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Empowering the Rural Poor : Amul Model of Development

BM VyasManaging Director

GCMMF Ltd.Anand, India

Session on Markets at the Bottom of the Pyramid

Financial and Private Sector Development Forum 2007The World Bank

Washington26 April 2007

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Bottom of the PyramidThese unhappy times call for the building of plans that

rest upon the forgotten, the unorganized but the indispensable units of economic power...that build from the bottom up and not from the top down, that put their faith once more in the forgotten man at the bottom of the economic pyramid.

U.S. President Franklin D. Roosevelt , 1932

Put the tools of development in hands of the poor. Let us form cooperatives and fight the oppression of the poor at the hands of the rich.

Sardar Vallabhbhai Patel , 1945

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The AmulMovement

Linked to the freedom movement of IndiaInspiration of pre-eminent national leaders SardarVallabhbhai Patel, MorarjiDesaiFounded in 1946 to stop the exploitation of milk producers at the hands of middlemenA co-operative movement - member control on milk production, processing & marketing Milk Producer

Vill. Dairy Co-op.

Dist. Milk Co-op. Union

The Consumer

State Co-op. Milk Mktg. Fed.

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Product Range

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India - todayLargest producer of milk in the world12.4 million cooperative producers nationwide118,000 coop milk societies pan India 180 cooperative dairy unions across the countryMilk is the biggest agricultural crop in India!

MILK GRIDCooperative Dairy Network

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Key LearningsDairying has provided gainful employment to millions, primarily women, in the villagesAn investment of Rs 20 Billion under Operation Flood Program over 25 years is yielding annual returns amounting to Rs 1000 Billion every yearThe producer price of milk has not dropped despite four fold increase in productionVibrant dairy industry has provided nutrition to the masses Self Sufficiency has been achieved in the vital food sector !

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Amul Model has demonstrated that :Rural development involves more than agricultural productionHigh value of national ownership in developmentThe beneficial effects of dairy incomes in relieving worst aspects of poverty even during droughtsThe capacity of dairying to benefit the poor at low cost

Source : World Bank Operations Evaluation Dept. ReportIndia : The Dairy Revolution, 1998

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Empowering Farmers through:

Strong BrandsMarket Access to Rural produceIncentive PricesEmployment; especially to womenNutrition to masses; particularly childrenEducation in VillagesDemocracy in Villages

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Current Scenario

Rural literacy levels are rising rapidlyEfforts to build rural infrastructureGreater usage of agriculture equipmentGreater availability of better seedsImproving rural credit facilities

Expect a rapid increase in rural productivity in the next 10-20 years

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India - 2020India is likely to produce 200 Million MT of Milk in 2020 and is poised to be a dominant player in the international dairy market.Indias share of world milk production to increase from current 14% to 28% by 2020.

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View of the Market

SEC B

SEC C

SEC D

Creating ProductsFor top end Of the market

SEC : Socio economic classification

SEC A

Expanding theMarket Base Increasing productpenetration

Creating Employment Opportunity through dairying for the People at the bottom of the pyramid Thereby creating income and consumption opportunities

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SEC Socio-Economic Classification

A robust alternate system to classify consumers based on their propensity to consumeUrban SEC A-E is based on occupation and education of the head of HouseholdRural SEC R1-R4 is based on education of the head of household and type of house lived in.

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Thrust Area

SEC A-6.3 m

B-10.6m

C-12.8 m

D-14.2 m

E-17.5 m

Rural SEC R1- 5.8m

R2- 15.9m

R3-56.7m

R4-67.3m households

Focus on Producers : Creating Employment Opportunity through dairying in rural areasThereby creating incomeand consumption opportunities

Focus on Consumers : Creating Products for top end of the market and Growing the market

Total Rural :146 m Households

Total Urban :61 m Households

UrbanNumbers in million households

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Rural Poverty is a serious issueAs per National Sample Survey Organisation in India, 55% of poor households are rural labourhouseholdsUnemployment rate amongst rural labourhouseholds is 12% Very high seasonality skew touching almost 15% in July-Sep Dairying provides 365 day occupation and helps in converting the non- performing sections of our large population to productive assets.Dairying offers stable stream of income as compared to agriculture

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The Road AheadThe Need of Hour :- Remove Political interference - Improve Professional Management- Amend Archaic cooperative laws- Government to only support cooperatives and not

run dairies directly or indirectly- Invest in modern procurement and processing

systems

Why not Operation Flood IV in India, SAARC and African countries ?

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Thank you*****

bmvyas@amul.coop

Session on Markets at the Bottom of the PyramidFinancial and Private Sector Development Forum 2007The World BankWashingtonBottom of the PyramidThe Amul MovementIndia - todayMILK GRIDKey LearningsAmul Model has demonstrated that :Empowering Farmers through:Current ScenarioIndia - 2020View of the MarketSEC Socio-Economic ClassificationThrust AreaRural Poverty is a serious issueThe Road AheadThank you*****