NDDB pulls out of joint venture in Sri Lanka

COLOMBO, JULY 20. In a development that does not bode well for joint ventures between Indian and Sri Lankan companies, the Indian milk giant, National Dairy Development Board(NDDB), has pulled out of an ambitious but star-crossed partnership with a State-owned milk manufacturer here.

The Hindu has learnt that the NDDB pulled out of the joint venture Kiriya in March this year after a series of labour problems. It is now trying to recover its 51 per cent equity in the project amounting to $2 million.

Crippled from its inception by worker unrest, which took on a distinct anti-India hue last year, Kiriya is possibly NDDB's first failed project. The failure was perhaps in underestimating the power and influence that the international milk powder lobby holds in Sri Lanka.

The pullout came ironically as India and Sri Lanka operationalised the Free Trade Agreement, touted by officials on both sides as just the medicine to get joint ventures up and running between the two countries.

If the NDDB experience with Kiriya is anything to go by, even the backing of the single most powerful person in Sri Lanka is of no use while treading on powerful vested interests.

``It shows that when push comes to shove, no one is willing to come forward to help,'' said a senior official of an Indian company which has invested in a large project in Sri Lanka.

After trying for three years to make it work, NDDB managers packed up when repeated strikes paralysed Kiriya's three milk manufacturing plants which it inherited along with the work force from the parent company, the state-owned Milco.

Only last year, workers, who rejected a pay-hike package manhandled an Indian manager, chanting ``Indians Go Home.'' But used to success and determined to turn Kiriya around, NDDB officials vowed to stay on, unable to foresee they would be packing their bags within the year. The wholly NDDB-managed joint venture faced problems almost from inception. After the management was locked out last year, a dejected senior official of the company told this correspondent: ``All we know is that we are up against very powerful vested interests. The stakes are high.''

The facts speak for themselves about the stakes: Sri Lanka annually imports milk products, including 40,000 tonnes of milk powder, worth roughly 100 million dollars. Multinational brands like Anchor and Nestle are household names here. Advertisements portray loving mothers bringing up their children on powder milk ``manufactured and packed in Australia'' rather than fresh milk. It was against this background that in 1997, the Operation Flood mastermind, Dr. V. Kurien, arrived here on a personal invitation from the Sri Lanka President, Mrs. Chandrika Kumaratunga, with a plan to cut down Sri Lanka's milk import bills. Not only that, he also promised to make the country a milk-exporter. The larger vision was to bring about a transformation in Sri Lanka's struggling agricultural sector.

With much fanfare, the Indian and Sri Lankan Governments announced a 10-year joint venture with NDDB holding 51 per cent of the shares in the new company, not being aware of what lay ahead. Despite the constraints it faced, Kiriya did manage to galvanise milk farmers' co-operatives in Sri Lanka to a certain extent, but finally, the NDDB managers proved unequal to the task of battling vested interests on unfamiliar terrain.