chapter  2
22 Pages

Hindustan Lever Limited: A Milk Processing Operation in India

WithRuth Karen

In the late 1960s, Hindustan Lever (HLL) established a milk products factory in the district of Etah, in the state of Uttar Pradesh. By 1973, it was ready to withdraw; the enterprise simply could not generate sufficient supplies of raw milk. Employees at the factory, supported by the governor of the state, persuaded HLL to reconsider the decision. Between 1973 and 1975, HLL streamlined the plant and changed its manner of working with local farmers. Supplies of milk reached satisfactory levels; the enterprise succeeded; net farm income from dairy herds increased significantly. Encouraged by this success, and because of a deeper sense of appreciation of both the needs and capabilities of the farmers in the area, in 1976 HLL initiated the Integrated Rural Development Program (IRDP), which has since become a model of private-sector intervention in long range, comprehensive economic and social development.

The IRDP covered six villages in 1976. Fifty villages, involving approximately 100,000 people and 50,000 hectares, were impacted by the program in 1983. Net farm income per hectare (1 hectare = 2.5 acres) doubled in this time, and a total additional income of US$10 million flowed into the Etah District. During these years, IRDP concentrated on four programs.

Agriculture. To improve all crop practices; to introduce new cash crops, such as oilseeds, which create a raw material base for a new investment by HLL for oil extraction and animal feed formulation; and to reclaim alkaline/saline land to add to the productive capacity of the area.

Animal husbandry. To raise the quality of dairy herds by cross breeding and providing veterinary and nutritional services.

Community development. With an emphasis on the provision of health delivery services and potable water, renewable energy technology, improved roads and schools, and the creation of cottage industries.

In special projects. For example, the organization of dairy cooperatives and registered village societies.

14Future plans for the expansion of IRDP call for the establishment of a research and development center; opening a supply depot to ensure prompt delivery of inputs relevant to improved and diversified crop practices; and readying the farmers for a rapid increase in the production of oilseed crops. IRDP has become so important to HLL top management that selected management trainees, from all areas of the company, spend several months working in the program.

The Etah case clearly illustrates the concept of "satellite farming," with a single-channel marketing system supplying an onsite core processing facility. The case also demonstrates the strength of a truly global, highly diversified private-sector company to take risks, persist in the face of failure, and learn from experience to correct errors in judgment about the range and diversity of economic and social factors governing the success of agribusiness sited among technically backward, traditional people. More than this, the Etah story reveals an extraordinary decision by HLL to invest in the social and economic development of the people affected by the corporate presence, far beyond the limits to which agribusiness normally goes and far beyond the limits that most investors and theorists in the field of rural development would believe allowable by governments in the Third World. The importance of the HLL case, therefore, rests not only on the accomplishments in the Etah District of India, but also on its challenge to all those who tend to restrict too rigidly the leadership role agribusiness might play in accelerating agricultural and rural development everywhere.