Challenges Facing Dairy Sector in India – Explained, Pointwise

Introduction

World Milk Day was celebrated on 1st June while National Milk day is celebrated on 26th November. Both days recognize the importance of milk for the health and well-being of an individual. Apart from nutritional benefits for health, the dairy sector in India is a crucial source of employment generation and a steady income for the majority of small and marginal farmers.

The sector has been performing well since the onset of operation flood in the 1970s. It is testified by India’s occupation of top spot in terms of milk production. However, acquisition of a top position doesn’t mean the sector is devoid of challenges. Indian dairy farmers are dealing with fragmented supply chains, poor returns, and high price sensitivity, all of which make the sector less lucrative. 

Furthermore, the pandemic has created additional stress on the sector that demands immediate reform to enhance the income potential and resilience in the sector.

About the Dairy Sector in India

• Dairy is one of the biggest agri- businesses in India and a significant contributor to the Indian economy. 
• It is the largest single agricultural commodity with a 4 % share in the economy. 
• India is the largest producer of milk globally with 188 million MT production in 2019-20. It produces over one-fifth of the global milk production. 
  • Organizations like Amul, Mother Dairy, Kwality Limited, etc. have played a pivotal role in expanding the production. Amul today has over 3.6 million milk producers nationwide.
  • Further, there has been a proliferation of private dairy enterprises that now account for more than 60 % of dairy processing capacity in the country.
• In the Gross Value Added (GVA) from agriculture, the livestock sector contributed 28 percent in 2019-20. Further, India witnesses a 6% growth rate in milk production every year.
• The dairy sector serves a wide range of consumer needs too – from protein supplements and health foods to indulgence foods such as yogurt and ice creams.

Significance of the Dairy Sector in India

• Tackling agricultural uncertainties: Farmers keep 2-5 milk animals for livelihood. They provide great support to them, especially during drought and flood. Further, dairying is not a seasonal occupation in nature, like agriculture.
• Nutritional Support: The milk and associated products have immensely helped India in reducing the malnutrition and undernourishment levels in the country. Thus, the dairy sector is indispensable for meeting the nutritional requirement of the country’s rising population. 
• Employment Generation: It is a significant contributor to farmers’ income as approximately 70 million farmers are directly involved in dairying.
• Reduces Import Bill: Operation Flood (also called as White Revolution) converted India from a milk importer to the world’s largest producer.
  • The program launched in 1970 and adopted a multi-pronged approach. This included tax incentives, food quality standards, subsidies on inputs, infrastructure provisions such as cold chain and electrification. 
  • All this helped in reducing import bills and made India an exporter. The country exported dairy products worth $187 Million in 2019-20.  
• Women Empowerment: Female population comprises around 69% of the sector’s workforce. They are dependent on the sector for their livelihood. Therefore, the dairy sector’s development automatically augments women’s empowerment. 
• Boosting other sectors: The dairy sector provides cow dung which is used as an organic manure for the agricultural sector. Further, the sector provides raw materials to manufacture processed foods. 
  • For instance, the whey protein powder is an extract from the watery portion of milk that separates from the curds during the cheese-making process.

How did the pandemic impact the dairy sector in India?

• In the first wave, agriculture and allied sectors put up a spectacular performance. It showed an annual growth of 3.4 % while the economy contracted by (-)7.2 % in 2020-21. 
• However, the dairy sector could not replicate this good performance in the second wave.

Challenges Faced by Sector

• Fragmented Supply Chain: The fundamental challenge in dairy is maintaining quality and quantity within a diversified supply base. Due to its perishable nature, dairy requires more complex supply chain operations and logistics to ensure freshness and safety. 
  • The sector also witnesses adulteration practices and overuse of antibiotics to boost production.
• Price Sensitivity: Milk producers are highly susceptible to even minor shocks.  For instance, small changes in the employment and income of consumers can leave a significant impact on milk demand.
• Unorganised Nature: The majority of cattle raisers are unorganised unlike sugarcane, wheat, and rice-producing farmers. This nature further inhibits the creation of political clout to advocate for their rights.
• Data Deficiency: There is no official and periodical estimate of the cost of milk production. Even though, the value of milk produced outweighs the combined value of the output of wheat and rice in India.
• Poor returns: There is no MSP (Minimum Support Price) for milk unlike 24 major agricultural commodities in the country including wheat and rice. Further, dairy cooperatives are not a preferred choice for landless or small farmers.
  • The cooperatives adopt a fat-based pricing policy which is 20 to 30 % less than the price in the open market. 
  • Further, dairy cooperatives buy more than 75% of milk at its lower price band.
• Competition from alternatives: The traditional cow and buffalo milk is shunned by some consumers for more eco-friendly alternatives like ‘Soy Milk’ or ‘Almond milk’. They believe that the carbon footprint of plant-based milk products is much lesser than the traditional dairy products.

Impact of Pandemic

1. First, the threat of disease has restrained the door-to-door sale of liquid milk to households. This has forced the farmers to sell the entire produce to dairy cooperatives at a much lower price.
2. Second, the lockdown had led to the closure of shops. This has reduced the demand for milk and milk products.  
3. Third, the severe shortage of fodder and cattle feed has pushed up the input cost.
4. Fourth, private veterinary services have almost stopped due to Covid-19. This has led to the death of milch animals.

Government Initiatives for the dairy sector in India

The government introduced various initiatives to boost the dairy sector in India. Such as,

• Rashtriya Gokul Mission: It was launched in 2014 under the National Programme for Bovine Breeding and Dairy Development.
• Objectives:
  • Development and conservation of indigenous breeds
  • Breed improvement programme for indigenous cattle breeds to improve their genetic makeup and increase the stock
  • Enhancement of milk production and productivity
  • Upgradation of nondescript cattle using elite indigenous breeds like Gir, Sahiwal, Rathi, Deoni, Tharparkar, Red Sindhi and
  • Distribution of disease-free high genetic merit bulls for natural service.
• The government has launched a Nationwide AI (artificial insemination) program. It targets to augment annual milk productivity from 1,860 kg/per animal to 3,000 kg/per animal upon its completion.
• The government launched the National Livestock Mission in 2014-15. It broadly covers all the activities required to ensure quantitative and qualitative improvement in livestock production systems and capacity building of all stakeholders. The major objectives of the mission: 
  • Reduce the gap in demand and availability of feed and fodder, 
  • Conservation and improvement of indigenous breeds, 
  • Ensure higher productivity and production in a sustainable and environmentally friendly manner
  • Enhance livelihood opportunities and increase awareness
• The government established a Dairy Processing & Infrastructure Development Fund (DIDF) in 2017. It aims to modernize the milk processing plants and create additional infrastructure for processing more milk. 
• The dairy farmers have been included in the Kisan Credit Card (KCC) programme. It provides adequate and timely credit support from the banking system to the farmers for their cultivation and other needs.
• Similarly, dairying was brought under MGNREGA to compensate farmers for the income loss due to Covid-19.

Suggestions

• The government should support start-ups that come up with a solution-oriented approach. 
  • For instance, Country Delight is a Haryana-based dairy-tech company that is providing quality milk at consumers’ doorstep. 
  • The milk undergoes 26 quality tests and farmers deliver it directly. This ensures good quality and optimum pricing. 
• The producers should be given the requisite support to enter into value-added segments such as ice cream, yogurt, cheese, and whey. These segments show profit margins of 20%, which is much higher than the 3-5% margin in the case of simple milk produce.
• The dairy farmers must be given a stable market and remunerative price for the milk. For the price, a greater weightage should be accorded to the quantity of milk than its fat content.
• The government should focus on a hub and spoke model. Under this, the main farm (hub) should have all integrated facilities for milking, feed production, and milk processing. 
  • The connected farms (spokes) should have a basic infrastructure for milking and cattle management. The hub should also provide technical, veterinary, and training support to their spokes for inclusive development.

Conclusion

The current situation demands a sustainable development of the dairy sector. This development should be in line with the environmental, nutritional, and socio-economic demands of the country. Government should take robust steps in order to make dairy farming more lucrative for the small and marginalized farmers.

Source:

The Indian Express