Demonetisation Dairy Dares
Rural & Marketing|January 2017

Diary organisations procure milk from lakhs of farmers. Some have been making payments to farmers through bank transfers while some are still disbursing cash. The demonetisation move has changed the way Indian dairy sector functions. Mohd Mustaquim reports on how dairy dares to take the challenge.

Mohd Mustaquim

The demonetisation of high value currency notes - Rs 500 and Rs 1000 - resulted into a massive cash crunch for the the dairy industry in procuring milk from the farmers. One of the leading dairies from India’s southern peninsula, the Kerala Cooperative Milk Marketing Federation (KCMMF), famously known as milma, faced tremendous heat on disbursing cash to its milk producing farmers.

Before the demonetisation move by the Government, KCMMF had been paying to 90 per cent of its 500,000 milk producers in the form of cash through its three union and over 3,000 primary milk cooperative societies. KCMMF is making payments to primary cooperative societies through bank transfers while these societies had been paying farmers through cash on weekly basis. The cash crunch following the demonetisation paralysed the functioning which led to food crisis among these farmers within 10 days.

Learning from other dairy cooperatives, the badly affected KCMMF found a way to transfer the payments to the bank accounts of the farmers. Informing about the development, PT Gopala Kurup, Chairman, KCMMF said to R&M, “Since the Government of India demonetised the Rs 500 and Rs 1000 currency notes and put restrictions on withdrawals, our cooperative societies were not able to withdraw the cash from banks. In Kerala, over 90 per cent of farmers already have bank accounts for getting government’s subsidies under Direct Benefit Transfer scheme. Thus, immediately, we started transferring the payments to farmers’ bank accounts.”

“Some societies are transferring to banks, some are paying through cheques, some have their localised milk chains who collect and make payments in cash. Today, within 20 days, 80-85 per cent farmers are getting payment through their bank accounts. We have asked rest of the farmers to open their accounts as soon as possible,” Kurup added. 

Showing the way

Even before demonetisation, in 2013 Hatsun Agro Products, a dairy company located at Villupuram in Tamil Nadu had started making payments to over 300,000 milk  producers through banks. In the beginning, the farmers were reluctant to accept the idea as they were more familiar with cash transactions.

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