Onderstaand artikel is gepubliceerd in / Published in: Economic and Political Weekly, 22-8-1987      


EEC Consultants' Report on Operation Flood

Parimal C. Bardhan

The report entitled 'Operation Flood: EEC Report Vindicates Critics' by Shalini Randeria (Economic and Political Weekly, June 20) is yet another attempt to continue 'the propaganda vilification' of a well established and internationally recognised successful rural development programme. Shalini Randeria seems to be one of those social scientists and 'dairy policy experts' whose views are no different from those stated in the report. It is a pity that our social scientists and researchers and journalists have to merely parrot what foreign consultants and NGOs have to say about the programme; a programme which is benefiting millions of our landless labourers and small and marginal farmers. This only proves that our social scientists and researchers have neither the understanding nor the willingness to recognise facts that are so evident of the impact of Operation Flood both in the rural and urban areas.
The Report of the Joint Mission of the EEC and the World Bank referred to is neither an official report of the EEC nor a report of the Joint Review Mission of the EEC and the World Bank. The World Bank has categorically denied its association with this report and the EEC has not officially accepted it. Although the report was prepared with the financial support of the commission of the European Communities it is actually the report of the Team Leader of the Review Mission. It therefore does not represent the official views of the EEC. Though the Team Leader claims that his report is a synthesis of the findings and views of his fellow consultants, evidence shows otherwise. Some of the consultants, for obvious reasons, have chosen to ignore the stated objectives of the project and placed undue emphasis on various macro-economic issues. The 'extracts' which the author refers to are nothing but a checklist of the Team Leader's views and opinions drawn heavily from the already existing studies and documentation produced by the Institute of Social Studies, The Hague (Working Papers Series on Dairy, Aid and Development (ISS/IDPAD) numbers 1-29).
The charter of Operation Flood is to replicate the Anand Pattern and not to do all of the following as has been suggested in the report: (a) remove all of India's rural poverty, (b) use dairying as an instrument for developing economically backward districts, (c) develop private trade in milk into an effective alternative to dairy co-operatives, (d) establish a regional balance in dairy development notwithstanding the regional differences in natural endowments and dairy development potential, (e) to ensure equality of status for women, and so on. These points have been the major focus of the consultants even though these have little or no relevance to the stated objectives of the Operation Flood programme.
Interestingly enough, the report's concern for the lack of a 'farm system analysis' in dairying only reflects the consultants' lack of knowledge of India's resource-base. The moment one adopts a farm systems approach to dairying, it becomes clear that the scarcity of feed and fodder in India is 'economic' and not 'physical', it is a result of the low productivity and poor incentives in dairying and not the cause. It also becomes clear that the internal production and availability of all feeds is endogenous to the farming system in India and is not autonomously determined. If the Indian farmers do not grow high protein green fodder, it is because in the present state of dairying, it does not make economic sense for them to devote resources with high opportunity costs to dairying. The scarcity of feed and fodder in India is not absolute; it is relative to the state of conversion efficiency and relative prices of dairy inputs and outputs. The 'farm-system' approach that presupposes 'rationalisation' has the stark consequence of the small and medium farmers in Europe being eliminated. Every two minutes a farm goes into liquidation in Europe - that is, a total of approximately 250,000 farms or 350,000 agricultural jobs are destroyed each year. It is surely a senseless approach to adopt in India where dairying is a small farmer livelihood.
In its reference to pricing of milk, the report suggests that milk prices should be co-ordinated by an agency like the Agricultural Prices Commission, without comprehending the production functions of milk in India. Realising the practical difficulties such as seasonality in production, diverse feeding practices, wide variations in milk yields, etc, the Agricultural Prices Commission has viewed this as not feasible for the present.
Notwithstanding such misgivings towards Operation Flood propagated by some NGOs and researchers including the India Committee of the Netherlands, the opinions and observations of the EEC, its various member countries and the World Bank continue to be positive. It is ironical that a group of consultants were to review and malign Operation Flood within a lapse of four months of a very positive review by the EEC which states: "Given the constraints and difficulties in operating such a complex and diversified programme of activities the project has made good advances ... and the experiment has been positive." According to the Dutch Minister for Development Co-operation, "Operation Flood has lived up to expectations. With the aid of European milk powder and butter oil, a home dairy industry has been set up in India".
The World Bank Audit of Operation Flood, in its draft report, has clearly recognised the existence of a strong campaign against Operation Flood. The report notes that "aspects of the programme were even deliberately sabotaged and an active propaganda campaign was directed against it both inside and outside the country. Notwithstanding these many obstacles ... as in the case of OF I, OF II was successfully implemented overall and its gains were impressive... Their [NDDB/IDC's] original approach to milk industry and rural development, their innovative skills and their management, marketing and co-ordination expertise are all highly commendable in the audit's view." Also the World Bank Appraisal Mission for Operation Flood III, which visited India in March-April 1987, has reiterated that Operation Flood is a sound dairy development programme with considerable achievements to its credit.
Our experience confirms that it is possible to replicate the Anand Pattern with necessary adaptations to suit any region. The simple logic underlying this conviction is that, environmental differences among regions notwithstanding, the key constraint in dairy development in all hinterland (not peri-urban) milksheds of India is the absence of a structure to link the rural producers with the urban demand centres.
The strength of the Anand Pattern is its democratic nature of functioning, farmer ownership of infrastructure for procurement, processing and marketing and freedom in decision making on which the project authority has been reluctant to compromise. The 'Anand Pattern' is an accepted model for dairy development by the government of India and the basic tenet on which the World Bank and the EEC agreed to fund the Operation Flood. Many evaluations by national and international agencies have established that the 'Anand Model' is the most effective model for dairy development in the Indian agro-economic situation. In this context the World Bank's draft audit report notes that "the approach clearly has a solid grassroot base. The direct benefits presently accruing to participating DCSs - a remunerative reliable market for milk and a higher family income - being the most significant." The World Bank has once again placed its confidence in the programme and is now considering much larger financial assistance than before. Similarly, the EEC has confirmed continued support for another phase of the Operation Flood programme contrary to the views expressed in the report.
Operation Flood's detractors have deliberately chosen not to recognise what the dairy situation in India would have been had there been no Operation Flood. The consumer price of milk would have risen many-fold and consumers would still be receiving highly adulterated milk. Cattle keeping in cities would have continued resulting in draining of our best genetic resources apart from polluting the environment. Operation Flood has enabled the dairy sector to grow rapidly. The tiny dairy industry of the 1960s producing a meagre 20,000 tonnes of milk powder annually has developed in such a way that every type of dairy product consumed in the country is now produced indigenously. Numerous diversifications have taken place for milk products. Process development for Indian milk products was a rarity in the 60s. Today, through R and D, large scale processes have been developed to manufacture indigenous milk products so as to enable the producers to get better prices from the value-added products, which normally are taken away by middlemen. Each diary plant has a scientifically evolved product mix to utilise the milk procured in the most optimum manner.
At the core of Operation Flood is its emphasis on marketing, that is, linking the rural producers of milk to urban demand centres, besides balancing regional and seasonal fluctuations in production and supply. This has enabled milk to be available throughout the year in the metro-cities, 136 class I cities and over 200 other smaller towns. These cities and towns are daily supplied 6.4 million litres of pasteurised milk by over 5 million farmer producers through 49,000 village dairy co-operatives in 168 milksheds. Imports have continued to decline from around 40 per cent of the total throughput of India's dairy industry in the 1960s to 13 per cent in the 1970s to less than 5 per cent currently. While the domestic production of milk and milk products is rising consistently, the demand for it continues to outstrip supply. The consultant's report suffers from an inner contradiction as it states that official data on the growth rate of milk production appears overestimated and in the same vein it advocates that "the imports should be substantially reduced or terminated". If one accepts the view that milk production data is overestimated then it would seem that milk production is not rising sufficiently to keep pace with the demand and thereby there is every need to continue some import to meet the supply gap. Further, milk production in India like any other agricultural product is subject to the vagaries of nature and of course bio-genetically our buffaloes being seasonal calves, there is also sharp seasonality in milk production.
Owing to drought condition, some states are currently experiencing a severe drop in milk production which has resulted in short-fall in overall supply. This phenomenon is more often than repeated on a cyclical basis. And this is usually not understood by our foreign researchers. Needless to say, to overcome such fluctuations in milk production, bufferstocking of milk products, be it imported or indigenous, is essential.
It is sad that against the background of a positive report - the Report from the European Commission to the Council and the European Parliament (February 1986) - that comments "turning to Flood as a development project, the results obtained so far are without any doubt good", the consultants' report should reflect a total lack of understanding of the key issues and underlying principles of Operation Flood. The consultants' report is full of contradictions and misconceptions, its policy prescriptions for dairy development in India only cast suspicions on the intentions of these consultants as well as of the India Committee of the Netherlands and the other NGOs abroad. In this context, the Minister for Development Co-operation of the Netherlands has very appropriately remarked that "what strikes me is the condescending manner in which activists in the Netherlands feel they must judge decisions which are a purely Indian affair. The manner in which activists in the Netherlands approach the government and the EEC raises the impression as if we can determine politics in India from here. But we happen to be speaking about a sovereign nation of 750 million people."


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