The National Dairy Development Board (NDDB) founded by Dr Verghese Kurien in 1965, has been mired in controversy after controversy, mostly related with its subsidiaries, funding and management affairs. On Friday, the union government told the Rajya Sabha that it had given previous approval to just five subsidiaries of NDDB out of some 20 odd subsidiaries, including step-down units.
In a written reply, Dr Sanjeev Kumar Balyan, minister of state for fisheries, animal husbandry and dairying, says, "Based on the resolutions passed by the NDDB board and proposals received from NDDB, this department has given previous approval to NDDB to form five subsidiary companies under Section 43 of the NDDB Act, 1987."
The subsidiaries that received approval from the ministry are Mother Dairy Fruit and Vegetables Ltd (Mother Dairy), NDDB Dairy Services (NDS), Indian Dairy Machinery Company Ltd (IDMC), Indian Immunological Ltd, and Pristine Biologicals (NZ) Ltd.
Prof Manoj Kumar Jha, a member of Parliament (MP) has asked questions about formation of subsidiaries by NDDB. He asked, "...whether under Section 43(1) of the NDDB Act, the government gave previous approval in writing to NDDB to form subsidiary companies other than as private limited company..."
The MP further asked “If the permission is not given, then what were the reasons NDDB vitiated section 43(1) of the NDDB Act where, as 100% shareholder of NDS, NDDB’s nominees approved actions under Companies Act, 1956 and obtained a fresh certificate of incorporation for NDS prohibiting payment of any dividend to its members?"
The minister, however, says that the department on 3 August 2009, had conveyed approval of the government for formation of a fully owned subsidiary company for implementing NDDB’s development objective relating to productivity enhancement and cooperative effort as per the resolution passed in the 89th meeting of the board of directors on 28 January 2009 under the provisions of Section 43 of NDDB Act, 1987.
The annual reports of NDDB show large transfer of funds to around 20 odd subsidiaries, many of which are step-down subsidiaries – reminiscent of the failed Infrastructure Leasing & Financial Services (IL&FS) group with 347 odd entities.
These units seem to vanish at regular intervals. In its annual report for FY17-18, NDDB had mentioned only four subsidiaries, Mother Dairy, NDS, IDMC and Indian Immunological.
So, which are the subsidiaries or subsidiaries of subsidiaries for which NDDB that has not received any approval from the government, as per the reply given by Dr Balyan in the Rajya Sabha? These are, Mother Dairy Foods Ltd, which was last reported in 2002-03, Parag Milkfoods (UP) Ltd, a joint venture (JV) last reported in 2004-05, Mother Dairy Delhi Ltd, a JV last reported in 2005-06, Mother Dairy Food Processing Ltd and Mother Dairy India Ltd have vanished from NDDBs reports after 2006-07.
Three joint venture (JVs) companies, Milma Foods Ltd, Aanchal Milkfoods Ltd, and Maathashri Milkfoods Ltd, were last reported by NDDB in the annual report for 2005-06. Safal National Exchange of India Ltd, was a JV of which there is no record in any of the annual reports at all.
Further Indiagen Ltd, (last mentioned in NDDB’s annual report for 2008-09), Dhara Vegetable Oil and Foods Co Ltd (last reported in 2007-08), Bharat Aseptic Packaging Ltd (last reported in 2001-02), Bhagnagar Vegetable Products Ltd (last reported in 2001-02), Kiriya Milk Industries of Lanka Pvt Ltd (last reported in 1990-2000), and Hindustan Packaging Co Ltd (last reported in 1998-99 after it was sold out) are the other companies for which NDDB has not obtained any approval from the government.
Why is the disappearance significant? Because hundreds of crores of rupees extended to these entities for multiple purposes appear to have gone down the drain along with the companies, without any disclosure. The auditors have had no comments to offer about these vanishing entities.
Now let us look at the sums involved. Between 2004-05 and 2011-12, Mother Dairy received funds worth Rs411 crore in the form of investment, grant and other considerations from NDDB. It was also provided with subsidised dairy commodities worth Rs405 crore and other goods worth Rs542 crore at discounted prices. NDDB also allowed
Mother Dairy the use of an entire office complex in Noida
for several years.
Further, NDDB extended loans of Rs688.7 crore to Mother Dairy at below market rate of interest for over 13 years. If that weren’t enough, seven subsidiaries of Mother Dairy separately received grants from NDDB.
NDDB Dairy Services or NDS was set up as a private limited company in 2009 where NDDB subscribed to Rs1 crore as share capital. Soon, it was converted into a not-for-profit company under Section 25 of the Companies Act (now Section 8 of Companies Act, 2013). When NDS was first incorporated as a private limited and wholly owned subsidiary company of NDDB, the board transferred Rs199 crore to NDDB Dairy Services, in the form of contribution of capital for purchase of equity of an equal amount.
In 1992, IDMC became a wholly owned subsidiary company of NDDB. The company offers processing and packaging solutions to its customers across dairy, cattle feed, pharmaceutical, beverage and thermal segments.
During 1999-2000, Indian Immunological was set up as a wholly owned subsidiary; Mother Dairy was set up in 2000-2001 and Dhara Vegetable Oil and Foods, the next year. Over the next few years or by 2004-05, NDDB had over a dozen subsidiaries as per its annual reports.
Indian Immunological has three subsidiaries where NDDB is shown as the holding company, including Pristine Biologicals Ltd (2017-18), Indiagen Ltd (JV- 2006-07) and Indiagen Ltd (2009-10).
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