This study analyzed the costs and returns of milk production from crossbred and local cows in Nagaland, India. Data was collected from 120 households rearing crossbred and local cows. The average daily maintenance cost per crossbred cow was Rs. 85.96, while the average daily milk yield was 4.39 liters. The average cost of milk production from crossbred cows was Rs. 19.58 per liter. In comparison, the average daily maintenance cost of local cows was Rs. 42.40, with an average daily milk yield of 1.47 liters. The cost of milk production from local cows was higher at Rs. 28.15 per liter. The study also identified the major constraints in milk production as the

1. Research Article
Production
Economics of Milk Production and its
Constraints in Nagaland
L.L. Michael Khoveio 1, D.K. Jain2 and A.K. Chauhan2
National Dairy Research Institute, Karnal-132001 (Haryana)
This study was undertaken to determine the cost and returns from milk production and to
identify the various constraints in milk production and marketing. The study was conducted in
the Kohima and Dimapur districts of Nagaland state. Primary data was collected during 2010-11
from 120 milk-producing households. Tabular analysis was employed to work out the cost and
returns from milk production while Garrett's Ranking Technique (GRT) was used to identify the
major constraints in milk production and marketing. The overall average net maintenance cost
per day for crossbred and local cows were worked out to be Rs. 80.46 and Rs. 41.04, respectively.
The average daily milk yield of milch crossbred and local cows was 4.34 litres and 1.47 litres,
respectively. The average costs of milk production for crossbred milch cows and local milch
cows were Rs 18.52 and Rs 28.15 per litre, respectively. The net returns was found to be positive
for crossbred cows while it was negative for local cows across all the categories of households.
The constraints were studied separately for cooperative members and non-members. Low availability
and high price of concentrate was the major production constraint in both member and nonmember households followed by lack of availability of green fodder. Low price of liquid milk
was found to be the major marketing constraint among the cooperative members while delay in
payment by unorganized sector was the major constraint in case of non-members.
Keywords:
Maintenance cost, milk yield, crossbred cows, local cows, net returns,
constraints, cost of milk production
INTRODUCTION
L
ivestock sector in India has emerged as an
important sector for employment generation
as well as providing a stable source of income.
With the launching of Operation Flood in 1970
and other dairy development programs, India has
now emerged as the single largest milk producing
country in the world where milk production grew
by 4.22 per cent from 80.6 million tonnes in
2000-2001 to 121.8 million tonnes during 201011. Consequently, the per capita per day
availability of milk in India has increased from
just 120 grams (g) in 1960 to 281 g in 2010-11,
thus meeting the minimum nutritional
requirement of 250 g as recommended by the
Indian Council of Medical Research. Though dairy
development programmes have been taking place
throughout the country yet the situation in the
North Eastern states is not that encouraging.
The setting up of Kohima District Cooperative
Milk Producer's Union Limited (KOMUL) and
KOMUL milk plant (10,000 litres per day capacity)
1
2
in Kohima district during the second phase of
Operation Flood Programme (OF) in 1985-86 and
the introduction of centrally sponsored schemes
Intensive Dairy Development Programme (IDDP)
during 1993-97 has made a significant impact
on milk production in the state of Nagaland.
Maximization of profit using limited resources
is the main motive in any enterprise. Thus,
the success of any enterprise will be based on
the extent of its profitability where milk
production is no exception. Milk yield is the
main output which has economic significance
ultimately bringing returns to the milk producers
in dairy enterprise. Hence, estimation of costs
and returns from milk production for different
milch animals maintained by different sample
households is very essential. Moreover the
understanding of the various constraints faced
by the dairy farmers which are the ground
realities can help policy makers in identifying
the avenues for enhancing the milk production
in the state. Though a large number of research
M.V.Sc Scholar, DES&M Div. NDRI, Karnal-132001, (Haryana)
Principal Scientist, DES&M Div. NDRI, Karnal-132001, (Haryana)
2012-086 Received:June 2012; Accepted:December 2012
520

2. Economics of Milk Production and its Constraints in Nagaland
studies have been carried out on cost and
returns from milk production yet no relevant
information is available in case of Nagaland.
Keeping in view the gap in information, the
present study was carried out in the state of
Nagaland.
METERIALS AND METHODS
Sampling plan : The study is based on a sample
survey conducted in 2010-11. Out of the eleven
districts of Nagaland, Kohima and Dimapur
districts were selected out of which a cluster of
villages were selected randomly from which 30
sample households were selected randomly.
Kohima and Jakhama blocks were selected from
Kohima district and Dhansiripar and Medziphema
blocks were selected from Dimapur district. Thus,
a sample of 120 households was drawn for the
present study.The selected sample households
were post stratified using the cumulative square
root technique with milch animal as the basis
of classification. The household were thus
categorized into three herd size categories namely
small (1-2 milch animals), medium (3-4 milch
animals) and large (>5 milch animals). Thus,
the distribution of 120 households was 38, 64
and 18 households for small, medium and large
herd size categories, respectively.
THE DATA
The study is based on primary data collected by
survey method through personal interview of
the head of households. The data on various
aspects on family size and composition,
education of head of the family, land holding,
herd size, type of animals and their value, dairy
equipments, cattle shed along with their present
value and expected life, quantity of feeds and
fodders fed to animals along with their prevailing
prices, family and hired labour used along with
prevailing
wage
rate,
veterinary
and
miscellaneous expenditure were collected. The
information on milk production and its selling
price and disposal pattern was also collected.
Besides this, data on various production and
marketing constraints faced by the dairy farmers
was also collected.
ANALYTICAL FRAMEWORK
(a) Tabular Analysis
Tabular analysis was employed to work out the
cost and returns from milk production. The total
cost comprised of two components viz. fixed cost
and variable cost.
Fixed costs: Fixed costs are that expenditure
which are incurred whether or not the production
is carried out. It includes interest on fixed capital
and depreciation on buildings, cattle shed
machinery/equipments and milch animals. The
depreciation for milch animals was taken as 8
per cent assuming productive life of 12.5 years
for crossbred cows and 10 per cent assuming
productive life of 10 years for local cows.
Depreciation was calculated using straight line
method. The depreciation on cattle shed, manger,
milking cans, utensils and other instruments
were calculated as per productive life of the
individual equipment.
Variable Costs: Variable costs are those costs
which vary with the level of production and can
be altered in the short run. It includes feeds
and fodder cost, labour cost, veterinary cost and
miscellaneous costs.
The cost of green fodder, dry fodder and
concentrate were worked out by multiplying the
total quantities fed with their respective
prevailing prices in the study area. The labour
cost included both family and hired labour. The
hired labour was calculated considering type of
work allotted and wages paid. In case of family
labour, the imputed value was obtained depending
on the time spent in performing various dairy
activities and the prevailing wage rate of casual
labour in the study area. The veterinary cost
included cost of Artificial Insemination (A.I.),
vaccination and medicines incurred on the
animal during the period of one year.
Miscellaneous costs such as cost of electricity,
water charges, fuel etc. were calculated on the
basis of per milch animal per day for different
types of milch animals kept by the sample dairy
farms.
Gross cost was obtained by adding all the cost
components including fixed and variable costs
while net cost was worked out by deducting the
imputed income of dung from the gross cost.
The cost per litre of milk was obtained by
dividing the average net maintenance cost per
animal per day by average milk yield per animal
per day.
Returns from Milk Production:
Gross returns were obtained by multiplying milk
yield of an individual animal with respective
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Indian J. Dairy Sci. 65(6), 2012

3. L.L.Michael Khovelo et al.
prevailing prices in the study area while net
return was calculated by subtracting net cost
from gross return.
Constraints in milk production and its
marketing
In order to study the constraints, a schedule
was developed in accordance with the available
literature. Accordingly, constraints were identified
and sub-divided into production and marketing
constraints and thereafter the response of the
sample households were recorded.
Various questions that were formulated relating
to production and marketing constraints included
availability of green fodder and concentrate,
knowledge of balance feeding, availability of
veterinary facilities, incidence of tick/worms
or parasitic infestation, lack of awareness on
animal health care, training facilities for
scientific dairying, mode of insemination, heat
detection, incidence of reproductive disorder,
repeat breeding and marketing constraints such
as lack of regulated market and milk cooperatives,
delay in payment by unorganized sectors, distantly
located milk collection centre, low price of liquid
milk etc.
The ranks given by the respondents were then
converted into percentage position with the help
of formula
100 (Rij - 0.5)
Percent position = ------------------------------Nj
Where,
Rij = Rank given to ith constraint by jth individual
Nj = Number of constraints ranked by jth individual
The per cent position of each rank thus obtained
was converted into scores by referring the table
given by Garrett. Then for each reason the scores
of individual respondents were added and divided
by the total number of respondents. Thus the
mean score for all the constraints were arranged
in descending order and then rank were assigned
to individual constraints.
RESULTS AND DISCUSSION
Cost and Returns from milk production
In any enterprise, profit is the main motive of
the entrepreneur and he tries to optimize his
profit using limited resources. Thus, the success
of any enterprise is based on the extent of its
profitability and milk production is no exception.
In the present study efforts have been made to
estimate the costs and returns from milk
production for different milch animals maintained
by different categories of sample households.
Crossbred cow
The daily maintenance cost per milch crossbred
cow and net returns from milk production across
different categories of sample households have
been presented in Table 1.
The overall average daily net maintenance cost
per milch crossbred cow was worked out to be
Rs 85.96, while it was Rs. 90.68, 84.34 and 85.64
for small, medium and large categories of
households, respectively. On an average feed
cost accounted for 78.28 per cent of the gross
cost in overall category which is more than 65
per cent as reported by Autkar et al. (1995) in
Vidharbha region of Maharashtra, 68 per cent
as reported by Arun Kumar (2003) in Tamil Nadu
and 71.79 per cent by Raju et al. (2005) in
Bangalore district of Karnataka. However, the
present findings are in agreement with one made
by Singh (2008) who also reported feed cost to
be 79 per cent of the gross cost in Varanasi
district of Uttar Pradesh. The expenditure on
concentrate constituted the major feed cost across
all the household categories. The overall
concentrate cost was worked out to be 44.42
per cent of the gross cost. The overall labour
cost accounted for 12.79 per cent of the gross
cost while it was found to be 16.34, 12.34 and
10.56 per cent for small, medium and large
household categories, respectively which is much
less than 20.82 per cent as reported by Bardhan
et al. (2005) in Udham Singh Nagar district of
Uttaranchal. The labour cost per milch animal
was found to be highest for small household
category which is in agreement with the findings
of Rajadurai (2002) in Madurai district of
TamilNadu.
The overall fixed cost was worked out to be 8.15
per cent of the gross cost while it was 10.13,
8.00 and 6.67 per cent for small, medium and
large household categories, respectively which
is much less than 17.63 per cent as reported by
Vinod (2005) in Bidar district of Karnataka and
19.11 per cent by Mahajan (2010) in Ludhiana
district of Punjab. This could be due to the fact
that only value of dairy animals was the major
522

4. Economics of Milk Production and its Constraints in Nagaland
Table 1: Maintenance Cost and Returns per milch crossbred cow
(Rs./animal/day)
Cost component
Variable cost
Green fodder
Dry fodder
Concentrate
Labour
Miscellaneous
Total variable cost (A)
Fixed cost
Depreciation on fixed capital
Interest on fixed capital
Total fixed cost (B)
Gross cost (A+B)
Value of dung (C)
Net cost (A+B-C)
Sale price of milk (Rs/kg)
Milk production (litres)
Gross return
Net return
Cost per litre (Rs)
Small
Medium
Large
Overall
12.14
(13.21)
16.34
(17.78)
38.09
(41.42)
15.03
(16.34)
1.02
(1.11)
82.62
(89.86)
12.94
(15.11)
16.85
(19.66)
37.91
(44.25)
10.58
(12.34)
0.54
(0.64)
78.82
(92.00)
13.07
(15.02)
16.87
(19.39)
41.38
(47.56)
9.18
(10.56)
0.70
(0.80)
81.20
(93.33)
12.81
(14.67)
16.75
(19.19)
38.77
(44.42)
11.16
(12.79)
0.68
(0.78)
80.17
(91.85)
4.51
4.80
9.31
(10.14)
91.93
1.25
90.68
24.59
4.61
113.31
22.63
19.68
2.80
4.06
6.86
(8.00)
85.68
1.34
84.34
24.82
4.26
105.77
21.42
19.79
2.78
3.03
5.81
(6.67)
87.00
1.36
85.64
23.55
4.51
106.22
20.58
18.99
3.15
3.97
7.12
(8.15)
87.29
1.33
85.96
24.47
4.39
107.48
21.47
19.58
Note: Figures in parenthesis indicate percentage to gross cost
fixed cost as almost all of the cattle shed were
of kaccha type and moreover no mechanized
equipments were used by the farmers. The overall
net return per milch crossbred cow was worked
out to be Rs. 21.47 while it was Rs. 22.63, 21.42
and 20.58 for small, medium and large categories
of sample households, respectively. The net
return per milch cow was highest for small
household category. The average daily milk yield
was found to be 4.61, 4.26 and 4.51 litres for
small, medium and large households while it
was 4.39 litres for overall category. The overall
per litre cost of milk production was worked
out to be Rs 19.58, while it was Rs 19.68, 19.79
and 18.99 for small, medium and large household
categories, respectively.
Local cow
The daily maintenance cost per milch local cow
and net returns from milk production across
different categories of sample households have
been presented in Table 2.
As per Table 2, the overall average daily net
maintenance cost per milch local cow was worked
out to be Rs 42.40, while it was Rs. 39.90, 43.35
and 41.66 for small, medium and large categories
of sample households respectively. Feed cost
contributed 68.82 per cent of the gross cost where
concentrate formed the major cost component
with an overall share of 28.44 per cent to the
gross cost. The overall labour cost accounted
for 21.08 per cent of the gross cost while it was
worked to be 25.81, 20.74 and 21.15 for small,
medium and large household categories
respectively. The overall fixed cost was calculated
to be 9.21 per cent of the gross cost while it
was 10.00, 11.18 and 7.04 per cent for small,
medium and large household categories,
respectively. The average milk yield per milch
animal per day was found to be 1.47 litres, while
it was 1.50, 1.60 and 1.33 litres for small,
medium and large household categories. The
overall per litre cost of milk production was
worked out to be Rs 29.08, while it was Rs 25.93,
27.09 and 31.33 for small, medium and large
household categories, respectively. The high per
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5. L.L.Michael Khovelo et al.
Table 2: Maintenance Cost and Returns per milch Local Cow
(Rs./animal/day)
Cost component
Variable cost
Green fodder
Dry fodder
Concentrate
Labour
Miscellaneous
Total variable cost (A)
Fixed cost
Depreciation on fixed capital
Interest on fixed capital
Total fixed cost (B)
Gross cost (A+B)
Value of dung (C)
Net cost (A+B-C)
Sale price of milk (Rs/kg)
Milk production (litres)
Gross return
Net return
Cost per litre (Rs)
Small
Medium
Large
Overall
8.40
(21.00)
8.96
(22.41)
8.00
(20.00)
10.32
(25.81)
0.31
(0.78)
35.99
(90.00)
7.42
(16.68)
10.43
(23.24)
12.02
(27.01)
9.23
(20.74)
0.51
(1.15)
39.61
(88.82)
7.23
(16.95)
10.12
(23.73)
13.01
(30.51)
9.02
(21.15)
0.26
(0.62)
39.64
(92.96)
7.36
(16.94)
10.19
(23.44)
12.36
(28.44)
9.16
(21.08)
0.39
(0.89)
39.46
(90.79)
3.14
0.86
4.00
(10.00)
39.99
1.10
38.90
20.50
1.50
30.75
-8.15
25.93
4.28
0.70
4.98
(11.18)
44.50
1.15
43.35
23.34
1.60
37.35
-6.00
27.09
2.27
0.28
3.00
(7.04)
42.65
0.99
41.66
21.62
1.33
28.74
-12.92
31.33
3.50
0.52
4.01
(9.21)
43.47
1.07
42.40
22.43
1.47
32.93
-9.47
29.08
Note: Figures in parenthesis indicate percentage to gross cost
litre cost of milk production for local cow observed
in the study area could be due the low milk
yield associated with high gross maintenance
cost especially that of concentrate. The net return
per milch local cow was found to be negative
which is in agreement with the findings of Dixit
(1999) in Mandya district of Karnataka and Singh
(2006) in Imphal district of Manipur.
Constraints and Dairy Farming Practices
The constraints faced by the dairy farmers were
classified as production constraints and marketing
constraints.
Production constraints
Various production constraints faced by the dairy
farmers are presented in Table 3 along with
their Garrett score and ranks.
It can thus be seen that low availability and
high price of concentrate formed the major
constraints in milk production for both
cooperative and non-cooperative members followed
by lack of availability of green fodder. Balakrishna
(1997) in Karnataka also reported high cost of
concentrate and non availability or poor quality
of green fodder to be the major constraints in
milk production. Tick and parasitic infestation
and lack of veterinary facilities were also
considered to be major constraints by many dairy
farmers. However parameters like heat detection,
inadequate knowledge about balanced feeding,
incidence of reproductive disorder were found
to be of less importance. It was also observed
that both cooperative members and non members
faced similar production constraints though they
differ in magnitude.
Marketing constraints
Table 4 provides marketing constraints as
perceived by the farmers in the study area. It
was revealed that low price of liquid milk was
the main constraint faced by the cooperatives
members. This might be due to the reason that
the price of milk were paid based on fat and
SNF. The delay in payment by unorganized sector
was the main constraints faced by the non
cooperative members.
524

6. Economics of Milk Production and its Constraints in Nagaland
Table 3: Production constraints
Constraints
Members
Non-members
Score
Score
Ranks
71.28
79.71
31.11
24.68
36.43
44.9
57.01
59.81
41.86
51.16
Lack of availability of green fodder
Low availability and high price of concentrate
Inadequate knowledge about balanced feeding
Problem of heat detection
Incidence of reproductive disorder
Repeat breeding
Lack of veterinary facilities
Tick/parasitic infestation
Lack of awareness on animal health care
Lack of training facilities for scientific dairying
Ranks
II
I
IX
X
VIII
VI
IV
III
VII
V
70.91
80.08
28.45
24.75
35.8
43.73
58.36
58.63
42.76
51.5
II
I
IX
X
VIII
VI
IV
III
VII
V
Table 4: Marketing constraints
Constraints
Members
Non-members
Score
CONCLUSION
Results of the study showed that the feed cost
accounted for 78.28 per cent of the gross cost
in crossbred cows and 68.82 per cent in local
cows where concentrate formed the major
constituent of the feed cost. The share of labour
was 12.79 and 21.08 per cent of the gross cost
for crossbred and local cows, respectively. The
average daily milk yield of milch crossbred and
local cows was found to be 4.39 and 1.47 litres,
respectively. The per litre cost of milk production
for milch cows was worked out to be Rs 19.58
and 29.08 for crossbred and local cows. The high
per litre cost of milk could be due to the high
feed cost associated with low milk yield in case
of local cows. Therefore, efforts should be made
to upgrade the germ plasm of local zebu cattle
in order to improve its productivity thus reducing
the cost of milk production. The study further
observed low availability and high price of
concentrate to be the major production
constraints in milk production for both
cooperative and non cooperative member
households, while low price of liquid milk was
the major marketing constraint for cooperative
members and delay in payment by unorganized
sector was the major constraint for non
Score
Ranks
37.83
33.55
54.84
51.01
71.75
Lack of regulated market and milk cooperatives
Lack of transport facilities
Unawareness of improved dairy farming practices
Delay in payment by unorganized sector
Distantly located milk collection centre
Low price of liquid milk
Ranks
IV
V
II
III
I
48.43
29.55
35.35
71.4
61.16
III
V
IV
I
II
cooperative members. Steps may be taken to
strengthen the cooperative society infrastructure
and payment of remunerative prices of milk to
the milk producers.
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