Evolving policy framework for a changing dairy industry

The incredible aspect about this growth of private dairies is that it has come about with limited support from government led initiatives, which have been largely designed and built to support cooperatives.

The Indian agriculture and dairy sector is the veritable life-line of the country’s rural economy, and also a key pillar of our nutrition security. With our milk production accounting for 18.5% of the total global milk output, milk holds about 25 % of the total economic value of the total agri output in India. The dairy sector has evolved from being an agrarian way of life, to a profit-making, professionally-managed sector built on strong linkages across the value chain from the farmer to the consumer, brought about by the organization of this sector. This has empowered over 76 million dairy farmers by providing them with gainful employment, besides significantly contributing to the financial independence of women in India’s villages – a significant socio-economic impact.

By 2020, our milk production is estimated to touch 190 million tonnes. However, the steadily rising demand for dairy proteins is creating a demand and supply mismatch. Even though the organized sector has been rapidly growing – it still accounts for only 20%. Out of which private dairy companies hold a share of 11% and cooperatives have 9%. Further, about 45% of organised milk procurement is today undertaken by private dairies. It’s clear that the evolution of the private sector in dairy has been instrumental in building and developing this industry.

The incredible aspect about this growth of private dairies is that it has come about with limited support from government led initiatives, which have been largely designed and built to support cooperatives. The private dairy sector value chain, – from sourcing infrastructure to processing capacities (as well as complete sales, distribution and marketing effort) has been created on the strength of entrepreneurial initiative.

According to the latest publication of Dairy India, by 2020, procurement by private dairies is projected to reach 28.93 million tonnes (mt), ahead of the 23.67 mt of cooperatives and it is estimated that private corporate dairies will overtake cooperatives and handle larger milk volumes. The National Dairy Development Board’s website even states the fact that post-operation flood the capacities created by private dairies in the last 15 years equals that set up by cooperatives over 30 years. This sustainably changing scenario needs to draw attention on the role of NDDB which also needs to evolve to support this changing dairy eco-system.

The NDDB National Dairy Plan (NDP), a Central scheme aimed at increasing the productivity of our milch animals to keep up with rising domestic milk demand, envisaged an investment of Rs 2242 crores till 2018-19. However, the NDP covers only cooperatives or producer companies, and not the private dairy sector.

During operation flood programme (1970-96) there were hardly any organised private dairies, but since 1992 when the dairy sector was de-licensed and private players allowed to establish operations the dairy players have gone head to head with the co-operatives. Amul in Gujarat, and Nandini in Karnataka constitute more than 50% of the total milk procurement of the cooperatives. This is perhaps a testament to the fact that other co-operatives have not been able to efficiently make progress in most other states, and the NDDB stance of lending a hand to cooperatives may not result in higher impetus towards the dairy sector overall in the country as the procurement pattern is skewed towards only a few states.

The NDDB should take a relook at its policy framework and especially, look at the under developed dairy states, where its support programmes should cover both the state cooperatives and a selected number of private dairy companies which could be chosen based on certain parameters.

To develop the dairy sector in especially under-developed dairy states, the role of the private dairy sector is crucial and a policy framework which helps them scale up their production and sourcing infrastructure as well as cold-chain distribution would be very important in the evolving dairy eco-system.

Ultimately, the consumer and the farmer have to be benefitted by any industry and agri-sector related policy of the government. The government and NDDB must evolve to embrace the good work being done by several private dairy companies which impacts both consumers and farmers positively. The new Dairy Infra Fund of Rs.8000crs announced by the government must also take cognisance of the requirements of the sector as a whole and not channelize all support only to cooperatives as this will not meet the end objective. If the aim is to have a “National Dairy Development”, then the private sector has to be seen in a more contemporary non-socialistic framework – just like there’s good socialism and bad socialism, there’s similarly bad capitalism and good conscious capitalism.

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