CHAPTER 1

OVERVIEW OF DAIRY INDUSTRY

CHAPTER 1

OVERVIEW OF DAIRY INDUSTRY

1.1 Introduction

1.2 Co-operative Movement Globally

1.3 Co-operative Movement in India

1.4 Co-operative Movement in Gujarat

1.5 Objectives of Dairy Co-operatives

1.6 The National Co-operative Dairy Federation of India (NCFDI)

1.7 The National Dairy Development Board (NDDB)

1.8 Co-operative Dairying in India

1.9 Anand Pattern

1.10 Operation Flood Programmes

1.11 Impacts of Operation Flood

1.12 Pitfalls in the Operation Flood

1.13 Role of Dairy Co-operatives

1.14 Dairy Co-operatives in Gujarat

1.15 Co-operative Companies playing in Dairy Industry and its Brands

1.16 Milk Production and State-wise Milk Production in India

1.17 Problems and Prospects of Dairy Industry in Gujarat

1.18 Steps to revive Dairy Co-operatives

1.19 SWOT Analysis of Indian Dairy Industry

1.20 Dairy Industry in India at a glance

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CHAPTER 1

OVERVIEW OF DAIRY INDUSTRY

1.1 INTRODUCTION

Maximum people of thickly populated India live in villages. Majority of them are

involved in agriculture. The cattle animal is correlated with agriculture in India as the

old method of cultivation is still vogue here. Rearing of cattle animal is also an

additional source of income of the villagers in our country.

We get from our ancient history that the domestication of the cow and the buffalo

dates back to nearly 4000 years. Scriptures of India refer to the wealth through the

word Godhan. Maximum proportion of cows and buffaloes of the world are seen in

India.

Dairy enterprise is an important occupation of the farmer. In India, nearly 70% of the

people depend on agriculture. It is the backbone of India. It is mainly a rural

occupation closely associated with agriculture. More than 2,445 million people

economically active in agriculture in the world, probably 2/3 or even more of them

are wholly or partly dependent on livestock farming. The dairy sector in the India has

shown remarkable development in the past decade and India has now become one of

the largest producers of milk and value-added milk products in the world. The dairy

sector has developed through co-operative in many parts of the state. Traditionally, in

India dairying has been a rural cottage industry. Semi-commercial dairying started

with the establishment of military dairy farms and co-operative milk unions

throughout the country towards the end of the 19th

century. In earlier years, many

households owned their own family cow or secured milk from neighbors who had

one. With the increase in urban population fewer households could afford to keep a

cow for private use and moreover there were other problems also like the high cost of

milk production, problem of sanitation etc. restricted the practice; and gradually the

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family cow in the city was eliminated and city cattle were all sent back to the rural

areas. Gradually farmers living near the cities took advantage of their proximity to the

cities and began supplying to the urban population; this gave rise to the fluid milk

sheds we see today in every cities of our country. Prior to the 1850s most milk was

necessarily produced within a short distance of the place of consumption because of

lack of suitable means of transportation and refrigeration. The Indian Dairy Industry

has made rapid progress since Independence. A large number of modern milk plants

and product factories have since been established. These organized dairies have been

successfully engaged in the routine commercial production of pasteurized bottled milk

and various Western and Indian dairy products. With modern knowledge of the

protection of milk during transportation, it became possible to locate dairies where

land was less expensive and crops could be grown more economically. In India, the

market milk technology may be considered to have commenced in 1950, with the

functioning of the Central Dairy of Aarey Milk Colony, and milk product technology

in 1956 with the establishment of AMUL Dairy, Anand. Indian dairy sector is still

mainly an unorganized sector as barely 10% of our total milk production undergoes

organized handling. Beginning in organized milk handling was made in India with

establishment of Military Dairy Farms. Handling of milk in co-operative Milk Unions

established all over the country on a small scale in the early stages. Long distance

refrigerated rail-transport of milk from Anand to Mumbai since 1945 pasteurization

and bottling of milk on a large scale for organized distribution was started at Aarey

(1950), Calcutta (Haringhata, 1959 ), Worli (1961), Madras (1963) etc. establishment

of Milk Plants under the Five-Year plans for Dairy Development all over India. These

were taken up with the dual object of increasing the national level of milk

consumption and ensuing better returns to the primary milk producer. Their main aim

was to produce more, better and cheaper milk.

In 1965, National Dairy Development Board (NDDB) was set up with the object of

meeting the increasing demand of milk specially in urban areas as well as developing

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the rural economy through the enhancement of the milk production of the country. In

1970 National Dairy Development Board took up Operation Flood Programme in

order to organise Milk Producers Co-operative in several probable places of India

taking the Kaira District (Anand) Co-operative Milk Producers Union Limited

(AMUL) of Anand, Gujarat.

The presence of milk cooperatives all over the country helps to organize the industry

and give this sector a distinct advantage. Cooperatives allow for much easier

marketing of the end product as compared to other businesses. Cooperatives assure

the farmer of not only a market for their product but also take care of logistical issues

like transportation and containers. The farmer is spared these costs as well as the cost

of putting up a retail outlet. Cooperatives allow for stable selling rate which does not

change even when they yield is surplus. Payments are guaranteed to milk producers

and ensured within a maximum of 30 days. Cooperatives play an important role by

eliminating middlemen and the associated costs.

Dairy co-operatives are found everywhere in both developed and developing

countries. In developing countries, it is one of the income sources of their rural

economy whereas in developed countries it takes as a sustainable business. These

countries face different types of problems. Developing countries focus on increase in

production volume of milk and milk product, and developed countries do on

enhancement of milk product, brand, and merger of dairy cooperatives. Dairy

cooperatives have been getting various opportunities as well as facing different

challenges. They are going to formulate different types of strategic planning to cope

with these challenges and to get success. Strategic plans of dairy cooperatives in

developing countries are, generally to increase production volume of buffalo milk,

bring about the internal improvement in cooperative societies, reduce cost of

production, and provide quality service to consumer through skill, trained and

educated manpower. Strategic plan of developed countries is quite different from that

of developing countries. Their strategic plans are to merge different dairy cooperative

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societies/institutions into a dairy cooperative, and compete in the global market with

quality of products. Co-operative Movement has been recognized as an effective

instrument for the economic development of the rural masses and for improvement in

the socio-economic condition of the underprivileged.

1.2 CO-OPERATIVE MOVEMENT GLOBALLY

The genesis of co-operative movement can be traced back to the first half of the 18th

century. Industrial revolution in U.K. had increased the production of morality and

values of mankind as man was replaced by machine. Because of lust and lure for the

production, it had directly resulted in the exploitation of the mankind and so

cooperative movement took birth in U.K. for removing the bad conditions of laborers.

From England, co-operative movement spread out all over the world and had been

changed in to the great movement which can be seen by the following table:

Table - 1.1: Cooperative Movement in various countries

Sr. No. Types of Cooperatives Country Name

1. Consumers Cooperatives England, Russia and Sweden

2. Credit Cooperatives Germany, Italy, Sweden and India

3. Marketing Cooperatives Canada, U.S.A. and Australia

4. Land Mortgage Credit Germany, England and France

5. Dairy Cooperatives Denmark and New Zealand

6. Farming Societies Russia, Yugoslavia and Palestine

7. Housing Societies U.S.A., Sweden and Israel

8. Producers Cooperatives Labour

Societies

France and England

9. Labour Societies Italy

10. Insurance Cooperatives England

11. Cooperative Education England

(Source: Pranab Chakrabarty, Problems of Co-operative Development 1967.)

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1.3 CO-OPERATIVE MOVEMENT IN INDIA

1904: The Co-operative Credit Societies Act i.e. the first Co-operative Law of

India was passed.

1912: The Co-operative Societies Act, 1912 had wider scope for other types of co-

operatives to function.

1919: Government of India Act, Co-operation as a subject was transferred to

provinces.

1942: Multi-unit Co-operative Societies Act, delegated the power of Central

Registrar of Co-operatives to State Registrars for all practical purposes.

1984: Multi-State Co-operative Societies Act.

1991: Brahma Prakash Committee comes out with the Model Co-operative

Societies Act, with lesser state involvement.

1995: The Government of Andhra Pradesh passes the new Mutually Aided Co-

operative Societies Act, granting autonomy to the co-operatives.

2002: Multi-State Co-operative Societies (MSCS) Act, 2002 replaced the MSCS

Act, 1984.

2002: Companies Amendment Act, 1956 provides an alternative to the

institutional form that is presently available to co-operative enterprises.

2004: Task Force on Revival of Co-operative Credit Institutions set up under the

chairmanship of Prof. A. Vaidyanathan.

1.4 CO-OPERATIVE MOVEMENT IN GUJARAT

The first agricultural credit society registered under the 1904 Act was Vilaspur

Co-operative Credit Society in the Dascroi taluka of Ahmedabad district.

Kaira District Milk Union Ltd. Popularly known as AMUL was established by

Late Sri Tribhuvandas Patel in December 1946 at Anand.

The state has also been ahead in the organization of Agricultural Marketing Co-

operatives, Non-agricultural Co-operative Credit Societies, Forest Labourers

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Societies for Adivasi, Co-operative Housing, Poultry Co-operatives, Lift Irrigation

and Industrial Co-operatives.

The co-operative movement in Gujarat is similar to the mild Dairy cooperative

movement of Gujarat. Due to the exploitation of the middlemen called the Bhatiya,

the farmers decided to form their own association to save their interest. So, the first

co-operative society was started in 1939 in Surat and that was the beginning of new

era of co-operative movement in Gujarat. Before the birth of Amul Dairy, Anand,

there was no systematic marketing for milk in Gujarat and in India also and then, with

the birth of Amul in 1946, the co-operative movement began as a revolution and

then it emerged as a White Revolution.

1.5 OBJECTIVES OF DAIRY CO-OPERATIVES

The dairy co-operative is based on following objectives:

1. To develop the skills of dairying in rural people and prepare them to accept this

activity as a joint business along with farming.

2. To develop co-operative societies at village, taluka and district level.

3. To encourage dairying in co-operative sector and to strengthen the co-operative

dairies and unions to be economically strong.

1.6 THE NATIONAL CO-OPERATIVE DAIRY FEDERATION OF INDIA (NCDFI)

The NCDFI is the fourth tier of the APDC. All the state-level federations are

members of NCDFI. They become members by paying the requisite entrance fee and

purchasing shares. The NCDFI board consists of all the chairpersons/managing

directors of the state federations/ state unions/territory unions.

The main function of the NCDFI is to promote the dairy industry on a cooperative

basis. It offers services in procurement, processing and marketing of milk and milk

products from one state to another within the country and is also responsible for

international marketing. NCDFI also coordinates the supply of milk and milk products

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to institutional consumers such as the army. Further, it organizes and operates the

national milk grid. It helps the member federations in the purchase, storage and

distribution of machinery and equipment.

The State Dairy Cooperative Federation

The district dairy cooperative unions are federated into a state-level cooperative milk

marketing federation by subscribing to it at least one share. The federation is

responsible for developing and implementing policies on cooperative marketing of all

member unions liquid milk and milk products, the product-price mix, cooperative

provision of joint services (such as AI and breeding) and cooperative marketing of

support services to members. Out of its net profit, the federation distributes the profit

share among all the member unions according to the milk procured by them and the

provision of by-laws.

The federation board consists of the elected chairpersons of all member unions and

the federations managing director; other members are representatives of registrar

cooperative societies and nominees of NDDB. Only the elected chairpersons of the

member unions have voting rights and elect the chairperson of the federation.

The federation board is advised by its programming committee, which is composed of

each member unions chief executive, the federations chief quality control officer

and one or more non-voting co-opted technical representatives of NDDB. The

federations managing director is the committees chairperson, and the general

manager, its secretary. The programming committee meets once every month and is

also responsible for day-to-day implementation of the boards policies and plans.

District Cooperative Milk Unions

All the registered village dairy cooperatives are affiliated with and members of the

district cooperative milk producers union, which enables them to jointly own a dairy

processing plant and cattle feed plant. In order to become a member of the union, a

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registered society has to pay a nominal entrance fee and must purchase at least one

share of the union.

The union is controlled by a board of directors consisting of 16 to 17 members, of

whom 12 are democratically elected from among the chairpersons of the member

village dairy societies. The remaining 4 to 5 members include the unions managing

director as a member secretary, one or two representatives of financing institutions

and a nominee each from registrar cooperative societies and the federation. These five

members are not eligible to compete for the post of chairperson, who is elected by

ballot by the board of director members. One-third of the elected board members

retire every year by rotation so that each member carries out his duties for three years.

This ensures continuity in management.

The board frames the general policy for the union and employs the managing

director/general manager. While the board determines the number, type and pay

scales of personnel, it is the managing director/general manager who appoints the

junior staff.

The union carries out five important elements: (i) procurement, processing and

marketing of milk; (ii) provision of technical inputs (support services); (iii)

strengthening of the dairy cooperative movement; (iv) organization of extension

activities; (v) rural development services. The union owns and operates a dairy plant,

a cattle feed plant, fodder and bull mother farms, semen collection stations and a

centre for animal husbandry activities. In addition, the union carries out research,

development and other promotional activities for the overall benefit of milk

producers. The union provides macro-level inputs such as compounded cattle feed,

fodder seeds and various veterinary services including round-the-clock emergency

visits at the producers doorstep. The total cost of these programmes is included in the

milk price structure. It is therefore at the union level that professionals are hired for

specialized purposes that individual producers cannot afford.

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The union distributes among producers dividends on their shares and bonus in relation

to the quantity of milk supplied by them during the year. The milk products processed

by the union are marketed through the federation. A special feature of the Anand

Pattern is that the unions are under continuous audit to maintain financial propriety.

Village Dairy Cooperative Societies (DCSs)

The basic unit in the Anand Pattern is the milk producers cooperative society, a

voluntary association of milk producers in a village who wish to market their milk

collectively. Every milk producer who has at least one milch animal that is owned can

become a member of the cooperative by paying a nominal entrance fee and

purchasing at least one share. At a general meeting of all the members, the

representatives are elected to form a managing committee, which runs the day-today

affairs of the cooperative society by setting the policies and appointing necessary

staff. Out of nine managing committee members, one member is elected as

chairperson.

Every morning and evening the society buys the surplus milk from its producer-

members. The producer is paid for milk usually within 12 ho urs (for morning milk, in

the same evening and for evening milk, the next morning). The payment is made on

the basis of fat and SNF (solids-not-fat) content of the milk supplied by the individual

producer. The district milk union organizes the transport of collected milk twice daily

(whenever the dairy society has no bulk coolers) or according to the schedule based

on the quantity of the milk collected and the capacity of bulk coolers from all its

affiliated member cooperatives.

The producers in this system are not only ensured regular and remunerative payment

for their milk, but also have access to the milk production enhancement inputs,

support services, to further improve their productivity and income. The micro-level

support services such as veterinary first aid and AI are organized by village societies.

One of the staff members of the society is trained to carry out these functions.

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Societies also market the liquid milk locally at the village level. In addition, supply of

balanced cattle feed and fodder seeds and milk products are also channeled through

societies.

In addition to regular payment and support services, members also receive the price

difference, dividend and bonus deriving from the net profit of the societys business

as per the provisions of the societys by-laws.

1.7 THE NATIONAL DAIRY DEVELOPMENT BOARD (NDDB)

The public sector impressed by the socio-economic changes that had been brought

about by the dairy cooperative organization, proposed a national level organization

that could replicate the APDCs. The GOI created the NDDB in September 1965.

Then, under the National Dairy Development Board Act of 1987 passed by parliament

and made effective on 12 October 1987, a restructured NDDB, a body corporate of

national importance, was formed.

The major objectives of NDDB are:

Promote viable producer-owned and controlled organizations primed to

produce, procure, process and market milk and its products, as well as other

commodities, so as to: (i) maximize productivity and optimize the producers'

share of the consumer price paid; (ii) influence and foster the development of

the dairy and other agricultural industries.

Generate funds to finance producer-owned organizations.

Provide assistance for planning projects and appraising them for financing.

Provide training for farmer leaders of the cooperative sector, as well as for the

professionals employed therein.

Provide cooperative-oriented education for all those involved in building

cooperatives.

Provide services to enable effective management of cooperatives.

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Monitor achievements against physical and financial targets and take necessary

corrective measures.

Monitor the financial viability of projects.

Create a data bank on all related activities to be shared with similar

organizations.

Promote industries to ensure fulfilment of the needs of the developmental

projects undertaken by NDDB.

Apply research and development and identify new technologies.

Respond to other developing countries' requests to organize their

developmental programmes on cooperative lines.

Undertake any other special projects at the request of the central or state

governments.

1.8 CO-OPERATIVE DAIRYING IN INDIA

HISTORY OF DAIRY COOPERATIVE IN INDIA

The Co-operative movement started in India in the last decade of the 19th

century with

two objects in view, i.e. to protect the farmers from the hands of the private money

lenders and to improve their economic condition. Madras province was the birth-place

of this movement. With the setting up of an Agricultural Co-operative Banks there the

movement took root in our Land and slowly gained strength. However, the growth of

Co-operative movement in India during British rule was very slow and haphazard

one. In most of the cases, the provincial governments took the lead. The foreign ruler

had only made some committees or framed a few rules and regulations. But they did

not take any wide-ranging programme to spread the movement all over the country.

The golden era of Co-operative movement began after India had won freedom. Within

two decades of independence the membership of primary societies had increased four

times while the share capital and working capital increased 23 and 31 times

respectively.

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The history of Dairy Development Movement in India is a new one. During the pre-

independence period this movement was limited to a few pockets of Calcutta, Madras,

Bangalore and Gujarat. The most notable of this venture was Kaira District Co-

operative Milk Producers Union Limited of Anand, Gujarat. But after independence

the National Government took great initiative in setting up new Dairy Co-operatives

in many parts of the country. The National Dairy Development Board was set up to

make the ambitious project a success.

An impressive development has taken place as far as dairying as co-operatives are

concerned. Strengthening the cooperative business is a thrust area that focuses on

expanding and reinforcing the cooperative infrastructure at every level and enhancing

market potential through modern dairy plant technology, new product development

and innovative marketing. Today, women dairy farmers are encouraged to play a

major role. Thus, it has become an important instrument for their empowerment.

NDDB is committed to increase women participation by establishing 2,062 women

dairy cooperative societies with 90,000 women participants.

ORIGIN

The history of Dairy Development Movement in India is a new one. During the pre-

independence period this movement was limited to a few pockets of Calcutta, Madras,

Bangalore and Gujarat. The most notable of this venture was Kaira District Co-

operative Milk Producers Union Limited of Anand, Gujarat. But after independence

the National Government took great initiative in setting up new Dairy Co-operatives

in many parts of the country. The National Dairy Development Board was set up to

make the ambitious project a success.

DEVELOPMENT

The organized dairying in India was started at the end of 19th

century when military

dairy farms and creameries were started to meet the demands of the armed forces and

their families. The first dairy co-operative society was established at Allahabad in

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1913. After this the Calcutta milk supply societies union was established in 1919. Till

1938 there were only 19 unions with 264 primary societies and 11,600 milk producer

members. However, dairy co-operatives did not make much headway in the pre-

independence period. The first major landmark in the development of co-operative

dairying in India was the establishment of the Kaira District Co-operative Milk

Producers Union Ltd (KDCMPUL). Before the establishment of Amul, the milk

marketing system in the district was controlled by contractors and middle men who

used to exploit the milk producers in all possible ways, there by earning huge profits.

As a result there was growing discontent among the milk producers. On the advice of

Sri Sardar Patel and under the able leadership of Sri Tribhuvandas Patel, it was

decided to organize primary dairy co-operative societies which led to the emergence

of Amul on 14th

December, 1946.

The dairy co-operatives in Kaira district under the able guidance of Sri Tribhuvandas

Patel and Dr. Varghese Kurein, its chairman and general manager respectively,

followed an integrated approach to dairy development linking all the major elements

of dairying viz., production, procurement, processing and marketing and achieved

remarkable progress. Today AMUL is the largest dairy plant in the country handling

on an average about 8.5 lakh liters of milk per day collected from 3.65 lakh milk

producers from over 880 villages of the district. The ultimate result is that Anand or

Amul became a model world-wide for a co-operative.

1.9 ANAND PATTERN

The unprecedented success of AMUL stimulated the farmers in other districts of

Gujarat to emulate their example. Thus, the integrated approach to co-operative dairy

was successfully adopted in Gujarat and later it came to be known as Anand-pattern

of dairy co-operatives. This Anand model of co-operative structure was built on

vertically integrated co-operatives linking rural producers with urban consumers. It is

a three-tier structure. The three tiers are:

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The primary Dairy Co-operative Society at the village level is the first-tier that

consists of members who own milch animals within the village jurisdiction and

supply milk to the co-operative society on regular basis.

District co-operative milk producers union at the district level is the second-

tier that in which all primary societies are members. It is managed by a Board

of Directors the majority of who are elected by the presidents of primary dairy

co-operative societies. The district union is responsible for the procurement,

processing and marketing of milk and also to provide technical inputs like first -

aid, emergency veterinary services, Artificial Insemination (AI) facilities,

fodder seeds, cattle feed and for training the staff of the primary societies.

Co-operative federation at the state level is the third-tier to which all the

district unions in a state are federated. The federations board consists of

elected chairman of the district unions and representatives of the state

government. Its primary purpose is to maximize returns to the milk producer

members through centralized marketing, purchase and quality control.

SALIENT FEATURES OF ANAND PATTERN DISTRICT CO-OPEARTIVES (APDC)

The salient features that have contributed to APDCs are as follows:

A single commodity approach; handles only the milk business.

Four-tier organizational structure ; an integrated structure owned, managed and

controlled by milk producers members themselves, which handles milk

production, procurement, processing and marketing, and provides support

services for milk production enhancement.

Democratically elected boards from among their members in all the four tiers,

i.e. the village DCS, the district milk union, the state federation and the

national federation. The board members are authorized to decide upon the

policies for total democratic governance.

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Employment of professionals by the cooperatives and professional managers

answerable to the cooperative boards.

The basic philosophy of the Anand Pattern; combining the power of its people

with professional management in a vertically integrated cooperative structure

that establishes a direct linkage, eliminating all middlemen, between those who

produce the milk and those who consume it, either in the form of milk or milk

products. This structure transfers the largest share of consumers money to the

producers, creating an incentive to improve production. It supports production

by exposing farmers to modern technology. Placing the farmers in command as

the owners of their cooperative involves them in the process of development.

The democratic form of the cooperative provides an underpinning for

democracy in the country, through a foundation of a democratic institution

right down to the village level.

Transparency maintained in business: by-laws providing continuous and

concurrent audit.

Cash and regular payment to producers for the milk supplied by them.

Awareness raised on clean milk production and animal husbandry practices,

which resulted in higher quality of milk production and breed improvement.

THE REPLICATION OF ANAND PATTERN

Sri Lal Bahadur Shastri, the then Prime Minister of India, visited Anand in 1964 to

inaugurate the cattle feed plant. Having been immensely impressed with the success

of dairy co-operatives in Gujarat, he has advocated the replication of Anand pattern

dairy co-operatives throughout the country. Accordingly, the government of India

established the National Dairy Development Board (NDDB) in 1965 to replicate this

pattern throughout the country by implementing the Operation Flood (OF)

programmes for this purpose. The Indian Dairy Corporation (IDC) was set up in 1970

to handle the donated commodities, the generation of funds and their disbursement for

the dairy development programmes.

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1.10 OPERATION FLOOD PROGRAMMES

Development Operation Flood (OF), the worlds largest dairy development

programme ever undertaken, aims at setting up of a modern dairy industry to meet

Indias rapidly increasing need for milk and its products and making it viable and self

sustaining growth. The project undertook the colossal task of upgr ading and

modernizing production, processing and marketing of milk with the assistance

provided by the World Food Programme (WFP). The aim was to create a Flood of

rurally produced milk, assuring the farmer of remunerative price and ready market,

and the urban consumer of wholesome milk at stable and reasonable prices by linking

the main producing areas to the main consuming centers in urban areas.

Operation Flood I (1970-81):

The programme laid emphasis on setting up of Anand pattern rural milk producers

co-operative organizations to procure, process and market milk and to provide some

of the essential technical input services for increasing milk production. OF-I was

launched in 1970, following an agreement with the WFP, which undertook to provide

1,26,000 tonnes of Butter Oil (BO) as aid for financing the programme. The

programme involved organizing dairy co-operatives at the village level, providing the

physical and institutional infrastructure for milk procurement, processing, marketing

enhancing services at the union level and establishing of city dairies. The main thrust

was to set up dairy co-operatives in the milk sheds, so as to link them to the four

metro cities of Mumbai, Calcutta, Delhi and Chennai, in which a commanding share

of the milk markets was to be captured. The overall objective of Operation Flood I

was to lay the foundation of a modern dairy industry in India which would adequately

meet the countrys need for milk and milk products. Funds for Operation Flood I

were generated by the sale of SMP and Butter Oil. A total of Rs. 116.54 crore was

invested in the implementation of the programme. The achievements of OF-I are

furnished in table 1.2. By the end of OF-I about 13,300 DCS, 39 milk sheds were

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organized, enrolling 18 lakh farmer members. It achieved a peak milk procurement of

34 lakh litres per day (llpd) marketing of 28 llpd.

Operation Flood II (1981-85):

The background of the institutional framework of OF-II essentially comprised of the

successful replication of the Anand pattern three-tier co-operative structure of

societies, unions and federations. OF-II was designed to build on the foundation

already laid by OF-I and the Indian Dairy Association (IDA) assisted dairy

development projects in Karnataka, Rajasthan and Madhya Pradesh. The programme

was approved by the Government of India, for implementation during the Sixth Plan

period, with an outlay of Rs. 273 crores. About US $ 150 millions were provided by

the World Bank and the balance in the form of commodity assistance from the

European Economic Community (EEC). OF-II helped to market milk in about 148

cities and towns with a total population of 15 million through a national milk grid,

linking these towns and cities to 136 rural milk sheds. The project was extended

crores 34,500 village co-operative societies, covering 36 lakh farmer members. The

peak milk procurement increased to a level of 79 llpd and milk marketing to 50 llpd.

Operation Flood III (1985-2002):

The third phase aimed at consolidation of the gains of earlier two phases. The main

focus of the programme was on achieving financial viability of the milk unions state

federations and adopting the salient institutional characteristics of the Anand

Pattern co-operatives. The OF-III programme was funded by a World Bank with a

loan of US $ 365 millions, Rs. 222.6 crores of Food-Aid (75,000 tonnes of milk

powder and 75,000 tonnes of butter/butter oil) by the EEC and Rs. 207.7 crores by

NDDB from its own resources. The programme covered some 170 milk sheds of t wo

countries by organizing 70,000 primary dairy co-operative societies.

The World Bank granted provisional extension of OF-III credit upto April 30, 1996.

Its major emphasis was to consolidate the achievements gained during the earlier

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phases by improving the productivity and efficiency of the co-operative dairy sector

and its institutional base for its long-term sustainability. Investments in OF-III were

focused on strengthening the institutional management aspect of dairy co-operatives

at various levels to establish financially strong, farmer owned and managed

organisation.

The OF-III also had provision for productivity enhancement inputs and institutional

strengthening in the form of training, research, market promotion, monitoring and

evaluation. Particular emphasis was placed on institutional and policy reforms. Efforts

were made to expand infrastructural facilities in all major markets, linking them to

milk sheds through the National Milk Grid (NMG) to ensure year-round stable milk

supply. Marketing thus, becomes the linking force to improve procurement and

strengthen the financial viability of the Unions. The role of NMG is crucial in

ensuring the availability of milk to consumers and a remunerative price to milk

producers by leveling out regional and seasonal imbalances in supply and demand.

Marketing indigenous milk products forms an important part of the overall marketing

strategy.

Table 1.2 displays progress of dairy development during three phases of OF under

four broad parameters namely procurement, processing capacity, market and technical

inputs. Between 1971 and 2000 all the indicators of milk procurement witnessed 4 -

digit increase in percentage terms. With regard processing capacity, the percentage

growth in processing capacity was more in metro dairies (4-digit increased) than in

rural dairies (3-digit increase). In milk marketing dairies in and towns either than

those in metros had a cities better record (4-digit increased) and the same can be alert

milk marketing powder. In permission of technical inputs there was a 3-digit increase

in all the parameters.

19

Ta

ble

1

.2:

Dair

y D

evelo

pm

en

t u

nd

er O

perati

on

Flo

od

Prog

ram

mes

in I

nd

ia

Pa

ram

ete

rs

Pha

se

I

Pha

se

II

Pha

se

III

%

incre

ase

in

2002 o

ver

1971

1971

1981

1985

1990

1994

1995

1996

2002

Pa

nel A

- P

rocu

rem

ent

Nu

mb

er o

f m

ilk

she

ds

5

39

136

170

170

170

170

170

3400.0

0

Nu

mb

er o

f D

CS

(0

00

s)

1.6

13.3

34.5

60.8

67.3

2

69.6

72.7

4

75.2

4

4700.2

5

Nu

mb

er o

f fa

rmer

s m

em

ber

ship

(in

lak

hs)

2.8

17.5

36.3

70

86.9

90

93.1

4

95.2

4

3401.4

2

Ave

rage

mil

k p

rocur

em

ent

(llp

d)

5.2

25.6

57.8

98.1

111.4

5

102

109.4

2

107

2057.6

9

Pea

k m

ilk p

rocur

em

ent

(llp

d)

6.5

34

79

120

130

116

140

151

2323.0

7

Pa

nel B

- P

rocu

rem

ent

Rur

al d

air

ies

(llp

d)

6.8

35.9

87.8

140.3

167.5

172

193.7

185.2

5

2724.2

6

Met

ro d

air

ies

(llp

d)

10

29

35

37.9

38.3

52.3

72.4

86.5

765.0

0

Pa

nel C

- P

rocu

rem

ent

Met

ro d

air

ies

(llp

d)

N.A

. 21.8

29.5

30.6

32.3

4

35

38

45

206.4

2

Oth

er c

itie

s &

to

wn

(llp

d)

0.9

6.1

20.6

41.9

53.9

59

61.3

8

52.2

6

5806.6

7

To

tal

mark

etin

g

N.A

. 27.9

50.1

72.5

86.2

4

94

99.3

8

97.2

6

368.3

0

Milk

dair

y ca

pac

ity

(llp

d)

N.A

. 261

507.5

663

831.5

842

74

956

366.3

0

Milk

po

wd

er p

rod

uct

ion

(0

00 t

one

s/y

ear)

22.4

76.5

102

165

185

195

195.5

250

1016.0

7 %

Pa

nel D

- P

rocu

rem

ent

% incre

ase

in

2002 o

ver

1981

Nu

mb

er o

f A

I ca

nters

(0

00s

) N

.A.

4.9

7.5

10.9

15.1

2

16.2

8

16.5

15.2

5

211.2

2

Nu

mb

er o

f A

I D

one

(in

lak

hs)

N.A

. 4.9

8

13.3

30.1

37.9

39.5

41.5

733.3

3

Cat

tle

feed

cap

acit

y (

00

0

ton

nes/

day

) N

.A.

1.7

3.3

4.3

4.7

4.9

5

5

294.1

1

Inve

stm

ent

(R

s. C

rore

s)

N.A

. 116.5

4

277.1

7

411.5

9

690.6

896.2

1

1303.1

151.6

130.0

8

20

1.11 IMPACTS OF OPERATION FLOOD

Operation Flood has had far reaching impacts on the development of modern dairying

facilities in the country. It has not only impacted growth in production and

distribution of milk and milk products, but also dominated the rural development

scenario by providing sustainable livelihood options to millions of rural farmers. A

World Bank audit showed that of the Rs. 200 crores invested in Operation Flood (II),

the net return into the rural economy has Rs. 24000 crores per year over a period of

ten years, or a total of Rs. 240,000 crores in all. No other major development

programme in the world has matched this input-output ratio.

The impact of Operation Flood on Indias modern dairy sector has been paramount.

From an insignificant 200,000 litres per day (lpd) of processed milk in 1950-51, the

organised sector is presently handling more than 25 million lpd in more than 400

modern dairy plants setup in different milk sheds in the country. One of the largest

liquid milk processing and pasteurizing plants has been established in Delhi handling

over 800,000 lpd (Mother Dairy). Indias first automated dairy plant with handling

capacity of 1,000,000 lpd has been established at Gandhinagar near Ahmedabad in

Western India. Several domestic cooperatives have mushroomed, and many of them

are now emerging as major players in the global market. The Gujarat Cooperative

Milk Marketing Federation Limited, with its popular brand Amul, has become the

one of the largest food companies in Asia, with annual turnover in excess of Rs. 30

billion.

Operation Flood offers some very crucial lessons for policy-makers. The first lesson

is inclusive growth. By establishing dairy cooperatives at the grassroots level, it

brought the milk farmers into its ambit, and placed control in their hands to decide

what and how much to produce and sell. This market-oriented, participatory approach

to development led to many grassroot-level innovations in designing of the supply

chain in dairy.

21

Secondly, efficiency is the key to success in food processing industries such as dairy,

and thus, streamlining and strengthening of the supply chain holds paramount

importance. With setting up of a strong supply-chain network, leakage from the

system to middlemen can be checked and more returns can be realized for the milk

producers (who are the ultimate stakeholders of the system).

Thirdly, for higher price realization, one needs to graduate from simple, low-value

commodities to high-value added processed products. Marketing holds the key to

ensuring that products are available at the right place, at the right time, at the right

price. Brand building is an essential exercise for all dairy companies to exploit the full

potential of the dairy value-chain.

Finally, the most crucial lesson of Operation Flood to all policy makers is that growth

and development should be market-oriented and market-led. By developing the

market forces, and ensuring healthy competition among different players in the

market, a robust and transparent system can be developed, which benefits both the

producers and consumers by ensuring quality products at value-for-money prices.

1.12 PITFALLS IN THE OPERATION FLOOD

There are many pitfalls in the Operation Flood:

1. Operation Flood Successful in Limited States Only: The success of dairy

cooperatives has been largely confined to a few states in India such as Gujarat,

Punjab, Andhra Pradesh and Rajasthan, where brands like Amul, Verka, Vijaya and

Saras have become household names. However, a large number of dairy cooperatives,

unions and federations are defunct and are not able to create value for their members.

Cooperatives in Uttar Pradesh (Parag Dairy), Kerala (Milma), and Madhya Pradesh

(Uttam Dairy) are largely loss-making. A lot needs to be done to strengthen such non-

performing cooperatives.

22

2. Excessive Government Interference in Decision-Making: Excessive

government interventions in the cooperatives due to vested political interests have led

to massive politicization of dairy cooperatives. These cooperatives have a very large

rural base, with millions of farmers as members, and they could play a major role

during political elections. With electoral forces, and not market forces guiding the

decision-making of the cooperatives, most cooperatives have become agencies for

implementing the populist policies of the government, and thus unprofitable and

unviable business units.

3. Limited Sources of Finance: Limited sources of finance available to these

cooperatives also hinder the smooth functioning of many dairy cooperatives. The

cooperatives cannot raise equity from the market, and have to depend either on their

own retained earnings or on equity from member farmers. Both these sources are

woefully inadequate for meeting the financial needs for technological upgradation and

innovation, and thus the cooperatives have to resort to government loans and grants.

This in turn makes them an easy prey for government interference in decision-

making.

4. Politicization of Cooperatives: Politicization of cooperatives has caused a

plethora of problems. Overstaffing, low capacity utilization, weak market orientation

and poor financial controls have become the norm rather than exception in case if

most Indian dairy cooperatives. Appointment of bureaucrats as managers of the

cooperatives has been the case in Madhya Pradesh, Orissa and Uttar Pradesh. These

bureaucrats do not have the professional skills required to manage such producer

cooperatives. Consequently, under such bureaucratic heads, the cooperatives fail to

respond to neither the needs of the producer farmers, nor the needs of the industry.

5. Government dictated input-output pricing: In case of most cooperatives the

state government fixes the minimum producer price. For instance in Maharashtra and

Punjab, the State Government fixes the selling price of milk to government dairies.

23

The selling price is determined by the government through on the spot interventions

in case of Andhra Pradesh and Karnataka. This has caused inevitable distortions in the

pricing of processed dairy products, and has adversely affected the financial health of

the cooperatives.

6. Inability to Meet the Stringent Sanitary and Phyto-Sanitary Standards for

Exports: Indian dairy industry, on an average, falls short of meeting the Sanitary and

Phyto-Sanitary (SPS) requirements of the WTO Agreements, and thus is not able to

compete in the global markets. As a direct consequence of this, most of the Indian

dairy exports are directed to the Middle East and the developing nations of Asia and

Africa where the SPS and other export regulations are not all that stringent. However,

in order to be able to compete in the more remunerative markets of the West such as

Europe and the US, there has to be a more concerted effort to make our dairy plants

truly of global standards.

Bangladesh and UAE account for around 45% of dairy exports from India. Indian

exports to remunerative markets of USA, EU, Canada and Australia have been quite

low. One reason for low exports of dairy products from India to these markets is that

these developed nations are also the major milk producing nations of the world. Thus

there does not exist much scope of meeting the unsatisfied demand in their

economies. Also, these nations have very high and stringent SPS and FDA norms,

which most Indian dairy manufacturers find difficult to comply with.

The recent Clean Milk Production (CMP) campaign of the NDDB is a step in total

quality management in dairy products. In other words, total quality management at

every step from the cow to the consumer. This has been initiated keeping in mind

the growing quality consciousness among consumers in domestic as well as in

international markets.

24

1.13 ROLE OF DAIRY CO-OPERATIVES

Dairy farming plays a key role in the socio economic status of the large percentage of

rural people especially in developing countries through provision of employment

opportunities as well as supplementary income to the rural poor. However, evidence

indicates that the proportion of dairy farmers engaged in subsistence agriculture in the

developing world is still high despite the rapid increase in demand of livestock

products. As a result, many countries are attempting to increase milk production by

assisting small-scale farmers to integrate in markets since they are the most numerous

and poorest of the farmer population as a whole. This has an impact on the provision

of rural employment, increase in income and diversification away from traditional

production to modern systems of production. Therefore, the co-operative system has

proved to an effective vehicle for dairy development, particularly in rural areas. It has

featured prominently in dairy development worldwide because of the range of skills

involved in milk production and marketing that require a number of activities that can

best be provided through collective action, thus through co-operatives.

The role of co-operatives in dairy production is evident in the following ways:

1. Improvement in milk production

Co-operatives have played a vital role in fostering dairy development in a number of

countries in the developing world, particularly by providing a stable market

environment and delivering necessary farmer services for smallholder dairy farmers.

This has been made possible through the development of informal or traditional

marketing channels which co-operatives have contributed to, and these markets are

dominated by smallholder farmers. They control approximately 80% of marketed

milk in many countries 1in SSA, South Asia and Latin America. Examples include

Kenya (86%), Tanzania (98%) and India (83%).

Dairy development through co-operatives is considered to be the most effective

strategy for supporting smallholder dairy farmers, which is made possible by

25

providing a guaranteed market for milk; supplying feed at reasonable prices as well as

provision of other services such as milk collection, provision of credit, veterinary aid,

and artificial insemination. Access to necessary inputs and services is a major

contributor to increase and sustain milk production. An increase in milk production

has a positive influence in income generation which encourages farmers to invest in

better dairy technology, such as improved dairy breeds and better feed, resulting in

milk production being more profitable. Farmers produce better feeds and improve

housing and care for their animals, which contribute to dairy development and hence

an increase in milk production.

2. Improvement in milk marketing

The marketing of milk presents serious challenges for smallholder dairy farmers

because of its unique features that require special co-ordination in markets as

compared to other agricultural products. According to Wolf and Hamm and

Hovhannisyam, milk has three special attributes that distinguish its marketing from

other agricultural products. Firstly, milk is a perishable product and unlike other

agricultural products, it can only be stored for a few days in its liquid state. Secondly,

most agricultural products are harvested twice a day. Thirdly, the supply and demand

of milk is counter-cyclical over the year. These attributed are evidence that milk

requires a secure market and co-operatives have proven to be a provider of such an

assured milk market, as observed in countries like India, Kenya and Uganda.

Moreover, these special attributes of milk contribute to high transaction costs in dairy

production and marketing because of the high marketing costs for fluid milk, scattered

nature of fluid milk markets and the risk attached to marketing milk as a perishable

product. Because of its perishable nature, milk requires rapid transportation to the

market in order to avoid losses arising from spoilages. Farmers lack post harvest

infrastructure such as chilling facilities to keep milk in good condition hence the need

for rapid transportation of milk to the market. This results in high transaction costs

which negatively affect farmers decision to participate in markets, thus limiting them

26

from accessing markets. In this regard, co-operatives play a crucial role in minimizing

transaction costs in dairy production because they improve market participation by

overcoming barriers to assets, information, necessary services and, most importantly,

by overcoming barriers to markets within which smallholders wish to sell their milk.

Co-operatives therefore improve the marketing of milk through the minimization of

transaction costs associated with marketing milk as a perishable product. Co-

operatives provide a reliable market outlet to dairy farmers and they have the

advantage in the collective marketing of milk which significantly lowers transaction

costs among smallholder farmers. The provision of a reliable market outlet that is

sufficiently rewarding for farmers acts as a stimulator for milk production and co-

operatives provide more marketing options to farmers. This in turn brings about major

improvements in the production and marketing of milk as well as changes in

consumption behavior of smallholder households since they consume a higher

percentage of their produce. Co-operatives also enable value addition through the

processing of milk into less perishable products which assists farmers in selling

directly to final consumers, thereby earning more profit.

Improvement in market access encourages more intensive dairy production in the

form of improved dairy breeds and improved feed technologies that enable

smallholder farmers to increase their income and employment, which in turn leads to

improvement in the welfares of families, including those of women and children. An

example of successful co-operatives in the dairy industry is found in India. More than

70% of Indias milk is produced by households owning only one or two dairy animals

and these producers form part of a nationwide network of dairy co-operatives.

3. Improving food safety and standards

Increasing food safety concerns over the effects on health and recent global concerns

have led to a growing interest among consumers in food safety assurances and

traceability of products offered by farmers. As one of their advantages, co-operatives

27

have made it possible for dairy farmers to produce good quality milk and dairy

products as independent farmers are often unable to meet food safety and quality

control requirements because of poor milk handling techniques and technology used.

Smallholders do not usually have chilling or processing facilities because of extreme

poverty, low asset base and no access to finance. Co-operatives can thus provide

farmers with such facilities. To ensure good quality products and safety, milk from

farmers is tested on a daily basis, which forces farmers to use appropriate milk

handling techniques for which they are given appropriate training. In addition, co-

operatives have played a role in undertaking more farmer-oriented research which has

expanded dairy education and extension services, and enhanced government role in

integrated dairy development. They have played an important role in providing a base

for farmer service delivery and for generally stable agricultural knowledge systems. In

short, co-operatives play a major role as a source of market information for dairy

farmers. Access to market information improves decision making by farmers and

enhances market participation. Access to such information improves production

practices to prevent, eliminate or reduce food safety hazards on the farm. According

to Valeeve, these practices include particularly husbandry and management practices

such as feed production, cattle movement and traceability, health and treatment,

milking procedures, maintenance of milking equipment, dairy cattle housing, water

management, hygiene level on the farm, as well as transport of raw milk to selling

points. Evidence suggests that farmers with limited access to this information are less

likely to adopt standards.

1.14 DAIRY CO-OPERATIVES IN GUJARAT

The Dairy Co-operative movement in Gujarat is similar to the co-operative movement

in India. Amul is the pioneer of the Dairy co-operative in Gujarat and in India also.

Before the birth of Amul Dairy Anand, there was no systematic marketing for milk in

India. As milk is perishable item, milk producers farmers had to sue their milk to the

middlemen for whatever they were offered. Middlemen bought the milk from milk

28

producers at a lower price and sold it to cities with the huge margin of profit. Many

times, milk producers were complied to sell cream and ghee at throw away prices.

Thus, the middlemen exploited the milk producers, farmers.

Though many farmers were illiterate, they knew that the system under which private

traders bought their milk and milk products at lower prices and sold it to huge margin

of profit was just not true and fair. In 1945, the Government of Bombay started the

Bombay milk scheme. At that time, the Polson Dairy the private dairy had got

monopoly to collect milk from Kaira district to be sold at Bombay and exploited the

farmers. The Government of Bombay found it profitable and Polson Dairy also kept

good margin of profit. But, in spite of this situation, nobody had tried to determine the

price of milk to the benefits of the farmers. As such unsatisfaction among the farmers

grew. So, they decided to have their own milk co-operatives to save their own

interest. In this reference, they determined to supply the milk as an organization and

not as an individual. The motivation for this came from Sardar Vallabhbhai Patel. In

shaping and creating the Amul, the vital role of leaders like Morarji Desai,

Tribhuvandas Patel, dedicated processionals like Dr. V. Kurien and Dr. Dalaya was

very valuable. The Bombay Government in the milk industry. In this reference, the

milk producers of Kaira district went on strike for 15 days. So, not even a drop of

milk was sold to private traders. And they could not provide a drop of milk to

Bombay. So, the scheme had collapsed, due to the strike of milk producers. After

seeing the strong determination of the milk producers farmers, the Bombay

Government had to obey to the demand for the establishment of milk co-operatives.

Eventually, the Kaira District co-operatives milk producers, Union ltd. Which is

known as Amul Dairy Anand was started in 1946. In the starting, the Amul Dairy

collected just 250 liters of milk per day with the help of two co-operative societies of

the union. Due to Amul Dairy, farmers were obtaining fair and sufficient reward on

the basis of fat content of the milk. They were paid promptly also. So, more and more

farmers jointed the union, and the union got much strength. It turned today into

29

7,56,600 litres of milk per day, being collected from 1073 vil lage co-operative

societies with the help of 6,15,415 farmer members Late Tribhuvandas Patel and Dr.

V. Kurien have given the name of Amul as excellence in Asia and have brought the

White Revolution in Gujarat as well as in India. And the milk producers also

supported and co-operated their efforts nicely and realized the spirit of co-operation in

a real sense.

Amul Dairy Union collected from its members and delivered it to milk commission of

Bombay. But the milk commission had started irregularity. They could not give the

payment to the union in time and rejected to accept the excess milk in winter season.

And so, the union established its own processing plant to handle winter glut of milk.

The union also set up the chilling centre in Anand in 1949. The production of butter

and milk power was started in 1955. In the year 1958, milk producers factory was

developed to produce sweetened condensed milk a new plant was started for the

production of baby food and cheese in the year 1960. In the year 1964, for the first

time in the world, cheese and baby foods were being processed from buffalo milk on

large professional scale. The prime minister, Shree Lal Bahadur Shastri visited Anand

in 1964 and he announced the cattle feed plant of the union. Another milk powder

plant was commissioned in 1965. Shree Lal Bahadur Shastri wished that milk

cooperative as this Amul Pattern should be set up in the other region of the

country also. And with this aim, N.D.D.B. was established in the year 1965. With its

headquarter in Anand. In 1970, N.D.D.B. introduced the operation Flood (O.F.)

programme for the replication of Amul pattern of dairy co-operative throughout in

India. For the marketing of milk, Gujarat co-operative Milk Marketing Federation

Ltd. (GCMMF) was established in 1971 in Anand. To develop dairy industry on

cooperative line, Gujarat Government established (G.D.D.C.) Gujarat Dairy

Development Corporation in the year 1972. Amul Dairy set-up the plant for high

protein weaning food, chocolate etc. in 1974. Thus, the Dairy co-operative revolution

is continuing year by year.

30

Presently, 16 co-operative milk dairies are connected and worked under Gujarat Co-

operative Milk Marketing Federation (GCMMF) Ltd., Anand.

Table 1.3: Co-operative Dairies in Gujarat

Co-operative Dairy City No. of

Societies

No. of

Members

Average Milk

Production

Ahmedabad District Co-operative Milk

Producers Union Ltd. Ahmedabad 433 52,428 90,000 lpd.

Banaskantha District Co-operative Milk

Producers Union Ltd. Palanpur 1,130 97,251 2,95,000 lpd.

Baroda District Co-operative Milk Producers

Union Ltd. Baroda 783 1,56,691 2,25,000 lpd.

Bharuch District Co-operative Milk Producers

Union Ltd. Bharuch 289 37,900 38,000 lpd.

Bhavnagar District Co-operative Milk Producers

Union Ltd. Bhavnagar 190 25,532 23,000 lpd.

Gandhinagar District Co-operative Milk

Producers Union Ltd. Gandhinagar 56 13,000 46,500 lpd.

Junagadh District Co-operative Milk Producers

Union Ltd. Junagadh 400 41,500 73,000 lpd.

Kaira District Co-operative Milk Producers

Union Ltd., Amul Dairy Anand 943 5,13,280 7,40,000 lpd.

Kutch District Co-operative Milk Producers

Union Ltd., Kutch Dairy Madhapar N.A. N.A. 25,000 lpd.

Mehsana District Co-operative Milk Producers

Union Ltd., Dudhsagar Dairy Mehsana 1,020 2,92,800 7,04,402 lpd.

Panchmahal District Co-operative Milk

Producers Union Ltd., Panchamrut Dairy Godhra 1,133 1,26,510 1,12,000 lpd.

Rajkot District Co-operative Milk Producers

Union Ltd. Rajkot 193 29,620 50,000 lpd.

Sabarkantha District Co-operative Milk

Producers Union Ltd., Sabar Dairy Himatnagar 1,315 2,00,482 3,22,346 lpd.

Surat District Co-operative Milk Producers

Union Ltd., Sumul Dairy Surat 854 1,60,000 3,00,000 lpd.

Surendranagar District Co-operative Milk

Producers Union Ltd. Surendranagar 486 31,000 30,000 lpd.

Valsad District Co-operative Milk Producers

Union Ltd, Vasudhara Dairy Valsad 348 35,900 74,400 lpd.

31

1.15 CO-OPERATIVE COMPANIES PLAYING IN DAIRY INDUSTRY AND ITS

BRANDS

Table 1.4: Co-operative companies playing in dairy industry and its brands

States Co-operative Unions Brands

Andhra Pradesh Andhra Pradesh Dairy Development Co-operative Federation

Limited (APDDCF)

Vijaya

Bihar Bihar State Co-operative Milk Producers Federation Limited

(COMPFED)

Sudha

Gujarat Gujarat Co-operative Milk Marketing Federation Limited

(GCMMF)

Amul,Sagar

Haryana Haryana Dairy Development Co-operative Federation Limited

(HDDCF)

Vita

Himachal

Pradesh

Himachal Pradesh State Co-operative Milk Producers

Federation Limited (HPSCMPF)

Karnataka Karnataka Co-operative Milk Producers Federation Limited

(KMF)

Nandini

Kerala Kerala State Co-operative Milk Marketing Federation Limited

(KCMMF)

Milma

Madhya Pradesh Madhya Pradesh State Co-operative dairy Federation Limited

(MPCDF)

Sanchi,

Shakti,Sneha

Orissa Orissa State Co-operative Milk Producers Federation Limited

(OMFED)

Omfed

Utter Pradesh Pradeshik Co-operative Dairy Federation Limited (PCDF) Parag

Punjab Punjab State Co-operative Milk Producers Federation Limited

(MILKFED)

Verka

Rajasthan Rajasthan Co-operative Dairy Federation Limited (RCDF) Saras

Tamil Nadu Tamil Nadu Co-operative Milk Producers Federation Limited

(TCMPF)

Aavin

West Bengal West Bengal Co-operative Milk Producers Federation Limited

(WBCMPF)

Benmilk

Goa Goa State Co-operative Milk Producers Union Limited Goa dairy

Jammu Jammu Co-operative Milk Producers Federation Limited Jamfed

Pondicherry Pondicherry Co-operative Producers Union Limited Ponlait

Sikkim Sikkim Milk Producers Union Limited Sikki milk

Tripura Tripura Co-operative Milk Producers Union Limited Gomati

32

1.16 MILK PRODUCTION AND STATE-WISE MILK PRODUCTION IN INDIA

India ranks as the world's largest milk producer during 2010-11 with an annual output

of 121.8 million tonnes (Table-1.5). India's milk production accounts for 16% approx.

of the world total output. Constituting an important segment of the Indian rural

economy, dairy and dairy products provide livelihood to millions of homes in villages

and ensure supply of quality of milk and milk products to people of both urban and

rural areas. The accelerated socio-economic development during the 21st century is

throwing up challenging issues like food security, food safety, quality and their

linkages with the national and international markets as the demand for food is

increasing.

Table 1.5: Milk Production in India

Year Production (Million Tonnes) Per Capita Availability (gms/day)

1997-1998 72.1 207

1998-1999 75.4 213

1999-2000 78.3 217

2000-2001 80.6 220

2001-2002 84.4 225

2002-2003 86.2 230

2003-2004 88.1 231

2004-2005 92.5 233

2005-2006 97.1 241

2006-2007 102.6 251

2007-2008 107.9 260

2008-2009 112.2 266

2009-2010 116.4 273

2010-2011 121.8 281

2011-2012* 127.3

Note: * Anticipated achievements

Source: Department of Animal Husbandry, Dairying & Fisheries, Ministry of Agriculture, GOI.

(www.nddb.org/statistics/milkproduction.html)

33

STA

TE

-WIS

E M

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Min

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Agr

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OI.

35

Union Agriculture Minister had launched the ambitious Dairy Project named as

National Dairy Plan Phase-I to increase the productivity of milch animals and

provide more revenues to Indias 70 million small milk producers and upgrade milk

processing plants in cooperatives and private sectors. The total amount of Rs. 2242

crores (426 Million USD) will be spent by International Development Association,

World Bank and Government of India. Milk production is growing at 3.3% while

consumption is growing at 5% leaving a gap between demand and supply. We are

sure that with the implementation of NDDB National Dairy Plan, Government would

be able to plug the gap between demand and supply.

1.17 PROBLEMS AND PROSPECTS OF DAIRY INDUSTRY IN GUJARAT

Dairy Industry in general and Gujarat in particular, will have to face many challenges

and problems that can be classified in to the following categories:

1. External Problems

2. Internal Problems

External Problems: External problems are as under:

1. Tradition: Dairies of Gujarat are particularly proved that the dairy co-operatives

have encouraged and strengthened the understanding and practice of democracy.

We are also proud that women have an increasing role not only in milk

production. But also in the membership and leadership in dairy co-operatives. We

are proud of this and above said achievements. At the same time, we must not rest

our successes. The world is changing rapidly and if we are continue to serve the

interests of Indias dairy farmers, and then we must be aware of and respond to the

dramatic changes in our own country and in the world as a whole. We must keep

our purpose and principles constantly.

2. Inadequate Marketing: When we see, the perspective 2010, strategy for

marketing, the result of the investment has not entirely measured up to our

36

expectations. According, to the NDDB the major reason for inadequate marketing,

is that the co-operative unions and marketing federation too often lack qualified

professionals in the key marketing positions. This problem is compounded by their

lack of freedom in employing the right professionals.

3. Raising Quality Standard: If, we truly want to be global players then we must

not only meet-we must strive to surpass- the strictest international standards. It is

not greatest and the most difficult challenge. At the present, the dairy industry

continues to be all too indifferent to quality. If we are to raise quality, we have a

address the entire system from producer to procurement to processing through to

marketing and the end customer or user.

4. Increase the scale of operation: Co-operatives in the west are merging with other

co-operatives or investor owned firms. Regional dairy co-operative like land o

lakes in the U.S. have become national through merger. In India and in Gujarat,

co-operatives must begin to examine whether there are valuable synergies in

coming together and formatting alliances. As global dairy evolves, we must be

sensitive to change and must in turn consider new ways and forms of doing

business.

5. Building and Sustaining a Database: Sound policy depends on sound

information. Government has so far unfortunately, failed to invest our national

data on cattle milk and milk products and marketing. Without accurate and timely

data neither commercial nor policy decisions can be taken with the degree of

confidence. Global positioning implies that we face global competition. Without

this our dairy industry can be at the best only be mismanaged.

37

Internal Problems: Internal problems are as under:

1. Need of Professional Leadership and Management: They believe that there is

an urgent need of professional leadership and management at every level of the

organization.

2. Need to change approach to farmer members: There is a need to change the

approach of farmer members because they consider the milk activity as a

secondary activity and not as a prime profession.

3. Co-operative Laws and by Laws: There is a serious need of amendment in

present co-operative laws and bylaws to protect the interest of all the stakeholders.

4. Governments Audit System: There is a need to reform present governments

audit system. Today, many co-operative dairies have started their Internal Audit

System because of this reason.

1.18 STEPS TO REVIVE DAIRY CO-OPERATIVES

Assistance to Cooperatives: Under the scheme of revitalizing sick dairy cooperative

unions and federations, 12 milk unions in Madhya Pradesh, Uttar Pradesh, Karnataka,

Kerala, Maharashtra and West Bengal have been proposed for rehabilitation with an

estimated outlay of Rs. 87 crores approximately. The scheme is implemented on a

50:50 partnership between the state and the union government. Though such

rehabilitation plans do provide these cooperatives with much-needed financial support

in the form of grants, they on the flip-side bring with them more government

interference in the management of these cooperatives. Thus, on the one hand such

rehabilitation and revival packages for the cooperatives do provide short-term

solutions to make the cooperatives function; they on the other hand do not address the

long-term issues of bureaucratic interference in management of these cooperatives.

What required are not more grants or loans from the government. Allowing the

cooperatives to raise funds from the markets and other financial institutions at

38

competitive rates, and more professional management of the cooperative are the

structural solutions needed to make these cooperatives vibrant business entities. The

Producers Companies Act (2002) is a pioneering step in the direction of m aking the

cooperatives less dependent on government sources of funding, and enabling them to

restructure their debt-equity ratio on prudent financial lines.

Dairy Development in Non Operation Flood, Hilly and Backward Areas: In

continuation of the centrally sponsored scheme to promote dairy development, an

outlay of Rs. 250 crores was made in the 9th Plan. Under this scheme dairy

cooperatives are to be promoted and strengthened in hilly and backward districts of

the country. The focus of the programme is two-pronged of not only giving a thrust to

dairy in these regions, but also sustainable livelihoods to the poor. The Anand

experience of dairy development has been of understanding the importance of value -

addition, marketing and branding for higher price realization. In the light of the above,

the National Dairy Development Board has launched a Mnemonic Campaign to

develop a common, umbrella brand, with standardization of logo, artwork and retail

outlet design for faster brand recall for these cooperatives. The regional dairy

cooperatives, upon paying a consideration to Mother Dairy, can use the Mother

Dairy brand for selling their milk; however Mother Dairy shall ensure quality control

and inspection of these regional cooperatives. This has been allowed to reap the

mileage of the Mother Dairy brand by smaller, upcoming cooperatives which did not

have the wherewithal to establish their own brands.

1.19 SWOT ANALYSIS OF INDIAN DAIRY INDUSTRY

STRENGTHS

Largest pool of dairy cattle in the world.

Our culture makes us passionate about keeping cows.

Availability of skill for animal rearing in most parts of the country.

Indian breeds of cows represent the worlds largest milk producing herd.

39

Keeping animal is a household practice.

India is the largest producer of milk in the world.

70% of milk production is done by small and marginal farmers in the country and

is largest employment provider in the non farm sector.

Indigenous breeds of cows show better immunity than crossbred cows.

WEAKNESS

Coexistence of a large portion of useless cattle population with low productivity.

Too much fragmented production of milk.

Farmers have a poor knowledge on costing of milk as most of the costs are

imputed costs.

Land cost for growing fodder is never calculated as it is done on gochar land.

Labour is becoming costlier.

Traces of insecticides, pesticides and antibiotics are common in milk.

Poor knowledge about nutrition and balanced ration for animal.

Poor personal hygiene of farmers and his family and ignorance of clean milk

production also lead to poor quality of milk.

It is not considered as a full time employment and is being carried out by woman

or elderly person at home.

Current practices are not environment friendly.

Poor infrastructure for milk collection, chilling and transportation.

Poor infrast