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business leaders > profiles > Dr Verghese Kurien
Operation Flood: an unfinished dream

Operation Flood, a programme that Dr Verghese Kurien implemented as chairman of the National dairy Development Board in three phases over a 26-year span, created a flood of milk, which eventually led to India becoming the world's largest milk producer, overtaking the US in 1998.

Dr Kurien made innovative use of a World Bank loan, EEC food aid and the internal resources of NDDB to usher in the White Revolution. It was an experiment immortalised by noted filmmaker Shyam Benegal in Manthan (the churning) and one, which Dr Kurien himself put down in black and white as An Unfinished Dream.

Operation Flood: phase 1
During the 1970's, dairy products were piling up as a major surplus in Europe, a phenomenon in which Dr Kurien saw both a threat and an opportunity. In the event of these surpluses being dumped in India at rock bottom prices, it would have prematurely destroyed the fledgling dairy sector of the country.

The large quantities that India was already importing had eroded domestic markets to the point where dairying was not viable. Kurien ingeniously turned this double-edged sword to his advantage and incorporated it as a golden opportunity into the Operation Flood strategy.

He deployed the European surpluses as an investment in building India's dairy industry. In an unprecedented initiative, 126,000 mt of skimmed milk powder and 42,000 mt. of butter oil, obtained from the EEC countries as food aid, was utilised to finance the programme. It was for the first time in the history of economic development that food aid was seen as an important investment resource. Working as an anti-inflationary measure, it provided a buffer stock to stabilise the Indian market, and was used to prime the pump of markets that would later be supplied by domestic production.

Funds generated through sale of these commodities were used in the development of 18 rural milksheds in 10 states and for setting up dairies in the rural hinterlands and in Mumbai, Delhi, Kolkata and Chennai. This led to a 60-per cent increase in milk production, which rose from an estimated 20-million mt in 1970 to 32-million metric tones in 1978.

A year-round remunerative market for the milk producers was created and the sale of milk in the major urban demand centres rose by 140 per cent.

During this phase, Operation Flood linked 18 of India's premier milksheds with consumers in India's four major metropolitan cities: Delhi, Mumbai, Kolkata and Chennai.

Operation Flood: phase 2
Impressed by the success of the first phase of the project, the government of India decided to continue with dairy development through cooperatives but on a greatly expanded scale. Operation Flood II, which began in 1981 aimed at building a National Milk Grid linking 136 rural milksheds in 22 Indian states and the centrally-administered Union territories with the urban demand centres in the country and creating the infrastructure required to support a viable dairy industry.

The second phase of the programme was implemented with a World Bank credit of $150 million and commodity assistance from EEC (216,584 mt of SMP, 62 ,402 mt of butter oil and 16577 mt of butter) and Rs280.87 crore which NDDB raised out of its own resources during 1985 to 1987.

According to a World Bank audit, of the Rs200 crore that it invested in Operation Flood II, the net return into the rural economy has been a whopping Rs24,000 crore per year over a period of 10 years, or a total of Rs240,000 crore in all. No other major development program has matched this input-output ratio.

Operation Flood's Phase II (1981-85) increased the milksheds from 18 to 136; 290 urban markets expanded the outlets for milk. By the end of 1985, a self-sustaining system of 43,000 village cooperatives covering 4.25-million milk producers had become a reality.

Domestic milk powder production increased from 22,000 tons in the pre-project year to 140,000 tons by 1989, all of the increase coming from dairies set up under Operation Flood. In this way EEC gifts and World Bank loan helped to promote self-reliance. Direct marketing of milk by producers' cooperatives increased by several million litres a day.

The seed capital raised from the sale of WFP / EEC gift products and World Bank loan had created, by end 1985, a self-sustaining system of 43,000 village cooperatives covering 4.25-million milk producers.

Operation Flood: phase 3
The third phase of Operation Flood, undertaken from 1987 to 1996 aimed at consolidating the gains of the earlier phases. The main focus of the programme was on achieving financial viability of the milk unions/ state federations and adopting the salient institutional characteristics of the Amul Pattern or Amul Model Cooperatives.

This phase of the programme was funded by a World Bank credit of $365 million, Rs222.6 crore of food-aid (75,000 mt of milk powder and 25,000 mt of butter / butter oil) by the EEC and Rs207.6 crore by NDDB's own resources. At the end of May 1995, Rs1,578 crore had been invested under the three phases of Operation Flood programme.

At the conclusion of the third phase of Operation Flood 3 in 1996, 72,744 district cooperative societies in 170 milksheds of the country, with a total membership of 93.14 lakh had been organised. The targets set had either been effectively achieved or exceeded.

Phase 3 (1985-1996) enabled dairy cooperatives to expand and strengthen the infrastructure required to procure and market increasing volumes of milk. Veterinary first-aid health care services, feed and artificial insemination services for cooperative members were extended, along with intensified member education.

Operation Flood's Phase 3 consolidated India's dairy cooperative movement, adding 30,000 new dairy cooperatives to the 42,000 existing societies organised during
Phase 2. Milksheds peaked to 173 in 1988-89 with the numbers of women members and 'women's dairy cooperative societies' increasing significantly.

Phase 3 gave increased emphasis to research and development in animal health and animal nutrition. Innovations like vaccine for Theileriosis, bypass protein feed and urea-molasses mineral blocks, all contributed to the enhanced productivity of milch animals.

Phase 3 of Operation Flood (1985-1996) enabled dairy cooperatives to rapidly build up the basic infrastructure required to procure and market more and more milk daily. Facilities were created by the cooperatives to provide better veterinary first-aid health care services to their producer members.

Conceived as a holistic programme Operation Flood, through dairy development, achieved:

  • Cost reduction and technology management. The per capita availability of milk stood at 192 grams per day at the end of the third phase of the project, in spite of a substantial increase in population
  • Modernisation of process and plant technology
  • Interventions for increase in productivity: annual milk production, which had stagnated at between 20 and 22-mt during the 1960s, has steadily increased to over 60-mt
  • Development and absorption of frontier technologies like DNA vaccines and genetically engineered bovine omatotropin, embryo transfer technology and in vitro fertilisation of oocytes
  • Establishment of the 'national milk grid' linking 136 rural milksheds in 22 states and union territories
  • The creation of farmer-owned structures
  • The orchestration of all policies and programs that affect production
  • Significant augmentation in rural incomes

Compiled by Shubha Khandekar

Also see:
Dr Verghese Kurien: The milkman of India
Dr Verghese Kurien: Background
White Revolution
National Dairy Development Board
Institute of Rural Management, Anand
Amul Pattern
Amul Brand
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