CHAPTER 2

DAIRY INDUSTRY IN INDIA

2.1 Introduction -
Aryans were the first in India who tamed and domesticated the cows and
used their milk as a food substance for human being. They also considered cows as
very useful animals, which further turned into religious belief and faith. From
excavation, old records and pictures of milking scenes of cow with their calves
painted and carved one can conclude that, milk business is in existence in India
6,000 to 10,000 years ago. In India, the Vedas, puranas and Arthashastras establish
the facts that the cows were worshiped on account of their utility as a source of milk
and had become a common feature of Indian life.9
Considerable reference to milk business are observed in Mahabharata, that
‘Gavalanis’ selling milk from Dwarka to Mathura. References to popular milk
products like butter, Khava, pedha etc. are also found in the Mahabharata, indicating
that it was beginning of today’s milk business on a smaller scale.3
Dairying before independence was in very primitive and old form. Private
person milkman collects milk from the rural farmers twice a day & sells it door to
door in cities and towns by bicycle. Milkman sell the row fresh milk.2 In India,
factory system of production was adopted in the year 1850 and it revolutionalized
the production techniques in the industrial world of India. Production of milk and
milk-products was taken up as an industry, making of cheese, cream, butter, Ghee
and other products were transferred to factory system from farm level.1 Around the
year 1900 a Swedish dairy expert A. C. Stafford established a dairy plant in Gujarat
named as ‘British express dairy’. The dairy was located in Kaira District and
supplied about 45,500 kg creams daily to Bombay in 1910-11. A. M. Kohler, a
German started a casein manufacturing unit in 1911 at Gamdi near to Anand in
partnership. In the village of Nadiad, Stratton and company started the Indian Dairy
Supply Company, which pasteurized milk and manufactured butter, milk powder
and cheese. The English dairy expert, G. R. Reeves joined the company in 1914. He
established the first mechanized creamery in Gajarat : The Government Central
Creamery, Ahmedabad.11

14
 Polson plays a major role in dairy development. Pastonji Edulji Dalal, a
parasi, started the business with selling coffee bean under the name Polson. Polson’s
coffee was supplied to the British and Indian armed forces. In 1915 Polson got a big
order for butter from the armed forces. He started Polson’s Model Dairy in January
3, 1930.13
In 1945 Polson obtained from the Bombay government an executive order giving his
dairy the monopoly to purchase milk from Anand and the fourteen villages that
surrounded it, simultaneously banning the export of milk or milk products from
Kaira district. Because of Polson’s exploitation milk producers started to think of
co-operation as a means of self-defence.12 On December, 14th 1946, Kaira District
Cooperative Milk producers Union Limited was registered. Kaira Co-operative was
not unique. There were other milk co- operatives in India like Madras Co-operative
Milk Supply Union, which was 19 years old in 1945-46, the Coimbatore Co-
operative Milk Supply Union, the Allahabad Milk supply Union and the Lucknow
Milk Supply Union.5

2.2 Pre-operation Flood Period –

The earlier attempts at dairy development can be traced back to the British
rule, when the defense department established military dairy farms to ensure supply
of milk and milk products to the colonial army. The first farm was established in
Allahabad in 1913.4 In post-independence period, modernization of the dairy
industry became a priority of the government with the initiation of a planning
process. One of the first policy initiatives immediately after independence was the
recommendation from the milk sub-committee of the policy committee on
Agriculture (1950) which resulted in City Milk Scheme Set up in Delhi. The
government implemented various schemes such as Key Village Scheme (KVS) and
Intensive Cattle Development Project (ICDP) to increase milk production. However,
during the two decades between 1951 & 1971, the milk production remained more
or less stagnant and growth in milk production was nearly one percent.13

15
2.3 Operation Flood Period –

National Dairy Development Board (NDDB) was set up in Anand in 1965 &
gave it the task of helping the bodies set up by the State Governments to develop
dairy projects along the lines of Anand. The operation Flood (OF) programme was
launched by the National Dairy Development Board to develop a viable and self
sustaining dairy industry in 1970. The key objective of the programme was to create
a strong network and linkages between procurement, processing and distribution of
milk by the Co-opeartive sector & thus linking the milk producing Villages with the
major urban markets.9

The first phase of operation flood was for the period of 10 years. With successful
implementation of OF – I, OF – II was launched to widen the area covered under the
OF programme.
Table 2.1 - Achievements of Operation Flood, 1970-2002

Post-OF
Indicator OF phases
phase
Phase I Phase II Phase III
Date started July 1970 October 1979 April 1985 April 1996
Date concluded March 1981 March 1985 March 1996 March 2002
Investments (Rs. Million) 1,165 2,772 13,031
No. of federations/apex milk unions
10 18 22 22
operating
No. of milk sheds covered 39 136 170 170
No. of dairy co-operative societies set
13.3 34.5 72.5 74.3
up (thousands)
No. of members (millions) 1.75 3.96 9.26 11.06
Average milk procurement (million
2.56 5.78 10.99 17.60
kg/day)
Liquid milk marketing (million liters/
2.79 5.01 10.02 12.67
day)
Processing capacity
Rural dairies (million liters/ day) 3.59 8.78 18.09 26.47
Metro dairies (million liters/ day) 2.9 3.5 3.88 NA
Milk drying capacity (Mt/day) 261.0 507.5 842.0 990.0

16
Technical inputs
No. of Artificial Insemination centres
4.9 7.5 16.8 22.0
(thousands)
No. of AIs done (million/year) 0.82 1.33 3.94 6.00
Cattle feed capacity (thousand mt/day) 1.7 3.3 4.9 5.2
(Source – www.amul.com)
The first phase of Operation Flood (OF-I) was launched in 1970 following an
agreement with the World Food Programme, which undertook to provide 1,26,000
tons of skimmed milk powder and 42,000 tons of butter oil over the five years of the
project.19 The programme involved organizing dairy co-operatives at village levels,
creating physical and institutional infrastructure for milk procurement, processing,
marketing & production enhancement programmes / services at the union levels.
The programme adopted Anand Pattern. Under the Anand Pattern milk producers in
each village form their own Village Dairy Co-operative, elect the Board of
Management which sets the Co-operative’s policies & empower the board to appoint
a secretary, who manages the co-operative & who is paid out of its earning. Every
morning and evening, the co-operative buys milk from all producers in the village
who wish to sell their milk to it. The co-operative staff measure the milk bought
from each producer and test it for its fat content. Within twelve hours, he or she is
paid for the milk sold earlier and each payment is based on the tested fat content of
milk.15

2.4 – Operation Flood Phases –

2.4.1 Operation Flood I –

Operation Flood I was expected to last five years – from 1970 to 1975. This
period was subsequently extended to mid 1978. This project covers 57 districts of 10
states i.e. Andhra Pradesh, Bihar, Gujarat, Hariyana, Maharashtra, Punjab, Rajsthan,
Tamilnadu, Uttarpradesh and West Bengal. By the each of OF-I about 13,500 dairy
co-operative societies in 39 milk shades were organized with 17.50 lakh member
farmers. It achieved milk procurement of 34 lakh LPD and marketing 28 lakh LPD.
The OF-I extended to six years due to delay in implementation and also delay in
receipt of commodities.9

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2.4.2 Operation Flood – II

The second phase of the programme was implemented between 1981 to 1985
and covered 22 States/Union territories. OF-II was designed on the foundation of
OF-I. The total investment was Rs.2771.70 million. The main objectives of OF-II
are –
1. To enroll some 10 million rural families in a viable self-sustaining dairy
industry.
2. To erect a National Milk Grid linking producers in rural areas to urban
centers with a total population of 150 million.
3. Set up a national frozen semen centre, develop vaccine production and step
up the design and manufacture of dairy equipment.
4. To provide 180 grams of milk each day for a total population of 750 million.
OF-II helped to market milk in about 148 cities & towns with a total
population of 15 million through a National Milk Grid linking these town
and cities to 136 milk sheds. The project expanded the number of village co-
operatives to 34,500 covering 36 lakh farmers. The peak milk procurement
increased to a level of 79 lakhs L.P.D. and milk marketing to 50 lakhs
L.P.D.14

2.4.3 Operation Flood – III

The third phase of operation flood was launched on April 1, 1985 to

consolidate the extensive milk procurement, processing and marketing infrastructure
created under OF-I and OF-II and finally completed on March 31, 1996. The main
objective of OF-III was to establish 70,000 dairy co-operative societies in 170 milk
–Shed areas. The total budget of OF-III was Rs.8,962.10 million fundeded by World
Bank’s loan US $ 365 million, Rs.222.6 crores generated in the form of donated
commodities & Rs.207.7 crores generated by NDDB from its own resources.9
The Government of India launched the ‘Technology Mission on Dairy
Development’ (TMDD) in August 1988 to support and supplement the efforts of
operation Flood programme and to enhance rural employment opportunities &

18
income generation through dairying. These programmes transformed the Indian
dairying scenario drastically from an insignificant one to the world leader. But all
this growth in dairy production took place largely under a regulated market
environment, both domestically and externally.7

2.5 Achievements of Dairy Industry –

I. World’s Largest Dairy Development with 170 milk unions, operates in over
346 districts, 1,22,534 village co-operative societies, 1296 million farmer
families, 21.5 million liter daily milk procurement.
The future of Indian Dairy sector is now at cross roads, with increasing
liberalization of this sector.

II. Milk Production –

1) India’s milk production increased from 21.2 million metric tons in 1968-
69 to 100 million metric tons in 2006-07.
2) Per-capita availability of milk increased from 112 grams per day in
1968-69 to 245 grams per day in 2006-07.
3) India’s 3.8% annual growth of milk production surpasses the 2% growth
in population; the net increase in availability is around 2% per year.

III. Marketing –
1) In 2006-07 average daily milk marketing stood at 181.27 lakh liters;
annual growth has averaged about 6.2% compounded over the last five
years.
2) Milk is marketed in about 200 class I cities including metros and some
600 smaller towns.
3) During 1991-2007 the daily milk supply has increased from 37.3 to 63.6
liters per 1000 urban consumers.

(Source: SharmaVijay Paul & Sharma Pritee, Trade Liberalization &

Indian Dairy Industry, Oxford IBH Publishing Co. Pvt. Ltd
Sharma Vijay Paul, Sharma Preeti, Performance and Competitiveness of
Indian Dairy Industry, A Report )

19
2.6 Institutional Support for Dairy Development
Following are some institutes which are supporting Dairy Development in
India.
1) National Dairy Development Board (NDDB) –
National Dairy Development Board was established in 1965 at Anand
(Gujarat) to replace exploitation with empowerment, tradition with
modernity, stagnation with growth, transforming dairying into an instrument
for the development of India’s rural people. NDDB began its operations with
the mission of making dairying a vehicle to a better future for millions of
grass roots milk producers. The mission achieved thrust and direction with
the launching of Operation Flood – a programme extending over 26 years
and which used World Bank loan to finance India’s emergence as the
World’s largest milk producing nation. Since its inception, the Dairy Board
has planned and spearheaded India’s dairy programmes by placing dairy
development in the hands of milk producers and the professionals they
employ to manage their co-operatives.

2) Indian Dairy Corporation (IDC) -

Indian Dairy Corporation was established on 13th February, 1970.
The corporation works with NDDB. The main responsibility of IDC was to
co-ordinate Operation Flood project with NDDB. The IDC handled all
commercial activities in the Operation Flood phase I, II and III and played an
important role in establishing National Milk Grid. The corporation maintains
a pool of dairy machineries and equipments to supply them various projects
of dairy co-operatives. The major objective of IDC is to promote dairy
development in India.

3) National Co-operative Dairy Federation of India (NCDFI) –

NCDFI was established in November, 1969 in New Delhi. This is a
National Apex Body of Dairy Co-operatives. It has 27 members of State
level apex institution of co-operative dairy federations and 22 co-operative
dairy organizations. The main objective of NCDFI is to promote dairy
industry in co-operative line.

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 4) National Dairy Research Institute (NDRI) –
NDRI was established in 1955 at Karnal in Hariyana state. The NDRI
metamorphosed into a national institute from older Imperial institution of
Animal Husbandry and Dairying founded at Bangalore in 1923. The NDRI
engages itself in teaching, research and extension activities and the
participants in this three dimensional activities are the scientists, the farmers
as students and dairy industry at large. It develops educational programmes
to meet the man- power requirements of dairy industry. The main function of
NDRI is to advice and assist with regard to techno economic feasibility
projects, reports, product development work and quality control. This
institute has two regional research centers at Kalyani (West Bengal) and
Bangalore (Karnataka).
(Source: www.nddb.com)

2.7 Importance of Milk in India’s Food Basket –

A household spends the money on the different requirements of the family viz. food
and beverages, fuel and light, clothing, medical care, recreation, durable goods,
education, etc.
Table 2.2 How a rupee is spent on overall household expenditure.

Items Spending -(Paise)

Food & beverages 51
Fuel & Light 9
Clothing & Footwear 8
Medical Care 7
Recreation 6
Durable goods 4
Education 4
Gross rent 3
Miscellaneous 4
Transport 4
Total 100
(Source – Gupta P. R. Managing Growth is the challenge – Dairy Industry Profile,
Dairy India, 2007, pp 34)

21
Graph 2.1 How a rupee is spent on overall household expenditure

The table 2.2 shows that how a household spends a rupee on their requirements.
Spending on the food and beverages is maximum i. e. 51 percent where as the
remaining rupee is spent on the other items such as fuel and light, clothing and
footwear, medical care, recreation, durable goods, education, gross rent, transport
and miscellaneous.

2.7.1 Share of milk in Food expenditure –

Out of total expenditure on food again the amount is spend on the different food
products like cereals, milk and milk products, meat, egg, fish, pulses, edible oil,
sugar, pulses, beverages, vegetables, ,fruits and nuts.

22
Table 2.3 Share of Milk
Food Products Share in
Percentage
Cereals 31
Milk & Milk Products 16
Meat, Egg, Fist 6
Pulses 6
Edible Oils 8
Sugar 3
Beverages 10
Salt / Spices 4
Vegetables 12
Fruits & nuts 4
Total 100
(Source – Gupta P. R. Managing Growth is the challenge – Dairy Industry Profile,
Dairy India, 2007, pp 34)

Graph 2.2 Share of Milk in food expenditure

The table 2.3 shows that expenditure on the cereals is maximum i. e. 31 percent.
Below that the households spends 12 and 10 percent on vegetable and beverages
purchase. An average household made an expenditure of 16 percent on the milk and
milk products purchases.

23
2.8 World Milk Production -
World milk production is the aggregate of the cow milk and buffalo milk
production.
Table 2.4 World Milk Production (Million Tones)

Buffalo Milk (million

Year Cow Milk (million Tones)
tones)
1997 4699 595
2000 4894 666
2003 5167 755
2005 5325 786
2006 5432 805
2007 5330 820
(Source- Department of Animal Husbandry, Dairying & Fisheries, Ministry of
Agriculture, GoI, www.nddb.com)

Graph 2.3 World Milk Productions (Million Tones)

Table 2.4 shows that world cow milk as well as buffalo milk production has
increased from 1997 to 2007 continuously. Cow milk production is far more than
the buffalo milk production over a period of time.

24
2.9 Buffalo Milk Production in India -
Buffalo milk production in India from 1997 to 2006 is given in the following table.
Table 2.5 Buffalo Milk Production in India (Million Tones)

Year 1997 2000 2002 2005 2006

Country
384 436 464 509 525
(India)
(Source- Department of Animal Husbandry, Dairying & Fisheries, Ministry of
Agriculture, GoI, www.nddb.com)

From the table it can be observed that buffalo milk production in India has increased
from 384 million tones in 1997 to 525 million tones in 2007. But if it is compared
against the world buffalo milk production, it is very less.

2.10 Milk Consumption and per Capita Availability of milk in selected

countries –
Milk consumption in different parts of the world varies according to the milk
availability and the purchasing power of the consumers.
Table 2.6 The per capita consumption of milk in some developed and
developing countries (2006)

Daily per capita consumption

Country
(gm)
Developed Countries
1 Norway 2046

2 New Zealand 2032

3 Sweden 1812

4 Switzerland 1588

5 U. K. 1315

6 Denmark 1188

25
Developing Countries
1 Israel 577
2 India 246
3 Pakistan 225
4 Bangladesh 51
5 Philippines 2
(Source- Department of Animal Husbandry, Dairying & Fisheries, Ministry of
Agriculture, GoI, www.nddb.com)

Although the existing dairy development programmes in the country have increased
the milk production, yet the real increase in per capita availability of milk is
marginal. The per capita availability of milk has been declined from 132 grams in
1951 to 108 gms in 1966. After 1966 it increased from 108 to 112 grams in 1971
and 131 gms which was about two times less than the minimum requirement of 280
gms as recommended by the National Advisory committee. Per capita availability
has been increased from 149 gms in 1985 to 246 gms in 2006-07.

2.11 Pattern of Milk Utilization –

According to the National Commission on Agriculture, liquid milk

consumption in India accounts for 45% of total milk output, while 39% is converted
into ghee and butter, 8% into curd and 5% into Khoa or similar milk sweets with
cream, milk powder and other dairy products absorbing the remaining 3%, while the
pattern of milk utilization in U. S. A. is some what different from India. The liquid
milk consumption account for 37.9% of the total milk output, while 20.5% is
converted into cream butter, 13% for farmer’s use, 9.3% for cheese, 5.7% for ice-
cream, 5% for farm butter and remaining 8.6% for other products.16
This shows that the consumption of liquid milk in its traditional form in our
country is more. Due to a lack of proper transport and storage facilities most of the
milk is consumed in its raw form only.

26
2.12 Production of Milk and per capita availability of milk in India –
Per capita availability of milk varies over a period of time with the increase in milk
production in India.
Table 2.7 Production of Milk and per capita availability of milk in India –

Production in India
Per Capita Availability
Year Production (Million Tones)
(gms/day)
1991-92 55.7 178
1992-93 58.0 182
1993-94 60.6 187
1994-95 63.8 194
1995-96 66.2 197
1996-97 69.1 202
1997-98 72.1 207
1998-99 75.4 213
1999-2000 78.3 217
2000-01 80.6 220
2001-02 84.4 225
2002-03 86.2 230
2003-04 88.1 231
2004-05 92.5 233
2005-06 97.1 241
2006-07 100.9 246
(Source : Department of Animal Husbandry, Dairying & Fisheries, Ministry of
Agriculture, Government of India.)

27
 Figure 2.4 Production of Milk and per capita availability of milk in India

The table 2.7 shows that milk production has increased over a period of time from
55.7 million tons in 1991 – 2000 to 100 million tons in 2006-07. Per capita milk
availability also shows the increasing trend from 178 gm/ day in 1991 -2000 to 246
gms / day in 2006-07. But if we compare this statistics against world milk
production and consumption then it is low.

2.13 Per Capita Availability of milk in Maharashtra-

Per capita availablilty of milk and milk products from 1991 to 2003-04 is given in
the following table.
Table 2.8 Per Capita Availability of milk in Maharashtra-

Per Capita Availability of Milk in Maharashtra (gms/day)

91- 92- 93- 94- 95- 96- 97- 98- 99- 00- 01- 02- 03-
Year
92 93 94 95 96 97 98 99 00 01 02 03 04
Per capita
Availabilit
136 138 140 156 163 161 161 168 168 162 172 172 172
y
(gms/day)

(Source- Department of Animal Husbandry, Dairying & Fisheries, Ministry of

Agriculture, GoI, www.nddb.com)

28
 Graph 2.5 Per Capita Availability of milk in Maharashtra

The table 2.8 shows that per capita availability of milk in Maharashtra has increased
from 136 gms / day in 1991-92 to 172 gms / day in 2003 -04. If we compare per
capita milk availability in Maharashtra against per capita milk availability in India,
availability in Maharashtra is far lees than the country average.

2.14 Live Stock Population in India by Species-

The population of the live stock viz. cattle, adult female cattle, buffalo, adult female
buffalo are given below.
Table 2.9 Live Stock Population in India by Species-

Livestock Population in India by Species

(In Million Numbers)
Species 1951 1956 1961 1966 1972 1977 1982 1987 1992 1997 2003
Cattle 155.3 158.7 175.6 176.2 178.3 180 192.5 199.7 204.6 198.9 185.2
Adult
Female 54.4 47.3 51 51.8 53.4 54.6 59.2 62.1 64.4 64.4 64.5
Cattle
Buffalo 43.4 44.9 51.2 53 57.4 62 69.8 76 84.2 89.9 97.9
Adult
Female 21 21.7 24.3 25.4 28.6 31.3 32.5 39.1 43.8 46.8 51
Buffalo
Total
198.7 203.6 226.8 229.2 235.7 242 262.2 275.7 288.8 288.8 283.1
Bovines

29
(Source- Department of Animal Husbandry, Dairying & Fisheries, Ministry of
Agriculture, GoI, www.nddb.com)
From the table 2.9, it can be observed that the live stock population of cattle has
increased from 1951 to 1992, but decreased in 1997 and 2003. In case of other
species it has shown increasing trend from 1951 to 2003. This has ultimately
increased the total milk production.

2.15 Per Capita Monthly Consumption Expenditure on Milk and Milk

Products
Per capita monthly expenditure on milk and milk products in rural and urban area is
different because of the socioeconomic conditions prevailing in the area.
Table 2.10 Per Capita Monthly Consumption Expenditure on Milk and Milk
Products

Per Capita Monthly Consumption Expenditure on Milk and Milk Products

NSS Round Milk and Milk Products Average Size of
(in Rs.) Household
th
25 (1970-1971)
Rural 3.03 -
Urban 5.01 -
th
27 (1972-1973)
Rural 3.22 5.22
Urban 5.91 4.72
32nd (1977-1978)
Rural 5.29 5.22
Urban 9.16 4.89
38th (1982)
Rural 8.45 5.2
Urban 15.15 4.85
42nd (1986-1987)
Rural 13.48 5.26
Urban 23.32 4.79
43rd (1987-1988)
Rural 13.63 5.08

30
 Urban 23.83 4.71
44th (1988-1989)
Rural 15.65 5.17
Urban 26.74 4.87
th
45 (1989-1990)
Rural 18.35 4.96
Urban 29.53 4.66
46th (1990-1991)
Rural 19.04 4.81
Urban 32.37 4.55
th
47 (July-Dec.1991)
Rural 21.9 5
Urban 37.21 4.73
48th (Jan-Dec 1992)
Rural 23 5.2
Urban 42 4.8
49th (Jan-Jun 1993)
Rural 23 5.1
Urban 41 4.6
50th (July 1993 – June 1994)
Rural 27 4.9
Urban 45 4.5
51st (July 1994 – June 1995)
Rural 27 4.9
Urban 49 4.6
52nd (July 1995 – June 1996)
Rural 32.38 5
Urban 56.45 4.6
53rd (Jan-Dec 1997)
Rural 39.31 5
Urban 62.75 4.6
54th (Jan-June 1998)
Rural 36.54 5
Urban 64.63 4.7
55th (July 1999 -June 2000)

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 Rural 42.56 5
Urban 74.18 5
th
56 (July 2000 – June 2001)
Rural 42.97 5.1
Urban 75.9 4.5
57th (July 2001 – June 2002)
Rural 41.91 5.02
Urban 75.82 4.48
th
58 (July 2002 – Dec. 2002)
Rural 45.34 5
Urban 78.19 4.4
59th (Jan.2003 – Dec 2003)
Rural 44.69 5
Urban 80.03 4.5
60th (Jan 2004 – June 2004)
Rural 47.6 5.08
Urban 82.98 4.42
61st (July 2004 – June 2005)
Rural 47.31 5.08
Urban 83.3 4.55
(Source- Department of Animal Husbandry, Dairying & Fisheries, Ministry of
Agriculture, GoI, www.nddb.com)

From the table 2.10 it can be observed that there is no significant change in the
average size of household. Increasing trend can be observed for the per capita
consumption expenditure of milk and milk products over a period of time.

2.16 Current Scenario of Indian Dairy Industry –

Dairying has become an important secondary source of income for millions
of rural families and for millions more has assumed the most important role in
providing employment and income. The per capita availability of the milk has also
increased to a level of about 245 gm per day, but this is still low as compared to
developed nations or the world average 285 gm per day. Government of India is

32
making efforts to increase the productivity of milk animals and thus increase the per
capita availability of milk.3
The Annual Report of the NDDB for 2007-08 states that a draft National Dairy
Plan (NDP) has been proposed to increase the country’s milk production to meet the
projected demand of 180 million tones by 2021-22. With an estimated outlay of
Rs.173 billion, the National Dairy Plan focuses on -
1) Productivity measures to enhance milk production as the average annual
production will have to increase from 2½ million tones to 5 million tones
over the next 15 years.
2) Strengthening and expanding infrastructure to procure, process and market
milk through existing and new institutional structures. The share of the
organized sector is proposed to be increased from 30 percent today to 65
percent ensuring the supply of quality milk to consumers.16

India remained the largest milk producing country in 2007-08 with a share
close to 15 percent of world milk production. However, a combination of factors, led
by high GDP growth in particular has led to a rapid increase in the domestic demand
for milk. Producer prices for milk continued to increase leading to a corresponding
rise in consumer prices.20
Recognizing the importance of increasing productivity, NDDB provided a
range of technical and managerial services, including establishing standards and
protocols for quality bull and semen production. It also funded the production of
genetically evaluated bulls through progeny testing, expansion of door-step artificial
insemination (AI) services, ration balancing amongst other services.7
This clearly indicated that dairy industry is moving towards the right
direction but increase in milk production and the availability of milk for processing
on various scales i.e. small and large scales, call for product diversification.
Not only increasing urbanization means greater consumerism, but with the
rapid spread of the modern communication systems like television in the rural areas
and ever increasing emphasis on advertisements, the consumption pattern for dairy
products is rapidly changing all over the country.
In order to produce quality dairy products, microbiological quality of milk
has to be improved considerably both at farm level and the processing units. More

33
chilling are to be installed for prompt cooling of raw milk at the site of production.
Imparting of proper education to the workers at the farm level is envisaged for
maintaining proper hygienic conditions. Packaged dairy products will have
expanding markets. There is a need to search/develop bio-degradable packaging
material for dairy products since changing life styles especially among urban
population will necessitate production of large quantities of prepared or ready-to-use
food products containing dairy ingredients. Health dairy foods are likely to
command a large share of the food market.12 With the increasing purchasing power
of the urban middle class, value added products will occupy a key position in dairy
products range. The economy of the country has been thrown open to global market.
In the light of recent developments, the dairy plants involved in the processing of
milk and manufacture of dairy products would be required to exploit the
international markets which are possible by stringent control on the quality of dairy
products so that the product become competitive in the international market.

2.17 Potentials of Indian Dairy Industry –

India has the largest population of milch animal in the world. It constitutes
more than 50 percent of the cattle in the world. Unlike other milk producing
countries, 54 percent of India’s milk comes from buffaloes, which is endowed with
unique processing qualities. Buffalo milk production is advantageous to India
because buffalo milk is especially appropriate for commercially important dairy
products such as cheese, Casein, Cream, Paneer, Khoa etc.18 India may emerge as
the leading supplier of these products in the world market. Indian dairy industry has
to derive maximum benefits of the uniqueness and positive virtues of buffalo milk to
obtain the competitive edge in the global dairy market. Most of the countries in Asia
and Africa are large importers of dairy products and therefore these regions are
emerging as important dairy export markets. Realizing the nutritional importance of
milk in the dietary regimen the consumption of milk and milk products is increasing
in these countries.

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2.18 Prospects for Indian Dairy Industry –

All the countries in South Asia, except India, are net importers of milk and
milk products. Bangladesh and Shrilanka are major importers, their imports in 2001
was 2.55 MT and 4.88 MT respectively. In the West Asian region, countries like
Iran, Iraq, Syria, Turkey, Saudi Arabia and other countries produce small quantity of
milk and meet their requirements mainly through imports. This is where opportunity
lies. During the past two years, the Asian countries accounted for almost ¼th of
world ‘Cheese’ imports, more than half of world ‘Whey’ and almost 2/3rd of world
‘Lactose’ imports. India has prospect to tap the export market for these products in
the above mentioned countries. A major market for the Indian milk based sweets is
fastly developing in overseas. Large population of Indian subcontinent origin settled
in Ocean, Middle East, Western Europe and North America and they represent
lucrative export market. An advantage of this niche market can be taken by
developing dairy products of Indian ethnic origin and also by meeting the quality
standards required for the global market.17

2.19 SWOT Analysis of Indian Dairy Industry –

Every industry has its Strengths, Weaknesses, Opportunities and Threats

(SWOT). In case of dairy industry SWOT analysis looks very hopeful. Its salient
features are as follows -

Strengths -
1) Demand is optimistic with the growth in population and increased incomes.
2) Profit margins are reasonable for milk products; higher margins are possible
for quality products.
3) Product mix can be extended. Milk is known for generations to offer variety
of products. The potential is yet to be fully exploited a dairy enterprise can
keep on adding to its product line.
4) Raw material i.e. milk is available in abundant
5) Professionally – Trained managers and technicians available to meet the
challenges.

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 6) Newer technologies for product and process know how available with
national level institution.

Weaknesses -
1) Milk and Milk products are perishable in nature.
2) In spite of various programmes implemented to raise the productivity of
milch animals, there are millions of cows and buffaloes which have very low
yields.
3) Smaller quantities of milk being available over a wide area with woes of bad
roads and inadequate transportation facilities make milk procurement
problematic.
4) The ever rising cost of diesel has increased the distribution costs. As a result,
milk and milk products are distributed in areas that are uneconomical to
cater.
5) Competition is becoming tough. But then competition has to be faced as a
ground reality on merit. The market is large enough for newcomers to carve
out their niche.

Opportunities –
Innovation is the Key Word to add value into a product in its composition,
health benefits, packaging & presentation. Following are potential areas of value
addition.
1) Products like Shrikhand, Paneer, Khoa, Lassi, Ice creams, Flavoured milk,
dairy Sweets etc. offer good flexibility in the market place along with
opportunities in brand building.
2) Mass production of indigenous milk based sweets in dairy plants can tap the
growing demand for them.
3) Cultured products like Dahi, Yoghurt and Cheese lend further strengths.
4) There are opportunities in milk proteins through casein and caseinates and
other dietary proteins for domestic marketing and exports.
5) Infant foods, designer milk and milk products for niche market like low
calorie, low fat, cholesterol free, sugar free etc.

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 6) Efforts to exploit export potential are on. Already several organizations in
the co-operative and private sectors are successfully exporting to
Bangladesh, Sri Lanka, Nigeria & the Middle East. As world trade is
opening up, opportunities will increase tremendously for the export of dairy
products if quality standards are met.

Threats –
1) Non-organized sector occupies a pride of place in the industry. An
organized consumer awareness campaign is required to tackle this threat and
educate consumers about the safety of milk and milk products they
consume.
2) At the Government level, strict vigilance is required to curb the import of
substandard, low priced milk products as well as precautions against their
dumping which can otherwise create a big threat.
(Source – Chandan R.C., Dairy Industry: opportunities for FDI, 6th Edition,
Dairy India, pp. 30
All India Dairy Business Directory, Dairy Year Book, 2005.)

2.20 -11th Five year plan for Dairy Development –

Under Dairy Development programmes, the main objectives are to improve

socioeconomic conditions of milk producers, to maintain effective supply system at
reasonable price and provide subsidiary occupation to farmers. During the 11th Five
Year Plan (2007-2012), it is proposed to start 20 Co-operative milk producers’
societies including 17 women co-operative milk producers’ societies. Assistance is
given to the new primary co-operative milk producers societies & existing primary
co-operative producers societies for purchase of Automatic Milching Machine,
Automatic Testing Equipments purchasing of computers and construction of office
building cum milk collection yard in the form of grant, Share Capital and Loan etc.
11th five year plan focuses on marketing front, as adequate efforts have not
been made to understand the emerging needs and wants of domestic consumers.
Similarly there has been the absence of strategic plan in building the necessary

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infrastructure and putting in place relevant institutional mechanism for marketing
and branding, export of milk and milk products.
There have been hardly any appreciable research & development (R & D)
efforts in the processed and packaging technology especially for Indian sector. Also,
there has not been any large scale effort in marketing branded Indian Milk products.
The development of appropriate technology for improving the productivity and
reducing the cost of milk at the farm level such as cooling, avoiding contamination,
machine milking of high yielder, have not been addressed on an appropriate required
scale.
The goal for dairy development in the Eleventh five Year Plan would be to
achieve a growth rate of at least 5 percent per annum. The working group on Animal
Husbandry & Dairying for the Eleventh Five Year Plan has an investment of Rs.8,
000 crores.
(Source: www.india.gov.in/sectors/agriculture/dairy_development
www.nddb.com )

2.21 Major Issues and Challenges for Indian dairy industry –

India is a low cost milk producer due to the inexpensive maintenance and feeding
costs associated with local cow breeds. Dairy production is an important direct and
supplementary source of income for around 75 million rural families, which
accounts for around 98 percent of total milk production. The top ten milk producing
states are Uttar Pradesh, Rajsthan, Punjab, Andhra Pradesh, Gujarat, Maharashtra,
Madhya Pradesh, Bihar, Tamil Nadu and Haryana. They account for more than 80
percent of India’s milk production.1
With the advent of better technology and penetration of organized retail into the
Indian markets, the dairy industry in India has been able to bring in the ethnic as
well as exotic product offerings to the markets. The demand for pure milk has
moved a long way from bottled milk to high quality tetra pack UHT milk with
increased shelf life and quality.18
Dairy cooperatives account for major share of processed liquid milk marketed
in the country. Milk is processed and marketed by 170 milk producer’s cooperative
unions, which federate into 15 state cooperative milk marketing federations. The

38
organized sector still remains a minor stakeholder and handles about 20 percent of
milk whereas the unorganized sector still controls 80 percent of the industry. Indian
dairy industry faces challenges at different levels, these are as follows-

Issues and challenges at production and processing level-

1. Production by small and large number of farmers – Indian milk production in
contrast to other milk producing countries is characterized by millions of
small and marginal farmers including landless milk producers for whom
dairying is not only a business but also the main source of income.
2. Seasonality of production and fluctuating supply – India being a topical
country renders a hot and humid climate for the animals and thus fluctuations
in milk production. During flush season, the surplus of milk exceeds the
processing capacity and milk goes waste whereas the processing capacity
goes down during lean season.
3. Adulteration and Food safety – The most important aspect of milk is its purity
and wholesomeness. Even after quality certification, there have been
instances of cheap substitution of skim milk powder with below standards, or
use of chemicals etc.
4. Lack of trained and skilled workers – There is lack of trained and skilled
workers who can handle the milk processing operations hygienically and
safely.

Issues and challenges at storage and logistic level-

1. Lack of cold storage facilities – Milk being a highly perishable product
requires to be processed or cooled as soon as possible after milking, so as to
prevent spoilage and contamination. However to ensure this there is a need
of refrigerated milk silos for storage which are not present at the village
levels.
2. Gap in the cold chain and the transport facilities – There are long distance to
be covered to reach bulk milk coolers from the collection center. There is
shortage of refrigerated vans and insulated tankers for ferrying the chilled
milk to processing plants.

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Issues and challenges for marketing -
1. Majority of the market is still unorganized – The milk market in India still
faces the challenge of getting organized. The unorganized market makes it
competes with the organized market in relation to prices.
2. Acceptability of consumer base – A large fraction of the consumer base in
India is yet to accept the clean milk from organized dairies due to higher costs.
The mindset of buying fresh whole milk from the milkman is still prevalent in
the Indian consumers.
3. Lack of transparent pricing system – There is no specific minimum support
price of the milk in the system which makes it unremunerative for the farmers.
4. International competition – The Indian dairy industry faces challenges from
the international dairy market. Indian as a signatory to the World Trade
Organization (WTO) is obligated to open its milk and milk products market to
international dairy companies.
(Source- A Report of Confederation of Indian Industry, Public Private
Partnership in Indian Dairy Industry- Initiating White Revolution, May 2010)

References-

1 Agarwal V.K. Marketing of Dairy Products in Western U.P., Himalaya

Publishing House.
2 All India Dairy Business Directory, Dairy Year Book, 2005.
3 Bandopadhaya Manab K., Dairy cooperative and Rural development in
India, Uppal Publishing House, Delhi.
4 Bedi M.S., Dairy Development- Marketing and Economic Growth,
1987 Deep and Deep Publications, New Delhi.
5 C. Madan Mohan, Dairy Development in India, 1989, Mittal
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6 Chand Kumar, Saraiya Aneesh and Sridhar V., Public Private
Partnership in Indian Dairy Industry- Initiating White Revolution II,
May 2010, Confederation of Indian Industries.

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7 Dairy Industry Profile, Dairy India, 1997, Fifth Edition.
8 Department of Animal Husbandry, Dairying & Fisheries, Ministry of
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13 Kurien Verghese, An Unfinished Dream, 1997, Tata McGraw Hill
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organisations in western Maharashtra , unpublished Ph.D. Thesis,
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15 Pawar S.N., Koli P.A., Salunkhe S.A., Dairy Co-ooperatives and Rural
Development in Kolhapur, UGC Major Research Project, 2003
16 Sharma Vijay Paul, Sharma Preeti, Performance and Competitiveness
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AD, 1996, Indian Dairyman, Indian Dairy Association, New Delhi
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20 www.indiadairy.com
21 www.nddb.com
22 A Report of Confederation of Indian Industry, Public Private
Partnership in Indian Dairy Industry- Initiating White Revolution,
May 2010.
23 www.india.gov.in/sectors/agriculture/dairy_development

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