Indian Dairy industry - An Overview

India is largest milk producer in the world; in 2006-2007 its milk production was100.9 million tonnes & per capita milk consumption is 246gms/day (2006-2007). It is also having second largest no. of cattle & highest no. of buffalo in the world. This underscores the potential of India to be as the biggest player in the dairy market, at world stage. The overall growth rate of the dairy industry in India is 4 %, which is almost 3 times the average growth rate of the dairy industry in the world. In India, dairy industry is mostly unorganized & only 15 % of this sector is organized. The share of organized sector is expected to rise rapidly, especially in the urban region. Milk processing level is 35 percent.
The growth rate of agriculture is stagnant, below 2% (Recently it touched 4% but next year projection is again gloomy), and livestock sector growth rate is more than 4.5%. Small and marginal farmers own only 33 % of land, and about 60% of female cattle and buffaloes &75 % of households have 2-4 animals on average. Dairying is a part of the farming system in India & feed is mostly residual from crops. Most imp thing is that dairy is a source of regular income; crop income is seasonal so it minimizes risk. Dairying comprises 1/3 rd of rural income. Livestock is a security – asset to be sold in times of crisis. It is also important as it is a tool for rural income generation, rural nutrition & women empowerment.
The value of milk & milk products in India is more than Rs. 1179 billion in the year 2004 -05 (Almost equal to the combined value of the paddy & wheat). Out of India’s total milk production, no less than 65% is consumed unpasteurised. Of this percentage, 44% is consumed in the rural area where it is produced. The remaining 21% of the unpasteurised milk is sold to urban consumers. Rest 35% of the milk production that is pasteurised, 22% is processed by the unorganised dairy sector. This means that only 13% of the Indian milk procurement is processed in the co-operative and privately owned dairy industry. The majority of this, 8% of the total milk procurement, is processed into packaged or loose pasteurised drinking milk for consumers in the major cities. The other 5% is used to make products with added value, such as milk powder, ghee, ice cream, cheese and fresh milk products. Some important milk products are:
Infant Milk Food, Milk Powder, Whitener, Condensed Milk, Malted Milk Food, Butter, Cheese, Ice Cream and Ghee.
The organized industry handles only 15 per cent of milk, with 36 per cent being handled by private dudhias and unorganized players and 46 per cent being retained in rural areas. Within the 15 per cent organized sector share, private and cooperative/government dairies handle an equal quantity. Organized sector is mainly made up of the co-operatives but now the private players like Reliance, Britannia, and Nestle etc. are also coming in this sector.
Dairy sector was de-licensed in 1991. The Milk and Milk Products Order (MMPO) 1992 has some controls over Collection areas/milk sheds specified & processing capacity was fixed. But after revising the MMPO in 2002: controls stand were withdrawn. After that private sector investment in dairying has increased considerably. Previously, co-operatives did not have any competition from the private sector but now considering the potential, several big players are coming in this sector. To strengthen co-operatives, the government has also reduced interference in management & now farmers are free to govern their cooperative organizations.
From 2000 onwards, Indian dairy products, particularly milk powder, casein, whey products and ghee started making their presence felt in global markets. The decade of 2000-10 will be recorded in dairy history as the decade of exports. India today is the lowest cost producer of per litre of milk in the world, at 27 cents, compared with the U.S' 63 cents, and Japan’s $2.8 dollars. Now to take advantage of the lowest cost of milk production and increasing production in the country multinational companies are planning to expand their activities here. Some of these milk producers have already obtained quality standard certificates from the authorities for exports. This will help them in marketing their products in foreign countries in processed form.
Dairy demand is income elastic, this means increase in income and increase in population- high growth rate for dairy. The urban market for milk products is expected to grow at an accelerated pace of around 33% per annum. This growth will come from the greater emphasis on the processed foods sector and also by increase in the conversion of milk into milk products. Specially the demand for Ghee & table butter is rising at faster pace, 8 % & 10 % respectively. By 2011, Dairy India projects the value of the industry to be more than double to Rs 520,780 crores. With all this India Dairy industry is poised to play a bigger & central role at world stage.

Prakash Saini
PGPABM(08-10)