Corporate Governance At Dairy Farms – IIM Bodh Gaya

Introduction

Dairy Farming has grown to be a profitable business in India over the past few decades. The industry is dominated by unorganized players as of now. Nearly 80 percent of India’s milk production is contributed by small and marginal farmers, with an average herd size of one to two milching animals. Currently, the Milk Production is around 145 million tonnes per day and is expected to grow at 7-8 million tonnes per day per year for the years to come. The organized sector, including packaged milk and milk products, accounts for 25-30 million tonnes per day. With the estimated demand to climb up to 180 million tonnes by 2021, the future of dairy businesses seems to be bright.

The Milk Industry

The livestock sector contributes to 4 percent of India’s GDP at present and the dairy sector comprises a king’s share of it. With 85 million farmers benefiting from the industry, the livestock farming is a huge employer. But India lags behind countries like the USA and New Zealand both in milching capacity of cattle breeds and the average herd size, it would be safe to say that the industry is nowhere near its threshold. The onus of keeping milk prices in check and also to meet the evergrowing demand of milk products lies with the dairy co-operations. Again it is easier said than done. Along with its positives, dairy farming is a volatile business. It is difficult to speculate prices and overstocking can often lead to obsolescence. This makes the responsibility and role of governance in Dairy Industries even more crucial.

 

History of Dairy Co-operations in India

The Katara co-operative Dairy Ltd Allahabad, is the oldest dairy registered under the Co-operative Societies Act 1912. The Calcutta Co-operative Milk Union Ltd was registered in 1919. The Telenkheri Dairy Co-operative Society, Nagpur was registered in 1922. The Madras Milk Supply Union was started in 1927-28. The Lucknow Co-operative Milk Supply Union was registered in 1938. The largest Milk Co-operation in India, Kaira District Milk Union Limited, was incorporated in 1946 and it acquired the brand name Amul in 1955. Again in 1970, Operation Flood was launched as an initiative by National Dairy Development Board. Operation Flood was world’s largest dairy development programme. Till date there are around 22 states federations in the dairy sector.

The privatization of dairy farms in India is a recent achievement with an equity investment of more than 2100 crore rupees made in the last 4-5 years. With these industries, parallel industries like cattle feed industries have also grown manifold. These developments have made India the largest producer of milk globally.

Role of Cooperate Governance

With the increasing number of stakeholders in the sector, governance of the Dairy Industry needs revolutionizing changes. Leaders cannot guide and monitor a successful business without a thorough knowledge of the whole range of disciplines and a clear understanding of the aspirations and values of the owners. The owners need to have a scrutiny over their operational tactics and make sure that the real value of the business is achieved. USA with an average herd size of 190 animals sets up a benchmark for Indian farmers. But to achieve such a taunting target, efficient methods need to be adopted.

Regular reviews should be formalized and skilled personnel should be employed in order to maintain industrial standards. This would not only lift the bushiness potential but would also provide means to address generational and succession issues. The dairy industry is the only sector of comparable size to endure primitive governance up till now. But the time to change has come. The owners should accept the decisions relating to the business by collaborative processes. The consumers should also encourage upcoming organized sector farms and accept them as a source of employment and as a symbol of development for the nation. The enterprises should not only target profitability but should also keep a check on the availability and prices of their products. As the corporate model continues to become more complex, it presents both challenges and opportunities to the industry.

Proper veterinary care and cattle insurance should be given to farmers by the corporate houses which procure milk from them. Awareness programs regarding the scope of cattle farming should be conducted. Subsidies on cattle feed and other necessities can be given by the societies to the farmers.

 

Conclusion

With increasing demand for milk products India has come a long way and has become a global leader in milk production. Dairy Industry along with other livestock harvesting industries presents an opportunity for immense growth for the nation. If proper governance is achieved and the bottom tier is supported appropriately the year to come can prove to be golden years for the generally rural industry.

IIM Bodh Gaya

Shashwat Arora, PGP 19, IIM Bodh Gaya

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