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Higher Products Demand to Spur India’s Dairy Sector Growth
Monday, 26 August, 2019, 08 : 00 AM [IST]
Vijay Intodia
Dairying is considered a major source of livelihood for farmers particularly in the times of agrarian distress. There has been a major thrust by government to boost the milk production by supporting programmes for increasing milk productivity, input supplies and access to organised milk processing sector. The support programmes have resulted in the country’s milk production growing at a very high growth rate of more than 6 per cent during the last few years. By the year 2021-22, the country is estimated to touch production of around 200 million metric tonne of milk.
In spite of rapid strides in production, the dairying has increasingly become unviable for the farmers as they failed to get the remunerative prices for the milk while the input prices have gone up substantially.

A number of states are even providing subsidy of Rs 4-5 per litre to the respective milk cooperatives, so as to provide remunerative milk procurement prices to the dairy farmers. However, the milk procurement prices reportedly may see an upward trend in the year 2019, largely due to decline in milk supply during the current flush season in winters. In the present scenario, it is quite clear that supply exceeds demand as far as India’s domestic market is concerned. India’s dairy industry mainly caters to the domestic market as it consumes whatever it produces.

Rising trend
India’s dairy exports are also minimal largely due to global oversupply and suppressed dairy prices. Though, the dairy exports are again looking on a rising trend. Nevertheless, India itself being a large consumer market has potential to drive the growth in the dairy sector. On supply side, of course, there are a number of interventions that are being made to improve the viability of more common small dairy farms in the country.
However, it is the increased demand through higher consumption, which can significantly improve the profitability of dairy processors and thus help small and marginal dairy farmers realise higher economic returns.

Liquid milk marketing
India’s current dairy consumption is still very low at 53 Kg per capita (Milk Equivalent, 2017) against 246 and 226 Kg per capita in the EU and USA respectively ( However, the consumption growth will likely be driven by rising incomes, rapid urbanisation and increase in double income households. India’s dairy consumption is mostly in the form of liquid milk. In fact, more than 50 per cent of the revenue of some of the major dairy cooperatives comes from liquid milk marketing.
However, the bigger profit margins are in the marketing of value-added products. The fact that biggest dairy cooperative in India continues to provide highly remunerative prices to its member producer farmers is due to their higher profit margins realised from diverse range of value-added products. Therefore, India eating more of cheese, ice cream, yoghurt, and ethnic dairy products such as butter milk and paneer than simply liquid milk contributes more to the profitability of dairy companies and thus farmers.

It is therefore imperative that dairy players including cooperatives diversify its range of value-added products; the market which is already growing at a rate of 15 to 20 per cent per annum. Greater research and development efforts to develop newer range of products, increasing shelf life and improving packaging technology will help boost consumer demand.
The companies need to build strong brands by differentiating products based on desired quality attributes. In case of export markets too, the country need to focus on exports of ethnic products rather than commodities, to fulfil the growing demand of Indian diaspora abroad. It is also important to ensure the formulation and implementation of food safety and quality standards for ethnic dairy products so as to promote consumer trust in domestic as well as global markets.

Distribution of products
There is need to improve the availability of cold chain infrastructure at the retail points particularly in remote rural areas, which may enable widespread distribution of products. The country’s dairy board is already implementing programme to provide milk to children under mid-day meal scheme in schools. The programme should be expanded to wider areas with support of state governments, which would help increase milk demand. At firm level, the small- scale private and cooperatives need technological and financial support to develop and market diversified high value dairy products.
Therefore, it is imperative that investments for the production and marketing of value- added products are incentivised though fiscal and other means of financial support. The dairy associations may also look for generic marketing of ethnic dairy products promoting their health benefits. Therefore, Indian consumers having more of cheeses, ice creams, rasogullas or srikhand rather than raw milk only, will help dairy farmers realise greater profits and double their income by the year 2022 as targeted.
(The author is Deputy Director (Research), ICSSR, New Delhi)
(The views are his personal)
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