March, 1988

Agreement to continue EC diary aid to India till 1994 will be signed soon

Campaigning on Operation Flood leads to important concessions
of the European Community (EC)

New critical reports of the European Parliament and the Court of Auditors of the ECon Operation Flood

After years of debate and controversy in India and Europe on Operation Flood, the European Community recently decided to support the third phase of this national dairy development programme in India with new multi-annual food aid supplies. From 1970 till 1986 the EC has already been providing Operation Flood with around half a million ton of skimmed mil powder (SMP) and butteroil (BO). Most probably in March this year India and the EC will sign an agreement on Operation Flood III (1987-1994) for the supply of 75.000 ton of SMP and 25.000 ton of BO. In fact 40% of these amounts have already been delivered last year or will be delivered in the first half of this year.
The World Bank will also support Operation Flood III with a loan of $360 million (Rs. 4680 million) on a total project budget of around $700 million. The rest of Flood III will be financed with funds generated by new EC dairy aid (Rs. 2126 million) and with the existing resources of the National Dairy Development Board (Rs. 1960 million). The latter are largely deriving from unspent counterpart funds of EC support to Operation Flood II.

Campaigning on Operation Flood by European non-governmental organizations (NGOs) - among which the India Committee of the Netherlands - has resulted in some important concessions of the EC with regard to the conditions under which new dairy aid will be given.
Most important are a number of specific measures which are meant to avoid that EC donated dairy products will continue to depress the price and production of Indian milk and milkproducts. A report just published by the European Court of Auditors on 'food aid supplied to India between 1978 and 1985' states unambiguously on this issue: "It is clear that the Indian authorities have taken advantage of the Community donation and supplied the dairies at low cost with products which are in fact subsidized, thereby encouraging some reduction in marketing prices and conseqently exerting downward pressure on the prices of local products at the production stage."
Without explicitly admitting that this has been the case since 1970, the European Commision - the executive body of the European Community - now reached an agreement with the Indian authorities on some 'special conditions' related to the use of dairy aid commodities. The first one of these reads:

"In order to maintain and strenghten a price policy providing remunerative prices to the producers and stimulating local production, the food aid supplies should be priced at the same level as indigenous milk price, taking into account the cost of an efficient transformation into milk powder".

This condition and others can be found in the 'Draft Commission Decision allocating food aid to India', which was submitted by the European Commission to the Food Aid Committee of the EC member states. This Committee working on behalf of the Council of Ministers of the member states gave its approval.
India and the EC also agreed to have an annual review of the required amount of dairy aid and, if necessary, to replace it with financial aid. A new system to monitor, review and evaluate the implementation of Operation Flood III will be jointly set up as well.
Furthermore it is stipulated that food aid for Flood III is exclusively destined for recombination into liquid milk. According to the report of the European Court of Auditors, "the bulk of gifts of butteroil was sold as edible oil" and "without being absolutely certain, the Court cannot rule out that substantial quantities of skimmed milk powder were used to manufacture baby food".

Another concession of the Indian project authorities and the European Commission to their critics, is the "increased emphasis on buffalo improvement" in Operation Flood III. In the recent report by the European Commission on 'Community support to India's dairy industry development' of August 1987, it is said that: "cattle cross-breeding may have been overemphasized" and "genetic improvement will be reoriented towards buffaloes and local breeds, reserving half breeds to more efficient producing farmers and regions". A number of Indian scientists and organizations however, are opposed to any large increase in the number of crossbred cows for áll farmers. Large scale cross-breeding reduces the availability of suitable draught animals. They also need a lot of concentrate feed which is in very short supply in India. This would in turn lead to a higher price and an even greater shortage of concentrate feed for local draught and milk animals.

It can also be seen as a positive development that some unrealistic targets of Operation Flood II have been drastically revised. Where Flood II wanted to enroll 10 million milk producing farmers as cooperative members by 1985, the aim of Flood III is now to cover 7 million farmers in 70.000 cooperatives by 1994! At the moment there are around 4,7 million members in 47.000 cooporatives. According to the European Commission due attention will be given by the project to "fully apply farmers' control over the whole system from local cooperatives to national federations". Although of course desirable, one can ask how - given the present situation - such a major goal can be achieved and more importantly 'which' part of the farmers will be in control.

On the related issue of the impact of Operation Flood on the poor in India, the European Commission has chosen to largely ignore the criticism from many independant sources on the disappointing and sometimes negative effects of this programme. Even the European Court of Auditors states: "In the light of fodder and capital requirements, large scale milk producers have a real advantage". Reading the above mentioned documents of the European Commission however, one comes to the conclusion that the original objectives of the programme - which emphasized the benefits for poor producers and consumers - have been discarded by the Indian project authorities (the NDDB) and the European Commission. Not even a word is said in these documents about the position of women (who infact do most of the dairy work), although the independant consultants of the EC-funded Review Mission state in their report: "there are indications that - as dairying acquires more public status and brings in more cash income - women will be participating less in the ensuing benefits". Vigorous and innovative action is recommended to improve the position of women at all levels of the cooperative structure, including their election to key positions. Several Indian non-governmental women's organizations are also working on that and jointly published elaborate 'recommendations for policy planning for women in dairy production' (in the hook "Indian Women - A study of their role in the dairy movement" by Marty Chen and others).

Another important point regarding Operation Flood III refers to the objective to reach self-sufficiency in milk production. This was first to be reached in 1975, then in 1985 and now the European Commission tells us that the third phase of Operation Flood will allow India to become "totally self-sufficient" by 1994. According to the 'Draft Commission Decision allocating food aid to India' however, India's total requirements for dairy imports in 1988 might reach 60.000 ton of SMP and 20.000 ton of BO. As the EC will only supply 18.000 ton of SMP and 6.000 ton of BO as food aid, this leads to the conclusion that India will have to import commercially large quantities of dairy products. This might partly be due to the after-effects of the extreme drought conditions of last year, but there are clear indications that commercial imports of dairy commodities will also be necessary in the future and might be even increasing. On the basis of the report by the European Commission of August 1987, it can be calculated that the average annual increase in milk production of an Operation Flood producer will not be more than 1.5%. The demand for milk will, according to various sources, most probably be increasing by 4 or 5%.
From the above we can draw the conclusion that it is very likely that India, or rather Operation Flood, has become dependant on commercial imports of dairy products and that the EC has created a market for itself and other Western dairy exporting countries. Continuing with dairy aid for another seven years is not the solution to this problem, but will only aggravate it in the long run. More EC dairy aid for Operation Flood will help to further expand a system of capital-intensive dairying in India, who's real costs are temporarily covered up by the finances generated with food aid. The type of dairy development upheld this way, at some point of time has to go through a painfull process of adjustment and consolidation. Operation Flood is, according to the India Committee of the Netherlands, now addicted to dairy aid and cannot escape to be weaned away someday.

On the basis of these and other arguments the ICN recently made an urgent call upon the European Parliament: "NO MORE DAIRY AID FOR OPERATION FLOOD IN INDIA WITHOUT POLICY CHANGE IN FAVOUR OF THE POOR". The ICN further stated:

"The European Community should stop its dairy aid to India's dairy development programme Operation Flood III. This can best be done after the proposed quantities of SMP and BO for 1988 (18.000 t. and 6.000 t. respectively) have been delivered, because this gives the project authorities some time to adjust to the new situation.
Any additional aid for Operation Flood III, preferably financial aid and not dairy aid, should only be considered if there is a clear policy change in favour of the poor, among which women in particular, and if competition between European dairy aid and indigenous milk production is strictly avoided. In this case any financial transfers or proceeds from dairy aid should be used to support the implementation of these policy changes".

The immediate reason for this appeal was the fact that the European Parliament recently (22-1-1988) voted on its own report (including a resolution) on Operation Flood III. The report was drawn up on behalf of the Parliamentary Committee on Development and Cooperation by Wilfried Telkämper, a member of Parliament of the Green parties who cooperate in the Green Alternative European Link (GRAEL). The original text of the resolution and the proposed final version (including amendments), supported by the GRAEL and the socialist and communist parties, was sharply critical of Operation Flood and insisted that after meeting some requirements dairy aid should be given for one year, after which any further aid should be made conditional on the progress made on a number of specific shortcomings. This large left wing of the European Parliament felt that the effects of Operation Flood are not in accordance with the original social objectives and does not want the European Commission to make a multi-annual food aid commitment to this programme. Instead it wanted the Parliament itself to decide each year on any further aid. Some other interesting amendments on the final resolution supported by the left-wing parties were:
"proposes that out of the sales proceeds of any future dairy aid to India, other more employment oriented patterns of cooperative dairy development should be financed instead of just imitating the capital-intensive model of AMUL in Gujarat," and
"asks for a substantial regional reallocation disbursements as the northwestern part (especially Gujarat) has been treated most preferentially uptill now, which has made the eastern part of India dependant on it".
Besides the left parties in the European Parliament say that, because of the uncertain results of Operation Flood, they do not encourage the European Commission to implement similar programmes in other developing countries.

All of the above points, were however (narrowly) outvoted by the right wing majority of the European Parliament. Nevertheless the final resolution adopted, although generally welcoming "the major positive effects of Operation Flood", insists on a number of important policy changes in the programme. This compromise resolution, which was as a whole accepted without a vote against, for example "insists on Community support for Operation Flood being made compatible with improving the lot of landless, marginal and small milk producers", "demands that all is done to actively promote women's participation as members of cooperatives and as elected members in their governing bodies at all levels" and "emphasises the need for supplementary feeding programmes in favour of vulnerable groups for which milk is of special value (small children, nursing and expecting mothers etc.)". The European Parliament's resolution also advocates a number of measures to avoid competition between imported and local milk and to assure a reasonable price to the producer. Furthermore Parliament is of the opinion that "the use in India of locally produced concentrate feed which is currently being exported should be encouraged" and that "for buffaloes, genetic improvement should concentrate on indigenous breeds best suited to local conditions".
Compared to the latter and several other recommendations it is rather contradictory that the resolution also asks for the export of European cows to projects of Indian and European 'charities'. This specific point was brought forward as an amendment by two conservative members of parliament and accepted by a small majority. Mr. Cheysson, European Commissioner for North-South relations and on behalf of the European Commission politically responsible for the Operation Flood negotiations, advised the European Parliament - quite rightly - to vote against this amendment.

The majority of the European Parliament accepted the proposal of the Commission to continue Operation Flood "while emphasizing that EC food aid contributions planned for Operation Flood III will steadily decline".
The powers of the Parliament within the European Community are limited. Their resolution on Flood has the actual status of an advice, although a unanimously accepted resolution like this one certainly carries weight with the European Commission, the member states and the public opinion. The Parliament's influence on the position of the Commission seems however mainly the result of it's active interest and participation in the political and public debate on the issue during the last two years. This can be examplefied by the Round Table discussion on Operation Flood which was organized by the GRAEL in the Parliament two days before the voting on the resolution. Both advocates (including representatives of the Indian Embassy in the EC and of the European Commission) and critics (including representatives of NGO's) together formed a panel, debating among themselves and with participating MP's and others.
It can be expected that the European Parliament will closely follow the implementation of Operation Flood III. The Parliament accepted an amendment of the GRAEL calling for an evaluation - in combination with the progress reports - which should focus specific attention on a number of crucial and controversial aspects (see point 15, Annexe "EEC-India cooperation with particular reference to Operation 'Flood'"). The Parliament as a whole was also quite irritated because of the insufficient information regarding the negotiations and decisions on Operation Flood and insisted to be provided with the complete consultants Review Report and the report 'in preparation' by the European Court of Auditors.

Less then two weeks after the European Parliament voted on it's resolution, a special report on Operation Flood II of the European Court of Auditors was published and, as usual, accompanied by the replies of the European Commission. The report of the Court itself however, was already adopted on 29 October 1987. One therefore cannot help to get the strong impression that the Commission has delayed it's (short) replies and thereby the publication of the Court's report, untill after the resolution of the Parliament was passed. This impression is reinforced because the Court of Auditors report is highly critical of many aspects of Operation Flood and explicitly doubts whether new dairy aid would be necessary.

In it's general conclusions the Court employs a two-pronged approach. On the one hand it is of the opinion that "if reference is made to the general principles on which 'traditional' dairy aid is based, the Community's participation in the Flood operation merits a positive assessment, particularly if it is compared with certain food operations carried out by the Community to assist other recipient countries".
On the other hand the Court concludes: "Nevertheless, if reference is made to the specific objectives of the Flood operation, it has to be admitted that they only have been achieved on a very piecemeal basis as regards the increase in the yield of dairy livestock, the increase in milk consumption per inhabitant, the advantages to the poor of the rural and urban areas, the improvement in the supplying of the market in the large urban centres, membership of cooperatives by dairy producers and the extension of the Anand model to the whole of India."

But maybe the most important reason for the European Commission to delay the Publication of the Court's report, is the quite explicit recognition that Operation Flood could do without new EC dairy aid. The report states: "as regards the question of supplying the liquid-milk needs of those who can afford to pay for it, the Flood operation may now be considered to be in a position to take over responsibility for the production of skimmed milk powder that has hitherto been provided by the Community". Also in it's conclusions the Court says: "Community aid in it's present farm has now achieved it's objective. It is because Community aid provided Flood, via the Indian Dairy Corporation, with a considerable amount of additional finance for the implementation of it's investment programme, that the Indian authorities have recently expressed the desire for this aid to continue. The quantitative need, in relation to the present level of solvent demand no longer exists".

In december 1985 the India Committee of the Netherlands started it's campaign 'EEC MILK OUT OF INDIA' with four main 'points for action':
* phase out dairy aid to India within two years
* no dairy aid for bottle feeding
* no aid for exotic cross-breeding in India
* stop EEC animal feed imports from India
For over two years we have together with other European NGO's campaigned on these and other issues related to Operation Flood. There have been quite a number of positive reactions to the campaign from Indian social scientists, other experts on Operation Flood and non-governmental organizations. Some of them, like the Indian Dairy Action Group (IDAG) and the social scientist Dr. Shanti George, wrote on their own initiative to the European Commission and the European Parliament on the changes they felt were necessary in Operation Flood III.

For the moment confining ourselves to the above mentioned four points, we can now sum up what has politically been achieved at this point of time.
EC dairy aid will not be phased out within two years as we urged, but it is a positive development that the quantity of new annual dairy aid will only be around one third of the average allocation during Operation Flood II. A major result of the campaign however are the 'special conditions' to avoid that new dairy aid will depress the price and production of milk of the Indian milk producers. The main way to do this is closely related to the condition mentioned in the campaign manifesto for any further dairy aid to Operation Flood: "the donated dairy products should be sold to the dairy plants tor a price which makes recombined milk slightly more expensive than fresh milk."

The direct and indirect support the EC has been given to the promotion of bottle feeding in India has been or will be drastically reduced or even stopped if the new agreement on Operation Flood III is implemented. Direct use of EC skimmed milk powder for commercial baby food production is banned by the condition that dairy aid is exclusively destined for recombination into liquid milk. Indirectly the EC is linked with the promotion of bottle feeding in India because dairy aid enabled cooperative dairy plants to use about half of India's indigenously produced milk powder for manufacturing baby food, because the donated products filled the resulting gap in city milk supply. In our campaign we urged only to deliver dairy aid to India, if the cooperative companies using those products would abide by the Indian National Code for Protection and Promotion of Breast Feeding issued in 1983 by the Government of India. This Code includes a ban on any public advertizing or other forms of promotion of breast milk substitutes. At the end of 1985 important articles of this Code were still violated by the cooperative as well as the multinational dairy industry. Indian organizations cooperating in the National Alliance for the Nutrition of Infants, played a very active and important role in the realization of the Code and its adoption as a law in November 1986. Already after March 1986 however the cooperative dairy industry of Gujarat, who is the marketleader in babyfood with its product Amulspray, stopped advertizing. Possibly our campaign together with active Indian opposition and international campaigning on bottle feeding, helped AMUL to make that decision.

Criticism of Indian scientists, the India Committee of the Netherlands and other NGO's on the planned large scale cross-breeding programme of Operation Flood II, seems to have had an impact on the project plans of Operation Flood III. According to documents of the European Commission a reorientation from cross-breeding to genetic improvement of buffaloes and local cattle breeds, "seems to be sufficiently considered in the definition of the new programme." This general statement leaves of course room for cross-breeding and falls short of our appeal not to use any counterpart funds of EC dairy aid for this purpose. On the other hand this new focus on local breeding is - if it is not only an eyewash of the European Commission and the project authorities - an important policy change which should be welcomed. The ICN also urged the Dutch Ministry of Development Cooperation not to go ahead with their plans to support cross-breeding programmes in India. No programme of this kind was financed up till now.

The last 'point for action'of our campaign - to stop EC animal feed imports from India - was of course the most difficult one to get results on. Compared to aid it is even much more complicated to reorient trade in favour of the interests of less privileged groups. But bringing the export of very scarce Indian animal feed to the attention of the European and Indian public and politicians, certainly stimulated the debate on the issue. There have been publications in the press and questions were raised a number of times in the Indian Parliament. Reacting to a written question of Ram Awadesh Singh on 31 July 1987 in the Rajya Sabha why the exports of cattle feed were not stopped in view of acute shortage of cattle feeds and recurrent droughts, the Minister of Agriculture stated that 'a proposal has been mooted to stop the exports of cattle feeds in view of the existing drought conditions'. It is not clear what actually happened, but at least the export of cattle feed has now become a matter of political debate.
The European Commission rejected the idea to stop or curb the import of Indian animal feed, while the Court of Auditors notes somewhat ironically: "India exports 1 million tonnes of oil cake per annum (about 1/3 of quantity extracted nationwide from oilseeds) largely to feed overproductive European cattle". If India would not export any animal feed, it could produce annually between 20 and 30 times more milk than the average amount it will receive during Operation Flood III. But because this export leads to soaring prices of animal feed in India many local producers are not able to afford this price. Because until now EC dairy aid is depressing the local milk price, one can really speak of a vicious circle of EC dairy aid and Indian animal feed exports. This circle will be partly broken if dairy imports under Flood III would stop competing with local production, but EC animal feed imports from India will for the present continue to hamper Indian dairy development.

A more general result of the campaign 'EEC MILK OUT OF INDIA' and other NGO-activities on this issue, is that it definitely helped to make Operation Flood and similar EC food aid programmes to come into a political issue in Europe. The Indian correspondent in Brussels of the (Indian) newspaper Economic Times and the magazine Commerce, wrote an article in the latter under the headline 'Operation Flood - Non-governmental organizations behind controversy' (Commerce, September 12-18 ,1987). There Mr. Malcolm Subhan stated: "The controversy over Operation Flood might not have erupted in Brussels, and certainly not with such force, but for a number of non-governmental organizations." In a more recent article 'EEC aid for Operation Flood - Tussle continues' (Commerce, January 9-15, 1988) he gives as his opinion that: "The opponents of Community aid for Flood III have suffered a severe setback of course; but they also made a number of gains, which are reflected in the terms on which the aid is being given."
Hardly anybody would have expected two and a half years ago however, that even the much officially praised Operation Flood programme would have to accommadate partly to it's critics. And no doubt the 'tussle' on Operation Flood will not end, neither in India nor in Europe.

Annexe 1: Draft Commission Decision allocating food aid to India: http://www.indianet.nl/pb8803-1.html.

Annexe 2: EEC-India cooperation with particular reference to Operation 'Flood': http://www.indianet.nl/pb8803-2.html.

Annexe 3: Article 'Operation Flood - Non-governmental organizations behind controversy' in Commerce, September 12-18, 1987: http://www.indianet.nl/a870912.html.

Manifesto of the campaign 'EEC Milk Out Of India': http://www.indianet.nl/milkman.html.

India Committee of the Netherlands/Landelijke India Werkgroep - 1 augustus 2003