CHAPTER 1

OVERVIEW OF DAIRY INDUSTRY

CHAPTER 1
OVERVIEW OF DAIRY INDUSTRY
1.1

Introduction

1.2

Co-operative Movement Globally

1.3

Co-operative Movement in India

1.4

Co-operative Movement in Gujarat

1.5

Objectives of Dairy Co-operatives

1.6

The National Co-operative Dairy Federation of India (NCFDI)

1.7

The National Dairy Development Board (NDDB)

1.8

Co-operative Dairying in India

1.9

Anand Pattern

1.10 Operation Flood Programmes

1.11 Impacts of Operation Flood
1.12 Pitfalls in the Operation Flood
1.13 Role of Dairy Co-operatives
1.14 Dairy Co-operatives in Gujarat
1.15 Co-operative Companies playing in Dairy Industry and its Brands
1.16 Milk Production and State-wise Milk Production in India
1.17 Problems and Prospects of Dairy Industry in Gujarat
1.18 Steps to revive Dairy Co-operatives
1.19 SWOT Analysis of Indian Dairy Industry
1.20 Dairy Industry in India at a glance

CHAPTER 1
OVERVIEW OF DAIRY INDUSTRY
1.1

INTRODUCTION

Maximum people of thickly populated India live in villages. Majority of them are
involved in agriculture. The cattle animal is correlated with agriculture in India as the
old method of cultivation is still vogue here. Rearing of cattle animal is also an
additional source of income of the villagers in our country.
We get from our ancient history that the domestication of the cow and the buffalo
dates back to nearly 4000 years. Scriptures of India refer to the wealth through the
word Godhan. Maximum proportion of cows and buffaloes of the world are seen in
India.
Dairy enterprise is an important occupation of the farmer. In India, nearly 70% of the
people depend on agriculture. It is the backbone of India. It is mainly a rural
occupation closely associated with agriculture. More than 2,445 million people
economically active in agriculture in the world, probably 2/3 or even more of them
are wholly or partly dependent on livestock farming. The dairy sector in the India has
shown remarkable development in the past decade and India has now become one of
the largest producers of milk and value-added milk products in the world. The dairy
sector has developed through co-operative in many parts of the state. Traditionally, in
India dairying has been a rural cottage industry. Semi-commercial dairying started
with the establishment of military dairy farms and co-operative milk unions
throughout the country towards the end of the 19 th century. In earlier years, many
households owned their own family cow or secured milk from neighbors who had
one. With the increase in urban population fewer households could afford to keep a
cow for private use and moreover there were other problems also like the high cost of
milk production, problem of sanitation etc. restricted the practice; and gradually the
1

family cow in the city was eliminated and city cattle were all sent back to the rural
areas. Gradually farmers living near the cities took advantage of their proximity to the
cities and began supplying to the urban population; this gave rise to the fluid milk
sheds we see today in every cities of our country. Prior to the 1850s most milk was
necessarily produced within a short distance of the place of consumption because of
lack of suitable means of transportation and refrigeration. The Indian Dairy Industry
has made rapid progress since Independence. A large number of modern milk plants
and product factories have since been established. These organized dairies have been
successfully engaged in the routine commercial production of pasteurized bottled milk
and various Western and Indian dairy products. With modern knowledge of the
protection of milk during transportation, it became possible to locate dairies where
land was less expensive and crops could be grown more economically. In India, the
market milk technology may be considered to have commenced in 1950, with the
functioning of the Central Dairy of Aarey Milk Colony, and milk product technology
in 1956 with the establishment of AMUL Dairy, Anand. Indian dairy sector is still
mainly an unorganized sector as barely 10% of our total milk production undergoes
organized handling. Beginning in organized milk handling was made in India with
establishment of Military Dairy Farms. Handling of milk in co-operative Milk Unions
established all over the country on a small scale in the early stages. Long distance
refrigerated rail-transport of milk from Anand to Mumbai since 1945 pasteurization
and bottling of milk on a large scale for organized distribution was started at Aarey
(1950), Calcutta (Haringhata, 1959 ), Worli (1961), Madras (1963) etc. establishment
of Milk Plants under the Five-Year plans for Dairy Development all over India. These
were taken up with the dual object of increasing the national level of milk
consumption and ensuing better returns to the primary milk producer. Their main aim
was to produce more, better and cheaper milk.
In 1965, National Dairy Development Board (NDDB) was set up with the object of
meeting the increasing demand of milk specially in urban areas as well as developing

the rural economy through the enhancement of the milk production of the country. In
1970 National Dairy Development Board took up Operation Flood Programme in
order to organise Milk Producers Co-operative in several probable places of India
taking the Kaira District (Anand) Co-operative Milk Producers Union Limited
(AMUL) of Anand, Gujarat.
The presence of milk cooperatives all over the country helps to organize the industry
and give this sector a distinct advantage. Cooperatives allow for much easier
marketing of the end product as compared to other businesses. Cooperatives assure
the farmer of not only a market for their product but also take care of logistical issues
like transportation and containers. The farmer is spared these costs as well as the cost
of putting up a retail outlet. Cooperatives allow for stable selling rate which does not
change even when they yield is surplus. Payments are guaranteed to milk producers
and ensured within a maximum of 30 days. Cooperatives play an important role by
eliminating middlemen and the associated costs.
Dairy co-operatives are found everywhere in both developed and developing
countries. In developing countries, it is one of the income sources of their rural
economy whereas in developed countries it takes as a sustainable business. These
countries face different types of problems. Developing countries focus on increase in
production volume of milk and milk product, and developed countries do on
enhancement of milk product, brand, and merger of dairy cooperatives. Dairy
cooperatives have been getting various opportunities as well as facing different
challenges. They are going to formulate different types of strategic planning to cope
with these challenges and to get success. Strategic plans of dairy cooperatives in
developing countries are, generally to increase production volume of buffalo milk,
bring about the internal improvement in cooperative societies, reduce cost of
production, and provide quality service to consumer through skill, trained and
educated manpower. Strategic plan of developed countries is quite different from that
of developing countries. Their strategic plans are to merge different dairy cooperative
3

societies/institutions into a dairy cooperative, and compete in the global market with
quality of products. Co-operative Movement has been recognized as an effective
instrument for the economic development of the rural masses and for improvement in
the socio-economic condition of the underprivileged.
1.2

CO-OPERATIVE MOVEMENT GLOBALLY

The genesis of co-operative movement can be traced back to the first half of the 18 th
century. Industrial revolution in U.K. had increased the production of morality and
values of mankind as man was replaced by machine. Because of lust and lure for the
production, it had directly resulted in the exploitation of the mankind and so
cooperative movement took birth in U.K. for removing the bad conditions of laborers.
From England, co-operative movement spread out all over the world and had been
changed in to the great movement which can be seen by the following table:
Table - 1.1: Cooperative Movement in various countries
Sr. No.

Types of Cooperatives

Country Name

1.

Consumers Cooperatives

England, Russia and Sweden

2.

Credit Cooperatives

3.

Marketing Cooperatives

Canada, U.S.A. and Australia

4.

Land Mortgage Credit

Germany, England and France

5.

Dairy Cooperatives

Denmark and New Zealand

6.

Farming Societies

Russia, Yugoslavia and Palestine

7.

Housing Societies

U.S.A., Sweden and Israel

8.

Producers Cooperatives Labour

Germany, Italy, Sweden and India

France and England

Societies
9.

Labour Societies

Italy

10.

Insurance Cooperatives

England

11.

Cooperative Education

England

(Source: Pranab Chakrabarty, Problems of Co-operative Development 1967.)

1.3

CO-OPERATIVE MOVEMENT IN INDIA

1904: The Co-operative Credit Societies Act i.e. the first Co-operative Law of
India was passed.
1912: The Co-operative Societies Act, 1912 had wider scope for other types of cooperatives to function.
1919: Government of India Act, Co-operation as a subject was transferred to
provinces.
1942: Multi-unit Co-operative Societies Act, delegated the power of Central
Registrar of Co-operatives to State Registrars for all practical purposes.
1984: Multi-State Co-operative Societies Act.
1991: Brahma Prakash Committee comes out with the Model Co -operative
Societies Act, with lesser state involvement.
1995: The Government of Andhra Pradesh passes the new Mutually Aided Cooperative Societies Act, granting autonomy to the co-operatives.
2002: Multi-State Co-operative Societies (MSCS) Act, 2002 replaced the MSCS
Act, 1984.
2002: Companies Amendment Act, 1956 provides an alternative to the
institutional form that is presently available to co-operative enterprises.
2004: Task Force on Revival of Co-operative Credit Institutions set up under the
chairmanship of Prof. A. Vaidyanathan.
1.4

CO-OPERATIVE MOVEMENT IN GUJARAT

The first agricultural credit society registered under the 1904 Act was Vilaspur
Co-operative Credit Society in the Dascroi taluka of Ahmedabad district.
Kaira District Milk Union Ltd. Popularly known as AMUL was established by
Late Sri Tribhuvandas Patel in December 1946 at Anand.
The state has also been ahead in the organization of Agricultural Marketing Co operatives, Non-agricultural Co-operative Credit Societies, Forest Labourers
5

Societies for Adivasi, Co-operative Housing, Poultry Co-operatives, Lift Irrigation

and Industrial Co-operatives.
The co-operative movement in Gujarat is similar to the mild Dairy cooperative
movement of Gujarat. Due to the exploitation of the middlemen called the Bhatiya,
the farmers decided to form their own association to save their interest. So, the first
co-operative society was started in 1939 in Surat and that was the beginning of new
era of co-operative movement in Gujarat. Before the birth of Amul Dairy, Anand,
there was no systematic marketing for milk in Gujarat and in India also and then, wit h
the birth of Amul in 1946, the co-operative movement began as a revolution and
then it emerged as a White Revolution.
1.5

OBJECTIVES OF DAIRY CO-OPERATIVES

The dairy co-operative is based on following objectives:

1. To develop the skills of dairying in rural people and prepare them to accept this
activity as a joint business along with farming.
2. To develop co-operative societies at village, taluka and district level.
3. To encourage dairying in co-operative sector and to strengthen the co-operative
dairies and unions to be economically strong.
1.6

THE NATIONAL CO-OPERATIVE DAIRY FEDERATION OF INDIA (NCDFI)

The NCDFI is the fourth tier of the APDC. All the state -level federations are
members of NCDFI. They become members by paying the requisite entrance fee and
purchasing shares. The NCDFI board consists of all the chairpersons/managing
directors of the state federations/ state unions/territory unions.
The main function of the NCDFI is to promote the dairy industry on a cooperative
basis. It offers services in procurement, processing and marketing of milk and milk
products from one state to another within the country and is also responsible for
international marketing. NCDFI also coordinates the supply of milk and milk products
6

to institutional consumers such as the army. Further, it organizes and operates the
national milk grid. It helps the member federations in the purchase, storage and
distribution of machinery and equipment.
The State Dairy Cooperative Federation
The district dairy cooperative unions are federated into a state-level cooperative milk
marketing federation by subscribing to it at least one share. The federation is
responsible for developing and implementing policies on cooperative marketing of all
member unions liquid milk and milk products, the product-price mix, cooperative
provision of joint services (such as AI and breeding) and cooperative marketing of
support services to members. Out of its net profit, the federation distributes the profit
share among all the member unions according to the milk procured by them and the
provision of by-laws.
The federation board consists of the elected chairpersons of all member unions and
the federations managing director; other members are representatives of registrar
cooperative societies and nominees of NDDB. Only the elected chairpersons of the
member unions have voting rights and elect the chairperson of the federation.
The federation board is advised by its programming committee, which is composed of
each member unions chief executive, the federations chief quality control officer
and one or more non-voting co-opted technical representatives of NDDB. The
federations managing director is the committees chairperson, and the general
manager, its secretary. The programming committee meets once every month and is
also responsible for day-to-day implementation of the boards policies and plans.
District Cooperative Milk Unions
All the registered village dairy cooperatives are affiliated with and members of the
district cooperative milk producers union, which enables them to jointly own a dairy
processing plant and cattle feed plant. In order to become a member of the union, a
7

registered society has to pay a nominal entrance fee and must purchase at least one
share of the union.
The union is controlled by a board of directors consisting of 16 to 17 members, of
whom 12 are democratically elected from among the chairpersons of the member
village dairy societies. The remaining 4 to 5 members include the unions managing
director as a member secretary, one or two representatives of financing institutions
and a nominee each from registrar cooperative societies and the federation. These five
members are not eligible to compete for the post of chairperson, who is elected by
ballot by the board of director members. One-third of the elected board members
retire every year by rotation so that each member carries out his duties for three years.
This ensures continuity in management.
The board frames the general policy for the union and employs the managing
director/general manager. While the board determines the number, type and pay
scales of personnel, it is the managing director/general manager who appoints the
junior staff.
The union carries out five important elements: (i) procurement, processing and
marketing of milk; (ii) provision of technical inputs (support services); (iii)
strengthening of the dairy cooperative movement; (iv) organization of extension
activities; (v) rural development services. The union owns and operates a dairy plant,
a cattle feed plant, fodder and bull mother farms, semen collection stations and a
centre for animal husbandry activities. In addition, the union carries out research,
development and other promotional activities for the overall benefit of milk
producers. The union provides macro-level inputs such as compounded cattle feed,
fodder seeds and various veterinary services including round-the-clock emergency
visits at the producers doorstep. The total cost of these programmes is included in the
milk price structure. It is therefore at the union level that professionals are hired for
specialized purposes that individual producers cannot afford.

The union distributes among producers dividends on their shares and bonus in relation
to the quantity of milk supplied by them during the year. The milk products processed
by the union are marketed through the federation. A special feature of the Anand
Pattern is that the unions are under continuous audit to maintain financial propriety.
Village Dairy Cooperative Societies (DCSs)
The basic unit in the Anand Pattern is the milk producers cooperative society, a
voluntary association of milk producers in a village who wish to market their milk
collectively. Every milk producer who has at least one milch animal that is owned can
become a member of the cooperative by paying a nominal entrance fee and
purchasing at least one share. At a general meeting of all the members, the
representatives are elected to form a managing committee, which runs the day-today
affairs of the cooperative society by setting the policies and appointing necessary
staff. Out of nine managing committee members, one member is elected as
chairperson.
Every morning and evening the society buys the surplus milk from its producermembers. The producer is paid for milk usually within 12 ho urs (for morning milk, in
the same evening and for evening milk, the next morning). The payment is made on
the basis of fat and SNF (solids-not-fat) content of the milk supplied by the individual
producer. The district milk union organizes the transport of collected milk twice daily
(whenever the dairy society has no bulk coolers) or according to the schedule based
on the quantity of the milk collected and the capacity of bulk coolers from all its
affiliated member cooperatives.
The producers in this system are not only ensured regular and remunerative payment
for their milk, but also have access to the milk production enhancement inputs,
support services, to further improve their productivity and income. The micro-level
support services such as veterinary first aid and AI are organized by village societies.
One of the staff members of the society is trained to carry out these functions.
9

Societies also market the liquid milk locally at the village level. In addition, supply of
balanced cattle feed and fodder seeds and milk products are also channeled through
societies.
In addition to regular payment and support services, members also receive the price
difference, dividend and bonus deriving from the net profit of the societys business
as per the provisions of the societys by-laws.
1.7

THE NATIONAL DAIRY DEVELOPMENT BOARD (NDDB)

The public sector impressed by the socio-economic changes that had been brought
about by the dairy cooperative organization, proposed a national level organization
that could replicate the APDCs. The GOI created the NDDB in September 1965.
Then, under the National Dairy Development Board Act of 1987 passed by parliament
and made effective on 12 October 1987, a restructured NDDB, a body corporate of
national importance, was formed.
The major objectives of NDDB are:
Promote viable producer-owned and controlled organizations primed to
produce, procure, process and market milk and its products, as well as other
commodities, so as to: (i) maximize productivity and optimize the producers'
share of the consumer price paid; (ii) influence and foster the development of
the dairy and other agricultural industries.
Generate funds to finance producer-owned organizations.
Provide assistance for planning projects and appraising them for financing.
Provide training for farmer leaders of the cooperative sector, as well as for the
professionals employed therein.
Provide cooperative-oriented education for all those involved in building
cooperatives.
Provide services to enable effective management of cooperatives.
10

 Monitor achievements against physical and financial targets and take necessary
corrective measures.
Monitor the financial viability of projects.
Create a data bank on all related activities to be shared with similar
organizations.
Promote industries to ensure fulfilment of the needs of the developmental
projects undertaken by NDDB.
Apply research and development and identify new technologies.
Respond to

other

developing countries' requests

to

organize

their

developmental programmes on cooperative lines.

Undertake any other special projects at the request of the central or state
governments.
1.8

CO-OPERATIVE DAIRYING IN INDIA

HISTORY OF DAIRY COOPERATIVE IN INDIA

The Co-operative movement started in India in the last decade of the 19 th century with
two objects in view, i.e. to protect the farmers from the hands of the private money
lenders and to improve their economic condition. Madras province was the birth-place
of this movement. With the setting up of an Agricultural Co-operative Banks there the
movement took root in our Land and slowly gained strength. However, the growth of
Co-operative movement in India during British rule was very slow and haphazard
one. In most of the cases, the provincial governments took the lead. The foreign ruler
had only made some committees or framed a few rules and regulations. But they did
not take any wide-ranging programme to spread the movement all over the country.
The golden era of Co-operative movement began after India had won freedom. Within
two decades of independence the membership of primary societies had increased four
times while the share capital and working capital increased 23 and 31 times
respectively.
11

The history of Dairy Development Movement in India is a new one. During the preindependence period this movement was limited to a few pockets of Calcutta, Madras,
Bangalore and Gujarat. The most notable of this venture was Kaira District Cooperative Milk Producers Union Limited of Anand, Gujarat. But after independence
the National Government took great initiative in setting up new Dairy Co-operatives
in many parts of the country. The National Dairy Development Board was set up to
make the ambitious project a success.
An impressive development has taken place as far as dairying as co-operatives are
concerned. Strengthening the cooperative business is a thrust area that focuses on
expanding and reinforcing the cooperative infrastructure at every level and enhancing
market potential through modern dairy plant technology, new product development
and innovative marketing. Today, women dairy farmers are encouraged to play a
major role. Thus, it has become an important instrument for their empowerment.
NDDB is committed to increase women participation by establishing 2,062 women
dairy cooperative societies with 90,000 women participants.
ORIGIN
The history of Dairy Development Movement in India is a new one. During the preindependence period this movement was limited to a few pockets of Calcutta, Madras,
Bangalore and Gujarat. The most notable of this venture was Kaira District Cooperative Milk Producers Union Limited of Anand, Gujarat. But after independence
the National Government took great initiative in setting up new Dairy Co-operatives
in many parts of the country. The National Dairy Development Board was set up to
make the ambitious project a success.
DEVELOPMENT
The organized dairying in India was started at the end of 19 th century when military
dairy farms and creameries were started to meet the demands of the armed forces and
their families. The first dairy co-operative society was established at Allahabad in
12

1913. After this the Calcutta milk supply societies union was established in 1919. Till
1938 there were only 19 unions with 264 primary societies and 11,600 milk producer
members. However, dairy co-operatives did not make much headway in the preindependence period. The first major landmark in the development of co -operative
dairying in India was the establishment of the Kaira District Co -operative Milk
Producers Union Ltd (KDCMPUL). Before the establishment of Amul, the milk
marketing system in the district was controlled by contractors and middle men who
used to exploit the milk producers in all possible ways, there by earning huge profits.
As a result there was growing discontent among the milk producers. On the advice of
Sri Sardar Patel and under the able leadership of Sri Tribhuvandas Patel, it was
decided to organize primary dairy co-operative societies which led to the emergence
of Amul on 14 th December, 1946.
The dairy co-operatives in Kaira district under the able guidance of Sri Tribhuvandas
Patel and Dr. Varghese Kurein, its chairman and general manager respectively,
followed an integrated approach to dairy development linking all the major elements
of dairying viz., production, procurement, processing and marketing and achieved
remarkable progress. Today AMUL is the largest dairy plant in the country handling
on an average about 8.5 lakh liters of milk per day collected from 3.65 lakh milk
producers from over 880 villages of the district. The ultimate result is that Anand or
Amul became a model world-wide for a co-operative.
1.9

ANAND PATTERN

The unprecedented success of AMUL stimulated the farmers in other districts of

Gujarat to emulate their example. Thus, the integrated approach to co-operative dairy
was successfully adopted in Gujarat and later it came to be known as Anand-pattern
of dairy co-operatives. This Anand model of co-operative structure was built on
vertically integrated co-operatives linking rural producers with urban consumers. It is
a three-tier structure. The three tiers are:

13

 The primary Dairy Co-operative Society at the village level is the first-tier that
consists of members who own milch animals within the village jurisdiction and
supply milk to the co-operative society on regular basis.
District co-operative milk producers union at the district level is the secondtier that in which all primary societies are members. It is managed by a Board
of Directors the majority of who are elected by the presidents of primary dairy
co-operative societies. The district union is responsible for the procurement,
processing and marketing of milk and also to provide technical inputs like first aid, emergency veterinary services, Artificial Insemination (AI) facilities,
fodder seeds, cattle feed and for training the staff of the primary societies.
Co-operative federation at the state level is the third-tier to which all the
district unions in a state are federated. The federations board consists of
elected chairman of the district unions and representatives of the state
government. Its primary purpose is to maximize returns to the milk producer
members through centralized marketing, purchase and quality control.
SALIENT FEATURES OF ANAND PATTERN DISTRICT CO-OPEARTIVES (APDC)
The salient features that have contributed to APDCs are as follows:
A single commodity approach; handles only the milk business.
Four-tier organizational structure ; an integrated structure owned, managed and
controlled by milk producers members themselves, which handles milk
production, procurement, processing and marketing, and provides support
services for milk production enhancement.
Democratically elected boards from among their members in all the four tiers,
i.e. the village DCS, the district milk union, the state federation and the
national federation. The board members are authorized to decide upon the
policies for total democratic governance.

14

 Employment of professionals by the cooperatives and professional managers

answerable to the cooperative boards.
The basic philosophy of the Anand Pattern; combining the power of its people
with professional management in a vertically integrated cooperative structure
that establishes a direct linkage, eliminating all middlemen, between those who
produce the milk and those who consume it, either in the form of milk or milk
products. This structure transfers the largest share of consumers money to the
producers, creating an incentive to improve production. It supports production
by exposing farmers to modern technology. Placing the farmers in command as
the owners of their cooperative involves them in the process of development.
The democratic form of the cooperative provides an underpinning for
democracy in the country, through a foundation of a democratic institution
right down to the village level.
Transparency maintained in business: by-laws providing continuous and
concurrent audit.
Cash and regular payment to producers for the milk supplied by them.

Awareness raised on clean milk production and animal husbandry practices,

which resulted in higher quality of milk production and breed improvement.
THE REPLICATION OF ANAND PATTERN
Sri Lal Bahadur Shastri, the then Prime Minister of India, visited Anand in 1964 to
inaugurate the cattle feed plant. Having been immensely impressed with the success
of dairy co-operatives in Gujarat, he has advocated the replication of Anand pattern
dairy co-operatives throughout the country. Accordingly, the government of India
established the National Dairy Development Board (NDDB) in 1965 to replicate this
pattern throughout the country by implementing the Operation Flood (OF)
programmes for this purpose. The Indian Dairy Corporation (IDC) was set up in 1970
to handle the donated commodities, the generation of funds and their disbursement for
the dairy development programmes.
15

1.10 OPERATION FLOOD PROGRAMMES

Development Operation Flood (OF), the worlds largest dairy development
programme ever undertaken, aims at setting up of a modern dairy industry to meet
Indias rapidly increasing need for milk and its products and making it viable and self
sustaining growth. The project undertook the colossal task of upgr ading and
modernizing production, processing and marketing of milk with the assistance
provided by the World Food Programme (WFP). The aim was to create a Flood of
rurally produced milk, assuring the farmer of remunerative price and ready market,
and the urban consumer of wholesome milk at stable and reasonable prices by linking
the main producing areas to the main consuming centers in urban areas.
Operation Flood I (1970-81):
The programme laid emphasis on setting up of Anand pattern rural milk producers
co-operative organizations to procure, process and market milk and to provide some
of the essential technical input services for increasing milk production. OF-I was
launched in 1970, following an agreement with the WFP, which undertook to provide
1,26,000 tonnes of Butter Oil (BO) as aid for financing the programme. The
programme involved organizing dairy co-operatives at the village level, providing the
physical and institutional infrastructure for milk procurement, processing, marketing
enhancing services at the union level and establishing of city dairies. The main thrust
was to set up dairy co-operatives in the milk sheds, so as to link them to the four
metro cities of Mumbai, Calcutta, Delhi and Chennai, in which a commanding share
of the milk markets was to be captured. The overall objective of Operation Flood I
was to lay the foundation of a modern dairy industry in India which would adequately
meet the countrys need for milk and milk products. Funds for Operation Flood I
were generated by the sale of SMP and Butter Oil. A total of Rs. 116.54 crore was
invested in the implementation of the programme. The achievements of OF-I are
furnished in table 1.2. By the end of OF-I about 13,300 DCS, 39 milk sheds were

16

organized, enrolling 18 lakh farmer members. It achieved a peak milk procurement of

34 lakh litres per day (llpd) marketing of 28 llpd.
Operation Flood II (1981-85):
The background of the institutional framework of OF-II essentially comprised of the
successful replication of the Anand pattern three-tier co-operative structure of
societies, unions and federations. OF-II was designed to build on the foundation
already laid by OF-I and the Indian Dairy Association (IDA) assisted dairy
development projects in Karnataka, Rajasthan and Madhya Pradesh. The programme
was approved by the Government of India, for implementation during the Sixth Plan
period, with an outlay of Rs. 273 crores. About US $ 150 millions were provided by
the World Bank and the balance in the form of commodity assista nce from the
European Economic Community (EEC). OF-II helped to market milk in about 148
cities and towns with a total population of 15 million through a national milk grid,
linking these towns and cities to 136 rural milk sheds. The project was extended
crores 34,500 village co-operative societies, covering 36 lakh farmer members. The
peak milk procurement increased to a level of 79 llpd and milk marketing to 50 llpd.
Operation Flood III (1985-2002):
The third phase aimed at consolidation of the gains of earlier two phases. The main
focus of the programme was on achieving financial viability of the milk unions state
federations and adopting the salient institutional characteristics of the Anand
Pattern co-operatives. The OF-III programme was funded by a World Bank with a
loan of US $ 365 millions, Rs. 222.6 crores of Food-Aid (75,000 tonnes of milk
powder and 75,000 tonnes of butter/butter oil) by the EEC and Rs. 207.7 crores by
NDDB from its own resources. The programme covered some 170 milk sheds of t wo
countries by organizing 70,000 primary dairy co-operative societies.
The World Bank granted provisional extension of OF-III credit upto April 30, 1996.
Its major emphasis was to consolidate the achievements gained during the earlier
17

phases by improving the productivity and efficiency of the co-operative dairy sector
and its institutional base for its long-term sustainability. Investments in OF-III were
focused on strengthening the institutional management aspect of dairy co -operatives
at various levels to establish financially strong, farmer owned and managed
organisation.
The OF-III also had provision for productivity enhancement inputs and institutional
strengthening in the form of training, research, market promotion, monitoring and
evaluation. Particular emphasis was placed on institutional and policy reforms. Efforts
were made to expand infrastructural facilities in all major markets, linking them to
milk sheds through the National Milk Grid (NMG) to ensure year-round stable milk
supply. Marketing thus, becomes the linking force to improve procurement and
strengthen the financial viability of the Unions. The role of NMG is crucial in
ensuring the availability of milk to consumers and a remunerative price to milk
producers by leveling out regional and seasonal imbalances in supply and demand.
Marketing indigenous milk products forms an important part of the overall marketing
strategy.
Table 1.2 displays progress of dairy development during three phases of OF under
four broad parameters namely procurement, processing capacity, market and technical
inputs. Between 1971 and 2000 all the indicators of milk procurement witnessed 4 digit increase in percentage terms. With regard processing capacity, the percentage
growth in processing capacity was more in metro dairies (4-digit increased) than in
rural dairies (3-digit increase). In milk marketing dairies in and towns either than
those in metros had a cities better record (4-digit increased) and the same can be alert
milk marketing powder. In permission of technical inputs there was a 3-digit increase
in all the parameters.

18

N.A.
0.9
N.A.
N.A.
22.4

Metro dairies (llpd)

Other cities & town (llpd)
Total marketing
Milk dairy capacity (llpd)
Milk powder production (000 tones/year)

Number of AI canters (000s)

Number of AI Done (in lakhs)
Cattle feed capacity (000 tonnes/day)
Investment (Rs. Crores)

6.8
10

Rural dairies (llpd)

Metro dairies (llpd)

N.A.
N.A.
N.A.
N.A.

4.9
4.98
1.7
116.54

19

7.5
13.3
3.3
277.17

10.9
30.1
4.3
411.59

1981
1985
1990
Panel A - Procure ment
39
136
170
13.3
34.5
60.8
17.5
36.3
70
25.6
57.8
98.1
34
79
120
Panel B - Procure ment
35.9
87.8
140.3
29
35
37.9
Panel C - Procure ment
21.8
29.5
30.6
6.1
20.6
41.9
27.9
50.1
72.5
261
507.5
663
76.5
102
165

Phase II

Panel D - Procure ment

5
1.6
2.8
5.2
6.5

1971

Number of milk sheds

Number of DCS (000s)
Number of farmers membership (in lakhs)
Average milk procurement (llpd)
Peak milk procurement (llpd)

Parameters

Phase I

15.12

4.7
690.6

32.34
53.9
86.24
831.5
185

167.5
38.3

170
67.32
86.9
111.45
130

1994

16.28
37.9
4.9
896.21

35
59
94
842
195

172
52.3

170
69.6
90
102
116

1995

Phase III

16.5
39.5
5
1303.1

38
61.38
99.38
74
195.5

193.7
72.4

170
72.74
93.14
109.42
140

1996

Table 1.2: Dairy Development under Operation Flood Programmes in India

15.25
41.5
5
151.6

45
52.26
97.26
956
250

185.25
86.5

170
75.24
95.24
107
151

2002

206.42
5806.67
368.30
366.30
1016.07 %
% increase in
2002 over 1981
211.22
733.33
294.11
130.08

2724.26
765.00

3400.00
4700.25
3401.42
2057.69
2323.07

% increase in
2002 over 1971

1.11 IMPACTS OF OPERATION FLOOD

Operation Flood has had far reaching impacts on the development of modern dairying
facilities in the country. It has not only impacted growth in production and
distribution of milk and milk products, but also dominated the rural development
scenario by providing sustainable livelihood options to millions of rural farmers. A
World Bank audit showed that of the Rs. 200 crores invested in Operation Flood (II),
the net return into the rural economy has Rs. 24000 crores per year over a period of
ten years, or a total of Rs. 240,000 crores in all. No other major development
programme in the world has matched this input-output ratio.
The impact of Operation Flood on Indias modern dairy sector has been paramount.
From an insignificant 200,000 litres per day (lpd) of processed milk in 1950 -51, the
organised sector is presently handling more than 25 million lpd in more than 400
modern dairy plants setup in different milk sheds in the country. One of the largest
liquid milk processing and pasteurizing plants has been established in Delhi handling
over 800,000 lpd (Mother Dairy). Indias first automated dairy plant with handling
capacity of 1,000,000 lpd has been established at Gandhinagar near Ahmedabad in
Western India. Several domestic cooperatives have mushroomed, and many of them
are now emerging as major players in the global market. The Gujarat Cooperative
Milk Marketing Federation Limited, with its popular brand Amul, has become the
one of the largest food companies in Asia, with annual turnover in excess of Rs. 30
billion.
Operation Flood offers some very crucial lessons for policy-makers. The first lesson
is inclusive growth. By establishing dairy cooperatives at the grassroots level, it
brought the milk farmers into its ambit, and placed control in their hands to decide
what and how much to produce and sell. This market-oriented, participatory approach
to development led to many grassroot-level innovations in designing of the supply
chain in dairy.

20

Secondly, efficiency is the key to success in food processing industries such as dairy,
and thus, streamlining and strengthening of the supply chain holds paramount
importance. With setting up of a strong supply-chain network, leakage from the
system to middlemen can be checked and more returns can be realized for the milk
producers (who are the ultimate stakeholders of the system).
Thirdly, for higher price realization, one needs to graduate from simple, low-value
commodities to high-value added processed products. Marketing holds the key to
ensuring that products are available at the right place, at the right time, at the right
price. Brand building is an essential exercise for all dairy companies to exploit the full
potential of the dairy value-chain.
Finally, the most crucial lesson of Operation Flood to all policy makers is that growth
and development should be market-oriented and market-led. By developing the
market forces, and ensuring healthy competition among different players in the
market, a robust and transparent system can be developed, which benefits both the
producers and consumers by ensuring quality products at value-for-money prices.
1.12 PITFALLS IN THE OPERATION FLOOD
There are many pitfalls in the Operation Flood:
1. Operation Flood Successful in Limited States Only: The success of dairy
cooperatives has been largely confined to a few states in India such as Gujarat,
Punjab, Andhra Pradesh and Rajasthan, where brands like Amul, Verka, Vijaya and
Saras have become household names. However, a large number of dairy cooperatives,
unions and federations are defunct and are not able to create value for their members.
Cooperatives in Uttar Pradesh (Parag Dairy), Kerala (Milma), and Madhya Pradesh
(Uttam Dairy) are largely loss-making. A lot needs to be done to strengthen such nonperforming cooperatives.

21

2. Excessive

Government

Interference

in

Decision-Making:

Excessive

government interventions in the cooperatives due to vested political interests have led
to massive politicization of dairy cooperatives. These cooperatives have a very large
rural base, with millions of farmers as members, and they could play a major role
during political elections. With electoral forces, and not market forces guiding the
decision-making of the cooperatives, most cooperatives have become agencies for
implementing the populist policies of the government, and thus unprofitable and
unviable business units.
3. Limited Sources of Finance: Limited sources of finance available to these
cooperatives also hinder the smooth functioning of many dairy cooperatives. The
cooperatives cannot raise equity from the market, and have to depend either on their
own retained earnings or on equity from member farmers. Both these sources are
woefully inadequate for meeting the financial needs for technological upgradation and
innovation, and thus the cooperatives have to resort to government loans and grants.
This in turn makes them an easy prey for government interference in decisionmaking.
4. Politicization of Cooperatives: Politicization of cooperatives has caused a
plethora of problems. Overstaffing, low capacity utilization, weak market orientation
and poor financial controls have become the norm rather than exception in case if
most Indian dairy cooperatives. Appointment of bureaucrats as managers of the
cooperatives has been the case in Madhya Pradesh, Orissa and Uttar Pradesh. These
bureaucrats do not have the professional skills required to manage such producer
cooperatives. Consequently, under such bureaucratic heads, the cooperatives fail to
respond to neither the needs of the producer farmers, nor the needs of the industry.
5. Government dictated input-output pricing: In case of most cooperatives the
state government fixes the minimum producer price. For instance in Maharashtra and
Punjab, the State Government fixes the selling price of milk to government dairies.

22

The selling price is determined by the government through on the spot interventions
in case of Andhra Pradesh and Karnataka. This has caused inevitable distortions in the
pricing of processed dairy products, and has adversely affected the financial health of
the cooperatives.
6. Inability to Meet the Stringent Sanitary and Phyto-Sanitary Standards for
Exports: Indian dairy industry, on an average, falls short of meeting the Sanitary and
Phyto-Sanitary (SPS) requirements of the WTO Agreements, and thus is not able to
compete in the global markets. As a direct consequence of this, most of the Indian
dairy exports are directed to the Middle East and the developing nations of Asia and
Africa where the SPS and other export regulations are not all that stringent. However,
in order to be able to compete in the more remunerative markets of the West such as
Europe and the US, there has to be a more concerted effort to make our dairy plants
truly of global standards.
Bangladesh and UAE account for around 45% of dairy exports from India. Indian
exports to remunerative markets of USA, EU, Canada and Australia have been quite
low. One reason for low exports of dairy products from India to these markets is that
these developed nations are also the major milk producing nations of the world. Thus
there does not exist much scope of meeting the unsatisfied demand in their
economies. Also, these nations have very high and stringent SPS and FDA norms,
which most Indian dairy manufacturers find difficult to comply with.
The recent Clean Milk Production (CMP) campaign of the NDDB is a step in total
quality management in dairy products. In other words, total quality management at
every step from the cow to the consumer. This has been initiated keeping in mind
the growing quality consciousness among consumers in domestic as well as in
international markets.

23

1.13 ROLE OF DAIRY CO-OPERATIVES

Dairy farming plays a key role in the socio economic status of the large percentage of
rural people especially in developing countries through provision of employment
opportunities as well as supplementary income to the rural poor. However, evidence
indicates that the proportion of dairy farmers engaged in subsistence agriculture in the
developing world is still high despite the rapid increase in demand of livestock
products. As a result, many countries are attempting to increase milk production by
assisting small-scale farmers to integrate in markets since they are the most numerous
and poorest of the farmer population as a whole. This has an impact on the provision
of rural employment, increase in income and diversification away from traditional
production to modern systems of production. Therefore, the co-operative system has
proved to an effective vehicle for dairy development, particularly in rural areas. It has
featured prominently in dairy development worldwide because of the range of skills
involved in milk production and marketing that require a number of activities that can
best be provided through collective action, thus through co-operatives.
The role of co-operatives in dairy production is evident in the following ways:
1. Improvement in milk production
Co-operatives have played a vital role in fostering dairy development in a number of
countries in the developing world, particularly by providing a stable market
environment and delivering necessary farmer services for smallholder dairy farmers.
This has been made possible through the development of informal or traditional
marketing channels which co-operatives have contributed to, and these markets are
dominated by smallholder farmers. They control approximately 80% of marketed
milk in many countries 1in SSA, South Asia and Latin America. Examples include
Kenya (86%), Tanzania (98%) and India (83%).
Dairy development through co-operatives is considered to be the most effective
strategy for supporting smallholder dairy farmers, which is made possible by
24

providing a guaranteed market for milk; supplying feed at reasonable prices as well as
provision of other services such as milk collection, provision of credit, veterinary aid,
and artificial insemination. Access to necessary inputs and services is a major
contributor to increase and sustain milk production. An increase in milk production
has a positive influence in income generation which encourages farmers to invest in
better dairy technology, such as improved dairy breeds and better feed, resulting in
milk production being more profitable. Farmers produce better feeds and improve
housing and care for their animals, which contribute to dairy development and hence
an increase in milk production.
2. Improvement in milk marketing
The marketing of milk presents serious challenges for smallholder dairy farmers
because of its unique features that require special co-ordination in markets as
compared to other agricultural products. According to Wolf and Hamm and
Hovhannisyam, milk has three special attributes that distinguish its marketing from
other agricultural products. Firstly, milk is a perishable product and unlike other
agricultural products, it can only be stored for a few days in its liquid state. Secondly,
most agricultural products are harvested twice a day. Thirdly, the supply and demand
of milk is counter-cyclical over the year. These attributed are evidence that milk
requires a secure market and co-operatives have proven to be a provider of such an
assured milk market, as observed in countries like India, Kenya and Uganda.
Moreover, these special attributes of milk contribute to high transaction costs in dairy
production and marketing because of the high marketing costs for fluid milk, scattered
nature of fluid milk markets and the risk attached to marketing milk as a perishable
product. Because of its perishable nature, milk requires rapid transportation to the
market in order to avoid losses arising from spoilages. Farmers lack post harvest
infrastructure such as chilling facilities to keep milk in good co ndition hence the need
for rapid transportation of milk to the market. This results in high transaction costs
which negatively affect farmers decision to participate in markets, thus limiting them
25

from accessing markets. In this regard, co-operatives play a crucial role in minimizing
transaction costs in dairy production because they improve market participation by
overcoming barriers to assets, information, necessary services and, most importantly,
by overcoming barriers to markets within which smallholders wish to sell their milk.
Co-operatives therefore improve the marketing of milk through the minimization of
transaction costs associated with marketing milk as a perishable product. Co operatives provide a reliable market outlet to dairy farmers and they have the
advantage in the collective marketing of milk which significantly lowers transaction
costs among smallholder farmers. The provision of a reliable market outlet that is
sufficiently rewarding for farmers acts as a stimulator for milk production an d cooperatives provide more marketing options to farmers. This in turn brings about major
improvements in the production and marketing of milk as well as changes in
consumption behavior of smallholder households since they consume a higher
percentage of their produce. Co-operatives also enable value addition through the
processing of milk into less perishable products which assists farmers in selling
directly to final consumers, thereby earning more profit.
Improvement in market access encourages more intensive dairy production in the
form of improved dairy breeds and improved feed technologies that enable
smallholder farmers to increase their income and employment, which in turn leads to
improvement in the welfares of families, including those of women and children. An
example of successful co-operatives in the dairy industry is found in India. More than
70% of Indias milk is produced by households owning only one or two dairy animals
and these producers form part of a nationwide network of dairy co -operatives.
3. Improving food safety and standards
Increasing food safety concerns over the effects on health and recent global concerns
have led to a growing interest among consumers in food safety assurances and
traceability of products offered by farmers. As one of their advantages, co -operatives

26

have made it possible for dairy farmers to produce good quality milk and dairy
products as independent farmers are often unable to meet food safety and quality
control requirements because of poor milk handling techniques and technology used.
Smallholders do not usually have chilling or processing facilities because of extreme
poverty, low asset base and no access to finance. Co-operatives can thus provide
farmers with such facilities. To ensure good quality products and safety, milk from
farmers is tested on a daily basis, which forces farmers to use appropriate milk
handling techniques for which they are given appropriate training. In addition, cooperatives have played a role in undertaking more farmer-oriented research which has
expanded dairy education and extension services, and enhanced government role in
integrated dairy development. They have played an important role in providing a base
for farmer service delivery and for generally stable agricultural knowledge systems. In
short, co-operatives play a major role as a source of market information for dairy
farmers. Access to market information improves decision making by farmers and
enhances market participation. Access to such information improves production
practices to prevent, eliminate or reduce food safety hazards on the farm. According
to Valeeve, these practices include particularly husbandry and management practices
such as feed production, cattle movement and traceability, health and treatment,
milking procedures, maintenance of milking equipment, dairy cattle housing, water
management, hygiene level on the farm, as well as transport of raw milk to selling
points. Evidence suggests that farmers with limited access to this information are less
likely to adopt standards.
1.14 DAIRY CO-OPERATIVES IN GUJARAT
The Dairy Co-operative movement in Gujarat is similar to the co-operative movement
in India. Amul is the pioneer of the Dairy co-operative in Gujarat and in India also.
Before the birth of Amul Dairy Anand, there was no systematic marketing for milk in
India. As milk is perishable item, milk producers farmers had to sue their milk to the
middlemen for whatever they were offered. Middlemen bought the milk from milk
27

producers at a lower price and sold it to cities with the huge margin of profit. Many
times, milk producers were complied to sell cream and ghee at throw away prices.
Thus, the middlemen exploited the milk producers, farmers.
Though many farmers were illiterate, they knew that the system under which private
traders bought their milk and milk products at lower prices and sold it to huge margin
of profit was just not true and fair. In 1945, the Government of Bombay started the
Bombay milk scheme. At that time, the Polson Dairy the private dairy had got
monopoly to collect milk from Kaira district to be sold at Bombay and exploited the
farmers. The Government of Bombay found it profitable and Polson Dairy also kept
good margin of profit. But, in spite of this situation, nobody had tried to determine the
price of milk to the benefits of the farmers. As such unsatisfaction among the farmers
grew. So, they decided to have their own milk co-operatives to save their own
interest. In this reference, they determined to supply the milk as an organization and
not as an individual. The motivation for this came from Sardar Vallabhbhai Patel. In
shaping and creating the Amul, the vital role of leaders like Morarji Desai,
Tribhuvandas Patel, dedicated processionals like Dr. V. Kurien and Dr. Dalaya was
very valuable. The Bombay Government in the milk industry. In this reference, the
milk producers of Kaira district went on strike for 15 days. So, not even a drop of
milk was sold to private traders. And they could not provide a drop of milk to
Bombay. So, the scheme had collapsed, due to the strike of milk producers. After
seeing the strong determination of the milk producers farmers, the Bombay
Government had to obey to the demand for the establishment of milk co -operatives.
Eventually, the Kaira District co-operatives milk pro ducers, Union ltd. Which is
known as Amul Dairy Anand was started in 1946. In the starting, the Amul Dairy
collected just 250 liters of milk per day with the help of two co -operative societies of
the union. Due to Amul Dairy, farmers were obtaining fair and sufficient reward on
the basis of fat content of the milk. They were paid promptly also. So, more and more
farmers jointed the union, and the union got much strength. It turned today into
28

7,56,600 litres of milk per day, being collected from 1073 vil lage co-operative
societies with the help of 6,15,415 farmer members Late Tribhuvandas Patel and Dr.
V. Kurien have given the name of Amul as excellence in Asia and have brought the
White Revolution in Gujarat as well as in India. And the milk producer s also
supported and co-operated their efforts nicely and realized the spirit of co-operation in
a real sense.
Amul Dairy Union collected from its members and delivered it to milk commission of
Bombay. But the milk commission had started irregularity. They could not give the
payment to the union in time and rejected to accept the excess milk in winter season.
And so, the union established its own processing plant to handle winter glut of milk.
The union also set up the chilling centre in Anand in 1949. The production of butter
and milk power was started in 1955. In the year 1958, milk producers factory was
developed to produce sweetened condensed milk a new plant was started for the
production of baby food and cheese in the year 1960. In the year 1964, for the first
time in the world, cheese and baby foods were being processed from buffalo milk on
large professional scale. The prime minister, Shree Lal Bahadur Shastri visited Anand
in 1964 and he announced the cattle feed plant of the union. Another milk powder
plant was commissioned in 1965. Shree Lal Bahadur Shastri wished that milk
cooperative as this Amul Pattern should be set up in the other region of the
country also. And with this aim, N.D.D.B. was established in the year 1965. With its
headquarter in Anand. In 1970, N.D.D.B. introduced the operation Flood (O.F.)
programme for the replication of Amul pattern of dairy co-operative throughout in
India. For the marketing of milk, Gujarat co-operative Milk Marketing Federation
Ltd. (GCMMF) was established in 1971 in Anand. To develop dairy industry on
cooperative line, Gujarat Government established (G.D.D.C.) Gujarat Dairy
Development Corporation in the year 1972. Amul Dairy set-up the plant for high
protein weaning food, chocolate etc. in 1974. Thus, the Dairy co-operative revolution
is continuing year by year.
29

Presently, 16 co-operative milk dairies are connected and worked under Gujarat Cooperative Milk Marketing Federation (GCMMF) Ltd., Anand.
Table 1.3: Co-operative Dairies in Gujarat
Co-operative Dairy

City

Ahmedabad
District
Co-operative
Milk
Ahmedabad
Producers Union Ltd.
Banaskantha
District
Co-operative
Milk
Palanpur
Producers Union Ltd.
Baroda District Co-operative Milk Producers
Baroda
Union Ltd.
Bharuch District Co-operative Milk Producers
Bharuch
Union Ltd.
Bhavnagar District Co-operative Milk Producers
Bhavnagar
Union Ltd.
Gandhinagar
District
Co-operative
Milk
Gandhinagar
Producers Union Ltd.
Junagadh District Co-operative Milk Producers
Junagadh
Union Ltd.
Kaira District Co-operative Milk Producers
Anand
Union Ltd., Amul Dairy
Kutch District Co-operative Milk Producers
Madhapar
Union Ltd., Kutch Dairy
Mehsana District Co-operative Milk Producers
Mehsana
Union Ltd., Dudhsagar Dairy
Panchmahal
District
Co-operative
Milk
Godhra
Producers Union Ltd., Panchamrut Dairy
Rajkot District Co-operative Milk Producers
Rajkot
Union Ltd.
Sabarkantha
District
Co-operative
Milk
Himatnagar
Producers Union Ltd., Sabar Dairy
Surat District Co-operative Milk Producers
Surat
Union Ltd., Sumul Dairy
Surendranagar District Co-operative Milk
Surendranagar
Producers Union Ltd.
Valsad District Co-operative Milk Producers
Valsad
Union Ltd, Vasudhara Dairy

30

No. of
No. of Average Milk
Societies Members Production
433

52,428

90,000 lpd.

1,130

97,251

2,95,000 lpd.

783

1,56,691

2,25,000 lpd.

289

37,900

38,000 lpd.

190

25,532

23,000 lpd.

56

13,000

46,500 lpd.

400

41,500

73,000 lpd.

943

5,13,280

7,40,000 lpd.

N.A.

N.A.

25,000 lpd.

1,020

2,92,800

7,04,402 lpd.

1,133

1,26,510

1,12,000 lpd.

193

29,620

50,000 lpd.

1,315

2,00,482

3,22,346 lpd.

854

1,60,000

3,00,000 lpd.

486

31,000

30,000 lpd.

348

35,900

74,400 lpd.

1.15 CO-OPERATIVE COMPANIES PLAYING IN DAIRY INDUSTRY AND ITS

BRANDS
Table 1.4: Co-operative companies playing in dairy industry and its brands
States

Co-operative Unions

Brands

Andhra Pradesh Andhra Pradesh Dairy Development Co-operative Federation Vijaya

Limited (APDDCF)
Bihar

Bihar State Co-operative Milk Producers Federation Limited Sudha

(COMPFED)

Gujarat

Gujarat Co-operative Milk Marketing Federation Limited Amul,Sagar

(GCMMF)

Haryana

Haryana Dairy Development Co-operative Federation Limited Vita

(HDDCF)

Himachal

Himachal

Pradesh

State

Co-operative

Milk

Producers

Pradesh

Federation Limited (HPSCMPF)

Karnataka

Karnataka Co-operative Milk Producers Federation Limited Nandini

(KMF)

Kerala

Kerala State Co-operative Milk Marketing Federation Limited Milma

(KCMMF)

Madhya Pradesh Madhya Pradesh State Co-operative dairy Federation Limited Sanchi,
(MPCDF)
Orissa

Shakti,Sneha

Orissa State Co-operative Milk Producers Federation Limited Omfed

(OMFED)

Utter Pradesh

Pradeshik Co-operative Dairy Federation Limited (PCDF)

Parag

Punjab

Punjab State Co-operative Milk Producers Federation Limited Verka

(MILKFED)

Rajasthan

Rajasthan Co-operative Dairy Federation Limited (RCDF)

Saras

Tamil Nadu

Tamil Nadu Co-operative Milk Producers Federation Limited Aavin

(TCMPF)

West Bengal

West Bengal Co-operative Milk Producers Federation Limited Benmilk

(WBCMPF)

Goa

Goa State Co-operative Milk Producers Union Limited

Goa dairy

Jammu

Jammu Co-operative Milk Producers Federation Limited

Jamfed

Pondicherry

Pondicherry Co-operative Producers Union Limited

Ponlait

Sikkim

Sikkim Milk Producers Union Limited

Sikki milk

Tripura

Tripura Co-operative Milk Producers Union Limited

Gomati

31

1.16 MILK PRODUCTION AND STATE-WISE MILK PRODUCTION IN INDIA

India ranks as the world's largest milk producer during 2010-11 with an annual output
of 121.8 million tonnes (Table-1.5). India's milk production accounts for 16% approx.
of the world total output. Constituting an important segment of the Indian rural
economy, dairy and dairy products provide livelihood to millions of homes in villages
and ensure supply of quality of milk and milk products to people of both urban and
rural areas. The accelerated socio-economic development during the 21st century is
throwing up challenging issues like food security, food safety, quality and their
linkages with the national and international markets as the demand for food is
increasing.
Table 1.5: Milk Production in India
Year

Production (Million Tonnes)

Per Capita Availability (gms/day)

1997-1998

72.1

207

1998-1999

75.4

213

1999-2000

78.3

217

2000-2001

80.6

220

2001-2002

84.4

225

2002-2003

86.2

230

2003-2004

88.1

231

2004-2005

92.5

233

2005-2006

97.1

241

2006-2007

102.6

251

2007-2008

107.9

260

2008-2009

112.2

266

2009-2010

116.4

273

2010-2011

121.8

281

2011-2012*

127.3
Note: * Anticipated achievements

Source: Department of Animal Husbandry, Dairying & Fisheries, Ministry of Agriculture, GOI.
(www.nddb.org/statistics/milkproduction.html)

32

97-98

72128

4473

43

719

3420

38

4913

4373

714

1167

3970

2343

5377

5193

62

59

State

All India

Andhra Pradesh

Arunachal Pradesh

Assam

Bihar **

Goa

Gujarat

Haryana

Himachal Pradesh

Jammu & Kashmir

Karnataka

Kerala

Madhya Pradesh

Maharashtra

Manipur

Meghalaya

61

65

5609

5442

2420

4231

1232

724

4527

5059

41

3440

725

45

4842

75424

98-99

62

68

5707

5519

2532

4471

1286

742

4679

5269

44

3454

667

46

5122

78286

99-00

64

66

5849

4761

2605

4599

1321

761

4850

5312

45

2489

683

42

5521

80607

00-01

66

68

6094

5283

2718

4797

1360

756

4978

5862

45

2664

682

42

5814

84406

01-02

68

69

33

6238

5343

2419

4539

1389

773

5124

6089

46

2869

705

46

6584

86159

02-03

69

71

6379

5388

2111

3857

1414

786

5221

6421

48

3180

727

46

6959

88082

03-04

71

75

6567

5506

2025

3917

1422

870

5222

6745

57

4743

739

48

7257

92484

04-05

06-07

07-08

08-09

09-10

(000 Tonnes)
10-11

73

77

6769

6283

2063

4022

1400

869

5299

6960

56

5060

747

48

7624

74

77

6978

6374

2119

4124

1400

933

5366

7533

57

5451

750

49

7938

77

78

7210

6572

2253

4244

1519

1007

5442

7911

58

5783

752

32

8925

77

78

6455

6855

2441

4538

1565

1026

5745

8386

59

5934

753

24

9570

78

78

7679

7167

2509

4822

1592

971

6006

8844

59

6124

756

26

10429

79

78

8044

7514

2645

5114

1609

1102

6267

9321

60

6517

790

28

11203

97066 102580 107934 112183 116425 121848

05-06

Table 1.6: Estimates of Milk Production State-wise

STATE-WISE MILK PRODUCTION IN INDIA

267

36

---

---

---

D&N Haveli

Daman & Diu

Delhi

Lakshadweep

Pondicherry

Chhattisgarh

Uttaranchal

Jharkhand

---

---

---

36

290

43

22

3441

13618

76

4273

35

6923

7394

733

48

20

98-99

---

---

---

37

290

42

23

3465

14152

77

4586

35

7280

7706

850

48

18

99-00

910

1025

777

37

291

43

22

3471

13857

77

4910

35

7455

7777

876

51

14

00-01

940

1066

795

37

294

43

23

3515

14648

90

4988

37

7758

7932

929

57

14

01-02

952

1079

804

37

296

43

26

3600

15288

79

4622

45

7789

8173

941

58

15

02-03

954

1188

812

40

299

44

25

3686

15943

84

4752

48

8054

8391

997

63

15

03-04

1330

1195

831

41

303

43

24

3790

16512

86

4784

46

8310

8554

1283

69

16

04-05

34

Source: Department of Animal Husbandry, Dairying & Fisheries, Ministry of Agriculture, GOI.

43

57

Tripura

Chandigarh

4061

Tamil Nadu

22

35

Sikkim

A&N Islands

6487

Rajasthan

3415

7165

Punjab

West Bengal

672

Orissa

12934

46

Nagaland

Uttar Pradesh

17

97-98

Mizoram

State

1335

1206

839

43

310

46

20

3891

17356

87

5474

48

8713

8909

1342

74

15

05-06

1401

1213

849

45

288

46

23

3983

18094

89

6277

49

10309

9168

1431

67

16

06-07

1442

1221

866

46

445

10

47

24

4087

18861

91

6540

42

11377

9282

1625

45

17

07-08

1466

1230

908

46

450

10

47

26

4176

19537

96

6651

42

11931

9387

1598

53

17

08-09

1463

1377

956

46

466

10

46

24

4300

20203

100

6787

44

12330

9389

1651

78

11

09-10

1555

1383

1029

47

480

11

45

25

4471

21031

104

6831

43

13234

9423

1671

76

11

10-11

Union Agriculture Minister had launched the ambitious Dairy Project named as
National Dairy Plan Phase-I to increase the productivity of milch animals and
provide more revenues to Indias 70 million small milk producers and upgrade milk
processing plants in cooperatives and private sectors. The total amount of Rs. 2242
crores (426 Million USD) will be spent by International Development Association,
World Bank and Government of India. Milk production is growing at 3.3% while
consumption is growing at 5% leaving a gap between demand and supply. We are
sure that with the implementation of NDDB National Dairy Plan, Government would
be able to plug the gap between demand and supply.
1.17 PROBLEMS AND PROSPECTS OF DAIRY INDUSTRY IN GUJARAT
Dairy Industry in general and Gujarat in particular, will have to face many challenges
and problems that can be classified in to the following categories:
1. External Problems
2. Internal Problems
External Problems: External problems are as under:
1. Tradition: Dairies of Gujarat are particularly proved that the dairy co-operatives
have encouraged and strengthened the understanding and practice of democracy.
We are also proud that women have an increasing role not only in milk
production. But also in the membership and leadership in dairy co-operatives. We
are proud of this and above said achievements. At the same time, we must not rest
our successes. The world is changing rapidly and if we are continue to serve the
interests of Indias dairy farmers, and then we must be aware of and respond to the
dramatic changes in our own country and in the world as a whole. We must keep
our purpose and principles constantly.
2. Inadequate Marketing: When we see, the perspective 2010, strategy for
marketing, the result of the investment has not entirely measured up to our
35

expectations. According, to the NDDB the major reason for inadequate marketing,
is that the co-operative unions and marketing federation too often lack qualified
professionals in the key marketing positions. This problem is compounded by their
lack of freedom in employing the right professionals.
3. Raising Quality Standard: If, we truly want to be global players then we must
not only meet-we must strive to surpass- the strictest international standards. It is
not greatest and the most difficult challenge. At the present, the dairy industry
continues to be all too indifferent to quality. If we are to raise quality, we have a
address the entire system from producer to procurement to processing through to
marketing and the end customer or user.
4. Increase the scale of operation: Co-operatives in the west are merging with other
co-operatives or investor owned firms. Regional dairy co-operative like land o
lakes in the U.S. have become national through merger. In India and in Gujarat,
co-operatives must begin to examine whether there are valuable synergies in
coming together and formatting alliances. As global dairy evolves, we must be
sensitive to change and must in turn consider new ways and forms of doing
business.
5. Building and Sustaining a Database: Sound policy depends on sound
information. Government has so far unfortunately, failed to invest our national
data on cattle milk and milk products and marketing. Without accurate and timely
data neither commercial nor policy decisions can be taken with the degree of
confidence. Global positioning implies that we face global competition. Without
this our dairy industry can be at the best only be mismanaged.

36

 Internal Problems: Internal problems are as under:

1. Need of Professional Leadership and Management: They believe that there is
an urgent need of professional leadership and management at every level of the
organization.
2. Need to change approach to farmer members: There is a need to change the
approach of farmer members because they consider the milk activity as a
secondary activity and not as a prime profession.
3. Co-operative Laws and by Laws: There is a serious need of amendment in
present co-operative laws and bylaws to protect the interest of all the stakeholders.
4. Governments Audit System: There is a need to reform present governments
audit system. Today, many co-operative dairies have started their Internal Audit
System because of this reason.
1.18 STEPS TO REVIVE DAIRY CO-OPERATIVES
Assistance to Cooperatives: Under the scheme of revitalizing sick dairy cooperative
unions and federations, 12 milk unions in Madhya Pradesh, Uttar Pradesh, Karnataka,
Kerala, Maharashtra and West Bengal have been proposed for rehabilitation with an
estimated outlay of Rs. 87 crores approximately. The scheme is implemented on a
50:50 partnership between the state and the union government. Though such
rehabilitation plans do provide these cooperatives with much-needed financial support
in the form of grants, they on the flip-side bring with them more government
interference in the management of these cooperatives. Thus, on the one hand such
rehabilitation and revival packages for the cooperatives do provide short-term
solutions to make the cooperatives function; they on the other hand do not address the
long-term issues of bureaucratic interference in management of these cooperatives.
What required are not more grants or loans from the government. Allowing the
cooperatives to raise funds from the markets and other financial institutions at
37

competitive rates, and more professional management of the cooperative are the
structural solutions needed to make these cooperatives vibrant business entities. The
Producers Companies Act (2002) is a pioneering step in the direction of m aking the
cooperatives less dependent on government sources of funding, and enabling them to
restructure their debt-equity ratio on prudent financial lines.
Dairy Development in Non Operation Flood, Hilly and Backward Areas: In
continuation of the centrally sponsored scheme to promote dairy development, an
outlay of Rs. 250 crores was made in the 9th Plan. Under this scheme dairy
cooperatives are to be promoted and strengthened in hilly and backward districts of
the country. The focus of the programme is two-pronged of not only giving a thrust to
dairy in these regions, but also sustainable livelihoods to the poor. The Anand
experience of dairy development has been of understanding the importance of value addition, marketing and branding for higher price realization. In the light of the above,
the National Dairy Development Board has launched a Mnemonic Campaign to
develop a common, umbrella brand, with standardization of logo, artwork and retail
outlet design for faster brand recall for these cooperatives. The regional dairy
cooperatives, upon paying a consideration to Mother Dairy, can use the Mother
Dairy brand for selling their milk; however Mother Dairy shall ensure quality control
and inspection of these regional cooperatives. This has been allowed to reap the
mileage of the Mother Dairy brand by smaller, upcoming cooperatives which did not
have the wherewithal to establish their own brands.
1.19 SWOT ANALYSIS OF INDIAN DAIRY INDUSTRY
STRENGTHS
Largest pool of dairy cattle in the world.
Our culture makes us passionate about keeping cows.
Availability of skill for animal rearing in most parts of the country.
Indian breeds of cows represent the worlds largest milk producing herd.
38

 Keeping animal is a household practice.

India is the largest producer of milk in the world.
70% of milk production is done by small and marginal farmers in the country and
is largest employment provider in the non farm sector.
Indigenous breeds of cows show better immunity than crossbred cows.
WEAKNESS
Coexistence of a large portion of useless cattle population with low productivity.
Too much fragmented production of milk.
Farmers have a poor knowledge on costing of milk as most of the costs are
imputed costs.
Land cost for growing fodder is never calculated as it is done on gochar land.
Labour is becoming costlier.
Traces of insecticides, pesticides and antibiotics are common in milk.
Poor knowledge about nutrition and balanced ration for animal.
Poor personal hygiene of farmers and his family and ignorance of clean milk
production also lead to poor quality of milk.
It is not considered as a full time employment and is being carried out by woman
or elderly person at home.
Current practices are not environment friendly.
Poor infrastructure for milk collection, chilling and transportation.
Poor infrastructure in networking of information.
OPPORTUNITIES
Huge demand of milk and milk products in unorganized retail.
High purchasing power of the customer.
Large dairies are feeling the need to invest in backward integration.
Large corporate are looking for developing large herd farms.
More awareness about benefits of cows milk and panchgavya.
39

 Large opportunities in carbon credits and development of non conventional

environment friendly sources of energy through dairying.
Large parts of population (about 25%) are lacto vegetarians, who consider milk as
the only source of animal protein.
THREATS
High rate of urbanization.
No distribution and pricing policy on milk.
No incentive on entering into this sector unlike other food processing and meat
sector.
No fodder policy and it is not clear under which ministry does fodder fall.
No firm plan on breeding/AI/Progeny testing and protection.
No control on unproductive animals growth both for bulls and cows.
No incentive on clean milk production.
Very poor animal insurance policy
Import and export policies on animals, semen, embryos, and dairy products are not
conducive of small and marginal farmers.
1.20 DAIRY INDUSTRY IN INDIA AT A GLANCE
Indian agriculture supports 17.5% of world population with 2 .3% of global land
and 4.2% of water.
Milk production in India has come a long way over the years from a low volume
of 17mn tons in 1951 to around 116 million tonnes in 2010 and is the largest
producer of milk in the world.
In corresponding period, milk production increased from 17 MT to 105 MT.
The livestock sector provides regular employment to 8.5% of the total workforce .
Largest livestock population: 57 % of world buffalo and 16 % of cattle .
About 70% of milk is produced by marginal farmers having 1-4 animals.

40

 The productivity of Indian milch animal is 987 kg./year (world average is 2200
kg.).
Regional contribution to milk production - North (38%), South (20%), East (11%)
and West (31%).
In 2007 around 28 crores* liters of milk was produced from 9 crore milch animals
on per day basis (1 Crore = 10 million).
The marketable surplus was around 50 % and out of the organized sector
processed around 5 crore liter of milk per day with equal handling by cooperatives
and private dairies which is around 30 % of available surplus and which needs to
be doubled up till 2020 so as to match the demands (1Crore = 10 million) .
India has grown by around 3 million MT per annum till 2007 and requires growing
at 5 million MT per day so as to meet the ambitious target of around 170 million
MT by 2020.
There are around 835 organized sector dairies in India being registered under
MMPO with total installed capacity of around 10 crore liters of milk per day.
There has been a negative growth of 6.5 % in indigenous cow's population in last
five years.
There has been a positive growth of 10 % and 35 % respectively in the population
of in buffaloes and hybrid cows.
The current value of milk output from livestock at current prices is around Rs.
240000.00 crores and the value of dairy products market is around 400000.00
crores.
The increase in price of milk at base (Wholesale price index WPI 1993 -94 as 100)
WPI as compared to other commodities may be represented as follows:
Commodity

Primary food articles

Cereals

Pulses

Milk

WPI Dec 2009

288

267

374

263

There has been a decline in annual growth rate of milk production in last two
decades. It was found to be 5.5, 4.21 and 3.5% for 1980s, 1990s and from 2000 2008 respectively.
41

References
1.

B. Parameswara Reddy (2010), Growth and Trend Discerning of Indian Dairy

Industry, Asia Pacific Journal of Social Sciences, Vol.II, No.2, June -December,
pp.105-125.

2.

Dr. Shankar Ambhore (2010), Dairy Co-operative: An Overview, Journal of

Shodh Samiksha Aur Mulyankan, September, Vol. II, Issue No.20, pp. 18-19.

3.

http://bmsproject.weebly.com/uploads/2/4/3/5/2435652/amul-_marketing_
assignment.pdf

4.

http://dairytechindia.in/

5.

http://shodhganga.inflibnet.ac.in/bitstream/10603/2502/10/10_chapter%204.pdf

6.

http://upetd.up.ac.za/thesis/available/etd-06242011-162009/unrestricted/
dissertation.pdf

7.

http://www.authorstream.com/Presentation/arunugale-1533093-traditional-vsnew-generation-cooperatives-dairy-sector/

8.

http://www.dsir.gov.in/reports/ittp_tedo/agro/AF_Animals_Milk_Dairy_Intro.pdf

9.

http://www.idfresearch.org/pdf/Policyen.pdf

10. http://www.iif.edu/data/fi/journal/Fi102/FI102Abs6.pdf
11. http://www.socialsciences-ejournal.org/4.6.Parameswara%20Reddy.pdf
12. IAI VISION 2020 1st White Paper Document for Indian Dairy Industry, 2011.
(Website:

http://www.suruchiconsultants.com/pageDownloads/downloads/14_

White%20Paper.pdf)
13. Jatakia, Tushar D. (2006), Analysis of Productivity of Co-operative Dairy and
Milk Supply Units of Gujarat State, Ph. D. Thesis, Saurashtra University,
Rajkot, November, pp. 119-124. (http://etheses.sauras htrauniversity.edu/id/
eprint/103)
14. Shah, Tushar, Nagarbrahmam D. and Shah, Janat (1992), A Problem in Milk
Pricing by Indian Dairy Co-operative: Key Issues and Present Policies, Indian
Dairyman, Vol. 45, No. 8.

42

15. Manob Kanti Bandyopadhyay (1996), Dairy Co-operative and Rural

Development (With Special Reference to Comparative Study between the Kaira
District Co-operative Milk Producers Union Limited and the Himalayan Cooperative Milk Producers Union Limited, Finance India, Vol.X, No.2, June,
pp.406-411.
16. Mohan, Shrivastava and Jaishankar Singh (2008), Dairy Development in New
Millennium, Deep and Deep Publications, New Delhi.

43