A woman milking a water buffalo in Miryalaguda, India.
Photo: © FAO/N. Seelam

India’s dairy sector is not yet making use of its potential

Since the European Union removed the milk quota in April 2015, milk production has risen by just below four per cent in the Member States. NGOs fear that growing EU exports are destroying the livelihoods of countless milk producers in the countries of the South – a good reason for our Indian author Amrit Patel to take a look at the strengths and weaknesses of the milk sector in his country.

Liberal subsidies, accompanied by the application of science and technology, have been instrumental in making the few, but resourceful farmers in developed countries capable of producing surplus milk. For example, the annual subsidies paid to milk producers are estimated at 15 billion US dollars (USD) in the USA, 11 billion USD in the EU and 6 billion USD in Canada. As compared to this total of 32 billion USD of subsidies, the value of 141 million tons of raw milk produced in India without subsidy during 2014–15 is estimated at 65 billion USD. For the first time, the ministerial conference of the World Trade Organization (WTO) in Nairobi, Kenya, in December 2015 legally bound the member countries to remove subsidies and promote free trade in farm produce. Withdrawal of subsidy would obviously limit surplus milk production and halt the decline in international prices.

Not only has surplus milk production in the EU, the US, New Zealand and Australia already caused a slump in milk prices, but under the provision of free trade agreement (FTA), these major nations producing surplus milk will exert sufficient pressure to allow them duty-free exports of their products to India. If this happens, it will be detrimental to the interest of 80 to 90 million families to sustain their livelihoods, not to mention their enjoying decent living standards. While the WTO has opened up the opportunities in international trade by increased market access and a world-wide reduction in import tariffs, in practice, this is being used as a potent tool by developed countries to not only obstruct entry of dairy and other agricultural products from developing countries but also distort free and fair operations in the international markets.

International NGOs have warned that production of surplus milk by the EU farmers since 2011 has been the decisive cause of the world milk markets being flooded with massive excess milk, leading to the slump in prices which is threatening dairy farmers’ livelihoods in West Africa (see also article:African farmers suffer from overproduction of milk in the EU). Growth in surplus ratcheted up sharply in the course of eliminating milk quota in 2015. By contrast, global demand for milk rose significantly more slowly. A possible solution for Africa and the EU would be to put in place a policy framework to check excess production in the EU and virtually unrestricted imports to West Africa.

The Indian scenario

What is the situation in India? With 191 million head, India has the largest cattle population in the world. Since 1998, the country has been the largest global milk producer. A national milk grid is established where, annually, over 13 million tons of milk is procured. In 2014–15, milk output increased to 142 million tons, valuing 4.18 trillion Indian rupees (Rs).

India is also one of the largest consumers of milk and milk products in the world, and the industry’s size is estimated at Rs 430 billion. During three decades, from 1982 to 2012, the average milk yield of cattle and buffalo per day grew from 1.9 kg to 3.9 kg and from 3.7 kg to 6.2 kg respectively. Although milk yield of cross-bred cattle is 7.10 kg/day, this is still significantly lower than that in the UK (25.6 kg), USA (32.8 kg) and Israel (36.6). This can be attributed largely to a broad range of factors. There are quite a large number of small and medium milk processing enterprises in India; moreover, many rural women and landless people actively pursuing dairy farming have inadequate resources, technical know-how and a low level of capability to manage cattle efficiently.
Frequently, both intrinsic factors such as a low genetic potential and extrinsic factors like poor nutrition and feed management, inferior farm management practices, inadequate veterinary and extension services and inefficient implementation of breed improvement programmes exist together, their impacts aggravated by inadequate investment and efforts in arresting the declining key natural grazing resources in particular.

The per capita milk availability in the country increased from 126 grams a day in 1960 to 359 grams in 2014–15. Milk consumption is growing at an annual rate of six per cent. The National Dairy Development Board has projected the demand for milk at 150 million tons by 2016–17 and at 200 million tons by 2021–22. Since the 1950s, the Government has invested 22.42 billion Rs to help meet the national demand.
  
Making the sector more competitive

On 19th April 2012, the National Dairy Development Board (NDDB) launched a 15-year perspective National Dairy Plan (NDP) envisaging an outlay of Rs 173 billion which aims at increasing the productivity of milch animals by adopting focused scientific and systematic processes and helping rural milk producers get greater access to the organised milk processing sector. It will cover about 1.2 million milk producers in 23,800 villages and seeks to increase milk procurement by co-operatives from the current level of 30 per cent to 65 per cent in the next 15 years. In order to enable co-operatives to perform better, the constitution of existing ones is being amended to increase transparency in the co-operative sector and facilitate setting up of producer companies or new-generation co-operatives. The NDDB will implement through its End Implementing Agencies located in each of the 14 major milk producing States.

What should the NDP address in particular to make the sector economically viable and financially bankable for small and marginal farmers, including agricultural labourers, and internationally competitive? An efficient supply chain network is important that sustains the cost of production, increases milk yield per animal and milk quality as well as fodder productivity. This calls for innovative farming models and motivation of a large number of small milk producers to adapt them. Linking the production system to the consumer demand and processing units requires a robust value chain, intensive research and technology infusion. The country should focus on the following factors and measures:

“Upgrading” the sector

First of all, dairy farming deserves to be given equal status on a par with agriculture, rather than its subsidiary status, in view of its share in agricultural GDP and employment. Village-level milk producing units should be brought into the organised sector and promoted in a systematic manner to convert existing individual sustenance dairy farms and traditional family farms into collective, community and commercial farms operating as business farms. This would call for intensive training and capacity building of dairy farmers (human resources) with a focus on business-like operations, financial and marketing management.

Comply with standards

Additionally, a large share of supply or production still does not conform to the domestic, let alone global food safety standards. This is due to adulteration, lack of awareness and rigorous enforcement of food safety standards and inadequate infrastructure comprising technology and trained manpower. The government reported some time ago that 68.4 per cent of milk in the country did not conform to standards laid down by the food regulator. This may be one of the key reasons for India’s 0.4 per cent share in global export despite India accounting for 17 per cent of the global milk output. Remedying the situation requires significant investments in terms of purchasing electronic milk-testing machines, electronic weighing systems as well as chilling and transportation equipment. If this is accomplished, the quality of milk collected directly from farmers will be better, unadulterated and relatively cheaper. The environment under which milk is produced, collected, transported, processed and distributed should be fully conducive, and animal raising practices related to sanitation, quality of drinking water, feed and fodder, type and quality of pipelines, etc., must be aligned to the goal of healthy milk. Farmers need to be trained/ guided to display high degree of hygiene and know-how of animal health care and nutrition.

Raising the level of organisation

Growth in milk production will require a substantial increase in milk handling capacity and marketing in an organised sector since about 80 per cent of milk produced is still handled in the unorganised sector and only a remaining 20 per cent is shared between co-operatives and private dairies. The organised dairy sector (comprising co-operatives and the private sector) will have to progressively and systematically plan to expand its coverage of milk producers, penetrate into interior villages and improve its current share of marketable surplus from 30 per cent to 65 per cent by 2021–22. This would in turn make larger volumes of good quality milk available to consumers at competitive prices.
For 900 million people residing in 6,40,867 villages in India, dairying is not just a major economic activity; it is also an integral part of India’s social and cultural heritage. Its uniqueness lies in its unifying power, as no other industry touches the lives of millions of farmers 70 per cent of whom are landless. Dairy co-operatives are the result of dairy farmers’ entrepreneurship to exploit the potential of dairy markets in India. These institutions have to be driven like business enterprises combining professional management with technical and financial expertise. The need is to nurture dairy entrepreneurs through effective training of rural youths at the village level coupled with dedicated leadership and professional management of farmers’ institutions/organisations.

Breeding animals with a better milk yield

History records that the crossbred cow Jill – a combination of Ireshire bull and Haryana cow – gave 65 litres of milk per day in 1927 at the National Dairy Research Institute, Bangaluru. This shows the extent of milk yield potential that can be harnessed through scientific cross-breeding techniques. However, strategies to achieve a milk output of 200 million tons by 2022 should consider a realistic assessment of the options available for production enhancement specific to each agro-ecological region and socio-economic conditions of milk producers. Cross-breeding has been one of the most promising options, but not the only one. A comprehensive review and a social and economic analysis of our experiences of cross-breeding in the past three decades can better guide strategic planning for the future. A more realistic approach could be to undertake systematic breeding and genetic upgrading of India’s finest indigenous cattle, such as Sahiwal, Red Sindhi, Gir, Kankrej and Rathi, which are, in fact, good milk producers. An organised effort to conserve and propagate elite germ plasm from nucleus breeding herds will facilitate poor farmers to rear desi (indigenous) cattle more economically.

At present, there are 51 semen stations in India with a production capacity of 81 million doses a year against the current demand of 100 million doses for bovine semen and 150 million doses in the next few years. Most of the semen stations cater to the demand for buffalo semen and germ plasm of exotic and cross-bred cattle. The country needs to augment trained manpower, including veterinary personnel, to provide quick service delivery and make quality equipment and appropriate training available to avoid artificially inseminated cows becoming infertile and developing infections. 

Improving feed management and veterinary services

About 34 per cent is the current deficit of green fodder and concentrates, besides a supply-demand gap for quality forage seeds. Application of technology to produce large scale feed blocks, feed enzymes and other innovative feed resources needs to be deployed. An effective implementation of the Ration Balancing Programme of the NDDB and of the Government’s Accelerated Fodder Development Programme can ensure better feed availability and improved nutrition.

Due to a current lack of adequately trained manpower and its mobility, the services provided are not creating the desired impact. An authentic, concurrently updated database for prevalence and emergence of diseases is essential for identification, onward prevention and control. Infrastructure of vaccine and diagnostic production units, semen stations and AI breeding farms that are largely owned by the government can be more efficiently utilised by way of appropriate participation of the private sector.

Creating access to national and international markets

Dairy industry’s potential for inclusive and equitable growth and income distribution in villages can be harnessed by enhancing market access and offering stable and remunerative prices to farmers. Integrating dairy and crop farming with value chain systems can be a better source of sustainable livelihoods for the rural poor and the most vulnerable families.

India contributes about 17 per cent of the global milk output, but its share in global export is insignificant, at 0.4 per cent. A large quantity of milk still remains unprocessed. India is surrounded by countries and regions that are milk-deficient. Examples of them include Bangladesh, China, Singapore, Thailand, Malaysia, Philippines, Japan, the United Arab Emirates, Oman and other gulf countries all of which are located very close to India. India, therefore, needs to have systematic research and feasibility studies under the Public-Private-Partnership mode to explore these hitherto unexploited international markets and initiate specific policy and programmes along lines of the Agricultural Products Export Development Authority in consultation with the Union Commerce Ministry, the Institute of Foreign Trade and the Indian embassies in these countries. Rich experience of the Gujarat Cooperative Milk Marketing Federation (GCMMF; see box at the end of the article) can be fruitfully utilised in the area of the export of milk and milk products.

Learning from others

India should have a robust system to periodically generate survey-based data and information on critical aspects of the dairy sector that can help formulate a five-year perspective plan for targeted milk production State-wise bridging of the gaps in institutional and physical infrastructure. The country should develop a system to compete with developed countries where every milch animal is tagged with a number and every drop of milk is processed with value added, marketed and instantly recorded.                      
Resourceful farmers in India should be motivated and incentivised to learn from best practices across the world. For example, Super Cows in Israel produce 12,000 litres milk a year thanks to superior breeding techniques, balanced nutrition and management practices including better health care.  

Dr Amrit Patel,
 Consultant, Ahmedabad/India
Contact:dramritpatel(at)yahoo.com

GCMMF’s Role

Acknowledging the fact that fresh liquid milk is the most perishable food commodity, the GCMMF was established in 1973 in the co-operative sector to market milk and dairy products. Thus, the GCMMF played a significant role in enabling a large number of small farmers to increase financial returns and income of millions of small milk-producers. It is now the largest milk and dairy food products marketing organisation of India in the co-operative sector, with an annual turnover of 3.4 billion US dollars in 2014–15.
It is the exclusive marketing organisation for products under the brand name of Amul and Sagar. Its daily milk procurement is about 14.85 million litres from 3.37 million member-milk producers pouring milk in 18,536 village milk co-operative societies, affiliated to 17 member co-operative milk unions covering 33 districts. It provides the much needed technological, financial, managerial and marketing support to its members more than 70 per cent of whom are small and marginal farmers, including landless labourers. The GCMMFC helps and ensures that 80 per cent of the price paid by consumers flows back to the milk producers as compared with a reported 35 to 38 per cent of the consumers’ price flowing back to dairy farmers in developed countries.  

The GCMMF operates through 56 Sales Offices with a network of 10,000 dealers and one million retailers in India. Its product range comprises 26 products which include, inter alia, milk, milk powder, health beverages, ghee, butter, cheese, pizza cheese, ice-cream, paneer, chocolates, and traditional Indian sweets, etc.
GCMMF has been India's largest exporter of Dairy Products for the last 16 years. The products are available in 22 countries, including the USA, the Gulf Countries, Singapore, the Philippines, Japan, China and Australia. In 2013–14, GCMMF took giant strides in expanding its presence in International markets. Its presence has been recognised across the world on the Global Dairy Trade (GDT) platform, in which only the top six dairy players of the world sell their products.