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Indian Dairy: Biggest contributor to agri GDP; milk is largest agri. commodity
Friday, 05 August, 2011, 08 : 00 AM [IST]
Nandita Vijay, Bangalore
The Indian dairy sector is the largest contributor to the agriculture Gross Domestic Product (GDP). In terms of output, milk is now the single largest agricultural commodity in India. Currently, around 46 per cent of the milk is consumed in the form of liquid milk, 47 per cent as traditional dairy products and 7per cent as Western dairy products. The value-added versions like ghee, butter, yogurt, paneer, cheese, along with a cornucopia of flavoured milks, ice creams, UHT processed milk and shredded and liquid cheese is making the sector an attractive for growth.

The dairy industry in India is currently estimated to be about 130 million tons and is expected to grow at 4-5% per annum. The projected value of the industry is about Rs 500,000 crore, which includes Rs 160,000 crore from liquid milk, Rs 45,000 crore from ghee, Rs 50,000 crore from khoa / chhana / paneer, Rs 10,000 crore from milk powder, Rs 300 crore from table butter, Rs 8,000 crore from cheese / edible casein and the balance from other products.

The other significant feature is that within the 30 per cent overall share of organised dairies, the major 20 per cent of that will be accounted for by the private sector. The cooperatives and government dairies will handle 10 per cent which will be lower than that of the organised private sector. The milk consumed by the rural population and the producer families remains in the unorganised sector and this anomaly will continue to show in India when compared to the other dairy advanced countries, according to Vijayabhasker Reddy, consultant, Fresh Ideas, Hyderabad.

There are more than 550 plants in the country with about 175 in the north, about 50 in east about 120 in south and west, accounting for more than 200.

The leading dairies in country are Gujarat Cooperative with Amul brand, Karnataka Milk Federation (KMF) with Nandini brand, Mahanand Dairy (Mahanand), Tamil Nadu Co-operative Milk Producers' Federation Limited with Aavin brand, Heritage, Nilgiri Dairy Farm Pvt Ltd, Hatsun with Arokya brand, Cavinkare Dairy, GRB Dairy, CreamLine Dairy and Parag Milk Foods, Tirumala Milk Products, Gokul and Sridevi Milk Products.

Mulkanoor Women's Mutually Aided Milk Producers Cooperative Union is the first women's co-operative in the country and globally. It is located in Bheemdevarapally mandal in Karimnagar district.

The Indian dairy sector is now in a phase of consolidation and dairy- owners are looking for acquisitions for which it is also scouting for private equity and venture capital infusions, stated representatives from KMF, Nilgiri Dairy Farm and GRB Dairy.

Reddy stated that the dairy sector in the country is poised to take off only if the right inputs are put in place. As of now, it is at crossroads. “Do we go the way we have been going through or do we seek the model of the advanced / developed countries in the field of dairying,” he queried.

“We are typically a small farmer led with small holdings and few animal with low productivity. Sheer numbers that we have, add up and make us the world's largest producer of milk. We are predominantly buffalo economy in the dairy parlance, while world over it is cow dominant.  But when it comes to productivity we are among the least. And whatever, we see in terms of increased productivity is on account of the increasing cross bred Cow population. It is time for the policy-makers to focus on right inputs in terms of genetic constitution, better feeding practices, improved fodder and ensure equitable opportunity to the private sector in the dairy sector. It is also important to treat dairy as an agro industry than as back yard farming. It is essential to increase the herd size, the quality of the herd and get to kind of mechanised farming to improve on the productivity,” Reddy opined.

There are significant growth prospects. Although India is one of the world’s leading milk producers, yet the northern parts of the country are facing acute shortage of milk supply. States of north-east, West Bengal, Delhi and Kerala are dependent on milk powders. In fact, Delhi government is keen to procure milk from Karnataka Milk Federation (KMF) via a rail tanker and the supply is awaiting clearance from the Indian Railways. There are also opportunities for development of low-fat and sugarless milk products, paneer and cheese variants, informed A S Premanath, managing director, KMF.

Indian dairy research and development holds immense potential for the future. The focus is on the development of value-added products. This is where innovation is driving the dairy industry on the verge of an exciting and economically strong future, stated Dr Satish Kulkarni, head, National Dairy Research Institute (NDRI), Southern Campus, Bangalore.

Foreign players

In 2009, Elbit India Agricultural Ventures, part of the Israeli-based Elbit Group, had invested Rs 650 crore to set up the country's largest dairy farm in Andhra Pradesh. The modern farm spread over 350 acres was to be ready by 2012. The company was also scouting for more opportunities to set up similar farms across the country.

According to a recent report, US-based private equity major the Carlyle Group had infused funds to the tune of Rs 110 crore for a 25 per cent stake in the Tirumala Milk Products in Andhra Pradesh.

According to Girish Aivalli, EVP & country head, food & agribusiness strategic, advisory & research, Yes Bank, under its select corporate advisory assignments, it has extended advice to leading multinational dairy company for Assessment of Key Supportive Metrics for setting up a large-scale dairy plant in India and advised select corporate houses on setting up Integrated dairy farms in West Bengal, Punjab and Gujarat.

“The only way we can ensure to attractive foreign investment in this sector is to make it a viable entity with fewer stakeholders. For example, a dairy plant has about 10-12 farms that it collects its milk from. Here in India, to get to the same quantity of milk, the dairy processor will need to collect from at least a hundred villages and more so from few thousand farmers. That makes life difficult for the processor. One is the logistics involved and the other is managing quality. Ideally, once the animal is identified as good for milking after doing the necessary tests for any infections etc, the animal goes into a parlour for milking. Utmost hygienic conditions need to be maintained and also the milk chilled immediately to ensure the quality of milk stays as is. Quality of milk is of paramount importance to the processor. Here we talk of both chemical quality as well as microbial quality. Since the animals have low productivity, it is not possible for the farmers to get into mechanised milking and also ensuring proper storage. That leads to hand milking, improper sanitation and hygiene and over and above this, there are no "on farm" chilling facilities. These are the reasons for poor quality of milk in India,” stated Reddy.

Now coming to Elbit, though we did hear about the investment in the dairy sector, it has not taken off, and presumable for the same reasons, he said.

The processing in the dairy sector is about 37 per cent compared to above 60 to 70 per cent in developed countries and this is where there is a huge potential for high profitability of the dairy products business, stated Aivalli.

“The national dairy plan will have to look at the Industry at large rather than looking at the cooperative sector. If the economy is being driven mostly by the private entities, they should have the share of the pie that the gover
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