Wednesday, January 15, 2014

Amul abuses its market power to fleece customers and destroy competition

There is nothing 'co-operative' or even 'social' about Amul or Gujarat Cooperative Milk Marketing Federation; it is now a full-scale money-grubbing corporate bandit out to cheat the consumers of hundreds of crores of rupees by arbitrarily setting prices and destroying competition. 

Delhi-based Subhash Chandra Agrawal, whom I deem one of the best, the most tireless and the most effective citizen activists of India, recently made out a case for merging Delhi Milk Scheme (DMS), a dairy firm controlled by the central government, with Amul or Sudha or Mother Dairy.

Agrawal, who is a living legend in his prolific and effective use of the RTI Act, 2005, builds his case on the basis of revelations that there have been large-scale irregularities and corruption in the functioning of DMS, which has run up an outstanding of more than Rs 23 crore against "booth-holders with no signs of recovery or steps taken to abandon such outlets".

Agrawal cites the use of DMS booths by the licensees to sell products other than those belonging to the dairy firm. He even goes on to say that the "mere existence of Delhi Milk Scheme" after the formation of much bigger Mother Dairy (which also operates in Delhi) by the central government "was in itself wastage of public resources".
Having learnt through an RTI request that both Amul and Sudha had called upon the central government to "hand over the loss-making DMS to them", he then makes a case for putting the troubled firm out of its misery in larger public interest.

"It is a sorry state of affairs that Union Agriculture Minister is not taking any decision on long-pending requests of ‘Amul’ and ‘Sudha’ to transfer ‘Delhi Milk Scheme’ for best utilisation of DMS resources for public-good," says Agrawal.

I couldn't stop myself from responding to Agrawal's case mainly because I think it is built on erroneous impressions and on a mistaken view of the real nature of co-operatives and how they have been controlled and manipulated by the State actors.

I believe that Agrawal -- who is quite spot on in taking sides on most issues of public interest -- may have become this time a victim of pernicious propaganda.

"To portray or deliberately push a public enterprise into sickness is now a very well understood tactic of subversion employed by those in authority who want to help themselves or the powerful interests they
represent," I wrote to him.

Like a large number of other public enterprises, DMS is most likely to have been the latest target of this kind of tactic.

Cooperative banks have similarly been decimated -- to clear the field for private corporate banks -- through a combination of stifling regulations and motivated propaganda about their 'inefficiency' and 'corruption'.

"Your concerns may well be perfectly valid and the corruption that you perceive in DMS's functioning may well have a large amount of truth in it, but the situation that you portray is fully consistent with the 'smear and destroy' tactic that has been very effectively applied to not just the co-operative sector, but the entire public sector across the country," I wrote.

Now that the dream of privatization is increasingly proving to be a nightmare in sector after sector (electricity, water, airports, ports, roads, etc.), the people of India are waking up - or so I hope - to this massive fraud.

One needs to remind oneself again that a utility's performance and management could be assessed without regard to the political factor, only if it is substantively independent of political control. But that's hardly the case with DMS and other co-ops, as I understand the situation.

One doesn't need reminding how public-sector airlines have been cannibalized by gangsters like Praful Patel to favour fellow criminals like Vijay Mallya who continues to hold the entire society to ransom through the scam that Kingfisher Airlines is.

How the central government pulled off a huge scam by pushing states to 'unbundle' electricity boards into generation, transmission and distribution companies to be sold off to the cronies of the political bosses and create private monopolies in electricity distribution -- a virtual licence to loot the public.

Within this environment of criminal capitalism that Manmohan Singh inaugurated in 1991 (and even before that), the co-op sector has faced systematic vilification through the corporate media as well as laws and regulations that destroy the autonomy and democratic character of the cooperatives and make them a hostage to the tender mercies of politicians and their capitalist cronies.

(Just registering a co-op has been a nightmare under state laws. Even though some reforms have been attempted through Multi-State Co-operative Societies Acts, I don't think they have allowed co-operatives to breathe freely, let alone flourish.)

There is absolutely no "in case" (as Agrawal suggested) about Amul acting like an anti-social MNC. It has long been acting like a money-grubbing corporate behemoth, leveraging its market power to browbeat competition and arbitrarily set prices to boost its profits at the cost of the larger society.

Amul is now the 'butter monopoly' in many hugely lucrative urban markets across India and it has long been abusing its market position to loot the consumers of hundreds of crores of rupees.

The price of 500 gram Amul butter gets a neat jump by anywhere in the Rs 5-15 range every time one goes to buy it, i.e. on an average interval of 20-25 days. That's my own experience.

For instance, in Bhopal, on January 15, a 500 gram October packing of Amul butter was available at Reliance Fresh at a price of Rs 157 -- which was also the MRP that Mukesh Amabani's retail gang would not sell at any discount because they knew that the price of the fresh packing had been exorbitantly revised -- while December packing was available at a local discount store for Rs 170 (MRP: Rs 172).

Just about nine months ago, the price was no more than Rs 135 or thereabouts.

Amul (Gujarat Cooperative Milk Marketing Federation) has gone berserk in fleecing the consumers and, I think, is a fit case for a complaint to the Competition Commission of India (CCI).

Concentrated market power is invariably bad for both suppliers and consumers. So whether Amul is merged into Mother Diary (as Agarwal suggested) or vice verse, the effect will be as bad as we've already been experiencing with Amul's corporate banditry.

Post Script

(a) I had written to Subhash Chandra Agrawal and this post under the mistaken impression that Delhi Milk Scheme (DMS) was a co-operative. Upon subsequently checking its status, I found that DMS describes itself not as a co-op, but as an arm of the ministry of agriculture of the central government.
I stand corrected.

(b) I was also under the impression that Mother Diary was a co-operative. Upon checking, I found that it's a private limited company wholly owned by National Dairy Development Board (NDDB) which claims itself to be run "fundamentally on co-operative principles and co-operative strategies". So technically, Mother Dairy is a limited company run by a 'co-operative'.

These subsequent discoveries do not in any way change the views I've expressed in this post.

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