Академический Документы
Профессиональный Документы
Культура Документы
Hassnain Shah
Nadeem Akmal
Muhammad Sharif
Abstract
Value chain analysis plays a key role in understanding the need and scope for systemic competitiveness,
upgrading and achieving efficiency which allows entry into global markets. As a survey paper, it presents
the importance of livestock and dairy sector in the economy of Pakistan and attempts to characterize the
dairy vale chain of Pakistan's Punjab. Livestock accounts for 52.2 percent of agriculture value added. Small
dairy farmers account for 80 percent of the marketed milk. The average farm gate price of milk was 19
https://www.researchgate.net/publication/264384703_CHARACTERIZATION_OF_DAIRY_VALUE_CHAIN_IN_PAKISTAN'S_PUNJAB_A_PRELIMIN… 1/15
4/22/2019 (PDF) CHARACTERIZATION OF DAIRY VALUE CHAIN IN PAKISTAN'S PUNJAB: A PRELIMINARY ANALYSIS
Rs./liter while production cost was 13.4 Rs./liter. The informal sector still holds 90 percent of the market.
Milk collectors margin varies from 1.5 to 2.5 Rs./liter while khoya makers and de-creamers were getting
margins of 10-20 Rs./kg of the produce. Difference in purchased and sale price of UHT milk was about 30
Rs./liter. Demand and supply are the main factors for determining price of milk. There is gap in demand and
supply of milk. Due to the central development role played by the dairy value chain, a more comprehensive
analysis of its operations than presented in this paper is required.
Abstract
Value chain analysis plays a key role in understanding the need and scope for sy
competitiveness, upgrading and achieving efficiency which allows entry in
markets. As a survey paper, it presents the importance of livestock and dairy s
the economy of Pakistan and attempts to characterize the dairy vale chain of Pak
Punjab. Livestock accounts for 52.2 percent of agriculture value added. Sm
farmers account for 80 percent of the marketed milk. The average farm gate
https://www.researchgate.net/publication/264384703_CHARACTERIZATION_OF_DAIRY_VALUE_CHAIN_IN_PAKISTAN'S_PUNJAB_A_PRELIMIN… 2/15
4/22/2019 (PDF) CHARACTERIZATION OF DAIRY VALUE CHAIN IN PAKISTAN'S PUNJAB: A PRELIMINARY ANALYSIS
milk was 19 Rs./liter while production cost was 13.4 Rs./liter. The informal s
holds 90 percent of the market. Milk collectors margin varies from 1.5 to 2.5
while khoya makers and de-creamers were getting margins of 10-20 Rs./kg
produce. Difference in purchased and sale price of UHT milk was about 30
Demand and supply are the main factors for determining price of milk. There
demand and supply of milk. Due to the central development role played by t
value chain, a more comprehensive analysis of its operations than presented
paper is required.
BACKGROUND
Share of livestock in agriculture growth has jumped from 25.3 to 49.6 percen
last decade. Total number of animals increased by 30 percent in 2006 since
Similarly milk production of cows increased by 42 percent and of buffaloe
percent in same period (GOP 2007a). Pakistan is ranked fifth in the world
production, attributable largely to the sheer number of diary animals, it has a ver
1
Paper presented in the first annual conference of the Indian Society of Agri-Business M
"Emerging Trends in Agri-Business Management" 25-27 September, 2008 Bangalore, I
by International Food Policy Research Institute and the Indian Society of Agri-business
presence in the global market (FIAS 2006) and there exist gap in supply and d
https://www.researchgate.net/publication/264384703_CHARACTERIZATION_OF_DAIRY_VALUE_CHAIN_IN_PAKISTAN'S_PUNJAB_A_PRELIMIN… 3/15
4/22/2019 (PDF) CHARACTERIZATION OF DAIRY VALUE CHAIN IN PAKISTAN'S PUNJAB: A PRELIMINARY ANALYSIS
of milk for local consumption (Sharif et al. 2007). Under this scenario the curre
seeks to characterize how activities are performed and to understand how va
created and shared among participants along the dairy value chain. Value
analysis plays a key role in understanding the need and scope for sy
competitiveness, to upgrade and achieve efficiency and hence allows to ent
global markets (Kaplinsky and Morris 2001).
METHODOLOGY
Punjab is the major milk-producing province in Pakistan, was chosen for thi
Punjab province has nearly half (43%) of the livestock inventory including cattl
buffaloes (65%) and account for 53 percent of total milk production (GOP 2
rapid reconnaissance survey was conducted to collect field level info
substantiated with secondary sources. Field level information from the key
producers, milk collectors, Khoya makers, de-creamers, village milk collection
contractors and representatives of some of the milk processing industries (
Noon, Engro, Haleeb, Halla) was collected through individual and group di
during field visits in different milk producing areas of Sargodha, Multan, K
Sahiwal, Okara and Lahore. Volume of milk and price variations along the valu
was estimated. Brief role of different stakeholders involved in dairy sector is de
with the purpose of understanding their organization and functioning so tha
research activities could be planned accordingly.
https://www.researchgate.net/publication/264384703_CHARACTERIZATION_OF_DAIRY_VALUE_CHAIN_IN_PAKISTAN'S_PUNJAB_A_PRELIMIN… 4/15
4/22/2019 (PDF) CHARACTERIZATION OF DAIRY VALUE CHAIN IN PAKISTAN'S PUNJAB: A PRELIMINARY ANALYSIS
There are about 8 million farm households with herd size of 50 million milch
Majority of them (43%) had only 1-2 animals and 28 percent with 3-4 animals.
25 percent of the total milk output is channeled into urban marketing system
dairy farmers account for 80 percent of the marketed milk (GOP 2001, FIAS 200
The average farm gate price of milk was 19 Rs./liter and varies from 16 to 25 Rs
June 2008. Variation in farm gate price was mainly due to geographical l
farmers’ access to different buying agencies, access to urban areas, number of m
animals (fodder availability such as in barani areas) and season
arrangements, services including the advance payments determine the farm gate
With the increase of milk prices and pressurized by higher cost of productio
small scale milk producers sell part of their milk after their household consumpt
family's decision to sell milk and the amount to sell is clearly poverty drive
farmers sell milk only because they have no other source of cash income (Kha
1999, Ali 2007).
To estimate the milk production cost 3 data on the input/feed along with m
activities and labor involved was also collected from farmers. The animal hu
cost 88 (85-90) percent and decreases with the increase of animal heads. It in
mainly the feeding 4 cost, 67 (55-80) percent, labor 30 (18-41 ) percent and vet
percent. The other cost was cost of milking by hand (6%), electricity/fuel (
depreciation (5 percent). Including all these cost of milk were calculated at 13.4
with an average milk production of 8.4 liters per animal and heard compositio
milking buffalo and cow.
The milk supply chain/system can be classified into two groups.
It was assessed during the reconnaissance survey that if taken into account th
https://www.researchgate.net/publication/264384703_CHARACTERIZATION_OF_DAIRY_VALUE_CHAIN_IN_PAKISTAN'S_PUNJAB_A_PRELIMIN… 5/15
4/22/2019 (PDF) CHARACTERIZATION OF DAIRY VALUE CHAIN IN PAKISTAN'S PUNJAB: A PRELIMINARY ANALYSIS
Milk Collectors/Dodhies
5
The traditional milk collectors, known as dodhies , play the dominant mid
between millions of subsistence and commercial dairy farmers and consumers (B
2
The companies categorize milk collection in two seasons, flush and lean. During flush season, since there is a lot of m
down and during the lean season, milk production goes down and prices of milk increase.
3
These estimates were done for the small market oriented farmers with 3-7 milking animals and having mix crop and livestock farming.
4
Fodder, wheat straw, cotton seed cake/balance feed, etc including cost of production of fodder i.e. input, irrigation cost along with the la
for producing fodder at own farm
5
While the exact number of dodhis is not known, Pakistan Dairy Development Company (2006) notes that about one million dodhis are at work in Pakistan
The medium scale milk collectors supply milk to a variety of milk users
bakeriesm khoya makers, retail shops and urban consumers at their door
Skimming of milk was also performed according to the demand or for mixing m
sold to the urban consumers. The large dodhies purchase milk from small dhodi
also directly from farmers and supply to big cities. They had different clients an
long term contract. Skimming was also done according to the requiremen
demands.
https://www.researchgate.net/publication/264384703_CHARACTERIZATION_OF_DAIRY_VALUE_CHAIN_IN_PAKISTAN'S_PUNJAB_A_PRELIMIN… 6/15
4/22/2019 (PDF) CHARACTERIZATION OF DAIRY VALUE CHAIN IN PAKISTAN'S PUNJAB: A PRELIMINARY ANALYSIS
There is huge difference between purchase and sale price of these urban sup
However the difference in margin per liter remains very small between small a
dodhies due to high collection and transportation costs. But large volume (250
liters/day) results in high profit. In the informal milk supply chain the
increasing as processors had expanded its milk collection system to the remote
The demand pull factors had increased the milk prices for the dodhies while
their margins resulting in adulteration and malpractices. Mixing the skimmed
and water are the main practices. Absence of cold chains and cooling tanks (chi
the informal system had also resulted in the mixing of chemicals (unhygienic
preservation particularly when transported for long distances.
Khoya Makers
A large number of khoya makers are also working in rural areas where ch
(sugarcane leaves, bushes etc) is available. They purchase milk from farm
dodhies. Small khoya makers collect milk at their own in the morning and ma
afterwards at their house/farm and had only one burner (bhatti). Large players ha
than one points. The product is sold in the city to the confectioners/bak
sometimes at khoya shops.
The conversion factor of milk for khoya is 5:1 i.e. it takes five kg buffalo milk
one kg khoya. The cost price of khoya ranges between 90 to 97 Rs/kg and i
labor charges and fuel charges 5 Rs/kg each). The remaining is the cost of m
present it is being sold in the small towns at Rs. 100 to Rs. 110 while it is sup
other major cities including Lahore and Peshawar between Rs. 110 to Rs. 120
Small khoya producers also sell their produce at khoya shops in cites who get a
https://www.researchgate.net/publication/264384703_CHARACTERIZATION_OF_DAIRY_VALUE_CHAIN_IN_PAKISTAN'S_PUNJAB_A_PRELIMIN… 7/15
4/22/2019 (PDF) CHARACTERIZATION OF DAIRY VALUE CHAIN IN PAKISTAN'S PUNJAB: A PRELIMINARY ANALYSIS
Dodhi Village
16-25 Rs. /Liter 17-26 R
Khoya Makers
16-22 Rs. /Liter
Local C
16-26 R
De-creamers Backers
service charges 2 Rs./Liter
18-26 Rs. /Liter
Urban Retailers/Hotels
18-27 Rs. /Liter
Urban Consumers
20-35 Rs. /Liter
In the formal/processed/packed milk supply chain the key players are Coop
(Halla/Idara-e-Kissan only), Private Dairy Sector (National Dairy Compa
https://www.researchgate.net/publication/264384703_CHARACTERIZATION_OF_DAIRY_VALUE_CHAIN_IN_PAKISTAN'S_PUNJAB_A_PRELIMIN… 8/15
4/22/2019 (PDF) CHARACTERIZATION OF DAIRY VALUE CHAIN IN PAKISTAN'S PUNJAB: A PRELIMINARY ANALYSIS
Haleeb, Noon) and Multinational (Nestle only). There are 24 units processing f
well as dry milk in private and corporate sector in the country (GOP, 2007b). T
estimated installed processing capacity of 2.42 billion liter per annum. The maj
of the country includes Nestle, Nirala, Halla, Noon, Milac, Dairy Bell, Da
Premier, Haleeb, Prime, K&K, Engro and Pak Army. The industry i
concentrated in Punajb with only 2 units in Sindh. Dairy industry processed 992
liters of fresh milk of buffalo and cow and 12.5 million kg of dry milk durin
2005-06. Dairy industry is producing various products namely: UHT, Low fat,
Pasteurized, flavored, Powder and Condensed milk, cream, Yogurt and But
Pakistan fresh milk processed is 3.23 percent of the overall net milk producti
buffalo and cow in the country where the share of large units is 99 percen
2007b).
Presently most of the processing industries has increased capacity for example
expanded from 1.3 to 2.4 million liters and would further increase to 3.0 millio
day, Nurpur Noon from 0.15 to 0.25 million liters and now installing anoth
plant of 0.2 million liters capacity, HFL from 0.9 to 1.8 million liters during th
years. The Cooperative system has not increased its capacity during the recent pa
Although the capacity of the major players in the industry has almost doubl
huge gap was found in the full capacity and actual processing. When averaged f
flush (70-80%) and lean (30-40%) period, the industry was running at its ha
capacity for whole year. Along with the expansion of processing capacity and c
network, competition between the industry has increased. The wet market is als
a tough competition to the industry. Resultantly the milk prices are increasing
the remote areas.
The data to calculate the margins in the formal sector were not provided how
https://www.researchgate.net/publication/264384703_CHARACTERIZATION_OF_DAIRY_VALUE_CHAIN_IN_PAKISTAN'S_PUNJAB_A_PRELIMIN… 9/15
4/22/2019 (PDF) CHARACTERIZATION OF DAIRY VALUE CHAIN IN PAKISTAN'S PUNJAB: A PRELIMINARY ANALYSIS
difference in purchased price and sale price of UHT milk was about Rs. 30 per
Garcia et al 2003, has reported that margins in the formal sector in the UHT m
amount to US$ 0.18 to 0.36 per kg fresh milk (6 percent fat milk). The val
extracted cream lies between US$ 0.05 and 0.09 per kg of fresh milk with a 6
fat content.
Milk collection system for processing sector varies from company to company.
speaking it can be categorized into three groups: direct/self, indirect and contrac
It can be defined as the collection of milk by the industry from the farmers di
employing its own personals through establishing milk collection net work in th
VMCC and sub-centres. In case of Cooperative (Halla) Village Milk Collection
(VMCI) works as sub-centre agent. The VMCI was charging up to Rs. 2 per
collection and transportation to the VMCC. The Noon Dairies gave only 0.25
incentive to its sub-centre agent as transportation cost above the price offe
VMCC. Haleeb has also started direct milk collection system just recen
incentive structure of Nestle for its sub-centre agent varies from 1700-7800 Rs
with distance (2-4 Km) from VMCC and volume of milk (75 to above 250
supplied.
VMCC are established by the company. VMCC agent gets pay and other incen
meeting the targets. Some companies pay commission to VMCC agent on milk
Milk is supplied by different sources and VMCC incharge/agent is responsib
and purchase quality milk only. At Halla VMCC no direct purchase of milk is
all the milk is to be collected through the VMCI. Milk from the VMCC is tran
the company or contracted vehicles to the plant directly or through PHE to get it
long travel.
6
Best farm practices include, free water acces s, vaccination and de-worming, balance feeding, artificial Inseminat ion (AI), calf rearing sy
record keeping and farm mechanization
https://www.researchgate.net/publication/264384703_CHARACTERIZATION_OF_DAIRY_VALUE_CHAIN_IN_PAKISTAN'S_PUNJAB_A_PRELIMI… 11/15
4/22/2019 (PDF) CHARACTERIZATION OF DAIRY VALUE CHAIN IN PAKISTAN'S PUNJAB: A PRELIMINARY ANALYSIS
Processing Plant
16-26 Rs. /Liter
Consumers
UHT 48-56 Rs. /Liter, Pasteurized 35 Rs. /liter
Under the indirect milk collection system a third party is involved to collect an
milk to the company. Main players involved in the indirect milk collection are
and mini suppliers. Dodhies supply milk at the VMCC and get the base price. T
suppliers collect milk at their own collection points and vehicle collects milk
point after testing. Mostly mini suppliers have only milk tanks without any c
use ice for getting it cool. They are given price margin above the prices being of
VMCC of dairy company in that locality. Normally the mini suppliers offer sim
and fat or TS criteria to the farmers like other VMCC in the area. However the c
has no bindings on the mini supplier regarding the purchase price from farmers.
https://www.researchgate.net/publication/264384703_CHARACTERIZATION_OF_DAIRY_VALUE_CHAIN_IN_PAKISTAN'S_PUNJAB_A_PRELIMI… 12/15
4/22/2019 (PDF) CHARACTERIZATION OF DAIRY VALUE CHAIN IN PAKISTAN'S PUNJAB: A PRELIMINARY ANALYSIS
industry (at its processing plant by own transport). They get higher prices
Rs./Liter) than prices paid to the farmers along with the allowance for transp
Some contractors are also given milk tanks, chillers etc and partial advance paym
https://www.researchgate.net/publication/264384703_CHARACTERIZATION_OF_DAIRY_VALUE_CHAIN_IN_PAKISTAN'S_PUNJAB_A_PRELIMI… 13/15
4/22/2019 (PDF) CHARACTERIZATION OF DAIRY VALUE CHAIN IN PAKISTAN'S PUNJAB: A PRELIMINARY ANALYSIS
7
The prices vary from contractor to contractor depending upon the area of milk collection, milk price in that area and volume of milk sup
Price Mechanism
Demand and supply are the main factors for determining/establishing the pu
price of milk in different milk producing areas. At producers level the distance
urban areas along with the infrastructure affects the price of milk. The pres
VMCC also affects the milk price due to higher milk demand and competition
the processing and wet market. However the price offered by the wet marke
major force behind the milk price offered at VMCC. The price of powder m
international market also plays its role in establishing the purchase price of milk
industry.
https://www.researchgate.net/publication/264384703_CHARACTERIZATION_OF_DAIRY_VALUE_CHAIN_IN_PAKISTAN'S_PUNJAB_A_PRELIMI… 14/15
4/22/2019 (PDF) CHARACTERIZATION OF DAIRY VALUE CHAIN IN PAKISTAN'S PUNJAB: A PRELIMINARY ANALYSIS
The prices offered by different dairy industries remain almost same within sam
However prices vary from area to area. Under the direct collection system pric
VMCC remained in the range of 21 to 24.5 Rs./liter during 2007-08 for 14 TS o
The prices for contractors and mini suppliers involve additional incentives for
and transportation charges paid. The contractors and mini suppliers were gettin
to 2.0 Rs./liter higher than the prices offered to farmers.
Conclusion
A snapshot of dairy value chain of Pakistan’s Punjab has been presented in this
Milk production in Pakistan has increased by 35.6 percent from 1996 to 2006 m
a growth in the number of dairy animals. Traditional dairy value chains have hig
share backed by strong consumer preferences and low price of for fresh milk
face of the supply demand gap, it is likely that domestic demand will absorb a si
portion of any increase in milk supply. The processing sector is expanding its
and network. Increasing competition among the market actors would result ris
price. Although large farmers would get higher margins due to economies of sc
more bargaining power yet the small farmers, who are providing 80 percent of
would also be benefited as the future of the industry lies upon this segment. The
issue is still unresolved as most of the milk supplied in the formal sectors is als
https://www.researchgate.net/publication/264384703_CHARACTERIZATION_OF_DAIRY_VALUE_CHAIN_IN_PAKISTAN'S_PUNJAB_A_PRELIMI… 15/15