Dairy companies woo cattle farmers for steady supply

Private dairy producers are wooing cattle farmers with higher remuneration, interest-free loans and animal healthcare facilities to ensure steady supply of raw milk.

Industry executives and analysts say the share of the organised dairy segment in the Indian dairy industry is expected to improve from about 19 per cent last year. Private dairy firms including Prabhat Dairy, Heritage Foods [BSE 0.20%] and Sterling Agro have been giving monetary advances and animal healthcare facilities, among others benefits, to attract more farmers into their network. Experts say the strategy is working as annual milk procurement has increased by 10-15 per cent

Kishore Nirmal, director of Prabhat Dairy, said, “We have been able to bring in as many as 4,500 farmers under our fold in Ahmednagar and Raigarh districts of Maharashtra in the past couple of months by providing monetary advances without interest and making prompt payments by way of Vodafone M-pesa’s business correspondents.”

Prabhat Dairy recently tied up with M-pesa to facilitate payments to its 85,000 dairy farmers who supply milk to its plant in Maharashtra. The dairy firm procures 70 per cent of its milk requirement from regular farmers and the remaining from loose milk suppliers, who are farmers not committed to any dairy firm, private or cooperative, and mostly sell milk in the open market.

“With advances, farmers are able to buy more cows or buffaloes, resulting in an increased production,” said Kuldeep Saluja, managing director of Sterling Agro Industries, which sells milk under the brand name ‘Nova’. “Also, it helps the company to make optimum utilisation of the funds invested in logistics or milk processing.”

According to Saluja, earlier, a truck with a capacity of 2,000 litres of milk, used to carry 800 litres, resulting in higher expenditure, but with the farmer support initiatives, dairy owners are able to make the economics work favourably.

Akshay Chitgopekar, director at rating agency CrisilBSE -0.53 % Ratings, said, “One of the main reason for farmers to move to organised dairies is better price realisation as it eliminates intermediaries (agents).” The other reasons are fair compensation and skill development and support activities such as advice on cattle management, veterinary services and animal feed provision, he said.

Industry players say mid-sized diary firms have of late been spending Rs 8-10 crore every year on farmer centric schemes, which include providing cattle feed at discounted rates.

However, dairy associations believe that the scale of such initiatives is very small. Jaipal Reddy of Progressive Dairy Farmers’ Association, said, “Firstly, the scale of such initiatives is very small and don’t reach majority of the farmers. Also, it won’t have much of an impact as only high remunerative prices will attract the farmers.”

India is the world’s largest milk producer, accounting for a fifth of the global output, according to national Dairy Development Board (NDDB) and Crisil estimates. The organised dairy segment’s revenues are estimated at about Rs 75,000 crore in fiscal 2014-15, or 19 per cent of the overall domestic dairy market of Rs 4.3 lakh crore, a report by Crisil Ratings said.

The revenue share of the organised segment is expected to go up to 25 per cent by fiscal 2017-18 on the back of a shift in consumer preference and growing demand. Further, the report said, the organised channel is expected to invest about Rs 15,000 crore by 2018 to shore up processing capacities.