The milk industry is perhaps the only industry that has led to the large-scale upliftment of the poor – providing them with both money and health. This was the essence of the dream that Dr Verghese Kurien had. This remains perhaps the only industry which allows a marginalised family to earn a small amount of cash every day, and also to provide a good nutritional supplement to the children of the house.  It requires only a small investment of purchasing a milch cow.

What prevented a marginal cattle owner from achieving these goals was the absence of a milk collection system, and a robust distribution system which could eventually sell the milk and pay back the cattle owner every day. Kurien showed the people of India how this could be done, and with the blessings of Lal Bahadur Shastri, the then prime minister, set up the National Dairy Development Board and the Gujarat Co-operative Milk Marketing Federation (GCMMF). The latter is more popularly known by its brand, Amul.

Kurien was always convinced that India was destined to become the world’s biggest producer of milk (which it is today), even in those years when India was nowhere among the top five. His reasoning was simple. “Every government’s first objective is to ensure that its people get food,” he used to say. “Fortunately, most Indians consume rice and wheat, much of which is grown domestically. As it happens, for every kilo of rice or wheat you produce 4-5 kg of chaff, which is consumed by cattle. Thus, in terms of marginal costing, India can become the cheapest producer of milk in the world. Western countries have to grow cattle feed. We get it free. The only other country which enjoys this advantage is China. Once again, fortunately, China does not consume much of milk because many Chinese cannot digest milk. So it is advantage India.”

In order to ensure that every marginal-income family participated in this strategic industry, Kurien encouraged the low-input-low-output strategy of milk production. He believed that the best way for the economically backward villager was to own a cow/buffalo and let it graze on locally available grass, leaves or fodder, so that the cost of feeding would not be too high. The quantity of milk offered by the local breed of cows might have been small compared to world records. But this way, the surplus cash available with the villager would be high, and the risks of purchasing expensive fodder would be low.  Today, even the International Farm Comparison Network (IFCN) acknowledges that in India milk costs just around $25 per 100 kg compared to $43.7 for the rest of the world. And this is in spite of India becoming the largest producer of milk globally.

Kurien encouraged each family to own cows, and to sell the milk to a collection centre which would pay the cattle owner a price based on the fat content and the volume of the milk. Money for the milk was disbursed (and continues to be disbursed) each evening. Thus, each family could have some money at the end of each day.

TMA Pai, the man who founded Syndicate Bank, went further. Being a doctor, he persuaded each fishing family (he stayed in Malpe, a fishing village, very close to Manipal, Karnataka) to deposit 25 paise in what is today known as the “pigmy deposit’. Since banks would accept a minimum deposit of Rs 5, which most village folk could not pay in a single instalment, Pai created his own private collection scheme, with one dairy with his compounder, and one with the family. Within six months, Pai realised that he had a lot of money with him, and then began persuading his village folk to purchase a cow, so that its milk could first be given to the children (and thus improve their health) and then sold in the market. He advanced people money from the deposits he had garnered to purchase these cows, and then formed a milk cooperative which could purchase the milk from the village families.

With more money coming to the people, Pai’s deposits grew, and he then looked at another focus area – education. He set up a school, then a college, and then many more cooperatives. By the 1970s, Syndicate Bank became the only Indian bank with its headquarters in a rural area (in Manipal). But it got big enough to invite the attention of the then prime minister, Indira Gandhi, who promptly nationalised it. In fact, if there is any instance which shows how Indira Gandhi was lying when she said that banks need to be nationalised so that rural areas could get funds, Syndicate Bank remains the best example. It was a rural bank, and which, under Pai’s supervision, made Manipal one of the most affluent and progressive centres in India.
But milk was the starting point for making the rural folk both healthy and economically independent.

The Birth of Amul

The seeds of this unusual saga were sown more than 65 years back in Anand, a small town in the state of Gujarat in western India. The exploitative trade practices followed by the local trade cartel triggered off the cooperative movement. Angered by unfair and manipulative practices followed by the trade, the farmers of the district approached the great Indian patriot Sardar Vallabhbhai Patel for a solution. He advised them to get rid of middlemen and form their own co-operative, which would have procurement, processing and marketing under their control.

In 1946, the farmers of this area went on a milk strike refusing to be cowed down by the cartel. Under the inspiration of Sardar Patel, and the guidance of leaders like Morarji Desai and Tribhuvandas Patel, they formed their own cooperative in 1946.

This co-operative, the Kaira District Co-operative Milk Producers Union Ltd., began with just two village dairy co-operative societies and 247 litres of milk and is today better known as Amul Dairy. Amul grew from strength to strength thanks to the inspired leadership of Tribhuvandas Patel, the founder chairman, and the committed professionalism of Dr Verghese Kurien, who was entrusted the task of running the dairy from 1950.

The then Prime Minister of India, Lal Bahadur Shastri decided that the same approach should become the basis of a National Dairy Development policy. He understood that the success of Amul could be attributed to four important factors. The farmers owned the dairy, their elected representatives managed the village societies and the district union, they employed professionals to operate the dairy and manage its business. Most importantly, the co-operatives were sensitive to the needs of farmers and responsive to their demands.

At his instance in 1965 the National Dairy Development Board was set up with the basic objective of replicating the Amul model. Dr. Kurien was chosen to head the institution as its Chairman and asked to replicate this model throughout the country.