SIX DECADES OF NESTLE MOGA (INDIA) MILK PLANT 3: ECONOMIC, PUBLIC HEALTH AND ENVIRONMENTAL EXTERNALITIES
Parts 1 and 2 in this series analysed how Nestle has consistently provided competitive milk prices to 90 thousand households and employment to 2,400 persons and promoted ancillary enterprises which employ another 86,000 persons. Although Nestle is neither a philanthropic entity nor a development agency, and the concepts of Creating Shared Value and Corporate Social Responsibility were unheard of in 1960s, the company planners emphasised that economic efficiency, company success and growth were inseparable from community progress and welfare. This Blog examines economic, public health and environmental benefits which have accrued to the society at large in Moga Milkshed from Nestle operations.
GROUND REALITIES OF MOGA MILKSHED IN 1960s
For an appraisal of Nestle’s contributions, it is imperative to understand socio-economic conditions when the milk plant was set up. In 1960, the area was a place of abject poverty, low literacy, widespread malnutrition, high population growth, mud houses and poor transportation. Very few villages had access to electricity. Irrigation and transportation were mostly animal-operated. Low productivity, subsistence farming was the main economic activity. Agriculture support, public health and banking services were conspicuous by their absence in rural Punjab. The only institutional credit available was Taccavi loans (from the state budget) of Rs 2 crore. Nestle launched several local-context-tailored initiatives to meet community-specific needs and provide public goods.
PROVIDING CHEAP CREDIT
During early days, the company filled many service gaps, including those related to banking and finance. At the onset of operations in 1961 the factory took a loan of Rs 15 lakhs @ 4.5% interest and passed on this credit to farmers on the same rate for purchasing buffaloes. The loan was recovered over four years through small deductions every fortnight from milk payments, excluding the lean months of April-June. From 1971 to 1979 Nestle supported bank loans of Rs 113 lakhs by banks for purchasing dairy animals. This practice was discontinued when banks began direct loaning to farmers. Since 1980, Nestle is assisting loan-seeking farmers by acting as a form of employment, income stability and reputational collateral as banks accept a farmer’s milk pay as repayment guarantee. Credit access enhanced herd size and productivity.
IMPROVING DRINKING WATER, SANITATION AND TUBE WELL IRRIGATION
When survey of a relatively prosperous village Madoke in 1965 revealed that effluents were percolating along the pipes of hand pumps and contaminating ground water, Nestle launched a campaign to lay small concrete foundations for hand pumps in mud houses. Under Clean Water Drinking Programme, the company contributed 90% funds for installing submersible pumps and specially designed 8-sided, 8-tap concrete structures enclosing food-grade plastic tanks in 116 schools, benefitting over 50,000 students and teachers.
Another company initiative was promotion of biogas plants and smokeless stoves, significantly reducing indoor air pollution. Nestle also joined hands with villagers to design, construct and maintain dry pit latrines.
In 1968, Nestle launched Accelerated Irrigation Programme drilling 357 tube wells and installing power-driven pumps. When Punjab Government started disbursing loans to promote tube well irrigation, Nestle engineers helped farmers procure good quality pipes and engines at concessional rates and provided free technical advice. These efforts helped in reaping early benefits of Green Revolution.
NUTRITIONAL BENEFITS
The entire chain of Nestle activities from milk production, through collection, transportation, and manufacturing, to distribution is focussed on good health and nutrition. Some additional benefits have accrued directly to the community. Together with PAU, Nestle’s Healthy Kids Programme created awareness on good nutritional practices, and cooking methods to enhance nutritional content and physical fitness among village school students and teachers. By 2012 it had reached to about 5,500 girl students.
Other advantages have been extended more widely to all consumers through nutrition-enhanced products. Observing widespread iodine deficiency in children, which impaired mental health and physical development, Nestle started manufacturing Maggi bouillon cubes using iodine-fortified salt, and later on added iodine to the entire range of Maggi products to reduce/eradicate the debilitating deficiency.
ADOPTING CLIMATE SMART PRACTICES
WATER CONSERVATION: Concomitant with increase in volume and variety of products during the past 60 years, the production processes have been modernised resulting in improved efficiencies and lower use of water per tonne of manufactured product. By institutionalising importance of water conservation throughout the production process and factory management, water consumption per tonne of product was reduced by 74% between 1997 and 2010. Generation of wastewater also declined by 73%. The treated wastewater is extensively reused. Water evaporating during production of powdered milk has been increasingly captured and reused during the last decade. By 2022 Nestle plant became water neutral.
SAVING ELECTRICITY: Like water, energy audits are regularly undertaken. Replacement of inefficient equipment and investments in state-of-the-art machinery and processes have reduced energy used per tonne of product by 65% during 1997–2010 period. Waste heat from one process is increasingly used in another process. In addition to enhancing environmental conditions, these steps have improved economic efficiency as energy costs, unlike water, have significantly increased.
REDUCING CARBON DIOXIDE EMMISSIONS: Adoption of state-of-the-art technologies to improve fuel combustion has resulted in 2/3rd reduction in carbon dioxide (CO2) emissions. Nestle belongs to a rare breed of factories in Punjab which have shown that steps to reduce environmental, water and energy footprints can concurrently improve economic performance.
EPILOGUE
Since independence public sector has been favoured over private sector in terms policies and philosophy. Despite dismantling of the ‘License Raj,’ the mindset persists. Criticism of private/corporate sector has been especially sharp and pervasive in Punjab during agitation against farm reform laws. Newspaper articles and TV discussions have selectively highlighted contributions of Milkfed, remaining mum about the remarkable role of Nestle. My request to High Priests extolling virtues of public sector in Punjab is to remove their blinkers which see only evil in the private sector and all virtues in the public sector. If they objectively analyse operations of major milk plants in Punjab from all angles, not a single milk plant in the vaunted Government Cooperative Sector comes near Nestle.
A vibrant dairy sector requires a level playing field and stiff competition by a futuristic Milkfed. With obsolete machinery, environment damaging processes, absence of innovative expertise, declining work culture, rent seeking, and Punjab Government buried under a rising mountain of debt, future of Milkfed plants looks bleak. Even a competent and well-meaning Milkfed MD K.S. (Rana) Sangha can, at best, make only a marginal difference. Costly and unreliable power, crumbling infrastructure, deficient and patchy livestock support services are compounding dairy sector woes.
ACKNOWLEDGEMENTS: This Blog has greatly benefitted from the third-party impact assessment of Nestle: Biswas, A.K., C. Tortajada, A. Biswas-Tortajada, Y.K. Joshi with A. Gupta (2014) Creating Shared Value: Impact of Nestle in Moga, India. Springer Briefs on Case Studies of Sustainable Development.
