42nd Annual General Body Meeting held on 17th June 2016

42^ndAnnual General Body Meeting held on 17^thJune 2016

Madam and Gentlemen,

Decades ago, Mahatma Gandhi uttered these golden words “India lives in its villages”. These words ring true even today with 70% of our population still residing in rural areas and 50% of our overall laborforce still dependent on agriculture. Over 800 million citizens of India, live in its six lakh villages. Rural India contributes over half of India’s income, has a share of 56% of consumption expenditure of our nation. True development of India certainly isn’t possible without development of its vast rural population.

Over half of all rural households do not have any land holdings and another 44% are marginal and small farmers. Only a quarter of all rural households, depend solely on incomes from cultivation of land. An overwhelming majority earn their livelihood from a combination of farm and non-farm incomes. Availability of remunerative employment opportunities within rural environment is definitely a major concernin their mind.

Make in India campaign was launched by Hon’ble Prime Minister of India in 2014 with the aim of transforming India into a global manufacturing hub. The campaign is pivoted on the strength of India’s human resources. Any policy, which aims at comprehensively dealing with the Indian economy, must also include provisions for improving the rural economy. New manufacturing units can decisively transform the rural economy and provide a plethora of positive opportunities.While the call for Make in India is timely and has been well received, the issue is how these strategies can also be tailored to further reduce rural poverty. Fusing local skills with entrepreneurial and marketing inputs can open up a world of opportunities for the rural poor. Major issues facing Indian agriculture can be dealt with successfully with the large scale implementation of Make in India campaign involving sectors like food processing and textiles. We need to ensure that the existing rural – urban divide in terms of a specialized workforce does not impede the reach of the Make in India campaign in rural India.

There are plenty of positive opportunities for India’s rural population associated with the success of the Make in India campaign.While Make in rural India is clearly the way ahead, the challenges are multifold – (a) how to create more entrepreneurship opportunities in rural India (b) involving the most deprived and vulnerable sections of our rural population and (c) up-scaling the effort in a sustainable manner.

Recently,our Hon’ble Prime Minister has outlined a comprehensive strategy to double farmer’s income within six years. In this context, I am proud to inform you that our Amul model of dairy cooperatives in Gujarat has already demonstrated the ability to double milk procurement price paid to our farmers-members within six to seven years. As part of its Make in rural India policy, Government should aggressively encourage dairy entrepreneurship among rural youth. If our rural youth view dairy entrepreneurship as an attractive livelihood option, this will help to check migration from villages to urban areas. Incentive schemes to promote dairy entrepreneurship and commercial dairy farming among rural youth should be the central pillar of our Make in rural India campaign.

Considering the dynamic environment we live in today, I find that the dairy industry is full of opportunities. It is a vital part of the global food system and plays a key role in sustainability of rural areas.Dairying is not just a large economic activity but also an integral part of our social and cultural heritage. Its uniqueness lies in its unifying power, in the fact that no other industry touches lives of millions of farmers. Complementing this are Indian climatic conditions that support animal husbandry. Dairy is a great tool for equitable growth and income distribution. What remains is providing market access by offering stable and remunerative prices to farmers and encouraging this generations-old sustainable livelihood source, a role which is fulfilled by dairy cooperatives based on Amul model. Infact, Dr. Verghese Kurien firmly believed that dairy cooperatives are a means of placing instruments of development, in the hands of the farmers, themselves. Our country needs balanced and inclusive growth. In order to facilitate inclusive growth, it is pertinent that our villages progress, and if villages are to progress, dairy, which is an integral part of the rural economy and livelihood, must also progress.Thus, Make in Rural India is clearly the way to go. For this, what can be better than the dairy sector, a sector that touches the lives of millions of farmers twice every day?

It is important to understand the multiple dimensions of milk. It is the largest agricultural crop in India with market value exceeding Rs 4 lakh crore (US $ 60 billion) per annum and directly affects livelihood of more than 150 million Indian farmer families,which translates into 750 million citizens of rural India; a vast majority of whom belong to families of small and marginal farmers. Dairy sector contributes almost 8% to GDP of rural India. Further,most of the dairy business in organized sector is in the hands of cooperatives, which are owned by farmers themselves. Our dairy farmers have ensured food-security for our country in one of the most critical dimensions – milk and dairy products. In fact dairy cooperatives have triggered a socio-economic revolution in rural India by generating gainful employment for the most vulnerable sections of our rural population; especially rural women and landless labourers. Thanks largely to dairy cooperative movement led by Amul,our rural women have gained some measure of economic independence. Milk is the answer to questions of economic self-sufficiency of the rural population.

Even the Economic Survey 2015-16 presented in Parliament by the Hon’bleUnion Finance Minister acknowledges the contribution of Indian dairy cooperatives towards Nation-building. The Economic Survey explicitly states that the success of dairy industry has resulted from the integrated cooperative system of milk collection, transportation,processing and distribution, conversion of the same to milk powder and products, to minimize seasonal impact on suppliers and buyers,retail distribution of milk and milk products, sharing of profits with the farmer, which are ploughed back to enhance productivity and needs to be emulated by other farm producers.

Thanks to the focus that Amul cooperative network has always had on marketing of value-added, branded milk and dairy products directly to end-consumers, our farmer-members are perhaps the only ones across the entire world, to witness increase in farm-gatemilk prices. On the other hand, dairy farmers across the globe are facing severe crisis due to fall in farm-gate milk prices by 55% over two years. For example, New Zealand which paid NZ $ 8.50per kg of Milk solids for 2014, paid NZ $ 4.50 for the year 2015 and now for the year 2016, have announced milk price of NZ $ 3.85 per kg of milk solids. This shows farmers are facing the heat as their costprice of milk production is about NZ $ 5 per kg of milk solids. This is largely because Fonterra, the primary dairy cooperative of NewZealand was largely dependent on dairy commodities business and was therefore vulnerable to the crash in global dairy markets.

Since Amul has always focused on marketing of branded consumer packs of both fresh milk and value-added dairy products, through our marketing and technological innovation, we were successful in swimming against this global trend. Despite sharp declines in farm-gate milk prices across the world, farmers associated with Amul cooperative network,received 20% higher prices for the milk they supplied during last two years. Clearly, farmer’s control on the entire value-chain of dairying through their own cooperative network and focus on brand-building as well as consumer marketing, has ensured that Amulfarmers are insulated from volatility in global dairy markets.

Due to the meltdown in global prices of dairy commodities, countries suchas Australia, New Zealand and EU nations, are lobbying hard foraccess to Indian dairy market through bilateral Free Trade Agreement(FTA) negotiations. Faced with the prospect of mounting inventory of dairy commodities on one hand and stagnating demand, these countries intend to use India as a dumping ground for their export surpluses. If they succeed in their objective, then our domestic dairy industry of India will be crippled forever.

Increase in per-capita availability of milk in India from 110g per day in1970s to 340g per day, today, is one of the reasons which have resulted in remarkable improvement in various health-relatedsocial indicators, since independence. Enhanced milk availability has contributed towards decline in malnutrition among children in our country, in recent decades. Driving our efforts further in this direction, we have partnered with Government of Gujarat to implement ‘Doodh Sanjeevani Yojna’, with a view to provide nutrition tochildren, pregnant women and lactating mothers. We shall continue our efforts to ensure that the nutritive goodness of milk reaches as many children as possible.

I now present to you, our Federation’s Annual Report and the Audited Accounts for the year 2015-2016.

REVIEW OFOPERATIONS

MILK PROCUREMENT

Total milk procurement by our member unions during the year 2015-16 averaged 174.81 lakh kilograms (17.48 million kg) per day, representing growth of 14.3 per cent over 152.90 lakh kilograms (15.29 million kg) per day achieved during 2014-15. The highest procurement was recorded during February 2016 at 220.00 lakh kilograms (22.00 million kg) per day.

During the last six years, our milk procurement has witnessed phenomenal increase of 87%. This enormous growth in milk procurement was a result of high milk procurement price paid to our farmer-members which has increased by 90% during last six years.In fact, when dairy farmers across the world have witnessed sharpdecline in farm-gate prices of milk, only farmer-members of Amul cooperative family have witnessed growth in milk procurement price.This is due to the fact that large dairy organizations including dairy cooperatives in EU, Australia and New Zealand were heavily dependent on trade in dairy commodities. Farmers in these countries had to bear the brunt of the crash in global dairy commodity markets,last year. As we have mentioned before, dairy farmers in New Zealand suffered 47% decline in farm-gate prices of cow milk, in last two years. On the other hand, thanks largely to the focus on marketing value-added milk and dairy products in consumer packs, farmer-members of Amul family witnessed 17% in their milk procurement price duringthe same period. High remunerative milk procurement price to our farmers has helped us to win back farmer’s interest in milk production. Better returns from dairying have obviously motivated farmers to enhancement their investments in increasing milk production. Our initiative in promoting the concept of commercial,scientific, cooperative dairy farming is also helping to attract next generation of dairy farmers to remain in the business.

SALES

During the last six years, sales of our Federation has registered remarkable growth of 187%, which implies an impressive cumulative average growth rate (CAGR) of 19.2%. In line with this notable performance, this year, our Federation has registered an impressive growth of 11%, to reach Rs. 22,972 crores (Rs. 229.72 billion). Last year, our turnover was Rs. 20,733 crores (Rs. 207.33 billion). We took giant technological leaps ahead in extending information technology integration and sales-force automation to cover most of our distributors and markets, across India. Technological innovation has helped us in micro-level planning and execution of our sales and marketing strategies. Leveraging on technology, we have started the process of instant communication with millions of trade partners across the country; helping to align all key-channel elements in the same strategic direction. Our digital marketing activities and social media visibility initiatives are helping us to connect with youngsters and emerging generation of new consumers.

The DNA of brand Amul has always revolved around consumer marketing; in other words, marketing of value-added milk and dairy products to millions of house-hold consumers and genuine end-users. Thanks largely to this focus on consumer marketing; the crash in world dairy commodity markets and subsequent depression in Indian dairy commodity market, had relatively lesser impact on our business. I am also pleased to note that our Federation has done remarkably well in many of the value added consumer products. Our flagship brand, Amul Butter has shown an impressive value growth of 19%. Launch of innovations such as unsalted Butter in consumer packs as well as Garlic &Herbs Buttery spread has helped to further augment growth in this category. In a major leap ahead in terms of packaging innovations, Amul Butter has also been introduced in highly convenient, directly usable tubs of multiple sizes. We have also expanded our production capacity of single serve packs, which is helping to expand consumer base of Amul Butter, even in smaller towns and interior markets. Similarly our Ghee sales registered 37% growth in value terms. We have started manufacturing and marketing ghee variants customized as per regional tastes and preferences, which is helping us expand market reach for Amul ghee. Our sales of long-life UHT milk, increased by 22%. Continuing our efforts in product innovation, we launched Amul Lactose Free milk this year, for customers who are unable to enjoy the goodness of milk due to lactose in tolerance. Wehave also recently introduced single-serve, Amul liquid creamer for whitening tea and coffee.

Sales of Amul Cream in long-life UHT packaging also increased by 28% in value terms. Amul Cream has consolidated its position as the gold standard, trail-blazer and the most preferred brand, in this category. Leveraging on the enthusiastic consumer response to severalnew innovative flavors and variants, our entire range of Amul Ice-creams registered quantum value growth of 18%.

The single largest food brand of India, Amul fresh milk in pouches once again registered high growth of 13%. The highly successful launch of Amul Milk in Punjab, Chandigarh and northern part of West Bengal was a major step forward for us, as it marked our entry into fresh milkproducts category in these major markets. In the fresh milk products category, Amul Butter milk registered 24% value growth and sales of Amul Dahi grew by 16%.

Inline with our expansion plans, we have already achieved expansion in our milk processing capacity to 28 million litres per day (280 lakhlitres per day). During the year, several major expansion projects were successfully completed, with commissioning of our new dairy plant at Faridabad with capacity of 10 LLPD (lakh litres per day), expandable to 20 LLPD. Our new plant at Rohtak, also started operations with current capacity of 6 LLPD expandable to 10 LLPD. In Gujarat, our new dairy plant at Amreli commenced operations with capacity of 2 LLPD and our plant in Kutch expanded capacity from 50,000 LPD to 2 LLPD with new production facilities for buttermilk and dahi. In view of quantum growth in our beverages range, we have started two new high capacity, packaging lines for PET bottles. During the year, Kaira milk union has started new cattle feed plantat Kapdivav village with capacity of 800 MTPD expandable to 2000MTPD.

We are very close to achieving our goal of trebling our cheese production, with the commissioning of our new ultra-modern,state-of-the-art, Cheese plant at Palanpur and parallel capacity expansion at our existing cheese factory at Khatraj. At Palanpur,we have also started our new cheese whey processing plant with capacity of 60 MTs per day.

DISTRIBUTION NETWORK

Over the years GCMMF has been improvising and strengthening its distribution coverage across geographical areas, consumer segments,age groups to ensure product availability to its consumers. These improvements are brought in to its existing very unique & robust distribution model of servicing consumers through its four distribution highways of fresh, ambient, refrigerated and frozen.These improvements are being brought in to improve upon the already existing leading edge over the competition in the market.

Continuing its journey of opening new branches thereby bringing it closer to the market, GCMMF has opened two new branches: - Agra and Brahmapur in the current year. In line with increased infrastructural requirements to service market in better & efficient manner, we have increased our infrastructure at branch locations also. Working ahead on our objective of ensuring that our products are available as close to consumers as possible, we have added 1120 new distributors and Area Delivery Agents in the current year. We have also strengthened our rural reach with 176 Super-stockists covering 3500 interior markets.

In the current year we have successfully implemented the integrated Distributor Management System software at 2300 distributor locations across India. This system has actually brought in the much needed last mile information availability & complete control on our reach across markets. Entire sales force is leveraging the benefit oft his technology led market intervention program by filling the market gaps.

We also leveraged the technology for market intelligence & reporting by implementing e-DSRs (Electronic Daily Sales Reporting System) for all our field force. This has resulted in to faster information sharing and action.

INFORMATION TECHNOLOGY INTEGRATION

We are glad to inform you that our Federation has successfully completed 5 years of operations on ERP. A total of 14 member unions are deriving benefits of using ERP for business transactions in addition to AmulFed Dairy, Vidya Dairy and our Federation.

We wish to inform you that implementation of Distributor Management System software is completed at most locations. More than 3000 Salesman of these distributors are now booking orders, using sales-force automation system on mobile. “Amul Cart” – a mobile application for retailers order booking was also released to facilitate placing of order directly from mobile by viewing stockavailability and entire Amul range of products.

We wish to inform you that Federation has also started implementation of “Common AMCS (automatic milk collection system) Application” for 18000 Village District Cooperative Societies of Gujarat. Amul AMCS will integrate Cow-to-Consumer (C2C) IT Value Chain. The application is also providing mobile applications for producer members, society team and member unions to access AMCS data at their convenience.

Federation has also developed portal for reverse auction and e-procurement which is widely used for cost effective procurement of goods and services.

EXPORTS

As you are aware, the global dairy market prices have been falling for the last two years. The global dairy commodity prices have seen the lowest in last 10 years. In spite of all this, I am pleased to inform you that our exports in consumer products have shown a good growth. Federation has continued to sell its products on Global Dairy Trade Auction Platform at a premium.

I am hopeful that GCMMF will continue to focus on strengthening export of consumer product portfolio and build the brand truly as : “Amul- the Taste of India.”

COOPERATIVE DEVELOPMENT PROGRAMME

During the year, we have also continued to provide support to Milk Unions of Saurashtra and Kachchh region, to organize farmers to build and develop cooperatives and increase milk production and procurement. We have developed a dedicated initiative to improve animal health services, by conducting health camps and veterinary routes in Saurashtra and Kutch region.

Stepping up our efforts in cooperative development

During the last sixteen years, our Member Unions are implementing Internal Consultant Development (ICD) for developing self leadership among member producers and thereby enabling them to manage their dairy business efficiently leading to their overall development and enabling them to implement the total quality management at Village Dairy Cooperative Societies (VDCS) and milk producer level.

During the year, Member Unions continued to implement the module on Vision Mission Strategy (VMS) for primary milk producer members & Village Dairy Cooperatives. Specially trained consultants facilitated around 716 Village Dairy Cooperative Societies (VDCS) and have conducted their VMS workshop, prepared their Mission Statements & Business Plans for next five years. Till date, 9,840 VDCS have prepared their mission statement and Business plan under the initiative. During the year, 2,154 VDCS have also reviewed their business plan under annual revisit of VMS and have prepared action plan for next year to propel the momentum gained through VMS.

To take VMS to next level and extend thrust area implementation up to milk producer’s level, our MUs have initiated VDCS and milkproducer’s integrated Dudhutpadak-Mandali Sanklit Vikas AyojanKaryakram (DIVA) Programme. MU’s consultant facilitates the member milk producers to identify gap between their existing & desired AH practices and action plan is prepared and VDCS supports and facilitate milk producer to achieve the desired result as per action plan.

In order to strengthen knowledge and skill base of young girls and women of the villages about Animal Husbandry management, 575 women resource person have been trained under “Mahila Pashupalan Talim Karyakram” during the year.

Strategic Productivity Enhancement:

GCMMF and Milk Unions have identified the gaps which are hindering the efforts of improving milk productivity and therefore have envisioned integrated intervention to achieve objective of higher milk productivity and production, titled Strategic Productivity Enhancement Programme.

The concept of this programme is designed with an aim to develop agenetically improved animal with high productivity. It initiates with the selection of elite animals, to develop pure bred cows and buffaloes with high genetic potential by adopting Pure Breeding Programme. Accordingly, 20,100 Superior animals having high productivity have been identified under the programme and their better progeny will be obtained by using 100% pure bull semen. To develop the genetic potential of calves we have implemented Calf Rearing Programme. Around 97,682 calves have been registered under calf rearing programme. With a long term vision to reduce infertile animals and convert a non-productive animal into productive asset, we conduct Fertility Improvement Programme (FIP). At present, FIP is successfully being implemented in selected 3045 villages covering 2.06 lakh numbers of animals. To generate a database of animals under animal breeding activities, around 23.74 lakhs animals have been registered in 2319 villages under E-Animal programme. Activities of Strategic PEP and FIP are being monitored through a dedicated system on www.amul.org.in.

Entrepreneurship Development Programme for Dairy Farmers:

We have conducted 50 programmes under Entrepreneurship Development Programme for Dairy Farmers based on different segmentation and have trained 3316 milk producers. Such milk producers are trained, through interactive group workshops to better understand farm economics and develop management plans for increasing income and reducing operating costs.

Safeguarding the interests of Indian dairy farmers…..

One of the reasons why dairy cooperatives have flourished and prospered,especially in Gujarat, because the Government of Gujarat and theGovernment of India have in their wisdom, always safeguarded the interests of Indian dairy farmers. In Gujarat specifically, dairy cooperatives have always been given the freedom to take the most appropriate business decisions in the interests of their farmer-members. Our policy-makers have been proactive in keeping the interests of dairy farmers at the fore-front, in view of the tremendous contribution that dairy cooperatives have made towards socio-economic transformation of rural India. In fact, Government ofIndia, readily acknowledged the stellar role played by farmer-owned dairy cooperatives in rural development.

With current lower international prices of milk-fat, there are several Indian traders who are importing / planning to import butter and butter oil into India, at much cheaper rate and sell it at a lowerprice. If this happens, it will be detrimental to the interests of farmer owned milk cooperatives. We fear that farmers would be at a complete loss as they are already suffering from the impact of drought in several parts of India, but import of dairy fat at very low prices would result into loss of income for them. You will appreciate that such short term and opportunistic import will have long term adverse impact on farmer and take years to correct. We humbly request the government to ensure that the current 40% import duty is continued on a permanent basis and also to ensure that permit for import of dairy products is not issued under current environmentsince duty (even at 40%) is not really a deterrent, as global prices are at very low levels.

Dairy should be treated at par with agriculture in all respects. However,currently, income that a farmer earns from dairying is not exempted from taxation, as in case of Agricultural income. We request our policy-makers to ensure that income from dairying should be treated in the same bracket as agricultural income and should therefore be exempted from tax. Extending the same logic, income in the hands of dairy cooperatives, which are owned by farmers themselves, should also be exempted from tax.

Dairy sector should also be classified under priority sector lending. Reserve Bank of India is not extending priority sector lending to dairy cooperatives, although it is given to agricultural sector. Dairy cooperatives are getting loans at a higher lending rate from banks, than the rest of agricultural sector.

With continuous support from our policy makers, our farmers will ensure that India continues to prosper in dairy sector, safeguarding a critical dimension of our national food security.

ACKNOWLEDGEMENTS

Before closing, I would like to thank all those who have helped to make our Federation’s operations successful.

We are very much thankful to Hon’ble Prime Minister of India and Hon’ble Chief Minister of Gujarat for their constant support and guidance.

We are grateful to the Government of India for immense support received from various departments and specifically from the Department of Animal Husbandry and Dairy Development. We convey our special thanks to NCDC for providing valuable support to our village co operative dairy societies. We are also thankful to the Government of Gujaratespecially the Department of Animal Husbandry and Cooperation fortheir very supportive and facilitating role.

NationalDairy Development Board (NDDB) had played a role in our growth and development. We are extremely grateful to Shri T Nanda Kumar, Chairman, NDDB and Shri Dilip Rath, Managing Director, NDDB for their continuous support to our organization. National Cooperative Dairy Federation of India had been providing us with invaluable support incoordination with other agencies and organizations. We are very grateful to them.

Institute of Rural Management, Anand, as always, has contributed to the perspective building and professionalization of the management of cooperative sector. We express deep gratitude for its support.

We are in debted to Vidya Dairy for having organized training programs on dairy technology for our employees. We are also grateful to SMC College of Dairy Science, Anand, for strengthening the dairycooperative sector, by providing technically skilled man power. We express our sincere thanks to the College of Veterinary Science and Animal Husbandry, Anand.

Our advertising agencies, bankers, insurers, management consultants,suppliers and transport contractors have been of great help to us in managing our growth and are our partners in success. We acknowledge their contributions and commit ourselves to continue and strengthen this fruitful alliance in all times to come.

The Indian Railways has played a crucial role in the growth of our dairy cooperatives since inception. We thank them for their continuous support.

We depend on the efficiency of our WC&F agents, distributors, retailers and most important of all, the patronage of our consumers, who have come to regard our brands as synonymous with quality and value. While thanking them for their support, we assure them that we shall strive endlessly to delight them.

Our Member Unions are our strength. We thank them for their guidance, support and cooperation without which we would not exist.

Lastly, we thank the officers and staff of our Federation for their continued perseverance, loyalty and unflinching efforts devoted to our cause.

Thank you.

For and on behalf of the Board of Directors

Jethabhai P. Patel

Chairman

42nd Annual General Body Meeting held on 17th June 2016