Dairy Sector in India: An Overview

Dairy is a place where handling of milk and milk products is done and technology
refers to the application of scientific knowledge for practical purposes. In developed
dairying countries such as the U.S.A., the year 1850 is seen as the dividing line
between farm and factory-scale production. Various factors contributed to this change
in these countries, viz. concentration of population in cities where jobs were plentiful,
rapid industrialization, improvement of transportation facilities, development of
machines, etc. whereas the rural areas were identified for milk production, the urban
centers were selected for the location of milk processing plants and product
manufacturing factories. These plants and factories were rapidly expanded and
modernized with improved machinery and equipment to secure the various
advantages of large-scale production. Nearly all the milk in the U.S.A. before 1900
was delivered as raw (natural) milk. Once pasteurization was introduced, it developed
rapidly. Mechanical refrigeration helped in the rapid development of the factory
system of market milk distribution.

INDIAN DAIRY INDUSTRY

In India, dairying has been practiced as a rural cottage industry since the remote past.
Semi-commercial dairying started with the establishment of military dairy farms and
co-operative milk unions throughout the country towards the end of the nineteenth
century.

Gradually farmers within easy driving distance began delivering milk over regular
routes in the cities. This was the beginning of the fluid milk-sheds which surround the
large cities of today. Prior to the 1850s most milk was necessarily produced within a
short distance of the place of consumption because of lack of suitable means of
transportation and refrigeration.

The Indian Dairy Industry has made rapid progress since Independence. A large
number of modern milk plants and product factories have since been established.
These organized dairies have been successfully engaged in the routine commercial
production of pasteurized bottled milk and various Western and Indian dairy products.
With modern knowledge of the protection of milk during transportation, it became
possible to locate dairies where land was less expensive and crops could be grown
more economically.

HISTORY OF INDIAN MARKET MILK INDUSTRY

Beginning in organized milk handling was made in India with the establishment of
Military Dairy Farms. But in the early stages Co-operative Milk Unions were
established all over the country on a small scale. Long distance refrigerated rail-
transportation were there from Anand to Bombay since 1945. Pasteurization and
bottling of milk on a large scale for organized distribution was started at Aarey
(1950), Calcutta (Haringhata, 1959), Delhi (1959), Worli (1961), Madras (1963) etc.
Establishment of Milk Plants under the Five-Year Plans for Dairy Development all
over India. These were taken up with the dual object of increasing the national level
of milk consumption and ensuing better returns to the primary milk producer. Their
main aim was to produce more, better and cheaper milk.

BASIC FEATURES AND FACTS

Dairy in rural India part of mixed crop livestock farming. Traditionally multiple
functions were performed, like producing milk for household consumption, dung as
manure and fuel. Also, dairy generates a continuous flow of income in rural India &
acts as a cushion against income shocks arising due to crop failure.

FACTS
In India, dairy production system is dominated mainly by small producers.
* Around 100 million milch animals are reared by 70 million farmers.
* Village Cooperatives: 100 thousand.
* Cooperative membership: 11 million.
* Milk contributes 63% of the available animal protein in Indian diet.
* Milk would continue to be a major source of animal protein in India.
PRESENT STATUS OF DAIRY DEVELOPMENT

Development of dairy industry in India primarily due to NDDB cooperative model &
NDDB was responsible for implementing `Operation Flood ` (OF) Program between
1970 and 1996.The OF was implemented in three phases with OF-1 in 1970; OF-2 in
1979; and OF-3 in 1986.Under OF a large dairy infrastructure (dairy plants, feed
plants, rail and road milk tankers etc.) has been created as per the requirements. But
the OF programme was confined to the most potential milk producing areas for what
some areas were neglected. So now
* The focus now is on remaining areas &
Broad strategy: genetic upgradation of livestock, control of diseases, accelerating
fodder development, establishment of National Production and Health Information
System and strengthening cooperatives on the Anand pattern are on the process.

ANAND PATTERN OF DAIRY COOPERATIVES

* Operation flood covered 170 districts having 100 thousand village dairy
cooperatives with an aggregate membership of around 11 million producers.( upto
2002).
* Primary cooperatives are federated into 170 district cooperative milk unions and
further to state cooperative dairy federations.
* The dairy cooperative network collects about 17 million litres per day and pays an
aggregate amount of about Rs.700 billion to the milk producers in a year(as per
www.punjabgovt.com).
* These cooperatives form part of the National Milk Grid which today links the milk
producers with consumers throughout India.
* The milk grid has minimized variation across the seasons and regions in the
availability of milk and at the same time ensuring a remunerative price to the
producers and a reasonable price for quality milk and milk products to the consumers.

Source: NDDB website (www.nddb.org)

Dairy Cooperative Infrastructure and milk procurement

Source:www.indiadairy.com
Dairy animal population (in-milk+dry) in India
RURAL URBAN DISTRIBUTION

* Rural share in milch stock: 94%

* Urban dairy animals growing faster than rural

Figure 1: Trend in milk production and net trade in

India: 1961-2004

90000 200
Production
80000 100
Net trade
70000 0
60000 -100
(000 t)
(000 t)

50000 -200
40000 -300
30000 -400
20000 -500
10000 -600
0 -700
1961 1966 1971 1976 1981 1986 1991 1996
Distribution of dairy animals by size group of land holdings, 2002

Contribution of dairy to agricultural output and employment

Status of dairy processing industry in India

Source:www.foodprocessing-technology

SITUATION AND OUTLOOK

* India is the largest producer of milk in the world (87 million tons)
* Near self sufficiency in milk and milk products
* Marginal and small households will continue to be the major producer of milk in
future
* Current growth rates of 4-5% in milk production per annum
* Sustained rise in per capita income and urbanization are fuelling rapid growth in
demand for milk
*Despite its being the largest milk producer in the world, India's per capita availability
of milk is one of the lowest in the world, although it is high by developing country
standards. The per capita availability of milk, which declined during the 1950s and
1960s (from 124 grams per day in 1950-51 to 121 grams in 1973-74) expanded
substantially during the 1980s and 1990s and reached about 226 grams per day in
2001-02 The per capita consumption of milk and milk products in India is among the
highest in Asia, but it is still growing. It is still below the world average of 285 grams
per day, and also the minimum nutritional requirement of 280 grams per day as
recommended by the Indian Council of Medical Research (ICMR) (see Sharma et.al.,
2003).
* Milk demand is projected to rise to 121 kg/capita and total demand at 156 million
tons by 2020
* This would require intensification of dairy activities and bigger role by private
sector
* Contract farming is becoming increasingly popular institutional arrangement in
dairy industry
* Sustained rise in per capita income and urbanization are fuelling rapid growth in
demand for milk
* Between 1983 and 1999 per capita milk consumption increased from 43 kg to 74 kg

CONTRACT DAIRY FARMING: THE CASE OF NESTLE INDIA LIMITED

Nestle India Limited - one of the largest and oldest firms in dairy business in India. It
sources raw milk from producers through contract. Nestle started its milk processing
factory at Moga town in Punjab in 1961 with 510 kg of milk collected from 180
producers in four villages around Moga town. In 1962 the firm expanded its
operations to 66 villages covering 4660 milk producers and collected 2.0 million kg of
milk. Growing demand for dairy products encouraged the firm to expand its
processing capacity, and milk collection efforts. Initially, the firm adopted a
`cooperative approach' to source milk supplies, but this was gradually abandoned in
favour of contract farming with an aim to increase milk production and procurement
by providing inputs and services to the producers. In 2001 it procured 236 million kg
milk from over 85000 farmers in 1002 villages spread over Moga and its adjoining
districts
The major benefit to producers is an assured market for milk at their door-steps. The
producers save on considerably on transport and travel associated with marketing of
milk. The price paid to the producers is not less than the market price. Besides, the
firm provides feed and medicines, fodder seed etc. to the willing producers at market
prices. Veterinary and agronomic services are provided free.
COUNTERVAILING FORCES

The major constraint would be the feed. Also, decline in common grazing lands can
be the same. Delivery of livestock services: require shift from present approach of
Curative to prophylactic controls. At the same time breeding services are not up to the
desired level, hardly 20 percent of the breeding cattle and 5 percent of the buffaloes
are bred through artificial insemination.

DAIRY SECTOR REFORMS

* The dairy industry was reserved for cooperatives and protected till 1990s
* The entry of big private players was restricted through licensing system
* Some of the sub groups of dairy industry like ice cream were reserved in the small-
scale sector.
* Situation started changing with economic reforms introduced in 1991
* The industry was de-licensed in 1991 and opened for private participation
* Milk and Milk Products Order (MMPO) enacted in 1992 to regulate the production
and maintain the quality of milk and milk products
* The order amended in March 2002, which lays stress on hygiene, sanitation, quality
and food safety standards in the dairy sector
* The registered units are no longer allotted the designated milk sheds
* All milk products except malted foods are covered in the category of industries for
which foreign equity participation upto 51 per cent is automatically allowed
EXPORT-IMPORT POLICIES

01 Liquid milk 05 Whey

02 Skim milk powder 06 Butter

03 Whole milk powder 07 Dairy spreads

04 Yogurt/ butter milk 08 Cheese & curd

CONCLUSION:
Different developments are occurring in the global dairy sector at the moment:
production in the developed countries is falling (together with the no of dairy cows &
farms) while productivity is rising. Simultaneously milk production in developing
countries like India is growing strongly. This development is mirrored in
consumption. With increasing consumer demand the Indian dairy trade volume is
increasing rapidly in a progressive way. Some of the major international dairy
companies, which have already established operations in India, include Nestle,
Unilever are the pathfinders in this aspect but what actually needed to make it
successful are proper quality of procurement structure& product capabilities along
with the best quality.
References:
Rado India, 2002
Chand, R, Dairy Industry in India, NCAEPR, New Delhi 2004
Indian Dairy Study, “Opportunities in the Indian dairy Industry” by Rabobank
International
'New economic policies, the real threat’ Frontline, Vol 19 - Issue 07, Mar. 30 - Apr.
12, 2002
Indian Dairyman, Vol. 11- Issue 07, August, 2003

www.indiadairy.com

www.fao.org/

www.punjabgov.net/

www.banknetindia.com

www.icar.org.in

www.icar2005.org/

www.ciionline.org

www.acdi-cida.gc.ca

www.foodprocessing-technology

www.vetwork.org.uk/

www.oecd.org
 ASSIGNMENT
On

Dairy Sector in India: An Overview

(Rural Production & Livelihood Systems)

Submitted To:
Prof. Niraj Kumar
Submitted by:
Sanat Singaran (37)
Suchismita Sinha(43)
PGPRM- I