Reinvigorating India’s dairy value chain

Reinvigorating India’s dairy value chain for export competitiveness

Harnessing technology for efficiency in dairy value chains along with the right policy support and strong infrastructure can make India a leading dairy exporter.

BY DR DEBESH ROY

While India is the largest milk producer globally, it was ranked 34th in the world in the export of milk in 2021, and 12th in the export of valueadded dairy products in 2019. India’s potential for exports is much higher. Major exporters of milk and dairy products, viz. New Zealand, the Netherlands, Germany, Belgium, France, Denmark, Australia, the UK, and the US are characterised by high exportable surplus, efficient dairy value chains and strong export infrastructure.

The globally acclaimed White Revolution had enabled India to become the largest producer of milk in the world. The dairy sector in India is dominated by small milk producers who supply milk to over 1.9 lakh dairy cooperative societies across the country, providing livelihood to millions of families.

Milk production has grown at a significant CAGR of ~4.7% since the 1970s, mainly with government support through various incentives and developmental schemes. Further, adoption of modern technology and digitalization across the supply chain is facilitating growth in milk productivity, improvement in farm management practices, better record keeping and enhanced technology for breed selection.

According to Integrated Sample Survey, the average yield per animal in India is 1.5 times lower than the global average. In 2019-20, average annual productivity of Indian cattle stood at 1,777 kg per animal as against the world average of 2,699 kg per animal. According to OECD, between 2017 to 2019, average yield per in-milk animal in the US was eight times higher than India. New Zealand, the largest exporter of milk & milk products, recorded 3 times higher average yield.

The major challenges faced across the dairy value chain are: • Low availability/high cost of cattle feed and fodder. • Unorganized dairy farming and small livestock holding makes it a challenge to automate processes. • Inadequate medical facilities and shortage of qualified veterinarians and para vets has drastically hit the production. • Shortage of basic breeding activities like livestock identification, performance recording and evaluation. • Milk production by small and

marginal farmers makes logistics of daily collection and chilling of milk at farm level a huge challenge. • Inadequate quality testing facilities & infrastructure at milk collection centres. • Shortage of electricity in many chilling plants, which, hence, cannot run optimally. • Capacity utilization of the processing plants in lean season is lower on account of reduced supply of milk. • Lack of commercialization of ethnic dairy products. • Maintaining cold chain at retail level is a challenge due to lack of knowledge.

India’s low value of dairy exports may be attributed mainly to high domestic consumption demand for milk and milk products, very low yield of milk output and low exportable surplus of processed dairy products due to increasing demand in urban areas.

POLICY AGENDA

India is one of the least cost producers of raw milk. Steady rise in demand for value added products such as ice cream, ghee, curd, paneer, cheese, flavoured milk, chocolates, etc., is expected to drive strong industry growth, but liquid milk is expected to retain highest share. Other products focusing on boosting immunity and nutrition like probiotics and nutraceutical products could also be in high demand. Higher exportable surplus can be generated through improved breeding and feeding programmes.

GoI has envisaged the double of milk processing capacity to 108 million MT by 2025. A number of initiatives have been taken to develop dairy infrastructure and dairy value chain, like Dairy Processing and Infrastructure Development Fund; National Programme for Dairy Development; Pradhan Mantri Kisan Sampada Yojana (PMKSY); Cold Storage Scheme; Kisan Credit Cards (KCC) and PLI Scheme for Food Processing Industry. Significant investments are envisaged for new processing capacities & stronger procurement infrastructure.

Technology will play a crucial role in retail distribution with increasing adoption of e-commerce platforms by end consumers. For the development of an efficient dairy export value chain, digitalization will undoubtedly play a crucial role in enabling end-to-end traceability.

The impact of climate change, viz. fall in milk production, scarcity of water and dry fodder for the cattle, would need to be addressed. A strategy needs to be developed to deal with the situation arising out of climate variability. Learnings from SDC in the Netherlands and GMS adopted by Nestle, would enable the dairy industry to address climate

INDIA’S EXPORTS OF DAIRY PRODUCTS

600

400

200

0 546

330.1

260

2012-13 110.2 198 186

115 135 17.4 37.0

-63.7 -11.8 346

187 201

36.4

-46.0 7.9 392

94.4

2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22

Dairy products (Value $ Mn) Annual Growth (%)

Source: Data accessed from APEDA Agri Exchange change and sustainability issues.

To boost the export of dairy products and make the sector globally competitive, GoI needs to consider development of Dairy Export Zones (DEZs) in collaboration with state governments, in leading milk producing states like UP, Rajasthan, MP, Gujarat, AP, Punjab, Maharashtra, Haryana, Tamil Nadu, and West Bengal.

Such zones could involve the creation of common infrastructure like a cold chain, chilling plants, processing facilities, R&D facilities, logistics, and connectivity to ports and airports. Leading dairy producers could set up modern hi-tech dairy processing units in the DEZs, for producing globally competitive high-value dairy products. Units in DEZs could enter into contract farming arrangements with dairy FPOs/FPCs/cooperatives for sourcing milk. This would be mutually beneficial in terms of cost efficiency and higher export revenue to the dairy companies, and higher income for farmers.

The India-UAE CEPA, the India-Australia ECTA, and the forthcoming CEPAs with the UK, the EU, and Canada would create significant opportunities for the export of dairy products from India. It is, therefore, imperative to raise export competitiveness of dairy products through creation of efficient dairy export value chain, along with strategic marketing and branding for international markets.

Development of an efficient dairy export value chain with a focus on globally competitive value-added dairy products, strong infrastructure, digitalisation along the value chain, and adoption of sustainable practices, through coordinated efforts by stakeholders, along with financial support from NABARD & banks, would go a long way in transforming India into a leading exporter of dairy products.

_____________________________ Dr. Debesh Roy is Chairman, Institute for Pioneering Insightful Research & Edutech (InsPIRE). Views expressed are personal.