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Volume 2, Number 4, October December’ 2013 ISSN (P):2319-9032, (O):2319-9040 International Journal of Logistics & Supply Chain Management Perspectives © Pezzottaite Journals. 791 | Page OPPORTUNITIES AND CHALLENGES IN INDIAN DAIRY INDUSTRY SUPPLY CHAIN: A LITERATURE REVIEW Rajeev Kumar 1 Dr. Raj Kiran Prabhakar 2 ABSTRACT The Indian dairy industry has been through an evolution right from the British era until today. It has come a long way over the years from a milk production volume of 55.7 million tons in 1991-92 to 127.3 million tons in 2012. Steadily and firmly, it has cruised to become numerouno in the list of milk producing countries and the smallholder milk producers have scripted this success story. Today, the Indian Dairy industry stands at a mammoth size of US$ 70 billion. Given the highest mulch bovine population of 115.487 million in the world, India exhibits tremendous potential to further strengthen its position in the world dairy market. The operation flood program promoted and implemented by the National Dairy Development Board (NDDB) has been instrumental in bringing about a white revolution in India. Changing lifestyle, feeding habits and urban culture has somewhat effected the transition of the Indian dairy Industry into a more of a demand driven, highly diversified and exciting business proposition. Currently, the Indian dairy market is growing at an annual rate of 7 per cent. Despite the increase in production, a demand supply gap has become imminent in the dairy industry due to the changing consumption habits, dynamic demographic patterns, and the rapid urbanization of rural India. This means that there is an urgent need for the growth rate of the dairy sector to match the rapidly growing Indian economy. The paper is an attempt to identify various prospects and challenges for Indian dairy industry supply chain and identifying various opportunities for governmental organizations to provide critical standard infrastructures that will improve the efficiency of dairy supply chain management. This paper also tries to finds out, what should be the objective for Indian dairy Industry to overcome this global crisis faced by the country, and what should be the evolving strategies adopted by Indian diary industry to have competitive edge on the global players in diary market. KEYWORDS Indian Dairy Industry, Supply Chain Management, Infrastructure, National Dairy Development Board etc. INTRODUCTION Indian Dairy Industry The Indian dairy industry has been through an evolution right from the British era till today. It has come a long way over the years from a milk production volume of 55.7 million tons in 1991-92 to 127.3 million tons in 2012. Steadily and firmly, it has cruised to become numerouno in the list of milk producing countries and the smallholder milk producers have scripted this success story. Today, the Indian Dairy industry stands at a mammoth size of US$ 70 billion. Given the highest mulch bovine population of 115.487 million in the world, India exhibits tremendous potential to further strengthen its position in the world dairy market. The operation flood program promoted and implemented by the National Dairy Development Board (NDDB) has been instrumental in bringing about a white revolution in India. Changing lifestyle, feeding habits and urban culture has somewhat effected the transition of the Indian dairy Industry into a more of a demand driven, highly diversified and exciting business proposition. The country accounts for more than 15 per cent of world’s total milk production and is also the world’s largest consumer base of dairy products, consuming almost all of its own milk production. Dairying has been regarded as one of the activities that could contribute to alleviating the poverty and unemployment especially in the drought prone and rainfed areas. In India, about threefourth of the population live in rural areas and about 38 per cent of them are poor. Therefore among these people, as well as the large vegetarian segment of the country’s population, dairy products provide a critical source of nutrition and animal protein to millions of people in India. Prior to year 2000, India was not noticed by most international dairy companies, as the country was neither an active importer nor an exporter of dairy products. Currently, the Indian dairy market is growing at an annual rate of 7 per cent. Despite the increase in production, a demand supply gap has become imminent in the dairy industry due to the changing consumption habits, dynamic demographic patterns, and the rapid urbanization of rural India. This means that there is an urgent need for the growth rate of the dairy sector to match the rapidly growing Indian economy. 1 Research Scholar, Faculty of Management Studies, Banaras Hindu University, Uttar Pradesh, India, [email protected] 2 Assistant Professor, Faculty of Management Studies, Banaras Hindu University, Uttar Pradesh, India, [email protected]

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Page 1: 1059-4441-1-PB

Volume 2, Number 4, October – December’ 2013 ISSN (P):2319-9032, (O):2319-9040

International Journal of Logistics & Supply Chain Management Perspectives © Pezzottaite Journals. 791 | P a g e

OPPORTUNITIES AND CHALLENGES IN INDIAN DAIRY INDUSTRY SUPPLY CHAIN:

A LITERATURE REVIEW

Rajeev Kumar1 Dr. Raj Kiran Prabhakar2

ABSTRACT

The Indian dairy industry has been through an evolution right from the British era until today. It has come a long way over the

years from a milk production volume of 55.7 million tons in 1991-92 to 127.3 million tons in 2012. Steadily and firmly, it has

cruised to become numerouno in the list of milk producing countries and the smallholder milk producers have scripted this

success story. Today, the Indian Dairy industry stands at a mammoth size of US$ 70 billion. Given the highest mulch bovine

population of 115.487 million in the world, India exhibits tremendous potential to further strengthen its position in the world

dairy market. The operation flood program promoted and implemented by the National Dairy Development Board (NDDB)

has been instrumental in bringing about a white revolution in India. Changing lifestyle, feeding habits and urban culture has

somewhat effected the transition of the Indian dairy Industry into a more of a demand driven, highly diversified and exciting

business proposition. Currently, the Indian dairy market is growing at an annual rate of 7 per cent. Despite the increase in

production, a demand supply gap has become imminent in the dairy industry due to the changing consumption habits, dynamic

demographic patterns, and the rapid urbanization of rural India. This means that there is an urgent need for the growth rate of

the dairy sector to match the rapidly growing Indian economy.

The paper is an attempt to identify various prospects and challenges for Indian dairy industry supply chain and identifying

various opportunities for governmental organizations to provide critical standard infrastructures that will improve the

efficiency of dairy supply chain management. This paper also tries to finds out, what should be the objective for Indian dairy

Industry to overcome this global crisis faced by the country, and what should be the evolving strategies adopted by Indian

diary industry to have competitive edge on the global players in diary market.

KEYWORDS

Indian Dairy Industry, Supply Chain Management, Infrastructure, National Dairy Development Board etc.

INTRODUCTION

Indian Dairy Industry

The Indian dairy industry has been through an evolution right from the British era till today. It has come a long way over the years

from a milk production volume of 55.7 million tons in 1991-92 to 127.3 million tons in 2012. Steadily and firmly, it has cruised to

become numerouno in the list of milk producing countries and the smallholder milk producers have scripted this success story.

Today, the Indian Dairy industry stands at a mammoth size of US$ 70 billion. Given the highest mulch bovine population of

115.487 million in the world, India exhibits tremendous potential to further strengthen its position in the world dairy market. The

operation flood program promoted and implemented by the National Dairy Development Board (NDDB) has been instrumental in

bringing about a white revolution in India. Changing lifestyle, feeding habits and urban culture has somewhat effected the

transition of the Indian dairy Industry into a more of a demand driven, highly diversified and exciting business proposition.

The country accounts for more than 15 per cent of world’s total milk production and is also the world’s largest consumer base of

dairy products, consuming almost all of its own milk production. Dairying has been regarded as one of the activities that could

contribute to alleviating the poverty and unemployment especially in the drought‐prone and rain‐fed areas. In India, about

three‐fourth of the population live in rural areas and about 38 per cent of them are poor. Therefore among these people, as well as

the large vegetarian segment of the country’s population, dairy products provide a critical source of nutrition and animal protein

to millions of people in India.

Prior to year 2000, India was not noticed by most international dairy companies, as the country was neither an active importer nor

an exporter of dairy products.

Currently, the Indian dairy market is growing at an annual rate of 7 per cent. Despite the increase in production, a demand supply

gap has become imminent in the dairy industry due to the changing consumption habits, dynamic demographic patterns, and the

rapid urbanization of rural India. This means that there is an urgent need for the growth rate of the dairy sector to match the

rapidly growing Indian economy.

1Research Scholar, Faculty of Management Studies, Banaras Hindu University, Uttar Pradesh, India, [email protected] 2Assistant Professor, Faculty of Management Studies, Banaras Hindu University, Uttar Pradesh, India, [email protected]

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The Structure of the Indian Dairy Industry

The Indian dairy industry is mainly constituted of 22 state milk federations, 110,000 dairy cooperative societies involving more

than 12 million milk producers. There are also some major private players in the field which further improved the dairy sector of

the country namely; Amul, Britannia, Nestle, Mother dairy and Nandini etc., to name a few. The home company "Amul" is ranked

18thin the world (IFCN, 2007), Fonterra of New Zealand being the no. one player in this field.

According to NDDB, the dairy cooperative network includes 177 milk unions operating in over 346 districts and covering 1,

33,349 village level societies is owned by around 13.9 million farmer members of which 3.9 million were women. The Indian

dairy industry contributes about 69 per cent to the entire bulk of output from the livestock sector. The dairy sector has grown

robustly in the past years and has increased the per capita availability to around 256 grams.

Dairy cooperatives account for the major share of processed liquid milk marketed in the country. Milk is processed and marketed

by 170 milk producers' cooperative unions, which federate into 22state cooperative milk marketing federations. The organized

sector still remains a minor stakeholder and handles about 20 per cent of the milk whereas the unorganized sector of the dudhiyas

and mithaiwallas still controls about 80 per cent of the industry. The structure of Indian dairy industry, as mentioned in Figure 1,

further reveals that organized sector of Indian dairy industry comprise of private dairies, various Milk Cooperatives Societies and

Government dairies.

Figure-1: Structure of Indian Dairy Industry (Source: Technopak analysis, 2010)

Sources: Authors Compilation

Share of Processing Food Category in India

The food processing sector in India covers a wide range of food items such as meat and meat products, fish and fish products,

fruits and vegetables, vegetable oils and fats, milk and milk products, grain milling, animal feed, confectionery products, bakery

products, sugar processing, among others In food categories, major contribution comes from dairy industry which is 30 per cent

which is followed by grain based product with 26 per cent and edible oil contribute 9 per cent which is followed by pulses, spices,

fruits and vegetables, sugar and sugar based products as shown in Graph-1.

Graph-1: Share of Processing Food Category in India (Source: MOFPI 2009)

Sources: Authors Compilation

Indian Dairy Industry

Organised

20%

Private Dairies (532)

Cooperatives

Societies(254)

Government

(46)

Unorganised

80%

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Indian Dairy Exports by Product Types

India exported more than 50 percent of its total dairy products shipments to the United States, Bangladesh, U.A.E., China, Egypt,

and Singapore during 2008-09. In Asia, neighboring countries in South Asia and the Middle East are the main buyers.

Indian imports of dairy products are not substantial in volume. The volume of imports during 2008-09 was approximately 9,130

tons. More than 80 per cent of dairy imports are butter and fats, whey and products, milk and cream, milk powders, and baby

foods. However, increased lean-season milk supply shortages and rising demand for full-cream milk and milk fats are expected to

lead to a rise in future imports of non-fat dried milk (NFDM) and butter oil.

Graph 2 shows that the percentage of dairy product which is exported to others countries where milk powder and baby food

accounts for the largest share which half of total share of dairy products that is followed by butter and other fat products with 21

per cent followed by milk ice cream and casein with 11 per cent. The cheese and whey products consist of 4 per cent and 3 per

cent respectively.

Graph-2: Indian Dairy Exports by Product Types (Source: GTIS, Technopak analysis, 2010)

Sources: Authors Compilation

According to IUF (Indian union of food) dairy industry research (2010), India accounts for 15 per cent of world dairy production.

In India, 22 are the state cooperatives of total 1100000 milk cooperatives. Dairy industry employs around 90 million workforces,

which constitutes around 7.4 per cent of the total population. Of the total production, per capita consumption is 250g/day and the

exportable quantity was more than 70000 tons as per the figure of 2008-09.

The figures further presents that approximately 40-50 per cent of the total milk production (vide Table 1). Other data for the year

2011-12 the annual milk production is 127.3 million tons (NDDB, 2011-12*).

Table-1: Key Statistics of India’s Dairy Industry

Annual Milk Production (2011-12)1* 127.3 Million Tones

Annual Export Volume (2008‐9)2 70,790 Tones

Share of world dairy production (2010)3 15%

Milking herd size 5 115.5 million

Number of milk producers’ cooperative unions 170

Number of local dairy cooperatives 110000

Number of state cooperatives 6 22

Per capita consumption (Drinking milk) 7 250g/day

Estimated percentage of dairy farmers in organized sector 8 40‐50%

% of dairy produce consumed by unorganized sector 9 65%

Dairy industry workforce 10 75 million women/ 15 million men

Sources: IUF Dairy Industry Research (2010),

Note: *http://www.nddb.org/English/Statistics/Pages/Milk-Production.aspx

Milk Processing: A Global Scenario

The information given in Table 2 demonstrates a comprehensive list of top 21 milk processors across the globe based on the

quantity of milk intake in million tons and the relative market share of the various milk producing brands around the globe. As per

the list Fonterra of New Zealand stand on the top followed by most of the US and European Brands; however, among the Asian

brands China and India secures 15 and 18 place respectively. This indicates that these brands possess the immense potential and

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require a thorough overhaul in the process to streamline their operations so that they can outperform in future. This calls for a

thorough research, which study the core part of the milk processing organization that adds value i.e., supply chain.

Table-2: List of Top 21 Global Milk Processors

Rank Company name Country

Milk in take

(million tons)

Market share in %of

world milk production

1 Fonterra New Zealand 20.5 3.00%

2 Dairy Farmers of America USA 17.1 2.50%

3 Nestle Switzerland 14.9 2.20%

4 Dean Foods USA 11.8 1.70%

5 Royal Friesland Campina The Netherlands 10.3 1.50%

6 Lactalis France 10.2 1.50%

7 Arla Foods Denmark/Sweden 8.7 1.30%

8 Danone France 8 1.20%

9 California Dairies Inc. USA 7.7 1.10%

10 Kraft Foods USA 7.5 1.10%

11 Nordmilch& Humana (DMK) Germany 6.7 1.00%

12 Saputo Canada/USA 6.2 0.90%

13 Land O' Lakes Inc. USA 5.8 0.90%

14 Sodiaal & Entremont alliance France 4.2 0.60%

15 Mengniu group China 3.8 0.60%

16 Parmalat Italy 3.7 0.60%

17 Yili group China 3.7 0.50%

18 Amul India 3.4 0.50%

19 Northwest Dairy Association USA 3.3 0.50%

20 20 Schreiber Foods Inc. USA 3.3 0.50%

21 21 Murray Goulburn Australia 3.2 0.50%

Grand Total

163.9 24%

Sources: IFCN Dairy Conference (2011)

SUPPLY CHAIN OF INDIAN DAIRY INDUSTRY

Supply chain in Indian dairy industry starts from supplying inputs for dairying in form of fodder, animal feed plant, vetenery aids

for the animal (cattle and buffalos), after supplying feed and fodder to the mulch animal milk is taken out from the mulching

animal on the daily basis by the dairy farmers (large, medium and small scale farmers) which afterward is collected by the milk

collection Centre (various milk cooperatives societies). Then the milk collected by the cooperative societies are sent to the dairy

plants where chilling of milk, processing and packaging of milk and milk product, transportation of milk and milk product is

carried out.

Figure-2: Supply Chain of Indian Dairy Industry (Source: Technopak Analysis, 2010)

Sources: Authors Compilation

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The transportation of chilled milk and milk products from one place to another is done through the means of refrigerated vans, or

insulated milk tankers vans of private, government and cooperatives societies.

The finally processed milk and milk products are transported to various retails outlets, supermarkets, and to retails markets from

where the processed milk and milk products finally reaches to their end customers which is shown in Figure 2.

LITERATURE REVIEW ON PROBLEM AND ISSUES RELATED TO SCM PRACTICES IN INDIAN DAIRY INDUSTRY

There are various problems, which are related to supply chain management practices, which are attached with Indian dairy

industry. Some of important findings based on the literature available on issue and problems of Indian dairy industry are compiled

in table 3.

Table-3: Crux of Literature related with Supply Chain Practice

Author Description

Gyan Prakash

(2011)

find that the Indian agro industry is fraught with many difficulties such as inefficiency, deterioration of

perishable food items, unsatisfactory quality of commodities, malpractices in weights and measures,

mismatch of demand and supply, long waiting times, exorbitant corruption, rude behavior of shopkeepers

and poor service delivery. Streamlining of PDS processes will result in increased operational efficiency,

thereby reducing transit losses and pilferages.

Technopak

(2010)

report on Indian dairy industry shows that:

Lack of proper cold chain facilities,

Gaps in information,

Lack of trained and skilled workers,

Logistics,

Lack of infrastructure,

leads to revenue and milk losses.

FAIDA report of

the Confederation

of Indian Industry

(CII) and

Mckinsey and

Company (2006)

Both the report shows that there is great potential for development of food processing and other agro

industry. However, India’s agro industry development is today plagued by tough challenges, including

costly raw material, supply chain inefficiencies, and market demand constraints (Srivastava and Patel,

1994; Goyal, 1994; CII–Mckinsey, 1997).

Rangasamy&

Dhaka,

(2007,2008)

Show that the cost of collections and the chilling respectively with the dairy cooperative societies and the

bulk milk coolers keeps on rising due to low milk procurements, which further increases the cost of

transportation, and processing.

Burki and Khan

(2008)

Analyzed the effects of producer’s participation in supply chain networks on productive/technical

efficiency and found that building supply chain has positive effect on productive efficiency of the small

dairy farmers of small dairy farmers.

Brahmaprakash

and Dinesh

(1997)

In their study on infrastructural requirements for establishment of development and operation of agro-

processed, industries in rural areas opined that lack of market information systems, timely and adequate

financial support and post-harvest technology as the major problems to realize the rural projects in India.

Roy (1997) Opined that lower capacity utilization of the agro-based industries was reasoned by lack of infrastructural

facilities such as lack of transportation, storage and technology for post-harvest handling. He also opined

that the lack of integrated network between the producer, farmer and the processor as indirect problem of

agro-based industries.

Bhalla (2001) discussed the challenges of the dairy industry in terms of quality which includes Quality Management

Systems (QMS), Total Quality Management (TQM), ISO-9000 series, food safety standards,

Environmental Management System (IS0: 14000), quality of raw milk, combating adulteration of milk,

and upgrading quality of testing.

Kulkarni (1997) opined that the lack of sufficient milk collection of cooperatives in the rural areas, quality testing,

inconvenient timings of milk collection, spoilage during the rains, and warm seasons and inadequate

extension services were some of the lacunae in milk collection from the producers.

Sources: Authors Compilation

OPPORTUNITIES AND CHALLENGES IN INDIAN DAIRY INDUSTRY

The entire dairy Industry in India has its base in the small holders and marginal farmers. These prime stakeholders of the entire

value chain of milk are deprived of minimum resources of land, labor, capital etc. The other issues and challenges in Indian dairy

industry at the grass root levels are given below:

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Issues and Challenges at the Small holder Level

The entire dairy Industry in India has its base in the small holders and marginal farmers. These prime stakeholders of the entire

value chain of milk are deprived of minimum resources of land, labour, capital etc. The other constraints at the grass root levels

are:

Inadequate feeding of animals: With burgeoning human population, there is an increasing pressure on the land

resources for cultivation of food crops and fodder crops are not preferred. This apart the small holders are not able to

feed the animals with balanced diet of concentrates and roughages due to lack of financial support.

More disease incidence: Small holders who are not members of cooperative societies often get deprived of good

animal health care facilities in terms of routine vaccination and prophylactic disease prevention measures. Financial

constraints generally inhibit these farmers’ access to the organized veterinary services and they still rely on the quacks

and conventional treatment methods.

Low genetic potential of animals: The stock of animals even if crossbred has less percentage of exotic genes, which

lowers their milk production. There is indiscriminate artificial insemination without proper record keeping which leads

to repeated inbreeding and decreased production potential of the animals.

Lack of chilling capacities: The farmers having high yielding varieties of the cattle and buffalo have a different issue

all together. These farmers milk their animals 2-3 times in the day and every time they have to carry this milk to the

distant collection centers where there is a cooling facility or else the milk goes waste if there is delay.

Exploitation of farmers: Those farmers who do not conform to any of the cooperative societies get exploited at the

hands of the contractors of the private dairies with regard to payment of exact dues as per the fat content of the milk.

High production costs: Compared to the amount of efforts and maintenance costs being involved in the production of

milk, the farmers do not get remunerative prices due to low market prices and lack of elasticity in the prices of milk.

Delayed payment of dues: The farmers are not only paid less according to the quality of milk but also their payment is

delayed from time to time. This comes in line with the sick and non-performing milk cooperative unions, which pass on

the perils of mismanagement and marketing losses to these poor farmers.

Issues and Challenges at Collection Level

Milk base mainly consisting of small holders: The majority of dairy farmers being small and marginal the average

holdings of animal come to around 5 animals per farmer. This brings in the logistical challenge of collecting milk from

each farmer twice on a daily basis. The farmer usually loses much time waiting in the queue to deposit their milk at the

collection centers thus resulting in loss of networking mandays.

Involvement of too many intermediaries: Keeping in view the large no of intermediaries involved in the milk

collection procedures the milk loses its quality in the process. This leads to increased microbial contamination and

fluctuation in the volume of the milk before reaching the collection centers and bulk coolers.

Gaps in information: In this era of information technology, the dairy sector is unorganized with respect to the support

information. There is no record of the milk, which is being collected from different milk producers at the collection

centers. If anything goes wrong in terms of the discovery of zoonotic disease organisms at a later stage there is no scope

of backtracking to the farmer. Though there has been a success in this regard with the e-governance project being

implemented in AMUL with the help of IIM Ahmadabad, it has not been replicated by all the cooperative societies in

the sector.

Absence of a screening system: Milk before being pooled up at the collection center from various farms and animals

are not subjected to any screening for the zoonotic diseases and adulterants and contaminants in many of the

cooperative societies. This often results in spoilage of the entire batch of the pooled milk if one of the milk cans goes

undetected. Linking back to source as such is not possible in the absence of a database.

Lack of Infrastructure: When there is a thrust on increasing the milk production, then there should be ample amount

of facilities to handle it. There is a dearth of required infrastructure of chilling plants and bulk coolers due to which so

much of milk goes waste due to spoilage.

Manipulation of the quality of milk by the farmers: The farmers not being able to get fair and remunerative prices

for the milk often tend to give adulterated milk at the collection centers. They often add additives to forge the fat

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content of the milk and get better price for the lot. Addition of vegetable fat, animal fat, starch, etc. has been quite

frequent among the farmers to alter the fat and solid content of the milk.

Issues and Challenges at the Processing Level

Seasonality of production and fluctuating supply: India being a tropical country renders a hot and humid climate for

the animals and thus fluctuations in the milk production. There is a flush season in the cooler parts of the year whereas

the production goes down in the warmer months. Thus, at times, the surplus of milk exceeds the processing capacity and

milk goes waste whereas on the other hand the processing capacity goes underutilized in the lean period.

Absence quality standards: There is absence of stringent quality standards like HACCP, Codex etc. in most of the

cooperative milk unions, which bars Indian dairy products for exports into the foreign market.

Adulteration and Food safety: The most important aspect of milk processing is its purity and wholesomeness. There

has been an instance of cheap substitution of skimmed milk powder with below standard substances, which is hazardous

to health. Even though there are certain Food safety Acts but still every other day we get to know about various tankers

of spurious milk being apprehended.

Lack of trained and skilled workers: There is lack of trained and skilled workers who can handle the milk processing

operations hygienically and safely.

Issues and challenges at the Storage and Logistics Level

Lack of cold storage facilities: Milk being a highly perishable product requires be processing or cooling as soon as

possible after milking, to prevent spoilage and contamination. However to ensure this there is a need of refrigerated

milk silos for storage which are not present at the village levels.

Gap in the cold chain and transport facilities: There are long distances to be covered to reach bulk milk coolers from

the collection center. There is a shortage of refrigerated vans and insulated tankers for ferrying the chilled milk to the

processing plants

Issues and Challenges at the Co-operative Level

Less number of member farmers: The cooperative model though successful has not been able to include all the

farmers into the fold. There are still many potential farmers who use the informal channel of milk sale and delivery.

Lower participation in the decision making process: There is huge government interference in many of the co-

operative federation activities, which leads to lesser say of the farmers in many crucial issues.

Losses: Poor management of the some of the village cooperatives have led to huge losses in the trade due to which

farmers have lost faith in these entities.

Low prices of milk: The co-operatives declare low prices for procuring milk from the farmers, which benchmarks the

prices and forces other players to sell milk at the same prices.

Inefficient services: The cooperatives have also failed in many parts of the country in providing the basic inputs in

terms of quality feed, exotic germplasm and veterinary services.

Insufficient Infrastructure: Some of the co-operatives are lacking the cooling and milk testing facility at the village

level collection centers.

Issues and challenges for Marketing

Majority of the Market is still unorganized: The milk market in India still faces the challenge of getting organized.

The unorganized market makes it competes with the organized market in relation to prices.

Acceptability of the Consumer base: A large fraction of the consumer base in India is yet to accept the clean and

supple milk from organized dairies due higher costs. The mindset of buying fresh whole milk from the milkman is still

prevalent in the Indian consumers.

Less penetration to the rural Market: Most of the milk produced by the dairy co-operatives goes to the urban market.

The rural consumers are still dependent on the informal and unorganized market channels.

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Lack of transparent milk pricing System: There is no specific minimum support price of the milk in the system,

which makes it unremunerated for the farmers.

CONCLUSION

Highly competitive Indian dairy industry poses threat/challenges for the survival in the global dairy market. There is no doubt that

there is tremendous scope for the growth of the dairy industry in the new millennium. The product mix of world dairy trade is

likely to shift further towards cheese. This has been developed in the world markets. As the market opens up, consumption trends

associated with these markets will have increasing influence on the world trade. Whole milk powder is likely to continue to be a

substantial beneficiary and growth substantially in the Middle Eastern countries.

The dairy industry in India has been on a steady path of progression since Indian independence. It has grown from producing 17

million tons of milk in 1951 to producing 127.3 million tons in 2012. Today, India is one of the largest milk producing countries

in the world. This solid progress is primarily attributable to structural changes in the Indian dairy industry brought about by the

advent of dairy cooperatives. The Indian dairy industry reported a market size of USD 48.5 billion in FY2011.

With a Compound Annual Growth Rate (CAGR) of 16 percent, it is anticipated to reach USD 118 billion in 2017. On the back of

a rise in disposable income, coupled with strong demand for dairy products, the Indian dairy industry is all set to experience high

growth rates in the next five years. The consumption pattern of dairy products in India is unique as compared to some of the

western countries. Consumption is primarily skewed towards traditional products; however, westernized products are gradually

gaining momentum in the urban areas. Interestingly, buffalo milk accounts for the largest share of the total milk produced in the

country. Since the pricing of milk is based on the fat content, buffalo milk offers higher profit margins as compared to cow milk

as it contains higher fat.

The Indian dairy sector is characterized by high fragmentation. It is dominated by the unorganized sector comprising of 70 million

rural households. The per capita availability of milk in India stands at 289.4 grams per day. Backed by strong domestic demand,

the per capita availability of milk is anticipated to reach 336 grams per day in FY 2017. Currently, the Indian dairy market is

growing at an annual rate of 7 per cent. Despite the increase in production, a demand supply gap has become imminent in the

dairy industry due to the changing consumption habits, dynamic demographic patterns, and the rapid urbanization of rural India.

This means that there is an urgent need for the growth rate of the dairy sector to match the rapidly growing Indian economy.

Despite being the one of the largest milk producing countries in the world, India accounts for a negligible share in the worldwide

dairy trade. The ever-increasing rise in domestic demand for dairy products and a large demand-supply gap could lead India to be

a net importer of dairy products in the near future.

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