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A RESEARCH REPORT
ON
THE ROLE OF DAIRY INDUSTRY IN RURAL
DEVELOPMENT
Submitted under the partial fulfilment of
recruitment for
Post Graduate Diploma in management
Session: 2016-2018
SUBMITTED TO: SUBMITTED BY:
Prof. Ravi kumar singh ANIKET SINHA
ISM, Patna PGDM
Roll no: 161825

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ABSTRACT
The advent of dairying has been a boon for dairy farmers and of particular importance to
those segments of the society that have been traditionally weak, the small landholders,
landless labourers and women. It has provided a year-round source of income for people
who previously could only depend on payments from small seasonal crops or from
occasional labour. The results of the study indicate that 80 percent of the milk produced by
the rural producer is handled by an unorganized sector and the remaining 20 percent is
handled by an organized sector. It is estimated that up to 60-65 percent of the income of
this group (marginal and small-scale farmers) now comes from dairying. Studies have shown
that dairying in rural areas surpassed crop production in terms of profit in marginal, small
and medium-sized holdings. For small-scale farmers with irrigated land, dairying and crop
production together, were more profitable than crop farming alone. Over the period,
dairying has also acquired the contours of a fully-fledged industry in the country and has
positively improved the life of those engaged in this business, directly or indirectly, bringing
significant socio-economic changes.

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Objectives
 To understand milk ROLE OF DAIRY INDUSTRY IN RURAL DEVELOPMENT
facilities available and village development.
 To understand impact of milk cooperatives on social development.

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Introduction
Indian economy is predominantly an agrarian economy with more than 75% of its people
living in villages and depending upon agriculture and allied activities like livestock farming,
and dairy farming. The share of livestock product in the total agricultural sector is estimated
at 21 per cent. The dairy sub-sector occupies an important position in the economy, as milk
is the second largest agricultural commodity contributing to the GNP, next only to rice.
While the share of agricultural output to the total GDP has been on the declining trend, the
share of livestock output to the agriculture has been increasing and now it accounts for 25
per cent of agricultural output (around 6 per cent of total GDP). Milk alone contributes Rs.
450 billion to the GNP of the country. However, the plan investment in animal husbandry
and dairying is only a meagre 5% of agriculture. At present National Dairy Development
Board has established a large number of co-operative societies. Maharashtra has the
highest number of dairy co-operative societies (16,724) followed by Uttar Pradesh (15,648),
Gujarat (10679), Tamil Nadu (8,369), Punjab (6,823), Rajasthan (5,900), Karnataka (8,516),
Andhra Pradesh (4,912) and Madhya Pradesh (4,877). The strength of Indian dairy sector lies
in the fact that in spite of limited investment it has shown consistent and sustainable
growth. Dairying is one of the expanding branches that came out of the Green Revolution. It
is an agro-based industry, expanding very faste throughout the world. A decade ago only 5
per cent of the milk produces came into the dairies, whereas today, it is 10 per cent and it is
increasing. Recent report by the Ministry of Agriculture reveals that the Dairy industry has
the potential to offer about 4.2 crore jobs per year. The demand for milk products would
increase as a result of increase in national GDP. In order to meet the demand, it is essential
to have a consistent increase in milk production, which will be possible on successful
implementation of “Operation Flood” and evolution or new animal breed. India has become
the largest producer of milk in the world with an annual yield of 74 million tonnes. This is
mainly due to successful implementation of operation flood project. Milk and its products
constitute about two thirds of the value of total output of the livestock sector. It is also the
single largest contributor in the agriculture sector to the national GDP. The dairy sector
generating a revenue of about 68,000 crores, accounts for about 8 per cent of the GDP and
25 per cent of the agricultural GDP. Interestingly, over the years, the share of animal

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husbandry in GDP is rising, while, that of agricultural is on the decline. This amply endorses
the growing importance of dairying in Indian economy.
IMPORTANCE OF DAIRYING
The importance of dairying lies not only in production of milk, but in its capacity to bring
about significant changes in the socio-economic structure of rural economy. Its role in
employment-generation is well recognized. It has provided numerous small/marginal
farmers and agricultural labourers with supplementary employment and a regular source of
income. Dairying and its related activities create jobs equivalent to about 25 million a year.
The significant role played by the co-operatives in stimulation of dairying has also proved to
be an important source of progress.
HISTORY OF DAIRY DEVELOPMENT
Earlier, the British Government did not bother very much about the development of animal
husbandry and dairy in India. However, in 1923, the imperial institute of Animal Husbandry
and dairying was established at Banglore by British Government, subsequently numbers of
institutes were established by Government in India. The imperial institute was sniffed to
Karnal (Haryana State) and later renamed as the Imperial Dairy Research Institute. Presently
it is named as National Dairy Research Institute. After independence in 1947, great attention
was given to the different branches of Agriculture including dairying. Government of India
decided to increase the milk production by breeding the non descriptive cattle with bulls
procured from breeding tracks of established breeds and distribute in areas where cattle
were not good. Indian milk production began to rise after the implementation of the
operation flood programme since 1970. The Indian Dairy Industry has acquired substantial
growth from Eight Plan onwards, at present India’s milk output has not only placed the
industry first in the world, but also represents sustained growth in the availability of milk
and milk products. The government implemented four schemes namely Intensive dairy
development programme, Strengthening Infrastructure for Quality and Clean Milk
Production, Assistance to cooperatives and Dairy/Poultry Venture Capital Fund for the
development of dairy sector. The history of dairy development movement in India is of
recent origin. During the pre-independence period this movement was limited to a few
pockets of Calcutta, Madras, Bangalore and Gujarat. The most notable of this venture was
Anand Co-operative Milk Producers Union Limited (AMUL) of Kaira District, Gujarat. But

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after the independence, Indian government took great initiative in setting up new dairy co-
operatives in every corner of the country. The National Dairy Development Board (NDDB)
was set up in 1965 to make the ambitious project a success. Besides, the operation flood
project was taken up in 1970 to balance the demand and supply of milk throughout the
country and to help the rural people in making additional income by replicating the
“ANAND” pattern.
National Dairy Development Board (NDDB)
The National Dairy Development Board (NDDB) was constituted under the aegis of the
Ministry of Agriculture, Government of India in September 1965 under the Societies
Registration Act 1860. It was setup to replicate the Anand Pattern dairy co-operatives in the
other parts of India in an effort to improve rural incomes by giving the farmers a price for
milk based on price in the metropolitan cities. Its Board of Directors including Chairman is
nominated by the President of India. The secretary of NDDB is the Chief Executive of the
organization who is supported by professionals to carry out the Board’s activities.
SIGNIFICANCE OF THE DAIRY INDUSTRY IN THE INDIAN ECONOMY
Agriculture has always been the backbone of the Indian economy. It provides employment
to around 60 per cent of the total work force. Agricultural growth has a direct impact on
poverty eradication. The change in the agricultural sector, whether positive or negative, will
have a multiplier effect on the entire economy. Besides, the allied sectors like horticulture,
animal husbandry, dairy and fisheries have an important role in improving the overall
economic conditions of rural India. To maintain the ecological balance, there is need for
sustainable and balanced development of agriculture and allied sectors. From the India’s
first five year plan onwards, planners have been giving priority to the allied sector for the
economic development of the rural sector. Dairy farming is described as a small industry
which provides gainful employment opportunities to the rural folk. It comprises about six
per cent of the national income.

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The Indian context for Dairy
Indian agriculture is an economic symbiosis of crop and cattle population. Millions of rural
smallholder milk producers dominate India’s dairy industry, contributing 62 percent of total
milk produced in the country. Livestock plays a vital role in the economy; animal husbandry
is the most important economic activity in rural areas. The dairy sector today provides 80
million farm households with the triple benefits of nutritive food, supplementary income
and productive employment for family labour, mainly for women. Animal husbandry
provides self-employment to millions of households in rural areas. Dairying with crossbred
cattle and high-yielding buffaloes has become a lucrative business .Owed to the easy cash
provided by animal husbandry components, small-scale farmers prefer it to crop production.
Further dairying provides a support system to milk producers without disturbing their agro-
economic systems. The sustenance of rural livelihoods is currently at stake than ever before,
in the face of economic liberalization. Livelihoods options are shrinking in rural areas in
general and more so in eco-fragile regions, such as drought, desert prone, hilly areas and
other under developed /backward districts. Rapidly growing markets for livestock products
in general, and dairy products in particular (owing to rise in per capita incomes) are opening
new avenues for enhancing rural incomes. Dairy farming plays significant role in sustaining
the rural livelihoods, although the phenomenon of farmers suicides, migration,
malnutrition/ill health are widely prevalent in rural India. However, some of the dairy based
drought prone districts made rapid strides in ameliorating poverty by substantially
contributing to the District/State agriculture economy. Contribution of agriculture and allied
sectors to the national GDP has declined during the past few decades, the contribution of
the livestock sector has increased from less than 5 percent in the early 1980s to over 76
percent in the late 1990s.
In the context of poverty and malnutrition, milk has a special role to play for its many
nutritional advantages as well as providing supplementary income to some 70 million
farmers in over 500,000 remote villages. More importantly, the farmers earn an average of
27.3 per cent of their income from dairying, with as high as 53 per cent in the case of
landless and as low as 19 per cent in the case large farmers.

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CONSTRAINTS IN MILK MARKETING
The dairy sector is characterized by small-scale, scattered, and unorganized milk-animal
holders; low productivity; inadequate and inappropriate animal feeding and health care;
lack of an assured year-round remunerative producer price for milk; an inadequate basic
infrastructure for provision of production inputs and services; an inadequate basic
infrastructure for procurement, transportation, processing and marketing of milk; and lack
of professional management. Other important characteristics of the dairy sector are the
predominance of mixed crop-livestock farms and the fact that most of the milk animals are
fed on crop by-products and residues, which have very low opportunity costs. Additionally,
the dairy-development policies and programmes that are followed, including those relating
to foreign trade, are not congenial to the promotion of sustainable and equitable dairy
development. Low productivity of milk animals is a serious constraint to dairy development.
The productivity of dairy animals could be increased by crossbreeding low-yielding non
descript cows with high-yielding selected indigenous purebreds or suitable exotic breeds in
a phased manner. The cattle breeding policy should not only focus on milk yield but should
also provide for the production of good-quality bullocks to meet the draft-power
requirements of agriculture. Upgrading nondescript buffalo through selective breeding with
highyielding purebreds such as Murrah, Mehsani or Nili Ravi should be given high priority in
all areas where buffalo are well-adapted to the agro-climatic conditions. India remains
grossly primitive compared to its western counterparts. It begins with the largely
unregulated sector, which handles the majority of the milk production, providing ample
opportunity for malpractice. Some of the common forms of malpractice include false
measurements in the selling of milk and adulteration of milk. Another major impediment to
an efficient marketing system is the presence of numerous intermediaries, which take
advantage of producers’ weakness. In many cases, intermediaries dictate the price by
advancing a loan to the milk producers. Producers’ bargaining power is also limited because
of perishability and bulkiness of milk. In addition, the lack of proper infrastructure for
transportation, distribution, and storage also makes milk procurement difficult. On the
other hand, it will be impossible for most producers to market their milk without the
presence of these market intermediaries. The Cooperative Societies Act continues to be
restrictive rather than enabling, even though the Anand Pattern milk producers’ co-

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operatives have emerged as the most stunningly effective institutional model for milk
marketing. Political and bureaucratic interference, delayed payment.
FUTURE CHALLENGES
The Indian dairy industry needs to focus simultaneously on the four-fold challenge of
quality, product development, infrastructure-support development, and global marketing.
Equally urgent is the need for strategic alliances with some of the leading dairy companies in
the world for technical collaboration and marketing tie-ups. Raw-milk handling needs to be
upgraded in terms of physicochemical and microbiological attributes of the milk collected.
Better operational efficiencies are needed to improve yield, reduce waste, minimize fat and
protein losses during processing, control production costs, save energy, and extend shelf
life. The adoption of Good Manufacturing Practices (GMP) would help manufacture milk
products that conform to international standards and thus make exports competitive.
Restructuring Departments of Animal Husbandry in states, reorienting their mandate from
curative to preventive veterinary care, moving delivery of livestock services away from
government, progressive privatization of the services, a nation-wide programme for
prevention and control of animal epidemics, and creation of disease-free zones will all
reduce avoidable production losses, investment risks, and the yield gap; improve output;
and will facilitate India’s entry into global product markets, improving the quality and
viability of the entire Indian dairy industry. Restructuring the governments’ legal and
regulatory framework, thus liberating the cooperative movement, will enable milk
producers to extensively adopt the proven Anand Pattern producers’ cooperative model to
manage their assets and business interests. This will help them vertically integrate
production, processing, value additions, and marketing of milk and milk products in
domestic as well as global markets, converting India’s comparative advantages in dairy
production into globally competitive advantages.
Operation Flood
The Operation Flood programme, which was launched during 1970, organizing dairy
farmers’ cooperatives in rural areas and linking them with urban consumers created a
strong network for procurement, processing, and distribution of milkover a lakh villages in
rural India.

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Government is actively supporting the dairy sector by implementing various schemes. It all
started with the White Revolution under the title Operation Flood (OF) Programme
launched in 1970. By promoting Anand Pattern of dairy cooperatives, OF envisaged
sustained increase in resource productivity culminating in improved quality of life of milk
producers and assured supply of quality of milk and other dairy products to consumers at
reasonable price in a free market environment .Following the cooperative path, market
oriented milk production and modernization of dairying, milk production, processing and
marketing progressed significantly. The bedrock of Operation Flood has
been village milk producers’ cooperatives, which procure milk and provide inputs and
services making modern management and technology available to members.
The objectives of Operation Flood included:
 Increased milk production ("a flood of milk")
 Augmenting rural incomes
 Ensuring fair prices for consumers
In OF areas, the country has more than 1 lakh organized primary village dairy cooperatives
at present with an aggregate membership of 1.1 crore producers. These primaries are
federated into 170 district cooperative milk unions and further to state cooperative dairy
federations.
According to the latest release of the Central Statistical Office, the growth in the agriculture
and allied sectors is estimated to be 1.1 per cent in 2015-16. The Twelfth Five Year Plan
(2012-13 to 2016-17) had envisaged a growth rate of 4 per cent for the agriculture and allied
sectors. The realised growth rate during the last three years has been fluctuating at 1.5 per
cent in 2012-13; 4.2 per cent in 2013-14; and (-) 0.2 per cent in 2014-15. The shortfall in
growth in agriculture is explained by the fact that 60 per cent of agriculture is rain
dependent and there have been two consecutive drought years – 2013-14 and 2014-15.
During the last five years ending 2015-16, the average annual incremental production of
food grain is 2.05 million tonnes. During the same period, the average annual incremental
milk production was over six million tonnes. The variation between the growth rate in food
grain production and milk production can be partially explained by the volatility factor in
agricultural production and robustness in milk production. India’s estimated milk production
in 2015-16 was 155.49 million tonnes, which is about 6.28 per cent higher than last year.

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Estimated per capita availability in 2015-16 was 337 grams per day, an increase of 4.7 per
cent over the previous year. Appointment of Lady Extension Officers by the milk unions
under the aegis of VBMPS component has been helpful in creating awareness about the
benefits of cooperatives among women producers. With all these efforts, the number of
women members during 2015-16 reached 5.01 million. During 2015-16, the number of all-
women dairy cooperative societies increased to 32,092 across the country. Training and
capacity building continued to receive major focus during the year. Trainings were
facilitated for milk unions’ employees, management committee members, producer
members, field supervisors, procurement officers and Board of Directors. The participants
were oriented on the values and principles of cooperatives, roles and responsibilities of
various cooperative functionaries, importance of Business ethics and Good Governance.
Participants were also exposed to advanced dairying practices, clean milk production
practices and various measures to productivity enhancement. ‘Dairy Sahakarita Jagruti
Abhiyan’, a one-day programme funded under the National Dairy Plan-I to increase
awareness of the milk producers on topics like clean milk production, cooperative
functioning and governance was conducted throughout the country by the participating milk
unions.
Sub-Project Approvals
During 2016-17, 52 sub-projects were approved with the total outlay of ` 1,256.84 million
out of which ` 929.85 million to be provided as grant assistance from NDP I and ` 335.99
million to be contributed by the End Implementing Agencies implementing Village Based
Milk Procurement System sub-projects. Till 2016-17, 390 sub-projects of 162 EIAs from 18
States have been approved with the total outlay of ` 19,932.03 million out of which `
16,651.15 million would be grant assistance and ` 3,280.88 million would be contributed by
the End Implementing Agencies. The approved subprojects include 38 sub-projects for
Project Management and Learning Activities.

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Village Dairy Cooperative Societies (DCSs)
The producers in this system are not only ensured regular and remunerative payment for
their milk, but also have access to the milk production enhancement inputs, support
services, to further improve their productivity and income. The micro-level support services
such as veterinary first aid are organized by village societies. One of the staff members of
the society is trained to carry out these functions. Societies also market the liquid milk
locally at the village level. In addition, supply of balanced cattle feed and fodder seeds and
milk products are also channelled through societies. In addition to regular payment and
support services, members also receive the price difference, dividend and bonus deriving
from the net profit of the society’s business as per the provisions of the society’s by-laws. To
achieve this it would therefore be essential to ensure that this increased milk quantity is
duly tapped by the dairy cooperatives by providing them a fair, transparent and assuring
quality milk procurement system there by providing the rural milk producers greater access
to the organized milk processing sector. The strengthening of the Village based Milk
Procurement Systems in dairy cooperatives would be carried out through:
 Expand and set up of village based milk procurement systems to collect milk in a
fair and transparent manner and ensure timely payments
 Strengthen existing dairy cooperatives and promote producer Companies or New
Generation Cooperatives to put in place village level infrastructure for milk
weighing, testing, collection and milk cooling
 Provide support for creating institutional structures and training
This manual has been prepared primarily for the dairy cooperatives who would be
implementing the Sub-Project Plans under Village based Milk Procurement Systems at field
level. This would help equip the project staff with an understanding of how to go about in
implementation of the activities, and equip them with essential information to implement
the project effectively and in a comprehensive manner. The manual has specific Standard
Operating Procedures (SOP) and guidelines for implementing a Village based Milk
Procurement system. It also describes the objectives, Standard Operating Procedures (SOP)
and guidelines for each activity, management and monitoring mechanism, and key
institutional arrangements necessary for implementing a Village based Milk Procurement
System. It is expected that this Manual for the Village based Milk Procurement Systems will

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be a useful guide for the people directly or indirectly involved with the project. Every
morning and evening the society buys the surplus milk from its producer members. The
producer is paid for milk usually within 12 hours (for morning milk, in the same evening and
for evening milk, the next morning). The payment is made on the basis of fat and SNF
(solids-not-fat) content of the milk supplied by the individual producer. The district milk
union organizes the transport of collected milk twice daily (whenever the dairy
society has no bulk coolers) or according to the schedule basedon the quantity of the milk
collected and the capacity of bulk coolers from all its affiliated member cooperatives.
The Impact on Smallholders and Rural Development
The sustenance of rural livelihoods is currently at stake than ever before, in the face of
economic liberalization. Livelihoods options are shrinking in rural areas in general and more
so in eco-fragile regions, such as drought, desert prone, hilly areas and other under
developed backward districts. Rapidly growing markets for livestock products in general,
and dairy products in particular (owing to rise in per capita incomes) are opening new
avenues for enhancing rural incomes. Dairy farming plays significant role in sustaining the
rural livelihoods, although the phenomenon of farmers suicides, migration, malnutrition/ill
health are widely prevalent in rural India.
However, some of the dairy based drought prone districts made rapid strides in
ameliorating poverty by substantially contributing to the District/State agriculture economy.
. Eighty percent of milk is marketed through the highly fragmented unorganized sector,
which includes local milk vendors, wholesalers, retailers, and producers themselves. On the
other hand, the organized dairy industry, which accounts for about 20 percent of total milk
production, comprises two sectors: government and co-operatives. Even though co-
operatives provide a remunerative price to the producer, the unorganized

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constitute the core milk-production sector in the country (Table 2). Many of these farmers
own dairy animals primarily to supply milk for their own consumption. Slightly more than 30
percent of the milk produced in the country is retained in producer households.

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Distribution of Milk Animals in Rural Households (HH) by Land-
Holding Category, 2017.
Category Number of HH (
102)
Total number of milk
animalsa (per 100
HH)
Number of crossbred
milk animals (per 100
HH)
Landlessb 254,249 11 1
Marginal 561,777 68 8
Small 165,486 114 8
Semi-medium 112,911 136 9
Medium 57,369 168 10
Large 12,382 239 7
Contribution of agriculture and allied sectors to the national GDP has declined during the
past few decades, the contribution of the livestock sector has increased from less than 5
percent in the early 1980s to over 6 percent in the late 1990s. The Operation Flood
programme, which was launched during 1970, organizing dairy farmers' cooperatives in
rural areas and linking them with urban consumers created a strong network for
procurement, processing, and distribution of milk over a lakh villages in rural India.

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SWOT Analysis
SWOT Analysis The dairy industry has its own strengths and weaknesses to build on present
scenario for future growth. Strengths and weaknesses are the internalities of the present
situation of dairy industry within the country. Opportunities and threats are the externalities
of the future situation, not only within the country, but also expected from outside the
borders. The analysis attempts to identify the strengths to meet the opportunities and the
threats of the future and weaknesses are going to be challenged or shown up by these
threats and opportunities. The following table of strengths, weaknesses, opportunities and
threats is to be used as a guide for the analysis that follows.

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Employment
Livestock sector provides employment to 18 million people and nearly 70 per cent of them
are women. Further, dairy sector is the major source of income for an estimated 27.6
million people. Among these, 65 to 70 per cent are small, marginal farmers and land-less
labor. The dairy sector supportsaround 10 million members / farmers through one lakh
cooperative societies existing in the country. Apart from employment generated by rearing
of animals, the procurement of milk and its processing also provides substantial
employment. For example in Punjab, MILKFED, with its network of over 5,000 village Milk
Producers’ Cooperative Societies, supports over 3 lakh Milk Producers. Further, MILKFED
and its units have a work force of about 5,000 employees and gives employment to another

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10,000 workers who engaged in milk procurement and technical input supply, etc. Similar
number of workforce is employed in almost all the milk federations. Further, under SGSY
(Swarnajayanti Gram SwarojgarYojana) the only self-employment programme for rural
areas, about 35 per cent swarojgaries opted for dairy farming as income generating activity.
The incremental employment generated was 11 man-days per month and the incremental
net income generated was Rs. 865 per month per person (Nationwide Study on SGSY, NIRD,
2005). Recognizing the importance of dairy farming in its substantial contribution to the
agriculture economy and to the livelihoods of resource poor farmers/rural population, high
priority is attached in several locations strengthening the milk marketing infrastructure,
veterinary services for breed improvement and health care, extension support for capacity
International Journal of building of farmers, developing entrepreneurship, technical skills
and knowledge on scientific dairy farming practices, etc. several programmes have been
launched from time to time by State/ Central Governments for promoting the sector,
although the impact of such programmes varied widely.
PROGRESS OF DROUGHT PRONE DISTRICTS
Livestock rearing is a means for sustainable livelihoods in rural India, more so in ecofragile
regions. As per Indian Meteorological Department (IMD), 15 drought years were registered
during the past 5 decades registering one out of every third year as drought year. It may be
noted that they are 182 DPAP (Drought Prone Areas Programme) and 40 DDP (Desert
Development Programme) districts and 150 are backward districts as of now India. It may
also be noticed that 60 districts are identified both as DPAP/DDP and backward districts. In
all, around 312 districts, out of the 602 Indian districts are either DPAP/DDP or Backward
where livelihoods are under constant stress. Some of the districts in these drought prone
areas made spectacular progress in dairying in terms of contribution to the share of
agriculture economy and in ensuring sustainability of the rural livelihoods of the resource
poor farmers. Dryland agriculture accounts for 68 per cent of the total cultivated area
contributing only 44 per cent of the country’s food requirement and supporting 40 per cent
of human and 60 per cent of the livestock population (National Bureau of Soil Survey and
Land Use Planning, 2001).

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Contribution to Indian Economy
The Indian dairy market recorded a CAGR of 13% during 2010-2016. The factors which have
contributed to this growth are increasing population, rising disposable incomes, health
consciousness among the consumers, government initiatives, etc. As a result of these, the
market is further expected to reach a value of more than INR 16,000 Billion by 2022. The
latest report by IMARC Group titled, Dairy Industry in India 2017 Edition: Market Size,
Growth, Prices, Segments, Cooperatives, Private Dairies, Procurement and
Distribution”, finds that the Indian dairy market reached value of nearly INR 7,000 Billion in
2016, growing at a CAGR of 13% during 2010-2016. Some of the major factors driving the
growth of the Indian dairy market are rising working-population, increasing disposable
incomes and health consciousness among the consumers. Additionally, the government is
also taking active participation in advancing and promoting dairy farming practices to
promote the production and quality of milk. The government organisations such as National
Bank for Agriculture and Rural Development (NABARD) offer small scale farmers several
subsidies and loans at low interest rates which assist them to set up modern processing
plants, upgrade technology, breed good-quality milch animals, etc. Further, the market is
expected to reach a value of more than INR 16,000 Billion by 2022.
Highlights of the Indian dairy market:
 Government initiatives have contributed in influencing the growth of the market.
 The unorganised sector dominates the Indian diary market.
 The market is expected to reach a value of more than INR 16,000 Billion by 2022.
The Indian Dairy market is bifurcated as unorganised and organised. In the unorganised
dairy market, the milk is sold by means such as milkmen and vendors. These milkmen collect
raw milk directly from the farmers and sell in the market. In the organised sector, on the
other hand, cooperatives and private dairies set up efficient channel of milk procurement
and distribution. In this manner, raw milk is collected from the farmers, after which it is
processed, packed and distributed to various channels. The Indian dairy market was
dominated by the unorganised sector, however, due to changing socio-economic patterns
the focus is shifting towards developing the organised sector.
The Indian dairy market is segmented on the basis of two broad categories – milk and value-
added dairy products. More than 20 products are coversed under the value-added category

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such as flavoured milk, curd, lassi, buttermilk, dairy whiteners, ice cream, dairy sweets,
cream, etc. An evaluation of the competitive landscape is provided, along with the details of
the major players operating in the market. Some of the key players are GCMMF (Amul),
KMF, Mother Dairy, TN Cooperative, Saras, Hatsun Agro Product Ltd., etc.
Dairying has become an important secondary source of income for millions of rural
families and has assumed a most important role in providing employment and income
generating opportunity. Indian Dairying is unique in more than one ways. Contributing
about5.3 per cent to India’s agricultural GDP, milk is a leading agricultural produce. The
value output from milk at current prices during 2006-07 has been over Rs.144386 crores
which is higher than the output from paddy (Rs.85032 crore) alone and is also higher than
the value output from Wheat (Rs.66721 crore) and sugarcane (Rs.28488 crore), put
together. The unique feature of the system is that about 120 million rural families are
engaged in milk production activities as against big specialized dairy farmers in the west.
During the post independence period, progress made in dairy sector has been spectacular.
Milk production has increased more than four folds from a mere 17 million tones during
1950-51 to 104.8 million tones in 2007-08. However, the country’s per capita availability is
still lower than the world’s daily average of about 285 gms though it has doubled from 124
gms in 1950-51 to 256gms per day in 2007-08. This impressive growth effort speaks volume
about the co-coordinated efforts of large number of milk producing farmers, scientists,
planners, NGO’s and industry in achieving self-sufficiency in milk production. Dairy industry
is of crucial importance to India. The country is the world. largest milk producer, accounting
for more than 13% of world’s total milk production. It is the world’s largest consumer of
dairy products, consuming almost 100% of its own milk production. Dairy products are a
major source of cheap and nutritious food to millions of people in India population,
particularly among the landless, small and marginal farmers and women. Dairying has been
considered as one of the activities aimed at alleviating the poverty and unemployment
especially in the rural areas in the rain-fed and drought-prone regions. In India, about three-
fourth of the population live in rural areas and about 38% of them are poor. In 1986-87,
about 73% of rural households own livestock. Small and marginal farmers account for three-
quarters of these households owning livestock, raising 56% of the bovine and 66% of the
sheep population. According to the National Sample Survey of 1993-94, livestock sector
produces regular employment to about 9.8 million persons in principal status and 8.6 million

23
in subsidiary status, which constitute about 5% of the total work force. The progress in this
sector will result in a more balanced development of the rural economy
This impact of Dairy Industry can be categorized into the following:
• Social impact
• Economic impact
• Impact on infrastructure
• Impact on improved food aid security and nutrition.
Social Impact
Since membership is open to all, lack of discrimination, in caste, creed, gender and financial
status has succeeded in breaking down barriers for those with mulch animals.
Remarkable new awareness has been developed and observed among the producers.
Resolving Social Inequity
This social stigma still exists in many parts of rural India. At all the collection centres of
APDCs, morning and evening, hundreds of adults as well as the children of milk producers
belonging to all castes come and stand in queue to deliver milk, developing a habit of
discipline. The mix of various ethnic and social groups twice a day for a common cause and
to their mutual improvement has resulted in reducing social inequity.
Democracy
Elected representatives of the members manage the DCSs and are responsible for all the
policy decisions. All the members are entitled to cast their respective votes (one each) to
elect the management committee members. This annual election of the management
committee and its chairperson by members raises the participants’ awareness of the value
of their vote and their rights to elect the right person for the right job.
Hygiene and Cleanliness
All the producers are frequently kept informed on the importance of observing hygiene and
cleanliness of animals and milkier at the time of milking and at the milk collection centre. It
has been observed that such learning is carried with them in their daily living habits.
Superstitions
There were prevailing beliefs in most of the rural areas that milk is a holy commodity and is
not meant to be sold and that certain contagious diseases such as rudderpost should not to

24
be treated because they are a curse of God. Regular income and veterinary aid through
cooperatives have helped members leave such superstitions behind.
Health Care
The privilege of collecting the milk from members places an obligation on the cooperatives
to provide inputs to increase the milk production. Accordingly, the unions operate elaborate
veterinary services at their doorstep to take care of cattle health. Exposure to various
modern technologies and their applications by the veterinarians to treat their animals have
made farmers more aware of healthcare for their family members as well.
Nutrition
As a part of support services, the cooperative society arranges visits to the cattle feed plant
and the sale of balanced cattle-feed at the village dairy society. At the cattle feed plant a
nutritionist explains the contents of the feed concentrate, proteins, vitamins and minerals,
and why they should be fed to a pregnant cow or buffalo.
Womenfolk
Employment of women is an index of their economic and social status in society. They
constitute 90 percent of marginal workers with some regional variation.The of programme
recognizes that:
• Dairying at the household level is largely a woman’s domain
• The products and income from dairying can be controlled by women
• Dairying can be practised at a small scale.
Initially when OF was launched, membership in most of the India’s village-level DCSs were
heavily dominated by men. Now the picture has gradually changed in favour of women.
Presently, some 2 476 all-women dairy cooperative societies are operating in the country.
Out of 11 million members, 1.9 million are women, i.e. 17 percent of the total. Even in some
of the DCSs, there is female as well as mixed membership; however, women constitute only
3 percent of the total management committee members. Rural women play a significant
role in animal husbandry and are involved in feeding,
breeding, management, health care and other operations. Women constitute 71 percent of
the labour force in livestock farming; there are 75 million women compared to 15 million
men, engaged in dairying.

25
Impact indicators Observations
1. Participation of weaker sections Over 75% of the DCS membership are landless,
marginal and smallholder producers
2. Milk retention at home 47% of the milk produced is retained at home, daily
3. Milk marketed 53% of the milk produced, daily
4. Milk consumption/capita per day 339 grams
Impact on Infrastructure
Participating farmers have become aware of their responsibility to the csommunity.
Every year they generously contribute a portion of their cooperative’s profit towards the
overall development of the village, such as:
 Improving the village approach road condition
 Providing facilities to youth through establishing village libraries
 Contributing to educational institutions and village primary health centres
 Providing and updating day-to-day knowledge by putting television sets in
DCSs
 Providing a telephone facility to members for better and fast communications
 Contributing to establishing the drinking water supply system in the village.
 Cooperative dairying has therefore shown a significant socio-economic impact
in rural development.
Impact on Improved Food Aid and Nutrition
Several studies have revealed that India is better-off now in the area of production of food
grains, then before. The real problem though, is that even with additional grain availability
,malnutrition persists because those in real need have insufficient purchasing power. The
milk producers’ organizations (MPOs) do make a contribution towards
generating additional income for these poor groups and help build a symbiotic relationship
between animal and crop husbandry; income generated from one creates
demand for the output of the other, in other words, output of one becomes feed for the
other. The primary effect of MPOs are to provide greater income to the participating
families. As the per capita expenditure increases, so does the expenditure on food products.

26
In other words, there is a proportionate increase in the consumption of food as spending
power increases. Thus, additional income provided by MPOs to families below
the poverty line actually helps them increase their food intake.MPOs provided income at
regular intervals; usually on a daily basis, but sometimes also once a week. Given the low
purchasing power of rural households, items of essential consumption not produced by the
families themselves, such as salt, sugar, vegetable oils, spices, lentils and vegetables, have to
be purchased daily. The provision of additional cash income daily or weekly undoubtedly
helps the families increase their purchase and consumption of such essential commodities.

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STATEMENT OF THE PROBLEM
In view of the importance of agricultural sector in the national economy and especially of
the role of the animal husbandry in the rural economy of India, the need for increasing the
production of milk has received quite a lot of attention through operation Flood I, II, and III.
India depends more on cows than on buffaloes for its milk production. Though India has
achieved a lot in milk production, its per capita consumption is not upto the world average.
The milk yield per animal is also not up to the world standard because about 67 per cent of
the animals are owned only by the small and marginal farmers. Besides there is lack of
sufficient fodder, insufficient high breeding animals and no proper care and management of
milch animals. India has a unique pattern of production, processing and
marketing/consumption of milk. Approximately 70 million rural households (primarily, small
and marginal farmers and landless labourers) in the country are engaged in milk production.
Over 11 million farmers are organized into about 0.1 million village Dairy Co-operative
Societies (about 110 farmers per Dairy Cooperative Societies) The cumulative milk
production handled by the Dairy Cooperative Societies across the country is about 18 million
kg of milk per day. These co-operatives form part of a national milk grid which links the milk
producers throughout India with consumers in more than 700 towns and cities bridging the
gaps on account of seasonal and regional variations in the availability of milk. In the
organized sector, there are 676 dairy plants in the Co-operative, Private and Government
sector registered with the Government of India and the state Governments. The Organized
sector (both corporative and private dairy plants) handle about 20 per cent of the marketed
milk and the balance is handled by the unorganized sectors. Of late, a very significant
development in rural areas has been the growth of the modern dairy. It is playing an
important role in promoting improvement in the quality of rural life by generating additional
income for a very large number of farmers, most of whom are small or marginal, as well as
by supplying a nutritious item of food to the people, both in rural and urban areas. By now,
modern dairy development covers about 22 States and the Union Territories in India and is
poised to extend to the remaining few of these in the country. The dairy industry in India
provides regular employment to 9.9 million people in the principal status and 8.8 million
people in subsidiary status, which together comprises 5.5 per cent of the total workforce. It
now accounts for 25 per cent of the Agriculture output. India possesses over 16 per cent of

28
world cattle population. Among the milch animals some 57 per cent of buffalo population
accounts for only 14.20 per cent of world milk production. The profit from dairy farming is
very important from the employment and national income point of view. The profit from it
is based on the cost and returns of milk production. Milk production is based on the type of
the milch animal. Buffaloes yield more milk than the cows and the returns on investment
are very high because of their high yield and lactation period. The returns from the
buffaloes are greater than the returns from the cows.
The details about the selected milk producer’s in Bihar
In selected districts, survey reveals that small and medium farmer prefer to rear one or two
livestock for milk purpose. Cows are preferred over the buffalo. Some scheduled caste
families prefer to rear pigs and goats because of high cost of cows and buffaloes.
Sample District wise Production of Milk and Population of Livestock
An analysis of table
It reveals that the population of indigenous cattle was found highest in Bhagalpur district
followed by Buffalo and cross breed cow while annual milk production of indigenous cattle
was found highest followed by buffalo and cross breed cow. An analysis of Banka district
reveals that the population of indigenous cattle was found highest followed by buffalo, and

29
milk production of indigenous cattle was highest followed by buffalo and cross breed cow.
Now, Begusarai reveals that the population of cross breed cow was highest followed by
buffalo and the production of milk was found highest in cross breed cow followed by
buffalo. Whereas in case of Nalanda district, the population of buffalo was highest followed
by cross bread cow and the production of milk was found highest in buffaloes followed by
indigenous cattle. Thus, details of this analysis may be seen in table 5.3 Table 5.3 Production
and Population of Livestock in Sample District
Role of Dairy Sector in State Economy of Bihar
Role of Dairy Sector in State Economy of Bihar Bihar produces about 2.9 MT of milk
accounting for 3.28 per cent of the total milk production in the country. However, only 9-10
per cent of production is processed by COMPFED (Sudha Dairy) and only 2-3 per cent in the
private sector. Milk processing capacity in India has grown at a CAGR of 4.00 per cent with
almost negligible growth in Bihar. The technology being used is now decades old with no
primary processing/cooling facility at the farm/village level. Bihar’s estimated milk
production was 7.2 million tones in 2013-14, which was 5.2 per cent of the national milk
production and also stayed 9th ranked in the country. The cooperatives dairies procured 15
lakh kg per day in 2013-14. The state of Bihar has about 9 lakh producers’ members pouring
milk to around 15 thousand dairy cooperatives societies. The growth of livestock population
in Bihar was depicted in table 2.5 and reveals that livestock population was increased to

30
9.19 per cent over previous census. The highest growth in population was recorded in goat
population (19.54%) followed by buffalo (13.11%) and sheep (6.42%) while cattle population
registered decline (1.42%). East Champaran (5.52%) has highest number of total livestock
population followed by Araria (5.42%), Katihar (4.67%) and Gaya (4.56%). These four
districts together accounted for 20.17 per cent of the total state livestock population in
2012. East Champaran has the highest number of in milk buffaloes and cows followed by
Araria and Katihar districts. The percentage share of expenditure on dairy development has
increased to 95.91 in 2006-07 from 17.61 per cent in 2002-03. The proportion of
expenditure to outlay on dairy development was much better during corresponding period.
The milk production has increased from 2.66 MT in 2001-02 to 8.29 MT in 2015-16
registering a growth of 211 per cent over base year. Milk production in the state of Bihar has
been increasing continuously throughout the year from 2001- 2016. However, the per capita
availability of milk in the state was increased from 88 gms/day in 2001-02 to 208 gms/day in
2014-15. The
cooperatives have developed veterinary health and artificial insemination centre and these
provide service to a large number of milk producers at low cost. An attempt has been made
to analyse the animal health services available vi to livestock in Bihar. The number of
functional hospital increased from 852 in 2003-04 to 1114 in 2013-14 and number of
veterinary doctor also increased from 912 in 2003-04 to 1154 in 2013-14. The number of
livestock was also increased from 241 lakh to 270 lakh recording an annual increase of about
1.00 per cent in livestock population. Per hospital, livestock population increased from
26.26 thousand in 1991-92 to 31.69 thousand in 2003-04 and livestock population also
increased from 18.37 thousand to 29.61 thousand per veterinary hospital during
corresponding period. There are eight co-operative milk unions in the state of Bihar and
have total 66.45 lakh litre per day milk processing capacity and they procure 44.56 LLPD
milk. During the year 2012-13, 150 bulk milk coolers and 8 chilling centres with total chilling
capacity of around 660 TLPD.
Milk Collection through Dairy Cooperative Societies
Dairy cooperatives are one of the strongest in Bihar and other adjoining state but share of
Bihar in total milk procurement by cooperative sector to our country was very little and stay
9th rank in milk production. Among the different 06 milk cooperative unions and three

31
projects, the annual growth rate for milk procurement was highest for Koshi Dairy Project
(51.5%), followed by Magadh Dairy Project (44.8%). The milk procurement per functional
society per day had also recorded an increase between 2010-11 and 2015-16. Begusarai has
highest share of milk procurement (26.74%) to total state procurement followed by
Samastipur (20.83%), Patna (13.29%) and Ara (11.45%), whereas Begusarai has also highest
share of milk holding capacity (19.76%) to total state capacity, followed by Samastipur
(19.48%), Ara (17.44%) and Patna (15.99%). COMPFED markets milk products under brand
‘Sudha’ was 11975 MT in 2010-11 increased to 19979 MT in 2014-15 accounting for 66.84
per cent increased during last five year. Among different product of COMPFED, dahi was
highly sold about 6492 MT in 2014-15 followed by lassi (4412 MT) and paneer (3284 MT)
during responding year. These three products together had been accounting 71.01 per cent
of total state products in 2014-15.
Schemes for Dairy Development
Government has been implemented several policies to improve dairy development, by
operating different programmes like operation flood, strengthening infrastructure for
quality and clean milk production, assistance to cooperatives, intensive dairy development
programme (IDDP), Rashtriya Krishi Vikas Yojana (RKVY), accelerated dairy development
programme (ADDP), National project for bovine breeding and dairy development (NPBBDD),
integrated dairy farm project (IDFP) and package like Vidharbh Vikas package, Marathwara
Vikas package. As a result of operating these programme, substantial improvement in
quality and increase in quality noticed.
Data, Methodology and Sample Area
The present study is mainly based on secondary data. As per Methodology, we had selected
four milk unions:
Selection of Milk Union falling each in different categories in Bihar

32
Selections of village--- four villages have been selected from each respective sample district.
Two villages nearest to sample milk union and two 25-50 kms away from sample milk union.
One DCS and other non-DCS village from each selected/respective taluka have been
considered. It is also predicted in table No. 1.20 (B). Selection of Milk Producers From each
selected village, 15 milk producers comprising 5 each from small, medium and large milk
producers have been selected randomly so, 60 milk producers falling in each sample milk
union, therefore, total sample size of milk producers in each state will be 240.

33

34
Limitations of the Study
1. The study area was confined to only two DCS villages under each sample district,
more number of DCS villages would have been better for the preciseness given it
more reliable results.
2. The study was confined to only one agricultural year, that is, 2015-16 as mentioned
in milk producer’s questionnaire and households’ survey schedule. It would have
better to have the data at least for 2 or 3 years to reduce the variation.
3. The survey method of data collection was used, which could not be free from
memory bias, particularly in case of uneducated farmers.
4. The information obtained from DCS members and Non-members farmers,
particularly relating to their expenditure and income statements was are not tree
from certain margin of errors because they were hesitating in responding such types
of questions and enquires.
5. Because of the large sample size of sample and paucity of time and other resources
of the pact of the researchers the findings of the study may have its limited
acceptability. However, it raises many vital issues of practical importance, which may
be pursued for future research. The conclusions drawn may not have universal
applicability an account of diverse agroeconomic and physical environments. It is
however, felt that the value of the study would have increased many fold, had a
large size of sample drawn from a wider area formed the base of the study.

35
CONCLUSION
Apart from cooperatives, the dairy sector is still characterized by small-scale ,scattered and
unorganized milch animal holders; low productivity; inadequate and inappropriate animal
feeding and health care; lack of assured year-round remunerative producer prices for milk;
inadequate basic infrastructure for provision of production input sand services; inadequate
basic infrastructure for procurement, transportation, processing and marketing of milk and
lack of professional management. Despite all the problems it faces, the dairy sector holds
high promises as a depend able source of livelihood for the vast majority of the rural poor in
India. The AMUL model of Small - scale dairy production and marketing, as it has evolved
and been refined over the last 50 years, also holds high promises for smallholder dairy
development in India.
Liberalization of world trade in dairy products under the new trade regime of the WTO
poses new challenges and has opened up new export opportunities for the dairy industry in
India. It needs to enhance competitive economic advantage in dairy products in terms of
boths quality, cost and its credibility in international markets. Milk yield needs to increase so
as to decrease the per litre cost of production, quality needs to be enhanced with the
adoption of the latest processing and packaging technology will increase export of dairy
products. Though India is the largest milk producer in the world, here the per animal milk
production is very low. The cost of production of milk is also high due to the high cost of
fodder .The quality of milch animals in India is also not up to the mark. But if we will
overcome our deficiencies, the dairy industry is one of the most promising sector.

36
REFERENCES
 Department of Animal Husbandry, Dairying & Fisheries
http://dahd.nic.in/dahd/division/dairy-development.aspx
 Agro-industries characterization and appraisal: Dairy in India - O.P. Sinha, Dairy
Farmers’ Organization, Anand, India
www.fao.org/fileadmin/user_upload/ags/.../AGSF_WD_21.pdf
 IUF Dairy Division, Indian Dairy Industry
cms.iuf.org/sites/cms.iuf.org/files/IndianDairyIndustry.pdf
 Opportunities And Challenges in The Indian Dairy Industry
Dr K.G. Karmakar and Dr G.D. Banerjee
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 Opportunities And Challenges in The Indian Dairy Industry
www.nabard.org/fileupload/DataBank/.../issue9td-6.pdf
 Can Indian Dairy Cooperatives Survive in the New Economic Order?
Bhaskar Goswami
www.wto.org/english/forums_e/public_forum2007_e/session11_goswami_e.pdf
 Strategies for Sustainable Dairy Production in India
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 A Study on Improvement in Rural Livelihoods through Dairy Farming
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 A.Anbu and Dr. T. Johnson Sampathkumar, “An Empirical Study on Dairy Cooperative
Societies which Satisfies the Dairy Farmer’s” International Journal of Management
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 Draft report on breeding policy for dairy animal improvement in Bihar by NDDB,
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Economic Survey, 2016-17, Govt. of Bihar.