The incomplete version of GCMMF Managing Director R S Sodhi’s responses to charges levelled against him by Vipul Chaudhary through the Vice-Chairman of Mehsana Dairy is circulating in the media. Indian Cooperative has got the full text in which Mr Sodhi has rebutted every single point.
Sodhi’s letter dated 21st October is as follows:
Smt. Jalaben Desai Date: 21 October,2013
Vice Chairman
Mehsana District Co-operative Milk Producers’ Union Ltd.,
Mehsana
Subject: Regarding full capacity utilization of Mehsana District Co-operative Milk Producers’ Union Ltd.’s Dudhsagar Dairy, Dudhmansagar Dairy and Dudhmotisagar Dairy & Policy of GCMMF on procurement of milk in Rajasthan and Haryana.
Referenced: Your letters dated 20 September, 2013 and 11 October, 2013 on Programming Committee and Letters written to Board of Directors of GCMMF
Respected Smt. Jalaben Desai,
The issues, suggestions and allegations made in your above referred letters are not based on facts and are meant to misguide people and protect the image of your organization. So far we have not replied to your letters in the interest of your organization. But when your letters were published in your magazine (Mukhpatrika), it is clear that you are trying to blame the Federation for all the problems created by the Board Of Directors of Mehsana Milk Union. There is very possibility that someone is using you to misguide the milk producers of Mehsana district without providing you the complete facts. At this stage our silence should not be seen as acceptance of your allegations and in the interest of Mehsana Milk Union, we are writing this letter with great sorrow and heavy heart. Please pardon us if have exceeded our limits in bringing the facts to your notice.
Without discussing anything with the Federation, Mehsana Milk Union has established milk plant for which there was not requirement in the market and is procuring the milk from outside Gujarat. Because of decisions like this, the Milk Union has invested a huge amount with any need and this had let to lot of interest and depreciation burden, resulting in huge losses. Some of the decisions taken by the Milk Union are as under:
1.1 Dharuhera Plant: We would like to inform you that vide letter No.MD/GCMMF/DHD/5324 dated 14 June 2011, Mehsana Milk Union had asked permission for setting up of 30 Lakhs Liters Per Day of milk packaging plant. In this regard, in the Board meeting of GCMMF held on 21 June, 2011, the Federation has approved 9 Lakhs Liters Per Day milk packaging plant for Mehsana Milk Union. We would like to inform you that after establishing Dharuhera plant by the Mehsana Milk Union has requested the approval for the plant. Since the plant has been established by the Milk Union, the Federation Board approved the plant with the actual capacity. Against the approval for a plant of 9 Lakhs Liters Per Day, the milk union has spent more than Rs.300 crore for establishing 30 Lakhs Liters Per Day capacity plant.
1.2 Kadi and Hansapur Plant: Even though Mehsana Milk Union had dairy plant capacity of 22 Lakhs Liters Per Day at Mehsana, it has set up two more plants at Kadi (2.3 Lakhs Liters Per Day) and Hansapur (1.5 Lakhs Liters Per Day), for which no prior approval was taken from the Federation. In 2012-13, Mehsana Union procured only 16.35 Lakhs Liters Per Day from Gujarat, against the capacity of 25.8 Lakhs Liters Per Day within Gujarat.
1.3 Purchase of Plant for “Amul Moti”: We would like to draw you kind attention to the fact that the Milk Union has purchased five packaging plants for “Amul Moti” without any discussion with the Federation. They should have set up one plant and test marketed the product to plan future course of action. But without any planning, the Milk Union has purchased 5 plants at a total cost of Rs.85 crores.
1.4 Purchase of house and office at Delhi: The Milk Union has spent approximately Rs.18 crores for the purchase of a house at Chanakyapuri, Delhi and office at Ahmedabad at the cost of Rs.2.75 crore. We would like to inform you that not a single Milk Union of Federation has purchased this type of office and house.
1.5 Cattle feed plant: In addition to their existing cattle feed plants at Ubkhal and Boriyavi, the Milk Union has established a cattle feed plant of 1000 MT per day at Jagudan at a cost of Rs.46.76 crores. With this, the milk union has a capacity of 1900 MT per day of cattle feed. One of the two old plants is permanently closed, which proves that the Milk Union has invested in new plant without having any calculation. During September 2013, the utilization of cattle feed plant was only 34 %. We hope that you will not hold the Federation responsible for the low capacity utilization of cattle feed plants.
1.6 Free Gift of Cattle Feed: After spending a huge amount on expansion of cattle feed plant, without the approval of Mehsana Board, cattle feed costing Rs.22.5 crores (13,731 MT) was given free to farmers of Maharashtra.
1.7 Packaging Film: The Poly Film plant of GCMMF was established with the cooperation of all Milk Unions of Gujarat. The main intention of this plant is to increase the availability of film for milk pouch packing to all Milk Unions of Gujarat at reasonable rates. Even then Mehsana Milk Union purchasing packing film from a private party at a high rate by paying an advance of Rs.72 Lakhs for requirement of film for six months. For your information, Mehsana Union has many such transactions.
1.8 Private milk plant outside Gujarat: The Milk Union is burdened heavily due to processing of milk in 27 private milk plants outside Gujarat. In many of the private milk plants, milk is not being procured as per “Anand Pattern”. Private milk plants started by Milk Unions are very costly to run and there are lot of issues relating to quality of milk. The Federation, based on reports of Quality Control Department wanted to close 4 private milk plants, but milk procurement is still going on. The private milk plants are not maintaining the quality of milk procured by them and in this situation, “Amul” brand and Mehsana Milk Union have suffered huge losses. We would like to inform you that Mehsana Milk Union has paid price difference to producers outside Gujarat rather than milk producers of Mehsana district. In addition, the financial dealings with private milk plants are not proper. The incharge of Jhakla private milk plant had indulged in financial irregularities of Rs. 3 crores.
1.9 Huge loans and burden of interest: In the absence of any planning by the Milk Union, it is paying heavy interest on investments. A statement showing the total bank loan taken and milk procured by the 3 major Milk Unions of Gujarat are as under:-
Looking into the above figures, the interest and depreciation burden on the Milk Union is approximately Rs. 200 crores. In this situation, considering the present level of procurement, the farmers of Mehsana Milk Union are getting a price for milk which is less by Rs. 3 per liter (Rs. 40 to 45 per Kg fat). We would like to draw your attention to the fact that Mehsana Milk Union has taken a huge loan comparison with the Milk Unions who are procuring more milk. We fail to understand this.
1.10 Continuing decrease in milk procurement: Even though the milk production in the milk union’s milk shed area is increasing, the union’s procurement is continuously decreasing. Details of procurement for the last five years by Mehsana Milk Union in comparison with Kaira, Sabarkantha and Banaskantha Milk Unions are given below:-
Average milk procurement from within Gujarat (Lakhs Liters Per Day)
Even with the decrease in milk procurement in its own district, the milk union has invested huge amount of money in plant and equipment without the knowledge of the federation. Due to this, the plant capacity is not fully utilized.
1.11 Huge loss on selling of milk powder at cheaper rates: Ignoring the advice of Federation, the Milk Union has purchased huge quantity of milk powder from outside Gujarat by paying high price. After that, 7000 MT of milk powder produced by Milk Union was sold directly to private parties at approximately Rs. 162 – 164 per Kg without the knowledge of Federation. When the Federation came to know of this, the Milk Union was advised not to sell directly. During the same time, the Federation has sold milk powder at Rs. 205-210 per Kg. Due to the selling of powder at lower price by Mehsana Milk Union; the milk producers have lost approximately Rs. 28 crores. In addition to this, we would like to inform you that direct selling of milk products by Milk Union is against the Byelaws of the Federation. Fine has been imposed by Board of Directors of Federation on direct selling of milk and milk products.
In our opinion, the following are the 4 main reasons for the present financial condition of the Milk Union:
1. The loan amount taken by Mehsana Milk Union in 2012-13 was Rs. 1358 crores, which is more than the loan taken by Kaira, Sabarkantha and Banaskantha Milk Unions and due to this, Mehsana Milk Union is having a huge amount of interest burden.
2. The Milk Union has invested Rs. 300 crores in 2012-13 which was not necessary. Interest payment and depreciation are very high on this type of unnecessary investment. You may be aware that the Milk Union has planned to invest additional Rs. 300 crores in its Dharuhera plant.
3. Unnecessary expenses of approximately Rs. 60 crores during the year 2012-13 like inauguration on opening of Dharuhera plant and Jagudan factory and supply of free cattle feed to the farmers of Maharashtra.
4. Procuring of milk at higher price from milk producers outside Gujarat and selling milk powder made from this milk at a lower rate than Federation has resulted in lower payment to the milk producers of Mehsana. This directly affects milk procurement from Mehsana district.
In your Second letter, you have suggested the increase of milk price in Delhi and other market. In this connection we would like to inform you that we have increased the price of milk by Rs. 2 per liter. But Mehsana Milk Union is forcing us to go back on the price increase.
The Federation and its affiliated organization have been built on the values of selflessness and hard work of respected Shri Sardar Vallabhbhai Patel, Shri Tribhuvandas Patel, Shri Motibhai, Shri Mansinhbhai and Dr. Kurien. We would like to assure you that the Federation treats all the unions equally without any difference.
We hope you agree with the figures and facts submitted by us and the blame for wrong investment of Milk Union should not be put on the Federation. For a better future, you should plan in consultation with your Board of Directors and senior officers of the milk plant. We hope that the figures and facts submitted here would answer your questions satisfactorily. We request you to convey the issues raised by us to your Board of Directors and producers of Mehsana Milk Union so that they are made aware of the truth.
Thanking you.
Yours faithfully,
(R S Sodhi)