SUMMER TRAINING

PROJECT REPORT
ON
“EXPORT POTENTIAL OF MILK PRODUCTS
FROM INDIA”

UNDERTAKEN AT

THE STATE TRADING CORPORATION OF INDIA LTD.

NEW DELHI

UNDER THE GUIDANCE OF

Mr. G.C.KHUTTAN (Deputy General Manager)

Mr. R.C.SAHNI (Deputy Marketing Manager)

SUBMITTED BY

ABHAI PRASAD
(MIBA, 3RD SEMESTER)

FACULTY OF MANAGEMENT STUDIES

BANARAS HINDU UNIVERSITY
1
 CONTENTS
Page No.

1. Acknowledgement 3

2. Preface 4

3. Objective of Study 5

4. Research Methodology 6

5. Organisational Profile 7-21

6. Information About Dairy Products 22-27

7. Export of Indian Dairy Products 28-37

8. Export Forecasts 2010 38-40

9. Analysis & Findings 41-44

10. Recommendations 45-46

11. Bibliography 47

2
 ACKNOWLEDGEMENT

I take this opportunity to express my sincere gratitude to Mr. G.C.Khuttan, Deputy

General Manager, State Trading Corporation of India Ltd., who took the initiative to give
this interesting project and for his expert guidance and kind help.

I am deeply indebted to Mr. R.C.Sahni, Deputy Marketing Manager, my guide for this
project, who’s vast reservoir of knowledge was of immense help for the successful
completion of this project. I am also thankful to him for associating me in many practical
cases, which gave me an important insight into the difficulties faced and their solutions
thereon, while dealing in international market.

I would also like to express my gratitude towards Dr. Deepak Burman, Head and Dean,
and Dr. H.C.Chowdhary, for their valuable and kind support.

It’s my pleasure to record my sincere thanks to all of my faculty members and my

parents and all those people who constantly supports me.

Though every effort has been made to minimize the faults and errors but in case of any
discrepancies or fault, the sole responsibility is mine.

Abhai Prasad
(MIBA, 3rd Sem.)

3
 PREFACE

For the deep understanding of the management concepts, practical training is

important. Theoretical knowledge gives us the fundamental concepts of management
and practical training teaches us how these concepts are used to capture today’s
competitive market. Theoretical lectures must be correlated with practical training to
make learning process more effective and to provide a platform to judge and apply
one’s theoretical knowledge to practical situations. Practical training thus plays an
important role in developing and sharpening one’s skill in the field of business and
management and administration.

I have undergone 8 weeks of training at State Trading Corporation of India Ltd., New
Delhi. During the training I have worked on the project “Export Potential of Skimmed
Milk Powder and Other Milk Products from India”. Being a student of management, the
training contributed a lot in gaining knowledge about the actual business environment.

4
 OBJECTIVES OF STUDY

Objectives of this project includes the following-

 To study about the basics of Milk Powder and other Milk Products.
 To study about Milk Powder and other Milk Products export.
 To present a Quantitative and Qualitative overview of the world trade in Milk
Powder and other Milk Products.
 To assess the export potential of Milk Powder and other Milk Products.
 To identify the world markets for Indian Milk Powder and Milk Products.
 To study the major constraints faced and strategies required for promoting
exports of Milk Powder and Milk Products.

5
 RESEARCH METHODOLOGY

Primary Data:

Primary Data was collected from the employees of the Manufactured Foods Division of
STC.

Secondary Data:

Secondary Data was collected from libraries of STC, APEDA etc. Beside these some
relevant journals were consulted. Data were also collected from websites of
organisation related to milk industry.

6
 ORGANISATIONAL PROFILE

1) About State Trading Corporation

The State Trading Corporation of India Ltd. (STC) is a premier international

trading house owned by the Government of India. Having been set up in 1956, the
Corporation has developed vast expertise in handling bulk international trade. Though,
dealing largely with the East European countries during the early years of its formation,
today it trades with almost all the countries of the world.

By virtue of infrastructure and experience possessed by the Corporation, it plays

an important role in arranging import of essential items into India and developing
exports of a large number of items from India. It exports a large number of items ranging
from agricultural commodities to manufactured products from India to all parts of the
world. Because of Corporation's in depth knowledge about the Indian market, STC is
able to supply quality products at most competitive prices and ensure that the goods
reach the foreign buyer within the prescribed delivery schedule. It also imports bulk
commodities for Indian consumer as per demand in the domestic market.

The eventful track record of more than 52 years has helped STC to gear itself to
face the fierce competitive challenges, seize business initiatives and build on its core
competencies.

With a global vision in effective management, result oriented approach, strong

belief in productivity and accountability, STC is future ready to take advantage of the
opportunities in the 21st century and help propel India towards the new frontiers in world
trade.

7
 In last couple of years STC has undergone dramatic changes under the dynamic
leadership of Dr. Arvind Pandalai. Its has undergone make-over from being a bulk
trading agency in commodities to a one-stop shop that offers specialised trade
facilitation, by drawing from experience and contacts built over five decades. With so
much competition and the market opening up, the trading scenario is going to change.
Unless STC prepare itself through value-addition in trading operations, nobody is going
to come to it.

STC has devised several plans to position itself through backward and forward
integration and industrial participation programme with best international companies so
that not only its requirements are met but the country too gets the best technology at
affordable cost.

2) Mission of STC

To emerge as one of the largest global trading companies with international

standards of excellence nurturing a blend of quality, business ethics and proactive
enthusiasm to enhance stakeholders’ value.

3) Corporate Objectives

• To develop core competencies in select areas of export and exploit the market
opportunities in these areas to the best advantage of the corporation.
• To undertake continuous horizontal and vertical diversification thereby enabling
sustained growth of business.
• To make the best use of the financial strength of the corporation in expanding
its business.

8
 • To lay emphasis on quality of services to customers so as to develop long term
business relationship with buyers and suppliers in and outside the country.
• To undertake market intervention operation as and when advised by the
Government of India.
• To create new infrastructure and ensure optimum utilization of the infrastructure
available with the Corporation.
• To strive to pay adequate returns to the stakeholders.
• To fulfill the Corporation’s social responsibility by following ethical business
practices and reinforcing commitment to customers, employees, partners, and
the community.
• To undertake training/re-training of existing manpower on a continuous basis
and induct professionally qualified young talent to create a cadre of highly
professional and motivated managers.
• To ensure an efficient and streamlined system of operations at minimum
transaction cost.
• To act as a facilitator to small and medium exporters and importers.

4) Recognition Earned

• No.1 rank consecutively for the second year as per Super 100 companies
study by Business India.
• 3rd rank among trading companies of the country according to ‘India’s Top 500
Companies’ Survey by Dun & Bradstreet.
• 17th rank among 207 PSUs by the Department of Public Enterprises, Ministry of
Heavy Industries & Public Enterprises, Govt. of India.
• Merit Certificate for Excellent performance in terms of MOU: 2005-06.

9
 5) Performance Highlights (2006-07)

• All time high turnover – Rs.14335 crore, contributed by best ever performances
of exports, imports and domestic trade.
• Consistently increasing net profit – Rs.88 crore, up 126% over 2005-06.
• EPS: Rs.29.43 – up 127% from Rs.12.98 in the previous year.
• Successfully undertook 55 lakh MT of wheat on behalf of the Government of
India.
• Signed contract with NTPC for supply of 5 million MT of non-coking steam coal
valuing Rs.2200 crore.
• Successfully extended overseas steel operations to Bulgaria.
• Diversified into exports of gold jewellery – Rs.199 crore.
• Effected all time high exports of chemicals & pharmaceuticals – over Rs.600
crore.
• Undertook high bullion imports – Rs.2985 crore.
• Signed MOUs with BEML and MSTC for mutual co-operation in augmenting
trade.
• ‘Excellent’ rating in terms of MOU: 2006-07 for the fourth year in succession.

6) Looking Ahead

The phenomenal rate of growth achieved in the recent past makes STC look
ahead with hope and confidence.
It expects to reap dividends in the near future from the recently undertaken
initiatives such as acquiring plot of land at Paradip port for iron ore operations,
procurement of tea leaves directly from small growers for processing and marketing,
supply of branded tea to public distribution system through Gujarat State Civil Supplies

10
Corporation, online trading through commodity exchanges, setting up of chillies and
pepper processing plants in Karnataka (through subsidiary company STCL), etc.
Other new initiatives in the pipeline include expanding steel operations to Nigeria,
diversification into bio-fuels, long-term arrangement with a leading international supplier
for import, refining and marketing of edible oils under STC’s brand, setting up chillies
sterilization plant and food testing laboratory in Chhindwara.
STC is committed to profitably exploit the various opportunities coming up
globally.

11
 ORGANISATION STRUCTURE
DR. ARVIND PANDALAI
Chairman & Managing Director

S S R BURMAN N K MATHUR N K NIRMAL S CHOWDHARY

Director Director Director (Chief Vigilance
(Marketing) (Marketing) (Finance) Officer)

CGM (A. K. Kajla) CGM (S. Sarkar) CGM-F DGM (N B Pant)

- Wheat (B. Venkat Ram) CGM
- Gold/Silver - Vigilance
- Castor Oil/Seed - Rice - Finance & (Surender Kumar)
- Jewellery - Soya Extractions - Corporate Planning
- Coffee - Management
Accounts Services
- Cashew
GM (Samir Kaul) - Market Intelligence
- Rubber CGM (B.Datta
- Tobacco - Petrochemicals - Information
Majumdar)
- Newsprint - General Imports Technology
- Steel Items
GM (V. Mani)
- Pulses CGM (R. K. Sinha)
DGM(S L Jauhari) - Tea GM –I/C - Personnel
- Engg. /Const. - Jute Goods (RL BATRA) - Public
Materials - Sugar Relations/Publicity
- Project Exports
-Chemicals, Drugs& - America Desk - Travel Cell/Library
- Hydrocarbons
Pharma - Europe Desk
- Minerals, Metals,
- Govt. Grants - Development of GM-I/C (Sharab
Scrap
- CIS Desk New Items Shringla)
(Ferrous & Non-
ferrous) - HRD

DGM GM
(Prakash Chand) CGM-I/C
(G.C.Khuttan)
- Edible Oils (Amit Raha )
- Manufactured GM (B. K. Tuli)
- Vanaspati - General
Products - Insurance
- Electronic Administration
- Coarse Grains - Branch
Equipments - Building Cell
- Middle East Desk Operations
- Housing Colony
- Cement
- Asset Utilisation
- Almonds
- Protocol
- Rice Bran

CGM-I/C
DGM (Babu Lal) (Ashok Kalra)
- Africa Desk
- Iron Ore GM (SNRajaguru)
- Metal Scrap (NLC) - Legal

DGM DGM-F
(Om Prakash) (A .K. Gupta)
- Mustard - Board Sectt. &
Extractions Parliament

CM-F
DGM
(Vinod Sharma)
(S. C. Moton)
- Internal Audit
- Counter Trade

12
 SERVICES PROVIDED BY STC
While undertaking import and export operations, the Corporation renders following services:

To the Overseas buyer :

STC acts as an expert guide for buyers interested in Indian goods. For them, STC
finds the best Indian manufacturers, undertakes negotiations, fixes delivery schedules,
and oversees quality control - all the way to the final shipment to the entire satisfaction
of the buyer.

To the Indian Industry :

The Indian manufacturers, whose products sail the seas via STC, benefit a lot from its
expertise. STC helps thousands of Indian manufacturers to find markets abroad for their
products. STC assists the manufacturers to use the best raw materials,guides and helps
them manufacture products that will attract buyers abroad. Some of the other services
offered by STC to the Indian manufacturers include :

* Financial assistance to exporters on easy terms.

* Taking products of small scale manufacturers to international trade fairs and
exhibitions.
* Import of machinery and raw material for export production.
* Assistance in the areas of marketing, technical know-how, quality control, packaging,
documentation, etc.
* Supply of imported goods in small quantities as per convenience of buyers.
* Market intervention on behalf of the Government.

13
To the Indian Consumer:

The Indian consumers also benefit from STC's expertise and infrastructure. STC
imports essential commodities for them to cover shortfalls arising in the domestic
market. During the last one decade, STC imported sugar, wheat and pulses to meet
domestic requirements at a very short notice.

EXPORTS FROM INDIA BY STC

14
 STC exports a diverse range of items to a number of destinations throughout the
world. Exports by STC vary from traditional agricultural commodities to sophisticated
manufactured products.

Besides negotiating, contracting and shipping, STC seeks to introduce new

products, explore new markets and undertake wide ranging ancillary functions such as
Product Development, Financing, Quality Control and Import of machinery and raw
materials for export production.

STC makes purposeful use of its world-wide connections, abundant experience,

upto-date information about the market trends and long term perspective on various
commodities to ensure competitive prices, right quality and adherence to delivery
schedules to the buyers abroad.

In the year 2006-07 exports recorded the best ever performance of over Rs.2900
crore showing a strong growth of 167%. Exports achieved are over thrice the MOU
target. In fact, for the second year in succession, growth in exports has outstripped the
import growth. The growth achieved is far higher than the national growth of about 24%
in exports.

The outstanding export performance is mainly due to expansion of overseas steel

operations that are now also being undertaken in Bulgaria besides higher volumes
achieved from similar operations in Philippines. The main areas that helped in bolstering
export are: Steel Operations; Chemicals, Drugs & Pharma; Jewellery; Iron Ore.

Principal Items of Export

15
Agricultural Commodities Manufactured Commodities

-Wheat -Chemicals, Drugs and Disposables

-Cashew -Engineering & Construction Materials

-Coffee -Consumer Products

-Rice -Textiles and Garments

-Tea -Leatherware

-Tobacco & Rubber -Processed Foods

-Sugar -Iron Ore

-Extractions -Steel Raw Materials

-Opium

-Spices

IMPORTS INTO INDIA BY STC

16
 STC imports a number of essential commodities to cover the domestic shortfalls
and hold the price line. STC serves the national objective by arranging timely imports at
most competitive prices. In the process, the Corporation makes best use of its strength
in handling bulk imports, vast infrastructure and above all an experience of over four
decades in fulfilling the needs of the industry.

Imports for the year 2006-07 also grew by 95% to reach an all time high level of
Rs.10700 crore due to wheat imports and significant growth in a number of other items.
Major items contributing to the better import performance are: Wheat; Bullion; Hydro-
carbons; Minerals & Metals; Edible Oils/Vanaspati.

Principal Items of Import

Agricultural Commodities Manufactured Products

-Edible Oil -Hydrocarbons

-Sugar -Gold & Silver

-Wheat -Minerals/Metals

-Fatty Acids -Petro-chemicals

-Pulses -Fertilisers

-FMCG Goods

-IT Products

FINANCIAL PERFORMANCE OF STC

17
 Balance Sheets of STC

(for Financial Year 2004-05, 2005-06, 2006-07)

(Values in Rs. Crore)

Mar ' 07 Mar ' 06 Mar ' 05

Sources of funds
Owner's fund
Equity share capital 30.00 30.00 30.00
Share application money - - -
Preference share capital - - -
Reserves & surplus 403.77 335.14 289.99
Loan funds
Secured loans 717.62 202.73 129.62
Unsecured loans 177.21 - 0.04
TOTAL 1,328.60 567.87 449.65
Uses of funds
Fixed assets
Gross block 53.60 49.54 48.84
Less : revaluation reserve - - -
Less : accumulated depreciation 28.97 27.83 27.06
Net block 24.63 21.71 21.78
Capital work-in-progress 6.40 - -
Investments 90.72 90.72 90.72
Net current assets
Current assets, loans & advances 3,537.15 2,448.16 5,392.08
Less : current liabilities & provisions 2,330.29 1,992.72 5,054.94
Total net current assets 1,206.86 455.43 337.15
Miscellaneous expenses not written - - -
TOTAL 1,328.60 567.87 449.65
Notes:
Book value of unquoted investments 2.93 2.93 2.93
Market value of quoted investments - - -
Contingent liabilities 219.11 123.96 168.00
Number of equity shares outstanding (Lacs) 300.00 300.00 300.00

Profit & Loss Account

For the year ended 31st March, 2007

18
 (Rs. Lacs)

Particulars Year Ended 31st Mar, 07 Year Ended 31st Mar,06

Income
Net Sales 1,433,526.94 712,524.05
Other Income (Trade) 9,176.86 3,398.68
Interest Income 11,873.57 4,699.67
Miscellaneous Income 3,590.60 5,747.93
Total 1,458,167.97 726,370.33
Expenditure
Cost of Goods Sold 1,425,961.76 705,616.52
Overheads 9,807.63 6,228.47
Interest 5,134.14 1,918.86
Depreciation 178.02 146.85
Write-Offs 547.94 15.88
Pro. Against Doubtful - -
Receivables & Investments 4,182.73 6,564.01
Total 1,445,812.22 720,490.59
Profit before amortization
& prior period items 12,355.75 5,879.74
Prior period adjustments (89.51) (210.71)
Profit before Tax 12,272.24 5,669.03
Income Tax
Current Tax 4,450 1,616.38
Tax relating to earlier years 248.60 (12.55)
Deferred Tax (609.31) 69.31
Deferred tax relating to (776.74) -
earlier years
Fringe benefit tax 131.97 3,444.52 100.55 1,733.69
Profit after tax 8,827.72 3,895.34
Balance as per last 2,088.19 921.03
account
Transfer from Bonus 0.43 0.49
Reserve
Transfer from Export Devp. - 224.44
Fund
Profit available for 10,916.34 5,041.30
appropriation
EPS (in Rs.) 29.43 12.98

Current Performance Indicators:

19
Annual Turnover: 2007-08* Rs. 15345 Crore (US$ 3825 million)
Net Profit: 2007-08* Rs. 107 Crore (US$ 27 million)
Equity Rs. 60 Crore (US$ 15 million)
Net Worth (as on 31.3.2008)* Rs. 541 Crore (US$ 135 million)

*: Provisional

20
 Project

“EXPORT POTENTIAL OF MILK

PRODUCTS FROM INDIA”

21
 To know about the export potential of any product it is necessary:
1) To find which products can be exported.
2) To identify those countries where product can be exported.

Brief Information about Different Dairy Products

Brief Information about Milk Powder

Product Definition

• Milk Powders are essentially substitutes for liquid milk.

• Maximum use of milk powder is for whitening tea and coffee.
• Apart from the above, they are used for culinary purposes and can be used for
making products like kheer, custard etc.
• Milk Powder is normally used only when available milk is not of good quality.

Milk Powder can be classified into the following categories:

• Skimmed Milk Powder- Nonfat Dry Milk is the product resulting from the
removal of fat and water from milk and contains lactose, protein and minerals in
the same relative proportions as in the fresh milk from which it was made. It
contains not more than 5.0% moisture (by weight). The fat content is not more
than 1.5% (by weight) unless otherwise indicated.
• Whole Milk Powder- Dry Whole Milk is the product resulting from the removal of
water from milk and contains not less than 26%, nor more than 40% milk fat and
not more than 5.0% moisture (as determined by weight of moisture on a milk
solids-nonfat basis).
• Infant Milk Powder- This is the type of milk powder from which a major portion
of fat is removed and Vitamins and Minerals are added.

22
Objective of Production

• To remove the moisture so as to reduce bulk, thereby effecting a saving in

storage space and packaging costs.
• To reduce the cost of transportation (due to reduced bulk).
• To increase the storage life of the product (due to low moisture content).
• To provide a product this can be utilized for many food-manufacturing operations,
like Ready to Eat to food.

Quality standard of Milk Powders

Skimmed Milk Powder Whole Milk Powder

Protein 34.0-37.0 24.5-27.0
Lactose 49.5-52.0 36.0-38.5
Fat 0.6-1.25 26.0-28.5
Ash 8.2-8.6 5.5-6.5
Moisture 3.0-4.0 (non-instant) 2.0-4.5

3.5-4.5 (instant)

Brief Process of Preparation of Milk Powder

Milk used in the production of milk powders is first clarified, standardized and then given
a heat treatment. This heat treatment is usually more severe than that required for
pasteurization. Besides destroying all the pathogenic and most of the spoilage
microorganisms, it also inactivates the enzyme lipase which could cause lipolysis during
storage.

The milk is then evaporated prior to drying for the following reasons:

• less occluded air and longer shelf life for the powder
• viscosity increase leads to larger powder particles
• less energy required to remove part of water by evaporation; more economical

Homogenization may be applied to decrease the free fat content. Spray drying is the
most used method for producing milk powders. After drying, the powder must be

23
 packaged in containers able to provide protection from moisture, air, light, etc.
Whole milk powder can then be stored for long periods (up to about 6 months) of
time at ambient temperatures.

Skim milk powder (SMP) processing is similar to that described above except for the
following points:

1. contains less milk fat (0.05-0.10%)

2. heat treatment prior to evaporation can be more or less severe
3. homogenization not required
4. maximum shelf life extended to approximately 3 years

Low-heat SMP is given a pasteurization heat treatment and is used in the production
of cheese, baby foods etc. High-heat SMP requires a more intense heat treatment in
addition to pasteurization. This product is used in the bakery industry, chocolate
industry, and other foods where a high degree of protein denaturation is required.

Instant milk powder is produced by partially rehydrating the dried milk powder particles
causing them to become sticky and agglomerate. The water is then removed by drying
resulting in an increased amount of air incorporated between the powder particles.

Need for Quality Standard in Milk Powder

• To see whether minimum specifications are met regarding nutrients it contains.

• To look into the level of contamination of milk powder. Contamination can be in
the form of pesticides, heavy metals etc., which makes it unfit for consumption.
• To see whether the product has been prepared hygienically or not.
• To look whether there is any kind of adulteration, like using both cow and buffalo
milk for producing milk powder.
• For purpose of export it is necessary to meet the minimum quality standard of the
particular country.

Brief Information about Cheese

24
Product Definition

Cheese, which has been described as "milk's leap toward immortality," can be more
dispassionately defined as a product of milk fermentation. Cheese is made by
coagulating milk. This is accomplished by first acidification with a bacterial culture and
then employing an enzyme, rennet (or rennet substitutes) to coagulate the milk to "curds
and whey." The precise bacteria and processing of the curds play a role in defining the
texture and flavor of most cheeses.

Some of the most commonly used Cheese are given as follows:

• Processed Cheese: Processed cheese is made from traditional cheese and

emulsifying salts, often with the addition of milk, more salt, preservatives, and
food coloring. It is inexpensive, consistent, and melts smoothly. It is sold
packaged and either pre-sliced or unsliced, in a number of varieties. It is also
available in spray cans. Processed cheese contains natural cheese and
emulsifying agents, but add other ingredients like whey, skim milk, milk powders,
or water that raise the moisture content of the product.
• Fresh cheese: After the formation of curds, the cheese (and also, sometimes,
the whey) is usually transferred to plastic tubs and covered. The cheeses are
eaten fresh, not ripened, and do not have a rind. Cottage cheese, cream cheese,
etc., are some common examples of fresh cheeses.
• Blue-veined cheese: To allow the growth of their distinctive bluish or greenish
interior molds, these cheeses are never pressed. They are typically injected with
a mold strain, and then pierced to expose the insides to air.

Standard for Different Cheese

Fresh Cheese Processed Cheese

Fat 35% >40%
Protein 7-8% 23%
Moisture 60% 45-47%
Brief Information about Whey

25
Product Definition

Whey or milk plasma is the liquid remaining after milk has been curdled and strained; it
is a by-product of the manufacture of cheese or and has several commercial uses.
Whey is used to produce and brown cheeses and many other products for human
consumption. It is also an additive in many processed foods, including breads, crackers
and commercial pastry, and in animal feed. Whey protein (derived from whey) is often
sold as a nutritional supplement. Such supplements are especially popular in the sport
of bodybuilding.

Quality Standard for Whey

Calories 30 kcal/100gm
Fat 0.3-0.5%
Carbohydrate 4.5-5.5%
Protein 0.75-0.85%

Brief Information about Ghee

Product Definition

26
Ghee is a class of clarified butter that originated in the Indian subcontinent and is
important in South Asian and Middle Eastern cuisine and Egyptian cuisines and in
Ethiopian/Eritrean cuisines.

Preparation

Ghee is made by simmering unsalted butter in a large pot until all water has boiled off
and protein has settled to the bottom. The cooked and clarified butter is then spooned
off to avoid disturbing the milk solids on the bottom of the pan. Unlike butter, ghee can
be stored for extended periods without refrigeration, provided it is kept in an airtight
container to prevent oxidation and remains moisture-free.

Quality Standard for Ghee

Milk Fat 98.5-99.5%

Moisture 0.5-1%
Calories 900kcal/100gm.

Export of Indian Dairy Products: Recent Trends

1) Overall Export of Milk Products (Country Wise) [Table 1]

(Qty: in MTs, Value: in Lakhs)

27
 Dairy Products (Top 10)

(Ranked on basis of 2006-07 data)

Country 2004-05 2005-06 2006-07
Quantity Value Quantity Value Quantity Value
U.A.E. 4094.80 4456.20 5108.54 5029.64 5006.84 5733.19
Egypt 2426.18 1866.81 4979.20 4075.65 5145.38 5324.84
Bangladesh 16053.67 10922.16 7504.65 6339.31 4447.42 4539.86
Nepal 1610.74 1617.38 2477.24 2283.06 1712.84 1915.51
Algeria 2873.60 2658.76 6388.50 5805.04 1853.05 1853.58
Thailand 316.87 238.27 1309.39 1469.90 1772.47 1654.08
Pakistan 644.81 489.49 2720.95 2394.02 1630.50 1536.50
Yemen Arab 449.53 402.71 4797.40 4528.02 1458.43 1461.68
Republic
Philippines 581.98 498.93 398.69 374.74 797.21 1163.02
China 1067.15 605.97 3494.12 2804.41 1116.53 1089.06
Total (All 42160.10 35869.21 59745.78 55227.61 37391.36 39515.41
Countries)

2) Skimmed Milk Powder Data (Country Wise) [Table 2]

(Qty: in Kg., Value: in Rs.)

Skimmed Milk Powder (Top 10)

(Ranked according to 2006-07 data)

Country 2004-05 2005-06 2006-07
Quantity Value Quantity Value Quantity Value
Egypt 2119180 167557055 4879195 398127982 4763600 493418470
Bangladesh 9506500 585607576 5829825 493305825 3061500 303393312
U.A.E. 2320821 204229827 2590006 200045045 2378563 241465751
Algeria 2537000 238646703 4798200 420333109 1772051 177255134

28
Thailand 261000 18117456 1074470 120949649 1696600 156758686
Yemen Arab 241500 20501547 3866400 365601437 1356119 136817728
Republic
Pakistan 603206 46026077 2000938 178515277 1243500 117929033
Philippines 427000 35114813 232000 21327724 771150 110088615
Syrian Arab 205000 16419082 832000 72333528 741900 103659083
Republic
Morocco 578000 49856023 1240051 119422274 1077800 993659083
Total (All 26562906 205353519 4042612 355794577 26045199 2686634569
Countries) 5 0

3) Whey Data (Country Wise) [Table 3]

(Qty: in Kg., Value: in Rs.)

Whey
(Ranked according to 2006-07 data)
Country 2004-05 2005-06 2006-07
Quantity value Quantity Value Quantity Value
China 727150 3638044 1370000 89650787 757000 62635095
9
Myanmar 0 0 0 0 50000 5547216
Korea 368000 1472085 0 0 50000 3969280
Republic 0
U.S.A 0 0 75000 3073800 31000 2043920
Nepal 0 0 0 0 600 12375
Syrian Arab 0 0 48000 2981720 0 0
Republic
Singapore 25000 1226565 10000 297860 0 0

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Japan 0 0 256000 19356840 0 0
Total (All 1268350 5904520 1775100 116355252 888600 74207886
Countries) 3

4) Whole Milk Powder (Country Wise) [Table 4]

(Qty: in Kg., Value: in Rs.)
Whole Milk Powder
(Ranked according to 2006-07 data)
Country 2004-05 2005-06 2006-07
Quantity Value Quantity Value Quantity Value
Nepal 10000 883660 59909 6002077 138615 9152706
Oman 0 0 0 16000 1579582
Djibouti 0 0 0 14000 1497258
Saudi Arabia 0 7800 536400 9000 243650
Netherlands 0 0 0 100 14360
Total (All 17000 1398794 85517 7747281 177915 12492783
Countries)

5) Cheese (Country Wise) [Table 5]

(Qty: In kg., Value: in Rs.)
Cheese
(Ranked according to 2006-07 data)
Country 2004-05 2005-06 2006-07
Quantity Value Quantity Value Quantity Value
U.A.E. 77701 7323640 193056 197887700 296350 31793899

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Sri Lanka 3980 785752 43895 7452790 98934 14980846
Singapore 33645 3244841 67980 7133021 101338 12252074
Morocco 0 0 200500 24343306 80000 9402757
Nepal 24025 2558885 85914 6926892 43225 5654011
Total (All 290375 31668153 1027454 103232359 864042 103365630
Countries)

6) Ghee (Country Wise) [Table 6]

(Qty: in Kg., Value: in Rs.)

Cheese (Top 10)
(Ranked according to 2006-07 data)
Country 2004-05 2005-06 2006-07
Quantity Value Quantity Value Quantity Value
U.A.E. 1087050 167409850 1063319 160812526 1343262 203673413
Kuwait 185000 27578683 236700 38450587 170393 25827878
Australia 184656 28085499 1237411 141173100 205425 23600591
Sri Lanka 29650 3886043 121490 13988807 165043 23453968
Singapore 1220 124346 13030 625561 380266 20323958
Oman 104878 10256184 114665 11394646 150007 18253573
Bahrain 97800 14443896 53800 7985945 108900 16554505
Saudi 94115 13091444 54650 7975018 71900 11668855
Arabia
Bhutan 41100 3987510 83250 8236768 88734 8607271
Philippines 0 0 17829 2535284 67823 6291109
Total (All 1989535 288650672 3367497 437563746 3097900 404786211
Countries)

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Dairy Products Export Growth over the Years

• Although, India is the largest producer of milk in the world, it is a very minor
player in the world dairy trade, accounting for a miniscule 0.1 % of the world dairy
exports, worth more than $31 billion.
• Dairy products form only 0.4% of total agricultural exports from India. The reason
being, that India was a importer of milk products since 1970s, but with the onset
of ‘Operation Flood’ scenario changed and by early1990s milk products formed a
part of India’s export basket. So, export of milk products from India is still in
infancy.
• During the last decade there has been high volatility in dairy exports from India,
with growth in some years being more than 100% while in some years it has
been negative. This can been from the table given below:

Value of Exports of Dairy Products from India [Table 7]

(1993-94 to 2006-07)
Year Value of Exports Percentage change
(US $ mn.)
1991-92 4.60 -
1992-93 1.94 -57.83
1993-94 3.67 89.18
1994-95 12.25 233.79
1995-96 7.88 -35.67
1996-97 3.45 -56.22
1997-98 3.9 13.04
1998-99 4.13 5.90
1999-2000 11.28 173.12
2000-01 22.35 98.14
2001-02 39.96 78.79
2002-03 26.35 -34.06

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 2003-04 20.39 -22.62
2004-05 79.89 291.80
2005-06 124.72 56.11
2006-07 87.37 -29.94

• Even though export of milk product has been volatile, but in the long run it has
increased tremendously, especially in the new millennium. But there is need for
more consistency.

Direction of Exports of Milk Products

33
• The trend in direction of exports over the years indicates that Asia is the major
destination of dairy products from India. As can been seen in the Table 1, all the
top importers from India are from Asia, except Egypt and Algeria.
• Although India exported dairy products to more than 100 countries over the
period, but the average export to Asian forms 80% of the total dairy products
exports. This has been shown below:
[Table 8]
Year %Share
Quantity Value
1991 89.62 93.13
1992 99.29 99.13
1993 98.95 98.46
1994 83.67 82.47
1995 68.87 75.88
1996 71.79 73.67
1997 58.45 54.39
1998 68.34 73.39
1999 73.07 79.12
2000 76.46 81.16
2001 75.94 77.60
2002 81.86 82.26
2003 83.77 84.23
2004 84.77 87.81
Overall Average 79.63 81.62

• Among the Asian markets, Bangladesh and U.A.E. are the top most destinations
for our dairy products. In fact, for the period 1994 to 2006, Bangladesh has been
the largest importer of milk products from India.
• A table showing ‘Top Ten Countries according to their share in India’s Dairy
Export’, over different time period has been prepared below:
[Table 9]
Ranks Sub-Periods (% share)

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 1994-96 1997-2000 2001-04 2005-07
1 Bangladesh Bangladesh Bangladesh Bangladesh
(39.3) (38) (39.3) (20.1)
2 UAE (25) UAE (29.2) UAE (21.2) UAE (10.2)
3 Philippines Nepal (10.7) Nepal (6.4) Egypt (9)
(12.9)
4 Sri Lanka (8.4) Philippines Oman (4.5) Algeria (7.8)
(6.9)
5 Nepal (3.2) Sri Lanka (3.7) Yemen (3.8) Yemen (4.8)
6 Bahrain (1.9) Hong Kong Singapore Nepal (4.16)
(3.1) (2.6)
7 Kuwait (1.8) Bhutan (1.5) Sri Lanka (2.3) China (4.07)
8 Singapore Singapore Saudi Arabia Pakistan (3.58)
(1.7) (1.4) (2.2)
9 Yemen (1.5) Oman (1.3) Kuwait (2.1) Saudi Arabia
(2.7)
10 Oman (1.3) Bahrain (1) S. Korea (1.7) Thailand (2.4)
Total Share of 97.1 94.8 86.1 68.81
Top Ten
Countries

Composition of India’s Dairy Export

• If we look at India’s dairy export composition, one can easily find that Skimmed
Milk Powder and Ghee has dominated the dairy export, with Skimmed Milk
Powder alone contributing 60-70% over the year, Ghee contributes around 10%.

• While the above two products are dominating India’s export, share of Cheese
and Whey have increased over the period. Whole Milk Powder is also slowly
picking but its share is still quite low.

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Export Forecasts for 2010 [Table 10]

Country At Constant RPR 5% Decrease in RPR

Base Year Forecasted Annual % Forecasted Annual %
Qty. Qty. Change Qty. Change
(Tones) (Tones) (Tones)
Milk Powder and Cream Based Products
Saudi Arabia 545 1659.74 22.73 1906.28 27.75
Oman 152.49 251.25 7.2 281.46 9.40
Nepal 289.79 407.93 4.53 448.95 6.10
Jordan 100.89 109.01 0.90 110.76 1.09
Singapore 135.99 137.37 0.11 155.76 1.62
Philippines 166.84 125.47 -2.76 157.82 -0.60

36
Bangladesh 2749.72 1981.66 -3.10 2479.56 -1.09
Sri Lanka 230.30 154.78 -3.64 118.98 -5.37
TOTAL 4380.76 4831.22 1.14 5664.11 3.26
Ghee and Fat Based Products
Saudi Arabia 100 344.87 27.21 584.88 53.88
Nepal 36.61 61.19 7.46 62.46 7.84
Singapore 82.98 86.51 0.47 88.72 0.77
Philippines 42.50 19.65 -5.97 19.75 -5.94
Hong Kong 32.15 18.84 -4.6 21.34 -3.74
Oman 65.61 36.35 -4.95 37.36 -4.78
TOTAL 359.86 567.43 6.41 814.4 14.04
Cheese
Singapore 13.76 44.42 24.77 53.87 32.40
Oman 10 25.80 17.56 27.80 19.78
Nepal 5.72 7.91 4.28 8.22 4.86
TOTAL 29.47 78.14 18.35 89.90 22.78

Notes for Table 10:

• Base year Quantity has been calculated on the basis of four year average (2001-
04).
• RPR stands for Relative Price Ratio. Decrease in Relative Price Ratio means
Indian products becomes relatively cheaper than the products of competing
countries.
• This information was prepared by Commerce Ministry of India in 2005.

Conclusion of the Forecast

• This forecast has been done on the basis of existing situation as well as
expected development over the next few years.

• According to the data given, there is going to be steep increase in export to

Saudi Arabia by 2010, as there is going to be huge demand for milk products
there.

• Forecasts show a marginal increase in India’s export to Jordan and Singapore.

37
• It is expected that export of milk powder and cream products from India to
Philippines, Sri Lanka and Bangladesh will decline. As far as Philippines and
Bangladesh is concerned there has been decrease in domestic demand for this
product. However, in Sri Lanka despite a compound growth of nearly 5 per cent
per annum in import demand, Indian exports will decline due to large supplies of
the product from Australia and New Zealand. Even a 5 per cent decrease in price
will not improve the situation.

• India’s export for butter, ghee and other fat based products is likely to go up in
Saudi Arabia and Nepal. For other countries, the export volume is likely to suffer
a decline due to their changing food habits. These markets are shifting towards
Whey and Cheese.

• One can easily notice that there is going to increase in export of cheese from
India and as said earlier it is due to shift in food habits of people.

38
 Analysis and Findings

• As almost 70-80% of India’s export of dairy products goes to countries from Asia
itself, it is necessary to understand about nature of different countries. So, Asian
destinations can be classified into 5 categories on the basis of how consistent is
India’s export to those countries. These categories are:
1) Incessant: Those countries to which India has regularly exported.
2) Erratic: It includes those countries with whom India has highly volatile nature
of exports.
3) New: Those countries to which India has started exporting recently.
4) Unclassified: Those countries who have exported from India only once in
last 5 years.
5) Dropped: These are those countries with whom India do not traded for last
decade or so.
These categories have been shown in the table below:

Incessant Erratic New Unclassified Dropped

Bangladesh Afghanistan Taiwan Syria Iraq
UAE Jordan Lebanon Cyprus Laos

39
Nepal Japan North Korea Kazakhstan Uzbekistan
Sri Lanka Qatar Myanmar Macau
Oman Indonesia Cambodia
Bahrain Maldives
Bhutan Vietnam
Singapore
Kuwait
Pakistan

• Almost all the exports of dairy products from India is limited to Asia and Africa.
The reason for this can be attributed to two things:
1) Indian dairy products are not price competitive, i.e; Indian products are
priced higher than the products from European Union and America. The reason
being, high subsidy provided to dairy farmers by the government making milk
products cheap.
2) High standards set by these countries makes it difficult to make inroads in
there.

• Even within the Asia and Africa, India’s share in dairy export is quite low. For
example, in case of Skimmed of Milk Powder, which forms almost 70% of India’s
export, only Nepal and Bangladesh are two countries where India has market
share of more than 1%. The main reason again being price competitiveness. This
has been clearly shown in the table below:

Skimmed Milk Powder

Country Share of India (%)
Nepal 13.7
Bangladesh 6.53
Oman 0.91
UAE 0.61
Bahrain 0.40
Saudi Arabia 0.19

40
• In case of cheese also, where India is fast making progress in terms of exports,
the reason mainly being increase in per capita income of people in most
countries. The only problem for India is that it is out competed in price by rival
countries in nearly all the countries except Nepal.

• As far as Ghee is concerned, India gets a preference as she does not have much
competition and there is also demand for this product, especially in Middle East
Asian countries. This is the reason for India having nearly 10% share in Oman
and Bahrain in the category of fat based milk products.

• Whey, which was since few years back was not part of India’s export has shown
good growth over the last couple of years, and it is expected to increase further
with increase in use of whey for commercial purpose.

• India is facing tough competition in the Asian market to maintain its market share.
Its export to Bangladesh has reduced considerably over the last three years as
shown in Table 1, and it has affected India’s export badly as Bangladesh was
India’s dairy product biggest Importer. Its export to Algeria and Nepal has also
suffered. Other than this India’s milk product export overall has also been volatile
over the years.

• There are many countries which have potential to become importer of milk
products. The most important region emerging is Middle East, who is already a
big consumer of milk products, and with a large population under the age of 20
years this consumption is going to increase further. China is fast emerging as big
market, with continuous increase in consumption of milk products, and it is
expected that China will need to import more due to inadequate local supply.

41
• Due to changing food habits of people there will also be shift in the demand for
different dairy products. It is expected that in times to come there will be more
demand for product having unsaturated fatty acid, more protein etc. Cheese and
Whey will be in the commanding position, thereby replacing fat based products in
South and East Asian markets.

• Positive for India in dairy exports is in the case of whole milk powder which has
seen healthy growth over the last few years and this is expected to continue with
increase in the consumption in the Middle East Asian countries.

• In recent years, India has found some new markets in South and East Asia and
in the Gulf regions. China, South & North Korea, Lebanon, Myanmar, Israel are
some of the emerging markets.

• Another big problem facing Indian Dairy export is that, only 15-20 per cent of the
milk produced in the country flows through the organized sector, and so
production of value added dairy products is low and this poses a supply
constraint on Indian Dairy exports.

• Under WTO regime European Union had to reduce subsidy provided by it to

dairy farmers, thereby making Indian Dairy products more competitive, but our
product is still more expensive, due to lack of latest technology.

• Besides supply constraint, quality is also a hindrance. Indian products are price
competitive in some of the markets but are not preferred due to the poor quality.

42
 Recommendations

• If Indian exporters have to be successful they have to streamline the quality

and have to attain a minimum level of standard, so that Indian products can
be said to be reliable. If we continue as the present situation is then it will be
difficult for India to increase its export.

• More milk should be procured by the organized companies, as these are the
companies who are involved in export and until they do not procure more milk
it will pose supply constraint for the dairy exporters.

• Other than existing market Indian exporters should keep looking for new
markets for exporting. There is always a higher chance of succeeding in a
new market as competition will be equal or if taken initiative exporters can
have advantage being the first. Today’s small market can be big money
earner tomorrow.

• Indian exporters should diversify the product range offered by them to capture
new markets, as well as, to cater to the changing taste of the existing
markets.

• Latest technology should be used for the purpose of production. This will help
in reducing the cost of goods, thereby making Indian Dairy Products cheaper
and more competitive as far as price is concerned. This will also help in
improving the quality of goods produced.

43
• Indian exporters should pay special attention to new markets, mainly China
and Saudi Arabia and some other Gulf region countries. China is a big market
and with expectation of demand outstripping supply by big margin in near
future exporters should prepare themselves for this market. Similarly,
exporters should understand the need of Saudi Arabia and prepare for it.

• The demand for Whey is increasing quickly as it has different uses, including
commercial uses. Indian exporters should pay special attention to this
product.

• Consumption of cheese is increasing at a fast pace and this trend looks to

continue for next few years as income of people in this region increases. So
Indian exporters should also pay attention towards export of this product.

• Another important aspect that has to be kept in mind is how we market

ourselves in the international market. To overcome this problem professionals
should be hired who have the knowledge of international dairy market and
can make right strategies for marketing the product.

• Another area where Indian exporters can target there product is the Indian
Diaspora of around 20 million living abroad, half of them in the West. This will
help exporters gain inroads there. Besides, there is potential to popularize
these products among local consumers abroad.

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 • There is adulteration in case of milk powder, as milk from different cattle, like
buffalo, cow and goat are used together to produce milk. This is should be
done away with.

Bibliography

• www.stc.gov.in
• Apeda
• Dairy Year Book
• Modern Food Processing Magazine
• www.aifpa.net
• Ministry of Commerce

45