Amul vs Nandini threatens to limit choices for consumers

Source: The post is based on the following articles

“Who Moved My Milk? – Amul vs Nandini battle is meaningless. India needs both to expand nationally and shake things up” published in The Times of India on 11th April 2023.

“Express View: Amul vs Nandini threatens to limit choices for consumers” published in the Indian Express on 11th April 2023.

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

Relevance: About the milk cooperatives.

News: Recently, Amul, a Gujarat Cooperative Milk Marketing Federation, announced on social media that it will make online deliveries in Bengaluru. This supposedly threatens the local Karnataka Cooperative Milk Producers’ Federation (KMF) alias Nandini.

Why milk cooperatives are fighting with each other for markets?

Share for the market: India is the world’s largest milk producer, with 222. 1 million tonnes production in 2021-22. Almost half the milk produced is consumed locally. The rest enters the urban market, which is the growth area.

Role of state governments: Co-ops impart a unique dimension to milk and milk product markets. For example, the Karnataka government provides incentives for them. So, they have little flexibility over procurement or end-product pricing. In a difficult phase such as the lockdowns, the government was reluctant to raise product prices.

To fulfil farmer’s interest: Dairy is often the primary source of income for many landless households and marginal farmers. So, it’s in their best interest, successful brands like Amul and Nandini procure and sell across markets. In short, Karnataka’s dairy farmers, like their Gujarat counterparts, need to find new markets.

Surplus procurement: As per the government, milk cooperatives and private players share the liquid milk market. This market is expected to touch 54% by 2026, from 41% now. Milk cooperatives procure more from farmers with their attractive collection strategies. For example, Nandini Cooperative provide Rs 6-per-litre incentive to farmers. This led the KMF unions to procure milk far in excess of what can be absorbed within Karnataka. This surplus is, then, being “dumped” as milk powder, butter and ghee in other states.

Why blocking competition between milk cooperatives is wrong?

Neither producers nor consumers benefit from such protectionism and beggar-thy-neighbour policies. Competition can enable consumers to take the form of better quality or product differentiation.

By favouring one brand over the other might trigger a similar response in other states. For example, by blocking Amul in Bengaluru, politicians are risking similar retribution when it comes to Nandini selling outside Karnataka.

Blocking competition can frame a political economy challenge. Hence, the government has to consider electoral necessities before embarking on market reforms.