Does anyone outside the NDDB know what it is up to?

When Verghese Kurien, the father of the milk revolution in India set up NDDB in 1964, he did it to help the co-operative movement that he had started at Anand, in Gujarat. He first promoted dairy farming, and then set up the Gujarat Cooperative Milk Marketing Federation (GCMMF) to sell milk and milk products under the Amul brand.

Then, in order to tie up with other milk co-operatives, he created the NDDB in order to take the cause of the milk movement further.

That is why even though NDDB was set up as a registered society under the Societies Act 1860 (with the underlying objective of improving the prospects of the dairy sector in India, empowering milk producers across the villages and to promote other commodity-based cooperatives, agro/allied industries and veterinary biologicals on a nationwide basis), he moved rapidly to persuade the government to let NDDB be merged with the Indian Dairy Corporation through the NDDB Act 1987 to receive and monetise commodities from abroad.

And contrary to statements that Mother Dairy, New Delhi, was created as a division of NDDB, in reality it was only ‘managed’ through a NDDB controlled management committee.

That is why, even today, there are some at GCMMF who claim that Mother Dairy is not NDDB’s brand, and that it was created by Kurien to promote the sale of milk and milk products in the northern regions, just at Amul was initially sold only in the Western regions of the country.

Kurien knew that the best value for farm produce would come through sales in cities.  Hence, both the GCMMF and Mother Dairy were treated as marketing units.

That also explains why the milk co-operative industry was aghast when NDDB - after Kurien gave up his chairmanship of the board in 1998 - decided to corporatise Mother Dairy as a wholly owned subsidiary and then proceeded to amalgamate other activities and brands into this company.

As a ‘division’ all the finances (sales, expenses and surpluses) were visible to the entire organisation, both at GCMMF and NDDB.  The surpluses could be seamlessly used to further promote the co-operative movement.

And to ensure that these finances were never misused, Kurien adopted a policy of transparency, knowing fully well that this could be his best defence against powerful politicians asking for favours from these cash rich entities. Kurien remained apolitical all through his career.

When Amrita Patel assumed charge as chairman of NBBD, al these concepts and practices appear to have been thrown to the wind.

First, Mother Dairy Food Processing Ltd (MDFPL) and Mother Dairy India Ltd (MDIL) were amalgamated w.e.f April 1, 2006, with MDFVL.

Then Dhara Vegetable Oil and Foods Company Ltd (DOFCO) was amalgamated w.e.f April 1, 2007 with MDFVL.

Then it introduced the ‘Safal’ range of fresh and frozen fruits & vegetables, fruit juices, pulp, concentrates and ‘Dhara’ range of blended edible oils. The details of how these mergers took place was never made available to the public.

Thereafter other ‘divisions’ of NDDB got corporatised.  This is what happened to Indian Immunologicals.  And this is what happened to other business activities.  In some instances, Federations were made to create new Foundations and similar entities. 

For instance, the National Tree Growers Cooperative Federation suddenly had a National Econogy Foundation, and the staff of the former were transferred to the latter with instructions that they would have to implement the objectives of the former.

Why did NDDB adopt this strategy? Since none of NDDB’s officials has come forward to answer the queries DNA has raised over the past six months, we have to present surmises instead. 

Could it be possible, that by creating subsidiaries, and subsidiaries of subsidiaries (grand-daughter subsidiaries) NDDB was trying to achieve two objectives?

First, the funds would not be available for use by GCMMF or any other farmer co-operative as they would like with the subsidiary company instead. That could explain why none of the entitities have co-operative federations holding 51% of the equity stake of such ventures. The majority holding is with NDDB or its nominees, not with producer federations.

Second, since it was a subsidiary company, as distinct from the parent NDDB, it could always claim that these private companies were outside the purview of the Parliament and media scrutiny.

The second possibility gains credence if one recalls that this was the very argument MDFVL used to thwart a ‘Right to Information’ query. The officials stated that MDFVL was not a public company, and hence was not obliged to reply to the query.

There could have been a third purpose as well.  Each of these new entities could now be used to accommodate loyalists who could be given additional incentives in ways that would not be very transparent.

Consider the case of Harish Chandra Virmani, chief finance officer of MDFVL. Virmani joined NDDB after taking VRS from his former employer. He was on a contract employment with NDDB and received repeated extensions. He was later appointed in the Dhara ventuire and is now with MDFVL.

Or consider Deepak Tikku, who worked with Kurien at NDDB, and was recently made chairman of a newly created company, Chairman, National Dairy Development Board Dairy Services. 

According to market sources, this company has been created to access World Bank funds to implement something called the ‘Nestle Dairy Plan’. The amount being sought to be raised is said to be Rs 1,000 crore, but nobody from NDDB is willing to confirm or correct this figure.

According to a BusinessWeek document, Tikku enjoys 20 profesional relationships with Amrita Patel.  This would mean that he is a director, advisor, consultant or employee in 20 entities. 

Tikku is also shown to be a director on the board of Indian Immunologicals Ltd, managing director of NDDB and Director and Member of Remuneration Committee of IDMC Ltd. (a company from the NDDB stable). No details of remuneration or age are available in respect of both Virmani and Tikku.

In fact, some of the finances of the firms leave one dumbfounded.  ccording to a CARE ratings document, MDFVL showed gross sales of Rs 2,178  crore in 2007, and Rs 2,723 crore in 2008.  Profit before interest, depreciation and tax was a negative Rs 8 crore (i.e. a loss) in 2007 (after merging such lucrative lines of business?) and a healthier Rs. 45 crore in 2008.

Yet the website of MDFVL says that it is a one billion dollar company or Rs 4,500 crore. This means that the company increased its turnover by 2000 crore in just two years!  Even a dimwit would like to know how.

It is in this context that it is necessary for details of all the annual reports of all the new entities, whether they are subsidiaries or not, to be attached to NDDB’s annual report so that the true state of finances lf NDDB and its affiliates can be known.