India has the largest cattle and buffalo population in the world. More than 67% of dairy animals are owned by marginal and small farmers, which constitute the core milk-production sector in the country. Many of these farmers own dairy animals primarily to supply milk for their own consumption. Slightly more than 30% of the milk produced in the country is retained in producer households. In India 80% of milk is marketed through the highly fragmented unorganised sector, which includes local milk vendors, wholesalers, retailers, and producers themselves. On the other hand, the organised dairy industry, which accounts for about 20% of total milk production, comprises two sectors: government and co-operatives. Even though co-operatives provide a remunerative price to the producer, the unorganised sector plays a major role in milk marketing.
Co-operatives in Milk Marketing
Operation Flood, launched in 1970, introduced co-operatives into the dairy sector with the objectives of increasing milk production, augmenting rural income, and providing fair prices for consumers. It was started to effectively utilise donated milk products from abroad for domestic dairy development. These surpluses were used to speed up Indian dairy development in two ways. First, the donated milk products were used to reconstitute milk and therefore provide the major cities liquid-milk schemes with enough milk to obtain a commanding share of their markets. Secondly, the funds realised from the reconstitution and sale of donated products were used to resettle city-kept milk animals and permit their progeny to multiply to increase organised milk production, procurement, and processing; and to stabilise the major liquid-milk schemes position in their markets. The objectives of Operation Flood can be summarised as follows:
1. To enable each city’s liquid milk scheme to restructure and capture a commanding share of its market
2. To identify and satisfy the needs of milk consumers and producers, so that consumers preferences can be fulfilled economically and producers can obtain a larger share of the price paid by consumers for their milk
3. To facilitate long-term productive investment in dairying and cattle development
4. To ensure a sufficient supply of personnel to handle each facet of the project
The three phases of Operation Flood succeeded in fulfilling a major part of their objectives. During its I phase, Operation Flood linked 18 of India’s premier milk sheds with consumers in India’s four major metropolitan cities: Delhi, Mumbai, Calcutta, and Chennai.
Operation Flood’s Phase II (1981–1985) increased the milk sheds (collection centres) from 18 to 136; 290 urban markets expanded the outlets for milk. By the end of 1985 there was a self-sustaining system of 43,000 village co-operatives covering 4.25 million milk producers. Domestic milk-powder production increased from 22,000 tonne in the pre-project year to 140,000 tonne by 1985, all of the increase coming from dairies set up under Operation Flood. Producers’ co-operatives increased direct marketing of milk by several million litre a day.
Phase III (1985–1996) enabled dairy co-operatives to expand and strengthen the infrastructure required to procure and market increasing volumes of milk. Veterinary health-care services, feed, and artificial-insemination services for cooperative members were extended, and member education intensified. Phase III consolidated India’s dairy cooperative movement, adding 30,000 new dairy co-operatives to the 42,000 existing societies organised during Phase II. Milk sheds peaked to 173 in 1988-89 with the numbers of women members and Women’s Dairy Cooperative Societies increasing significantly.
Most of the dairy co-operatives in India are based on the principle of maximisation of farmer profit and productivity through cooperative effort. This pattern, known as the Anand Pattern, is an integrated cooperative structure that procures, processes, and markets produce. Supported by professional management, producers decide their own business policies, adopt modern production and marketing techniques, and receive services that individually they can neither afford nor manage. The Anand Pattern succeeds because it involves people in their own development through co-operatives where professionals are accountable to leaders elected by producers. The institutional infrastructure village co-operatives, dairy and cattle feed plants, and state and national marketing is owned and controlled by farmers.
The Anand model co-operatives have progressively eliminated middlemen, bringing the producers in direct contact with consumers. In spite of opposition to these projects by middlemen and other powerful vested interests, Dr Kurien, the former chairman of the National Dairy Development Board, has been able to make major breakthroughs in the dairy and oilseeds sectors supported by the highest level in the Government of India.
Milk marketing in private sector
The private dairy selected for the comparative analysis is an ISO 9001- certified dairy headquartered in Andhra Pradesh. The company set up there in 1992 after the MMPO opened the door to private dairies, and it now trades on the Indian stock exchange. Milk collection is about 7 lakh litre per day from 1,50,000 households in 3,500 villages in three states, although the major operations are in Andhra Pradesh. The company serves three main metropolitan areas with fresh milk (Hyderabad, Chennai and Bangalore) and is about to enter Mumbai. It also markets a wide range of products, including milk, curd, butter milk, pedha and paneer as well as new items such as flavoured yoghurt and flavoured milk to cater to the changing tastes of the young generation. The company has several chilling and bulk cooling units across its collection region in Andhra Pradesh to ensure quality of milk through the chain.
The company obtains its milk supply through village agents who have personal relationships with the farmers; it does not get directly involved with farmers. Depending on the social structure of the village, there may be more than one agent per village. The agent competes with agents of other private companies for a farmers milk supply. Collection areas depends on milk density and areas in which the district cooperative is less active and access to markets is efficient.
(The author is PhD scholar at Dairy Chemistry Division, NDRI, Karnal. She can be reached at srushtypatil5@gmail.com)