1. B.S.Chandel and Rishikanta Singh
National Dairy Research Institute, Karnal
(Haryana)-132 001 India

2.  Introduction
 Smallholder
milk production system
and value chain
 Dairy
Value chain analysis
 Critical
issues in the value chain
 Conclusions
& Policy interventions

3. 
Smallholder milk producers dominate
production in developing countries
the
milk

In India, small and marginal farmers contribute (68 per
cent)

Milk production by these households address vital
issues of their livelihood, nutrition and employment

The paper looks at mainstreaming of small milk
producers
• Addressing the issue of livelihood & poverty
• Augmenting the milk production at competitiveness

4.  Typical integrated production
• Crop residues-surplus family labor- household
activities
• Convert waste into high value products
• Comparative advantage to produce at lesser cost
 Marketed surplus
• Individual household (50%)
• Aggregated (70%)
 Marketed mainly through
• Milk vendors (58%)
unorganized sector

5. Figure 1: Dairy Value Chains of Small Milk Producers
Consumer (5%)
Retailer/ Retail outlets
Retailer
Wholesaler
Private Processing
Plants
Cooperative
union/federation
Milk Vendor
(58%)
DCS (9%)
Creameries/ sweet shops
(20%)
SMPMUs (5%)
Contractual
/contractor (3%)
Small milk Producer
Figures in parenthesis indicates percentage of the total marketed surplus
DCS: Dairy cooperative Societies; SMPMUs: Small Milk Product Manufacturing Units

6.  The
analysis helps policy maker to
• Identify exogenous variables to stimulate the
desired changes,
• Determine competitiveness and power exercised by
different players and
• Understand the complexity of inter-linkages in the
value chain.
 Approach
• Institute of Development Studies at University of
Sussex, Kaplinsky and Morris (2001), Schmitz
(2005)

7.  Dairy
value chain was analyzed for its
• Structure, competitiveness, integration, actors,
governance and policy questions
 Simple
tabular analysis and total factor
productivity were used to supplement the
argument in the results

8. Average milch Average
Cost
of Cost of milk Total Factor
animals/househ Productivity maintenance production Productivity
old or farm (L/animal/da (Rs/animal/d (Rs/L)
(TFP)
(No.)
y)
ay)
Karnal, Haryana: Subsistence farming (for milch buffalo)
2.27
6.800
186.86
27.07
0.0364
4.90
6.460
178.31
27.16
0.0362
8.29
5.73
168.85
28.77
0.0339
Jabalpur, Madhya Pradesh: for commercial dairy farms (90% buffaloes)
70
6.025
207.20
34.39
0.0266
238
6.200
204.04
32.91
0.0282
598
5.700
178.75
31.36
0.0288
Sources: Compiled from Singh (2013) and Sharma (2013).

9. 
Animal Health Service Providers
• Public animal health department, cooperative unions and
private veterinarians.

Service Delivery System (Ahuja 1999)
• Cooperative and private services- 80% at doorstep
• Government units was less than 20 per cent

Smallholder milk producers’ dependence-High

Expansion of veterinary health facilities required35-60%.
• From 7000 milch animals to 1000-1500 milch animals per
veterinary institute

10. Herd
size Average
categories
milch
animals/
household
(No.)
Small
2.27 (100.00)
Medium
Large
Average
crossbred
milch
animal/
household
(No.)
0.84 (37.00)
Proportion of Proportion of
households crossbred
(%)
milch animls
(%)
49.00
23.70
4.90 (100.00) 2.14 (43.67)
37.00
45.66
8.29 (100.00) 3.79 (45.72)
14.00
30.63
Source: Compiled from Singh (2013)

11. Particulars
Average
milk
production/household/day
Milk
Marketed
surplus/household/day
Proportion of milk marketed Cooperatives
through different channels
(%)
Direct to consumers
Open market (inclusive
of milk vendors)
Plains
8.4
Hills
4.5
Pooled
6.3
4.8
1.5
3.1
22.8
55.3
33.0
16.4
60.7
10.6
34.1
14.9
53.7
Average price (Rs/L) received Cooperatives
14.5
from
different
market
channels
Direct to consumers
17.2
Open market (inclusive 17.6
of milk vendors)
14.5
14.5
14.9
16.4
16.5
17.0
Source: Adopted from Bardhan et al., 2012

12. 
Marketing Channels
Marketing through Organized sector (12%)
Marketing through Unorganized sector (88%)

Short term advantages of the unorganized sector
The flexible payment schedule, even advance payment
also possible
Flat rate of milk which favours the farmers producing low fat
milk like cow milk
Higher milk price

Retardy growth of cooperative institutions

Lack of institutional framework for mainstreaming
in private sector

13. Dairy Coop. Societies (No.)
250
160000
140000
Per Cooperative Society
200
120000
150
100000
80000
100
60000
40000
Producer Members (No.)
Milk Procurement (KgPD)
50
Liquid Milk Marketing (LPD)
20000
0
0
1980-81
1990-91
2000-01
2008-09
2009-10*
1980-81
1990-91
2000-01
2008-09
2009-10*

14.  More
political
representation
in
management
 Large cooperative societies- increased
operational cost
 Lack of representation of milk producers in
federation/union
 Out of the market price fixation and
government interference
 Lack of diversification in product-mix

15. 
High transactions costs

Fresh milk marketing

Clean milk production

Demand specific milk production

Direct communication
producer and consumer
between
the

16.  Improve
veterinary services especially public and
up-gradate local breeds to strengthen milk
production capacity of smallholders
 Strengthen
institutional framework to bring small
holder under the ambit of organized marketing,
 Modernization
of informal sector to reduce
transactions cost and handling losses of milk,
 Encourage
fresh milk marketing and clean milk
production for quality and demand specific
production.