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DAIRY PRODUCTS

India retained leadership in milk production by producing 188 MT in FY19
Monday, 15 June, 2020, 08 : 00 AM [IST]
Our Bureau, Mumbai
The Indian dairy and dairy products industry comprises milk and large variety of milk products like flavoured milk, ghee, butter, curd, butter milk, cheese, paneer and ice cream as per a CARE Ratings’ report on Indian Dairy & Dairy Products Industry – June 2020. 

Milk consumption in India is regular part of the dietary programme in the country as it comes with healthy nutrients such as calcium, proteins, vitamins and phosphorus, irrespective of the region and hence demand is likely to rise continuously with sustainable growth potential providing health benefits such as maintaining normal blood pressure, strengthening bones and providing energy and repairing muscle tissues among many others. 

It contributes over 20 per cent to the agriculture GDP of the country. India has also retained the leadership position in milk production by producing 188 mn tonne in FY19; accounting for about 22% of global milk production. Hence, dairy industry has played a crucial role in the agro-based Indian economy. 

Structure of the Indian dairy industry 
The Indian dairy industry is divided into the organised and unorganised segments. The unorganised segment consists of traditional milkmen, vendors and self-consumption at home, and the organised segment consists of cooperatives and private dairies. 

As per the Annual Report for FY19 of Department of Animal Husbandry, Dairying and Fisheries, Ministry of Agriculture and Farmers Welfare, Government of India, co-operatives and private dairies still procure only about 20 per cent of the milk produced in the country, while 32 per cent is sold in the unorganised market and about 48 per cent is consumed locally.

About 40 per cent of the milk sold is handled by the organised sector and the remaining 60 per cent by the unorganised sector. However, in most of the developed nations, 90 per cent of the surplus milk is processed through organised sector. 

With the increase in population, rise in per capita income, changing lifestyle, affordable aspirational food habits and export opportunities, the demand for milk is expected to rise. As per the Department of Animal Husbandry and Dairying, it is estimated that the demand for milk would be in the range of 200 - 210 million tonne by FY22. 

Source: Dept. of Animal Husbandry, dairying & fisheries, Ministry of Agriculture & Farmers Welfare, GoI 
The dairy product industry has relatively low product differentiation. At the same time the industry is unorganised with a large number of small players. The organised dairy industry accounts for around 20 per cent of the total milk produced. Approximately half of the milk produced is marketed. Out of the total milk distributed jointly by the organised and unorganised segments, about 50 per cent is consumed in milk form and the balance is converted into various milk products like milk powder, ghee, butter, cheese and yoghurt. 
Cost-effective technologies, mechanisation and quality control measures are seldom exercised in the unorganised sector and remain key issues to be addressed. There is immense room for the organised sector to gain market share of marketable milk from unorganised sector by introducing standardisation in milk quality testing and transparency in computing consideration being paid to farmers for their milk along with educating farmers on best dairy and animal husbandry practices. 

This could also dovetail well with the shift of consumer preference from unorganised to organised market. As per the Department of Animal Husbandry, Dairying and Fisheries, the organised milk handling is expected to grow from 20 per cent at present to 50 per cent by FY23. 

4 Pillars of Dairy Industry 

•With the increasing population and the large vegetarian population, the demand for dairy and dairy products is continuously increasing and is expected to do so going forward.  
•Also, with increase in income levels, higher disposable income, demand for dairy and value-added products is expected to continue to witness growth 
•As most of the dairy products have low shelf life, it is difficult to manufacture them at a central location and distribute pan-India like FMCG products. Hence, it is crucial to have a network of multiple production units across the country to have maximum reach. 

•In India, milk is produced by cattle owned by farmers and dairy companies are associated with these 
Manufacturing farmers/agents for milk procurement. As a result, having association with the number of farmers along with the establishment of strong procurement facilities, like bulk coolers and chilling centres, plays a vital role in the 
procurement supply chain.  
•A steady increase in price of milk/milk products increases rural income and provides impetus for dairy farming.  
•Also, with improved economic factors and milk being a vital product of consumption, Indian consumers have shown resilience towards the upward price movements.  
Pricing •WPI for milk has registered a stable growth of about 5% between FY12 and FY20. 
•Approximately 80 million households in India are directly or indirectly dependent on the dairy industry, especially in the rural areas, largely women. Further, about 40-50% of cost of milk is passed onto these farmers as against an average of about 30% in case of developed countries thereby incentivising the farmers to increase production and sale of dairy and dairy products in the countries.  

Milk production in India  

The dairy sector in India has grown substantially over the years. According to NDDB, India ranks first among the world’s milk producing nations, achieving an annual output of 188 million tonne during the year FY19 which is approximately two times that of USA, over five times of China and over four times of Pakistan. 

In FY19, milk production stood at 188 million tonne, registering a largely stable y-o-y growth of about 6.5 per cent vis-à-vis a growth of about 6.6 per cent witnessed during the previous year. Milk production has witnessed a steady growth in the country registering a CAGR of about 5.5 per cent between FY10 and FY19. However, the production recorded a higher CAGR of 6.4 per cent between FY16 and FY19 led by increased consumption of dairy products in the country.  

Also, the per capita availability of milk in the country registered a CAGR of about 4.2 per cent between FY10 and FY19 and a CAGR of about 5.2 per cent between FY16 and FY19. Per capita availability increased from 273 gram per day in FY10 to 394 gram per day in FY19.  

Source: National Dairy Development Board (NDDB) 
 
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