Dairy Entrepreneurship: Post #41

White Revolution or Right Evolution?

At a recent 5-day training workshop, organized by the Lahore Campus of Comsat University, about dairy entrepreneurship, resource persons and trainers from national and international dairy shared their knowledge and experiences in the choice area.

Dr. Shafique’s presentation was about the required soil and water conditions for the dairy business. Since mal-nutrition is identified as a critical factor in low milk productivity of cattle and buffaloes in Pakistan, the participants took keen interest in the technology and techniques to manage local soil and water conditions to grow and harvest higher yields of forage crops to feed the chopped green fodder either directly or by proper processing.

In addition to Dr. Shafique’s assigned topic, the authors also presented a thesis about ongoing public dairy development strategy. After providing relevant information for promoting dairy development in Pakistan, we asked them the following question: Do we want a White Revolution or the Right Evolution? In other words:

• Are we doing the right type of dairy development?  
• Are we doing dairy development right as practiced in developed countries?

As we all know that a revolution generally replaces old actors with new ones, old practices with new ones and old beneficiaries with new ones. In our context, if we keep the current line of dairy development, the natural outcome is that about 8.5 – 10.0 million landless and small households having landholdings mostly up to 5 acres or living assets of 1-6 animals are going to be replaced with new but few resourceful dairy owners.

Of course, considering the rich and development contexts, where only very few people are involved in agriculture, this may be a right way to develop the dairy business. However, in an environment where the survival of the majority of rural households depends on their milk animals, the implementation of this model runs the risk of increasing millions of hungry people who, naturally, will be more inclined to join with angry people termed as extremists.

Moreover, in promoting the current model, we end up pushing those who are the cream of the society with entrepreneurial capabilities to only produce raw material. As a matter of fact, we ideally would like to have these entrepreneurs on the value addition part of the dairy entrepreneurship. So, instead of improving the productivity of already millions of families in dairy business, we go back to square one by initiating a process to introduce a new class of milk producers.  By opting for this approach, obviously, we will be bringing more distortions in the rural economy where 40% of the population is already below the traditional poverty line. This poverty status is already too dangerous to ignore, what to speak of letting it be further aggravated.

Before we proceed further, let me quote a few statistics to make this point clearer. Pakistan is among the top 5 countries based on number of animals and milk production (for milk production, people suggest 3^rd or 4^th in the world). It is interesting to note that if we treat owning of milk animals as assets, we cannot doubt this statement that small and landless are overwhelmingly holding such assets as reported by an NGO (PLS) in 2003. Contradictory to the existing land holding pattern, as per the following data presented by the referred source, small herd-holding families own almost four times more cattle and buffaloes when compared with medium and large land and animal holders.
 

It is also documented that in spite of lower production when compared with say developed countries, in Asia we stand out very well. Considering quality of local breeds, both for cattle as well as buffaloes, productivity is still better compared to many countries in Asia and Africa. However, this resource-starved section of the existing dairy owners needs the current public support to refocus for further improving their productivity. In my opinion, this approach is more practical to produce positive results than re-inventing wheels with uncertain outcome.

 Fortunately, the usefulness of this strategy is already well demonstrated by the Sweetwater Pakistan Dairies near Lahore, where, by improving dairy management for local and /or cross-breeds, milk production has been increased by almost three folds. By creating a conducive environment for necessary awareness and providing regular training about dairy management coupled with financial support to bring management related changes, the overwhelmingly dominant players of the dairy sector in Pakistan, in the form of small herd keeping families, can also improve their performance and productivity in a quick and cost effective manner without generating negative externalities that have been described earlier.

In a way it seems that we are quick to throw away the baby along with the degraded bath water. Our problem is mainly management related changes, as amply demonstrated by Sweetwater Pakistan Dairies, but we rush to change everything and in the process end up creating a new generation of problems. In line with this tendency, our current dairy development strategy appears to be more focused on hardware than software. 

However, this does not mean that we sweep all other issues of inefficiency of dairy production under the carpet because we foresee huge potential by bringing management related changes. Of course there are many other concerns that have to be addressed like: breed enhancement, technological improvements, value-additions, refrigerated transportation, hygienic storage, packaging, marketing, etc.

There is no harm in having large western styled dairy farms as they become part of the process to indigenize new technological changes beneficial in the local context. Considering the size of existing mega dairy environment owned by millions of small and medium herders, it seems very difficult to replace this huge existing infrastructure by these new dairies. Therefore, the real foundation for dairy development lies, obviously, in improving the whole that exists NOT the small additions that have be introduced as being contemplated at the present time: it has to be  the right evolution instead of the currently aspired white revolution.

The option under consideration is to build on the availability of local assets held by millions of original dairy owners. As a matter of fact, in some way, the idea already is in practice when we see entities like Nestle, Halla and Haleeb involved in the milk production business of Pakistan. There is a similar kind of approach opted in India where local entrepreneurs are more  drivento collect milk from producers through a chain of milk collection centers.  However, this current model does not address the issues related to hygienic requirement of milking, individual storages, collection center storages and transportation for processing and packaging.

On paper, these upper level entities (like Halla, Nestle etc.) claim to offer all attractive services to the producers but, in practice, their impact remained bare minimum. Why so? Because on one hand, this promised service component casts and reduces their net profits and on the other hand, there is no mechanism put in place to ensure effective say of the small households as producers to benefits from such facilities / services. In India, the milk producers are better placed as there are more 70,000 village cooperatives and 22 state level federated cooperatives to ensure better milk marketing and ability to benefit from the services provided from different sources.

In contrast to India, cooperative experiments in Pakistan attract mixed feeling at best and complete rejection on the other extreme. This is mainly as this arrangement was misused by influential persons for their loot and plunder of public resources.

However the referred cooperatives in India are mainly focused on improving marketing capacity and ability to make use of the public and private services available for the milk producers. Amul in Gujarat, India is a success story in this context.

 Amul is managed by an apex cooperative entity, Gujarat Cooperative Milk Marketing Federation, GCMMF, which is jointly owned by 2.71 million milk producers of the state.  During 2007-08, the daily milk collection was 7.4 million liters and milk drying capacity around 626 MTs per day. During same period, 2007- 08, the turnover of the GCMMF is reported to be 1.325 billion dollars. Amul’s products range includes milk powders, milk, butter, ghee, cheese, curd, chocolate, ice cream, cream, shrikhand, paneer, gulab jamuns, basundi, Nutramul brand and others.

Such cooperative mechanism should also work in Pakistan as it is evident from the cooperative of milk producers of Karachi who even owns its own milk processing plant. Evidently, it works better when cooperatives are intended to enhance the capacity and ability to earn the right rewards for milk producers, who are almost exclusively small households requiring a better marketing alternative on an individual basis.

Why should the more resourceful and knowledgeable entrepreneurs get involved in establishing or working through the cooperative mode when their current modalities are better bargaining tools in their hands? Or, why should they ask for the headache to deal with organized producers when they can produce raw milk on their own and feed to their processing factories?  Of course, they have the resources and derive to bring the trumpeted white revolution on their own. However, this will be a slightly twisted or unorthodox revolution in history where have-nots will be further deprived of whatever little they still hold on to keep their kitchen going. Frankly, consequences of such a revolution are too scary even to contemplate.

However, no one can deny that subsistence dairy farming is no solution for commercial goals. Then the win-win solution is not to eliminate those who are stuck in the vicious cycle of subsistence phenomenon; let us help them to get out of this terrible state by making them commercial producers and streamlining the milk processes so these producers have an incentive to maximize their returns from their assets. Wouldn't this be in every one’s interest where producers enhance their quantity and quality of produce by reaping extra benefits and processors gain, without developing and managing their own dairy farms, as there remains no dearth of good quality milk in the market?  If we can only help to minimize the exploitation of the middleman, we do make good progress in the desired direction.

How should we make such a thing happen? In reality, we wish to do business where producers, consumers and processors make concerted efforts to benefit each other. Under the current scenario, it seems difficult as a benefit to one is generally a loss to the other.  But we can certainly make an exception to this rule if we, as being entrepreneurs of technology and management at upper levels, go forward via the following route:

• ·  Either public/ private or through a public-private partnership, we establish village level cooperatives of milk producers aimed at enhancing the production model of existing small households;
• ·  To influence policy and regulations, these cooperatives can be federated even at provincial and national levels;
• ·  For better dissemination of managerial and technological improvements, area cooperatives are also desirable;
• ·  Let progressive and daring entrepreneurs like Sweetwater Dairies come in at area (Union council / tehsil or district levels) processing activity with collection centers located at each village in collaboration with respective village cooperative;
• ·   Area processors, on their own or in collaboration with other parties, get involved in providing existing or adapted technology to the individual producers through their respective village cooperative for hygienic milking and storage.
• ·   Area processors also promote or get involved in refrigerated milk transportation from source to processing units;
• ·   Along with the public sector, animal medical and AI support services are promoted as business enterprises;
• ·   Area processors and Government should promote value addition agro-based industry in each basic processing area for the benefit of all stakeholders;
• ·   Area processors can also either initiate or promote production of silage and other supplementary food stuff for animal;
• ·  Sweetwater International  can activate the entrepreneurial model that was conceived to promote the use of  Sweetwater Solution Machine (SSM ) for treating sodic soil and water conditions to grow all field crops in general and forages in particular;
• ·   Area processors ensure dairy management practices of small households are in line with the most recent research findings; and
• ·   Local and international processors either on their own or through third parties improve the marketing of value-added milk products within national and international contexts.

Since the proposed scheme benefits all concerned including original owners of small numbers of animals, without replacing them with more resourceful, albeit fewer, individuals, this becomes the “right evolution” instead of the much publicized “white revolution”. Everyone stands to benefit and hence it could be termed as a win-win strategy of dairy development. .