equally devastating on other Operation Flood claims including those involving milk production and procurement: 'The growth rate of milk production recorded in official data appears to be overestimating real growth. A rise in production, at the all-India level, seems related to the increased availability of feedstuffs due to crop production increases.' On procurement: 'The figures presented by project authorities regarding increase in procurement over the last four years have to be interpreted cautiously, as they refer to a growing number of districts from which the milk is procured.'
The review mission thus accepts that OF authorities may have incorrectly interpreted data on procurement, that milk production increases are basically on paper, and what ever increase there might have been is due to agricultural development rather than OF efforts, which even the Jha Committee on OF-II agreed were almost totally absent or non-existent.
As regards further imports of free milk powder from Europe (which is what OF-III is based on), the mission is negative: 'Import of dairy products can, in the present situation of growing indigenous stocks, damage the strengthening of the co-operative industry.' If the advice is accepted, OF-III has to be scrapped, and the project is formally already ended.
The report admits other grave problems: '... the use of indigenously produced milk powder and butter for recombination would indeed have to be subsidised given the present internal pricing structure. The finance needed for the recurrent operation is more or less equivalent to the income which Indian Dairy Corporation earns out of its present financial assets as interest.' The only other alternative is to raise milk prices for the consumer.
The report sharply exposes Kurien's claims that OF projects were making profits, while non-OF projects had run up huge losses. 'The majority of operations were either in a break-even or in a repeated annual loss situation. With adjustment for subsidies given by IDC practically all operations would show a loss situation, same coming into a very dramatic situation indeed.' Remove the subsidies made possible by the tree EEC milk powder supplies, and the operation is fully exposed as financially unviable forever.
What must be galling to the NDDB is that even its highly touted Anand model has been found deficient. The report concedes it is a 'top to bottom' model. 'In some cases, either the inapplicability of the model or the rigidity of its application has led to substantial delays or failure.' For the first time the report suggests alternative organisations, and competition to the organised co-operative sector, even reliance on the traditional trade, the focus of so much abuse from OF authorities over the years.
About fodder development without which there is really no milk possible: 'Fodder production development has been attempted but
the response to date has been negligible.' About crossbreeding, another major plank of the project, the report says there has been limited success, and adds: 'Apart from some regions, crossbreeding as a generalised technique for field improvements has failed...' It also admits that insufficient attention has been given to the improvement of indigenous pure breeds and buffaloes.
Another slap on the OF authorities' face is the mission's acknowledgement that much of OF's efforts have been built on the earlier work of state departments. In other words, OF has taken credit without doing work. 'In many cases, the project's achievements depend on previous constructive dairy achievements carried out by local state authorities or by other private organisations.' It goes further and suggests that instead of the structures set up by OF, the contributions of government services run by various animal husbandry and veterinary services must be recognised as the main agencies 'for dairy development in the past, and they will continue to have an important part to play in the future.'
Despite all the lavish praise of OF in earlier reports as a 'successful marketing programme', the report notes: 'the present marketing organisation is unable to cope with the present and future needs of milk and dairy project marketing at national level.'
When the mission notes that present operations must be 'rationalised,' it means the project situation today is ad hoc, arbitrary, irrational and economically unsound. The mission therefore ends by vetoing any further expansion of the project until present operations are corrected. It questions long distance transport of liquid milk, and for those who can read between the lines, acknowledges that Amul is constantly using its clout as the early market leader to keep down other co-operative rivals.
The review mission's report needs to be placed in perspective. In the wake of this writer's article, 'The White Lie', published in the Weekly, October 30, 1983, the government decided to appoint an evaluation committee under L K Jha. The Jha Committee 'supported' the project politically, but also provided sufficient clues to the government that nothing whatsoever had been done on the milk enhancement front, that farmers did not get a remunerative price for their effort, that there were heavy investment losses etc.
'The White Lie' fuelled a raging debate among European agencies
on whether the dairy aid given to OF was actually going to the poor. In countries like West Germany, Holland and France, activists took up the cudgels, held seminars and press conferences and lobbied officials in Brussels. The India Committee of the Netherlands brought out a special book, EEG Milk out of India, and started a campaign.
In March 1986, the European Commission published its report on OF-II, praised the project, but for the first time admitted 'shortcomings'. One of the most serious of these: 'On the production and productivity enhancement aspects, the programme overall has shown the lowest rate of achievements with respect to targets.'
Then in April, the general assembly of the Liaison Committee of Development NGOs to the European Community passed a long resolution against Operation Flood. By this time the project had become seriously controversial within the European Parliament and the European Commission.
In Maharashtra, suddenly, internal contradictions within the state's politics brought up a fresh spurt of opposition to Operation Flood. The Maharashtra milk department had put up a note before the Jha Committee in which it had argued that OF dairies set up in Jalgaon and Kolhapur in Maharashtra had been miserable failures. But what upset the milk officials was the fact that their own milk powder was being discriminated against by IDC, which had developed a vested interest in selling imported powder gifted to it freely by the EEC.
The World Bank/EEC team was now being seen as a sort of final assessment of the project. Little did the OF authorities even dream that the assessment would turn into an indictment.
The story has greater irony if viewed from the manner in which it has involved the OF authorities.
Europe has never questioned Kurien's demands for more and more milk powder and butter oil. In 1978, when OF-I got over, they readily
agreed to OF-II, committing vast quantities of dairy commodities as aid to the project. By 1985, the IDC's appetite for more milk powder from the EEC seemed endless.
The EEC then got unnerved. It now refused to give any more aid on a year-to-year extension basis, and said it would only entertain a fresh application for another five years. Kurien prepared a project proposal for OF-III. For the first time, however, Verghese Kurien found he had to wait for approval, that it was not guaranteed just for the asking. He was still waiting for the approval when the World Bank/EEC team arrived last year in India.
To be sure, Kurien had also not disclosed that OF-III included a possibility of commercial imports (for the first time since OF began) in case of milk shortages within the country.
But as the Maharashtra opposition signified, did the OF authorities really need the milk powder? Not at all, at least not to sell to the public. They needed it simply because it was the best source of income both for the IDC and the NDDB. If the milk powder stopped coming, the subsidies would have to go and that would eat into the coffers of these institutions.
In other words, it is the two dairy organisations, the IDC and the NDDB, that had developed a vested interest in the continuing supplies of free powder, not the Indian dairy industry.
For the first time, it was possible to argue that both institutions had turned anti-national. No wonder Shanti George renamed one the European Dairy Corporation, and the other, the European Dairy Development Board.
But are the World Bank and the EEC all that innocent, and what is their credibility in bringing out this indictment now? That is a worthwhile point to raise.
The EEC has been responsible for covering up the true status of the project for many years in order to protect its own skin, for seeing that the project is passed off as "successful" so that it could be used by the EEC as an entry point into other Third World countries. Further, the EEC's milk equipment companies made phenomenal business due to OF.
The World Bank has equally little credibility. It claims now that it had in 1979 itself told the project authorities that OF-II was too ambitious. However, it did not bother to enforce any changes, but gave the project support.
The World Bank was not concerned if anything proved disastrous to India: it had only to prevent anything disastrous happening to its own fortunes. The present World Bank/EEC report therefore not only damns the OF project, it also damns the EEC and the World Bank. The latter two institutions behaved irresponsibly at critical periods, playing with ordinary people's lives in order to protect their own interests. There is no other conclusion to draw from the evidence.