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 Co-
operative 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. INTRODUCTION
1.1 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: mrcmpu@malabarmilma.coop

mrcmpu@sify.com

mrcmpu@vsnl.com

Website: www.malabarmilma.coop

1.2 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

Representing
Board of Directors Designation
APCOS/Organisation
Qualification

1 PP Gopinatha Pillai Chairman Mukkom, Kozhikode Graduate

PT Gopalakurup (Chairman, Matriculate
2 Kerala Cooperative Milk Director Theneri, Wayanad
Marketing Federation Ltd,)
Vallikode Muttikulangara,
3 PC Vijayan Director NA
Palakkad
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
Government Nominee
13 NS Varadarajan Director NA
(KCMMF)
Government Nominee (Dept.
14 NT Sivadasan Director NA
of Dairy Development)
Government Nominee
15 Cherian Joseph Director NA
(NDDB)
Managing Director, M.Tech (Dairy
16 S Dakshinamoorthy Director
MRCMPU Ltd. & Food Engg)
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. Objectives and Methodology

2.1 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

PRODN.,
PROCUREMENT FINANCE & PERSONNEL
MIS MKTG. PLNG. &
& INPUT (P&I) ACCOUNTS & ADMN.
PROJ.

DAIRY PLANTS UNDER THE UNION

KASARGOD
KANNUR DAIRY KOZHIKODE DAIRY PALAKKAD DAIRY
DAIRY

UNITS UNITS UNITS UNIT

MCP MCP MCP

MCP Product MCP MCP
Meenang Mananth Attapa
Nilambur Dairy Pattambi Kanhangad
ady awady di

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

KANHANGAD KANNUR WAYANAD KOZHIKODE NILAMBUR PATTAMBI PALAKKAD

3.1 Dimensions of Organisation Structure

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 Departments

3.2.1 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 profit-

no 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. Rewards to best farmers and APCOS

3.2.2 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. STAFF
4.1 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

Subordinates

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

2. Others - Pay Scale less than Rs.1, 000/-

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 Merely <SSL SSLC - Post Professional/
Illiterate Graduation
Department Literate C PDC Graduation Technical

Engineering
0 0 24 2 2 0 63
Accounting
0 0 8 11 9 1 0
Production
0 8 127 63 0 1 15
Marketing
0 0 4 10 15 6 6
Quality
Control 0 0 12 23 4 5 6

Cash
0 0 2 1 1 1 0
P&I
0 0 2 1 23 5 2
General
0 0 1 0 3 0 1
MIS
0 0 0 0 0 1 3
Personnel
0 0 0 5 0 3 0
Store
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% 0-3 years
26%
4-10 years
11-20 years
>20 years
39%

4.3 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. FINANCIAL ANALYSIS
8.1 Budget Allocation

Table3: Budget allocation under various heads

Percentage
Sl. No. Item
Allocation
1 Raw Material Procurement 81.00
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 100.00

8.2 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 1997-
98 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 ASSETS 97-98 98-99 99-00
SHARE CAPITAL FIXED ASSETS
1797.9 1878.2
From DCS 245.30 294.11 352.53 Gross Block 1912.59
9 1
RESERVES Depreciation 673.77 851.69 1050.51
NDDB Capital 1026.5
458.65 458.65 458.65 Net Value 1124.22 852.08
Grant 2
Govt. of Kerala
30.37 Investments 49.00 49.00 82.00
Grant
Reserve Fund 45.82 20.91 47.28 CLOSING STOCK
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
SECURED LOANS Raw Milk 6.66 15.32 43.66
1376.7
NDDB 1183.28 1196.37 Peda 0.05 0.02 0.05
3
CURRENT
Curd 2.10 2.92 4.55
LIABILITIES
Payment to
167.76 143.01 190.86 Refresh 0.58 -0.09 0.84
Producers
Payment to
33.88 21.71 33.68 Cream 3.51 1.46 3.34
Suppliers
Sundry Creditors 29.24 127.84 26.22 Cardamom 0.05 0.19
Security Deposit 40.15 46.66 51.75 Others 0.38 0.79 1.51
Stores, spares &
Statutory Liabilities 10.11 26.22 17.33 132.42 125.36 119.39
cans
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
17.67 60.09 10.52 Cash in hand 29.92 18.86 18.49
Employees
KCMMF Current
14.19 14.19 0.45 Cash at bank 369.45 394.23 573.51
Account
NET PROFIT Cheque in transit 0.27 0.03 12.04
LOANS &
Upto the year 198.54 204.31 193.74
ADVANCES
Additions for the
50.52 70.66 18.26 To suppliers 37.42 62.51 16.52
year
To staff 34.19 41.52 56.78
Deposits 216.96 942.53 698.39
Other Assets 636.36 350.44 748.86
TOTAL 2889.0 3283.4 3623.3 TOTAL 2889.0 3283.4 3623.32
1 6 2 1 6
Profit & Loss Account for the Years 1997-98 to 1999-00
EXPENDITURE 97-98 98-99 99-00 INCOME 97-98 98-99 99-00
Opening Stock 505.76 96.95 65.45 Sales 8795.99 9704.72 11291.92
Raw Materials
7500.96 7930.58 9501.29 Sales by transfer 1763.60 1124.64 1224.75
Consd.
Purchase by transfer 1583.36 1120.18 1224.36 Other sales 34.38 37.72 59.22
Payments to empl. 409.63 585.99 547.98 Other income 127.74 214.76 251.58
Interest &
Manufacturing exp. 293.37 293.23 391.52 69.65 71.94 77.11
Dividend
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
31.55 32.97 39.79
plant.
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.
20.00 25.00 10.00
Provision
Depreciation 160.84 184.50 210.58

Profit/(Loss) (Bal.
50.52 95.62 18.26
Fig.)

13041.8
TOTAL 11308.84 11238.26 TOTAL 11308.84 11238.26 13041.83
3
ANNEXURE I (Contd.)