CHAPTER II

AN OVERVIEW OF THEORETICAL BACKGROUND, REVIEW

OF LITERATURE AND CONCEPTUAL FRAMEWORK

2.1 INTRODUCTION

This chapter deals with the theoretical background of the Micro and Small
scale units in Dairy sector, reviews of existing literatures related to operations of
dairy industry and development of framework of the study. This will enable to get a
clear view about the research gap and how the topic was finalised to fill these gaps.

2.2 MICRO AND SMALL SCALE UNITS –BACKGROUND

Micro, Small and Medium Enterprises (MSME) sector has emerged as a

highly vibrant and dynamic sector of the Indian economy over the last five decades.
MSMEs not only play crucial role in providing large employment opportunities at
comparatively lower capital cost than large industries but also help in
industrialization of rural & backward areas, thereby, reducing regional imbalances,
assuring more equitable distribution of national income and wealth. MSMEs are
complementary to large industries as ancillary units and this sector contributes
enormously to the socio-economic development of the country.

Micro, Small and Medium Enterprises (MSME) contribute nearly 8 percent of

the country’s GDP, 45 percent of the manufacturing output and 40 percent of the
exports. They provide the largest share of employment after agriculture. They are the
nurseries for entrepreneurship and innovation. They are widely dispersed across the
country and produce a diverse range of products and services to meet the needs of the
local markets, the global market and the national and international value chains.

The Micro Small and Medium Enterprises Development (MSMED) Act

The Micro Small and Medium Enterprises Development (MSMED) Act was
notified in 2006 to address policy issues affecting MSMEs as well as the coverage
and investment ceiling of the sector. The Act seeks to facilitate the development of
these enterprises as also enhance their competitiveness. It provides the first-ever
legal framework for recognition of the concept of "enterprise" which comprises both

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manufacturing and service entities. It defines medium enterprises for the first time
and seeks to integrate the three tiers of these enterprises, namely, micro, small and
medium. The Act also provides for a statutory consultative mechanism at the
national level with balanced representation of all sections of stakeholders,
particularly the three classes of enterprises; and with a wide range of advisory
functions. Establishment of specific funds for the promotion, development and
enhancing competitiveness of these enterprises, notification of schemes/programmes
for this purpose, progressive credit policies and practices, preference in Government
procurements to products and services of the micro and small enterprises, more
effective mechanisms for mitigating the problems of delayed payments to micro and
small enterprises and assurance of a scheme for easing the closure of business by
these enterprises are some of the other features of the Act.

MSME Definition:

An MSME (Micro, Small and Medium Enterprise) is defined by RBI/GOI

differently for the Manufacturing and the Services Sector, as follows:

Manufacturing Sector

Manufacturing sector refers to enterprises engaged in manufacture or

production, processing or preservation of goods. The definition of Micro, Small and
Medium Enterprises under the manufacturing sector is based on the Investment
inplant and machinery [original cost excluding land and building] and the items
specified by the Ministry of Small Scale Industries vide its notification No. S.O.
1722(E) dated October 5, 2006

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Services Sector
Services sector refers to enterprises engaged in providing or rendering of
services. These will include small road & water transport operators (owning a fleet
of vehicles not exceeding ten vehicles), small business (whose original cost price of
the equipment used for the purpose of business does not exceed Rs.20 lakh) and
professional & self employed persons (whose borrowing limits do not exceed Rs.10
lakh of which not more than Rs.2 lakh should be for working capital requirements
except in case of professionally qualified medical practitioners setting up of practice
in semi-urban and rural areas, the borrowing limits should not exceed Rs.15 lakh
with a sub-ceiling of Rs.3 lakh for working capital requirements). The definition of
Micro, Small and Medium Enterprises under the services sector is based on the
enterprise’s investment in equipments.

Since 2006, price index and cost of inputs both have increased manifold. The
criterion was amended in 2014 by the Ministry. Thus it is proposed to increase the
capital limit for the manufacturing sector wherein the capital ceiling for micro
enterprises is expected to go up from Rs 25 lakh to RS 50 lakh, small enterprises
from RS 5 crore to RS 10 crore and medium enterprises from Rs 10 crore to Rs 30
crore. Similarly, for enterprises engaged in the services sector, the ceiling for capital
investment will be increased from Rs 10 lakh to Rs 20 lakh in micro category
followed by an increase of RS 2 crore to RS 5 crore for the small category and from
Rs 5 crore to Rs 15 crore for the medium sector.

The MSME sector and related legal framework has come into limelight
following the “make in India” initiative of the government and rising number of sick
micro, small and medium enterprises in the country at the same time. In order to

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boost the growth of the MSME sector during the 12th Five-Year Plan, an outlay of
Rs 24,124 crore has been allocated for the Ministry of MSME. This 12th plan
allocation represents an increase of 133.53 per cent over the 11th Five-Year Plan
allocation of Rs 10,330 crore.

On 9 May 2007, subsequent to an amendment of the Government of India

(Allocation of Business) Rules, 1961, erstwhile Ministry of Small Scale Industries
and the Ministry of Agro and Rural Industries were merged to form the Ministry of
Micro, Small and Medium Enterprises (M/o MSME). This Ministry now designs
policies and promotes/ facilitates programmes, projects and schemes and monitors
their implementation with a view to assisting MSMEs and help them to scale up.
The primary responsibility of promotion and development of MSMEs is of the State
Governments.

However, the Government of India, supplements the efforts of the State

Governments through various initiatives. The role of the M/o MSME and its
organizations is to assist the States in their efforts to encourage entrepreneurship,
employment and livelihood opportunities and enhance the competitiveness of
MSMEs in the changed economic scenario. The schemes/ programmes undertaken
by the Ministry and its organizations seek to facilitate/provide:

i) adequate flow of credit from financial institutions/banks;

ii) support for technology upgradation and modernization;
iii) integrated infrastructural facilities;
iv) modern testing facilities and quality certification;
v) access to modern management practices;
vi) entrepreneurship development and skill upgradation through
appropriate training facilities;
vii) support for product development, design intervention and packaging;
viii) welfare of artisans and workers;
ix) assistance for better access to domestic and export markets and
x) Cluster-wise measures to promote capacity-building and
empowerment of the units and their collectives.

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Organisational Setup

The M/o MSME is having two Divisions called Small & Medium
Enterprises (SME) Division and Agro & Rural Industry (ARI) Division. The SME
Division is allocated the work, inter- alia, of administration, vigilance and
administrative supervision of the National Small Industries Corporation (NSIC)
Ltd., a public sector enterprise and the three autonomous national level
entrepreneurship development/training originations. The Division is also responsible
for implementation of the schemes relating to Performance and Credit Rating and
Assistance to Training Institution, among others. SME Division is also responsible
for preparation and monitoring of Results- Framework Document (RFD) as
introduced in 2009 by the Cabinet Secretariat under Performance Monitoring and
Evaluation System (PMES).

The ARI Division looks after the administration of two statutory bodies viz.
the Khadi and Village Industries Commission (KVIC), Coir Board and a newly
created organization called Mahatma Gandhi Institute for Rural Industrialization
(MGIRI). It also supervises the implementation of the Prime Minister's Employment
Generation Programme (PMEGP).

The Implementation of policies and various programmes schemes for

providing infrastructure and support services to MSME's is undertaken through its
attached office, namely the Office of the Development Commissioner (010 DC
(MSME)), National Small Industries Corporation (NSIC), Khadi and Village
Industries Commission (KVIC); the Coir Board, and three training institutes viz.,
National Institute for Entrepreneurship and Small Business Development
(NIESBUD), NOIDA, National Institute for Micro, Small and Medium Enterprises
(NI-MSME), Hyderabad, Indian Institute of Entrepreneurship (lIE), Guwahati and
Mahatma Gandhi Institute for Rural Industrialization (MGIRI), Wardha a society
registered under Societies Registration Act, 1860. The National Board for Micro,
Small and Medium Enterprises (NBMSME) was established by the Government
under the Micro, Small and Medium Enterprises Development Act, 2006 and Rules
made there under. It examines the factors affecting promotion and development of
MSME, reviews existing policies and programmes and make recommendations to

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the Government in formulating the policies and programmes for the growth of
MSME.

Office of the Development Commissioner [MSME]

The Micro, Small and Medium Enterprises- Development Organisation

(MSME-DO) is headed by the Additional Secretary & Development Commissioner
(MSME). The Office of the Development Commissioner (Micro, Small & Medium
Enterprises) assists the Ministry in formulating, co-ordinating, implementing and
monitoring different policies and programmes for the promotion and development of
MSMEs in the country. In addition, it provides a comprehensive range of common
facilities, technology support services, marketing assistance, etc. through its network
of 30 Micro, Small and Medium Enterprises-Development Institutes (MSME-Dls);
28 Branch MSME-Dls; 4 MSME Testing Centres (MSME-TCs); 7 MSME-Testing
Stations (MSME-TSs); 2 MSME-Training Institutes (MSME-Tls); and 1 MSME-
Technology Development Center-Hand Tools (MSME-TDC-Hand Tools). The %
DC (MSME) also operates a network of Tool Rooms and Technology Development
Centres (including 2 Footwear Training Institutes) which are autonomous bodies
registered as Societies under the Societies Act.

The main services rendered by MSME-DO are:

• Advising the Government in policy formulation for the promotion and

development of MSME sector Providing techno-economic and managerial
consultancy, common facilities and extension services to the MSME sector.
• Extending facilities for technology upgradation, modernisation, quality
improvement and infrastructure.
• Developing Human Resources through training and skill upgradation.
• Making available economic information services.
• Maintaining a close liaison with the Central Ministries, Planning
Commission, State Governments, Financial Institutions and other
Organisations concerned with development of MSME sector.
• Evolving and coordinating Policies and Programmes for development of
MSME sector as ancillaries to large industries.

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2.3 IMPORTANCE AND ROLE OF MSME IN DAIRY SECTOR

Dairy activities have traditionally been integral to India’s rural economy.

The country is the world’s largest producer of dairy products and also their largest
consumer. Almost its entire produce is consumed in the domestic market and the
country is neither an importer nor an exporter, except in a marginal sense.

Despite being the world’s largest producer, the dairy sector is by and large in
the primitive stage of development and modernization. Though India may boast of a
200 million cattle population, the average output of an Indian cow is only one
seventh of its American counterpart. Indian breeds of cows are considered inferior in
terms of productivity. Moreover, the sector is plagued with various other
impediments like shortage of fodder, its poor quality, dismal transportation facilities
and a poorly developed cold chain infrastructure. As a result, the supply side lacks in
elasticity that is expected of it.

On the demand side, the situation is buoyant. With the sustained growth of
the Indian economy and a consequent rise in the purchasing power during the last
two decades, more and more people today are able to afford milk and various other
dairy products. This trend is expected to continue with the sector experiencing a
robust growth in demand in the short and medium run. If the impediments in the
way of growth and development are left unaddressed, India is likely to face a serious
supply – demand mismatch and it may gradually turn into a substantial importer of
milk and milk products.

Fortunately, the government and other stakeholders seem to be alive to the

situation and efforts to increase milk production have been intensified.
Transformations in the sector are being induced by factors like newfound interest on
the part of the new units in the organized sector, new markets, easy credit facilities,
dairy friendly policies by the government, etc. Dairy farming is now evolving from
just an agrarian way of life to a professionally managed industry – the Indian dairy
industry. With these positive signals, there is hope that the sector may eventually
march towards another white revolution through the starting of micro small and
medium units.

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Key Areas of Concern in the Dairy Sector

Competitiveness, cost of production, productivity of animals are the major

areas of concern in dairy business. The demand for selective milk product is revising
in many developed countries. Cost of production is a major factor influencing the
purchase of dairy products. Increasing productivity of animals, better health care,
breeding facilities can reduce the cost of milk products. The government and MSME
units in dairy industry can play a vital role in this direction.

Production, Processing and Marketing Infrastructure

If India has to emerge as an exporting country, it is imperative that there

should be proper production, processing and marketing infrastructure which is
capable of meeting international quality requirements. A comprehensive strategy
should be formulated.

India is a country of sub continental size and character, a country of many

contradictions, a melting pot of many cultures and races, a polyglot with many
languages and dialects. The total land area is about 3.28 million square kilometres,
made up of 28 states and 7 union territories. Together they have over 510 districts;
their exact numbers changing, as many states are reorganising their district
configuration. The population was 846 million in 1991, with some 75% of the
people living in rural areas. Between 1991 and 2000 the population grew at the rate
of approximately 1.57% annually and crossed the 1 billion mark in 2000. Forests
account for 23% of the total land, whereas permanent pastures and grazing areas
cover less than 4%. In 1996, the net sown area in the country was about 142 million
hectares (47%), the gross cropped area 187 million hectares (cropping intensity 1.3)
and the gross irrigated area 71.5 million hectares (38%). India includes areas with
widely varying climates and rainfalls. It is classified into 15 different agro-climatic
zones ranging from alpine to desert; a very large part of the country can generally be
described as semi-arid.

India has a thriving agriculture sector, predominantly rain-fed, with

burgeoning outputs and food surpluses. While wheat and rice are the most popular
crops, Indian agriculture has a rich diversity of crops ranging from cereals, millets,

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oilseeds, pulses, cotton, jute, tobacco, tea, coffee, fruits, vegetables, tubers, spices,
flowers and aromatic and medicinal plants to a wide variety of plantation crops. The
agricultural sector is also the single largest employer, even in 2011 over 65% of the
main work force were engaged in agriculture either as cultivators (110 million) or as
agricultural labourers (74 million). However, at the turn of the century there are
indications of a major shift in employment patterns with burgeoning opportunities
opening up in the services sector. The Indian economy is robust; in 1999–2000 (at
constant prices with 1993–94 as base year), the GDP and the national income both
grew at 5.9% and the per capita income in real terms grew at 4.2% .

Table-2.1: Key Statistics of India’s Dairy Industry

Annual Milk Production (2011-12)1* 127.3 Million Tones

Annual Export Volume (2008‐9)2 70,790 Tones
Share of world dairy production (2010)3 15%
Milking herd size 5 115.5 million
Number of milk producers’ cooperative unions 170
Number of local dairy cooperatives 110000
Number of state cooperatives 22
Per capita consumption (Drinking milk) 250g/day
Estimated percentage of dairy farmers in organized 40‐50%
sector
% of dairy produce consumed by unorganized 65%
sector 9
Dairy industry workforce 10 75 million women/
15 million men

The milk market in India is predominantly in the non-organised sector and is

traditional and fragmented. The organised dairy industry represents less than 20% of
the total milk produced in the country and is made up of three distinctly different
sectors: the government, the co-operative and the private. In terms of volumes of
milk handled, installed processing capacities and marketing infrastructure, the co-
operative sector is by far the largest. Furthermore, the co-operative sector includes
some 10 million landless, marginal and smallholder milk producer families, all
members in the nearly 82 thousand DCSs across the country. However, in terms of

26
installed processing capacities alone, the co-operative and private sectors have more
or less matching capacities and the government only a small presence (Table 2.2 and
Figure 2.1 ). Together they have the capacity to process about 33% of daily average
milk production in the country, but they actually handle <20%.

Table 2.2 Milk processing capacity

Capacity
Sector Number of plants
(106 litres/day)
Co-operative 218 32.47
Private 366 30.26
Government 39 3.87
Total 623 66.60

Figure 2.2 . Processing capacity (%) by sector.

Much of the processing capacity created by the private sector in the wake of
the liberalisation of the Indian economy remains idle; only about 60% of the
installed capacity of the private sector is operated on a day-to-day basis. In the
government sector, too, most of the primary processing facilities installed in rural
areas (mainly milk chilling centres) are not functional and dairy plants in the smaller
towns and cities are grossly underutilized. In the co-operative sector, all plants are
used to their full capacity and remain under utilised only during the lean production
season. A little over 30% of the milk produced is retained in producer households.
About 50% of milk is traded in through the traditional channels; about half of this is
traded without any processing, whilst the other half, going into traditional product
and sweetmeat manufacture, undergoes some traditional processing (acid
coagulation and/or heat treatment) before it is traded.

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 These processing capacities include liquid milk processing and manufacture
of products: milk powders, table butter and white butter, cheese, ghee, condensed
milk and milk sweets. The special infrastructure for the dairy industry mostly
belongs to the co-operative system and the NDDB, while the government and the
private sector have only limited infrastructure, such as road milk tankers and a
limited cold chain. The co-operative infrastructure covers all aspects of the industry
including: milk collection (bulking, chilling and pre-plant transport, through a
network of over 82 thousand DCSs countrywide); processing and value addition
(liquid milk and milk products plants); transport (road, milk tankers and broad gauge
and metre gauge rail milk tankers); and cold chain/storage (cold stores, deep freezes,
refrigeration trucks, warehouses and automatic milk vending units). In addition,
there are thousands of shops selling milk-based sweetmeats, all privately owned,
with their own traditional recipes, processes and products, which are outside the
ambit of the organised dairy industry.

Some 45% of the milk produced is consumed as liquid milk. The bulk of it is
traded in the traditional channels, most of it through several tiers of contractors.
Some 16 million litres is traded as processed packaged milk: 13.5 million litres by
the co-operative sector and 2.5 million litres by over 300 private sector brands. A
very large percentage of these private sector brands is substandard, often
unhygienic, as quality and hygiene standards are seldom enforced. The co-operative
network supplies wholesome milk to some 800 cities, towns and urban
agglomerations daily, mostly as pasteurised, packaged milk but some in modern
automatic bulk vending units in metropolitan cities. Thus these can be further
improved with the help of small and medium scale units involved in the milk
processing.

Milk products from the organised sector are marketed through a vast network
of wholesalers, distributors and tens of thousands of retailers, separate chains of
them for each brand and company. By far the largest manufacturer of milk foods in
the country is the Gujarat Co-operative Milk Marketing Federation (GCMMF), the
apex co-operative body of the Gujarat milk co-operatives, which is also the single
largest food company in India, with both national and global markets. Almost all of

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the milk and milk products produced in India are traded and consumed in India
itself, with export forming a tiny share of the whole. Nevertheless, although the
volumes are small, India now has a presence in the world markets and regularly
exports milk products and long-life milk to countries in West Asia, South-East Asia,
South Asia and North America. The GCMMF is the prime exporter; it exported milk
powder, ghee, table butter, cheese and some other products. This constituted almost
80% of all exports. The total value of the exports for all exporters together was some
Rs 800 million in 2010.

Impact of dairy production on the small units:

Milk production in India is the endeavour of the marginal producers and

smallholders; they constitute the core milk production group and own 66% of the
‘in-milk’ animals (NSSO 1992). The popularity of large ruminants (cattle and
buffalo) with this class of landholders is primarily because of the complementarity
between land and animals in their traditional crop–livestock farming system. The
animals subsist largely on the free crop residues/crop by-products available in the
household and in return, contribute dung for fuel/enriching the soil and farm draft
power for crop production. With the increasing integration of these farm households
with the output markets, cattle and buffalo also generate substantial daily incomes
for the farm family, enhancing the viability of both the household and the farming
system. Dairy production in addition enables them to utilise the idle family labour
and enjoy higher family nutritional standards.

Table 2.3. Observations on milk producer households in dairy co-operative

society (DCS) villages.

Impact indicators Observations

1. Participation of weaker sections Over 75% of the DCS membership are
landless, marginal and smallholder
producers
2. Milk retention at home 47% of the milk produced is retained at
home, daily
3. Milk marketed 53% of the milk produced, daily

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4. Milk consumption/capita per day 339 grammes
5. Milch animal holding Animals per HH Percentage of animal
(number) holdings
5.1 Landless (15.3%)1 1.82 9.90
5.2 Marginal (38.2%) 1.63 39.80
5.3 Small (21.9%) 2.05 25.90
5.4 Semi-medium (10.3%) 2.45 12.20
5.5 Medium (4.2%) 2.88 3.30
5.6 Large (10.1%) 3.75 8.90
6. Family labour Average time spent on livestock
management: 4.3 hours/day (55%)
7. Share of family labour for Men 60% of their working time; women
livestock care 35% of their working time

1. Figures in parentheses are the percentage of DCS members by landholding

category.
On the household economic front, there are many micro-studies establishing
the impact of dairy production on household income in smallholder production
systems. One of the most documented schemes in India on this front is the Intensive
Mini Dairy Project of the Uttar Pradesh Dairy Development Department. This is
primarily a rural employment scheme, enabling eligible milk producers in DCS
areas access to commercial credit for replacing their local milch animals with two to
four crossbred cows or improved milch buffalo, enabling better household resource
utilisation.

Constraints to smallholder dairy production units:

1. Milk production in India takes place in millions of small and very small units,
both in terms of land and animals, scattered throughout the country. Reaching
out to such a scattered smallholder population for technology transfer and
extension support is, to say the least, a difficult task.

2. The progressively shrinking size and fragmentation of land holdings, render

them increasingly unviable, driving large numbers of the holders at the lower

30
 end of the smallholder spectrum below the poverty line and making the
government commit increasing amounts of funds, year after year, for poverty
alleviation.

3. Institutional credit at the farm level for dairy production is extremely hard to
access on account of procedural complexities, inordinate delays and high interest
rates, despite the existence of tens of thousands of rural credit institutions
including: rural credit co-operative societies, regional rural banks and rural
branches of commercial banks. Lack of good quality credit circumscribes the
potential of the smallholders for dairy production. Even at the turn of the
century, over 50% of farm level credit for smallholder dairy production in India
comes from traditional moneylenders.

4. Inputs and services for milk production enhancement are exclusively in the
domain of the state governments (some 51 thousand veterinary institutions, 36
thousand graduate veterinarians and over 70 thousand para professionals and a
host of production support institutions). Except in the areas covered by the co-
operatives under Operation Flood, inputs and services are uniformly of
substandard quality and are delivered at stationary centres requiring transport of
animals to the centres for the services to be received. Public funds for the
livestock sector are mostly squandered on services that are largely for generating
private good (i.e. curative veterinary care, not preventive veterinary care).

5. India has many animal epidemics ravaging the cattle and buffalo populations but
control of diseases is lowest among the priorities of the government (<3% of the
government veterinarians engaged in disease control). This has resulted in
enormous losses in terms of lost production (Rs 50–100 billion/year, nearly 10%
of the output value of the livestock sector) and has precluded India from joining
the global markets for dairy products. As smallholders own >70% of milch
animals, they are the ones who bear the brunt of the avoidable production losses
and the investment risks.

6. India has perhaps the largest single AI network in the world (63 frozen semen
production stations, 33 million doses of frozen semen produced/year, 40
thousand AI delivery outlets and an army of AI professionals). However, it is

31
 also one of the most inefficient and poor quality AI services: <20% of the
breeding cattle and not even 5% of the breeding buffalo are bred by AI; bulls
used for AI are not genetically evaluated and so the AI system does not produce
superior progenies generation after generation; in spite of over 25 million AIs in
a year the system produces <2 million progenies/year (<10% conception); and
the overwhelming presence of the state governments in AI services delivery has
totally prevented the emergence of free markets for AI.

7. There are widening deficits in the supply of feeds and fodder countrywide (dry
fodder such as straws/stover: production = 400 million tonnes, deficit 31%;
green fodder: production = 575 million tonnes, deficit 23%; and feed
concentrates: production = 46 million tonnes, deficit 47%). Demand estimates
are based on nutritional requirements and are unrealistic. Enlarging ruminant
populations compel smallholder producers to practice livelihood strategies
inimical to nature, leading to enormous environmental costs for the burgeoning
dairy production. Lack of adequate fodder and fuel wood supplies have
compelled livestock owners to allow overgrazing on common property resources
and forestlands, leading to denudation of common property resources and
deforestation of forestlands. Nearly 100 million hectares have become
wasteland, nearly a third of the total landmass of the country.

8. Government policies based on social and religious compulsions inhibit the

alternate use of large ruminants, limiting the scope and viability of dairy
production. These policies deny the smallholders of >40% of their potential
income, which would have been available from the sale of male and
unproductive stock as meat animals. These policies add untold numbers of
unproductive stock to the bovine populations.

9. Large ruminants account for >90% of the livestock load on land. On a cattle
equivalent basis, their numbers are already beyond the ability of the land to
support and the continuing relentless increase in their population seriously
threatens the sustainability of all animal agriculture.

10. Liberalisation of the Indian economy and the advent of the World Trade
Organization (WTO) regulations opened up global competition in the dairy

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 sector, exposing the smallholder producer to unfair and unequal market regimes.
The Indian Government has fallen far short of providing them with the levels of
protection and support measures permissible under WTO; thus, failing to create
for Indian smallholder producers the much talked about level playing field even
in their domestic markets.

11. The legal and regulatory framework of the government too has not kept pace
with changes in the economic regimen and the WTO. The Co-operative Societies
Act continues to be restrictive rather than enabling, even though the Anand
Pattern Milk Producers’ Co-operatives have emerged as the most stunningly
effective institutional model for smallholder dairy production. Even though
processing and value addition is pivotal to smallholder dairy production and only
15% of the milk produced in the country is processed by the organised dairy
industry, the government has not liberalised its regulatory framework to attract
the much needed capital into the processing and value addition sector.

12. After 50 years of planned development, the government still does not have a
unified policy framework for its livestock sector and policies so far have been
mostly ad hoc pronouncements to meet development needs. Policies, therefore,
have only a marginal presence in the livestock sector, have often failed to
galvanise purposeful action, have made extensive use of direct action by
government departments and yet government presence is almost invisible in
areas where it is most direly needed.

Opportunities in smallholder dairy production units:

1. Modifying the production organisation in the dairy sector in India, by enhancing

milch animal quality and holding size within smallholder farming systems, will
enable better utilisation of available family resources. It will enormously
improve production and enhance viability across the system. More small and
medium units can be allowed in this sector. The Punjab Model or the Intensive
Mini Dairy Model of Uttar Pradesh, could be used in all the major milk sheds.

2. Improving the quality of farm level credit and access to credit will enable the
lower 30% among the smallholder spectrum to move up from subsistence

33
 farming to progressively viable crop–livestock farming, adoption of intermediate
technologies (like crossbred cattle) and achievement of progressively higher
outputs and farm incomes. Reorganisation of credit institutions, simplification of
procedures, reduction of interest rates and removal of collateral security
requirements, are all logical steps in the credit reform process.

3. Restructuring of the departments of animal husbandry in states, reorienting their

mandate from curative to preventive veterinary care, moving delivery of
livestock services away from the government, progressive privatisation of the
services, a nation-wide programme for prevention and control of animal
epidemics and creation of disease-free zones will all reduce avoidable
production losses to smallholders, reduce investment risks for them, reduce the
yield gap, improve output and will facilitate India’s entry into global product
markets, improving quality and viability of the entire Indian dairy industry.

4. Given the vast AI infrastructure, delivery network and manpower that India
already has, newer institutional models, better delivery systems, better quality AI
sires and more effective AI are all possible. The results would be superior
progeny generations (larger numbers of crossbred cows and improved buffalo),
better dairy stock, reduced costs and higher incomes for smallholders.

5. India has a vast scientific manpower and research infrastructure (13 animal
sciences research institutes, over 900 animal scientists, some 1000 support staff,
17 agricultural universities and 34 veterinary colleges) under the Indian Council
of Agricultural Research (ICAR) system, to provide the dairy sector research
support. However, reorientation of their research priorities, greater user
participation and industry funding of the research establishment will enable the
growing of globalisation of the Indian dairy industry to gain immense cost and
quality advantages.

6. With the waning demand for work animals for farm power, India now has a
tremendous opportunity to reduce the overall cattle numbers through breeding
better draft animals, encouraging sharing of draft animals and promotion of
agro-service centres in major villages for custom hiring of tractors and farm
implements. Reduction in bovine numbers will progressively reduce the adverse

34
 environmental impact of smallholder dairy production and will render the entire
animal agriculture in India sustainable.

7. Restructuring the governments’ legal and regulatory framework (modernising

the Co-operative Societies Act, for example), thus liberating the co-operative
movement, will enable smallholders to extensively adopt the proven Anand
Pattern Producers’ Co-operative Model to manage their assets and business
interests. This will help them to vertically integrate production, processing, value
addition and marketing of milk and milk products in domestic as well as global
markets, converting India’s comparative advantages in dairy production into
globally competitive advantages.

8. Introduction of newer production technologies (like AI) and intermediate

technologies (like crossbred cows) in mixed crop–livestock farming systems in
India are not supported by extension services, which are essential for technology
transfer. Though a fairly successful attempt to set up an extension support
system for the livestock sector was made during the first two five-year plans, this
gradually degenerated into service delivery by the departments of animal
husbandry in almost all states. Absence of meaningful extension support in the
livestock sector has undermined the potential of the smallholder production
systems and has rendered investment in the sector for production enhancement
and technology transfer, at least in part, unprofitable.

2.4 REVIEW OF LITERATURE

Reviewing the existing research studies is an important aspect which guides

the researcher in identifying the gap in the related field of knowledge. The
researcher has conducted an extensive literature review which has enabled him to
understand the research problem and develop the focus point of the research. The
findings of the significant studies are also helpful in developing factors for the study.

This section therefore tries to bring out the salient findings of earlier studies
which throw light on various concepts in the related field. The reviews consist of
various research work carried out by other Researchers, articles published in
Journals and magazines and newspapers and PhD Thesis of other researchers.

35
 This section gives a brief account on the review of existing literature in the
field of Dairy sector and the small and medium units in this sector. The review has
been organised under the following headings.

2.4.1. PERFORMANCE EVALUATION OF MSME IN GENERAL AND

DAIRY UNITS IN PARTICULAR

Nagaphani (1996) 1 conducted a study on the marketing aspects with special

reference to Coimbatore district co-operative milk producers union Limited. The
study revealed that the reason for low procurement in the areas of Shanmughapuram
and Sultanpet chilling centers was due to the competition in procurement from
private dairies. The sale of milk in 500 Ml sachet was found to be high. Revenue
from sale of liquid milk was more than the sale of milk products.

Gopalsamy (1997) 2 in his study recommends that the concerted effort on the
part of manufacturers and marketing men to sell products specifically designed for
rural market were successful. The brand awareness created by these products had
given rise to number of imitation products sold at cheaper price. In addition regional
branded and local unbranded products also thrive in the rural market. The policy
with regard to distribution varies widely from company to company. Several
innovative measures were taken by various companies in rural areas

Dhruv Grewal (1998) 3 in this study reveals that due to increase in the
number of companies price is fixed based on the perceived value. Consumers see the
buyer’s perception of value, not the sellers cost, as the key to pricing. They use the
non-price perceived value in the buyers’ mind. Price is set to capture the perceived
value. In nutshell, perceived value is an evaluation that balances what consumers
receive, in an exchange, versus what they give up.

1
Naghapani, L.(1998), “A study on the marketing aspects with special reference to Coimbatore
district Co-operative Milk producers’ Union limited”, Project Report Madurai Kamaraj
University.
2
Gopalsamy T.P., “Rural Marketing, Environment problems and strategies”, Economic and
political weekly, December 1997, pp.85-86.
3
Dhruv Grewal, et al., “The effect of store name, Brand name and price discounts on consumers’
evaluation and purchase intentions”, Journal of Retailing, Vol.74,No.3 (1998), p.337.

36
 Ashish Bhasin (1999) 4 examined and revealed that in rural India, products
sell more via a mix of distributor and dealer push, as opposed to focused campaign
aimed at the village folk. He also opined in his study that advertising mix for rural
India had many pitfalls. Television and radio fare better than the print media.

2.4.2. IMPACT OF MSME DAIRY UNITS

Vyas and Chaudhri (1971) 5 have shown in their study on“Economics of

Dairy farming in Mahasana District”, that high yield of production and low cost
productivity occurred in dairy farming of cooperative sector. The results were
observed based on the comparative study of co-operative and non co-operative dairy
farming.

Narayanan (1971), 6 emphasized in his study on “the spread effects of dairy

entreprises”, that the spread effects of dairy farming by way of external economies,
creation of demand for dairy input services, demonstration effect, and infrastructural
facilities are essential for rural industrialization of dairy units.

Hogle (1972) 7, in his study on “The Influence of Agricultural Extension in

Selected Villages of Kaira District”, observed that those villages which had
favorable agricultural conditions and good access to inputs, credit and marketing
facilities had a considerable success in the dairy innovations. Further, he concluded
that the institute of agriculture would help to put the dairy activities on a successful
track.

Somjee and Somjee (1974) 8, in their study entitled “Co-operative Dairying

and the profiles of Social Change in India”, made a comparison of 3 different
villages, (Asoda, Ode and Khadgodhra in Kaira District) and concluded that the
4
Ashish Bhasin, “Quest for the rural Rest”, Advertising and Marketing Journal, Vol.X, Issue
XXIV, 31st March 1999, P.103.
5
V. S. Vyas; K. M. Choudhary; Economics of dairy farming in Mehsana district- Journal Of
Economic Development , Vallabh Vidyanagar, ISSN 0004-3567, ZDB-ID 8606134. - Vol.
7.1971, 2, p. 20-40
6
Narayana, B.K. “Spread Effects of dairy Enterprises: A Case Study of Anand”, Small industry
extension Training Institute, Hyderabad, p.14,1971.
7
Hogle, H. “The influence of Agricultural Extension in Selected villages in Kaira District”,
Gujarat, Ph.D. Thesis Michigan University, 1972 (Unpublished) p. 22.
8
Somjee, A.H. and Geetha Somjee, Co-operative Dairying and the profiles of Social Change in
India, paper Presented at XIX International Dairy Congress, New Delhi, 1974.

37
social and economic perceptions, ethnic reshuffles of the stratum of the society and
the democratic pattern of managerial efficiency through managerial shift in the
villages.

Patel and Pandey (1976) 9, in their study on “Economic Impact of Kaira

District Co-operative Milk Producers Union”, highlighted that the dairy co-operative
had a positive impact on milk prices, adoption of modern dairy practices, milk yield
per animal, household dairy income and per capita milk consumption. These results
were accrued by comparing 100 respondents of controlled villages selected in the
sample area.

National Development Board’s study (1977) 10 on “The Socio economic,

Productivity and Production Practices of Milk Producers of Sabarkanth of Gujarat
and Rothak District of Haryana” shows that the cooperative are the most effective
organization in canalizing the dairy developments inputs, and milk marketing. A
good association with every technical and material change reflects a corresponding
change in the attitudes, values and behavior of the people.

Chinnaiyan et al (1980)11 in their study “Marketing of Milk in Erode Taluk

in Tamilnadu” covered the market functionaries, market channel and price structure.
Market structure was identified as oligopolistic at the assembling level as well as in
distribution level. Further it was found that the unorganized sector held a large share
of milk market and even sent milk outside Tamilnadu to places like Bangalore and
Mangalore.

2.4.3 RISK AND UNCERTANITIES IN DAIRY UNITS

12
Murali Manohar and Sudarshan (1982) in their study on “Dairying as a
Household Industry” analyzed the role of dairy development and other agencies in

9
Patel, S.M., Thakur, D.S and Pandey, M.K. “Impact of the Milk Co-operative in Gujarat” Institute
of Co-operative Management, United Publisher, Allahabad, April, 1975.
10
National Dairy Research Institute, Souvenir, Diamond Jubilee, 1983-84.
11
Chinnaiyan, P. Kandasamy and Rangarajan, G. “Marketing of Milk in Erode Taluk, Tamilnadu”,
Indian Journal of Marketing, Vol.X, No.8, pp.21-26, 1980.
12
Murali Manohar, D. and Sudharshan, G.S. “Dairying as a Household Industry”, Kurukshethra,
Vol.30, No.11, March 1982, p.10.

38
the development of dairy units, employment opportunities and the livelihood of the
weaker sections of the selected sample society in their study area.

Chakravarthy and Reddy (1982) 13 studied the functioning of cooperative dairy

societies in drought prone area program. It is noted that 10 out of 12 presidents were of
the opinion that the performance of the M.P.C.S. was on the decline and indicated that
the main reasons was the low and remunerative price by the dairy co-operative.

Rajaram (1983) 14 made an analysis of the structural linkages underlying a

crisis in a Milk Co-operative in a medium sized village of Balasinor Taluk of
Gujarat. Field data for these studies were collected during the period 1982-83.The
conclusion of the study was that fractional tussles in the villages affected the milk
co-operative society severely.

Koli (1985) 15, in his study on ‘‘The Functioning of M.P C.S. in Gujarat With
Special Reference to Kaira District’’ viewed that the selected sample societies were
functioning well and collected a good quantum of milk per society - nearly 3,25,000
litres p.a. Further, it is noted that the societies are rendering a good service to the
community development like forming roads in remote villages, hospitals assistance,
drinking water and donation to schools, etc. The study also pointed out that the
members felt that the price of milk was low and needs enhancements.

Vithal (1986) 16, in his study on “Factors Affecting M.P.C.S. in Ananthapur

District of Andhra Pradesh”, found that the main factors affecting the procurement
of the M.P.C.S. were factions in the villages, caste dominance, acute water and
folder problem, lack of proper transport facilities, menace of vendors and lack of
adequate trained staff.

13
Chakravarthy, T.K. and Reddy, C.O. “Dairy Development Programme; process and impact a
study at village level”, Journal of Rural Development, vol.1, No.4, July, pp.459-512.
14
Rajaram, “The structural Linkages of A crisis in milk co-operatives In Kaira District Gujarat,”
Paper presented at Workship co-operatives and rural Development, Delhi, and March 1983.
15
Koli, “Functioning of Milk Producers Co-operatives in Gujarat with special reference to Kaira
Distirct”, Tamil Nadu Journal of Co-operation, Vol.76, No.12, pp.499-508, 1985.
16
Vithal, C.P. “Factors affecting milk co-operatives in Anathapur District of Andhra Pradesh A
study”, Indian Co-operative Review, Vol.XXIII, No.4, pp.325-337, 1986.

39
 Singh and Dhass (1988) 17 focused on the impact of Operation Flood -I at the
village level with the help of simple statistical tools like arithmetic mean, frequency
distribution table and Lorenz curve. Their main findings were the average milk yield
per animal in both the landed and landless households in the co-operative villages
was 12.58% higher than control villages; the milk yield per animal was higher in the
co-operative villages than the control villages. Lastly the study opined that the
average employment in dairying, the average per capital protein intake and
receptivity to various innovations introduced under the programme were higher in
co-operative villages than in villages.

2.4.4 OPPORTUNITIES IN DAIRY UNITS

According to Jain et al18.( 1978) , studied the growth of milk producers
cooperatives in Mehasana district of Gujarat. The sample villages in the milk shed
area were selected and were studied for the growth of cooperative societies,
membership, share capital, volume of milk handled, price paid by different agencies.
The data was scored under the benchmark and repeated surveys carried out by the
“Indian Agricultural Statistics Research Institute” during 1968-69 and 1973-74
respectively. It was observed that there was a sizable increase in the number
of village level milk producer’s cooperatives viz., from 230 to 380 between the two
Occasions, the membership of those cooperatives also increased from an average of
157 members per cooperatives on the first occasion to 240 on the second occasion
and the share capital of the cooperatives increased from an average of Rs 3448 per
milk cooperative on the first occasion to Rs 18842 on the second occasion. They
also noticed that there was an overall increase in the number of persons employed by
the milk cooperatives to assist in their functioning and the daily milk collection of
milk cooperatives increased in second occasion during all three seasons.

Kulkarni 19 ( 1979) opined that the lack of sufficient milk collection of

cooperatives in the rural areas, malpractices in weighment and quality testing,

17
Sinha, M.N. and Rama Murthy, H.S. “A study of Impact of membership of Dairy Co-operatives”,
Indian Co-operative Review, Vol.XXVI, No.2, pp.159-166, 1988.
18
Jain, J.P., Saxena, B.C., Aneja, K.G. and Prem Naraian, “Growth of milk producers cooperatives
in Mehsana ”, Dairy man, 30: 1978, pp.549-552.
19
Kulkarni,M.B.,“Collection of Milk: Some Lacunae and Remedies”,Dairy Guide 1(10): 1979,
pp.31-34

40
inconvenient timings of milk collection, spoilage during the rains, and warm seasons
and inadequate extension services were some of the lacunae in milk collection from
the producers.

Jain20, (1980) in his study on dairy development, through cooperatives,

discussed that dairy development in Rajasthan included various aspects, like
evaluation of cooperative system and its pattern of establishment, methods of milk
procurement, and processing; supply of technical inputs; animal breeding facilities,
supply of cattle feed; training and extensions; supervision and the extent of
cooperative programme.

Singh et al 21 ( 1983) compared and analysed monthly fluctuations in the

prices of cow and buffalo milk offered and quantity of milk procured by
cooperatives, private and public sector organizations, operated in three villages
adopted under operation flood of Kernal. They observed that private milk plant paid
the lowest price per litre of milk during July to March and the highest during April
to May. Public sector paid higher price in July. Cooperatives price remained
constant and higher than public sector and equal to private plants during July 1980-
1981. They concluded that public and private sector organization could attract only
about 17 per cent of the total milk sellers and cooperatives procured milk from about
45 percent and the remaining milk sellers sold to milk vendors, tea shops etc.

Sambasiva Rao 22 (1985) studied the factors affecting milk production,

marginal value productivity of different resources at their respective geometric mean
levels in Nagarajuna sagar project command area of Andhra Pradesh. Cobb-douglas
type of production function was used to express relationship between the average
milk yield per day and value of dry fodder, green fodder, concentrates per animal
per day, number of lactations completed, labour hours used per animal per day,
value of animal (in rupees) and age of animal. He observed that the inputs like green

20
Jain, M.M., “Dairy Development through Cooperatives: A Study of Rajasthan. Indian Dairyman
32 (3):1980, pp.195-204b.
21
Singh, C.B., Patel, R.K., Dhaka, J.P. and Sharma, P., “Management of Milk Procurement At
Village Level By Cooperatives, Private and Public Sector Organizations: A Case Study”, Agric
Marketing, 25(4):1983 pp.11-17.
22
Sambasiva Rao, B., “Factors Affecting Milk Production. A study”, Indian J Agric Econ.,11: 1985,
pp.169-174.

41
fodder and concentrates were the principal factors affecting milk production in all
the size groups of farmers and estimated marginal value products of green fodder
and concentrates were greater than factor cost implying that all the farmers were
underutilizing these two inputs. He concluded that the use of green fodder and
concentrates increased the milk yield and regarding labour, only marginal farmers
were utilizing in an efficient manner.

Baviskar 23 ( 1986) based on data collected during field work in two villages
of Surat district. The report traced the increase in the number of cooperative milk
producer societies and their impact on dairy development in the tribal area of
Gujarat. It focused upon milk cooperatives managed by Jesuit missionaries in the
region presenting a detailed description of their internal organization. The main
reason for the success of the Jesuit seen cooperative was found to lie with the loyalty
of its members and integrity of its leaders. The secretary of dairy cooperative was
found to be key functionary in the success of the project.

Vimal Shah (1986) 24, in his “Study on The Working of Sumul”, highlights
that dairy co-operative movement had not yet succeeded in a significant manner in
the larger goal of including landless weaker sections to take up productions and sale
of milk. He opined that the financial performance in the initial period and capital
output ratio were high due to stagnant output. However, during the later period it
became lower. The overall performance of the dairy was quite positive and wage
policy adopted by the plant was based on productivity.

Meera (1986) 25 studied the performance of dairy development in tribal Surat

under the Integrated Rural Development Programme .According to the author, the
high rate mortality of buffaloes, lengthy laction cycle, low productivity of animals
due to disease, lack of proper feeding and care would make the tribal dependents on
continuous subsides and loans instead of making them self-reliant . The author

23
Baviskar, B.S, “Dairy development in a tribal area of Gujarat”, working paper, Institute of Social
Studies, Netherlands, 1986, pp.8- 47.
24
Vimal Shah, “Role of milk co-operatives in Articulating Rural”, Urban Interaction-Experience in
Gujarat, UNESCO study, 1986.
25
Meera Savara, “Organised Dairying in the Tribal Areas of Surat District”, Working paper No.9
ISS/IDDAD 1986.

42
cautioned that the mismanagement of affairs of many societies, the corruption
associated with the bureaucracy at all levels of the programme and over loading of
ecological resources with a large number of imported buffaloes may affect the tribal
economy as a whole.

Dorsten 26 (1986) the study related to the impact of the Kaira district
cooperative milk producers union on milk production in Kheda district, Gujarat.
From the study, an unmistakable trend was towards commercialization of the
livestock by the year 2000 AD. Although India possessed an enormous cattle and
buffalo population, annual milk production was very low. The average annual milk
yield per cow was about 504 kg. One of the major constraints was supply and
quality of feeds and fodder. By the year 2000 AD, There was expected to be a short
fall of concentrates, 19.8 MT of green fodder and 16.2 MT of dry fodder. The
shortage was expected despite the declining trends in the dairy cattle population.

The study proposed a number of suggestions for improving the feed and
fodder situations and also the wealth and breeding of dairy animals.

Bhanja et al 27 (1987) examined the critical factors in organization of dairy

cooperatives by selecting twenty one primary milk producers cooperative societies
covering three milk production zones in Mahasana district of Gujarat. They
observed that the societies were successful in the cases of members who joined a
society besides economic reasons, and realization of social benefits. Milk producers
who were selling through milk vendors had came to know some malpractices made
by vendors.

Hirevenkana Gouda et al 28.( 1988) studied the impact of dairy development

on the weaker sections of Bangalore north and Doddaballapur taluk of Karnataka.
The small, marginal farmers and agricultural laborers were selected from the
villages having SFDA programmes. They were classified as Karnataka Dairy
26
Dorsten, F.Van, “The Impact of Amul On The Milk Economy of Kheda District (Gujarat)”,
Working Paper, Dairy Aid and Development, Institute of Social Studies, The Hague No: 1986,
pp.21-32.
27
Bhanja and Dubey, V.K, “Critical Factors In organization of Dairy Cooperative”. J. Rural
Development, 6: 1987, pp.466-474.
28
Hirevenkanagoudar, L.V, Hanumanthappa, D.S and Jalihal, K.A, “Impact of Dairy Development
On The Weaker Sections: A Study”, Kurukshetra, 36(5): 1988, pp.7-11.

43
Development Corporation (KDDC) farmers and non-KDDC farmers who were not
availing the facilities of cooperatives. They found that more than 56 percent KDDC
farmers getting only 25 percent of family income from dairy enterprises more than
64 percent of KDDC farmers had repaid 75 to 100 percent of dairy loan, where as
only 10 to 25 percent of non KDDC farmers had repaid 75 to 100 percent of dairy
loan.

Jawan Ram 29 ( 1988) made an attempt to analyze the organization and

working of Jaipur District Milk Producers Cooperative Union Limited, Jaipur. The
study was conducted through personal interview with management and other
employees of the union. It was found that the organizational structure and functions
performed such as (i) milk collection (ii) supply of technical inputs (iii) farmers
induction programmes and (iv) supervision etc., were analyzed. Some drawbacks
were found out and appropriate suggestions were made.

Ranade et al (1988) 30 studied the performance of integrated of milk co-

operative in the strata of backward and forward integrated. It is observed that co-
operative societies not only assisted small farmers in improving their income from
their milk operation substantially but also have helped landless laborers to undertake
milk production as primary occupation. The authors further viewed that the Gujarat
dairies generate considerable large surplus as compared to Maharastra due to the
combined effect of better marketing of milk due to forward integration and better
supply of inputs and services due to backward integration.

Sinha and Ramamoorthy (1988) 31, in their study on “The Impact of

Modernization of Dairy Co-operative”, expressed the view that members with
longer membership benefited more through acquiring the knowledge on scientific
dairying, whereas the new entrants needed more quantum of training to develop
their knowledge in scientific dairying.

29
Jawanram, “Organization and Working of Dairy Cooperatives in Rajasthan: a case study”, Indian
co-op rev. 25(3): 1988, pp.273-282b.
30
Ranade, C.G., Mathur, D.P., Ranagarajan, B. and Gupta, V.K. Performance of Integrated Milk
Co-operatives CMA, Monograph series No.111 Indian Institute of Management Ahmedabad and
Concept Publishing Company, New Delhi, p. 48, 1988.
31
Sinha, M.N. and Rama Murthy, H.S. “A study of Impact of membership of Dairy Co-operatives”,
Indian Co-operative Review, Vol.XXVI, No.2, pp.159-166, 1988.

44
 Saroja (1988) 32 studied the satisfaction of members of dairy cooperatives in
Erode district. For analysis 150 respondents from 10 societies were selected at
random. The study revealed that out of 150 samples members, only 14 members
were women. The study concluded that member satisfaction of dairy co-operatives
was not influenced by the sex of the member producers. Statistical analysis revealed
that irrespective of the sex of the members, the satisfaction derived by the members
of the milk producers’ societies was the same.

Mahak Malik (1989)33 studied the milk unions of Ambal, Karnal and Jind of
Haryana. The study was based on the secondary data collected from the milk unions
and the records of head office located at chandigarh. Data analysis included the
tabular analysis and production function analysis. According to the study, milk
procurement was the lifeline of a dairying plant. It also pointed out that proper
utilization of the installed capacities of the dairy plants for processing milk and
manufacturing various milk products were heavily dependent on the total quantity of
milk procured by it. Moreover, the dairy plants found it very difficult to utilize the
given capacity during lean seasons. The study concluded that there was plenty of
scope in all the milk unions covered in the study to increase the volume of milk
collected per society and per member effectively by linking the milk procurement
programme of the union with the volume of milk procured by each member.

Kamalaveni (1989) 34 studied the utilization by the members of the Erode

districts milk producers’ co-operative societies. For the purpose of the study
utilization index was calculated and personal factors like age, caste, sex, etc., and
institutional factors like knowledge of own society, members satisfaction democratic
participation were used. The study concluded that if the milk producers fail to use
the societies as an outlet for selling milk the very purpose of forming the M.P.C.S.

32
Saroja T. “Dairy co-operatives in Erode District: A Study on satisfaction of members”,
Unpublished M.Phil Dissertation, Bharathiar university, Coimbatore, 1988, pp.82
33
Mahak Malik, “Economic Evaluation of Organized Milk Procurement Haryana Dairy
Development Co-operative Federation”, Ph.D., thesis unpublished, National Dairy Research
Institute, Karnal, 1989.
34
Kamalaveni, “Milk Producers co-operative union in Erode District”, A study on utilisation by
members Unpublished PhD thesis, Bharathiar University, pp.21, 1990.

45
gets jeopardized. The study stressed the need for the expulsion of member supplying
milk to the traders. But in reality such measures are not taken.

Mattigatti et al (1989) 35, in their study on “The Dairy Co-operative in

Dharward District, Karnataka”, concluded that there was a direct positive relation
between the performance with higher volume of business of societies and their milk
productivity.

Mattigatti36 ( 1990) studied the performance of Milk Producers Cooperative

Societies and their impact on dairy farming in Dharwad district. The author selected
a number of physical and financial indicators to evaluate the performance. The
secondary data required was collected from the various annual reports of Milk
Producers Cooperative Societies for the period 1986-88. He opined that both the
physical and financial indicators of the societies showed significant growth in their
values. The above average societies have already progressed with higher values for
the indicators compared to below average societies, while below average societies
were shown a greater rate of growth, hence, he concluded that over the period of
time all these societies would contribute to the overall development of the societies.

Patil 37 ( 1991) studied the performance of the KMF (Karnataka Milk

Federation) and its impact on dairy development in Karnataka. He observed that
milk procured (in tonnes) increased by 26.95 percent during KDDC (Karnataka
Dairy Development Cooperation) period and 190.41 percent during KMF. However,
the overall percent increase was around 80.18 percent. Possible reason for such high
increase in milk procurement were, viz the considerable rise in registration and DCS
commissioned as well as the number of milk routes made operational, which had
increased the DCS commissioned and milk routes operational by 25.45 and 7.21 per
cent respectively.

35
Mattigatti, “Strategy for Rural Development-Dairy Co-operatives in India” Sage Publication, New
Delhi, 1989.
36
Mattigatti, R.M., “Performance of Milk Producers Cooperative Societies and Their Impact On
Dairy Farming In Dharwad District, Karnataka”, M.Sc. (Agri) Thesis,Univ. Agric. Sci., Dharwad,
1990.
37
Patil, B.L., “Performance of The KMF and Its Impact On dairy development in Karnataka an
economic analysis”, Ph.D. Thesis, Univ. Agric. Sci., Dharwad, 1991.

46
 Another study1 showed that the creation of new market outlet for fluid milk
brought major improvements in the production, marketing and consumption behavior
of smallholder households. The new marketing outlet may also promote involvement
in more intensive dairying.

As per Jaffee1, Co-operatives, by providing bulking and bargaining services,

increase outlet market access and help farmers avoid the hazard of being encumbered
with a perishable product with no rural demand. In short, participatory co-operatives
are very helpful in overcoming access barriers to assets, information, services, and the
markets within which small-holders wish to produce high-value items.

According to Nicholson1 Like contract farming, producer co-operatives can

offer processors/marketers the advantage of an assured supply of the commodity at
known intervals at a fixed price and controlled quality. They can also provide the
option of making collateralised loans to farmers. The schemes also provides better
relations with local communities than large scale farms, avoiding the expense and risk
of investing in such enterprises, sharing production risk with the farmer, and helping
ensure that farmers provide produce of a consistent quality.

Jithendra Kumar 38 (1992) studied the performance of dairy cooperatives and

their impact on milk production, income and employment in Chitoor district of
Andhra Pradesh. The study revealed that the societies which were above the average
level has shown better performance with an increase in membership and milk
procurement, and profits of societies showed an increasing rate except some specific
area.

Shiyyani and Singh (1992) 39 on the “Performance of Dairy Cooperative in

Saurastra, Gujarat an Econometric Analysis” emphasized the results with the help of
econometric tools. Further, rating technique was employed for analyzing the relative
performance of the societies. Financial performance was also analyzed with the help
of the main financial indicators like total turnover, net income, and salary paid to the

38
Jithendrakumar, D.S., “Performance of Dairy Cooperatives and Their Impact On Milk Production,
Income and Employment In Chitoor District (A.P.)”, M.Sc. (Agri) Thesis, Univ. Agric. Sci.,
Dharwad,
39
Shiyani R.L. and Rajvir Singh, “Performance of Dairy Co-operative in Saurastra, an Econometric
Analysis”, “Indian Journal of Agricultural Economics”, Vol.49, No.2, pp.238-243, 1992.

47
staff, value of milk procured as well as sold, dividend and bonus paid of animals
treated by veterinary doctors. Further, the study concluded that the introduction of
scientific methods for classification of societies of societies would help in rational
allocation of financial assistance to the societies.
40
Hema Tripathi and Bist (1994) conducted a study in Barely district of Uttar
Pradesh. The study concluded that risks orientation was the most important
psychological attributes of rural women in augmenting the productivity of dairy
animals. The study further concluded that there was also a need for a research system
to develop technologies which are relatively less risky, vis-à-vis the physical and
financial resources available to the rural dairy farmers. The inputs required for the
continued adoption of the dairy technologies available or needed also to be assured to
help the rural women to augment the products only of their rural dairy system.

Singh (1994) 41, in his study on “The Production Performance of Different

Types of Milch Animals in Rajouri Manjakot Blocks of Rajouri District”, highlights
that the returns on investment was maximum from murrah buffaloes followed by cross
bred cow, non descript buffalo and Haryana cow. While analyzing the costs of
production he found that it was maximum for murrah buffalo and minimum for non
descript cow.
42
Sanghu (1994) studied about “The Production Consumption and Marketed
Surplus in Meerat District of Uttar Pradesh”. The study focused on 196 producers with
444 milch animals from different category of milk producers’ households. The
households were classified into medium farmers, landless and small farmers. The
highest contribution to the total milk production of the study area was by the buffaloes
owned by medium farmers due to their population. Marketed surplus of milk was
observed to be negatively associated with the land holing size.

40
Hema Tripathi, Kunsro, O.W. and Bist, G.S. “Path Analysis of Women on Productivity of Dairy
Animals”, Indian Dairyman,p. 303.
41
Singh R.S. “An Economic Evaluation of milk production in Rajouri District of Jammu and
Kashmir”, Indian Dairyman, Vol.47, No.2,3, pp.43-46, 1994.
42
Sanghu, K.P.S. “Production and Consumption and Marketed Surplus of Milk Western
Uttarpradesh”, Indian Dairyman, Vol.46, No.10, p. 629, 1994.

48
 Ranganathan and Singh (1995) 43 observed that the majority of the respondent
household, though both women and men jointly participate in making decisions
regarding farming and dairying, generally men dominated the activities. the study
indicated that rural women as compared to other male counterparts needed relatively
more dairy processing and preparation of dairy products, while their men folk needed
relatively more training than women folk in the areas of breeding , feeding health care,
and management of dairy cattle.

Gupta and Devaraj (1995) 44conducted a study on Churu District of Rajasthan.

The study revealed that the proportion of milk production retained for household
consumption was a high as 73% and the marketed surplus was only 27% in the study
area, the marketed surplus was the lowest in the case of landless labourers. Apart from
its utilization in fluid form, a significant proportion of milk consumption was in the
form of ghee. The study observed that major portion of the milk production was
retained for family consumption and the marketed surplus was relatively low owing to
inadequate marketing facilities in the study area.

Thakur 45 ( 1996) studied the impact of dairy development through milk

cooperatives in Gujarat which covered four milk unions which were at the different
stages of development. Twenty-four village milk producers’ societies were selected
randomly in four districts and 400 respondents, respectively. The primary data
collected on survey method from respondents and secondary data from the sample
milk unions and societies, progress was captured by tabular analysis. The farmers are
categorized, as landless, small, medium, and large in order to examine the impact of
milk cooperatives on economic conditions of the weaker sections. It was observed that
the landless people earn as much as 65-70percent and small farmers earn more than
25-30 percent of the total income from dairying. The cash income obtained
continuously from the sale of milk can be used for better management of Milch

43
Ranganathan, K. and Singh, M.N. “A study of differential participation of Rural Women Of
Southern States in Dairy and Farm Sector, Annual Report 94-95, Southern Regional Station,
National Dairy Research Institute , Bangalore 1995.
44
Gupta and Devarajan, “Consumption and Disposal of Milk in Churu District (Rajasthan)”, Indian
Dairyman, Vol.47, No.6, pp.42-45, 1995.
45
Thakur, D.S., “Impact of Dairy Development Through Milk Cooperatives: A Case Study of
Gujarat”, Indian J Agril Econ 41(3): 1996, pp.83-89.

49
animals and for the purchase of improved agricultural inputs to some extent which
help the farmers in increasing their total income.

Prabaharan and Sivaselvam (1996) 46, in their study in Chengalpattu District of

Tamil Nadu found that the quality of the milk produced by various size of farmers.
Larger households produced more milk per day as compared to the other three
categories. However, milk production per animal per household was higher among
landless household category. Moreover, the study concluded that there was a definite
scope for improving milk yield by increasing the feeding level of concentrate, green
fodder and roughage both in the case of cows and buffaloes.

According to Tsehay 47 ( 1998) a milk marketing group can be viewed as a

group of smallholder farmers who individually produce at least one liter of saleable
milk/ a day, and are willing to form a group in order to collectively process and
market their milk. The milk marketing groups are named following their locality’s or
peasant association’s name. According to her, the idea of group work and formation of
a group is not new to Ethiopia. Different traditional local groups can be identified.
Edir is another kind of grouping in rural and urban communities where individuals
organize themselves and build up common savings through periodic contribution.
Understanding of the rural set-up in terms of social fabric and the farming system
practiced are key factors to long lasting formation of farmers’ group in the peasant
sector.

Biradar 48 (1999) employed a break even analysis technique in dairy enterprise

in Udyir taluk, Lathur district of Maharashtra. He observed that the break even milk
production among beneficiaries was 1291 lts at the given price of milk i.e., Rs 7.23.
Further, the average BEP price per ltr of milk Rs 7.55. He concluded that either milk
producers should able to procure 1291 lts for BEP level or the price should be raised
from Rs 7.23 to Rs 7.55. The prices paid to milk producers were not remunerative.

46
Prabaharan and Sivaselvam. S.N. “A Study for Milk in Chengalpattu District of Tamil Nadu”,
Indian Journal of Dairy Science, Vol. 39, No.1, pp. 13-16, 1980.
47
Tsehay Redda, “Prospects of Ethiopian dairy development.” Proceeding of the Role of Village
Dairy Cooperatives in Dairy Development: Prospects for Improving Dairy in Ethiopia, Addis
Ababa, April 1998.
48
Biradar, R.D., “Break Even Analysis of Dairy Enterprise”. Agric. Banker., 23(3): 1999, pp.30-32

50
 Kale et al 49 ( 2000) studied the financial position working and operational
efficiency of 23 dairy cooperatives in Raigad district of Maharashtra. They studied the
economic efficiency through income expenditure ratio, expenditure income ratio, rate
of return on capital and rate of turn over. They concluded that (i) the societies had low
owned capital and were dependent on borrowing from financial institutions (ii) even
though the working capital of the dairy cooperatives was low, their turnover was high
because dairy cooperative did not make payment to milk producers from their own
funds. Therefore, dairy cooperatives were able to carry on business with limited
capital and (iii) majority of the societies were trading Profit. It is difficult to explain
many aspects of small-scale farmers’ household behaviour in respect to livestock,
purely from an economic and rational point of view. Consequently, treating the
livestock production system as a pure input– output type of economic system often
misrepresents the Indian reality.

Reddy 50 ( 2000) studied the employment opportunities and the standard of

living among the rural folk and compared between arable farming, mixed farming and
dairy farming laborers in milk shed area of Vijayawada and the dry land area of
Chitoor. The data was collected by survey method from selected respondents.

The secondary data were collected, and analyzed. They found that mixed
farming created 32 percent of extra work as compared to arable farming. The dairy
farming created 45 percent of extra work as against mixed farming and 92 percent of
extra work as compared to arable farming. They also estimated that an additional
employment for 129 days as compared to mixed farming and 225 days as compared to
arable farming were found by maintaining dairy farm.

Jayachandra Reddy et al 51 ( 2004) conducted a comparative study of

economics of milk production in three states, viz., Chitoor district in Andhra Pradesh,
Erode district in Tamil Nadu and Kolar district in Karnataka involving aspects related

49
Kale, N.K., Tilekar, S.N., Borude, S.G. and Hinge, B.J., “ An economic enquiry in to working of
dairy cooperatives in coastal area of Maharashtra”, Indian Coop Rev., 38(4): 2000, pp.426-433.
50
Reddy Y.V.R., “Impact of Dairying On Rural Farmers”, Mysore J Agric Sci, 13:2000, pp.340-
342.
51
Jayachandra Reddy, Reddy, Y.V.Reddy and Ramakrishna, Y.S., “A Comparative Study of Cost of
Milk Production Under Different Agro-Climatic Regions In Semi-Arid Regions”, Indian J Agril
Econ., 59(3): 2004, pp.611.

51
to existing cost structure of milk production, profitability of crossbred dairy cows in
the three states under the changed socioeconomic-political scenario and also suggests
methods to improve the viability and profitability of these enterprises.

The net profitability varied from 43 percent in Tamil Nadu, 70 percent in

Andhra Pradesh and 83 percent in Karnataka. The study has further brought out the fact
that higher fat content provides higher prices as milk is priced based on FAT and Solid-
Not-Fat (SNF) content by dairies. Hence proper scientific breeding procedure is to be
followed to improve fat content in the milk as well as milk production per animal.

Thakur and Singh 52 ( 2004) conducted surveys in the year 2002-03 to assess
the energy and cost requirement for milk production in different commercial dairy
farms in four locations, viz., Maharajpur, Imaliya, Pariyat and Mohaniya, around the
Panagar block of Jabalpur district, representing the more plateau and Satpura hills
zone of Madhya Pradesh. The locations for conducting the survey was selected at
random without following any statistical method as there are enough number of
commercial dairy farms to get a good comprehensive data on the different activities in
milk production. It was inferred that cattle raising was not only an important
occupation for supplying the nutritional diet to the people but also it has greater
concern to uplift the socio-economic status of the people related to agricultural sector.
Likewise raising goats, cows, buffaloes and birds as a supplementary occupation in
the agricultural sector is apparently most economical for the development of socio
economic status of rural people particularly in weaker sections, having small and
marginal holdings or low investment capacity and tribal communities.

Dixit et al 53 ( 2004) studied the economics of milk production in five agro

climatic zones of Kerala. The primary data with respect of farm inventory, production
traits of Milch bovines, feeds and fodder fed, labour utilization, production and
consumption of Milk, value of various inputs and outputs, expenditure on veterinary
and other miscellaneous items etc. were collected from 750 households. The data

52
Thakur, C.L., and Singh, V.C., “Energy and Cost Requirements For Milk Production In Different
Commercial Dairy Farms of Jabalpur, Madhya Pradesh”, Indian J Agril Econ., 59(3): 2004
pp.615-616.
53
Dixit, P.K., Dhaka, J.P., Sajeesh, M.S., and Aravinda Kumar, M.K., “Economics of Milk
Production In Kerala- An Inter-Regional Empirical Study”, Indian J Agril Econ., 59(3): 2004,
pp.646.

52
pertained to the year 2002-03 the results of the analysis indicate that bovine husbandry
forms an important component of the typical homestead-farming situation in Kerala.
The crossbreeding of cattle has resulted in the spectacular performance of dairy sector
in the state.

Singh and Rekha Dayal 54 ( 2004) studied the economics of production and
marketing of milk in the state of Uttar Pradesh. Linear and log-linear functions were
used to work out the estimates of factors affecting marketed surplus of milk both for
the private and cooperative systems. The results of the study indicated that the feed
and fodder cost was the most important item of the total maintenance cost accounting
for 55 to 65 percent of the total cost in zone-I and 51 to 66 percent in zone-II. The net
profit per day of a milch buffalo was very low due to the higher maintenance and low
milk yield of milch buffalo on each herd size group in each zone of the state. The net
profit of milk production per buffalo per day was observed to be higher in the case of
small size group due to higher milk yield of milch buffaloes in this size group as
compared to medium and large herd size groups in both the zones. The establishment
of milk cooperative societies in the rural areas had positive impact on the marketed
surplus of milk. The study further showed that the milk vendor being an important
intermediary in milk marketing made huge profits by adopting various types of
malpractices. Lender utilization of plant capacity was the major factor for incurring
losses by cooperative milk plant in fluid milk marketing.

Neeraj Rao et al 55 ( 2004) studied the economics of milk production in Kanpur

(dehat) district of Uttar Pradesh Two blocks from the selected district and five villages
from each selected blocks were selected randomly in proposition to the number of
farmers categorized under three size groups of 0-1,1-2 and above two hectares. The
study revealed that the total maintenance cost of a milch animal per lactation increased
as farm size increased. On an average the maintenance cost of milch animal during a
lactation period came to Rs 10278. Amongst all labour charges accounted for the
highest share followed by fodder andconcentrates. The gross income from milk

54
Singh, R.B. and Rekha Dayal., “Economic Analysis of Production and Marketing of Milk In
Central Region of Uttar Pradesh”, Indian J Agril Econ., 59(3): 2004, pp.654.
55
Neeraj Rao, Prasant Kumar, Govind Pal and Chandra Sen., “Economics of Milk Production In
District Khanpur(Dehar), Uttar Pradesh”, Indian J Agril Econ., 59(3):2004, pp.624.

53
production was higher on large farmers because of excess utilization of concentrates
by large farmers. Input output ratio was the highest on small farmers and it was
1:1.31.Elasticity of production for fodder was the highest followed by human labour
and concentrates for all farms.

Ramachandran 56 (2004), studied the income and employment potential of

dairy farming in different stages in Kanyakumari district of Tamil Nadu. The primary
data collected from 100 farmers engaged in farming activities of five selected villages
of Kanyakumari district. The study revealed that the dairy farming is an activity with
great potential and has offered considerable scope for employment and income
generation in Kanyakumari district, the dairy farming gives employment opportunities
in the form of collecting dung, cleaning shed, watering and feeding animals, grazing
and cutting grass, milking, sale of milk, processing of milk and milk products. It may
be concluded that dairy constitutes the major proportion of the cattle population in the
sample households. Cattle rearing occupy a pivotal place among women folk of the
rural areas. Thus, dairy farming plays the main source of employment and income
generation in the study area.

Sidhu et al 57 (2004), studied the impact of dairy on income and employment in

Punjab. The study revealed that the livestock economy especially dairy is considered
to be an economically viable alternative for increasing income and employment in the
farm sector of Punjab. It is clear that the contribution of livestock economy to the farm
sector has increased over time whereas the contribution of crop sub-sector to the
agricultural growth as well as NSDP has declined due to stagnation/fall in productivity
of important crops, rise in fixed cost and degradation of soil and water resources. The
importance of dairy especially on small and marginal farms has increased and the
proportion of dairy to the total farm business income on these farms has increased.
The economic sustenance of these farmers is primarily dependent on dairy enterprise
as it helps in utilizing their surplus family labour, requires less land and water
resources and provides cash income to meet their daily consumption needs. The dairy

56
Ramachandran, T., “Rural Employment and Income Generation In Dairy Farming-A Case Study
In Kanyakumari District”, Indian J Agril Econ., 59(3): 2004, pp.643.
57
Sidhu, R.S. and Bhullar, A.S, “Changing Structure of The Farm Economy In Punjab: Impact of
Livestock On Income and Employment”, Indian J Agril Econ., 59(3): 2004, pp.578-587.

54
sector has also helped in generating employment on small, marginal and semi-medium
farms despite fall in employment in crop production.

Sharma et al 58, ( 2004) a study was carried out to estimate the contribution of
dairy and crop enterprises towards income and employment in relation to different
size of holdings in the semiarid region of Rajasthan. For this study data were collected
from 60 farmers in the four adopted villages of Sikar tehsil of Sikar district during the
agricultural year 2003-2004. The farmers were classified in to different size groups,
namely, small (upto 2 ha), medium (2 to 4 ha) and large (4ha and above). From each
village and each size group, 5 cultivators were randomly selected. Dairy enterprise
provided maximum employment of 338 mandays and crop farming provided 219
man-days. Per worker employment from crop and dairy farming were 80 man-days
and 123 man-days, respectively. Thus, dairy farming plays a key role in increasing
employment and income in the semiarid tract of Rajasthan.

Sujatha et al 59 ( 2004) studied the market structure, price spread, marketing

costs and marketing efficiency for milk in the cooperative and private sectors of
Andhra Pradesh. It was found that price spread was less in private sector and hence
the consumer price was also less. The major constraints identified in milk marketing
were high feed cost, inadequate price for milk, poor credit facilities, disease outbreak,
etc. Because of delay in the payment of fee for the milk sold to the cooperative
society, the farmers approached the private firms. For enhancing the marketing
efficiency of milk, infrastructure facilities like chilling plant, pasteurization and dairy
products processing plants have to developed.

Vinod et al 60 ( 2004) Conducted a study with reference to 120 respondents

scattered in six villages of two blocks in Rewari district of Hariyana to analyze the
nature of markets and role of cooperatives in marketing of milk. It was observed that
on medium and large category of farms the milk sold through cooperative society was
58
Sharma, B.L. and Sharma, R.C., “Contribution of Dairy and Crop Enterprises To The Economy of
The Rural Families In Semi-Arid Region of Rajasthan”, Indian J Agril Econ., 59(3): 2004,
pp.608-609.
59
Sujatha, R.V., Eswaraprased, Y., Srilatha, and Arunakumari, A, “Milk Marketing In Cooperative
and Private Sectors- A Comparative Study In andhra Pradesh”, Indian J Agril Econ., 59(3): 2004,
pp.650.
60
Vinod, K., Duhan, Khatkar, R.K. and Singh, V.K., “Nature of Markets and Role of Cooperatives
In Marketing Or Milk In Rewari District of Hariyana”, Indian J Agril Econ., 59(3): 2004, pp.651.

55
found to be higher than the disposal through milk vendors and directly to the
consumers mainly due to more marketable surplus. While on small farms the disposal
was found to be almost equal, i.e., 35 percent through milk vendors and directly to the
consumers, and the disposal of milk through cooperative society was less due to lower
marketable surplus owing to smaller heard size.

Usha Tuteja and Narinder Singh 61 ( 2004) conducted a study on employment

and income generation through livestock based milk processing units in rural
Hariyana. The study revealed that the production of milk in Hariyana grew at the rate
of 4.07 per cent per annum during 1980-1981 to 200-2001. Therefore, milk processing
on commercial scale has great potential in terms of enhancing the income of the
farmers by selling milk products in the expanding domestic and international markets.
The milk processing units on an average generated employment of 8.40 persons in
Gurgaon and 5.86 persons in Jind district. The factories generated the highest
employment of about 14 persons in the former and 11 persons in the latter district. The
study highlighted that marketing of local products faced severe competition from the
multinationals. Hence, promotional policies need to focus on the marketing
bottlenecks and devise efficient marketing channels through public and private
partnership. Special zones can be created in those areas where raw material/milk is
easily available. The alternative way could be formation of cooperatives like Amul.

2.5 GAP ANALYSIS

The reviews conducted by the researcher gives a detailed account of the
various aspects of Dairy industry and the small units in this section and their
operational and functional effectiveness. The studies highlighted the solid progress of
diary units, primarily attributable to structural changes in the Indian dairy industry
brought about by the advent of MSME units in this sector. Highly competitive Indian
dairy industry poses threat/challenges for the survival in the global dairy market.
However there is no doubt that there is a tremendous scope for the growth and ample
opportunities for the small and micro enterprises in dairy industry in the new
millennium. The importance of time , quality , quantity procurement issues , technical
and marketing aspects and other problems associated with the dairy industry.

61
Usha Tuteja and Narinder Singh., 2004, “Employment and Income Generation Through Livestock
Based Milk Procession Units In Rural Hariyana ”, Indian J Agril Econ., 59(3): 2004, pp.658-659.

56
 Most of the studies conducted in dairy industry have focused mostly
procurement, pricing and consumer behavior towards dairy products. Only very few
studies on the dairy units of MSME sector milk has been conducted. Similarly, though
much research has been done into the dairy product attributes and dairy cooperatives,
only few studies deal with the small enterprises which process milk and produce milk
products. Its also very much required to find the pattern of milk consumption and the
demand for these products and how to bring innovative products. In order to bridge
this gap the present study titled “A Study on the opportunities for Micro and SSI units
in dairy sector with reference to Salem district” was undertaken.

2.6 RESEARCH CONCEPTUAL FRAMEWORK

The extensive review of literature has enabled the researcher to construct a

proper research conceptual framework.

Based on the reviews the researcher has identified the various opportunities and roles
available for the MSME units in Dairy sector. They are:

The various opportunities spreading across this sector can be mentioned as

follows:

1. Increase in productivity at lower cost

2. Enhanced export potentials
3. Modernization and Upgradation
4. Concentration on quality and standards
5. Hygiene and food safety standards
6. Support from Government
7. Linkages – Forward and backward
8. Marketing efforts – parks and exhibitions
9. Proper co-ordination and co-operation
10. Involvement of too many intermediaries
11. Access to modern management practices

All these are the various factors considered to have an impact on the operations
and opportunities available for the MSME units in the dairy sector.

57
Conceptual framework is designed by the researcher to identify the various opportunities and roles available for MSME units in
Dairy sector.

Access to
Involvement of modern
too many management Increase in
intermediaries Practices Productivity
at Low cost

Proper Co-
ordination
and Co- Enhanced
operation Export
Potentials

Opportunities for
Marketing MSME Units in
Efforts-Parks Dairy Sector
and
Exhibitions Modernisation
and
Upgradation

Linkages-
Forward and
Backward Concentration
on Quality and
Support from Hygiene and Standards
Government Food Safety
Standards

58
Increase in productivity at lower cost

Over the span of three decades, India has transformed from a country of
acute milk shortage to the world’s leading milk producer, with production exceeding
200 million tonnes in 2010. This phenomenal success is attributed to a Government
initiative known as Operation Flood (1970–1996) and its intense focus on dairy
development activities. Milk production and productivity were enhanced by
ensuring the availability of veterinary services, artificial insemination (AI), feed and
farmer education. The need to reduce cost is also important. Hence the concentration
should be on providing more quantity at less cost.

Enhanced export potentials

The policy environment has favoured the expansion of cooperatives and

small units, which ultimately crowded out the private sector. However, liberalization
of the sector in recent years has encouraged private investment in dairying. In 2002,
the Milk and Milk Products Order (MMPO) ushered in major policy changes friendly
to the private sector and a momentum of activity that is likely to increase the export
potentials dramatically in the coming years. Nowadays, both the private sector and the
cooperatives drive the value chains. Because of the many unsuccessful cooperatives in
the country, other models of dairy farmer organizations are being explored, such as
mutually aided cooperative societies (MACS) and MSMEs.

Modernization and Upgradation

Dairy development also includes subsidies for developing infrastructure and

modernisation of milk processing and testing. The Clean Milk Production
Programme is a centrally sponsored scheme that is being implemented by the State
Department of Animal Husbandry, Dairying and Fisheries with several objectives: i)
the creation and strengthening of necessary infrastructure for the production of
quality milk and milk products at the farm level up to the points of consumption; ii)
improvement of milking techniques; and iii) training to enhance awareness on the
importance of hygienic milk production. Several other rural development initiatives
support dairying, such as through the District Rural Development Agency and
women’s self-help groups.

59
Concentration on quality and standards

Quality control is a critical issue. An important aspect is decide what are the
concern about quality. The manufacturing and production of vaccines also forms a part
of the Quality control aspect. The standards set for determining the quality aspects also
needs attention, as many of the farmers are not aware about the quality standards.
The quality of animals is critical in determining its milk productivity and hence overall
production. Hygene and food safety standards are also included in this aspect.

Support from Government

The dairy sector in India has traditionally been highly regulated. The
government projects and programmes in place for enhancing dairy development
include subsidies for developing infrastructure for milk processing and testing. The
Clean Milk Production Programme is a centrally sponsored scheme that is being
implemented by the State Department of Animal Husbandry, Dairying and Fisheries
Several other rural development initiatives support dairying, such as through the
District Rural Development Agency and women’s self-help groups.

An area of government support that has not been capitalized on so far is the
investment in promoting the nutritional aspects of milk, particularly pasteurized
milk versus loose milk. Also the training for the staff and farmers can be conducted
to improvise the quality.

Linkages – Forward and backward

Traditionally, the cooperatives have not had much of concentration on the

supply chain. In the liberalized environment characterized by open procurement of
milk, there is scope for having forward and backward linkages. Consequently, many
agencies, organizations and agents have started adopting this method. But a major
difference is that they are not backward investing in dairy development activities
through the offering of producer services.

Marketing efforts – parks and exhibitions

There is a strong need to develop more marketing strategies in the dairy

sector especially when the sector is more open for all the players. Innovative

60
marketing activities like organising exhibitions and parks will help to create more
marketing and sales.

Proper co-ordination and co-operation

In light of the increasing demand driven by the growing population, higher

incomes and more health consciousness, the slowdown in dairy industry growth is
severely worrisome. Based on estimates by the National Dairy Development Board
(NDDB), the demand for milk is likely to reach 180 million tonnes by 2022. To
supply the market, an average incremental increase of 5 million tonnes per annum
over the next 15 years is required – a doubling of the average incremental rate
achieved over the past 15 years. In the absence of sufficient increased production,
India will need to rely on the world market for imports. And because of the huge
volume required, it will affect global milk prices. Thus, focusing on areas for local
dairy development is critical. Unless there is a proper co-ordination is maintained
between the various links in the dairy sector, this competition will affect the quality
and quantity.

Access to modern management practices

The firms in the dairy sector should be made aware about the modern
management practices and techniques. This will help them to keep pace with the
technology and other developments.

2.7 OPERATIONAL DEFINTIONS

Operation Flood, launched in 1970 is a project of the National Dairy

Development Board (NDDB), which was the world's biggest dairy development
program, that made India, a milk-deficient nation, the largest milk producer in the
world, surpassing the USA in 1998, with about 17 percent of global output in 2010–
11, which in 30 years doubled milk available per person, and which made dairy
farming India’s largest self-sustainable rural employment generator. It was launched
to help farmers direct their own development, placing control of the resources they
create in their own hands. All this was achieved not merely by mass production, but
by production by the masses.

61
Dairy farming

Dairy farming is a class of agriculture for long-term production of milk

which is processed (either on the farm or at a dairy plant, either of which may be
called a dairy) for eventual sale of a dairy product.

Co-operative societies

A co-operative society is an autonomous association of persons united

voluntarily to meet their common economic, social and cultural needs and aspirations
through a jointly-owned and democratically-controlled enterprise. A co-operative
society is another means for forming a legal entity to conduct business besides
forming a company. It pools together human resources in the spirit of self and
mutual help with the object of providing services and support to members.

Dairy products

A dairy product or milk product is food produced from the milk of mammals.
Dairy products are usually high energy-yielding food products. A production plant
for the processing of milk is called a dairy or a dairy factory. Apart from breastfed
infants, the human consumption of dairy products is sourced primarily from the milk
of cows, water, buffalos, goats, sheep, horses, yaks, camels, domestic buffaloes, and
other mammals. Dairy products are commonly found in European Middle Eastern,
and Indian Cuisine, whereas aside from Mongolian Cuisine, they are little-known in
traditional East Asian cuisine.

62