Who’s afraid of Amul?

Source: The post is based on the article “Who’s afraid of Amul?” published in The Indian Express on 27^th May 2023.

Syllabus: GS 3 – Changes in industrial policy and their effects on industrial growth

Relevance: About Milk cooperatives

News: Tamil Nadu CM has requested Union Home and Cooperation Minister to direct Amul to cease encroaching upon the milk-shed region of the Tamil Nadu Cooperative Milk Producers’ Federation (Aavin). However, his demand is unreasonable.

Why is the demand of Tamil Nadu CM unreasonable?

First, Amul and Aavin are farmer-owned and professionally-managed dairy cooperatives. Hence, it isn’t desirable for any minister or bureaucrat to intervene in the business operations of such organisations.

The urge to control and reduce cooperatives to the govt. departmental undertakings also goes against the spirit of liberalization. Ease of doing business shouldn’t be only limited to large corporations.

Second, the entry of Amul in Tamil Nadu will benefit both farmers as well as consumers. It will benefit the state’s dairy farmers by buying their milk and benefit consumers by offering choice other than Aavin.

However, the only loser might be Aavin, because it had a situation of both monopsony (single buyer) and monopoly (single seller).

Hence, the entry of Amul will force Aavin to become more efficient, pay farmers better and work towards retaining consumers.

Must Read: Amul vs Nandini threatens to limit choices for consumers

What is the way ahead?

Amul has been present in Telangana and north Karnataka for about ten years, but it hasn’t really made an impact against locally produced cooperative and private dairy brands.

Therefore, state governments should permit the entry of new brands since doing so will promote healthy market competition and will offer greater choice to consumers.