The Indian Dairy Sector - Fact Sheet

From a milk deficient country in the early 1960s, India has emerged as the world’s largest producer of milk. By 2003, milk production touched the 88 million tonnes (MT) mark. By 2002-03, under the National Dairy Development Board (NDDB), and Operation Flood, 11.4 million cattle farmers had been organised into 103,281 dairy cooperatives. Their collection of milk was estimated at 84.6 million litres and their earnings were in the region of Rs 50 billion. Twenty-two state federations were affiliated to NDDB till 2002-03. However, except for Amul, most of the state federation brands are regional. These include Verka in Punjab, Nandini in Karnataka, Vijaya in Andhra Pradesh, Saras in Rajasthan, Anchal in Uttaranchal, Mother Dairy in Delhi and Calcutta. Though they dominate the liquid milk market in their own states, due to lack of standardisation, the value-added products, such as butter, cheese, etc. of these brands, have not been able to gain a national presence. Amul and, now Mother Dairy, are the only two brands that have acquired a national presence.

Nearly 46 per cent of the total milk production – i.e. 42.5 million tonnes – is consumed as liquid milk. 47 per cent  is converted into traditional products like cottage butter, ghee, paneer, khoya, curd, etc. Only 7 per cent of the milk is used in the production of western products like milk powders, processed cheese, processed butter. The unorganised sector accounts for more than 50 per cent of all milk and dairy products. Out of a total production of milk and dairy products worth Rs 1600 billion in 2003-04, traditional dairy products accounted for Rs 990 billion and the organised sector’s share is about Rs 230 billion. About 60 per cent of the installed processing capacity is in the cooperative sector.

The Dairy Movement in India

The dairy cooperative movement in India continues to be unparalleled in the world in terms of its scope and scale. Launched in the Kaira district of Gujarat during India's independence, farmers were encouraged to form a cooperative to counter exploitatively low prices offered for their milk by the monopoly milk supplier, Polson Dairy. The Kaira cooperative launched its operations in 1946 and operated at two levels. The primary village dairy cooperative society of milk producers collaborated with others in the district to form the milk producers union, which procured and processed the milk. The union processed the milk that was procured from the village dairy cooperatives at its processing plants. In addition to collecting surplus milk, the Kaira union assisted members in expanding production. The father of the Indian dairy movement was Verghese Kurien. A mechanical engineer from the Michigan State University, US, Kurien helped India to become the largest producer of milk in the country.

As the number of district unions increased, the Kaira cooperative was transformed into the Gujarat Milk Marketing Federation Ltd (GCMMF) under the chairmanship of Kurien. GCMMF coordinated the operations of the union and marketed milk and milk products. As the operations were based in Anand, Gujarat, this came to be known as the Anand model. This model was replicated across India. In 1965, NDDB was formed under the chairmanship of Kurien and was mandated with the task of building cooperative dairies across the country. Operation Flood was launched in 1970, which sought to establish dairy cooperatives across India, get rid of middlemen, remove seasonal price variations and make it economically viable for farmers to undertake production and distribution of milk. Operation Flood achieved phenomenal success: trebling India's annual  milk production from 21 million tonnes  in 1968 to 74 million tonnes in 1999. Nearly 9 million small producers in 74,000 villages began supplying hygienic and  fair priced milk to 300 million consumers and earning revenues of Rs 25 billion in the process.

Of the Rs 2 billion invested by World Bank in the second phase of Operation Flood, the net return to  the rural economy has been in the region of Rs 240 billion.per year over a period of ten years or a total of Rs 2.4 trillion in all. No other development programme in the world has achieved such success. Several countries like Sri Lanka, Bangladesh, Nepal, the Philippines, Malaysia and some African countries have decided to implement similar projects.  The third phase of Operation Flood, implemented during 1985-96 aimed at consolidating the achievements of the first two phases. Infrastructure was strengthened, production enhanced and animal healthcare and nutrition improved. The Operation Flood III programmes was funded by a World Bank credit of US $365 million and food aid worth Rs 2226 million. By May 1995, Rs 15.78 billion had been invested in the three phases of Operation Flood. By the time the third phase came to an end, milk processing capacity had grown to 17.2 million litres per day. Chilling capacity of 6.9 million litres per day had been added and milk powder production capacity of 839 tonnes per day had been set up. By 1999, average milk procurement by the cooperatives had grown to 10.2 million litres per day, of which 9.4 million litres was marketed as liquid milk. The remainder was converted into milk powder, butter, cheese, ghee and other traditional milk products.

NDDB has been focusing on intensive R&D activities in animal husbandry through the late 1990s. It has set up an embryo transfer lab at Sabarmati Ashram Gaushala in Ahmedabad. NDDB has also been working on improving nutrition quality of the normal cattle feed. NDDB has made it possible to transport milk over long distances by using over 140 insulated rail milk tankers, each with a capacity of 40,000 litres. This has enabled the National Milk Grid to supply milk to milk-deficient regions in the country.

In 2000, NDDB announced a ten-year plan called Perspective 2010. It is aimed at strengthening the dairy cooperative movement. The major objectives include:

• increasing milk procurement by cooperatives from 5.75 mt in 2000 to 17.8 mt in 2010;
• increasing the number of dairy cooperative societies from 84,289 in 2000 to 129,480 in 2010;
  
• increasing the membership in dairy cooperatives from 10.62 million in 2000 to 15.62 million in 2010; and
•  increasing the amount of milk to be marketed from 4.7 mt in 2000 to 14 mt in 2010.