The Hindu : Kerala News : Milma-NDDB joint venture falls apart

Online edition of India's National Newspaper
Thursday, Jun 10, 2004

Kerala

Kerala

Milma-NDDB joint venture falls apart

By Our Staff Reporter

THIRUVANANTHAPURAM, JUNE 9. The Kerala Cooperative Milk Marketing Federation (Milma) has decided to pull out from the joint venture marketing firm it had formed an year ago with the Mother Dairy Foods Ltd., a subsidiary of the National Dairy Development Board (NDDB), citing huge operational losses.

A unanimous decision to this effect was taken at the general body meeting of Milma held here on Wednesday. It was also decided that a detailed report will be placed before the Government before July 15, in order to seek its concurrence.

When contacted, the chairman of Milma, P. T. Gopalakurup, said that the decision to withdraw from the joint venture was taken as the new firm's marketing activities had not come up to the expectations. Also, there had been strong protests from the producers' unions in Thiruvananthapuram and Malabar as they had incurred substantial losses in operation after the tie-up was set in motion, he said.

"We have decided to part ways `amicably', because there is no point in continuing this partnership, with both parties engaged in a blame-game. We will request the Government to examine the facts and give its concurence and also seek NDDB's opinion," Mr. Kurup said.

It was in June last year, after receiving the Cabinet's nod, that Milma entered into an agreement with the NDDB to form a joint venture marketing firm, called Milma Foods Ltd., solely to handle marketing activities for Milma and to induce professionalism in operation.

According to the agreement with the new company, in which the NDDB had the majority stake, the responsibility of procurement and supply of milk was vested with Milma's Regional Cooperative Producers' Unions, regardless of the procurement cost. The procured stock would be transferred to the Milma Foods Ltd. for a `fixed stock transfer price', to be marketed by the company. The new company was responsible for all promotional activities in the market.

The understanding was that any increase in the cost of procurement and processing would be balanced through an increase in the volume of sales. However, the tie-up had been under a cloud right from the beginning, with the regional unions alleging that the new company was a white elephant, eating up huge amounts as overhead and infrastructural expenses, while there was no discernible change in the marketing scenario.

Matters had reached a head in January itself, when the Thiruvananthapuram Regional Cooperative Producers' Union (TRCMPU) locked horns with the Milma Foods Ltd., over the huge losses they were incurring in procuring milk at a high price from Karnataka. The Thiruvananthapuram union has claimed a total loss of Rs. 1.5 crores so far, while the Malabar union has put its losses at Rs. 86 lakhs. Things were slightly better at the Ernakulam union, where it recouped its losses after the new company entered the market.

In April, with the unions refusing to renew the supply contract they had with Milma Foods, till the company made good the losses that they had incurred, the federation, the apex body, was forced to take up the issue at the general body meeting.

"The NDDB had earlier promised to invest in improving infrastructure at the milk societies and the dairy plants. However, this was not to be. Because of our huge losses, we could not even disburse incentives to farmers last year. Ultimately, we have to put the interests of our farmers above all," Nandiyode Rajan, chairman of the TRCMPU, said.

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