Ou

ORGANISATION UNDERSTANDING

Submitted by Ajith D

(23003)

Bhagirath Iyer

(23013)

Mathew V.

(23030)

Robin P. Mathew

(23089)

Faculty Guide: Prof. Prabal K. Sen

MALABAR REGIONAL CO-OPERATIVE MILK PRODUCERS’ UNION LIMITED KOZHIKODE

OTS (PRM 2002-04)

Institute of Rural Management Anand 2003

EXECUTIVE SUMMARY I Students’ Name : Ajith D., Bhagirath Iyer, Mathew V, Robin P. Mathew II Organisation : Malabar Regional Co-operative Milk Producers’ Union Ltd. III Reporting Officer : Mr. G. Selvakumar, CEO, Malabar Rural Development Foundation IV Faculty Guide : Prof. Prabal K. Sen V Project Title : Organisational Understanding Component Malabar Regional Co-operative Milk Producers’ Union Ltd (MRCMPU) is the youngest of the three regional co-operative milk producers union in the state of Kerala. It operates in the six northern districts of Kerala viz. Kasargod, Kannur, Wayanad, Kozhikode, Malappuram and Palakkad. The union is procuring milk from 686 Anand Pattern Societies (APCOS) and 66 traditional milk societies in the above areas. Milk and milk products are being sold under the brand name ‘milma’. There are four dairy plants at Kasargod, Kannur, Kozhikode and Palakkad. The objective was to understand the structure and functioning of Malabar Regional Cooperative Milk Producers’ Union Ltd (MRCMPU). The methodology of the study included interviews with department heads and interactions with technical officers at the plant. Secondary data were collected and analysed from records available at MRCMPU, Kozhikode. The scope of the study was limited to the plant at Kozhikode where we covered all departments viz. procurement & inputs, production, finance, MIS, personnel and marketing. The learnings: The organisation has tried to link the producers with the customer, which has been brought out in its mission statement. The union procures 2.7 lakh litres per day (LPD) of milk on an average. It has also implemented quality standards of ISO and Hazard Analysis and Critical Control Point (HACCP) for production and processing of milk and milk products and improvement in services. The union also undertakes extension activities to provide need based technical inputs and training to dairy farmers. To promote the socio-economic development of dairy farmers, MRCMPU has set up a charitable trust, Malabar Rural Development Foundation (MRDF). Non-dairy activities have been transferred to MRDF, as the union wants to concentrate on its core activities. Subsequent to the formation of a joint venture with NDDB, a new company Milma Foods Ltd. has been formed which looks after the marketing aspects of the union. In future, MRCMPU intends to diversify to allied activities for strengthening its financial base.

ii

ACKNOWLEDGEMENTS We are grateful to the Institute of Rural Management Anand (IRMA) for having provided us with the opportunity to conduct this study. We also thank our faculty guide Prof. Prabal K. Sen for his guidance. We wish to thank all the head of departments and staff of MRCMPU Ltd., Kozhikode and supervisors of the P&I sub unit at Kannur and Palakkad Dairies for their inputs and support that they extended to us. Our sincere thanks are due to our reporting officer, Mr. G. Selvakumar, CEO, Malabar Rural Development Foundation for his support in the completion of the study.

Ajith D (23003) Bhagirath Iyer (23013) Mathew V (23030) Robin P Mathew (23089)

iii

TABLE OF CONTENTS Sr. No.

Page No.

1. Introduction....................................................................................................................1 1.1 Preliminary Information ..........................................................................................1 1.2 Brief History of the Organisation............................................................................1 1.3 Governing Body.......................................................................................................3 1.4 Organisation Mission...............................................................................................4 1.5 Vision.......................................................................................................................4 2

Objectives and Methodology.........................................................................................4 2.1 Objectives................................................................................................................4 2.2 Methodology............................................................................................................4

3. Organisation Structure...................................................................................................5 3.1 Dimensions of Organisation Structure.....................................................................6 3.2 Departments.............................................................................................................7 4. Staff..............................................................................................................................11 4.1 Recruitment Process...............................................................................................11 4.2 Manpower Profile..................................................................................................12 4.3 Human Resource Development and Capacity Building........................................13 5. Style.............................................................................................................................13 6. Skills............................................................................................................................14 7. Manufacturing Flow Diagram........................................................................................15 7.1 Effluent Treatment.................................................................................................16 8. Financial Analysis........................................................................................................18 8.1 Budget Allocation..................................................................................................18 8.2 Ratio Analysis........................................................................................................18 9. Strategy........................................................................................................................20 10. Conclusion...................................................................................................................22 References..........................................................................................................................23

LIST OF TABLES

iv

Sr. No.

Page No.

1. Table 1: List of Board of Directors......................................................................................3 2. Table 2: Qualification-based Division of Employees........................................................12 3. Table 3: Budget Allocation in Percentage for the Year 2002-2003....................................18

LIST OF FIGURES Sr. No.

Page No.

1. Figure 1: The Organization Structure..................................................................................5 2. Figure 2: Experience Profile of Employees.......................................................................12 3. Figure 3: Manufacturing Flow Diagram............................................................................15

ANNEXURE Sr. No.

Page No.

1. Annexure 1: Summarized Financial Statements..................................................................v

v

MALABAR REGIONAL CO-OPERATIVE MILK PRODUCERS’ UNION LIMITED, KOZHIKODE, KERALA (INDIA) 1. 1.1

INTRODUCTION Preliminary Information Name:

Malabar Regional Co-operative Milk Producers’ Union Limited

Address:

Head Office at Peringolam, 3 kms. from Kunnamangalam junction (on Kozhikode-Mysore National Highway 212) at a distance of 15 kms. from Kozhikode city

Telephone:

(91) 0495 280612, -96, -51, -52

E-mail:

[email protected] [email protected] [email protected]

Website:

1.2

www.malabarmilma.coop

Brief History of the Organisation Malabar Regional Cooperative Milk Producers’ Union (MRCMPU) Limited is one of the three

milk unions in Kerala. It is owned by 1,50,000 farmers spread over 764 village level dairy co-operative societies in the six districts of Kozhikode, Kasargod, Kannur, Wayanad, Malappuram and Palakkad. MRCMPU Ltd. was registered on 29th June 1989 and started functioning on 15th January 1990. The organisation has evolved with the support of the North Kerala Dairy Project (NKDP) with assistance from the Swiss Development Corporation and the National Dairy Development Board (NDDB). The NKDP was implemented in three phases from 1987 to 2001. Under the first phase of the NKDP (1987-1991), the District Milk Supply Unions of Kozhikode, Malappuram and Wayanad were amalgamated with MRCMPU Ltd. on 1st August 1990 and those of Palakkad and Kannur, on 1st June 1990. During the first phase of the NKDP (1987-1991), 149 Anand Pattern Co-operative Societies (APCOS) were organized. During the second phase (1991-1996), an additional 280 APCOS were organized and the total number of functional APCOS on 31st March 1996 was 429. During the third phase (1996-2001), an

additional 229 APCOS were organized and started. As on 31st March 2003, MRCMPU Ltd. had 764 functional APCOS and 63 traditional societies. In 1990, the total procurement of MRCMPU Ltd. was around 50,000 litres per day (LPD). It rose to 53,977 LPD at the end of the first phase of NKDP (1987-1991). During the second phase of the NKDP, it increased to 1, 38,756 LPD (1991-1996). During the third phase (1996-2001), the procurement increased to 226,000 LPD. It presently procures around 2.5 lakh LPD and has an annual turnover of around Rs. 130 crores. The union has four dairy plants located at Kannur, Kozhikode, Palakkad and Kasargod, with a total capacity of 3.8 lakh LPD. It also has five chilling centres with a total capacity of 1.25 lakh LPD. Although according to the Anand pattern, the milk and other products manufactured by the unions are marketed by a state-level Federation, yet in Kerala, the unions independently market the products manufactured by them (and other unions). This is because the volume of milk products produced is too less in relation to the cost involved in marketing these products by the Federation, which is located at Thiruvananthapuram. MRCMPU Ltd. manufactures and sells five varieties of milk – Milma Toned milk, Milma Homogenized Toned milk, Milma Smart (double toned milk), Milma Rich (standardized milk) and Milma Jersy (milk with higher fat content, to give the taste of cow’s milk). It also manufactures and sells Ghee, curd, Sambharam (butter milk), Milma Instant Palada (Payasam or kheer) mix, Ice Cream and Sip Up (ice cream in a tubular plastic packing, that can be sipped). In addition to these products, the union also sells butter sourced from the Ernakulam and Thiruvananthapuram unions. Since 1994-95, the average procurement of milk has been greater than the average sales. MRCMPU Ltd. is the only union of the three unions in Kerala, which has been consistently making profits, except in the first two years of operations. In the year 2001-02, the union made a profit of Rs. 78.6 lakhs. During phase two of the NKDP (1991-1996), MRCMPU Ltd. also implemented several extension programmes - the Co-operative Development Programme, Fodder Development Programme, Artificial Insemination Programme and the unique Women Cattle Care Programme. These activities were continued during phase three of the NKDP also.

1.3

Governing Body There are sixteen members on the board of MRCMPU Ltd., of which twelve are elected from the

various APCOS in the area of operation of the Union. Three members are nominated, one each from the KCMMF Ltd. and the Dairy Development Department of the State government and one nominee from the National Dairy Development Board. The Managing Director is also part of the board. The profile of the board has been shown in the table: Table1: Profile of the Governing Body

Board of Directors

Designation

Representing APCOS/Organisation

Qualification Graduate

1

PP Gopinatha Pillai

Chairman

Mukkom, Kozhikode

2

PT Gopalakurup (Chairman, Kerala Cooperative Milk Marketing Federation Ltd,)

Director

Theneri, Wayanad

3

PC Vijayan

Director

Vallikode Muttikulangara, Palakkad

NA

4

Jose Munnanal

Director

Thirumeni, Kannur

NA

5

K Narayanan

Director

Valkulambu, Palakkad

NA

6

M Sreenivasan

Director

Kumarampoil, Kozhikode

NA

7

KJ Devasya

Director

Vengaparatha, Malappuram

NA

8

VT Joseph

Director

Odenthode, Kannur

NA

9

A Raghavan

Director

Chittilanchery, Palakkad

NA

10

KP Mohanadas

Director

Balanthode, Kasargod

NA

11

K Surendran

Director

Peruvayal, Kozhikode

NA

12

TP Usman

Director

Irannaparamba, Kozhikode

NA

13

NS Varadarajan

Director

Government Nominee (KCMMF)

NA

14

NT Sivadasan

Director

Government Nominee (Dept. of Dairy Development)

NA

15

Cherian Joseph

Director

Government Nominee (NDDB)

NA

16

S Dakshinamoorthy

Director

Managing Director, MRCMPU Ltd.

M.Tech (Dairy & Food Engg)

Matriculate

1.4

Organisation Mission The stated mission of the organisation is: “Farmers’ prosperity through customer satisfaction”

1.5

Vision The vision statement of MRCMPU is as follows: To bring about socio economic development of dairy farmers on a sustainable basis and providing

quality milk and milk products to the customers at a reasonable price. The above statement shows the aspiration of MRCMPU and its determination to achieve the mission. When we look into the various activities of MRCMPU we see that it is in good alignment with the vision statement. Also, its Perspective Plan 2000-2005 is also to achieve the said vision that is farmers’ prosperity through sale of milk and milk products though there is acute competition in the field. Their plan to diversify activities and to venture into allied activities like vanilla cultivation and vegetable cultivation that can be indirectly related to dairying

2. 2.1

Objectives and Methodology Objective To study the structure, culture and the functioning of MRCMPU Ltd.

2.2

Methodology The methodology adopted for the study included interviews and discussions with officials of

MRCMPU Ltd. We also visited the dairy plant at Kozhikode and a number of primary societies (APCOS). We also had access to secondary data in the form of annual reports, organisational profile, and perspective plan document.

3.

ORGANISATION STRUCTURE Figure 1: The Organisation Structure of MRCMPU Ltd. CHAIRMAN AND BOARD OF DIRECTORS

MANAGING DIRECTOR

SENIOR MANAGER FUNCTIONAL MANAGERS AT HEAD OFFICE

PROCUREMENT & INPUT (P&I)

FINANCE & ACCOUNTS

PERSONNEL & ADMN.

MIS

MKTG.

PRODN., PLNG. & PROJ.

DAIRY PLANTS UNDER THE UNION

KANNUR DAIRY

KOZHIKODE DAIRY

PALAKKAD DAIRY

KASARGOD DAIRY

UNITS

UNITS

UNITS

UNIT

MCP Meenang ady

MCP Mananth awady

MCP Nilambur

Product Dairy

MCP Pattambi

MCP Attapa di

MCP Kanhangad

MILK PROCUREMENT AND INPUT (P&I) OFFICES FOR THE SIX DISTRICTS KANHANGAD

3.1

KANNUR

WAYANAD

KOZHIKODE

Dimensions of Organisation Structure

NILAMBUR

PATTAMBI

PALAKKAD

3.1.1

Complexity A look into the organisation structure shows that MRCMPU is having high complexity in terms of

horizontal, vertical and spatial differentiation. Since the organisation is in the business of procurement, processing and sale of milk and milk products which requires specialised knowledge and skills which is evident from the educational qualification of the employees that varies from illiterate to professional management background. Also, there is clear division of labour, which is reflected in the staff regulations and from the presence of various departments like Procurement & Input (P&I), Finance, Marketing, Production & Planning, MIS etc. Also, high span of control especially in the case of P& I and Production & Planning departments accounts for increased coordination and hence leading to vertical differentiation. Also, the organisation is spread among the 6 northern districts of Kerala through departments like P& I and Marketing mainly. Hence there is a greater need for effective communication, coordination and control devices in MRCMPU due to the high complex nature. The organisation gives much importance to MIS due to the same reason and is why it is in an attempt to automate even the primary milk collection societies though it involves a huge investment.

3.1.2

Formalisation High formalisation is another aspect of MRCMPU like any other Unions of its kind. It has clearly

defined the roles of each employee in the organisation structure with the help of KCMMF staff regulations, Employee Standing Orders etc which all are in documented state. Hence most of the jobs in MRCMPU are standardised which avoids duplication and overlap of work especially in the case of P&I and marketing personnel. For rural marketing the P& I people look after the marketing aspects, instead of marketing staff as they have better reach in villages. The organisation uses a large number of forms like indents, leave form, Travel Allowance bill, various vouchers etc. which has to be strictly followed and other requirements like job specification.

3.1.3

Centralisation Though the supreme powers are with the Managing Director who has the formal right to issue

orders, the individual departments can take decisions depending upon the nature of the task and impact of the decision on the environment. The MRCMPU staff regulation describes all these aspects. Even though there is greater flow of information within the organisation with the help of Information systems located in each and every department, the locus of control for decision-making is still with the management level. This does not

mean that lower level employees in the executive category have no decision-making capacity. The various management development programmes it conduct with the help of institutions shows that it is keen in imparting decision making power to them also though in a limited way. The various dairies that are spatially differentiated can take their own decisions in the procurement and processing of milk.

3.2 3.2.1

Departments P&I Department Following is the staff pattern of the department

•

Manager (P&I)

•

Assistant Manager (P&I)

•

Assistant Manager (P&I)-sub centres

This department is mainly concerned with organizing and supervising APCOS through field level activities. The P&I department arranges milk procurement from APCOS through milk routes to its 4 dairies and 5 milk chilling plants on annual contract basis. There are 60 milk collection routes and 38 milk distribution routes of which 48 routes collection and distribution are linked to reduce costs. Following are the extension activities of the Department: 1.

Integrated Technical Inputs Training and Extension Programmes

2.

Women Cattle Care Programme: Training women groups in villages by a trained woman promoter. About 100 women promoters are working now.

3.

Cooperative Development Programme: Training board members and staff in the societies to equip the to the need.

4.

Feed and Fodder Programme: To supply Feed and Fodder to the farmers on a no profitno loss basis.

5.

Artificial Insemination Programmes: Establishment of Artificial Insemination centres in needed place and arranging training sessions.

6.

Ksheera Karshaka Suraksha Scheme: Insurance scheme for dairy farmers

7.

Cattle Insurance

8.

3.2.2

Rewards to best farmers and APCOS

Marketing The marketing department consists of 2 managers. The main activity of the department is

coordinating the marketing activities of MRCMPU. Following are the products marketed by the union: Milma Rich, Milma Jersey, toned Milk, Homogenised Milk, Ghee, Milk peda, Sip up, Ice Cream, Curd and Sambharam, Instant Palada mix. The marketing activities of the Union are being handed over to a Joint Venture company of Mother dairy and Milma, named Milma Foods Limited.

3.2.3

Personnel and Administrative department This department undertakes various human and institutional development programmes to equip the

organization and its human resources and to maintain a high level of productivity, positive work culture and harmonious industrial relations. Main activities include:

1. Leadership development programmes to trade union leaders of MRCMPU. 2. Special training programmes for board of directors of MRCMPU. 3. Career development training for children of employees. 4. Objective oriented performance appraisal for executives. 5. Training Need Analysis and Training plan on a yearly basis. 6. MDP for executives in national level institutions like IIMs, IRMA, XLRI, ASCI, NDDB etc. 7. Networking Programmes for effective collaboration with other partners. 8. Establishment and Control of HRD centre. 9. Welfare Activities 10. Medical Insurance Scheme for employees not under ESI.

11. Free Accident Insurance coverage of Rupees 2 lacks with total temporary disablement compensation benefits.

12. Motor Conveyance Advance. 13. 1% interest subsidy for housing loans. 14. Scholarship to employees’ children. 3.2.4

Finance Department The finance and accounts department in the organisation is headed by a finance manager. There are

29 employees in the finance and accounts department of the organisation. Except in the first two years of its operation, the organisation has made profits every year. The organisation follows a unique dual pricing system whereby the farmers are paid an additional price during the lean season. In the year 2001-02, the additional price paid was 73.87 lakhs and the organisation made a profit of 78.60 lakhs.

3.2.5

MIS Department The Union has an MIS and systems department which started functioning in 1990. The basic

functions of the department include:

•

Information support to management

•

Compilation and presentation of information reports to various authorities

•

Responsible for computerisation

The department is under the direct control of the Managing Director and headed by an MIS manager.

Reasons for computerisation The organisation was facing difficulties in obtaining data from the functional departments running manually due to the non-availability of an automated system. Apart from that there was compulsion from functional departments like Finance and Personnel & Administration for the introduction of Financial Accounting and Payroll System. In order to address these issues, MRCMPU Ltd. procured the necessary

application software from Kerala Co-operative Milk Marketing Federation Ltd. (KCMMF) and introduced computerisation. With the introduction of new products, increasing number of distributors (agents), monitoring of agents’ performance etc., there was compulsion from the marketing staff and the dairy managers for a marketing software package for order acceptance, invoicing, despatch sheet preparation etc. KCMMF could not entertain the requests from the Union on time and hence the MIS department started developing software packages according to the respective departmental needs. However the union did not have a programmer or software development staff, as provision for such posts did not exist. Hence, they hired a programmer on a contract basis. At present, the department has four staff, which includes the MIS manager, a programmer and two data entry operators. Currently, a total of 90 computer systems are being used in 18 units of MRCMPU Ltd.. All dairies and head office are connected through a LAN system (Windows NT) and LAN messaging in all 18 units under .coop tag is possible (all units are connected through dial up networking facility). The following information systems software packages have been developed and implemented at both the Head Office and the dairy plants of MRCMPU Ltd.:

•

General Information System (MRUMIS)

•

Human Resource Information System (HRIS)

•

Society Information System (SIS)

•

Daily Business Monitoring System (DBMS)

As mentioned before, these systems evolved as and when the need arose. The introduction of IT in the organisation was with the setting up of an MIS and Systems department. Application programmes were then developed at random and these applications were not standardised (were vendor specific platform specific etc.) and mostly run independently. But the main issue, which the MIS department is facing, is with regard to the integration of these systems, as there was no proper plan to start with. Hence, there is an imminent danger of the organisation falling short of their expectations of integrating the information systems. Another problem being faced by the department is high employee turnover as most of the jobs in the department are on a contract basis.

4. 4.1

STAFF Recruitment Process The employees of MRCMPU are classified as: Senior Executives

-

Pay Scale Rs. 3, 530/- and above

Junior Executives

-

Pay Scale Rs.2, 380/- to Rs. 2, 780

1. Supervisory and clerical

-

Pay scale Rs. 1, 000/- to Rs. 2, 060/-

2. Others

-

Pay Scale less than Rs.1, 000/-

Subordinates

The Personnel Committee is responsible for carrying out all functions relating to the recruitment process to MRCMPU Ltd.. Usually openings are announced in leading local as well as national newspapers. Written tests and interviews are carried out for the applicants. There are four members in the selection committee and each member of the committee will have a certain % of mark allotment that he uses at the time of Interview itself. Those who get the highest marks will be selected depending upon the number of posts. All appointments are made by the MD or an officer authorized by the MD on the basis of selection made by the MD or on the basis of the recommendations of the selection committee constituted by the Personal Committee for the purpose as the case may be. Once an employee is appointed, there will be a training session on behavioural, technical and orientation aspects as a part of induction. He will be on probation for one year in a continuous period of 2 years after the date of appointment. All procedures of recruitment are made as per the KCMMF Staff Regulations Chapter 2 (Service Rules).

4.2

Manpower Profile

Table 2: Qualification-based Division of Employees

Name of Department Engineering Accounting Production Marketing Quality Control Cash P&I General MIS Personnel Store

Illiterate

Merely Literate

<SSL C

SSLC PDC

Graduation

Post Graduation

Professional/ Technical

0

0

24

2

2

0

63

0

0

8

11

9

1

0

0

8

127

63

0

1

15

0

0

4

10

15

6

6

0

0

12

23

4

5

6

0

0

2

1

1

1

0

0

0

2

1

23

5

2

0

0

1

0

3

0

1

0

0

0

0

0

1

3

0

0

0

5

0

3

0

0

0

0

2

1

0

0

The employee profile based on experience is shown in the chart below: Figure 2: Experience Profile of Employees

EXPERIENCE PROFILE

6%

29%

26%

0-3 years 4-10 years 11-20 years

39%

4.3

>20 years

Human Resource Development and Capacity Building MRCMPU Ltd. has, within a short span of twelve years, established its own identity in the

cooperative dairy industry in the country. The Union has dynamic executives and a committed workforce. The

HRD activities undertaken by the Union has made a tremendous impact on the overall growth of the organization and has been instrumental in converting ‘work’ into ‘performance’. The various HRD programmes introduced have helped the Union maintain a high level of productivity, positive work culture and harmonious industrial relations. Special training programmes for the Board of Directors, leadership development programmes for trade union leaders and management development programmes in national level institutions like NDDB, IRMA, ASCI, XLRI and IIM Kozhikode are organized regularly to equip them to function effectively and efficiently given the present competitive/liberalized economic environment.

5.

STYLE The Union is quality conscious and has implemented the ISO 9001:2000 and HACCP quality

management systems. Significantly, the quality control is working in conjunction with the manufacturing process. Another notable aspect is that the Union does not have any Research and Development wing and there are budgetary allocations made to carry out studies of any form. The Union had been facing a static environment and the established rules, procedures, and standard operating techniques have been facilitating the accomplishment of various tasks. The seniors in the organisation, who are well acquainted with these rules and regulations, exert more power and influence in the organisation. Hence the culture in the organisation is essentially hierarchical with a cautious and rule-bound approach to leadership. The jobs are highly formalised with very few opportunities for discretion. Of late, there has been some perceptible change in the organisational culture because of the changing environment. Due to the de-licensing policies of the Government and competition from the small private players, the Union has started shifting its focus on achieving high productivity and efficiency. This slow shift to a more rational and task–oriented culture would stand the organisation in good stead to face the competition from these players.

6.

SKILLS MRCMPU Ltd. has the following comparative advantages:

•

Well-established infrastructural facilities: The union has a network of three modern dairy plants with a total processing capacity of 3.2 lakh LPD and six milk chilling plants with a total chilling capacity of 1.35 lakh litres per day which ensures supply of quality milk in the required quantity throughout the year.

•

Assured and reliable supply base for raw materials. By virtue of the three-tier Anand pattern Co-operative structure, regular supply of milk to the Union is being done by the 600-odd village level co-operative societies, even though there are seasonal variations. Since milk comes from a known source and the close association of the Union with these societies, the Union is assured of quality raw materials. On the contrary, the other players do not have any control over the quality of milk being procured by them from the neighbouring states.

•

Established brand name: All milk and milk products of MRCMPU Ltd. are sold in the brand name ‘milma’, which is owned by the apex body, the KCMMF Ltd.. The brand name is well established for the last 20 years and enjoys the goodwill of the consumers in the state of Kerala.

•

Good distribution network: The entire quantity of milk produced by the Union is distributed through the network of 1500 retailers. All the major towns and most of the semi-urban areas are covered by the retailer network.

•

Market leadership: MRCMPU Ltd. plays a vital role in the milk market with a market share of 55 percent in the organised market.

•

Low manpower cost: The Union always maintains the manpower cost less than 5 percent, which is remarkable.

7.

MANUFACTURING FLOW DIAGRAM The manufacturing process of raw milk at the dairy plant is depicted in the flow diagram given

below: Raw Milk at Raw Milk Reception Dock

Organoleptic test (Taste, Smell, Colour)

Platform Test (Simple chemical test)

Heat Treatment to 30°C

If fit, chilled to 4°C

Stored in Stainless Steel Silos

Pasteurisation (Heated upto 74°C and held for 16 seconds)

Standardised/homogenised milk

Stored in mescaline floor storage tank at 4°C

Polyethylene film packing machines (milk at 5-6°C)

Retail packets in trays kept in cold storage at 4°C

Dispatch

7.1

Effluent treatment Being in the sector of food products, MRCMPU has to follow strict quality and pollution control

measures that makes it distinct from the private competitors who are not caring about hygiene and quality. Being organic in nature, about 0.2 -0.5 % milk will get deposited in the tanks, vessels, pipes etc. that later may become unhygienic. So, all such equipments are rinsed regularly using dilute acid followed by dilute alkali. Then the entire system is sterilised and washed with cold water. All these processes will result in a polluted effluent which may contain a high BOD (Biochemical Oxygen Demand) content to the extent of 1200 parts per million (ppm). This effluent is then purified to get water of 100 ppm with a pH greater than 7 by a stream of processes which are explained below. MRCMPU follows biological effluent treatment method in accordance with HACCP standards. Biological treatments can involve either aerobic (with oxygen) or anaerobic (without oxygen) processes. The main aim of biological treatment is to reduce BOD in the effluents and sewage. All dairy effluent plants in MRCMPU operate aerobically, whereas sewage treatment works utilise a combination of aerobic and anaerobic processes. Land applications including aerobic treatment such as ponds are used. Both aerobic and anaerobic technologies have been used, while anaerobic treatment of wastewater has emerged as an economical and viable alternative for conventional aerobic treatment particularly for high-BOD wastewaters. Aerobic technologies include trickling filter, activated sludge, rotating biological contactors, oxidation ditch, sequencing batch reactor etc. which involves splashing with a jet of water that absorbs excess of oxygen in the effluent there by improving the quality. Anaerobic technologies are systems including continuous-flow stirred tank reactor, contact reactor, anaerobic filter (up flow and down flow), expanded or fluidised bed and two-stage systems etc. In MRCMPU, aerobic and anaerobic processes are combined in one treatment system. Anaerobic treatment is used for removing organic matter in higher concentration streams, and aerobic treatment is used on lower concentration streams or as a polishing step to further remove residual organic matter and nutrients from the wastewater. 7.1.1

Operation The effluents are firstly piped to the anaerobic pond from the dairy. The anaerobic pond acts

like an uncovered septic tank, by separating out solid from dissolved material and depositing sludge on the bottom of the pond. Organic material is dissolved and digested, and partially treated effluent is allowed passage out of the anaerobic pond to the aerobic pond. These effluents can contain 50% less than the initial BOD 5. These effluents are transported to the aerobic pond via a pipe and baffle. The baffle, commonly a t-piece, prevents the

movement of solids between the ponds. The aerobic pond functions by further anaerobic treatment in the lower pond layer and aerobic breakdown of most remaining organic solids near the pond surface. In the aerobic pond the amount of disease-causing micro organisms are significantly reduced and ammonia evaporates into the air. Further solid residues settle out as bottom sludge and the water will be purified with a BOD of 100 ppm. This water can again be used for cleaning the system. Due to the conservation methods of MRCMPU, presently the requirement of water has been considerably reduced to the ratio of 1:2 instead of 1:3 that can be attributed to better usage of scientific methods as explained above. MRCMPU is keen in keeping up a quality conscious image that is evident from the various activities it carries out like quality conscious seminars not only for its own employees but also for its esteemed customers. This makes it different from the rest of the 42 competitors in Kerala.

8. 8.1

FINANCIAL ANALYSIS Budget Allocation Table3: Budget allocation under various heads Sl. No.

Item

Allocation

1

Raw Material Procurement

2

Technical input

0.21

3

Administration

0.62

4

Processing Cost

3.93

5

Packing

3.08

6

Employees salary

4.63

7

Sales & Distribution

2.37

8

Interest

0.91

9

Depreciation

1.75

10

Contribution to KCMMF’s Powder Plant

0.03

11

Miscellaneous

0.65

Profit

0.82 Total

8.2

Percentage 81.00

100.00

Ratio Analysis The following financial ratios have been calculated based on the final accounts for the years 1997-

98, 1998-99 and 1999-00: CURRENT RATIO (CR) 1997-98

1998-99

1999-00

2.74

2.52

3.02

The Union’s current ratio has been above 2.5 for the three years under consideration. However, a major portion of the current assets (more than 65%) is constituted by stock, deposits and advances and other assets. The liquidity of the last two assets (classified under “loans and advances”) is not known.

DEBT-TO-TOTAL ASSETS (D-TA R) 1997-98

1998-99

1999-00

0.63

0.63

0.63

The ratio shows the extent to which the total assets have been financed by debt (including current liabilities). During the period from 1997-98 to 1999-00, the ratio has been the same at 0.63, indicating that 63% of the total assets have been financed by debt.

DEBT-TO-EQUITY RATIO (D-E R) 1997-98

1998-99

1999-00

23.070

15.97

12.78

The ratio indicates the level of financing by creditors for every rupee of financing by shareholders (including own reserves). The only source of borrowed capital for the Union is secured loans from NDDB. During the period from 1997-98 to 1999-00, the D-E R has fallen, indicating that the Union is marching towards financing from own capital. (It is to be noted that capital grants from NDDB and SDC classified as Reserves, have not been included while calculating the ratio).

QUICK RATIO (CR) 1997-98

1998-99

1999-00

2.32

2.23

2.63

The quick ratio, which does not take into consideration the stock, is a better indicator of the liquidity position of an organisation. The quick ratio for the Union is considerably lower than the current ratio, particularly for the year 1999-00.

DEBT-TO-TOTAL CAPITALISATION (D-TC R) 1997-98

1998-99

1999-00

0.5875

0.5607

0.5459

The ratio indicates the extent of debt in the total capitalisation. The proportion of debt in total capitalisation of the Union has decreased from 58.75% in 1997-98 to 56.07% in 1989-99. This has been mainly due to the increase in the capital grant from SDC (45%), other reserves, funds etc. (887.39%) and share capital from DCS (20%). It may be noted that during the period, the amount of reserve fund has decreased by 54.36%. During the period from 1998-99 to 1999-00 also, the proportion of debt in total capitalisation has fallen, mainly because of the increase in the capital grant from SDC (106.11%), reserve fund (126.11%) and share capital from DCS (20%). There was also a grant from the Government of Kerala for Rs. 30.37 lakhs. It may be noted that the amount of other reserves, funds etc. decreased during the period by 44.31%.

RETURN ON INVESTMENT (ROI) 1997-98

1998-99

1999-00

1.75%

2.91%

0.54%

The ratio indicates how efficiently the organisation has been able to use its assets. During the period from 199798 to 1998-99, the ROI of the Union increased from 1.75% to 2.91% mainly because of an 89.3% increase in profit (the caused mainly by an increase in sales (10.33%) and in other income (68.12%). It may be noted that during the period, the total assets increased by 13.65%. The ROI during the period from 1998-99 to 1999-00 decreased because of an 80.1% fall in profit relative to the previous year. This has been mainly due to the increase in administrative expenses (30.19%) and NKDP expenses (33.63%). However, the cost of raw material consumed also increased by 19.81%, which would have resulted in a higher payment to the farmers. It may be noted that during the period, the total assets increased by 10.35%.

9.

STRATEGY The cost of production of milk in Kerala is higher than that in neighbouring states (Tamil Nadu

and Karnataka), because of which the Union has to pay a higher price for procurement of milk. The reasons for this have been discussed subsequently. Owing to this, the Union is facing competition from private agencies that procure milk from the neighbouring states at lower prices and market in Kerala at prices lower than those offered by the Union. While the Union had been periodically increasing the procurement price and the selling price till 1999, no further increase will be possible. Therefore, the Union follows a unique dual-pricing system, under which the farmers are paid a relatively higher price for the milk procured during the summer (lean) season. The price of major agricultural commodities, such as coconut, rubber, coffee, arecanut, pepper etc. in the State have been falling for the last two years, owing to cheaper imports and glut in the global market. On the other hand, dairy farmers receive an assured price for the milk supplied and the payment is also made regularly by the dairy societies. This has prompted many farmers to shift to dairying or pursue the activity more intensely. However, the high cost of feed (which constitutes about 58 per cent of the cost of production) acts as a major discouragement. The cost of feed is high because of the low size of landholdings, the relatively lower area under paddy cultivation in Kerala, and the fact that many crops used, as cattlefeed cannot be grown with rubber and pepper. Therefore, a major proportion of cattle feed (more than 40 per cent of roughages and the entire concentrates) is being imported from the neighbouring states. In order to reduce the cost of cattlefeed, the Union

had initiated a straw baling programme, in which the straw is compressed and enriched with urea, molasses and mineral mixture and transported from Palakkad district to North Malabar (where the price of straw is very high). However, this has been discontinued now. The Union plans to increase the scale of straw baling, for which funds of around Rs. 42 lakh is required to be invested. The Union also sells cattle feed concentrate supplied by the KCMMF, to the APCOS to be supplied to the dairy farmers at a reasonable price. The quantity of cattle feed sold to APCOS by the Union has increased by about 200 per cent over a period of four years, to the current level of about 2500MT per month. The brand name of the Union, i.e., ‘Milma’ is already an established name in the market and the customers can be sure of good quality milk and milk products at reasonable prices, when buying Milma products. In order to further enhance the image of the Union as a producer of good quality milk and milk products, the Union planned to get all the dairy plants certified by the International Standards Organisation. While the Kozhikode and Kannur dairy plants have already received the ISO 9001 and HACCP certification (in 2000 and 2003 respectively), the other dairies are also under the process of being certified. The marketing of milk and other products of the Union is done through Milma booths run by franchisees on contract basis. It may be noted that the franchisees find it profitable only if other complimentary products (such as bread, bun, etc.) are sold along with the products from the Union. In future, the marketing of the milk and other products from all the three Unions in Kerala is to be done by the newly-formed Milma Foods Limited (MFL), a 49-51 joint venture between the Kerala Co-operative Milk Marketing Federation (KCMMF) Limited and Delhi-based Mother Dairy Foods Limited, which is a wholly owned subsidiary of the National Dairy Development Board. Milma will continue to be responsible for the procurement, processing and packaging of milk and milk products, while the joint venture company will be in charge of marketing these products. The new marketing company, called Milma Foods Ltd, has been registered and started functioning from July 2003. Employees of the existing marketing department in Milma have been moved to the new venture. The marketing company will retain existing Milma distributors and there is no proposal to make any change to Milma's existing product line. MRCMPU has been implementing various extension programmes for the dairy farmers under the North Kerala Dairy Project from the year 1990. Further, considering the objective of the organization, “the socio-economic development of Dairy farmers,” other socio-economic development activities not directly related to the dairying, like thrift groups, health camps etc. have also been implemented during the last three

years. Considering the limitations of a co-operative organization like MRCMPU for implementing such developmental programmes not directly related to its main focus area of dairying and also considering that the NKDP Phase III has ended on March 31, 2001, the MRCMPU has decided to set up a Charitable Trust named as Malabar Rural Development Foundation (MRDF). MRDF was registered on October 16, 2000 under the Indian Trusts Act 1882. The draft byelaws of the Foundation have been prepared based on the byelaws of Tribhuvandas Foundation, Anand and the Vaisakh Trust sponsored by the Vaisakh Milk Union, Vishakhapatnam. The main objective of MRDF is the socio-economic development of dairy farmers, particularly women and children. The Union considers the competition from private agencies selling milk procured from neighbouring states as the greatest threat. Therefore, it is proposed to diversify into activities other than production and marketing of milk and milk products. The Union plans to initiate such activities through MRDF. Based on a study conducted by the Centre for Development Studies, Trivandrum for MRDF, the activities identified were: vegetable cultivation and marketing (particularly in Palakkad district), vanilla cultivation and marketing and coffee cultivation and marketing.

10. CONCLUSION MRCMPU Ltd. unlike the other regional milk unions in Kerala is the only profitable venture. The reasons are not far to seek. The Swiss Agency for Development and Cooperation (SDC) had a crucial role in the efficient functioning of the Union. Most of the employees recalled the transparency and commitment displayed by the Swiss in the course of the funding of the project. While the Swiss relied to a large extent on local knowledge, they contributed their managerial and technical expertise whenever the need arose. This initial handholding initiative helped the fledgling organisation grow and spread its reach across the Malabar region rapidly and help its various stakeholders and contribute significantly in boosting incomes of a large number of dairy farmers as well as open up new livelihood vistas for the rural masses.

REFERENCES Robbins P. Harold (2001) Organization Theory. Structure, Design and Applications New Delhi: Prentice Hall of India Private Limited. MRCMPU Ltd. (2002-2003) Annual Report ______________ (2002-2005) Perspective Plan ______________ (2003) Profile

ANNEXURE I: Summarized Financial Statements Balance Sheet for the Years 1997-98 to 1999-00 LIABILITIES

97-98

98-99

99-00

97-98

98-99

99-00

Gross Block

1797.9 9

1878.2 1

1912.59

Depreciation

673.77

851.69

1050.51

458.65

Net Value

1124.22

1026.5 2

852.08

30.37

Investments

49.00

49.00

82.00

SHARE CAPITAL From DCS

FIXED ASSETS 245.30

294.11

352.53

RESERVES NDDB Capital Grant

ASSETS

458.65

458.65

Govt. of Kerala Grant Reserve Fund

45.82

20.91

47.28

SDC Capital Grant

75.74

109.74

226.19

SMP

59.31

80.46

89.54

Other reserves

5.47

54.01

30.08

Ghee

58.92

27.38

88.66

Raw Milk

6.66

15.32

43.66

Peda

0.05

0.02

0.05

Curd

2.10

2.92

4.55

SECURED LOANS NDDB

1183.28

1196.37

1376.7 3

CURRENT LIABILITIES

CLOSING STOCK

Payment to Producers

167.76

143.01

190.86

Refresh

0.58

-0.09

0.84

Payment to Suppliers

33.88

21.71

33.68

Cream

3.51

1.46

3.34

Sundry Creditors

29.24

127.84

26.22

Cardamom

0.05

Security Deposit

40.15

46.66

51.75

Others

0.38

0.79

1.51

Statutory Liabilities

10.11

26.22

17.33

Stores, spares & cans

132.42

125.36

119.39

Provisions

46.06

92.23

38.75

DEBTORS

127.24

144.21

212.91

Other liabilities

266.63

342.76

519.81

CASH & BANK

Outstanding to Employees

17.67

60.09

10.52

Cash in hand

29.92

18.86

18.49

KCMMF Current Account

14.19

14.19

0.45

Cash at bank

369.45

394.23

573.51

0.27

0.03

12.04

To suppliers

37.42

62.51

16.52

To staff

34.19

41.52

56.78

Deposits

216.96

942.53

698.39

Other Assets

636.36

350.44

748.86

NET PROFIT

Cheque in transit

Upto the year

198.54

204.31

193.74

Additions for the year

50.52

70.66

18.26

0.19

LOANS & ADVANCES

TOTAL

2889.0 1

3283.4 6

3623.3 2

TOTAL

2889.0 1

3283.4 6

3623.32

Profit & Loss Account for the Years 1997-98 to 1999-00 EXPENDITURE

97-98

98-99

99-00

Opening Stock

505.76

96.95

65.45

Raw Materials Consd.

7500.96

7930.58

Purchase by transfer

1583.36

Payments to empl.

INCOME

97-98

98-99

99-00

Sales

8795.99

9704.72

11291.92

9501.29

Sales by transfer

1763.60

1124.64

1224.75

1120.18

1224.36

Other sales

34.38

37.72

59.22

409.63

585.99

547.98

Other income

127.74

214.76

251.58

Manufacturing exp.

293.37

293.23

391.52

Interest & Dividend

69.65

71.94

77.11

Selling exp.

477.86

509.27

581.73

Closing Stock

517.48

65.45

137.25

Administrative exp.

79.36

88.28

114.93

Contrib. to powder plant.

31.55

32.97

39.79

Taxes & duties

7.89

10.60

7.20

P & I Programme

49.59

61.80

82.15

Non-operating exp.

120.55

125.57

142.73

NKDP exp.

17.60

77.73

103.87

IT and Div. Provision

20.00

25.00

10.00

Depreciation

160.84

184.50

210.58

Profit/(Loss) (Bal. Fig.)

50.52

95.62

18.26

TOTAL

11308.84

11238.26

13041.8 3

11308.84

11238.26

13041.83

TOTAL

ANNEXURE I (Contd.)