challenges-facing-dairy-sector-in-india

Context: For dairy farmers, this increase in milk prices is not commensurate with the increase in their feed and other costs. Their margins are getting squeezed. 

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  • Amul has just raised its milk prices for consumers. This increase is well below the increase in the overall consumer price index (CPI) which has already crossed the tolerance limit of RBI at 6 per cent. 
  • But this will push up CPI further, causing inflationary pressures, which may soon force the RBI to change its “accommodative stance” on monetary policy.

Milk Production in India

  • India is the world’s largest producer and consumer of milk. It produces around 150 million tonne milk annually.
  • India has the world’s largest livestock population — 58 per cent of buffaloes and 15 per cent of cattle. 
  • Uttar Pradesh is the leading state in milk production followed by Rajasthan and Gujarat.
  • India exports only 0.01% of the world dairy export market. The productivity of Indian dairy animals is at present only 1806 kg per animal per year against the world average of 2310 kg/animal/ year. 
  • About 80 million rural households are engaged in milk production with a very high proportion being landless, small & marginal farmers.

Significance of dairy sector:

  • Milk is our biggest agri-commodity in terms of value, greater than paddy (rice), wheat, and sugarcane combined. 
  • Lifeline of rural economy: Our dairy sector is dominated by small holders with an average herd size of 4-5 animals. 
  • The overall growth in the dairy sector for the last 20 years has been between 4-5 per cent per annum, and lately, it has accelerated to even 6 per cent. 
    • In comparison, cereals have been growing at about 1.6 per cent per annum over the same period.

Govt. initiatives for improving milk quality:

  • National Programme for Dairy Development (NPDD): Department of Animal Husbandry has approved strengthening of dairy laboratories under the National Programme for Dairy Development (NPDD) for detecting adulteration in milk. 
    • Strengthening of quality milk infrastructure from farm level like dairy cooperative societies to processing plants at District/State level.
  • Dairy Processing & Infrastructure Development Fund: It has a corpus of Rs 8004 crore with National Bank for Agriculture and Rural Development (NABARD).
    • The project will be implemented by National Dairy Development Board (NDDB) and National Dairy Development Cooperation (NCDC) directly through the End Borrowers such as Milk Unions,
    • The project will focus on building an efficient milk procurement system by setting up of chilling infrastructure & installation of electronic milk adulteration testing equipment, creation/modernization/expansion of processing infrastructure and manufacturing faculties for the Milk Unions/ Milk Producer Companies.
    • State/District level Steering Committee has been constituted in some States to ensure the effective enforcement and implementation of the Food Safety and Standards Act, 2006
    • Village level co-operative societies are also considered for facilitating the testing of contaminants in the next phases of the scheme.
  • Rashtriya Gokul Mission
    • To enhance milk production and productivity of bovines, including promotion of embryo transfer technology, creation of facility for sex sorted semen production and genomic selection. 
  • Single norm for process certification of hygienic standards: After harmonization of products certification takes place, the Quality Mark logo shall be used in conjunction with ISI mark for Milk & Milk products sold by Co-operatives as well as Private Dairies. 
  • The food authority has now instructed big dairy houses to brand their milk correctly. 
  • When added with skimmed milk powder or glucose, the milk should be labelled “reconstituted”. But skimmed milk powder is added to milk for long to reduce its fat content.
  • Delicensing: The doors for the private sector were opened partially with the 1991 reforms, but fully in 2002-03, when the dairy sector was completely de-licenced. 
    • As per an NDDB report, the “capacity created by private dairy companies in the last 15 years is equivalent to the capacity set up by cooperatives in over 30 years”.
  • India's Operation flood was the world's biggest dairy development program which gave a major thrust to the milk production of the nation. 
    • It aimed at helping the dairy industry sustain itself economically while providing employment to poor farmers.
    • Verghese Kurien was the architect of Operation Flood which was launched in 1970 by India's National Dairy Development Board (NDDB).

Challenges faced by the Indian dairy sector

  • Marketing and Pricing:
    • There is no minimum support price (MSP) for milk. It is more like a contract between the company and the farmers. Thus, the price of milk is largely determined by the overall forces of demand and supply. 
    • Increasing costs of production enter through the supply side, but the demand side cannot be ignored.
    • There is also a poor perception of the farmers, due to lack of marketing facilities and extension services, towards commercial dairy enterprise as an alternative to other occupation.
  • The major causes of low productivity in India are both intrinsic (low genetic potential) and extrinsic (poor nutrition/feed management, inferior farm management practices, ineffective veterinary and extension services and inefficient implementation of breed improvement programmes).​​​​​​
  • Lack of organised private sector: However, even after five decades of Operation Flood, cooperatives processed only 10 per cent of the overall milk production. India needed the double-engine force of the organised private sector to process another 10 per cent. 
    • Recently many start-ups “dairypreneurs” have come in promising a farm-to-home experience of milk. 
  • Shortage of feed/fodder: There is an excessive number of unproductive animals which compete with productive dairy animals in the utilisation of available feeds and fodder.  The grazing area is being reduced markedly every year due to industrial development.
  • Health: Veterinary health care centres are located in far off places. The ratio between cattle population and veterinary institution is wider, resulting in inadequate health services to animals.

Way forward:

  • Free market regime: let prices be determined by market forces, with marginal support from the government or cooperatives in times of extreme. 
  • Augmenting Production, Processing and Marketing Infrastructure: If India has to emerge as a dairy exporting country, it is imperative to develop proper production, processing and marketing infrastructure, which is capable of meeting international quality requirements. 
  • The major focus should be on innovations to cut down costs, raise productivity, ensure food safety, and be globally competitive. That will help both farmers and consumers alike. 
    • Sexed semen technology helps in predetermining the sex of offspring by sorting X and Y chromosomes from the natural sperm mix. 
    • This can solve the problem of unwanted bulls on Indian roads. 
    • Green fodder: The Indian Grassland and Fodder Research Institute — Vision 2050 estimates that India will have a green fodder deficit of about 30 per cent by 2030. 
    • “Hydrogreens”, an agri-tech startup provides solutions to the green fodder deficit through their “Kambala”, a hydroponic green fodder unit. 
    • It allows farmers to grow fresh green fodder year-round without soil in a controlled environment and with limited water resources

The cooperatives did a great job during Operation Flood, and are still doing that, but the private sector entering this sector in a big way has opened the gates of creativity and competition.