DAIRY /MILK PRODUCTION

Logistics for exploiting business opportunities in dairy industry:

With an estimated 86.8 million tons of annual milk production from animals managed by nearly 70 million farmers, India is the top-most milk producing country in the world. The average annual growth is about 5.6%. The per capita milk availability is about 214 grams per day as against the recommended requirement of 250 grams. Milk is one of the most important item of common vegetarian diet of Indian people. With rapid industrialization, economic growth and 250 million potential economically strong domestic consumers of milk and milk products, there is a very strong potential for future growth of the industry.

Impressive work has been done under the guidance of the National Dairy Development Board under “ Operation Flood “ programmes for organizing dairy production, processing and marketing of milk and milk products by the cooperative dairy sector following the well known "Amul" model- a three tiered cooperative structure of village level dairy cooperative societies, a district level cooperative milk union and a state level cooperative milk marketing federation where the profits are shared by the farmer members.

The small rural milk producers have several problems. The major problems faced by the farmers include small herd strengths, small land holdings, shortages of green and dry fodder, low productivity of animals, non availability of timely inputs for breeding, feeding and health care of animals, lack of suitable education/training for skill development for new viable and sustainable technology, inadequate finances, poor rural infrastructure facilities and lack of proper marketing support for their produce.

In last 40-50 years, many development programmes have been taken up by the central and state Governments under the five year development plans.

The major thrust areas in the current Five Year Development Plan and the new livestock development policy laid by the Government include the following:-

effective animal health and management, including control and eradication of important animal diseases and "Animal Disease information Service" for farmers
Providing better quality Artificial Insemination service for breeding of animals
Support for activities under " Operation flood (milk) programme (OF)", including strengthening of existing viable dairies and rehabilitation of sick dairies.
Special integrated Dairy Development Projects for hilly and backward districts.
Improving data-base on production of milk and reproduction capacity per animal to facilitate better planning and forecasting of issues and activities.
Intensified research on milk products with particular emphasis on " indigenous milk products " and with particular reference to products suitable for the utilization of buffalo milk .
Encouraging milk production through commercial herds and for providing 'quality' milk for preparation of value-added products.
Providing adequate credit for dairy sector
Strengthening activities for fodder production.
Formation of " Cattle breeders' Associations " and state "Livestock Development Boards"

Present scenario:

Some important issues of the Dairy industry are as under:-

Breeding of animals

As per 1992 livestock census, India had a very large base of 56.3 million breedable indigenous cows and 42.5 million breedable buffaloes. However majority were nondescript low producing animals. India also had 6.36 million crossbred cows that had a good potential for milk production but the same was not fully exploited due to inadequate feeding and management.
A new breeding programme - " National Cattle and Buffaloe breeding programme" has been taken by the Government of India with massive financial assistance to the state Livestock Development Boards).
Since last several years, massive programmes have been taken up for cross-breeding of local non-descript cattle mainly utilizing semen of two exotic breeds namely Holstein Friesian ( for irrigated areas and for farmers with adequate fodder resources) and Jersey ( for dry/hilly areas and farmers having low fodder resources). In case of buffaloes the programme is for upgrading of local buffaloes using semen of better dairy breeds like Murrah, Mehasana etc. It is observed that the overall field results of crossbreeding with artificial insemination (A.I.) are still not very satisfactory. For example data of 17 million inseminations done through a large network of about 43782 A.I. centers showed that the number of calves born were only 15% of A.I. done in the field. Only about 10% of the breedable buffaloes were covered by A.I., the rest being covered by natural insemination service from locally available bulls for whom correct pedigree history was not available. .
Buffaloe is the major contributor (52.3%) to India's milk production. Therefore more emphasis is required on buffaloe development..

Feed and fodder development:

Almost 70% of arable land is dry or rainfed land having an erratic rainfall, and poor productivity of cereal grains resulting into low output of dry fodder.
As a result of rising human population, there is a tremendous pressure on land for its utilization for construction of human housing, roads and industries.
The land holdings per farmer -household are getting fragmented and reduced.
As and when irrigation facilities are available, the farmers tend to take cash crops and value-added crops. The land for fodder cultivation and availability is a last priority.
The cattle population and therefore the demand for fodder is increasing every year.
All the above issues have adversely affected the fodder balance for milk production. There is tremendous overall shortage of fodder availability against the nutritional demand for dairy cattle. Pandey (1995) had estimated that by year 2002, the gap (demand minus availability) of fodder in India will be 606.2 million tons for dry fodder, 1018.0 tons of green fodder in Kharif (monsoon) season and 1174.36 tons of green fodder in Rabi (winter) season.

Dairy cattle health:

The work of diagnosis and treatment is mostly done by the State veterinary departments. They have well qualified technical manpower but lack financial resources.
Most of the important vaccines and medicines are manufactured in the country . However there is a shortage of diagnostic agents.
Where farmers have high producing dairy animals, they are willing to pay for the services and private veterinary practice is possible and flourishing. A good networking amongst the veterinary laboratories and teaching institutions.
Almost every state has a state Agricultural University and a veterinary faculty.

Production and marketing of milk:

Most of the milk in India is produced in villages. Quantity of milk produced per household is very small.
About 56% of milk is available as marketable surplus for urban areas. Fairly large quantity of milk is converted to local milk products ( khoa, paneer, butter, ghee etc).
The share of organized sector is small ( private-11-12% , Government/cooperative sector - 11-12%).There is still a very large portion of milk market in the hands of unorganized sector which has adverse effect on the farm-gate price of the milk..
In Government/cooperative sector, almost 80% milk is marketed as liquid milk and only 20% as milk products. While it is reverse in the private sector - only 30% is marketed as liquid milk and 70% as milk products with value addition.
In absence of properly developed infrastructure for preservation of raw milk in local areas many plants in Govt. sector collect fresh raw milk from the far-flung rural areas (each producer having very small quantities) twice a day , send it over a long distance to towns for processing, incurring high cost on transportation. This erodes the profitability. As a result, many plants have become uneconomical, non-functional or they are working much below their potential capacities. Alternative strategies need to be developed to store raw milk in bulk coolers in the rural area and transport it in bigger volumes at a longer intervals. There is also a need to use alternative and cheaper energy sources to store cool milk, and develop rural markets so that much of the milk produced in the rural areas finds consumption avenue in the nearby local markets
There is a need to set up schemes for diversification and preparation of value added milk products at the production centers instead of sending raw milk over long distances. Depending upon the market demand for a particular product, quantum of raw milk available , and financial position of the milk plant, suitable milk processing and product manufacturing units can be set up.
The dairy products with high demand potential can be largely grouped under following categories:-
1. prepared by reconstitution of liquid milk eg. Flavoured milk with different fat content, flavours etc.
2. prepared from culturing methods ( microbial fermentation) eg. Indin milk products Dahi, Mishti Dahi, Lassi, Butter milk ( Chhas), Kadhi , Butter ( Makhhan), Ghee, Chakka, Shrikhand etc.
3. prepared by condensation of milk eg. indian milk products Kheer, Kulfi Basundi, Rabdi, Burfi, Pedha, Kalakand, Gulab Jamun etc.
4. prepared by acid precipitation eg. Indian milk products Paneer, Channa, Sandesh, Rasgolla, Rasmalai etc.
5. products such as lactose, casein etc.
Suitable technologies and model projects for several dairy products have been developed by institutions like NDDB Anand , NDRI Karnal, NDRI Bangalore, CFTRI Mysore etc .NABARD has prepared and circulated to banks suitable techno-economic model schemes

Institutional finance for Dairy Industry:

A separate data on ground level credit for dairy is not maintained by the banks. The figures mentioned below are for ground level credit disbursed by banks for Animal Husbandry Sector (Dairy, Poultry, sheep, goats pigs). However data on refinance disbursement by NABARD for dairy sector is maintained .The figures are as follows:-

In RS million

Particulars

1998-99

1999-00

2000-01

2001-02

2002-3

Ground level credit for A.H. sector

19960

21770

25990

31840

NA*

NABARD Refinance for Dairy

5813

6733

7690

8210

9092

Source: NABARD Annual reports 2001-02 , 2002-3. NA*= Not available

These figures show that lending for small farmer programes has reduced but there is overall increase in bank loans provided for the Dairy Sector.

A recent dairy sector study conducted by NABARD have indicated that so far ,banks have disbursed loans mainly for the scheme for purchase of milch cattle. They need to diversify and provide loans for following important components of dairy business.

Cattle and buffaloe breeding and calf rearing
Frozen semen banks and A.I. centers
Small, medium and commercial dairy units
Salvage of dry pregnant buffaloes from city dairies
Production of perennial Lucerne as green fodder
Fodder production on gochar lands( common village grounds) in the village
Silvi-pastoral schemes for production of fodder grasses, fodder trees, timber/fuel trees.
Conservation and storage of dry fodder and fodder banks
Production of fodder seeds
Mini and major cattle feed plants
Urea-molasses brick manufacturing units
Mobile veterinary service
Setting up of private veterinary practice
Electronic milk testers for dairy cooperatives
Equipment and machinery for processing of liquid milk and milk products
Other dairy machinery like milking machines, milk tankers,
Construction of milk houses for collection of milk from producers.
Manufacturing, storage and marketing of value added indigenous milk products.

The NABARD Dairy sector study has also indicated the following major action points for improvement of Dairy Sector.

Major strategies:

The state government Department of Animal Husbandry will have to take a leading role in planning and providing logistic support for the following activities

Breeding and productive capacity of animals:

Improving overall efficiency of Bull breeding farms, semen stations, A.I. service including delivery of semen and liquid nitrogen.
Extension education of farmers
Improving natural breeding service for buffaloes
Selecting better quality breeding bulls for distribution in the field
Introducing a bull calf rearing scheme by providing incentives to a farmer to purchase and rear a bull calf produced by a high milk yielding dam owned by from an identified breeder farmer .
Testing of breeding bulls for possibility of their being carriers of communicable reproductive diseases.
Choosing NGOs, progressive farmers as future trainers and traing them for modern management practices for rearing of dairy animals
Using paravets or educated unemployed local village youth for A.I. service and veterinary first aid.
Encouraging the farmers to keep proper breeding records

Fodder and feeding:

Taking the help of local teaching and research institute to identify suitable fodders, feeding scedules, feeding norms using locally available feed resources and using this information for extensive education of farmer producers
Utilising progressive farmers, NGOs as demonstration farms/points to train the local farmers in producing good quality fodder or utilizing the available feed and fodder resources including the knowledge of enriching the poor quality fodder.
Taking the help of local teaching and research institute to identify suitable fodder trees that can be locally grown on the bunds of farms by the dairy farmers
Training farmers to conserve the locally available surplus natural grassesTake catch crops/ relay crops etc during the fallow season immediately after the harvest of main cereal crop. Identifying suitable farming systems for the purpose for the local area.
Training the farmers to conserve and make maximum use of the available cattle dung and urine produced at the farm for utilisation as organic manure .
Establishment of fodder banks at strategic locations for providing fodder during emergencies and periods of fodder scarcity.
Training farmers to use locally available feed ingredients to manufacture their own cattle concentrate feed rather than depending upon the costly compounded feeds sold at high costs.
Establishing feed analytical laboratory or strengthening it , if such service is not available in the private sector in state .

Dairy Cattle health:

Improving the state veterinary services particularly with respect to adequate vaccination cover and disease diagnostic services
Since there is a problem of mobility of the staff due to limited budget, encourage service of paravets and self-employed veterinary practice
Encourage the farmers to use scientific principles of animal management, cleanliness and hygiene on dairy farms
Train the farmers to use cleanliness and hygiene in management of young calves so that their mortality is kept very low.
Introduce disease surveillance mechanism in the state and use the available audiovisual media like radio and Television to inform the farmers well in advance to take precautions of vaccinations etc. so as to prevent disease occurrence and minimize the risks
Introduce livestock health insurance schemes for dairy animals.

Milk marketing:

Improve the working efficiency, of village level dairy cooperatives and milk unions with a view to improve their sustainability and financial viability.
Provide parity between the price of cow milk and buffaloe milk purchased from the farmers
Encourage local sale of liquid milk, find nearby markets instead sending all the surplus milk to distant places .
Encourage farmers / societies for taking up schemes for converting the surplus milk into quality milk products.

Bank Credit:

Banks should ensure that all backward and forward linkages are available and prepare a scheme in a compact manner so that inputs and services including marketing of milk are available.
The methods of appraisal, sanction and disbursements of dairy loans needs to be improved, particularly by the cooperative Banks.
The field monitoring of ongoing schemes should be improved.
Banks should diversify and provide loans for all activities of dairy industry particularly for breeding of animals and processing and marketing of milk and milk products. NABARD should prepare guidelines and model schemes for these activities.
Many commercial banks are not taking refinance from NABARD. They should be motivated to do so.
A biannual meeting between NABARD, banks, state/central Governments, cooperatives and private sector should be held by NABARD for better coordination and implementation of schemes.

Logistics for exploiting business opportunities in dairy industry:

The information and data presented in foregoing paragraphs would clearly indicate the business potential and suitable logistics that need to be adopted for successful and sustainable dairy industry of India .
The field level agencies like state Government, cooperatives, teaching and research institutions, farmer-producers or their associations, NGOs, banks and other financial institutions, insurance companies, private sector ( particularly milk processing and marketing agencies) will have to take a closer look, establish a business liason and develop a suitable plan and strategy for investments in the dairy industry.
Foreign investors and financial institutions have to seek suitable local partnerships for survey of potential and investments in the areas of animal breeding, feed and fodder production, animal health cover, animal and plant insurance, transportation, processing, packaging, preservation and marketing of milk and value added products,.
Development of liaison amongst research institutes for collaborative research is required.
Liaison is required between local agencies and foreign Institutions and donors for business and manpower training and development programmes

Particulars	1998-99	1999-00	2000-01	2001-02	2002-3
Ground level credit for A.H. sector	19960	21770	25990	31840	NA*
NABARD Refinance for Dairy	5813	6733	7690	8210	9092