Evolution of dairy farming in India

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‘Operation Flood’ revolutionized dairy farming in India. Launched in 1970, it popularized the practice of cooperative dairy farming and forming marketing unions for distribution. This transformed dairy farming from a petty feudal business to a participatory movement of the farmers. Within a span of three decades India became the largest producer, even surpassing USA in the year 2000 to become the largest milk producer in the world. With a production of 146.3 million tonnes of milk in 2014-15, India’s share increased to over 18.5 percent of the total world milk production.

Around 70 percent of small farmers in India are dependent on rearing of livestock and dairying to supplement their farm income. Dairying also acts as a hedge against drought and other exigencies. According to a study by Ayush Kumar and Jignesh Shah in 2016 in Indian Journal of Agricultural Economics, households engaged in dairying activity have better socio-economic outcomes. Ashok Gulati, in a recent piece in The Indian Express points out the underlying potential of dairy industry to augment the crop based agro-economy.

Due to economic growth and rising disposable income, food consumption patterns are changing in India. Angus Deaton and Jean Drèze in a much cited paper in Economic and Political Weekly in 2009, highlight the fact that food composition in India is shifting from cereals to a more non-cereal, protein rich diet. Milk is one of the items in the consumption basket which is fast gaining popularity in India. Analyzing data from the National Sample Survey, Jignesh Shah and T. N. Datta in an article in Sarvekshana in 2009, report that from 1987 to 2004, one may observe a steady rise in per capita milk consumption, as well as an increase in number of people consuming milk.

However, data from the recent 68th round of National Sample Survey show that between 2004 and 2011, per capita household expenditure on milk products declined in both rural and urban India. Liquid milk consumption also grew at around 1 percent per capita in rural India and at less than 1 per cent per capita in urban India. After 2008, there has been a steep rise in wholesale prices of food articles (Figure 1). Milk is no exception to this general food inflation. Households may have responded by shelling lesser amount from their pockets for buying milk. But, a point to note here is that these expenditures may not reflect the complete picture on consumption of milk. Household surveys do not account for home-away milk consumption (such as milk in tea, coffee, ice cream etc. consumed outside the home). Hence, these figures may at best, perhaps remain an underestimate.

Figure 1

 

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Source: Author’s calculation based on WPI indices, GoI

Excess availability?

Milk is usually locally produced and consumed in India. Uttar Pradesh is the largest producer of milk in India (Figure 2). Punjab and Haryana are the highest milk consuming states (Figure 3 and 4). Though food preferences may differ across states, supply and availability of milk may also affect per capita consumption. Owing to the large population base in Uttar Pradesh, per capita availability of milk shrinks than the all India average (Figure 5).

Figure 2

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Source: Author’s calculation based on National Dairy Development Board (NDDB) data (only those states which contributes more than 1% of all India production)

Figure 3

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Source: Author’s calculation based on 68th NSS round

Figure 4

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Source: Author’s calculation based on 68th NSS round

Figure 5

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Source: Author’s calculation based on information provided by the Minister of State for Agriculture in the Lok Sabha on July 19, 2016 (http://pib.nic.in/newsite/mbErel.aspx?relid=147252)

Per capita availability is based on estimates of state’s milk production and the projected population of the state. But if one calculates the difference in per capita availability and per capita consumption of milk, then it may indicate the excess or deficit in milk supply in a particular state. During 2011-12, this difference is in excess of more than half a litre per capita of daily consumption in Punjab (Figure 6 and 7). This seems to indicate that there is excess production of milk in some states, and hence such states supply the surplus amount to other states. But, it is intriguing to note that states which consume less than the all India average are also producing more than 100 grams of its daily per capita consumption. For example, in rural Andhra Pradesh, Madhya Pradesh, Kerala, Tamil Nadu, Kerala and Nagaland there is excess availability of milk than per capita consumption.

Figure 6

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Figure 7

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Shortage?

In states like Assam, Manipur, Meghalaya, Mizoram, Tripura, Nagaland, Arunachal Pradesh, Nagaland, West Bengal and Orissa, per capita milk consumption is lower than the national average. Amount of milk consumption may depend on the gastronomical culture of people in a particular region. This may be a reason for low per capita consumption of milk in some of these states in India.

However, the problem may even persist from supply side. Due to lack of cooperative dairy farming, provisioning of raw milk may be in short supply. This is evident from the fact that such states spend a very high proportion of household budget share on powdered or condensed milk (Figure 8 and 9). And, this share has risen in 2011-12 when compared to 2004-05. This may then indicate that due to lack of supply of fresh milk, the demand for milk is being catered through powdered or condensed milk supplied from other states. States where there is a shortage of liquid milk, consumers have to bear a higher price burden. As Harish Damodaran points out in his article in The Indian Express, it takes around 11.5 kg of liquid milk to convert it into 1 kg of powdered milk. This makes powdered milk dearer than liquid milk.

Figure 8

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Source: Author’s calculation based on NSS 61st and 68th rounds (only those states where the share is more than 3% of total milk expenditure)

Figure 9

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Source: Author’s calculation based on NSS 61st and 68th rounds (only those states where the share is more than 3% of total milk expenditure)

Yield and marketing

Even though India is the largest producer of milk in the world, productivity or yield of milk per animal is low. According to Food and Agriculture Organization (FAO), with a yield of 1168 kg per animal, India ranks 11th in the world ranking of milk yield. Dairy yield depends on the quality of bovine breeds used for milk production, animal feed and other biotic conditions. There is also wide inter-state variation in milk productivity across India as well (Figure 10). It is quite intriguing that milk yield is exceptionally high in Kerala, while in most of the states, milk productivity is lower than the national average.

Due to price support mechanism and market intervention by the government for several cereal and commercial crops, acreage under fodder crops is fast shrinking. Consequently, the dwindling supply of both dry and green fodder may not match the increasing demand for it. A recent article by Gangadhar S. Patil in IndiaSpend, raises concern over the growing shortage of fodder crops in India. It reports that there may even be a fall in milk productivity, which in turn could result in India going on to buy milk from the world market by 2021. Concerns are also being raised regarding negative impact of climate change on milk production.

Figure 10

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Source: Author’s calculation based on 19th Livestock Survey (2012) and NDDB data.

The participation of cooperative society in procurement of milk is varied across regions. Harish Damodaran notes in an article in The Indian Express that, cooperatives hardly procure one tenth of milk produced in India. Most of the milk procurement and sale in the country is through local private traders. Small and marginal farmers, who operate outside the cooperative network, could have a better choice if they are within a cooperative service.

The number of milk cooperative societies is highest in Uttar Pradesh (Figure 11). But people’s participation in sale of milk through cooperatives is not much in the state. As can be deciphered from the numbers of producer membership in dairy cooperatives, Gujarat, Karnataka, Tamil Nadu and Maharashtra account for more than a half of cooperative milk procurement in India (Figure 12). In the remaining states, cooperative membership is abysmal. To ameliorate this condition, one of the basic objective of the National Dairy Plan (Phase I) is to provide access to the organized milk-processing units to the rural milk producers.

Figure 11

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Source: Author’s calculation based on NDDB data.

Figure 12

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Source: Author’s calculation based on NDDB data.

Dairying forward

Along with a second ‘green’ revolution in the crop sector, there is likewise need for a second ‘white’ revolution. The drive for this would grow if dairying is seen outside the framework of subsidiary agricultural practice. As Harish Damodaran puts it in a piece in BusinessLine, to give milk its ‘due’, dairying should be considered as a full-fledged farming activity and not as a subsidiary to crop farming. Policies should be envisaged to ensure a steady procurement and supply of milk to minimize the growing regional demand and supply mismatch.

Further, the recent spurt in ‘cow’ vigilantism and ban on slaughter gives the notion that dairying business may flourish in the coming days. However, simple logic tells that from time to time the farmer needs to get rid of cows which run dry and old. Lack of markets to do so may affect dairying. With bottlenecks galore in infrastructure, fodder and market access, that idea of vigilantism adding fillip to dairying may be a bit farfetched.

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