ECONOMIC ANALYSIS

Module 7. Outlook of dairy industry

Lesson 30
CHARACTERISTICS OF DAIRY SECTOR IN INDIA

30.1 Introduction

India is the largest milk producing country in the world with milk production of 118 MMT (2010-2011). But from the productivity point of view, the productivity of Indian dairy cattle is very less and largely handled by unorganized sector. This chapter describes characteristics features of dairy sector of India.

30.2 Milk Productivity

The milk productivity of the animals in India has appeared low and there has been a high genetic variability in the economic traits of cows, so there is a vast scope for improvement of milk production and consequently increased marketable surplus of milk for processing. It is known that in the Indian context, the structure of milk production is largely based on low input and low-to-moderate output which fits into the resource endowments of small producers in terms of ownership of land, family endowment as also with common property resources. The farmers’ perception about input use and its outcome is usually traditional. However, certain regions of the country and certain segments of rural population, have taken up dairying progressively as a means of employment. The traditional farms of dairy enterprises have given way to commercial farms with escalation in average production, bringing in modernity in farm practices and use of dairy farm power and mechanization. In this context the commercial dairy farming, if practiced scientifically, is capable of giving a return on the investment to the tune of 20-25 per cent or more which only a few other occupations are able to do. Further, the cost of milk production can be reduced and dairy farming can be made more economical by integrating the fodder production, feed processing, production of milk and value added milk products and marketing into a chain under a single roof. The other factors responsible for promotion of commercial dairying are shrinkage of land holdings, the displacement of labour from crop farming as a result of mechanization, the introduction of high yielding crossbred cows, the easy accessibility of improved technologies and the fact that the cost of milk production in India is one of the lowest in the world. In view of these developments dairy with high yielding crossbred cows is receiving a lot of emphasis which has generated ample scope for developing commercial dairy farming.

India is one of those countries where cost of milk production at the farm-gate level is very low. Though it is of great comparative advantage, it is also important to note that India has a huge domestic market. The geographical location of India coupled with its neighboring countries being milk deficient, can help India to place herself in the potential milk export map of the world.

Another interesting characteristic of Indian dairy sector is that there is a symbiotic relationship exists between agriculture and dairy farming. The agriculture by products provide feed and fodder for the cattle, whereas cattle provide necessary draught power for various agriculture operations, besides nutritional security and ready cash to farming families from sale of surplus milk.

30.3 Hurdles in Dairy Farming

Despite India being the highest milk producer in the world, the productivity per animal is very low which is a result of poor genetic make-up, shortage of feed and fodder and inadequate health cover. Production of milk in Indian dairy sector has shown tremendous growth from 17 million tones (1950-51) to 112.5 million tones (2009-10). This transition from deficiency to sufficiency has been achieved by a series of policy interventions by the government.

There has been an unprecedented growth in milk production, processing and marketing. Achieving further gains call for innovative technology. New initiatives will lead to emergence of modern dairying as a full-fledged agribusiness foe enhancing human nutrition and generating mass employment, particularly in rural areas. More intensive dairying activities can raise the purchasing power of the less privileged sections of society. Scientific dairy farming is also helping develop a symbiotic relationship between the farmer and the industry. The future of India’s dairying will, no doubt, is a hi-tech one, although its base will continue to be in the hands of millions of small and marginal farmers as well as landless labourers.

The quality of milk and its handling throughout the supply chain needs to be improved. This will cost a lot of money. But, it appears a sizeable segment of the market is willing to pay extra price for better quality milk and milk products. The answer appears to be simple: Investments in quality improvement can be charged to the high-end consumers through a higher price for better quality.

There is a need for intervention by the Government for providing financial assistance for improving quality of milk handled by non-organized sector/small-scale milk producers in rural areas scattered all over the country.

This is a good time for global dairy players to watch out for India. This is also a good time for the Indian dairy industry to look at the threats posed and the opportunities offered by rest of the world.

India has surely emerged as a competitive producer of milk and the Indian dairy industry as a modern cost-efficient player that can take on the world. These strengths cannot hide the weakness of poor quality milk coupled with a not very efficient public health enforcement structure. Globally this is a no-no situation.

It is clear that the rate of increase in milk production may not keep pace with the income increases. This may lead to imbalances particularly during drought years. That is the time a policy change may allow a ‘freer’ market. Watch out for the proverbial camel entering the tent

We cannot afford to forget them… The success for India’s dairy industry is not a story of the triumph of science and technology. There have been no miracles. The white Revolution was possible because we created structures that give our farmers control over the resources they create.

There are aspects of the Indian dairy industry, which make it different from the rest of the world. It’s neither a high energy-using industry nor a capital-intensive one! In fact, in terms of feed etc it relies on residues and by-products. So, in that sense it is a highly eco-friendly industry that recycles materials rather than adding to ecological imbalance. It contributes very substantially to income generation in rural areas. Growth of the industry, over the years, has meant that almost 22 percent of the income of rural people is now coming from livestock. It’s really the income accruing to that segment of population, which is lower down in the income-earning range.

In terms of structural change, the question arises: What is necessary for the dairy industry to cope with new challenges in future? One certainty in near future is that the organized sector to private sector, like the cooperate sector, would also have a larger role in the industry. In developing scenario, we expect that the integration of the producer with the organized sector will be an important component of the structural transformation!

Looking ahead, the diary industry has a very ambitious agenda, whose prime objectives are productivity enhancement, institutional and structural change, quality upgradation and making an impact on the global trade. It is not clear why a cooperate with weak processing or marketing capabilities should not consider alliances with other cooperative or companies that will pay a fair price for the milk it procures? It is only wrong if such alliances deprive farmers of benefits they deserve, or if it places that benefit at risk. Such relationships can be maintained as long as they serve their members, interests; when they cease to do so, the partnership can be ended. Do we not see this happening to cooperative all over the world?