03 chandel small_ruminant_milk_india
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Policy Interventions for mainstreaming of Small Milk Producers in Contemporary
Production System – a Value Chain Analysis of Indian Dairy Sector
B.S.Chandel and Rishikanta Singh
National Dairy Research Institute, Karnal (Haryana)-132 001 India
Presentation layout Introduction
Smallholder milk production system and value chain
Dairy Value chain analysis
Critical issues in the value chain
Conclusions & Policy interventions
Introduction Smallholder milk producers dominate the milk
production in developing countries
In India, small and marginal farmers contribute (68 per cent)
Milk production by these households address vital
issues of their livelihood, nutrition and employment
The paper looks at mainstreaming of small milk producers
• Addressing the issue of livelihood & poverty• Augmenting the milk production at competitiveness
Smallholder Milk Production System & Dairy Value Chain
Typical integrated production • Crop residues-surplus family labor- household activities• Convert waste into high value products• Comparative advantage to produce at lesser cost
Marketed surplus • Individual household (50%)• Aggregated (70%)
Marketed mainly through unorganized sector• Milk vendors (58%)
Figure 1: Dairy Value Chains of Small Milk Producers
Figures in parenthesis indicates percentage of the total marketed surplusDCS: Dairy cooperative Societies; SMPMUs: Small Milk Product Manufacturing Units
Consumer (5%)
Small milk Producer
Milk Vendor (58%)
Contractual /contractor (3%)DCS (9%)
Cooperative union/federation
Private Processing Plants
Wholesaler
Retailer/ Retail outletsRetailer
Creameries/ sweet shops (20%)
SMPMUs (5%)
Dairy Value Chain Analysis The analysis helps policy maker to
• Identify exogenous variables to stimulate the desired changes,
• Determine competitiveness and power exercised by different players and
• Understand the complexity of inter-linkages in the value chain.
Approach• Institute of Development Studies at
University of Sussex, Kaplinsky and Morris (2001), Schmitz (2005)
Dairy Value Chain Analysis- Continue
Dairy value chain was analyzed for its• Structure, competitiveness, integration,
actors, governance and policy questions
Simple tabular analysis and total factor productivity were used to supplement the argument in the results
Competitiveness of Smallholder Milk Production System
Average milch animals/household or farm (No.)
Average Productivity (L/animal/day)
Cost of maintenance (Rs/animal/day)
Cost of milk production (Rs/L)
Total Factor Productivity (TFP)
Karnal, Haryana: Subsistence farming (for milch buffalo)
2.27 6.800 186.86 27.07 0.0364
4.90 6.460 178.31 27.16 0.0362
8.29 5.73 168.85 28.77 0.0339
Jabalpur, Madhya Pradesh: for commercial dairy farms (90% buffaloes) 70 6.025 207.20 34.39 0.0266
238 6.200 204.04 32.91 0.0282
598 5.700 178.75 31.36 0.0288Sources: Compiled from Singh (2013) and Sharma (2013).
Veterinary Services Animal Health Service Providers
• Public animal health department, cooperative unions and private veterinarians.
Service Delivery System (Ahuja 1999)• Cooperative and private services- 80% at doorstep• Government units was less than 20 per cent
Smallholder milk producers’ dependence-High
Expansion of veterinary health facilities required- 35-60%. • From 7000 milch animals to 1000-1500 milch animals per
veterinary institute
Distribution of Crossbred technology
Herd size categories
Average milch animals/ household (No.)
Average crossbred milch animal/ household (No.)
Proportion of households (%)
Proportion of crossbred milch animls (%)
Small 2.27 (100.00)
0.84 (37.00)
49.00 23.70
Medium 4.90 (100.00)
2.14 (43.67)
37.00 45.66
Large 8.29 (100.00)
3.79 (45.72)
14.00 30.63
Source: Compiled from Singh (2013)
Choice of Marketing Channels and Price
Particulars Plains Hills PooledAverage milk production/household/day
8.4 4.5 6.3
Milk Marketed surplus/household/day
4.8 1.5 3.1
Proportion of milk marketed through different channels (%)
Cooperatives 22.8 55.3 33.0
Direct to consumers 16.4 10.6 14.9Open market (inclusive of milk vendors)
60.7 34.1 53.7
Average price (Rs/L) received from different market channels
Cooperatives 14.5 14.5 14.5
Direct to consumers 17.2 14.9 16.5Open market (inclusive of milk vendors)
17.6 16.4 17.0Source: Adopted from Bardhan et al., 2012
Institutional Support for Marketing Marketing Channels
Marketing through Organized sector (12%) Marketing through Unorganized sector (88%)
Short term advantages of the unorganized sector The flexible payment schedule, even advance payment also
possible Flat rate of milk which favours the farmers producing low fat
milk like cow milk Higher milk price
Retardy growth of cooperative institutions
Lack of institutional framework for mainstreaming in private sector
Drifting of Cooperative Movement
1980-81 1990-91 2000-01 2008-09 2009-10*0
20000
40000
60000
80000
100000
120000
140000
160000
Dairy Coop. Societies (No.)
1980-81 1990-91 2000-01 2008-09 2009-10*0
50
100
150
200
250
Producer Members (No.)
Milk Procurement (KgPD)
Liquid Milk Marketing (LPD)Pe
r C
oo
pe
rati
ve
So
cie
ty
Reasons for retardy growth- Cooperative Institutions
More political representation in management
Large cooperative societies- increased operational cost
Lack of representation of milk producers in federation/union
Out of the market price fixation and government interference
Lack of diversification in product-mix
Other issues High transactions costs
Fresh milk marketing
Clean milk production
Demand specific milk production
Direct communication between the producer and consumer
Policy interventions emerging from dairy value chain analysis
Improve veterinary services especially public and up-gradate local breeds to strengthen milk production capacity of smallholders
Strengthen institutional framework to bring small holder under the ambit of organized marketing,
Modernization of informal sector to reduce transactions cost and handling losses of milk,
Encourage fresh milk marketing and clean milk production for quality and demand specific production.
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