Indian Dairy Farm Sector: Opportunities and Challenges

kuldeep sharmaIndia’s 2016-17 forecast of milk production is pegged at around 1.6 billion litres subject to normal monsoon (which has already occurred) and considering a growth of over 4% over the previous year. The estimated production for SMP and ghee is estimated to be about 0.57 Million MT and 5.4 Million MT respectively. SMP production may show a slight increase provided global commodity prices move north catching up the current improving trend.
The poor genetic potential of our animals is still a big challenge and even for exotic cross breed animals, the yield is just one-fourth that of the developed world. Water buffalo remains the first choice of most of the farmers in the country due to better price realised for higher fat and convenient disposal of animals at a good price at slaughter house which is not possible in case of cows due to government ban in most of the states.
The farm gate price in India is still better than most of the country wherein half of the milk gets sold at around $0.35-$0.40 for cow milk and rest half at above $0.55 for buffalo milk. Milk production in India has a high level of polarisation with half of the states producing 90 % of the milk, 87% of the breedable cattle and 98 % of the fodder resources.
On one hand, the organised sector is becoming more responsive towards farmers through the implementation of appropriate extension services for animal health, clean milk production, breeding and balanced rationing at cooperative societies level. On another hand, the government is launching an all-inclusive drive to ensure micro finance, micro services, micro marketing and micro skill development at small and marginal farmers levels. The state government are becoming more active in reaching out to the farmers and launching a plethora of schemes and programs.
Feed and Fodder are other critical areas where the country has hardly 20% manufacturing capacity for meeting demand for cattle feed. There is a big shortfall on the availability of land for growing fodder on the other hand. However, initiatives by a few large feed companies and investors including Patanjali, organised silage and hay business is finding a lot of traction. It is expected that by 2020 Indian farmers will have vendors serving the fodder supply chain on Just in Time basis in certain part of the country.
In India, the total collection by cooperatives in first three-quarters of 2015-16 crossed 40 million litres per day mark. This accounts for close to 10 % of the total milk produced in the country per day. An almost equivalent quantity got collected by the private sector in the organised sector during the same period. This way the organised sector actually accounts for 20% of total milk produced. However, if we compare it with the available surplus milk that is marketable at farm gate (surplus after captive consumption of the farmer family and being sold to the neighbours and villagers) this percentage rises to an impressive 40% plus.
As per FSSAI records, India has a total registered infrastructure of 250 million litres per day at the central level and 80 million litres at state level thus making it around 330 million litres per day at the national level in 28 states. The total infrastructure for processing is considered to be around 140 million litres which is expanding very fast.
As per another study by NSSO, 44% of the rural household own bovine animals and for progressive states like Rajasthan (11%), Punjab (15%), Haryana (15%),Gujarat (18%), AP (20%), Kerala (22%) and Tamil Nadu (25%) the percentage of household with dairy as a main source of livelihood is shown in brackets. In another survey out of 30% of the women in rural households who have free time, 20% or 10 million in numbers have shown interest in opting for dairying as an activity provided they are given all supports in terms of training, finance and appropriate market linkage.
With more and more rural households shifting their focus towards dairying as an opportunity in certain states, there has been a counter mechanism of people getting out of it in other. Urbanisation or rather a suburbanization and very high growth rate of services sector could be treated as the major reason for such decline in the work force for agriculture and dairying sector.
There has been a complex scenario arising out of multiple factors like low animal productivity, high input costs, poor management skills, high patronage of intermediaries on supply chain, poor cold chain infrastructure, poor power uptime in rural India, absence of regulatory at primary production level (for breeding, use of antibiotics and hormones, use of neutralizers), poor financial inclusion for loans and cattle insurance, skewed scientific management of cattle policy for culling on one hand and high market demands, emerging consumerism towards safe and pure milk, high demand for protein-rich foods, improved socio-economic conditions, boom of service class, responsive behaviour of youth towards dairy entrepreneurship, etc. on the other hand.

by Kuldeep Sharma, Suruchi Consultants