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Sangram Chaudhary

Executive Director

National Dairy Development Board

India

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Background • "Institution" - bit ambiguous and enigmatic and changes meaning with

context.

• Douglass North – 1993 Noble prize

o great deal of variation in economic performance, across both space and time, can be explained by variations in institutions.

o defined as the humanly devised constraints that structure political, economic and social interaction.

o It also mean that people come together to work for each other for set of common objectives and goals.

o exist to reduce uncertainty in the world

• Developing responsive institutions with a strong design for producers’ interests, largely smallholder in the agricultural production, is therefore necessary for the development of rural production.

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Background (contd..)

• Milk by nature is a perishable commodity hence preservation and transportation to the market is always a challenge especially in a tropical countries.

• Dairying per se requires strong institutional structures for making it into a successful enterprise, more so in Asia which is a predominantly a small holder system.

• For small holders aggregation is much better way of market access and collective supply chain management

• World over dairying has progressed in the form of collectives

Large farm holdings – FONTERRA, DFA, DMK, CHS, DFMC Australia

Small farm Holdings – AMUL- India, Milk Vita-Bangladesh, DDC- Nepal

Cooperative Dairying along with strong institutions, requires enabling environment such as supporting legislations and proper budgetary allocations towards development of infrastructure, productivity improvement and market access

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Background (contd..)

• Dairying has been an important tool for poverty eradication and also ensures food security of the family.

• “Dairy sector institutional development” has been identified by stakeholders as important focus area for future.

• Therefore it is important to share successful sustainable dairy development models of the member countries.

• Indian dairying model has proved to be successful and sustainable over the years, hence Indian model holds relevance in the Asia and Pacific region.

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Indian experiences

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Indian perspective • India from a milk deficient country to

a self sufficient - 22 MMT in 1970 to 146 MMT in 2014-15.

• Per capita milk availability which was 112 grams per day in the 70s has now grown to over 322 grams per day in 2014-15 in spite of population almost tripling.

• 210 dairy cooperatives 1,65,400 village DCS formed which procured 13.8 million tonnes/year from 15.4 million dairy farmers (about 30% of them women) and sells 11.4 million tonnes per year.

NDDB through its efforts over past 50 years has organized millions of farmers, built 200 plus robust people organization which resulted in a self-reliant and self sustained dairy industry in India

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Pe

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ilk (

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Milk

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Milk ProductionPer capita availability

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Indian perspective & SDGs • Global Hunger Index (2015) reported that

highest hunger levels are found in Africa, South of Sub Sahara and in South Asian countries.

• In India, undernourished population stands at 15%, incidence of stunting among the children under 5 years of age is 39% and under- five mortality estimated at 5%.

• In the light of 17 Sustainable Development Goals (SDG) adopted by the world leaders at the United Nations Special Summit in New York, milk has significant impact in treating under nutrition, both in industrialised countries and in developing countries.

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Indian perspective(contd..)

• Dairying is inclusive in India both on cultural and economic grounds. It also acts as an insurance against unforeseen and unfavourable circumstances such as drought, floods and erratic monsoons

• Animal holding has been found to be more equitable as compared to land holding .

• Milk production in India has been an instrument of income security, employment,

women empowerment and social change.

• Eradication of hunger is our social, moral and even spiritual responsibility.

• Milk has proven to be the most eco-friendly alternative in achieving above goals as the supply of the nutrients in the form of milk-proteins and milk-fats to the needy cannot be more environment-friendly than any other food.

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Indian perspective (Contd..)

Families owning milch animals in rural areas consume almost three times more

milk than the families which are not into dairying

Category

PRODUCERS NON-PRODUCERS Ratio of milk

consumption:

Producer to Non-

Producer

Households in

each category

(%)

Milk

consumption

per capita

(litre/month)

Households in

each category

(%)

Milk

consumption

per capita

(litre/month)

Poor ( 0 - 20%) 10 3.6 17 0.9 4.0

Lower Middle (20 - 40%) 17 5.0 19 1.8 2.8

Middle Middle (40 - 60%) 22 6.3 19 2.6 2.4

Upper Middle (60 - 80%) 25 8.3 22 3.7 2.2

Rich (80-100%) 27 13.6 24 5.3 2.5

Overall 100 7.9 100 2.8 2.9

Per capita household consumption of milk by the milk producing and non- producing families in India

Source: Estimated from Unit Level data of NSSO, GoI,68th Round, 2011-12

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Dairying – Instrument of social & economic change

NSSO(National sample survey organisation) data indicates-

Livestock sector is the

third most significant source of rural income.

Accounts for 12% of income for all sizes of land holding groups.

More than 25 % of income in case of households with tiny holdings of area up to 0.01 ha.

Major Sources of income in rural areas by Land Holding Group

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Institutional Structure and Operation Flood

• Operation Flood (OF), the World’s largest Dairy development program.

• During the period 1970 – 1996, aggressively promoted and nurtured a 3-tier dairy cooperative structure throughout the country.

• Replication of the renowned three-tier “Anand pattern” throughout the country demonstrated that even the small holder dairy system can work efficiently through this institutional mechanism and can contribute to the growth in milk production, milk supplies and income levels of farmer members

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Institutional Structure & Operation Flood (Contd..)

Under this institutional structure:

• The village level dairy cooperative societies (DCS) are organised to aggregate milk from its members of which about 90% of them are small milk producers.

• Transparency is ensured in every step and payment to producers is made on the basis of volume and quality considerations, thereby earning their trust.

• This structure ensures that more than 75% of retail price is transferred to the producers which is highest in the world in any agriculture commodity. In countries such as US, producers gets only 30-50% share of the retail price.

• Transfer year- end profit to its member producers on the basis of their actual patronage thereby eliminating any individual bias in profit sharing.

• World Bank in its report observed that an incremental volume of 40 MMT milk was produced in India during the project implementation period which could be directly attributed to the project.

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Key lessons learned

• Principal learning which comes out is that when a large number of tiny producers organize themselves into a cooperative they assume command of procurement, processing and marketing of their produce and can be assured of a fair and stable price for their marketed surplus.

• Benevolent leadership, members participation, affordable credit,

maintaining transparency , equitable distribution can make long lasting socio-economic transformation.

• It is only by enabling such producers’ owned organisation to emerge and develop into strong and viable institutions that prosperity can be ensured for millions of farmers.

• OF was a single-commodity project with multidimensional impacts.

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Transformation by OF has continued its impact

The dairy cooperatives in India are today : Spread across 1,65, 800 villages

covering 15.4 million members of 210 milk unions operating in about 440 districts.

In 15 states, state level milk federations have been created to oversee, provide direction and undertaking marketing functions of the milk unions.

Milk collection now stands at 38 million kilograms per day and liquid milk marketing has crossed a level of 31.2 million litres a day.

Liquid milk marketing by the cooperatives covers about 4,000 urban centres out of the total towns of about 8,000 in the country.

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Institutional Structure and Operation Flood (Contd..)

• At present, dairy cooperatives pay about US$ 7 billion annually to its producer members

• Milk has become single largest agriculture commodity valued at USD 55 billion.

54.6

28.5

20.5

Milk

Paddy

Wheat

Value of output in Billion USD - 2012-13

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Emerging trends-Asia

• Structure of food demand is changing in favour of milk & milk products due to sustained economic growth, associated with urbanisation and changes in life styles.

• Demand for milk and milk product is likely

to be about 320 million tonnes by 2021 as per OECD-FAO report

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Successful Indian & Global dairy enterprises

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The Birth of Amul • It all began when milk became a symbol of

protest

• Founded in 1946 to stop the exploitation by middlemen

• Inspired by the freedom movement

• Began with just two village dairy co-operative societies and 247 litres of milk and is today better known as Amul Dairy.

Courtesy : AMUL Website

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• Amul grew from strength to strength thanks to the inspired, benevolent grass-root level leadership and the committed professionalism of Dr Verghese Kurien, who was entrusted the task of running the dairy from 1950.

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Amul (Contd..)

• Gujarat Cooperative Milk Marketing Federation Ltd. (GCMMF), is India's largest food product marketing organisation with annual turnover (2014-15) US$ 3.4 billion.

• Its daily milk procurement is approximately 15 million litres per day from

about 1,900 village milk cooperative societies, 17 member unions covering

31 districts, and about 3.5 million milk producer members.

• Through 3.3 million farmer-families, it touches the lives of 16 million citizens in

rural India

Courtesy : AMUL Website

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• Global dairy nutrition company.

• Owned by 10,500 farmers and their families.

• A collaborative spirit, they are a world leading dairy exporter – shaping the industry in quality and innovation.

• Fonterra collects around 18 billion litres of milk each season in New Zealand, 1.5 billion litres in Australia, 500 million litres in Chile, 600 to 800 million litres in Europe and are targeting a milk pool of 1 billion litres in China.

• The co-operative produces some 2.5 million tonnes of dairy ingredients annually, as well as consumer products and exports to more than 100 markets.

Courtesy : Fonterra Website

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• CHS is a farmer-owned cooperative working to help America’s farmers be more successful.

• Believes in shared success and farmer-first values.

• Grown into a Fortune 100 company

• Over the past five years has returned nearly $2 billion in cash to farmers and member cooperative owners.

• It has developed into a diversified conglomerate of agriculture, food , energy and business services.

Courtesy : CHS Website

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• Makes quality products from 6.8 billion kilos of milk, delivered each year by around 8,900 active dairy farmers.

• DMK’s customers include German and international retail companies, food manufacturers and bulk consumers.

• The company offers them a wide range of products from basic milk products, cheese and dairy ingredients for food manufacturing to baby food, ice cream and health products.

• With brands such as MILRAM, Ravensberger, Osterland, Oldenburger, Humana, Intact, Leben’s, Biolabor, hansal and NORMI, DMK is an established name for retailers and consumers in Germany and around 100 other countries throughout the world.

• The company generates a turnover of 5.3 billion euros, making it one of Europe’s leading dairy companies.

Courtesy : DMK Website

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Dairying model-Bangladesh

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Bangladesh- brief profile

• More than 80 percent households are located in rural areas. An estimated two-thirds of those households own livestock.

• More than half of the population owns less than 0.5 acres; the

bottom 40 percent possesses just 3 percent of the total land area; 48 percent live below the poverty line; and 30 percent consume less than 1900 calories per day (the minimum desired level is 2300 calories).

• The livestock sector contributes about 3 percent of GDP, and about 18 percent of agricultural GDP.

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Bangladesh- Dairying model • Successful models in which smallholders benefit from the complete dairy value chain

include the Milk Vita Cooperative and the Grameen (rural)–Community Development and Dairy Development Programme (CLDDP) models.

• The Grameen (rural)–CLDDP model has been adapted for use in Nepal and inspired the local Grameen (rural) Danone Foods social business venture.

• Tens of thousands of very poor rural households have moved out of poverty as a result of the successful introduction of the holistic Milk Vita and Grameen (rural)–CLDDP smallholder dairying models.

• The two models embrace a complete cow-to-consumer package of input and output services, and their on-going scaling up has helped put the dairy sector in Bangladesh in a unique position to take advantage of the recent huge increases in the cost of imported dairy products, especially milk powder, by substituting imports with domestically produced milk.

• Many families now own up to 20 cows and have intensified and commercialized their milk production.

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Conclusion

Rapidly changing demographics, increase in urban centres, changes in lifestyle coupled with increase in the disposable income is a phenomena in all major Asian countries.

This trend will lead to an increased demand of milk and milk products especially value added products like cheese, ice cream, yoghurt, nutraceutical and milk based personal care products.

Therefore, it is imperative that we increase the milk production and outpace this growing demand which can be achieved by enhancing the productivity of our livestock through scientific interventions in animal breeding, feeding and health.

Asian countries and particularly South East Asian Countries have greater homogeneity in demographics, income, lifestyle, culture and climatic conditions. Therefore a similar approach as adopted by us for dairying may prove highly effective in rest of the Asian countries as well.

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Conclusion (Contd..)

It is the collective responsibility of us to address the issues of poverty, hunger and malnutrition. Dairying is a proven livelihood option for addressing these issues.

Strong institutional structures must be put in place to optimally utilise each and every opportunity that dairying provides in a professional and efficient manner.

60 % of total global import of milk and milk products is done by Asian countries. As much as US$ 14.7 billion was spent by Asian countries in 2012 towards importing milk and milk derived products. This outflow can be reduced if the countries can move towards self sufficiency in milk production.

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Key takeaways

• India is willing to share its experiences with all Asian countries at appropriate forums and places through variety of means such as seminar, lectures and workshops.

• Exchange of technical expertise among the countries may be encouraged for dissemination of knowledge and technical know-how.

• Collaborative scientific research and development through mutually agreed ‘Centres of Excellence’ may be one of the best options available.

• Milk producing nations should help milk consuming nations in enhancing their production so that they can work towards achieving self-sufficiency.

• Promotion of dairying as a poverty alleviation tool ensuring nutritional and economic security of the poor.

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Key takeaways (Contd..)

• Successful institutional structures can be replicated in most of the Asian countries as most of the nations have predominantly small holder dairy systems.

• Policy environment must be made conducive and supportive to sustain small dairy holder systems. Legislation and development agencies may be collaborated through a specific mechanism to improve livelihood options and provide access to new technologies and market access.

• The cold chain infrastructure should be incentivized or state-supported to improve quality.

• Exchange of superior germ-plasm and breeding practices can be considered for rapid productivity and genetic improvement

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Milk requires an institution of the Farmers, by the Farmers and for the Farmers

“If you place the tools of development in the hands of those who are Directly involved in creating the resources on which developments rests and if you combine the Wisdom, the energy and the basic knowledge of our farmers with the skills of committed professionals, there is nothing that cannot be achieved” ---Dr. Verghese Kurien, the architect of Operation Flood world’s largest food-aid programme

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Thank You All including our

BOVINE FRIENDS

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