India’s inspiring dairy sector makes a mark globally

From 46 million tonnes of milk in 2014, India now produces 210 million tonnes, registering an increase of about 44%, remarked the Prime Minister, Narendra Modi at World Dairy Summit 2022 held on September 12, 2022. He also pointed out how his government has worked relentlessly to enhance the potential of India’s dairy sector and how it has led to an increase in the income of farmers. 

For about 25 years, India has been the largest milk-producing nation in the world. It has produced twice as much milk in the last 20 years. The dairy industry in India is the largest globally, accounting for 23% of global milk production. The industry contributes 5% to the national economy and directly supports more than 8 crore farmers.

India’s dairy industry has grown significantly over the past 10 years, supported by various initiatives taken by the government. The nation’s milk production increased at a CAGR of 6.2% from 146.31 million tonnes (MT) in 2014-15 to 209.96 MT in 2020-21.

Unlocking the vast potential

There are tremendous investment opportunities in the field of dairy exports which has witnessed a steady rise over the last three years. In 2021-22, India exported 108,711 MT of dairy products to the world for a total of Rs. 2,928.79 crore (US$ 391.59 million), with key export destinations being Bangladesh, UAE, Bahrain, Malaysia, Saudi Arabia and Qatar.

Butter exports are anticipated to reach 15,000 metric tonnes in 2022, a 36% increase above the revised 11,000 metric tonnes export total for 2021. The packaged fresh milk category is projected to grow at a 3.4% CAGR from 2021 to 2026, attaining a market value of $20 Bn. India exported 54,762.31 MT of dairy products worth $201.4 Mn in 2020-21, major destinations being UAE, Bangladesh, USA, Bhutan, and Singapore. India’s Butter, Ghee and Dairy Spreads export is valued at $ 102.2 Mn with 16,964.18 MT in 2020-2021, major destinations being UAE, USA, Saudi Arabia, Singapore, and Australia.

India exported 8,432.87 MT of Cheese worth $ 40.1 Mn in 2020-21, major destinations being UAE, Bhutan, USA, Singapore, and Saudi Arabia. India exported 13,457.11 MT of Skimmed Milk in Powder worth $ 35.1 Mn in 2020-21, major destinations being Bangladesh, Malaysia, UAE, Afghanistan, and Bhutan.

How did the success story unfold?

During the 1950s and 1960s, India had a milk shortage and was dependent on imports; annual production growth was negative for several years. Throughout the first decade after independence, milk production recorded a CAGR of 1.64%, which fell to 1.15% during the 1960s.

The National Dairy Development Board (NDDB) was established in 1965 to assist the Operation Flood programme, which was to be executed in stages, in establishing the Anand Pattern of dairy cooperatives throughout the country. The inaugural chairman of NDDB was Dr Verghese Kurien, who is well-known in India as the Father of the White Revolution. Dr Kurien and his team started working on the project’s launch, which called for establishing Anand Pattern cooperatives in milk sheds throughout the nation, from which liquid milk produced and purchased by milk cooperatives would be carried to cities.

Operation Flood was implemented in the many phases. The sale of butter oil and skim milk powder provided by the European Union (formerly European Economic Community) and sold during Phase I (1970-1980) helped to fund the project. Urban markets boosted the number of milk outlets to 290 during Phase II (1981-85), which saw an increase in milk sheds from 18 to 136. A self-sustaining network of around 43,000 village cooperatives with 4,250,000 milk producers had been established by 1985. Phase III (1985-1996) allowed dairy cooperatives to develop and expand the infrastructure needed to obtain and market rising milk volumes. Thirty thousand new dairy cooperatives were added during this phase, bringing the total to 73,000.

Through the National Milk Grid, Operation Flood made it possible for consumers in 700 towns and cities to access high-quality milk. The scheme also assisted in eliminating intermediaries, which decreased seasonal price differences. Due to the cooperative framework, it was financially feasible for farmers to produce and distribute milk and milk products on their own. Additionally, it eliminated India’s reliance on imported milk solids. In 1950-51, only 17 MT milk was produced. Before Operation Flood began, milk output was only 21.2 MT in 1968-69 but increased to 30.4 MT by 1979-1980, 51.4 MT by 1989-1990 and 209.96 MT by 2020-21.

Policy Initiatives

The government has taken several initiatives for development of the dairy industry in India.:

Rashtriya Gokul Mission: Under the Mission, farmers now have access to several cutting-edge technologies at their doorstep, including sex-sorted semen, IVF technique and genomic selection. Milk production will rise from 198.4 million metric tonnes in 2019-20 to 300 million metric tonnes in 2024-25 with the implementation of the planned programme. An increase in milk production of an average of 1,200 kg per animal per year will directly assist eight crore dairy producers.

National Programme for Dairy Development (NPDD): NPDD has been in place since February 2014 and aims to build or strengthen infrastructure for the production of high-quality milk as well as for the procurement, processing, and marketing of milk and milk products through the State Implementing Agency or State Cooperative Dairy Federation. From 2021-22 to 2025-26, the redesigned NPDD scheme will be implemented with a budget of Rs. 1,790 crores.

Dairy Entrepreneurship Development Scheme (DEDS): DEDS is being implemented by the Department of Animal Husbandry, Dairying, and Fisheries to create self-employment opportunities in the dairy industry. It covers activities such as improving milk production, procurement, preservation, transportation, processing and marketing by offering back-ended capital subsidies for bankable projects.

Outlook

Given that Indian milk production is expected to reach 270 MMT by 2025, corporations will need to invest in processing facilities, and this provides an investment potential of USD 10 Billion within the dairy sector. There is a chilling infrastructure deficit of roughly 120-130 MMT in the dairy sector, which translates into an investment potential of approximately USD 2.6 billion, with a 17-20% expected return on investment over the next 9-12 years. The recent initiatives like the National Digital Livestock Mission will go a long way towards enhancing traceability standards and will enable Indian companies to meet the quality standards set by importing nations.