After studying law I vectored towards journalism by accident and it's the only job I've done since. It's a job that has taken me on a private jet to Jaisalmer - where I wrote India's first feature on fractional ownership of business jets - to the badlands of west UP where India's sugar economy is inextricably now tied to politics. I'm a big fan of new business models and crafty entrepreneurs. Fortunately for me, there are plenty of those in Asia at the moment.
Very few kids growing up in the 1980s and the 1990s in India are acquainted with the concept of a milk shortage. The main reason for this is the success of the four-decade-old Operation Flood, the dairy development programme started by India’s National Dairy Development Board (NDDB) in 1970. One of the largest of its kind, the programme’s objective was to create a nationwide milk grid. It resulted in making India the largest producer of milk and milk products in 1998.
So, when NDDB chairman Amrita Patel painted a different picture while speaking at a national gathering of the dairy industry last month, it grabbed national headlines.
According to Patel, rising incomes have led to a shift away from cereals to vegetables, milk and meat. While milk production has so far been able to meet demand by growing at 3.5 million tonnes a year or 4 percent, it will now have to grow at 6 percent to keep up. Efforts to increase production have proved unsuccessful as the industry struggles with poor quality animal feeds, low yields and poorly bred cattle.
This was followed by a warning by the Economic Survey, a fortnight later, that unless production increased from 112 million tonnes to 180 million tonnes a year (an annual increase of 5.5 percent) in the next decade, India will need to import milk. The Survey also said that the recent spurt in milk prices does not bode well.
What ails the dairy industry and does India have a plan up its sleeve?
India’s dairy industry has chosen to follow a disaggregated production model. This means that large cattle farms using scientific milking techniques are few. Individual producers, who own a small herd and supply it to co-operatives, together with private dairies, account for 20 percent of the milk produced in India. The unorganised sector comprises the remaining 80 percent.
The co-operative model harks back to the days when capital was scarce and private enterprise frowned upon. “It has resulted in milk getting the highest price realisation among agri products, with 70 percent of the price paid by the consumer going to the original producer,” says R.G. Chandramogan, chairman and managing director of Hatsun Agro Product, the largest private dairy in India based in Chennai.
But at the same time, individual farmers inevitably lack the means to invest in improving cattle yields. Parithibhai Bhatol, chairman of the Gujarat Cooperative Milk Marketing Federation (GCMMF), which sells milk products under the Amul brand name, says he can only borrow money at 10-12 percent interest as against the 4 percent interest that is given to farmers. Many GCMMF members have held back their expansion plans because of the high cost of capital, says Parthibhai.