Capitalisation of Livestock Programme Experiences India

The Importance of the Informal Milk Sector in India

A K Joseph; N Raghunathan; Satish

Kulkarni

ILRI workshop on safety of animal source foods with an

emphasis on the informal sectors, New Delhi, India, 8

February 2011

(A Programme of SDC - IC)

AROIMM

Action Research on Traditional Milk Market

Objective

To understand the Dynamics of the Traditional Milk

Sector & identify interventions to improve the sector

To facilitate community identified spontaneous actions

To contribute to sustainable livelihood options to the producers & assured quality milk to consumers

Partners

• Research Team: CMS, GoAP, NDRI, ACTIVE & SECURE

• Support & contribution: CALPI, ILRI, NRMPA

• Steering Support: IIMA, PPLPI, IC, SMILDA, APDDCF

CALPI

Traditional Milk Channel*Traditional Milk Channel*

Consists of channels served by producers or vendors supplying unprocessed, unbranded milk in loose form or filled in plastic bottles or pouches, in flexible quantities & prices

* Defined for the purpose of the AR

Unique features of TMSUnique features of TMS

1.1. Built on personal relationshipsBuilt on personal relationships

2.2. Wake-up call, help in milkingWake-up call, help in milking

3.3. Doorstep collectionDoorstep collection

4.4. Acceptance of froth in milkAcceptance of froth in milk

Key Findings and ActionsCALPI

5. 5. No free samples for testingNo free samples for testing6. Supply of milk when dry 6. Supply of milk when dry 7. Supply of groceries7. Supply of groceries8. Emergency loans, advances8. Emergency loans, advances

9. 9. The only market access in remote areas10. Only milk source in 80% towns11. High consumer confidence (rich, fresh, tasty, creamy)

Key Findings and ActionsCALPI

2. Limitations of OMS2. Limitations of OMS1. Delivery at the fixed center

2. Sample for testing

3. A critical minimum quantity of handling at primary level

4. Primaries have fixed costs to meet (building, staff…..)

5. Cluster of villages for a milk route, min. quantity for a mini truck

6. Viability of each tire

7. Uniform price through out

8. Standard system with little flexibility for local needs

1. Spread, reach & impact potential

TMS has enormous size, spread, reach & impact potential

Est. 1700 vendors in Khammam, A/cs for 61% of prodn & 91% of mktd in the Dist. Serves 53 – 57 % of producing HHs. even where all the three channels operate.

98% of HHs in Sathu; 89% in Kham. & 42 % in Vijayawada purchase from TMS. Market share 99%, 88% & 42%

Key Findings and ActionsCALPI

Key Findings and Actions

2. Quality of milk

• All producer samples conformed to legal standards

• < half of vendor samples conformed to quality stds

• 67% cons. samples in Khammam, 88 % in Sathuppally & 55 % in vijayawada did not conform to legal standards

• 50% vendor samples carried neutralizers in lean

• Part of evening milk gets mixed with morning milk

• Very short MBRT (1 hr to 5 min)

• 60-74% consumers feel TMS milk to be thick, creamy & tasty

• Legal standards, difficult to be adhered to

SNF SNF %%

Fat Fat %%

TS %TS %

9.09.0 5.05.0 14.014.08.58.5 4.54.5 13.013.0

8.58.5 3.03.0 11.511.5

9.09.0 1.51.5 10.510.5

9.29.2 0.50.5 9.59.5

Legal standards for milk Processed/packed Milk

Traditional MilkSNSNF %F %

Fat Fat %%

TS %TS %

9.09.0 5.05.0 14.014.0

Key Findings and Actions

3. Price of Milk

• Producer price lower at Rs. 11.20, price spread 51- 59%

• Existence of a sort of price cartel

• Non-price incentives (wakeup call, milking, accepts froth, doorstep collection, loan, grocery supply, flexible quantity)

• Flexible sale Price. Correlation between price & milk solids

4. Scale of operation

• Low scale – 45% < 20 lpd, 25% > 50lpd, Avg – 38 lpd

• Procurement takes 2- 4 hrs, total cycle 5-6 hrs, high labour input per unit quantity

• Quantity balancing at each vendor level

CALPI

Key Findings and Actions

5. Stakeholder institution

• Lacks stakeholder organizations/ platforms

• Lacks awareness /capacity building/ training

• Lacks pressure groups & enabling regulation

6.Basic infrastructure • No infrastructure for testing, bulking, processing, storage, packing, preservation

• Unsuitable cans, carriers & vehicles

• Cannot absorb high costs & long cycle timeTMS remains primitive with low efficiency, quality & productivity

CALPI

Traditional Milk Sector - Tapping the SynergyActions taken up

Associations of Vendors & producers and platforms of consumers

Capacity & awareness building/training

Interface meetings & negotiations

Establishment of quality testing facility

Linkage for productivity enhancement (trevis, bulls, Vet./ health camps, vaccinations, de-worming, feeds, seeds, fodder, exposure visits)

CALPI

Training in NDRI

Fodder production

Exposure visitsQuality based pricing

Veterinary camps

L.consump

Cop&Govt

Pvt.

Traditionl

AR on Traditional Milk Market – Macro picture Milk Flow in India – 2005-06

( Production 97.1 mmt )

33.91 mmt929 llpd34.92 %

49.00 mmt 1343 llpd, 50.5% / 77.55%

4.72 mmt 129 llpd , 4.86 % / 7.47%

9.47 mmt 259.5 llpd, 9.75 %/ 15 %

Source : Derived from Dairy India 2007, NDDB Annual Report, DAH & D

Rs. 1.6 bn. per day

Inspite of its enormous size, spread, reach & impact potential, TMS remains sadly neglected in policies, investments & programmes

CALPI

Low Production Areas Not Covered by the Organized Sector

Source: Derived from Dairy India 2007, NDDB Annual Report 2005-06, DAHD & F

ParameterParameter TotalTotal Covered Covered By OMSBy OMS

Not Not covered covered

% not % not coveredcovered

1. Districts1. Districts 604604 338338 266266 4444

2. Villages2. Villages 638,365638,365 188,365188,365 450,000450,000 7070

3. Milk Producing 3. Milk Producing House holds House holds (million)(million)

66.9466.94 20.3320.33 46.6146.61 7070

4. Milk marketed 4. Milk marketed (Min. (Min. mt 2005-06)mt 2005-06)

63.1963.19 14.1914.19 49.0049.00 7777

5. Consumer house 5. Consumer house holds holds (million)(million)

142142 3232 110110

TMS impacts the livelihoods of an estimated 46 min producer HHs, 110 min consumer HHs & millions of vendor HHs in India

CALPI

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0

10

20

30

40

50

60

70

80

90

1995-96 2001-02 2005-06

% of mktdQnty mktd

84.62%80.65% 77.55%

36.41mmt

43.97mmt

49.00 mmt

Milk marketed by TMS

At the present rate of displacement, TMS would take 6-7 decades to reduce to 10 % of milk marketed

CALPI

Source : Derived from Dairy India, DAH & D

Stimulating Growth in Areas Left Over by OMS

No/Low Market

No /Low Infrastructure

No Institution

Low density of prodn.

Low price

Low Liv. service

Poor quality

Slow growth

Characteristics of left over areas

Stimulating Growth in low productive Areas thru TMS

Link to Market

Minimum Infrastructure

Flexible Institution

Reasonable price

Coord Liv. service

Support for quality

Formal sector comes in early

Training

Traditional Milk Sector - Tapping Synergies

‘Vendor’ & ‘traditional sector’ are highly maligned

TMS is likely to stay for many decades to come

Is too vast & potential to be neglected

Law alone cannot ensure conformity to food stds

-ve impact of low price, income & quality on poor

Purpose of AR is not promotion of ‘Vendors’, but improve market access, income, quality, productivity & accelerated & inclusive growth

Tap synergies to accelerate production & attract competition for the benefit of all

CALPI

Traditional Milk Sector (TMS)

Further Improvements

Non-negotiable: Conformation to the food laws of the country

1. Mobile quality testing / tamper proof sample bottle

2. Redesigning of milk cans, carriers & two wheelers

3. Cream separation & fat balancing instead of dilution

4. Low volume, low cost, low cycle time instant milk chilling

5. Low volume, low cost milk pasteurization

6. Packing, labeling and branding

Action Research on Traditional Milk MarketPolicy Elements 1. Recognize TMS role in market access & livelihood security

2. Review criteria for coverage under dairy programmes – commercial route and development route

3. Provide infrastructure (low volume, low cost, instant) for testing, bulking, chilling, fat balancing, packing & storage

4. Review milk quality standards

5. Capacity building/ training & enabling quality regulation

7. Linkage & coordination for Livestock Service delivery

8. Review viability of smallholder milk production /supply of animals under poverty alleviation programmes

CALPI

CALPI

Capitalisation of Livestock Programme Experiences India

 

THANKS

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0

1

2

3

4

5

6

1992-93

95-96

98 -99

2001-02

2004-05

% Growth

Rate of Annual Growth in Milk Production in India

At the present rate of displacement, TMS would take more than 6-7 decades to reduce to 10 % of production

Milk ProducersMilk Producers

In research sites, 42% of HH are milk In research sites, 42% of HH are milk producersproducers

Overall 45 % illiterate; 36 % landless; 42 Overall 45 % illiterate; 36 % landless; 42 % small/marginal farmers – livelihood of % small/marginal farmers – livelihood of poor householdspoor households

More proportion of small producers (up to More proportion of small producers (up to 2 liters per day) in Vendor only Villages 2 liters per day) in Vendor only Villages

Low productive areas; small holders; poor management practices; lower income categories; additional/ supplementary income; large numbers;

prefer TMS for variety of reasons

Milk VendorsMilk Vendors

32% Landless; 31 % either small/marginal 32% Landless; 31 % either small/marginal farmers; farmers;

72 % of them in business for more than 5 72 % of them in business for more than 5 years and 75% of them it is main businessyears and 75% of them it is main business

73% of Vendors perceive “Producers Do not 73% of Vendors perceive “Producers Do not maintain Quality” as a major riskmaintain Quality” as a major risk

Scale of operations (large numbers with low Scale of operations (large numbers with low scales of operation)scales of operation) 45% of vendors handle < 20 LPD45% of vendors handle < 20 LPD 30% handle 20 – 50 LPD30% handle 20 – 50 LPD 25% handle > 50 LPD25% handle > 50 LPD Average around 38 LPDAverage around 38 LPD

ConsumersConsumers

Overall 57 % of Consumers buy from Traditional Overall 57 % of Consumers buy from Traditional sector; in terms of quantity, 59%sector; in terms of quantity, 59%

65% of Consumers of TMS report that they are 65% of Consumers of TMS report that they are getting water mixed milkgetting water mixed milk

Average purchase 223 ml per capita per dayAverage purchase 223 ml per capita per day Price range – Rs. 10 to 18 per litrePrice range – Rs. 10 to 18 per litre Preference for the TMS - ‘quality of milk (fresh, Preference for the TMS - ‘quality of milk (fresh,

thick and tasty)’ and ‘available at right time’ and thick and tasty)’ and ‘available at right time’ and ‘home delivered’‘home delivered’

Majority (67%) traditional sector consumers are Majority (67%) traditional sector consumers are satisfied (happy) with servicessatisfied (happy) with services

Long standing relationship consumers; Specific preferences;

Clear about the price-quality relationship; Flexibility and door deliveryPreferred; Perceive that their usage pattern

Takes care of problems related to quality, handling

Producers Share in Consumer Producers Share in Consumer RupeeRupee

Producers' Share in Consumer Rupee Channel - Producer - Vendor- Consumer

Prod Price, 0.59

Vendor Costs, 0.22

Vendor Opp Cost, 0.11

Vendor Net Margin, 0.08

Prod Price, 0.51

Vendor Costs, 0.11

Vendor Opp Cost, 0.04

Vendor Net Margin, 0.34

0%

20%

40%

60%

80%

100%

Large Scale - 100 LPD Small Scale - 15 LPD

Conformation of Fat and SNF Conformation of Fat and SNF levels in samples from different levels in samples from different

playersplayers

Conformation to Quality Standards across Milk Chain - NDRI Tests

0%

20%

40%

60%

80%

100%

Producer Vendor Consumer-HH

Consumer-Insti

Organisedsector

Channel PlayersFat SNF TS MBR

Producer samples consistently conformed to total solids figures, whereas vendors’ samples found to be below the standards

Institutional consumer samples had the poorest conformation rate

Conformation to Legal Standards Conformation to Legal Standards of Qualityof Quality

In case of vendors’ samples only 33% In case of vendors’ samples only 33% in Khammam, 12% in Satupalli and in Khammam, 12% in Satupalli and 45% in Vijayawada conformed to 45% in Vijayawada conformed to legal standardslegal standards

Water was the main adulterantWater was the main adulterant In the lean season, neutralizers were In the lean season, neutralizers were

present in 50% of the vendors present in 50% of the vendors samplessamples

TMS – Areas of ImprovementTMS – Areas of Improvement

Improvements in the quality of milk so that Improvements in the quality of milk so that issues of food safety and conformation to issues of food safety and conformation to legal standards are ensuredlegal standards are ensured

Quality – price relationships at both Quality – price relationships at both producer and consumer levelproducer and consumer level

Operational inefficiencies in operations due Operational inefficiencies in operations due to low quantities handled, handling to low quantities handled, handling practices, methods used for procurement, practices, methods used for procurement, etc. etc.

Lack of institutions and platforms that Lack of institutions and platforms that enables sharing, negotiations and working enables sharing, negotiations and working together to address common issuestogether to address common issues

Low productivity Low productivity due to lack of incentives due to lack of incentives for higher productivity, lack of services, etc for higher productivity, lack of services, etc

Khammam DistrictKhammam District

Position of DairyingPosition of Dairying Domestic animal population 19 lakhsDomestic animal population 19 lakhs Milch animal population – above 11 Lakhs; Milch animal population – above 11 Lakhs;

about 3.75 Lakhs in milk (90% Desi); 60% about 3.75 Lakhs in milk (90% Desi); 60% Buffalo populationBuffalo population

Cow / Bullock is used mostly for agriculture Cow / Bullock is used mostly for agriculture and breeding purpose – not for milkand breeding purpose – not for milk

Veterinary institutions – 238, AI centers - Veterinary institutions – 238, AI centers - 228, Gopalmitra – 52228, Gopalmitra – 52

Total milk production – 8.4 lakhs lpd (65% Total milk production – 8.4 lakhs lpd (65% buffalo milk)buffalo milk)

APDDCF, Seven Pvt. DairiesAPDDCF, Seven Pvt. Dairies Limited sale of packed milk Limited sale of packed milk

Stimulating Milk Production & Marketing in India Milk Flow

YearYear Milk Milk ProducProducti-onti-on

MarkeMarket-able t-able SurpluSurpluss

Total Total Coop & Coop & Govt. Govt.

Total Total PrivatPrivatee

Total Total OrgniseOrgnisedd

TotalTotal

traditiontraditionalal

1995-1995-96(mmt) +96(mmt) +

% of % of marketd marketd

66.266.2

--43.0343.03

1001003.973.97

9.239.232.652.65

6.156.156.626.62

15.3815.3836.4136.41

84.6284.62

Daily lkgpd Daily lkgpd 18141814 11791179 109109 72.5572.55 181181 998998

2001-2001-02(mmt) x02(mmt) x

% of % of marketd marketd

84.484.4

--54.5254.52

1001005.915.91

10.8410.844.644.64

8.518.5110.5510.55

19.3519.3543.9743.97

80.6580.65

Daily lkgpd Daily lkgpd 23122312 14941494 162162 127127 289289 12051205

2005-2005-06(mmt) #06(mmt) #

% of % of marketd marketd

97.197.1

--63.1963.19

--9.479.47

14.9814.984.724.72

7.477.4714.1914.19

22.4522.4549.0049.00

77.5577.55

Daily lkgpd Daily lkgpd 26602660 17311731 259259 129129 389389 13431343+ - Compiled Dairy India 1997, x - Tech. of Indian Milk Products, # - Extrapolated

Stimulating Milk Production & Marketing in India

General Features of Uncovered Areas

i. Vast areas, number of producers and high quantities of milk

ii. Low density of milk production and low potential

iii. Unable to meet pre-conditions of organized sector for procurement

iv. Unable to afford high fixed costs

v. Limited markets within

vi. Low livestock services

vii.Low on extension, capacity building, training

viii.The area needs some support, infrastructure and appropriate models for procurement, transport, processing, marketing…