September 2, 2009

The Real Amul: Our Visit to Israma

Filed under: Conversation,Economics,F&B,Gujarat — loggers @ 5:05 pm

Politics is outside the door of this collection center. Inside, it’s just business.

— Amul Society Supervisor

In order to fully understand (and appreciate) the Amul model, we visited Israma, a village in the Anand district of Gujarat. Milk collection at the designated centers takes place twice daily, at 6am and at 5.30pm. An Amul tanker arrives at the village at 10am to gather milk collected that morning and the previous evening. This tanker takes the stock to the Amul factory in Anand for pasteurization.

Milk Storage Tank At the Collection Center

Milk Storage Tank At the Collection Center

We reached Israma at 6:30am and found that the collection process was under way. The fat content of the milk is checked by a masked officer who uses a digital instrument which is connected to a computer that runs Gujarati software. The villagers are paid every 5 days but have the option of taking daily payments. The center is supervised by a Society Chairman, elected at the local level by members of the co-operative. Israma has a total population of 2,500 and 360 co-operative members (nearly every family in the village is involved). Membership can be obtained by supplying 700 liters of milk or by contributing for 180 days (in addition to paying a fee of INR 10).

Collection Process

Collection Process

Villager pouring milk into collection bucket

Villager pouring milk into collection bucket

The Israma collection center was established in 1965. Last year, it generated profits of INR 900,000 which were re-distributed among the villagers in direct proportion to their contribution. This center has an ISO standard which is reviewed annually. In order to meet the requirements, the center maintains its own scorecard and updates it every month. The unit also has a cattle feed storage room where 17kg sacks of mixed grains are stored. These are sold to farmers at a discounted price.

The ISO Certificate

The ISO Certificate

Grain Storage At the Collection Center

Grain Storage At the Collection Center

1,100 such centers are spread across the Kaira and Anand districts of Gujarat. Most villagers in these districts are members of the co-operative as it is a robust secondary source of income. In times of drought, this option is no short of life-saving. Amul is working towards providing broadband internet to these centers.

This institution works on simple traits – trust and teamwork. The system is unique in that it provides incentive for each farmer to be diligent and maintain healthy cattle. The center is decorated with posters that educate villagers on how to provide optimal nutrition for their cows. It sets an example for efficiency, hygiene and solidarity. To see such a co-operative thrive was heartwarming, and we hope Amul’s presence in rural India continues to grow for years to come.


1 Comment »

  1. Guys, your description of the Amul model is fascinating. However, you suggest that the model is profitable yet the products are commodities. In a competitive market, any excess profit will get competed away. The only profit is a normal — that is, the minimum acceptable — return on invested capital. Does INR 900,000 sounds like normal profit?
    You will probably answer that it runs as a not-for-profit organization and therefore is more efficient than private entities in this setting. However, the only way to argue that a not-for-profit or government agency can do something for less cost than a private entity has to rely on an ability to actually run the business more efficiently (fat chance!) or truly avoid some real cost (it probably does not pay taxes!).
    Co-operative arrangements have failed in Mao’s China and in the Israeli’s kibbutzim. Why and how does it work in the Amul model?

    Comment by Aviad — September 3, 2009 @ 8:07 am | Reply

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