About Indian Dairy Industry

Indian Dairy has been involved in the dairy business since many years. We take pride in introducing as one of Indias leading manufactures, exporters and suppliers of dairy products, We at Indian Dairy have shown a new way of living- a healthy way of living. We have wide range of product catering to people of all age. We are continuously striving for synergy between technology, system, and human recourse to provide product and service that meet the quality, performance and pride aspiration of customers. Indian Dairy ,one of the leading manufacture & exporter of skimmed milk powder ,desi ghee ,condensed milk ,casein, full cream milk powder, dairy whitener, palm kernal oil, white butter, lactose, glucose, dematerialized whey powder and all kind of dairy products, has emerged as the indubitable winner of dairy industry. Indian Dairy is a full-service dairy that processes and fills gallons of milk a week. It operates around the clock, 365 days a year, to provide the freshest dairy products to customers every day. Known for our adherence to strict quality norms, we are on the edge for further growth in our core competency areas - dairy products. We are also in the process of massive production and marketing of value added dairy food products. Under the brand name of "indian Dairy" we manufacture skimmed milk powder, whole milk powder, dairy whitener and pure ghee and many more. At Indian Dairy, supreme quality is accomplished by state-of-the-art manufacturing procedure in the most hygienic conditions with a profound understanding in every stage of processing. This heavenly part of the world was deprived of good quality milk. "The indian Dairy Group is an food group with a multinational strategy that seeks to increase the well-being of consumers throughout the world. The ultimate purpose of the Group is to create value for its shareholders while adhering to ethical principles of business conduct, perform a useful social function by prompting the professional development of its employees and associates, and serve the communities in which it operates by contributing to their economic and social progress. We have in mind to establish Indian Dairy as one of the top players in the global market for functional foods with high value added, which deliver improved nutrition and wellness to consumers, and attain a clear leadership in selected product categories and countries with a high growth potential for the Group. Milk & dairy products and fruit-based beverages, foods that play an essential role in everyone's daily diet, will be key categories for the Group" The safety, wholesomeness and nutritional value of our products are of paramount importance to Parmalat and are emphasised in the company Quality Policy.

Our policy is to be in complete compliance with National and State Health Department Food Standards. Indian Dairy is also committed to maintaining a high level of corporate governance by ensuring good business practices are utilized and licenses other than above are kept up-todate. In India, the dairy sector is important for various reasons. Among these its complementarity with agriculture for example and a capability to enrich the protein diet of the vegetarian population is well documented. A contribution, which is not well recognized, is its role in balancing the rural inequity1. In recent decades the dairy sector has emerged as an important source of rural employment and income in the country2. The growth of the dairy sector during the last three decades has also been impressive, at more than five percent per annum; although the country has emerged as the largest producer of milk3 only in the 90s. This is not a small achievement when we consider the fact that dairying in India is largely a subsistence activity; farmers in general keep dairy animals in proportion to their free crop residues as also the available family labour with little or no purchased inputs and a minimum of marketed outputs. A restrictive trade policy for milk products and the emergence of Amul type cooperatives has changed dairy farming practices in the country. Farmers have started receiving a favourable price for their milk, and the milk production system, which was essentially a self-contained one is now being transformed into a commercial proposition. The crossbred technology has further augmented the viability of the dairy units by increasing the milk production per animal. Subsequently milk production has increased at an exponential rate while the benefits of an increase in milk production also reached the consumers as is apparent from a relatively lower increase in the price of milk. The favourable price environment for milk producers however appears to have weakened during the 90s, a decline in the real price of milk being noticed after the year 1992. Incidentally, this is also the period in which trade liberalization in the dairy sector was initiated. In the new multilateral trading system trade liberalization is imminent with liberalizatio n of dairy sector being mandatory. In India most of the non-tariff-barriers(NTBs) in dairy have been replaced with tariffs and tariff- rate-quotas (TRQs); now there are pressures to reduce tariff. The imperfections in the world dairy market even after years of implementation of the WTO Agreements however, continue (Jha et al. 2000). In this situation any further liberalization of imports of milk products requires a cautious approach. One must not forget that in India, dairy is not merely another sector / subsectorof the economy; this is a source of livelihood for a bulk of the rural poor. Considering its importance the Indian dairy sector may require protection. Selective protection to a sectoris not WTO-incompatible, especially in the light of Harbinsons draft4 in the ongoingmillennium round negotiations on agriculture. The nature and magnitude of protectionhowever, needs to be assessed and also postulated without doing much damage to the largerinterest of the economy. Against this backdrop the present study attempts to assess the Indiandairy sector in the so-called globalizing world with the following specific objectives: To review the performance of Indian dairy sector To study the world dairy market To assess implications of import liberalization

In the history of dairy development, decade of 90s has been important on various accounts; India emerged as the largest producer of milk5 in the world and milk emerged as one of the biggest contributor to the value of agricultural output 6 in the country. These encouraging trends in milk production was apparent in the 70s following emergence and replication of Amul type cooperatives in the country; subsequently milk production has grew at an exponential rate; per capita availability of milk has also improved, though it is still less than the recommended dose for the country. The milk yield in the country remains one of the lowest in the world. In this backdrop, present chapter reviews performance of dairy sector in the country at the aggregate and disaggregate levels in separate sections. Performance has also been assessed with respect to the changes in policy environment at the aggregate level.

Dairy Development in India

The role of government in the sustainable growth of a sector such as that of dairy cannot be over-emphasized. In India, the governments approach towards dairy has passed through three distinct phases. Though it is difficult to earmark the exact year for distinguishing these periods as a shift in policy action is are often staggered over a couple of years, the present study attempts to demarcate this on the basis of plan periods, namely, first phase (Plan I-III), second phase (Plan IV-VII), third phase (since Plan VIII). The first phase began immediately after independence when dairy produce like many other agricultural commodities was considered as an important item to be supplied to the urban consumers at the lowest possible price. Government monopolized the supply and distribution through the Milk Control Board. This has led to a proliferation of middle-men in the milk supply system, and finally, a decline in the share of producers in the consumers price of milk. As a result of this set of policies, milk production observed a linear trend growth of less than 2 per cent during the first two decades of planned development , this rate of growth was too low to match the growth in human population during the period . The per capita availability of milk in the country was already low; Government had therefore resorted to import of milk powder to protect consumers interest. Import of milk powders, which was highly subsidized, has further deteriorated the price incentive for domestic milk production in the country; this is apparent with an almost stagnant milk yield during the period . Increase in milk production during the period was primarilybecause of an increase in the breedable bovine population and the milkproduction system, which was subsistence in nature, remained so during the period. Onaccount of this milk production in the country was in fact trapped in a vicious cycle of lowprice- production and yield of milk. This policy orientation continued, till the Third FiveYear Plan. The second phase of dairy development can be distinguished from the earlier plans with a high allocation for Operation Flood (OF) programme in the fourth Five Year Plan7. The OF programme aimed at replicating Amul type milk cooperatives, which essentially provide a favourable price to milk producers. The OF programme and similar other dairy development programmes to strengthen cooperative networks remained important throughout the planned development. The spread of the cooperative network8 is apparent with the growth in milk throughput (see Figure1.2). The role of Government in milk collection and

processing was restricted during the period; import of low cost milk powder was also restricted. As a result of these policies, the growth in milk production has experienced a structural break in its trend during the year 1973-74 (see Figure 1.1). The exponential trend in growth is visible during the later period. The per capita availability of milk, which started declining during the first two decades of the plan period, has shown an increasing tendency after the mid-70s (see Fig. 1.1). There has been an encouraging trend in the sources of milk production as well. The rate of growth in the breedable bovine population has slowed down after the 80s, suggesting that the increase in milk production is largely contributed to by an increase in the productivity of milch animals.

SWOT ANALYSIS OF INDIAN DAIRY INDUSTRY

Strengths:

Demand profile: Absolutely optimistic. Margins: Quite reasonable, even on packed liquid milk. Flexibility of product mix: Tremendous. With balancing equipment, you can keep on adding to your product line. Availability of raw material: Abundant. Presently, more than 80 per cent of milk produced is flowing into the unorganized sector, which requires proper channelization. Technical manpower: Professionally-trained, technical human resource pool, built over last 30 years.

Weaknesses:

Perishability: Pasteurization has overcome this weakness partially. UHT gives milk long life. Surely, many new processes will follow to improve milk quality and extend its shelf life.

Lack of control over yield: Theoretically, there is little control over milk yield. However, increased awareness of developments like embryo transplant, artificial insemination and properly managed animal husbandry practices, coupled with higher income to rural milk producers should automatically lead to improvement in milk yields. Logistics of procurement: Woes of bad roads and inadequate transportation facility make milk procurement problematic. But with the overall economic improvement in India, these problems would also get solved. Problematic distribution: Yes, all is not well with distribution. But then if ice creams can be sold virtually at every nook and corner, why cant we sell other dairy products too? Moreover, it is only a matter of time before we see the emergence of a cold chain linking the producer to the refrigerator at the consumers home!

Competition: With so many newcomers entering this industry, competition is becoming tougher day by day. But then competition has to be faced as a ground reality. The market is large enough for many to carve out their niche.

Opportunities: "Failure is never final, and success never ending. Dr Kurien bears out this statement perfectly. He entered the industry when there were only threats. He met failure head-on, and now he clearly is an example of never ending success! If dairy entrepreneurs are looking for opportunities in India, the following areas must be tapped:

Value addition: There is a phenomenal scope for innovations in product development, packaging and presentation. Given below are potential areas of value addition: o Steps should be taken to introduce value-added products like shrikhand, ice creams, paneer, khoa, flavored milk, dairy sweets, etc. This will lead to a greater presence and flexibility in the market place along with opportunities in the field of brand building. o Addition of cultured products like yoghurt and cheese lend further strength both in terms of utilization of resources and presence in the market place. o A lateral view opens up opportunities in milk proteins through casein, caseinates and other dietary proteins, further opening up export opportunities. o Yet another aspect can be the addition of infant foods, geriatric foods and nutritionals.

Export potential: Efforts to exploit export potential are already on. Amul is exporting to Bangladesh, Sri Lanka, Nigeria, and the Middle East. Following the new GATT treaty, opportunities will increase tremendously for the export of agri-products in general and dairy products in particular.

Threats: Milk vendors, the un-organized sector: Today milk vendors are occupying the pride of place in the industry. Organized dissemination of information about the harm that they are doing to producers and consumers should see a steady decline in their importance. The study of this SWOT analysis shows that the strengths and opportunities far outweigh weaknesses and threats. Strengths and opportunities are fundamental and weaknesses and threats are transitory. Any investment idea can do well only when you have three essential ingredients: entrepreneurship (the ability to take risks), innovative approach (in product lines and marketing) and values (of quality/ethics). The Indian dairy industry, following its delicensing, has been attracting a large number of entrepreneurs. Their success in dairying depends on factors such as an efficient yet economical procurement network, hygienic and cost-effective processing facilities and innovativeness in the market place. All that needs to be done is: to innovate, convert products into commercially exploitable ideas. All the time keep reminding yourself: Benjamin Franklin discovered electricity, but it was the man who invented the meter that really made the money!

Dairy Industry Profile, 2004:

Human population: 953 million (70 million dairy farmers)

Milk production: 74.3 million tonnes (203.5 million lpd)

Average annual growth rate (1995-2004): 7.5%

Per capita milk availability: 214 g/day or 78 kg/year

Milch animals: 57 million cows; 39 million buffaloes

Milk yield per breedable bovine in-milk: 1,250 kg

Cattle feed production (organized sector): 1.5 million tonnes

Turnover of veterinary pharmaceuticals: Rs. 550 crores

Dairy plants throughput: 20 mlpd

Throughput as percentage of total milk output: 12

Value of output of milk group (2003-04): Rs. 50,051 crores

Value of output of dairy industry**: Rs. 105,000 crores

India prepares to tackle the international market

Following Japan, where milk consumption today, has more than trebled to 70 kg per capita from a mere 20 kg in the 'sixties - the consumption of dairy products in other Asian 'tiger' nations is also growing. As a consequence - creating excellent export opportunities for India as these nations are deficient in milk by at least 3 million tonnes per year. India, with some 27 per cent of Asia's population, accounts for more than half of the milk output with enough growth potential to explore foreign markets. In anticipation of the export opportunities and in view of the post GATT scenario, India is gearing up to tackle the demands of the international market.

Indian companies are getting ready to meet international standards and other non-tariff barriers. Our planners are taking measures to meet the sanitary and phyto-sanitary specifications prescribed by Office International des Epizooties (OIE) under the auspices of the World Trade Organization (WTO) - which range from the quality assurance of processed dairy products to the health status of livestock. The main thrust of the Ninth Plan proposals is on the improvement of animal health and adoption of sanitary and phyto-sanitary specifications (SPS) for dairy products. Towards this end, the Technology Mission on Dairy Development (TMDD) has initiated a wideranging program.

In addition to the above mentioned points - there are areas where major thrust is required: Brand image needs to be projected in leading international dairy trade fairs, particularly of those countries to which exports are being targeted. Another step may be to encourage technical collaboration and marketing tie-ups with leading international dairy companies.

Conclusions
A review of dairy development in the country presents encouraging trends, in terms of milk production, per capita availability of milk, sources of milk production, as also accessibility of milk. A disaggregate analysis of the dairy sector however presents a wide disparity in the different indicators of dairy development; though the trend growth in most of the states is encouraging. Government policy has undoubtedly played an important role in achieving this magnificent success at the aggregate level, but all these have occurred under the regulated trade regime.