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Value Chain Analysis on

Dairy Enterprise

December 2014

Submitted to:

Hariyo Ban Program WWF Nepal

Submitted by:

Mr. Sichan Shrestha, Mr. Nirajan Bhattarai, and Gopi Paudyal

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Table of Contents I. Dairy Sub Sector Generalities .................................................................................................... 4 II. Rationale for the Study .............................................................................................................. 6 III. Study Objectives, Approaches, and Methodology ................................................................... 7

1.1. Approach and Methodology ............................................................................................... 8 1.2. Study Approach ................................................................................................................. 8 1.3. Study Districts ................................................................................................................. 11 1.4. Study Samples ................................................................................................................. 12 1.5. Methodology .................................................................................................................... 12

IV. Description of WWF Hariyo Ban Program Interventions and its Progress ............................. 14 1.1. District: Kailali ................................................................................................................ 14 1.2. Bara ................................................................................................................................. 14 1.3. Chitwan ........................................................................................................................... 15

V. Value Chain Mapping .............................................................................................................. 17 1.1. Primary Actors ................................................................................................................. 18 1.2. Supporting Organizations ................................................................................................. 23 1.3. Enabling Organizations .................................................................................................... 25

VI. Analysis of Findings ............................................................................................................ 27 1.4. Market Opportunities for Milk and Dairy Products ........................................................... 27

a. District: Kailali .................................................................................................................... 27

b. District: Bara ....................................................................................................................... 28

C. District: Chitwan ................................................................................................................. 28

1.5. Issues and Challenges faced by poor households and other actors of the value chains ....... 30 a. District: KAILALI ............................................................................................................... 30

b. District: BARA .................................................................................................................... 33

C. District: CHITWAN ........................................................................................................... 35

1.6. Calculation of margins ..................................................................................................... 36 a. Profit margins at Farmer level .............................................................................................. 36

b. Profit margin of Cooperatives .............................................................................................. 37

VII. Intervention Strategies ......................................................................................................... 39 1.7. KAILALI District ............................................................................................................ 39 1.8. BARA .............................................................................................................................. 41 1.9. CHITWAN District .......................................................................................................... 43

VIII. Collaboration with other Dairy Projects and Replication of Past Projects .............................. 45 IX. Conclusion and Recommendations for Intervention .............................................................. 46 X. Annexes................................................................................................................................... 48

1.10. Proposed Budget for dairy equipments for future reference ............................................... 48 1.1. List of people met ............................................................................................................ 48 1.2. Itinerary ........................................................................................................................... 50 1.3. Photographs ..................................................................................................................... 53 1.4. Study tools ....................................................................................................................... 55 1.5. References ....................................................................................................................... 61

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Acronyms and Abbreviations AI : Artificial Insemination CFUG : Community Forest User’s Group CMP : Clean milk production DDC : Dairy Development Corporation DLS : Department of Livestock Services DLSO : District Livestock Office EMI : Equated Monthly Installment FAO : Food and Agriculture Organization of the United Nations FGD : Focus Group Discussion GDP : Gross Domestic Product KII : Key Informant’s Interview LSC : Livestock service Centre MFI : Micro Finance Institution MPC : Market and Production Committee MSEs : Micro and Small Enterprises NARC : Nepal Agricultural Research Council NLG :National Life Insurance PACT : Project for Agricultural Commercialization and Trade PLBI : Program of Livestock Breed Improvement RLSD : Regional Livestock Services Directorate SNF : Solids-not-fat TS : Total Solid VAHW :Village Animal Health Worker VDC : Village Development Committee

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I. Dairy Sub Sector Generalities Hariyo Ban Program is a USAID funded program aims to reduce adverse impacts of climate change and threats to diversity. Program is being implemented by consortium of World Wildlife Fund (WWF) as the prime lead partner together with Cooperative for Assistance and Relief Everywhere (CARE), National Trust for Nature Conservation (NTNC) and the Federation of Community Forestry Users in Nepal (FECOFUN).

To participate in dynamic markets, Micro and Small Enterprises (MSEs) require access to quality input supplies, technology, finance, and market information. MSEs and smallholder farmers do not operate in a vacuum: they operate within market systems, which may be local, regional, or even international. The chain of activities required to bring a product from conception to consumer is a value chain, and the value of the product increases at each point in the process. The continuum of activities through which a product passes as it is transformed for the market is: input supplies production processing wholesaling retailing exporting. Typical consumer groups of a value chain are rural, low-income urban, high-income urban, and international. A value chain is defined by the final product reaching the end consumer within a market channel. Markets hold significant power to create or combat poverty. [Source: The Seep network, The Micro links]

The value-chain approach assesses the constraints and opportunities for enhancing industry competitiveness by looking at end-market opportunities, the enabling environment at the international and national levels, vertical and horizontal inter-firm cooperation, support markets, and firm-level upgrading. Market development principals focuses on assisting micro- and small enterprises to link with growing market systems. [Source: The Seep network, The Micro links]

Fast Facts: 1. Livestock contributes about 12.8% to the total national gross domestic product (GDP) and 31.5% to the

agricultural GDP. 2. Nepal has a large dairy animal population with 7.09 million cattle and 4.49 million buffaloes 3. Total milk production of Nepal is 1.4 million litres annually. 4. Per capita milk consumption over the country is about 48 Lire/year or approximately 130 ml per day. 5. There are 86,000 animals inseminated artificially. 6. Nepal imports milk powder worth NRs. 2 billion each year 7. There are more than 200 private dairies in Nepal. 8. Cheese production by the private sector is about 224 tons per year (DDC -176 tons)

Agriculture Perspective Plan (1995- 2015) highlighted livestock as one of the most important sub sectors. Developing livestock pockets and bulk production of animal products was the basic approach of APP. National Agricultural Policy 2004 has targeted to change the subsistence based agriculture to commercial one to improve the living condition of the growers in the sustainable manner. Agri Business Policy 2006 also emphasized on promoting subsistence based agriculture including livestock keeping system to commercial one through public-private-cooperative partnership. Dairy product is considering as one of the commodities to be promoted for import substitution. Similarly, Dugdha Bikas Niti 2064 (Dairy Development Policy 2008) is the most specialised policy document for the development of dairy animals and dairy products in Nepal that mainly focuses to maintain the health and convenience of the general public by producing much milk within the country through public participation and bringing about coordination among the programme on dairy production.

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Livestock is an integral component of farming systems in Nepal; it contributes about 12.8% to the total national gross domestic product (GDP) and 31.5% to the agricultural GDP. It is estimated that the livestock share of agricultural GDP will reach 45% by the end of 20 years of the Agricultural Perspective Plan (APP) programme that is by fiscal year 2014/15. The major components of livestock GDP are milk and milk products from buffalo and cattle (32.7% and 24.7% respectively). At present, the total annual milk production of Nepal is just over one million tonnes (70% from buffalo and 30% from cattle). Based on this figure, the per capita milk consumption over the country is about 48 Lire/year or approximately 130 ml per day. Nepal has produced about 1622751 metric tons of milk in the year 2012 (MOAD, 2012) i.e. 0.37 percent higher as compared to that of year 2001/02. The average annual growth rate of milk production in Nepal is very negligible i.e. 0.034 percent per year. The average growth rate of milk production from 1985 to 1995 was 2.4% and the population growth rate 2.9%. This gap is likely to increase in the future unless serious efforts are made to improve dairy production and marketing. In this chapter, we discuss the current characteristics of the dairy sector, its constraints, and opportunities for development. As per the national average one household possesses 2.25 cattle and buffalo.

Figure 1: Annual milk production and its annual growth rate from the year 2001/02 to 2011/12 Source: MOAD, 2013

0.0250.0270.0290.0310.0330.0350.0370.0390.0410.0430.045

1000000105000011000001150000120000012500001300000135000014000001450000150000015500001600000

2001/02

2002/03

2003/04

2004/05

2005/06

2006/07

2007/08

2008/09

2009/10

2010/11

2011/12

Annu

al P

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ons)

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II. Rationale for the Study As per the initial understanding, in the study districts (Bara, Chitwan and Kailali), WWF – Hariyo Ban program has supported dairy cooperatives, but their business efficiency is less due to various factors. The rationale for conducting study was to understand the existing situation to design suitable interventions in the target areas. The following issues and constraints in three study districts are summarized below.

1. At the local level, there is a common practice of milk adulteration by individual milk producers/sellers.

2. Individual poor people do not have own savings for investment in the livestock (cow and buffalo).

3. Households with surplus milk are usually converted into value added products by themselves. 4. Good quality forage is unavailable to smallholder farmers. Commercially produced

concentrates are expensive which increases the cost of milk production

Apart from the above issues, other dairy issues, and opportunities are highlighted below.

1. The availability of good quality forage is a major problem among smallholder farmers. This has made the dairy industry become more concentrate-based than forage based. Commercially produced concentrates are expensive and their use increases the cost of milk production and reduces profits.

2. The term ‘milk holiday’ was coined in 1991 when the DDC could not buy all the milk offered, and refers to days in the week when public or private dairy organisations do not buy milk from their regular suppliers (dairy farmers) (Upadhaya et al. 2000). Milk holidays are largely a phenomenon of the flush season (November to March) (FAO, 2010) during which the supply of milk is four times greater than in the lean season (August to October). (Upadhaya et al. 2000).

3. Nepal has a large dairy animal population with 7.09 million cattle and 4.49 million buffaloes with very low annual average productivity with 670 litre/milking animal (438 litre/milking cow and 854 litre/milking buffalo).

4. Serious depletion of animal feeding base due to deterioration in the forest areas for fuel wood and timber, and additional land for settlement and cultivation.

5. Inadequate government support services due to limited resources as many districts and sub-district level (livestock service centres) face shortage of manpower as well as necessary equipments and veterinary medicines.

6. Inadequate and inappropriate breeding support services as there is shortage of improved breeding bulls as well as artificial insemination services;

7. Weak farm advisory services and training as there remains a big gap between the specialized and expanded farmers’ service needs and those delivered by DLS resulting in lack of knowledge among the farmers regarding improved dairy farming and hence limiting their capacity to adopt new technology for production enhancement.

8. Critical shortage of dairy animals as dairy heifer rearing practice is not common due to small landholding and lack of cost effective heifer rearing technology. High opportunity costs of land and labour particularly around the main highways and townships where the dairy farming activities is mostly carried out.

9. Shrinking farm labour is becoming a serious problem due to migration of youth for off-farm jobs within or outside countries.

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10. Inadequate financial service is a serious problem particularly in the rural areas resulting in drastically curtailed investment in dairy animals.

11. Poverty and illiteracy among livestock raisers is severely hampering effective communication and the ability of livestock raisers to respond to new opportunities as lack of basic literacy among them complicates the extension process by requiring more face to face communication.

12. Limited market opportunities for a large proportion of the farming population caused by distance from market, poor access or lack of marketing mechanism and market information.

13. Rising awareness on carbon trade among people has resulted in increasing closure of community forests (which are presently the main source of fuel wood and fodder to the community in many part of the country) for animal grazing and tree cutting which has pushed the poor further away from livestock keeping because they have been depending on free forest feed to the animals.

14. Higher cost of milk production due to rising cost of inputs and absence of mechanism to regularly assess the farmers’ cost of milk production and relating it to the pricing of milk.

15. Very low annual average productivity with 670 litre/milking animal (438 litre/milking cow and 854/milking buffalo).

16. Shortage of milk has put several milk processing factories across the country at risk 17. Private dairy firms have not maintained milk standards - contained coliform count of above

2,400 in one millimetre of milk 18. Inadequate government support services - limited human, equipments and veterinary

medicines. 19. Inadequate and inappropriate breeding support services 20. Weak services and training – improved dairy farming, new technology 21. Critical shortage of dairy animals 22. Shrinking farm labour is becoming a serious problem – Youth migration 23. Inadequate government support services due to limited resources as many districts and sub-

district level (livestock service centres) face shortage of manpower as well as necessary equipments and veterinary medicines.

24. Inadequate and inappropriate breeding support services as there is shortage of improved breeding bulls as well as artificial insemination services;

25. Weak farm advisory services and training as there remains a big gap between the specialized and expanded farmers’ service needs and those delivered by DLS resulting in lack of knowledge among the farmers regarding improved dairy farming and hence limiting their capacity to adopt new technology for production enhancement.

26. Poverty and illiteracy among livestock raisers is severely hampering effective communication and the ability of livestock raisers to respond to new opportunities as lack of basic literacy among them complicates the extension process by requiring more face to face communication.

III. Study Objectives, Approaches, and Methodology The overall objective of the dairy value chain study was understand the existing value chain structure, including stages, value addition and potentialities and suggest interventions for scaling up to identify key constraints and opportunities to design interventions strategies for upgrading.

Specific objectives were as follows:

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1. Understand the existing scenario of dairy sub sector value chains – input, production, processing, marketing, and utilization and actors relationship.

2. Identify actors, institutions and other stakeholders along the value chain and their value addition at each level Issues and challenges faced by the target beneficiaries in three study districts;

3. Identify major Constraints and opportunities at various levels of dairy value chain actors [inputs: fodder, milk producers, collectors (storage and transportation), etc.]

4. To identify solutions/services for future investment and its source of financing at all levels; 5. To identify feasibility of business services such as milk breeds, animal health, vet services,

livestock insurance, etc. 6. Collaboration with other dairy projects and replication of past projects.

1.1. Approach and Methodology

The study was conducted based on the value chain framework of USAID, MICROLINKS (See Error! Reference source not found.) to analyze the dairy value chains. Key actors at all levels in the chains will be interviewed. The study team interacted with the value chain actors.

1.2. Study Approach 1.2. Study Approach Four steps (module 2 and 3 from Value Links)

Step 1: Planning and data collection

Step 2: Value chain mapping

Objective: Gather both primary and secondary source of information Process: Desk research, interviews, FGD with stakeholders (core groups) Tool: Questionnaire/Checklist, FGD guideline, etc. Whom: Firms, cooperatives, organisations at all functional levels of the chain Service providers, development professionals, experts, etc. Results: Explore concepts, generate ideas, opinions, triangulation of data

Objective: Prepare a basic VC mapping Process: Field observations, Interviews and literature review Tool: Desk research, interviews, FGD with stakeholders (core groups) Results: initial basic map and adjusted map

Step 3: Analysis

Step 4: Reviewing findings

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Objective: Analysis of opportunities and constraints Process: Factors affecting performance of a chain

1. End markets 2. Business enabling environment 3. Vertical linkages 4. Horizontal linkages 5. Supporting markets 6. Value chain governance 7. Inter-firm relationships 8. Upgrading

Tool: Constrains and Opportunities Results: Identify systemic chain-level issues (competitiveness)

Objective: To share findings of the report. Process: Draft report and incorporating feedbacks Tool: Value Chain reporting template Results: Recommendations for future actions and value chain improvement strategy.

As per the M4P framework (refer to Figure 2) the following value chain analysis diagnostic process were adopted.

1. Understand the profile of the poor and their wider context 2. Specifically how the market is failing to serve the poor currently 3. Going from identifying symptoms to understanding root causes

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The study approach as mentioned above first explored the needs and capacity of the target beneficiaries of three districts. FGDs and interviews with the cooperatives members and key officials provided sufficient evidences to judge their existing context. From the FGDs and interviews with cooperatives key constraints and issues were identified. In the next stage, Rapid Market survey were conducted by interviewing dairy processing companies and other traders who are involved in value addition activities to understand market level constraints and opportunities. Similarly, in-depth interviews with service providers (both government and private) were held to understand issues and constraints of enabling environment and support conditions. After analyzing all field level assessment, suitable pragmatic recommendation were made for future interventions.

Figure 2: The diagnosis process, M4P framework, DFID

Major discussion points with the cooperatives are:

1. Improvement of members’ knowledge and capacities, and institutional development in terms of milk collection and transportation mechanism;

2. Investment options in animals for increasing milk production and its financing options;

3. Quality improvements and enhancing competitiveness 4. Market linkages with dairy processing

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1.3. Study Districts The map below shows study districts with highlighted with VDCs where in-depth FGDs and interviews will be conducted with the target beneficiaries.

Figure 3: Study districts with names of VDCs

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1.4. Study Samples

All together in three districts, about 200 dairy value chain actors were interacted in the FGDs and key informants interviews (refer to annex 1.1 for more details).

Table 1: Study samples S.N. District FGD Interview Total no. of

participants No. of FGD No. of participants

No. of Interviews

No. of participants

1 Kailali 3 50 20 30 80 2 Bara 2 25 25 35 60 3 Chitwan 1 7 24 40 47 4 Kathmandu NR NR 20 20 20

Total 6 82 89 125 207 NR: Not relevant

FGDs were carried out in the cooperative offices inviting key farmers from dairy pocket areas and some were carried out in dairy pocket areas with the dairy farmers. There were separate discussions with the management of cooperative to discuss on issues and challenges on dairy sector. Similarly, Key Informant Interviews (KIIs) were done with dairy stakeholders by using structured questionnaire. The following major organizations were interviewed:

a. DLSO b. Dairy Cooperative c. Private dairy d. Dairy farmers e. Banks f. Agro-vets g. NARC h. NGOs – FORWARD i. Projects j. National Dairy Development Board

1.5. Methodology Value chain study will be carried out using following steps:

The study was divided into three specific milestones of activities:

Figure 4: Methodology for Value Chain Study

Step 1: PreparationWorks

Step 2: Field visitsand Interactions

Step 3: ParticipatoryWorkshops

Step 4: Value ChainStudy Report

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1. Assessment of existing situation 2. Selection of final products/services to each clusters and explore market potentials 3. Formulation of upgrading strategies for each products/services and recommendations based

on marketing mix.

After submitting the inception report, the study team made the presentation to the key officials of WWF – Hariyo Ban program at the WWF office with the study overview, methodology, tools, status of document reviewed, and work-plan. During the discussion, WWF team made the recommendation to explore and study in four major areas: a. breed improvements, b. milk production, c. feeds, d. investment in livestock & insurance services, e. expansion of cooperative, quality.

The following study team are involved in the study of the dairy value chain.

1. Mr. Sichan Shrestha, Team Leader 2. Mr. Nirajan Bhattarai, Dairy Expert 3. Mr. Gopi Paudyal, Forestry Expert

Limitation of this study:

a. The study was carried out specifically targeting WWF Hariyo Ban areas and thus may not represent the country context.

b. Strategies proposed are thus only relevant to the program areas c. Interactions with the large scale dairy processing units was done only in few numbers d. There are many stakeholders in the dairy sector, and with the scope of the TOR, it was not

possible to meet all stakeholders.

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IV. Description of WWF Hariyo Ban Program Interventions and its Progress

In three districts, WWF Nepal - Hariyo Ban program supported in cow farming through local organizations (NTNC in Chitwan, and Community Forest User’s Committee in Kailali and Bara), which is described below separately for three districts.

1.1. District: Kailali Through WWF Hariyo Ban program intervention, Ghodaghodi cooperative provided one batch of 7 days training on improved grass and Shed management program. Saplings of Jai and Barseem were distributed to the farmers in support of district DLSO office. Similarly, seeds of Napier and Maloto were distributed to the farmers.

Ghodaghodi cooperative was established with an aim to support dairy farmers in collective marketing at the local level. In the past, farmers were struggling to sell their milk due to less demand in the market and absence of marketing agents. Starting from year 2066 B.S., cooperative started collecting milk from their members. Quality parameters were set initially by minimum requirement of Fat and SNF (For cow Fat – 3% and SNF – 8%, for buffalo, Fat – 8% and SNF > 8%). Farmers were able to sell quality milk as per the standard set by the cooperative.

After milk collection from the farmers, it is sold directly to the local consumers in a plastic pouch through the own outlet and the surplus milk is stored for supplying to the DDC, Kohalpur every few days. Cooperative has signed a contract with DDC for regular supply of about 200 litres per day, which is not yet achieved due to insufficient milk collection from the farmers.

In the staring year (2066) within 6-month period, about 9 Lakhs amount of milk were sold to DDC. In the second year quality milk (12% Fat, 14% SNF) were collected from the farmers and farmers were able to receive NRs. 40 per litre as per the Fat and SNF requirements. In the second year, about 11 lakhs amount of milk were now collected from the farmers.

To support in motivation of animal farming, cooperative has initiated biogas scheme to the farmers for cooking and compost fertilizer with ultimate goal to stop them depended on the forest for energy consumption.

Cooperative has three full time staffs including Manager for day-to-day operation and management of business transactions. Other businesses are selling fertilizers, seeds, and other inputs to the farmers.

1.2. Bara

Prabhatpheri Dairy Producer’s Cooperative Limited is a sister company of Janakalyan Cooperative located in Simara-3, Bara district. Dairy has an average collection of 400 litres per day from their members. From the financial support of NRs. 630,000 from WWF Hariyo Ban program 30 cows have been distributed with NRs. 21,000 for each farmers and remaining cash has been managed from other sources. 30 cows have been provided with free insurance service to the farmers. To reduce dependency with the forests and engage them in income generation activities, cooperative has selected

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dairy as an alternative enterprise. Once the members started farming cows cooperative decided to support them in marketing of their produced milk. To increase milk production, cooperative had supported in purchasing of 100 cows to their members in the past. This year diary company has made profit of NRs. 5 lakhs, which will be distributed as a bonus to their members after the annual general meeting. This year, dairy cooperative has set target of monthly collection of 1,000 litres.

1. Cooperative provides embedded insurance service to the farmers along with the loan amount for purchasing cows.

2. Local market of whole milk is abundant for dairy cooperative about 1,200 litres per day, which is not yet fulfilled by the local dairy.

3. Dumarwana dairy cooperative has a capacity of 5,000 litres per day collection from their milk collection centres.

4. DLSO has been promoting cultivation of grass in the community forest. Every year there is a separate activity for distribution of saplings to the community forest.

5. DLSO has been implementing Artificial Insemination (AI) and Forage mission by providing improved fodder and forage seeds, saplings and other planting materials for commercial and organized farmers to support milk production in the district. Shed management program for 200 farmers by contribution of NRs. 2,500 for each farmer.

6. Hybrid maize is sometimes not used for consumption and used for firing purpose, which can be utilized for animal feeding.

7. For nutritional balance Urea Molasses Mineral Block (UMMB) technology 8. Chilling Vat is supported by DLSO (2 # every year), DDC, and other development projects. 9. Most of the development supports in the district are funnel through cooperatives. 10. Quality services are more in demand. For example, success rate of “Semen” provided by the

government to the veterinary service providers is less (50 to 60%), where as there are Semen bought from India at high price.

1.3. Chitwan Padampur VDC is a model VDC of Chiawan district, soon after shifting villagers from the Rapti River, due to frequent flood and damage by wild animals. The cabinet of late Girija Prasad Koirala took the decision to shift into this village for safety and conservation of forest and wild animal. Tharus are the dominant ethnic group with 45.89% of the total VDC population. Brahman, Kshetri, Tamang, Gurung and Newar are other castes here. Mainly banana, maize, and oil are farmed here.

WWF supported Shree Thangkhola Community Forest User's committee, Padampur, Jutpani through NTNC, Saurahaa office by cash amount of NRs. 11 lakhs, distributed to the 24 farmers (target group) each with NRs. 45,000 without interest charges, supposed to be returned by 45 months at NRs. 1,000 EMI. An overall idea expressed by CFUG representative is to attract large number of farmer owning cattle toward cow farming and gradually decreasing dependency of forest. Last year 65 bio-gas plants have been installed and this year there is a target of 300 bio gas plant. CFUG is providing additional NRs. 3,000 subside along with other existing scheme (NRs. 24,000 by BSP and NRs. 10,000 )

1. Project such as PACT has motivated large-scale dairy cooperatives in upgrading their processing facilities and marketing systems. Annapurna cooperative has usual collection of 350 litre per day and mostly sole raw milk to the large factories located in urban areas, now

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due to investment in processing after support received from PACT, it has started processing into value added products such as packet milk, ice cream, paneer, etc. which is sold in the local market. They have a target of processing of 4,000 litres.

2. There are already private banks such as Prime bank having “Gai Mai” project implemented for attracting farmers. 15 million loan outstanding in a dairy sector only in Chitwan district. One farmer can access 50,000 to 60,000 loan amount for 2 years at 12% interest.

3. Abundant market opportunities within the district, and assured market as the surplus milk is purchased by DDC.

4. Distribution network is well established by Padampur dairy in the catchment area of Shree Thangkhola Community Forest User's committee, Padampur, Jutpani, Chitwan. Padampur dairy has established five collection centres with well-equipped analyzer machine to check the quality of milk.

5. There is a possibility of earning NRs. 1000 -1200 per day from few cows and buffalos. 6. Community Forests has sufficient land available for growing feasible grass for animals by

replacing existing unnecessary weeds. 7. DDC has a provision of providing chilling VAT to the cooperatives under the terms and

conditions of milk supply. 8. Banks provide loan facility in cow farming through the cooperatives. Padampur dairy

cooperative has loan outstanding of NRs. 42 lakhs at 11% interest rate to the farmers. They have received loan from the Prime Bank at 9% interest. Dairy company has benefited by increase in milk collection from 2000 litre to 3000 per day.

9. NTNC was involved in vaccination program supported to the farmers through the Padampur dairy cooperative

10. Bio-gas plants has already been installed in many households out of 3400 in Padampur VDC and there are more demands.

11. Dairy cooperatives provides Dashain bonus scheme to the farmers where individual farmer receive in average NRs. 10,000. As per the bonus scheme, each individual farmer is eligible to receive NRs. 3 per litre. In average, each farmer will sell 3000 to 4000 litre in a year.

12. Padampur dairy cooperative has introduced milk analyzer machines to check the quality of milk instantly.

13. Livestock insurance scheme is available in the district either though Agriculture Development Bank or private insurance companies such as NLG Life Insurance Company.

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V. Value Chain Mapping Fresh milk is the main product of the dairy value chain and it is occupying over 80% of the total market share. The fresh milk and milk products produced in the study districts are supplied to the local markets, district headquarters, private dairies, and finally to DDC. The major milk products available in the markets are skim milk powder, full cream milk or whole milk powder, infant milk formula, dairy whitener, cheese, butter, sweetened condensed milk, ice cream (primarily imported from 20 countries in Asia, Europe, Australia and North America) and locally produced cheese, butter, ghee, ice cream, paneer, yoghurt and churpi.

The value chain map below described the flow of products from input supply to production, collection, processing and marketing to end users.

Figure 5: Dairy Value Chain Map Source: Field survey

Input Supply

Milk Production

Milk Collection

Milk Processing

Marketing

Functions

Seeds

Animal suppliers

Agro-vets

Feed Industries

Dairy Farmers

Large Scale Dairies

Distributors/Dealers

Retailers MOAD

NDDB, DairyAssociation

NGO, INGOs, FNCCI,

CommunityForest

Value Chain Actors Services

Private Dairies

Banks and FinancialInstitutions (Sana Kisan,

Prime, AgricultureDevelopment)

Local Market(Households andHotel/Restaurant

Regional and NationalMarket

DLSO, DFO ,DDC/VDC DFTQC ,NARC, Quarantine O ffice

Dairy DevelopmentCorporation (DDC)

Business Services

Enabling E

nvironment

End Market

Dairy Cooperatives

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1.1. Primary Actors a. Input Supply

The major inputs in dairy value chain include supply of improved breed of dairy animals (through artificial insemination or using improved breed of bull), forage and fodder, concentrated feed and veterinary items such as vaccines, doses for drenching, parasites, and other antibiotics.

DLSO provides Artificial Insemination (AI) services to the farmers. Although the cost of AI charge is only NRs 50 per straw in DLSO the farmers pay between NRs 300 to 1500 to the private extension workers/Village Animal Health Workers (VAHW). The rates charged by the technicians include cost of straw, charges for the service at the farmer’s door step and transportation costs.

DLSO has limitations in reaching all places in the district, especially rural areas due to limitations in their outreach programs. The local Agro vets and VAHWs have filled up this gap from the private sector. The National Animal Breeding Centre (NLBC) in Pokhara is the major semen supplier.

Generally, the dairy farmers rely on their own source of grass/forage for the animals. The animals are mostly fed grass along with the feed of maize corn and rice bran. The major fodder crops in demand are oat (Avena sativa), berseem (Trifolium alexandrinum), teosinte (Euchleana mexicana), Stylo (Stylosanthes guinensis), napier (Pennisetum purpureum) among others. DLSOs in various districts are promoting fodder cultivation areas each year. The current price of maize corn and rice bran, the staple feed for the milking cows in the region is around NRs. 18.5/kg to NRs. 25/kg. The practice of using concentrated feed is still not common among the small dairy farmers. This causes a heavy burden on the milk production cost especially in view of current prices given by the DDC to the farmers.

Table 2: Improved forage area DISTRICT Improve forage area in Hectare Grazing land area in Ha

KAILALI 18 125??

BARA 60 70

CHITWAN 460 55

N E P A L : 1.7 million hectares (FAO) na

Source: DLSO, 2014

Improved grass in Chitwan: Jai, Stylo, Molases, Napier, Barseem

Veterinary medical shops/Agro-vet shops: There are 160 agro-vets in Chitwan 42 in Bara )and 25 in Kailali district who supply tools, instruments, livestock feeds, medicine, vitamins, minerals, and fodder seeds to the farmers. These shops import tools, medicines and vital feed ingredients form India, often informally.

Informal animal traders: Informal traders supply improved or cross breed of cow and buffalo either from domestic source or import breeds from Indian Border side. In recent times, farmers are using informal trade while introducing cross or improved cattle breed from India because India has banned to export live animals as well as milk products.

Feed companies: There are 9 feed companies (Bara – 4 and Chitwan – 4 and Kailali - #1), that supply poultry feeds. However, there are no company that supply locally prepared feeds or concentrates for cattle and buffalo. Farmers buy vitamins/minerals from agro-vets, bran (Choker) from the local millers and prepare feed by mixing homemade cereal/legume by-products.

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NGOs: There are no NGO who directly support dairy sector but government projects such as Project for Agricultural Commercialization and Trade (PACT), Raising Incomes for Small and Medium Farmers' Project (RISMFP) and Community Livestock Development Programme (CLDP) support capacity building of government staffs, private dairies, dairy cooperatives and dairy infrastructures development such as chilling vats, de/freezes and milk cans.

Other input providers: Tool suppliers and repair shops supply various designs of pump sets, deep/shallow tube-well, grass chopping machine, electric motor, tractor, thresher, power tiller, dairy equipments, and accessories and also provide much needed repair/maintenance services.

b. Milk Production

The primary actors in the production of milk are the small dairy farmers. The farmers have been rearing Jersey and Holstein Friesian cross breeds. In an average, there are 2 to 3 dairy animals per household. It was reported during the field visit that in recent years around twenty farmers in three study districts have increased their herd size to around 5- 10 dairy animals. Presently, the major reasons for keeping small herd size are land holdings and availability of fodder grass. In case of increase in the herd size, there is a possibility of labour shortage due to the current trend of labour migration to overseas countries.

Table 3: Livestock Population of Nepal (2000/01-2012/13) CATEGORY 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13

CATTLE

7,044,279

7,090,714

7,175,198

7,199,260

7,226,050

7,244,944

7,274,022

BUFFALOES

4,366,813

4,496,507

4,680,486

4,836,984

4,993,650

5,133,139

5,241,873 MILKING COW

908,712

915,411

932,876

954,680

974,122

998,963

1,025,591

MILKING BUFFALO

1,124,454

1,158,300

1,211,495

1,252,770

1,291,644

1,331,037

1,369,796

Unit: Number Source: Agri-Business Promotion and Statistics Division,MOAD,2012/2013

Table 4: Livestock Products of Nepal (2000/01- 2012/13) PRODUCTS 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13

MILK PRODUCTION (Tons)

1,351,394

1,388,730

1,445,419

1,495,897

1,556,510

1,622,751

1,680,812

- COW MILK 392,791

400,950

413,919

429,030

447,185

468,913

492,379

- BUFF. MILK 958,603

987,780

1,031,500

1,066,867

1,109,325

1,153,838

1,188,433

MEATPRODUCTION (Tons)

227,105

233,900

241,690

248,573

277,625

287,930

295,167

- BUFFALO 147,031

151,209

156,627

162,213

167,868

172,414

175,132

Source: Agri-Business Promotion and Statistics Division, MOAD, 2012/2013

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The milk yield per dairy animal varies in each district. In Kailali an average milk yield per lactating dairy animal is about 6 litres per day where as in Bara it is 1.35 litres per day, similarly in Chitwan it is 3 litres per day, with an average lactation period of 300 days. There are cases where the dairy farmers have been able produce up to 24 litres of milk per day from Holstein Friesian and around 16 litres of milk from Jersey cross breeds. This signifies that there is a very low productivity in the districts in general. The cost of these improved cross breeds vary between Rs. 50,000 to Rs. 115,000 depending upon the milk yield and the age of the dairy animal.

The unit cost of milk production was calculated as per the interaction with the WWF- Hariyo Ban beneficiary farmers in three study districts. The data shows that per litre cost of production in Kailali, Bara and Chitawon is NRs. 12, 29, and 17 respectively for one lire of milk. Refer to a. Profit margins at Farmer level for assumptions and calculation details.

Livestock is kept for three purposes: cow/buffalo for milk, bullocks for ploughing land, and any of the livestock for dung to be used for bio-gas generation and farm yard manure. In traditional farms, size of herd depends partly on size of landholding as bigger holding means more bullocks for ploughing.

The productivity of milch animal greatly depends on the feed, nutrition and management practices. Observation showed that the feeding practice for far-west cattle has been guided by availability of farm by-products. The farmers usually create the feed mixes at home or rely on grazing of animals. A typical farmer lets the animals graze on pastures besides feeding them a mixture of cakes, grains by-products and other filler ingredient. The concept of compound feed is also catching up in the recent past, albeit slowly. Typically the following feed is provided to cattle:

Dry fodders - paddy straw, wheat straw, sugarcane tops, hay, gram husk etc.

• Green fodder/grasses – Epilpil, Napier grass, guinea grass, jowar, and fodder trees etc.

• Concentrates – mustard/rapeseed cakes, maize gluten, wheat / rice bran, molasses, etc.

Table 5: Livestock population and their distribution (2012/13) DISTRICT CATTLE BUFFALOES KAILALI 168,910 129,855

BARA 112,453 81,959

CHITWAN 92,081 120,127

Figure 6: Milk production Source: Agri-Business Promotion and Statistics Division, MOAD, 2012/2013

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13

MILK PRODUCTION (Tons) COW MILK BUFF. MILK

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N E P A L : 7,274,022 5,241,873 Source: Agri-Business Promotion and Statistics Division, MOAD, 2012/2013

Table 6: Milk Animals and Milk Production (2012/2013) DISTRICT MILKING MILKING BUFF COW MILK BUFF MILK TOTAL MILK

KAILALI 25,578 24,933 13,689 27,572 41,261

BARA 13,860 20,988 6,811 22,131 28,942

CHITWAN 21,713 32,680 12,664 29,866 42,530

N E P A L : 1,025,591 1,369,796 492,379 1,188,433 1,680,812 Source: Agri-Business Promotion and Statistics Division, MOAD, 2012/2013

Table 7: Milk production in tons

DISTRICT Production in tons

Cow Buffalo KAILALI 22,164 34,592

BARA 24,390 48,079

CHITWAN 31,905 47,610

N E P A L 492,379 1,188,433

Source: DLSO and Statistics Year book 2012/13

Table 8: Improved and local grass and seed production in B.S. 2069/70 (Chitwan district) Chitwan

Name Grass Area in Ha Ropani

Seed Production in kg

Jai Grass 139.2 25,000

Stylo 52.3 50

Molases 7.7 25

Joint Vhetch 15.4 -

Berseem 23.1 -

Tiyosenti 20.0 -

Source: Annual report, DLSO

c. Milk Collection

Milk is collected through the farmers to the private dairy or milk producers’ cooperatives. In the study districts, there are Hetauda Milk Supply Scheme (HMSS) and Dhangadi Milk Supply Scheme (DMSS). The milk collection networks under milk supply schemes of DDC is presented below. Chilling centres established under the milk supply schemes are in operation across the country.

Table 9: DDC collection networks

Schemes MPCCs Chilling Center

District Covered

Kathmandu Milk Supply Scheme (KMSS) 281 30 7

Biratnagar Milk Supply Scheme (BMSS) 126 11 4

Hetauda Milk Supply Scheme (HMSS) 167 8 3

Lumbini Milk Supply Scheme (LMSS) 63 6 4

Nepalgunj Milk Supply Scheme (NMSS) 40 3 4

Milk Product Supply Scheme (MPSS) 49 14 8 Janakpur Milk Supply Scheme (JMSS)

25 7 6

Dhangadhi Milk Supply Scheme (DMSS) 24 5 2

TOTAL 791 63 34 Source: DDC annual report, 2013

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Milk producers' cooperatives (MCPs) are primarily engaged in collection of fresh milk from the farmers and supplying mainly to the DDC and private dairies. It now collects fresh milk from more than 125 cooperatives. It provides guaranteed market to the dairy farmers and has been instrumental for the formation of numerous milk/dairy cooperatives in the region.

According to the DLSO, there are altogether 183 milk producer cooperatives in three districts. (Please refer to table below). In general, the milk collection capacity of DDC, and other private dairy operators, depends on milk availability, road network, and their own resources.

The traditional system of quality check is gradually replaced by modern technology using Milk Analyzer. The new technology facilitates in making the pricing more transparent to the farmers as well as provides exact status on the quality of milk. Taking into consideration the weak financial position of MPCs/collection centres, DDC has been providing subsidy up to NRs.100, 000 for the purchase of the equipment. The current market price of this equipment is below NRs.200, 000. Capacity of chilling centres range from 1000 to 14,000 litres.

Table 10: Cooperatives details

District No. of dairy co-operatives

Daily collection in litres

No. of chilling centres

Kailali 18 5,400 3 Bara 22 4,900 2 Chitwan 151 70,239 20 Source: Annual report, DLSO

Dhangadi Milk Supply Scheme of DDC, government stakeholder in dairy business. There is a uniform payment system adopted by cooperatives by providing "pass book" for the sellers. Cooperative agent fills the amount as soon as quality test and volume are finalized.

d. Milk Processing and Marketing

Processing involves chilling, pasteurization, production of milk and various dairy products. The DDC is the major player in the processing of fresh milk in four districts. Private sector dairies are also involved in processing. Various products are produced such as pasteurized milk, butter, ghee, yoghurt, cheese, Ice-cream, Paneer, skimmed milk powder, sweets (Lalmohan, Peda, Rasbari).

At present, over 90 percent is supplied in the form of fresh milk to the market and the remaining 10% goes to the processing units producing various dairy products.

Table 11: Private dairy District No. of private

dairy Kailali 50 Bara 9 Chitwan 151

Total 210 Source: Annual report, DLSO

Table 12: Milk Product Selling Price at Dhangadi and Hetauda S.N Details Amount in NRs.

1 Paneer: 410 Paneer 500grm. 210 Paneer 200grm. 85

2 Mozzarella Cheese 450 Mozzarella Cheese 500 gm. 235

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Mozzarella Cheese 200 gm. 100 3 Kanchan Cheese kg. 500

Kanchan Cheese 500 gm. 260 Kanchan Cheese 200 gm 110

4 Yak Cheese kg. 670 Yak Cheese 500grm 340 Yak Cheese 200grm 145 Yak Cheese 100grm 75

5 DDC fresh 200ml.with Bottle 30 6 Ghee pet jar 1 litre 520 7 Ghee pet jar 1/2 litre 265 8 Ghee Poly pack 1 litre 510 9 Ghee Poly pack 1/2 litre 260

10 Yak Ghee pet jar 1 litre 590 11 Butter Block per kg. 500 12 Butter Packed 250g. 140 13 Butter Packed 100g. 60 14 Yak Butter 1 kg. 540 15 Yak Butter Packed 1/2 kg. 275 16 Yak Butter Local sale 500 17 Cream fresh 60% fat/liter. 330 18 Cream fresh 40% fat/liter. 270 19 Cream fresh 40% fat/500ml. 140 20 Canned Rasbary(15Pcs) 220 21 Rasbary 120 22 Rasbary loose 11 23 Peda [packed 10 pcs]200grm. 120 24 Peda loose/p 11 25 Lalmohan [Packed 10pcs] 120 26 Lalmohan loose/p 11

1.2. Supporting Organizations Department of Livestock Services (DOLS) is public extension organization with strong network throughout the country. Under the DOLS, there are several organizations and programs responsible in the development and quality control of the livestock sector. Among them District Livestock Services Offices (DLSOs) are the most important organization. Public extension services including dissemination of technology, information and training for increasing livestock products production, income generation and sustainability, are conducted by 75 DLSOs and their sub-centres. Extension activities get technical supports from related sister organizations in the different districts, and also from regional and national level programs. DLSOs have collaboration with public, private and non-government organizations. The district-level extension programs are supervised, monitored, and evaluated at regional level by the Regional Livestock Services Directorate (RLSD) and at national level by the Department of Livestock Services. Dairy Development Board is responsible to design, review and amend policy on dairy sector while DDC is semi-government commercial organization on dairy business. It has been collecting milk from Kailali and Kanchanpur districts, among others, and is becoming most important input supplier. Its corporate office is providing one time free support of chemicals, tools and instruments that are related to milk collection, milk analysis, storage and supply. There are several organizations that support the dairy sub-sector in Nepal. There are 15 service centre/sub centres in Kailali at the Ilaka level.

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Table 13: DLSO service centre/sub-centres District No. of service centre/sub

centre Remarks

Kailali 14

Ka grade 5 Kha grade 9 No sub centre

Bara 15 Chitwan 14

Total 43 Source: Annual report, DLSO

Livestock insurance: Active milk producing cooperatives in close support of DLSO and ADB, are conducting live animal insurance in Kanchanpur and Kailali district. Chandeshwori MPC had collected NRs 0.15 million premium amount of milch animal insurance in which share of the grower, cooperatives and DDC is 50, 5 and 10 percent, respectively. The total premium rate is NRs 2,000 per animal as one time payment. Insurer receives 60 percent of the book value if his/her animal dies in the first year of the purchase and 80 percent if the animal dies within two years time. Insurance programme has been attracting other growers as well as cooperative members but supporting organizations – DDC, ADB and DLSO can not support all of them because of limited budget.

Breeding programme: Department of Livestock is playing due attention in breeding improvement through AI in Kailali and Kanchanpur district where semen of Murrah Breed (Buffalo) and Jersey / H.F breeds (cow) is transferred to the local, improved or cross receptor. Success rate of AI is 64 percent and 49 percent in cow and buffalo, respectively. The DLSO reported that 31 persons are trained in insemination technique.

Means of milk transportation are head load, bicycle, motor cycle, tempos and tanker. Dudhias or vendors use motor cycle, private dairies use vans and DDC uses milk carrying taker. In majority of places, metal cans are used in carrying milk. The other utensils used in transportation include jars and plastic gallons.

Forage Mission: Department of Livestock Services (DLS) is executing a program of forage development entitled "Forage Mission" with the motto of "Forage based milk production" in Nepal. The main objective of this mission is to aware dairy farmers to cultivate improved forage and fodder species for dairy commercialization. National Pasture Development Center, Hariharbhawan is the main implementing organization of this Forage Mission. National Pasture Development Center has been providing technical and material inputs to the farmers to develop forage resource center at farm level under this mission.

AI Mission (Program for Livestock Breed Improvement: Program of Livestock Breed Improvement (PLBI) was initiated by Government of Nepal as one of the important tools for genetic improvement. Government of Nepal has given the high priority to this program. National Livestock Breeding Center, Pokhara is a leading organization for the program, and NLBC chief is recommended as the national coordinator of this program. There is a central coordination committee that provides direction to the program and Director General of DLS is the Chairman of Central Coordination Committee. The aim of the project is to produce high milk yielder cattle of Nepalese Jersey and HF within the country. The project was launched at 375 community breeding centres of 40 districts till now. At district level, DLSOs are the main working organization for the program. Livestock Breeding Offices, Lahan, Siraha and Nepalgunj, Banke are responsible organization at regional level.

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District Breeding through Bull AI Services Buffalo Cow Buffalo Cow

Kailali 75 65 515 3,273 Bara 75 40 515 3273 Chitwan 45 15 1,550 20,740

Project for Agricultural Commercialization and Trade (PACT) is in operation since August, 2009 and will continue until June 2015. The Ministry of Agricultural Development (MoAD) is the Executing Agency. The overall project objective is to improve the competitiveness of smallholder farmers and the agribusiness sector in selected commodity value chains in 75 districts supported by the project. This will be achieved by:

1. helping farmer groups and cooperatives engage in profitable market-oriented production and improved access to markets through the provision of technology and information services and critical public infrastructure and linkages to agribusiness;

2. creating and strengthening industry-wide partnerships along the value chain, thus forging linkages between producers, traders, processors, and other stakeholders and;

3. reducing existing obstacles to agriculture and food trade thereby increasing the ability of farmers and agribusiness to respond to Sanitary and Phytosanitory (SPS) measures and food-quality standards to meet domestic and international market requirements.

Dairy Cattle Improvement Program (DCIP) is a joint program of NARC and DLS. Initially Animal Breeding Division of NARC, Khumaltar was leading organization for the project and National Livestock Breeding Center, Pokhara is a next to leading organization for the program. The financial TCP assistance of FAO has been terminated and Government of Nepal has given the high priority to this program. NLBC chief is recommended as the national coordinator of this program. There is a steering committee that provides direction to the project and Director General of DLS is the chairman of steering committee.

DCIP target is to register high producing milking animals under the program. These registered animals are known as nucleus herd and multiplier herd to produce better progeny than mother. The bull calf born by best mothers are selected for frogen semen production and distributed to the districts for natural services as well.

1.3. Enabling Organizations Department of Livestock Services (DLS) was first established in 1939 as veterinary dispensary, which was transformed into Veterinary Hospital in 1940. The Department of Livestock Services has following objectives:

Increase livestock production and productivity and eliminate the problem of malnutrition Improve the economic and social condition of the poor, socially disadvantaged people and

women through improved livestock farming Develop and improve existing livestock farming as the main income source of the farm

family and help in maintaining environmental balance and conservation Extend disease control services for security and conservation of livestock and public health

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Assist in the production of livestock and products which are exportable and import substitutable

Involve private sectors in commercial livestock farming; resource centre development and conservation; and market management

Increase self-employment opportunities by encouraging livestock sector and livestock based industry and trade

Extend quality control services in favour of livestock sector, livestock industries and the consumers

Identify, conserve, promote and develop the indigenous livestock breed which are going to be extinct

There are now four program directorates under the Department of Livestock services including I) Directorate of Animal Health, ii) Directorate of Livestock Production, iii) Directorate of Livestock Training Services, and iv) Directorate of Livestock Market Promotion. For ease and quick delivery of livestock services, it has established five regional directorates at Biratnagar, Kathmandu, Pokhara, Surkhet and Dipayal, respectively.

At the national level National Cooperatives Development Board, Central Dairy Cooperative Union and Nepal dairy association help the dairy sector through lobbying for appropriate policy, capacity development and other development related activities as specified.

Central Dairy Cooperative Union: Promote dairy cooperatives, provide training, help establish processing factories and promote operation under cooperative

Nepal Dairy Association: Problem identification, extend dairy business and promote dairy product diversification, code of practice monitoring

National Cooperatives Development Board: Highlights policy problem and recommend to amend, promotion of dairy cooperatives, establishment of dairy processing factories and their operation under cooperatives system

National Dairy Development Board: NDDB is an apex level policy-making body for dairy development in Nepal. It formulates and recommends policies on import and export of goods necessary for production and promotion of milk and milk products as well and animal feeds.

Nepal Market Development Project (NMDP) is a UKaid funded project. Animal health services is one the most critical services required by the dairy farmers. The project facilitates to establish linkage between milk cooperatives, veterinary doctors, and technicians for effective and quality service delivery to the community. The project is implemented jointly by Practical Action and FORWARD Nepal.

Non Governmental Organizations (NGOs): There are number of district and regional based NGOs operating in the area but primarily there are few NGOs which are directly involved in dairy farming.

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VI. Analysis of Findings Information gathered from field interactions were analyzed separately for three districts under opportunities and constraints sub headings along with the costing details.

1.4. Market Opportunities for Milk and Dairy Products a. District: Kailali

1. DDC consume 2,200 litre per day for sales in Dhangadi, Attariya, and Mahendranager markets and additional milk is send to Kohalpur division. From Kohalpur division, it is transported to Biratnager division for further processing into milk power to fulfil future demand during the lean season. DDC collects milk collection from many cooperatives within the catchment area in a regular basis (every alternate day in one route).

2. In average, NRs. 35 per litre for medium quality of milk. product: milk, curd, ghee, paneer 3. DDC in collaboration with Cooperative Division implemented “Gai Mai” program to support

farmers to purchase cows. Business model has a provision to provide of NRs. 25 lakhs to one cooperative, which will be further provided to farmers of NRs. 50,000 to 60,000. This scheme has not been successful yet due to difficulty in managing cows compared to buffalos. Farmers are more attracted towards buffalo.

4. There are 18 cooperatives and 50 private dairies operated in the district. 5. DLSO provides various services (training, resource centre, chilling VAT, awareness program

through FM stations, shed development) to the farmers mostly designed from the central office, which is channelled through the DLSO to the farmers.

6. Sweet shops and small dairy processing has own collection system from the farmers. They have mobilized few locals for regular milk collection.

7. Abundant market opportunities within the district and assured market as the surplus milk is purchased by DDC regional processing project office at Dhangadi. There are many dairy companies operated within the district which has supported in milk collection and marketing of value added products. There is a general understanding in the communities that any quantities of milk will be sold.

8. Animal rearing in the villages is part of their life and would continue forever for milk and their attachment with the animals.

9. Milk produced by the farmers is mostly sold in the market. In average, one-litre milk is consumed by self and the remaining is sold in the market.

10. All quantity of milk produced at present is immediately sold in the market due to high demand at the local level. Additional milk produced is stored at the collection centres and sold to the urban dairy industries. DDC is the ultimate collector of all additional milk produced. There are few private dairy industries in the district such as Khaptad dairy, SitaRam dairy,

11. Many farmers are aware that price of the milk depend on high Fat and SNF. But, there are still many farmers in the remote villages who perceive that the price is based only on volume. This is the reason why the farmers do adulteration by adding water.

12. Cooperative can avail support from various organizations. Ghodaghodi cooperative has received various supports (mostly infrastructure) for regular operation of their business. They have received defreezer, chilling vat, etc., from DLSO, CLDP, WWF, etc.

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13. Private dairy companies at the local level are operating business by collecting milk from the farmers and making profit.

14. Government has prioritized agriculture, tourism, and energy sectors and taken few initiatives in promotion of these sectors.

b. District: Bara

1. Cooperative provides embedded insurance service to the farmers along with the loan amount for purchasing cows.

2. Local market of whole milk is abundant for dairy cooperative about 1,200 litre per day, which is not yet fulfilled by the local dairy.

3. Dumawana dairy cooperative has a capacity of 5,000 litre per day collection from their milk collection centres.

4. DLSO has been promoting cultivation of grass in the community forest. Every year there is a separate activity for distribution of saplings to the community forest.

5. DLSO has been implementing AI and Forage mission to support milk production in the district. Shed improvement program for 200 farmers by contribution of NRs. 2500 for each farmer

6. Hybrid maize is sometime not used for consumption and used for firing purpose, which can be utilized for animal feeding.

7. Chilling VAT is supported by DLSO (2 # every year), DDC, and other development projects. 8. Most of the development supports in the district are funnel through cooperatives. 9. Quality services are more in demand. For example, success rate of “Semen” provided by the

government to the veterinary service providers is less (50 to 60%), where as, there are Semen bought from India at high price.

C. District: Chitwan

1. Project such as PACT has motivated large-scale dairy cooperatives in upgrading their processing facilities and marketing systems. Annapurna cooperative has usual collection of 350 litre per day and mostly sole raw milk to the large factories located in urban areas, now due to investment in processing after support received from PACT, it has started processing into value added products such as packet milk, ice cream, paneer, etc. which is sold in the local market. They have set a target of processing of 4,000 litres of milk.

2. There are already private banks such as Prime bank having “Gai Mai” project implemented for attracting farmers. 15 million loan outstanding in a dairy sector only in Chitwan district. One farmer can access 50,000 to 60,000 loan for 2 years at 12% interest.

3. Abundant market opportunities within the district and assured market as the surplus milk is purchased by DDC.

4. Distribution network is well established by Padampur dairy in the catchment area of Shree Thangkhola Community Forest User's committee, Padampur, Jutpani, and Chitwan. Padampur dairy has established five collection centres with well-equipped analyzer machine to check the quality of milk.

5. There is a possibility of earning NRs. 1000 -1200 per day from few cows and buffalos. 6. Community Forests has sufficient land available for growing feasible grass for animals by

replacing existing unnecessary weeds.

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7. DDC has a provision of providing chilling VAT to the cooperatives under the terms and conditions of milk supply.

8. Banks provide loan facility in cow farming through the cooperatives. Padampur dairy cooperative has loan outstanding of NRs. 42 lakhs at 11% interest rate to the farmers. They have received loan from the Prime Bank at 9% interest. Dairy company has benefited by increase in milk collection from 2000 litre to 3000 per day.

9. NTNC was involved in vaccination program supported to the farmers through the Padampur dairy cooperative

10. Bio-gas plants has already been installed in many households out of 3400 in Padampur VDC and there are more demands.

11. Dairy cooperatives provides Dashain bonus scheme to the farmers where individual farmer receive in average NRs. 10,000. As per the bonus scheme, each individual farmer is eligible to receive NRs. 3 per litre. In average, each farmer will sell 3000 to 4000 litre in a year.

12. Padampur dairy cooperative has introduced milk analyzer machines to check the quality of milk instantly.

13. Livestock insurance scheme is available in the district either though Agriculture Development Bank or private insurance companies such as NLG Life Insurance Company.

The National Insurance Board issued the Livestock and Crop Insurance Guidelines. The board has issued the guidelines to 17 different insurance companies working in the non-life insurance sector. The farmers insuring their crops and livestock are required to pay their insurance in installments on the evaluation carried out by offices under the Department of Agriculture and Livestock Services.

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1.5. Issues and Challenges faced by poor households and other actors of the value chains

Issues and challenges collected from the field level interactions are listed in four major headings: a. input supply, b. production, c. processing and d. marketing for each district.

a. District: KAILALIInput supply:

High yielding breeds such as Holstein Friesian and Jersey are hardly affordable by the small-holder farmers at the target community.

Veterinary services such as treatment of sick animals and artificial insemination facilities are poorly established. Few private veterinary centre and a livestock service centre (LSC) are providing limited veterinary services with the capacity what they have. Quality breeding bulls/semen has been poorly maintained at the target area resulting in great economic loss by the farmers.

Farmers have poor access to the reliable sources of improved breeds of cows and are being forced to purchase inferior quality (culled) cows of improved breeds from either India or from within the country (Chitwan, Gorkha, Nawalparasi).

There are no any government and private level resource centers for quality animals to purchase.

Farmers purchased a breeding bull of buffalo costing IC 60,000.00 (sixty thousands) that performed well in first few years. However, it is very costly to feed and maintain by the farmers.

Most of the animals farmed at the target households are low producing causing to very low production of milk in the target area.

Farmers are practicing concentrates based feeding to their dairy animals including cattle and buffalo resulting in high cost of production due to high cost of commercial concentrate feeds.

There is no any feed industry in the nearby area. Feed is to be imported from other districts. That costs high to afford by the smallholder farmers.

Majority of beneficiary households have very small piece of land. Thus, it is impossible to cultivate improved and nutritious forages on their land.

Animals in the target areas are mostly fed with native grasses rather than providing improved forages.

Farmers do not have knowledge on the techniques of improving the quality of straw which is the most common bulk feed fed to the animals.

Preservation of surplus agricultural crop residues is considered important to feed the animals in lean season when green forages are poorly available. However, making hay and silage from crop residues is beyond the capacity and knowledge of the farmers in the target area.

Availability of green grass is very less and they are depended on feed and straw. Farmers complain that by selling milk in the market, they do not make any profit, but they are in loss.

Farmers are not aware of proper management of shed and seeking proper training Farmers seek forage seeds which is not available Due to less availability of feeds, farmers are not motivated to have more animals (cow and

buffalo). They are aware that feeding animals by purchasing from the market is not profitable to them.

Farmers do not have adequate land and could not manage to feed animals from their own resources.

Veterinary services from the local service providers is not efficiently available to the farmers. There are very less number of DLSO sub centres in the district.

High investment in the animals (in average, 80,000 to 1 lakh for quality buffalo) and high costs in feeding, whereas in return less return due to low market price (NRs. 30 to 35 per litre).

Buffalos are preferred by the farmers due to comparative advantages over cows and have

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multiple benefits. Hardly any farmer is trained on animal farming. They have been rearing animals by their own

traditional knowledge. They are not aware on proper care and management practices of their cows and buffalos.

The only reason for having few animals is due to utilization of small land (2-4 Khatta), other resources and family members engaging as a labour.

Production: Findings revealed that majority of the livestock population available in the target areas are

local/indigenous leading to lower milk yield resulting in high cost of per unit milk production. Milk production in the target area of Kailali district ranges from 1.5 – 10 lit per cow per day.

Thus, there is great scope of increasing milk production per cow by improving the genetic makeup of the available stock.

On the other hand, the herd size of cow/buffalo is very low (i.e. 1-2 animals per household) that has led to lower milk production.

Farmers are lacking of awareness on forage based livestock production. Motivation level of farmers within the region is less due to various reasons. Low quantity of milk production from the local breed and farmers do not own improved

breed, which has resulted in less production. Farmers are cheated by others while purchasing cows, mostly discarded cows were purchased from border market. Average milk produced is less than 5 litres per day.

Processing:

The cooperative do not have milk analyzer. Fat and SNF have to be determined with the help of traditional techniques. Those techniques are very much time consuming. Besides, the older technique is not much reliable as compared to newly developed milk analyzer technique. Farmers are demanding milk analyzer to determine the FAT and SNF content of the milk produced by themselves for reliability and accuracy.

There is little awareness on clean milk production (CMP), hygienic and safe transportation of milk among the producers. They are using plastic bottles (which is considered to be very non-hygienic) to deliver milk from farm to dairy cooperative.

Pasteurization is important in enhancing the storage quality of the milk. However, there is no any pasteurization facility in the cooperative.

Cooperative has very less milk collection from the members as they are attracted towards selling in the market at high price.

There is a competition within the dairy companies in the district for milk collection from the farmers, which as resulted in low quality milk. To get the milk from the farmers, companies are giving high price for low quality milk.

Cooperatives performance is not satisfactory compared to the private dairies. Cooperatives have not been successful to motivate and attract their large number of members to sell their milk within their cooperatives. As a result of that cooperatives are operating with less profit margin and low revenue.

Wastage/damage of milk due to difficulty in maintaining appropriate temperature without Chilling Vat machine.

Cooperative is using traditional lacto fat testing machine which is cumbersome. It takes 30 minutes to test the quality of each farmer.

Private dairy companies are operated under loss with capacity utilization of less than 10%. Khaptar Dairy is one of the biggest with investment of 40 million in the district with 10,000 litres capacity, which is hardly utilized.

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Marketing:

Farmers are getting more price from the local market than their own cooperative, thus they are attracted towards selling in the local market to the private dairy. Farmers complain that they get NRs. 40 per litre from the private dairy whereas from their own cooperatives they only get NRs. 30 per litre.

Farmers compare milk with mineral water and said that per bottle mineral water costs NRs. 25 per litre where as for milk it is just NRs. 30 pre litre

Local market consumers especially hotels and restaurants buy milk at high price from the local farmers for tea and coffee.

Price paid to the farmers is least within the region.

Perception Changes Overtime In a year 2054, five farmers bought 15 cows at the costs of NRs. 7 lakhs from Parbathipur, Chitwan district with transportation support by Kailali district DLSO office. After it is bought, cows started giving sufficient quantity of milk, but in the market, consumers did not preferred to have cow milk due to the perception that it is not tasty compared to buffalo. Now the situation is completely different, people buys milk from the market. Source: Field interaction, Kailali

The major investment in the dairy sector is in cow and feed which is costly for rural farmers. Improved breed cow cost up to NRs. one lakh and average monthly expenditure feeding is more than NRs. 12,000 excluding other medicine. Poor farmers could not afford to invest in mature buffalo or cow, but they buy calf with a hope to get milk within few years.

Sees Future from the Livestock

One of the dalit women, Sukhad, Kailali says “previously when people sees me carrying milk to the market, they would not buy milk from that shop, but now, the cooperative buys milk from me and pay me on time.” She has four children and own few animals and small land for living. By selling milk, she could cover partial daily expenses and could give stationeries to their children. She is now a member of Forest User’s Group formed from where she has received NRs. 9,000 to purchase goat and save NRs. 100 per month. Source: Field interaction, Kailali

“Seeking Better Services”

Mr. Dilli Ram, Farmer, Sukhad owns two buffalos and has been able to sell 14 litres of milk in the market. He has purchased buffalo at NRs. 58,000 by taking thirty thousand (NRs. 30,000) loan

Figure 7: Dalit women, Sukhad, Kailali

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amount from the cooperative and already made payment. His says, major investment is in purchasing buffalo and preparing shed. One quality buffalo costs NRs 1 lakh and about NRs. 1 lakh for making shed. Other regular expenses are in feeds; where as other efforts are family involvement in taking care of buffalos. Due to high costs of feeding, he could not able to give regular feeds, which cost NRs. 25/ kg and hardly he could afford to give 1 kg for each buffalo. He had bitter experiences in receiving AI services by local veterinary service provider and failed three times. He is very motivated and planned to add few more buffalos by taking more loans from banks. He has already approached banks such as Agricultural Development Bank and others, but failed to get loan in spite of collateral as his 10 Kattha land. Source: Field interaction, Kailali

Untapped Opportunities

Darakha, Saraiya, ward no. 7 lies in the Sukhad VDC where about 700 households dwell. Out of 700 households, about 250 household own few animal mostly buffalo. Sukhad market is few kilometres

far from the market area; have to cross jungle area, and difficult road access. Most of the farmers own traditional buffalos that give few litres of milk (in average, 2 to 3 litres) and hardly sold in the private dairy (Achal dairy) located in Sukhad market. During our interaction with the farmers, they have expressed that due to difficulty in carrying their milk individually up to the market they are not selling in the market. They have to carry long distance and due to

limited family members, children had to carry milk who are mostly cheated. There is a potential of collection of about 200 litres per day if the collection tank is available and one person assigned by the group could carry milk up to the Sukhad cooperative. There are problems such as feeding animals, quality breed, and majority have very less family members to take care of animals. Most of the female spend most of their time taking care of their children. Source: Field interaction, Kailali

b. District: BARAInput supply:

There is fair status of veterinary services in the target area. Government's Livestock Service Office (LSC) and few private veterinary clinics/agro-vets are providing veterinary services to the animals in the target area.

Figure 8: Wife of Mr. Dilli Ram, Farmers, Sukhad, Kailali

Figure 9: FDG at Chaudari community, Saraiya, Kailali

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There is limited availability of green forages to feed the animals. Forage cultivation practices have been recently initiated in the barren land of community forest in few clusters. Commercial feeds costs high that increases the cost of milk production. Farmers lack knowledge about the fodder and forage preservation techniques (i.e. hay and silage making) for lean season.

High cost of production is a major problem especially on feeding which is based on straw. Seeds for growing various types of grass is made available by DLSO office but in very less

quantity There is lack of feeding and care knowledge with the farmers and simply complain that their

cows give less milk. There is no cultivation practice of improved nutritious grass varieties in the private land. Less

than 5% in the private land whereas mostly practiced in the community forests. Community Forests is the major source for improved grass, but they are not aware about its

importance. There is a difficulty in managing and taking care of grass as the ownership is in a group. Whereas in the leasehold forest, there is a mechanism for division of land within a members of a group.

Insurance mechanism exists in the district, but it is hardly practiced due to lack of awareness and premium amount is high for the farmers. Insurance is practiced by those farmers who have taken loan from the bank due to mandatory policy by the banks.

Quality veterinary services are not available to the farmers in an efficient manner and complaints that they are spending more but there are very less results especially on AI, and other regular treatments.

Production: In contrast to Kailali district, there was no problem of affordability of farmers to adopt high

producing improved breeds in Bara district. However, due to small size of land holding, farmers are keeping only one or two milking animals. Male calf management is one of the major problems in commercial dairy farming in Bara as it is a nationwide problem that could be solved by ensuring the access of farmers to the sources of sexed semen for artificial insemination.

Due to smaller herd size in the households of target beneficiaries, total milk production is not significantly higher as expected in the project area. It needs to be improved by encouraging the farmers to change the traditional practice of dairy farming and adopt commercial practice.

Farmers are not aware on proper management and care for improved cow breeds. They buy cows that give high quantity milk from other districts expecting the same quantity of milk, but to their surprise they receive very less milk due to lack of feeding and care practices. There are cases of death of cows due to improper care and management. While purchasing cows, they did not asked what they were feeding to their cows.

Cow farming is usually adopted as a low class people and it is not recognized by the society as a good business. It is a usual practice that low class society people own few cows and buffalo, and other cattle to sustain their living, but not an enterprise.

Cows provided to the members of Forest user’s committee is owned as a project’s cow. They already owned cows purchased by themselves. This shows that there is a lack of ownership of cows distributed and there is a question of management and care.

Farmers are rearing cows without adequate knowledge and only by learning from neighbours. Processing:

There is no sufficient investment in infrastructure by the dairy cooperative and is managed by basic facilities such as fridge. Chilling VAT of adequate size is not available at present with the dairy cooperative and thus could not collect sufficient quantity of milk from their members. Members are selling milk to other private dairy companies.

Many times milk stored are destroyed due to damaged resulting losses to the cooperative.

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Marketing:

Farmers complain that the price received is less when selling their milk and correlate with the market price at which they purchase from the market. For example, if they purchase from the market at NRs. 50 per litre, they also expect the same amount when selling their milk. Farmers do not understand marketing dynamics and costs incurred in the marketing and distribution costs.

Milk collection from individual farmer is very less. In average 2 to 3 litre per day with exception to 20 to 30 litre from few progressive farmers who owns 4 to 5 cows.

Milk collection mechanism is not is place, individual farmers have to come to the dairy outlet carrying milk for sales.

There are many local milk producers locally named “Tungre” in the villages (Dumarwana, Baduwa VDC) selling milk in the local markets carrying in the motorcycle in large quantity about 150 litres.

Transportation and logistics system

C. District: CHITWAN Input supply:

High cost of production is a major problem especially on feeding which is based on straw. Seeds for growing various types of grass is made available by DLSO office but in very less

quantity. For example, Padampur dairy has more than 850 members and distribute just 200 kgs of seeds (in average, 4 kg seeds per farmer). Farmers do not have sufficient land to grow grass.

Insurance mechanism exists in the district, but it is hardly practiced due to lack of awareness and premium amount is high for the farmers. Insurance is practiced by those farmers who have taken loan from the bank due to mandatory policy by the banks.

Availability of feeds in the market is not regular and there are frequent changes in the brand from various places, mostly from Dhangadi, Makawanpur, etc.

Production: Cow farming is usually adopted as a low class people and it is not recognized by the society

as a good business. It is a usual practice that low class society people own few cows and buffalo, and other cattle to sustain their living, but not an enterprise.

Cows provided to the members of Forest user’s committee is owned as a project’s cow. They already owned cows purchased by themselves. This shows that there is a lack of ownership of cows distributed and there is a question of management and care.

Processing:

Dairy processing companies had to purchase inputs from the individual trader due to credit facility rather than the companies. Dairy companies sell inputs (feeds, fertilizer, etc.) to the farmers in a credit period of 15 days.

Milk collection from individual farmer is very less. In average 2 to 3 litre per day with exception to 20 to 30 litre from few progressive farmers who owns 4 to 5 cows.

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Marketing:

Farmers complain that the price received is very less and they compared with bottled water, which cost NRs. 25 per bottle; where as price received in average is NRs. 30 to 40 in volume.

There is very less coordination and networking between the CFUG and Padampur cooperative for mutual benefits. Even though the funds were mobilized through CFUG committee for purchasing of cows, milk produced will be collected at the local dairy cooperative.

Forest User's committee, Padampur has been involved in cash distribution for purchasing of cows to their members, but there are no proper plans for management of feeds and other business service provisions required for the farmers.

There is a limited consumption of whole milk at the local markets and large quantity of milk is sold to the national dairy companies at less margins.

1.6. Calculation of margins Calculation of profit margins at production and marketing is shown below. Ideal farmer with average milk production and having 2 to 3 animals were taken for calculation. Assumption for calculation is provided below. Calculation shows that farmers are making marginal income in a year. Similarly, cooperatives are also making less profit margin mostly by selling raw milk without value addition.

a. Profit margins at Farmer levelAssumptions:

S.N. Description District

Kailali Bara Chitwan Assumptions:

Buffalo Cow Cow 1 Costs per cow/buffalo 58,000 80,000 50,000 2 Shed 50,000 40,000 50,000 3 Milk collection days 300 300 300

Per day Milk production in litre 15 9 15

Total yearly milk production in litre

4,500

2,700

4,500 4 Sales price 30 35 38 5 Number of cows/buffalo 3 2 4 6 Number of calf 1 2 7 Loan amount 30,000 80,000 8 Loan premium - monthly 1,000 4,000 9 Interest amount per month 250 500 10 Investment in machines 20,000 10,000 10,000 11 Feed price a Dana 26 25 25 b Paral 15 15 20 c Grass - - -

12 Land area (Katha) 2

Profit margins from selling milk (Amount in NRs.)

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District S.N. Description Kailali Bara Chitwan

1 Sales Revenue / Income 135,000 94,500 171,000 a Milk 135,000 94,500 171,000 b Compost - - c Animal - -

2 Expenses - Operating 48,200 70,240 76,500

A Feed: 37,200 48,240 57,500 a Choker 7,000 8,400 7,500 b Dana 11,700 12,240 15,000 d Straw 13,500 21,600 30,000 e Others (maize, etc.) 5,000 6,000 5,000

B Health costs 6,000 10,000 10,000 C Labour Cost* D Water and Electricity cost 4,000 6,000 4,000 E Maintenance 1,000 6,000 5,000

3 Expenses - Investment 7,000 8,000 2,000 a Depreciation of Fixed investment 4,000 2,000 2,000 b Bank interest 3,000 6,000 0 c Rent - -

Total Expenses 55,200 78,240 78,500

Operating Profit 86,800 24,260 94,500 Per litre cost of production 12 29 17

b. Profit margin of Cooperatives

S.N. Assumptions: District

Kailali Bara Chitwan

1 Milk purchase quantity in litre - Yearly 30,000 2 Milk purchase rate NRs. Per litre 32

3 No. of staffs @ NRs. 6500 for 12 months 2

4 1 labour at NRs. 250 per month for 12 months 1

5 Average price of curd (NRs. Per litre) 40

6 Average price of paneer (NRs. Per Kg) 350

7 Average price of ghee (NRs. Per kg) 600

Profit margins

District S.N. Description Kailali Bara Chitwan

1 Sales Revenue / Income

a Milk

960,000

2,712,708

b Curd

97,160

224,997

c Paneer

17,500

209,100

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d Ghee

12,000

100,860

e Other 1,465

Total Income 1,086,660

3,249,130

2 Expenses - Operating

A Milk purchase 1,034,329 2,619,689

B Direct expenses: 136,250 245,500 a Labour 91,250 119,699 b Fuel 10,000 20,580 c Packaging 25,000 79,227 d Chemical 10,000 25,994

C Administrative 233,500 280,691 a Salary 156,000 62,000 b Rent 5,000 36,858 c Maintenance 20,500 42,815 d Printing and Stationery 10,000 58,700 e Audit 5,000 10,000 f Telephone 20,000 8,357

g Loss 2,000 8,000 h Depreciation 53,461 i Miscellaneous 15,000 500

Total Expenses

1,404,079

3,145,880

Operating Profit

(317,419)

103,250

Gender Aspects in Livestock Farming:

The farm activities for livestock production and its management are jointly conducted by men and women. The study reveals that women are mainly responsible for non-cashable farm activities like forage collection, cleaning the gutter and shed, and feeding animals whereas milking animals and selling of milk to provide for quick cash income was found to be mostly by men. Men are in strong decision making in the family. The participation of women in outside affairs is very limited and they have far less chances for trainings, seminars, study/observation tours etc. Women have little opportunity to assume higher positions denoting that their participation in such organizations was not more than the symbolic representation.

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VII. Intervention Strategies Based on the study findings, suitable intervention strategies for WWF – Hariyo Ban program have been proposed for separately three districts in four major value chain functions (input supply, production, processing, and marketing), which covers breed improvements, production, feeds, investment & insurance, and quality aspect for dairy improvements. Breed improvements include access to affordable improved milk breeds and costs, including Animal health and vet services.

1.7. KAILALI District

Input supply: Train farmers on breeds, breeding and breed improvement strategies. Provide at least 35 days VAHW (Village Animal Health Worker) level course or 15 month

Veterinary JTA course to one of the cooperative members for improved quality services in collaboration with one of the Technical School/CTEVT nearby the project area

Need of establishing a community artificial insemination centre in collaboration with National Livestock Breeding Center, Pokhara with skill full technician.

Organize farmers' level training on disease care and management in dairy animals. Provide technical support in cultivating improved forages and fodder species in the barren

land of nearby community forest in collaboration with DLSO, DFO, Community Forest Users' Group and dairy cooperatives. Facilitate to provide lease land to land poor for plantation of fodder and forage.

Plantation of winter season fodder and forage Establish nursery for different variety of fodder and forage Distribute planting materials (seeds, seedlings, saplings) of improved forages such as Napier,

Paragrass, Molasses, Oat, Berseem, Paspalum, etc.) Provide deep boring facility with pumping set for irrigating the forage cultivated land. Train the farmers on the techniques of increasing nutritive value of agricultural crop residues Train the farmers on the techniques of forage preservation techniques such as hay and silage

making for feeding the animals in lean season Train the beneficiary households on the cultivation and management of improved forages and

fodder species for year round forage production. Train the beneficiaries to prepare home-made concentrate feeds, formulate dairy cattle feeds

themselves to reduce investment in purchasing commercial feeds. Dairy cooperative in Sukhad should start delivering commercial feeds in subsidized rate to its

member households. Distribute manual/electricity operated chaff cutter for increasing quality of forage and straw

to the beneficiary households. Establish a small scale feed mill by the cooperative and provide livestock feeds at subsidized

cost so as to reduce the cost of per unit milk production among the smallholder farmers. Insurance services should be inbuilt within the loan system by raising awareness and its

importance. For short-term and long-term investment, cooperatives should do networking with the banks

(private and government) at subsidized rate. Cooperatives should be proactive to liaise between the farmers and banks.

Production: Organize exposure visit for the farmers to the model dairy farms and major livestock resource

centres in and outside the country nearby the project district.

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Conduct awareness raising activities focusing to the replacement of native/indigenous low producing animals with high yielding improved breeds to increase income and enhanced food and nutritional security.

Need advocacy support to increased access of farmers to the veterinary service providers including Livestock Service Centre (LSC) at local level and District Livestock Service Office (DLSO) at district level.

Create awareness on the best economic herd size among the farmers by organizing daylong training in collaboration with District Livestock Service Office (DLSO), Kailali.

Provide support to the beneficiary households for increasing the number of milking animals in their farm.

Establish milk collection centres at the major dairy pockets areas around the target area near by cooperative catchment.

Provide shed construction/repair and maintenance support to the beneficiary households for healthy animal housing and increased milk production.

There is a urgent Fair price system should be introduced Cost reduction strategies should be implemented by provision of green forage to the animals.

Grazing land within the lower bank of community forest should be allocated by farming nutritional varieties of grass, which should be allowed to collect at certain intervals to the groups.

Processing: Training on animal farming and Shed improvement training should be provided through

cooperatives and groups Business scheme to the farmers for investment in this sector with both equity and loan

proportion by the cooperative by networking with the banks and other financial institutional at feasible interest rates.

Expedite insurance scheme of the Agriculture Development Bank by mobilizing local cooperatives and other NGOs working in the district.

Cooperative should do investment in modern equipments for building trust from the farmers to check the quality of milk. Analyzer machine should be installed.

Seasonal calendar training to the farmers should be provided to the farmers by cooperatives. Cooperative has competitive advantages over other private business enterprises due to close

attachment and business relations. Ghodaghodi cooperative should build long-term relationship with the farmers by providing services to build trust and commitments to collect milk from their members.

Cooperative should increase cash reserve through regular savings and other business opportunities.

Product development and diversification result in high return. However, investment should be carefully done looking at the market demand.

Subsidy should be provided to the farmers on feeds and other inputs to motivate them in cow farming.

Create awareness on clean and hygienic milk production among the farmers focusing to the use of quality dairy equipments (cans, milking buckets, measuring cylinders)

Distribution of modern dairy tools/equipments including milking buckets, cans, measuring cylinders

Cooperative in Sukhad should use milk analyzer to determine milk constituents including fat, SNF, TS and lactose.

Chilling VAT should be functionalized by the cooperative for maintaining the quality of milk collected from the beneficiary households.

Need to establish a milk pasteurization facility by the dairy cooperative at local level to increase the quality of milk.

Cooperative should have to manage power backup system (Generator/Inverter) for

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uninterrupted power supply on chilling vat and other machinery to maintain the quality of milk.

Marketing: Cooperative should establish milk collection centres in the catchment area for milk collection Create awareness on clean and hygienic milk production among the farmers focusing to the

use of quality dairy equipments (cans, milking buckets, measuring cylinders) Distribution of modern dairy tools/equipments including milking buckets, cans, measuring

cylinders

1.8. BARA

Input supply: Train farmers on breeds, breeding and breed improvement strategies. Organize farmers' level training on disease care and management in dairy animals. Provide technical support in cultivating improved forages and fodder species in the barren

land of nearby community forest in collaboration with DLSO, DFO, Community Forest Users' Group and dairy cooperatives

Distribute planting materials (seeds, seedlings, saplings) of improved forages such as Napier, Paragrass, Molasses, Oat, Berseem, Paspalum, etc.)

Provide deep boring facility with pumping set for irrigating the forage cultivated land. Provide fencing material support to protect the forage cultivated area in the community forest. Train the farmers on the techniques of increasing nutritive value of agricultural crop residues Train the farmers on the techniques of forage preservation techniques such as hay and silage


fodder species for year round forage production. Train the beneficiaries to prepare homemade concentrate feeds, formulate dairy cattle feeds

themselves to reduce investment in purchasing commercial feeds. Dairy cooperative in Simara should have to start delivering commercial feeds in subsidized

rate to its member households. Distribute manual/electricity operated chaff cutter for increasing quality of forage and straw

to the beneficiary households. Improvement in capacity of milk production will result in business networking with large-

scale dairy companies for buy back guarantee. Motivation to the farmers by recognition system There is a need for imparting proper knowledge to the farmers on important factors for

increasing milk production such as feeding (especially green forage through the year, veterinary care and other inputs.

Forage planning and management for increasing milk production when there is shortage of green grass.

Government policy is privatization of veterinary services thus the funds shall be mobilized at the VDC office for a separate community veterinary services provider “Samudayik Pasu Swewa Kendra” and “Gramin Pasu Swasta Karyakarta” in all wards. These services should be pay for services for sustaining their business. There are 16 veterinary service centres in the district.

Increase private veterinary service providers at the local level, strengthened and make it competitive for efficient management of their business.

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Production:

Organize exposure visit for the farmers to the model dairy farms and major livestock resource centres in and outside the country nearby the project district.

Create awareness on the best economic herd size among the farmers by organizing day long training in collaboration with District Livestock Service Office (DLSO), Bara.

Provide support to the beneficiary households for increasing the number of milking animals in their farm.

Establish milk collection centres at the major dairy pockets around the target area. Provide shed construction/repair and maintenance support to the beneficiary households for

healthy animal housing and increased milk production. There is a need of awareness to the farmers on pricing for selling that price is not based on the

market MRP. Project should promote farmers to farm adequate number of cows (4) for efficient

management and hassle for feeds and others. It is difficult to manage large number of cows especially for feeding and care by the individual farmer.

Improvement in capacity of milk production will result in business networking with large- scale dairy companies for buy back guarantee.

Motivation to the farmers by recognition system There is a need for imparting proper knowledge to the farmers on important factors for


Processing: Create awareness on clean and hygienic milk production among the farmers focusing to the


cylinders Prabhatpheri Cooperative in Simara should use milk analyzer to determine milk constituents

including fat, SNF, TS and lactose. Chilling VAT should be functionalized by the cooperative for maintaining the quality of milk

collected from the beneficiary households. Need to establish a milk pasteurization facility by the dairy cooperative at local level to

increase the quality of milk. Cooperative should have to manage power back up system (Generator/Inverter) for

uninterrupted power supply on chilling vat and other machinery to maintain the quality of milk.

Marketing: Need to establish milk collection centres in the catchment area Packaging system for reduction in cost Project should collaborate with the district DLSO office for networking

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1.9. CHITWAN District

Input supply: Train the farmers on breeds, breeding and breed improvement strategies. Provide at least 15 month Veterinary JTA course to one of the cooperative members for

improved quality services in collaboration with one of the Technical School/CTEVT nearby the project area

Need of establishing a community Artificial Insemination centre in collaboration with National Livestock Breeding Centre, Pokhara with skilled technician.

Linkages with the Padampur cooperative for provision of feeds at subsidized rate to the target beneficiaries

Provide technical support in cultivating improved forages and fodder species in the barren land of nearby community forest in collaboration with DLSO, DFO, Community Forest Users' Group and dairy cooperatives

Distribute planting materials (seeds, seedlings, saplings) of improved forages such as Napier, Paragrass, Molasses, Oat, Berseem, Paspalum, etc.)

Provide deep boring facility with pumping set for irrigating the forage cultivated land. Provide fencing material support to protect the forage cultivated area in the community forest. Train the farmers on the techniques of increasing nutritive value of agricultural crop residues Train the farmers on the techniques of forage preservation techniques such as hay and silage


fodder species for year round forage production. Train the beneficiaries to prepare homemade concentrate feeds, formulate dairy cattle feeds

themselves to reduce investment in purchasing commercial feeds. Distribute manual/electricity operated chaff cutter for increasing quality of forage and straw

to the beneficiary households. Improvement in capacity of milk production will result in business networking with large-

scale dairy companies for buy back guarantee. Motivation to the farmers by recognition system There is a need for imparting proper knowledge to the farmers on important factors for


Forage planning and management for increasing milk production when there is shortage of green grass.

There is a need for developing a suitable loan scheme for smallholder farmers. Past initiatives by ADB Nepal, Laxmi bank, Prime bank, etc., have left both farmers and bankers unsatisfied with the services.

Production: Organize exposure visit for the farmers to the model dairy farms and major livestock resource

centres in and outside the country nearby the project district. Organize farmers' level training on disease care and management in dairy animals. Create awareness on the best economic herd size among the farmers by organizing day long

training in collaboration with District Livestock Service Office (DLSO), Chitwan. Provide support to the beneficiary households for increasing the number of milking animals in

their farm.

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Provide shed construction/repair and maintenance support to the beneficiary households for healthy animal housing and increased milk production.

Cost of production could be reduced by collaborating with the community forests for provision of green grass without disturbing forest resources.

Processing: Target beneficiaries should be well defined and they should be supported through the

Padampur cooperative for provision of business services. Community Forest User’s Committee should play facilitating role in strengthening groups and

Number of milk collection centres should be increased in the pocket area through cooperative efforts so that there is business linkages with the farmers.

The basic business services should be channelled through the existing dairy cooperative (Padampur cooperative) for long-term sustainability and mutual benefits

Marketing: Create awareness on clean and hygienic milk production among the farmers focusing to the


cylinders

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VIII. Collaboration with other Dairy Projects and Replication of Past Projects

In the study districts, there are projects, private sector, and government involved in promotion of dairy sector in Nepal. There is a need for collaborative efforts for mutual benefits, which are summarized as follows.

a. DDC, Prime Bank and government implemented “Gai Mai” program in many parts of Nepal. WWF – Hariyo Ban program beneficiaries can benefit from cash investment for purchasing cows at low interest rate. In Kailali district “Gai Mai” program has not been effectively implemented due to lack of understanding between the cooperative and DDC. Similarly, in Chitwan, Padampur Cooperative has implemented this program to some extent, which can be further extended in the WWF – Hariyo Ban catchment area.

b. There are many local level MFIs such as Sana Kisan Cooperative, Kisan Multipurpose cooperative, etc., who are willing to invest in this sector by providing loan amount at very nominal interest if the cooperatives are ready to collaborate.

c. In Chitwan, there were projects implemented in the past by Practical Action through Forward. Program should coordinate with Forward for resource sharing.

d. There are commercial scale cow farming project implemented by private and cooperative. In Saurahha, Laliguras cooperative has started large-scale cow farm with 250 cows and has plan to expand up to1000 cows. This can be a resource center for knowledge and

e. Insurance companies should be tied with the local MFIs for effective marketing. There are a large number of farmers, who are not properly aware of animal insurance scheme.

f. SAMARTH project implemented M4P concept in dairy value chains through Practical Actions in Chitwan district. Collaboration for knowledge and resource sharing is possible.

g. In Chitwan district, there is an evidence for forage production in the community forest. Project should explore more on this aspect for replication in the diary pocket area.

h. Agriculture Development Bank, NGL insurance, etc., have insurance package for livestock.

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IX. Conclusion and Recommendations for Intervention

Farmers in general are not motivated especially in cow farming for milk production compared to buffalo. Commercial scale cow farming is Nepal is still challenging due to high investments, cost of production and difficulty in feeding green forage. Cow farming should not be looked as a separate business entity; it has “multiplier effects1” and not just milk production. There are many things that dairy farming brings to a community, but the most measurable is its impact on the economy. This effect is generally more than just the direct income or employment from the farm, because cow farming creates demand for other business such as fertilizers, feed, bio fuel, etc., and the money people earn from those businesses also drives more demand.

In addition to milk production, cow farming can be attached with biogas installation at subsidized amount, which will lead to free energy for cooking and lighting. As a by-product, compost fertilizer will be generated and will be utilized for vegetable farming.

Farmers in general have realized that to sustain cow farming there is should be availability of green forage. Community forests should be utilized within the lower belt by suitable forage production without disturbing forest area.

It is estimated that minimum of 22 hectares of land in each study district should be allocated to produce about 547 tons of green forage to feed 150 milking and non-milking animals owned by at least 30 beneficiary households of the project. Thus, in three districts, total area of community forest to be allocated for improved forage cultivation has been estimated approx. 66 hectares. The detail calculation of total forage requirement and land requirement is presented in Table 15.

The common need of milk producers is to obtain a fair price for their milk and this is fulfilled through collective marketing.

The dairy cooperative has been recognized as an important means of organizing the supply of agricultural inputs, processing and marketing of agricultural produce and providing agricultural credit, and related activities.

New or existing groups should be formed targeting households in the Hariyo Ban Program catchment area for milk collection and networking with the cooperative. These groups should be sensitized by conducting meetings along with the group leaders, executive committee of CFUGs, and the facilitator of program.

Specific trainings should be conducted on breeding, feeding, housing management, health management, veterinary care, forage cultivation, management & preservation technology, and 35 days VAHW level training to the target beneficiaries in all program districts. In addition to that, there is a need of regular dairy expert consultation visit to the beneficiary households and quarterly interactions program between the target beneficiaries and experts.

There should be a provision of small farm facilities as listed below:

At least, two milking animals of improved breeds to each household at subsidized cost

1 Multiplier effect refers to the idea that the initial amount of money invested leads to an even greater increase in income.

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Financial and technical support for shed construction/repair/improvement Chaff cutter machine to the target households Dairy tools/equipment support for maintaining cleanliness, hygiene and quality of milk

produced at beneficiaries' households Establishment of milk collection centres at target area Matching grant/fund for constructing bio-gas structure at farm level

Cooperatives are simply large equity partnerships. They are often born where there is market inefficiency. Dairy is an inherently inefficient market because of the perishable nature of milk on the farm. Without cooperative ownership, collective strength is removed. Dairy farmer margins are squeezed and the cash is moved elsewhere. At the cooperative level, the following recommendations are made.

One technician for veterinary service delivery to the target households Animal feed dealer/wholesaler shop to be initiated for delivering animal feeds at subsidized

rate Cooperative managed agro-vet at local level with the services including veterinary care, AI

facilities and many more. Facilities such as chilling vat, milk analyzer and paneer vat

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X. Annexes

1.10. Proposed Budget for dairy equipments for future reference

S.N. Description Specification Amount in NRs. 1 Shed 80,000 2

Milk analyzer

Total measurement cycle less than 1 minutes Testing can be done with very small quality of milk sample without any added chemicals Measuring parameters: Fat, Solid not Fat (SNF), Added water to milk, Measuring Cycle

500,000

3 Chaff cutter (Chara) Machine operated cutter – 1 HP

6,000

4 Feeder 1,500 5 Water pot and pipe 2,000 6 Milking can 24" H x 14 1/2" in diameter 500

7 Chilling Vat

Capacity 1000 litre, Inner thickness Stainless Steel 304 quality S.S, 1.6 mm

400,000

8 Lacto Meter, Thermo Meter and chemicals

2000

9 AI equipments 250,000 10 Deep freeze & freezes 400 L capacity 50,000

1.1. List of people met

Kathmandu

Name Organization Contact Details Siyaram Singh DDC Arniko Raj Bhandari Nepal Dairy Babu Kaji Panta National Dairy Dev. Board Pradeep Maharjan Kathmandu Dairy Ministry of Agriculture and cooperatives Niranjan Shrestha Sujal Dairy Netra Pratap sen Forward Prahlad Dahal Dairy Association of Nepal NARC Achut Prasad Dhakal National Plant Quarantine Guru Paudel Sujal Dairy Department of Livestock Services National Livestock Breeding Center Department of Livestock Training

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Directorate of Animal Health Nepal Veterinary Association (NVA) Basudev Nath Cow and Buffalo Promotion Office

District: Kailali

Name Organization Contact Details Devraj Joshi WWF 9801722118

Siddha Raj Oja Nakrod ghodaghodi Multiple cooperative 9848430518

Hemchandra Paudel DDC 9841279385 Sharmanad Bhatta Sita Ram Dairy 9848681487 Siddha Raj Oja Sital Dairy 9740015220 Bhupendra thapa Khaptad Dairy 9858420041

Dambar Bahadur Shah Kisan Multipurpose Cooperative Ltd. 9848433948, 9759001783

Ishwor Sapkota Hamro Hotel 9858022035 Niraj Maharjan DDC Nandala Bhatta 9749004904 Dilli Sapkota Bhairab Dagda Utpadak 9749020850, 9848592234 Bhim Sapkota CFCC Bharat B Shahi 9848637955 Hari Neupane Agrovet 9848421200

District: Bara

Name Organization Contact Details Mr. Surendra Ranapal WWF 9802006055 Anil Kumar Rai WWF Nepal 9841417178

Madhusudan Sitaula Jana Kalyan S&C Cooperative 98451-36143

Ram P. Adhikari Janahit Upakar Samiti 98452-52730

Udhav Prasad Paudel PrabhatPheri Milk Producer Cooperative Ltd. 9845132085

SushilDhital PrabhatPheri Milk Producer Cooperative Ltd. 9845130640

Madan Bahadur Chetri AurahaPasupalanSahakari 9806829439

Narayan Bartaula Dumarwana Milk Production Cooperative 9845098418

KhagendraGhimire Dumarwana Milk Production Cooperative 9841914897

Rameshwar S Pande National Forage & Grassland Research Centre, Nepal

Shree Krishna Syangtyang 9855068808, 9801068808 Narendar B. Thapa Gadimai ward no. 2 9855024404

Deepak Ghimire Dumarwana Milk Production Cooperative 9841914897

Dr. Narayan Shrestha DLSO

District: Chitwan

Name Organization Contact Details Mr. Ambika Katiwada NTNC 9851129853 NTNC 985506237

Jaylal Kandel Community Forest User’s Commettee 9845178230

Hari Prasad Chapagain Annapurna Milk Cooperative 9855050524, 9845206362 Khem Raj Timilsina Timilsina Livestock Firm (Private) 9855056206 Lok Raj Bhusal Shiva Shakti Milk Producer 056-580489

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Cooperative Ltd.

Dilliram Sharma Shree Radhakrishna Milk Producer Cooperative Ltd. 056-582515 / 9845075405

KeshavAcharya Harihar Milk Producer Cooperative Ltd. 9855060199/ 056561921

Krishna Prasad Acharya Shree AmritDhara Milk Producer Cooperative Ltd. (056)-6560793

Chitwan Dairy Anil Maharjan Prime Bank Ram Prasad Chalise Padampur Dairy Cooperative 9855058448 Rajendar Neupane Milijuli Poultry Vet Centre 9845200238

Amrit Shrestha Laliguras Dairy Farm and Research Centre 056-582685, 056-695431

Sikandar Shah Laliguras Dairy Farm and Research Centre 9841213560

1.2. Itinerary

Location: Kailali (Basanta Corridor)

VDC name: Darak, Pahalmanpur, Saandepaani, Masuriya

Visiting team:

a. Mr. Sichan Shrestha, Team Leader b. Mr. Nirajan Bhattarai, Dairy Expert c. Mr. Gopi Paudyal, Forestry Expert

Date Location Activity Remarks From To

September 14, 2014 (Sunday)

Kathmandu Nepalgunj Travel by Jeep Stay at Nepalgunj hotel

Hotel Siddhartha

September 15, 2014 (Monday)

Nepalgunj Kailali a. Travel early morning to Kailali

b. FGD interaction at Nakrod ghodaghodi Multiple cooperative

c. Interviews with key cooperative officials

d. Observation visits in Darak,

Pahalmanpur, Saandepaani, Masuriya VDCs to interact with the milk producers.

e. Meeting with WWF district team

f. Interviews with milk producers

g. Meeting with private dairy enterprises

(DDC, Sita Ram Dairy, Sital Dairy, Khaptad Dairy, etc.)

Mr. Devraj Joshi will arrange field level planning and coordination. Stay at Kailali hotel (Siddhartha)

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September 16, 2014 (Tuesday)

Kailali Kailali a. Continue meeting with private dairy enterprises

b. Meeting with government bodies (DLSO,

DADO, DDC, etc.)

c. Meeting with NGO, INGO, and Banks/MFIs

d. Meetings with transporters, medical

shop/Agro-vet, feed companies

Mr. Devraj Joshi will arrange field level planning and coordination.

September 17, 2014 (Wednesday)

Kailali Nepalgunj Meeting with DFTQC, NARC, etc. Regional Livestock Services Directorate (RLSD Meeting with urban dairy enterprises

Stay at Nepalgunj hotel

September 18, 2014 (Thursday)

Nepalgunj Kathmandu Return back In Chitwan, interaction with private dairy industries

Location: Bara and Chitwan

Date Location Activity Remarks From To

October13, 2014 (Monday)

Kathmandu Bara Travel by Jeep early morning Meeting with WWF team FGD Interaction meeting at PrabhatPheri Milk Producer Cooperative Ltd., Simara with their members Interviews with the farmers Field visit Stay at Birgunj

Mr. Surendra Ranapal, WWF will coordinate with the stakeholders (9802006055)

October14, 2014 (Tuesday)

Bara Bara h. FGD interaction with Auraha Pasupalan

Sahakari, Auraha, Bara

i. Interviews with key cooperative officials

j. Interviews with milk producers

k. Meeting with private dairy enterprises

e. Meeting with government bodies (DLSO, DADO, DDC, etc.)

f. Meeting with NGO, INGO, and

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Banks/MFIs

g. Meetings with transporters, medical shop/Agro-vet, feed companies

October15, 2014 (Wednesday)

Bara Chitwan Meeting continued… Travel Stay at Chitwan

Mr. Ambika Katiwada, NTNC will coordinate with the stakeholders (9851129853)

September 17, 2014 (Thursday)

Chitwan Chitwan a. Field visit to Padampur cow farming

b. Meeting with Annapurna Milk Cooperative and Timilsina Livestock Firm (Private)

c. Meeting with government bodies (DLSO,

DADO, DDC, etc.)

d. Meeting with NGO, INGO, and Banks/MFIs

e. Meetings with transporters, medical

shop/Agro-vet, feed companies

September 18, 2014 (Friday)

Chitwan Kathmandu a. Meeting with private dairy enterprises

Return back

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1.3. Photographs

Figure 10: Milk Analyzer installed, Padampur Cooperative, Chitawan

Figure 11: Improved grass in community forest land, Bara

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Table 14: Price of milk and milk products (2006/7 - 2012.13)

Year

Pasteurized Milk (NRs./Kg)

Butter (NRs./Kg)

Yak Cheese (NRs./Kg)

Local Curd (NRs./Ltr)

Special Curd (NRs./Ltr)

Kanchan Cheese (NRs./Kg)

Processed Cheese (NRs./Kg)

Paneer (NRs./Kg)

Cream (NRs./Ltr)

Ghee (NRs./Kg)

2006/2007 26 300 340 46.00–50.00 300 300 200 155 245 - 255

2007/2008 30 280 375 50 50 280 350 225 150 275 -285

2008/2009 34 280 500 50 60 380 400 300 200 350 - 390

2009/2010 40 410 600 60 75 380 400 320 230 440

2010/2011 44 480 570 80 90 430 400 380 230 450

2011/2012 48 480 670 N.A. 90 500 400 430 270 510

2012/2013 50 600 1000 90 600 450 430 N.A. 600 Source: Dairy Development Corporation

Table 15: Calculation of total area requirement to be allocated for forage cultivation in the study districts assuming 30 beneficiaries households consisting 5 animals (milking and non-milking)

SN Districts

No of househo

lds No of

Animals

Avg. Fresh forage

requirement (Kg.)/Animal/

Day

Total Forage

Requirement (Kg.)/Day

Total Forage

Requirement (kg)/Year

Avg. Productivity

of Forage (Kg./Hectare)

Total Area Required to allocate for

forage cultivation (Hectare)

1 Kailali 30 5 10 1,500 547,500 25,000 21.9 2 Chitwan 30 5 10 1,500 547,500 25,000 21.9 3 Bara 30 5 10 1,500 547,500 25,000 21.9

Total ~66 Hectare

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1.4. Study tools

Using questionnaire checklist two sets of interactions and interviews will be carried out in three study districts.

Focus Group Discussion(s): In each district, four FGDs will be conducted with the business service providers and entrepreneurs with the help from local NGOs and AEPC/NRREP support staff. Structure checklist will be used to interact with the target audience. In each FGD, 8 to 10 people will be included to express their needs, capacity, and opportunities that may exist in the district.

FGD guide 1# - FGD with Milk Cooperatives

Interviewer: Date of Interview: __ __ / __ __/ 2012 (DD/MM/YYYY) Interview starting time: ___:___ Interview ending time: ___:___ Location of interview: Focus Group Number: Number of participants at start: Number of participants in the end:

Purpose: To understand existing business operation and explore potential for business expansion Ask the following questions:

No. Questions/Issues

Warm Up Focus Group Questions

1 Please describe about your cooperative and it working structure, legal registration, members details

2 Are you satisfied with your current business operation? Explain for both yes or no.

3 Do you think that milk business will support for your living? If yes, why?

Main Focus Group Questions

Business operation:

1 Milk collection quantity and gaps issues - how collection takes place? Who are involved?

2 What types of business services do you provide?

Technology:

1 What types of tools and equipment are used?

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2 What are technology issues and challenges?

2 How quality and hygiene requirements are addressed?

7 What are the other difficulties/challenges you have been facing in milk production/collection?

8 What future opportunities do you foresee for sustaining your income?

Marketing:

Where do you sell your product? Who are your target customers?

What are marketing related issues and solutions?

Finance:

Please share your budget status: income, expense, profit/loss

Capital investments ( equity and loan)

Working capital expenditure plan

Cash transaction with both buyers and sellers - cash on delivery, advances, credit, etc.

Experience working with banks

Management:

Who manages business and how? Recording and reporting systems

Management issues and it's solutions

SWOT analysis

Policy:

Are there any government restrictions that either hinder or benefit your business/activity?

Note: Once the FGD is completed, few farmers will be interviewed.

Individual interviews: After the FGD is conducted few potential candidates will be selected for detail interview. Structure questionnaire form s will be filled from the target audience. Similarly, interviews will be done with other key stakeholders in the district. Interview will assess in-depth from the interviewers.

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Interview Guide 1# Value chain actors [Cooperatives staffs, DDC, Dairy processing companies (Chitwan Milk (P) Ltd, Himalaya Dairy, etc.), Chilling centres, Milk producers, Traders, Individual livestock owner, Consumer, Transporters, Inputs supplier (Medical shop/Agro-vet, Feed companies)]

Name of the company/organization: Name and position of the interviewee: Address: Telephone contact: Email:

Product:

1. Please list down the types of products you sell in the market? 2. Who are your buyers? 3. How do you sell it? In shops, markets, farm visits, etc. 4. To how many buyers do you sell your products? 5. How do you ensure that inputs are available at the right time when producers need it? Is that an issue? 6. Do you sell on cash only? Or are credits granted? On which terms? 7. What is your margin on those input sales? In % 8. What is the best way to reduce costs of your company? 9. What is the best way to increase turnover of your company? 10. What types of product diversification is taking place? 11. What is the volume of production and productivity? What potential is there to increase both production

and productivity? 12. What is the cost of production at each level of value chain and what is the value addition at that level of

value chain? 13. What is the best way to reduce costs? 14. What are the value addition potential? 15. What are the three biggest issues (technical, marketing, policy, social, etc.) that are hindering your

business turnover? 16. Please mention solutions to address those issues, if any. 17. Existing machine & equipments, infrastructure 18. What are the wastages generated and how do you manage it? 19. Members’ knowledge and capacities, and institutional development in terms of milk collection and

transportation mechanism 20. Investment options in animals for increasing milk production and its financing options; 21. Quality improvements and enhancing competitiveness 22. What is an average number of cows (Milking cows, Dry cows, Bull) owned by HH? 23. What is an average production of milk per cow? 24. What is an average daily consumption of milk per HH? 25. How much it is sold

Cooperatives:

1. Milk quality and quantity? 2. Backward and forward linkage role by cooperative? If yes, how? 3. Activities of cooperatives? Technology transfer and advocacy status if any? What interventions could

be done by cooperatives at local level? 4. What quantity of milk do you collect/process/sell milk/milk products? 5. Who are the buyers of your product? 6. Who are the raw milk suppliers? 7. What is the geographical diversity of raw milk suppliers and producers?

Input supplier (feed industries, local agro-vets etc

8. Coverage? area

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9. Collaboration with the service providers? Tie up status? 10. Annual income status, viable or not? Self sustained or not?

Relationships to other chain actors and supporters: What are the challenges with the following actors? Input supplier(seeds, animals, agro-vets, feed industries), dairy farmer, dairy cooperatives/MPC, DDC, Private dairies, retailers, distributers/dealer

SWOT analysis:

1. Your strengths: 2. Your weaknesses 3. What are the main threats? 4. What are the main opportunities?

Market

1. To how many buyers do you sell your produce? Who are they? How does the price differentiate between those buyers?

2. What are the different brands of milks available in the markets? 3. Packaging details 4. Pricing of milk products (Milk in litre, unit fat, unit SNF) 5. Out of total production what percentage is sold and to whom? 6. What is market value per VC today, as well as potential market value in say 5 years time? 7. What and where are the market opportunities (local/national/regional/international)? 8. What infrastructure is available or unavailable and how it is supporting or hindering the value chain

development? 9. What are the sales and its monthly trend? (Quantity, Price and Amount) 10. What are consumer preferences? 11. What do you see the biggest concentration of problems for chain development? 12.

Finance

1. Total target production in litre? 2. What is your total investment? 3. What is your sales turnover? 4. Pricing details of your products 5. Total capital investment (Debt and equity) – List down who have invested in this veture 6. Loan amount 7. Total fixed investment (Land development, building, machineries and equipment, vehicle, furniture and

fixture) and its details ((Quantity, Unit, Rate and Amount) 8. Machines and equipments used and its costing details (Quantity, Unit, Rate and Amount) 9. Furniture and fixtures 10. Pre operating expenses 11. Working capital (Raw materials, Processing, Finished products, Credit sales) 12. Raw materials expenses for a month 13. Direct labour expenses 14. Factory overhead expenses

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15. Marketing and promotional expenses 16. Administrative expenses 17. Insurance expenses, if any 18. What is your profit margins?

Business services:

1. Milk breeds, animal health, vet services, livestock insurance, 2. Collaboration with other dairy projects and replication of past projects

Intervention: Name up to three most urgent interventions, which are required for promotion of this sector? Probe: If you had funds, what would be the 3 interventions you would choose to improve the entire value chain?

Interview Guide 2# Service Providers (District Livestock Service Offices (DLSO), Regional Livestock Services Directorate (RLSD), Department of Livestock Services, NARC, NGO, INGO, Banks and MFIs)


1. Discuss on key relevant issues for brainstorming on its solutions and their roles for future intervention. 2. What upgrading is needed to exploit them? 3. Who will benefit from this upgrading? How the benefits are distributed to programme’s target group

(pro-poor growth and social inclusiveness) and how can it be improved? 4. Who are the main players/stakeholders who have the resources, skills, and incentives to drive

upgrading in the districts/region/country? What are their interests? 5. Who are the service providers (including financial service provider) to the actors of the value chain? 6. Why has it not happened already? 7. What will it take to make it happen? 8. Provide information on inputs and services required to raise cattle and collect milk. 9. What are the services provided by your organization for dairy sector development? 10. Who are the service receivers in the region? 11. Do you have registered the dairy value chain actors (collectors, processors, traders) under your

organization? 12. How many dairy cooperatives, small entrepreneurs (collectors, processors, traders) are registered under

your organization? 13. Do you monitor the dairy value chain actors registered under your organization? If yes, how often? 14. Are all the registered dairy value chain actors working actively? 15. What are the lacking to be improved by the dairy value chain actors in your region?

FINANCIAL INSTITUTIONS

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1. Do you provide loans for milk entrepreneurs in your area? If no why?

2. Why do you think this is a good sector for investment

3. What are the major risk factors associated with this sector for investment

Interview Guide 3# Interviews with the national level stakeholders (National Dairy Development Board (NDDB), MOAC, DDC and other private diaries (SUJAL, Laxmi, Nepal Dairy, etc.), DLSO, DFTQC, Plant Quarantine, Ministry of Industry, Commerce and Supply, MOAD)


1. What are your roles and responsibilities for promotion of this sector? 2. Name up to three most urgent interventions, which are required for promotion of this sector?

Probe: If you had funds, what would be the 3 interventions you would choose to improve the entire value chain?

3. What kind of technical assistance or support do you provide? 4. What constraints do you face in providing technical assistance and support? 5. Which products in your area have the greatest market growth potential?

- greatest number of collectors/cultivators? - greatest potential for profit for collectors/cultivators? - least policy restrictions? - greatest presence of women collectors/cultivators? - potential for adding value to raw material at the collector level?

MOAD, DLS, DDC for Policy issues:

1. What are the policies developed by the government for dairy development? 2. Mechanism and status of policy enforcement/implementation? 3. What are the gaps in those policies? 4. What is your strategy to fulfill those gaps? 5. Import export situation? 6. Problems and opportunities? 7. Government priority status for dairy development?

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List of private dairy companies

Name Location Production capacity in litre Jaya Ganesh Chainpur 800 Kalpana Bha Na Pa, Narayangad 500 Bidaya Mangalpur 1000

1.5. References

1. http://www.indiandairyequipment.com/dairy-equipment.html 2. Value chain study of dairy in far-Western development region, PACT, 2012 3. DDC annual report 4. Annual report – FORWARD 5. DLSO annual report 6. www.microlinks.org

http://www.indiandairyequipment.com/dairy-equipment.html

http://www.microlinks.org/

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