India’s dairy sector needs a structural shift

General Studies Paper 3

Context: India is faced with a milk shortage & the Centre has reportedly been considering the import of butter and ghee.

India’s dairy sector

• India’s success story in milk production was scripted by Dr Verghese Kurien, known as the “Father of the White Revolution”in India
• Dairy: It is the single largest agricultural commodity contributing 5 percent of the national economy and employing more than 8 crore farmers directly.
  • India is ranked 1st in milk production contributing 23 percent of global milk production.
  • Milk production in the country has grown at a compound annual growth rate of about 6.2 percent to reach 209.96 million tonnes in 2020-21 from 146.31 million tonnes in 2014-15.
• Stakeholders in the sector:
  • Notably, 228 dairy cooperatives reach out to 17 million farmers, many of whom are likely to be assured of their milk being procured at the right time and at a fair price.
  • This time, private players have wrested some market share from cooperatives by offering higher prices in a buoyant market.
• Stagnation in the sector:
  • The Union Animal Husbandry Secretary recently said that cooperatives reported a 1-2 percent milk production increase in 2022-23, while the data from other players in the organised and unorganised sector point to stagnant output.
• Outcomes:
  • Rise in milk prices:
    • Milk prices,which have been on the uptrend in the country, could soon hit an all-time high, forcing the world’s biggest producer to step up imports to boost supplies and ease cost of living pressures.
  • Demand supply mismatch:
    • Industry officials estimate demand for dairy products to rise 7 percent this year.
    • But milk production is likely to have risen just 1 per cent in the fiscal year to March 2023, well below the average annual rate of 5.6 per cent in the past decade

Challenges faced by India’s Dairy sector

• Following factors have majorly played a role in the drying up of milk output vis-a-vis the annual growth trend of 5-6 percent.
• Pandemic:
  • Demand destruction during Covid led to a crash in prices and with it the inability of dairy farmers to invest in the upkeep of their cattle.
  • Cattle breeding suffered during pandemic lockdowns due to a shortage of the village-level veterinarians needed to conduct artificial insemination.
• Lumpy skin disease:
  • Lumpy skin disease has, by all accounts, wreaked havoc. The official death count of 1.9 lakh cattle could be an underestimate.
  • Although the Centre claims that at least a third of the livestock has been vaccinated since last August and that the worst is over, the effects of the disease will perhaps linger for a while as dairy farmers need to recoup income and capital losses.
  • Long-term effects:
    • Lumpy skin disease, which causes blisters and reduces milk production in cows, has infected millions of cattle and killed more than 184,000 in India, including around 76,000 in Rajasthan, according to government data.
    • Farmers in Rajasthan who managed to protect their cattle through vaccinations, now complain about lower incomes as the disease has left them with low-yielding cattle.
  • Fodder inflation:
    • Fodder inflation at 30 percent has been a critical factor. According to ICAR scientists, fodder and feed account for 70 percent of the cost of milk.
    • Fodder inflation is an endemic issue, as supply has not kept pace with the demand. It has for decades been grown on just 4 percent of farmland.
    • Fodder development does not find much of a place in animal husbandry budgets.

Government’s Initiatives Related to the Dairy Sector

• Several measures have been initiated by the government to increase the productivity of livestock, which has resulted in increasing milk production significantly.
• “Dairy Sahakar” scheme:
  • Union Minister of Home Affairs and Corporation launched the “Dairy Sahakar” scheme at Anand, Gujarat, during the function organised by Amul for the celebration of the 75th Foundation Year of Amul.
    • The Dairy Sahakar with a total investment of  Rs 5000 crore will be implemented by NCDC  under the Ministry of Cooperation to realize the vision, “from cooperation to prosperity”.
  • Lumpi-ProVacInd:
    • It is jointly developed by ICAR’s National Research Centre on Equines (NRCE) and the Indian Veterinary Research Institute (IVRI).
      • It is a live attenuated vaccine, similar to those used against tuberculosis, measles, mumps and rubella.
    • National Animal Disease Control Programme (NADCP): 
      • It is a flagship scheme launched in September 2019 for control of Foot & Mouth Disease and Brucellosis by vaccinating 100% cattle, buffalo, sheep, goat and pig population for FMD and 100% bovine female calves of 4-8 months of age for brucellosis in five years (2019-20 to 2023-24).
    • Dairy Entrepreneurship Development Scheme (DEDS): 
      • The department of Animal Husbandry, dairying and fisheries is implementing DEDS for generating self-employment opportunities in the dairy sector, covering activities such as enhancement of milk production, procurement, preservation, transportation, processing and marketing of milk by providing back ended capital subsidy for bankable projects.
    • e-GOPALA: 
      • The web version of the e-GOPALA application developed by the National Dairy Development Board (NDDB) has been launched to aid dairy farmers.
    • Launching of Dairy mark:
      • The National Dairy Development Board (NDDB)and Bureau of Indian Standards (BIS) together developed a dedicated ‘Dairy Mark’ logo as a unified quality mark across India to boost the confidence of consumers in milk and milk products.
        • A unified Conformity Assessment Scheme has been chalked out by BIS with the help of NDDB after extensive stakeholder consultations.

Suggestions & way ahead

• Dairy product demand is growing rapidly with rising population, incomes, urbanisation and changing diets.
• For a sector that supports more than 80 million farmers, and one that can provide a livelihood to many more small and marginal farmers (120 million of them, with plots too small for viable farming),it is worth investing in policies to address embedded supply constraints.
• Today, there is room for all players to grow, given the demand scenario.
• For producers:
  • For sustainable dairy development, it is important that producers, most of whom are poor, are spared price volatility— they deserve price assurance of some sort.
• Cooperatives:
  • Cooperatives revolutionised dairying, but due to a variety of factors their success has not gone beyond Gujarat and Karnataka.
• For private players:
  • Private players should be nudged to invest in supply chains in this capital-intensive business.