+ Connecting Dairy Farmers to New Opportunities - CII Blog

With India moving from a position of scarcity to surplus in food production, the prospects for increasing processing levels in dairy are enormous.

Dairy has been one of the most dynamic verticals in the Indian agricultural space. It is the single largest agricultural commodity, contributing 5% to the national economy and employing more than 8 crore farmers directly. India is ranked 1st in milk production, contributing 23% to the global milk production. With a deeper and stronger connect between dairy farmers and industry through public private partnerships, dairy has the potential to drive the rural economy while making India a productive hub for dairy products for the world.

The presence of superior indigenous breeds is a key differentiator for Indian dairy. Breeds such as Murrah buffalo and Vechur cow are a few examples of high performing indigenous breeds, creating a distinction for Indian dairy. Nearly 45% of the milk production is contributed by indigenous/non-descript breeds of buffaloes, followed by crossbred bovines contributing 28%. On the other hand, the indigenous/non-descript cows contribute 20% of the total milk production in the country. Goat milk shares a contribution of 3% in the total milk production.

Dairy is especially significant for the Micro, Small and Medium Enterprises (MSMEs) in rural areas, as it provides the vital linkage between industry and agriculture and is of major significance for India’s development. As India’s production of milk increases, opportunities towards value added products is enormous. Further, value addition will have a direct effect on increasing farmers’ income.

The global dairy products market size was valued at USD 481.08 billion in 2019 and is expected to grow at a compound annual growth rate (CAGR) of 2.5% from 2020 to 2027. The rising consumption of dairy products and shifting consumer preference from meat to dairy products for protein enrichment are significant drivers for the market’s growth. The easy availability of dairy products due to modern retail facilities and cold chain logistics further drives the market growth. Furthermore, significant product sales through online distribution channels during the pandemic also supported its growth.

It is also important from export competitiveness perspective. Exports of milk and milk products have been consistently expanding. During 2020-21, India exported 54,762.31 million tonnes of dairy products worth `1,491.66 crore (USD 201.37 million). The major export destinations were UAE, Bangladesh, USA, Bhutan, and Singapore.

Cognizant of this, the Dairy Processing and Infrastructure Development Fund (AHIDF) of INR 15,000 crore has been announced to facilitate much needed incentivization of investments in establishment of infrastructure for processing and value addition and establishment of animal feed plants in the private sector. Also, the financial assistance eligibility has been broad based to include multi state dairy cooperatives, milk producer companies, self-help groups and Farmer Producer Organizations (FPOs). Further, towards strengthening infrastructure across the supply chain, the activities supported under the fund have been expanded to include breed multiplication farms and breed improvement technology, manufacturing of milk testing and dairy equipment, and manufacturing of feed supplements/ feed additives.

To boost growth and make dairying more remunerative for the 10 crore farmers (engaged in dairy related activities), the Government revised and realigned various components of Government of India’s schemes for next 5 years starting from 2021-22 with the outlay of `9800 crore for leveraging total investment of `54,618 crore for 5 years.

Further, the recently announced Production Linked Incentive Scheme for Food Processing Industry (PLISFPI) will support creation of global food manufacturing champions, support Indian brands of value-added food products in the international markets, and increase employment opportunities for off-farm jobs, ensuring remunerative prices of farm produce and higher income to farmers.

To give an additional impetus, a targeted approach ensuring higher public private partnership would be needed. Access to concessional institutional credit to farmers and greater participation of the private corporate sector may help in enhancing private investment in the dairy vertical. Strong tie-ups between farmers and processing players along with enhanced uptake of new technology would be key to ensure efficient farm management and to bring scale.

Read more about “Creating an Enabling Ecosystem for the Livestock Sector” in the July 22 issue of CII Communique.