Towards Accelerated Growth in Dairying

Towards AcceleratedGrowth in DairyingAn Action Research to Improve the

Traditional Milk Sector

Summary Report

CALPI PROGRAMME SERIES DECEMBER, 20062

KHAMMAM, ANDHRA PRADESH

COVER BACK FINAL.qxd 9/22/2007 6:59 AM Page 3

Action ResearchLed by Catalyst Management Services,Bangalore and participated by the NationalDairy Research Institute, Bangalore, two facilitating NGOs ACTIVE and SECURE andsupported by the Animal Husbandry and theDairy Development Departments, Govt. ofAndhra Pradesh.

ContributorsMain text of the report by Mr. N Raghunathan(CMS) with inputs from Dr. A K Joseph (CALPI)and Dr. Satish Kulkarni (NDRI)

EditingPritha Sen

Design, Layout Vimal Sarkar & Santosh Kumar Sharma

PrintingIdea Workshop, New Delhi

PhotosCMS Team and CALPI

PublisherIntercooperation in India, Hyderabad

Citation CALPI Programme Series 2

Copies available from Delegation, Intercooperation in India 8-2-351/r/8, Road No. 3.Hyderabad - 500 034, IndiaTelephone: +91 40 2335 5891Email: [email protected]

The use and sharing of information contained in this document is encouraged,with due acknowledgement to the source.

Socio-economic and Cultural Upliftment in RuralEnvironment (SECURE), Khammam, AP, IndiaEmail: [email protected]

Action for Collective Tribal Improvement andVocational Education (ACTIVE), Khammam, AP, IndiaEmail: [email protected]

National Dairy Research institute (NDRI),Bangalore, IndiaEmail: [email protected]

International Livestock Research Institute(ILRI), Nairobi, KenyaEmail: [email protected]

Government of Andhra Pradesh,Hyderabad, IndiaEmail: [email protected]; [email protected]

Natural Resource Management ProgrammeAndhra Pradesh (NRMPA), Hyderabad, India

Capitalisation of LivestockProgramme Experiences India, New Delhi, IndiaEmail: [email protected]

Intercooperation in Inida (IC),Hyderabad, IndiaEmail: [email protected]

Swiss Agency for Developmentand Cooperation (SDC), New Delhi, IndiaEmail: [email protected]

Catalyst Management Services Pvt. Ltd. (CMS)Bangalore, Indiahttp://www.catalysts.orgEmail: [email protected]


Towards Accelerated Growth in DairyingAn Action Research to Improve the

Traditional Milk Sector

Summary Report

December, 2006

Series 2

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Snapshots of the Traditional Milk Sector


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Towards Accelerated Growth in Dairying

Contents

i Acknowledgements 5

ii Foreword 6

iii Preface 7

1. Background and Rationale of the Research 9

1.1 Objectives and Methodology 10

1.2 Characteristics of the Traditional Milk Sector (TMS) 13

1.3 Channels of TMS 14

1.4 Size of TMS 15

1.5 Milk Producers - Profile and Operations 16

1.6 Milk Vendors - Profile and Operations 19

1.7 Consumers - Profile and Preferences 23

1.8 Quality of Milk in the TMS 23

1.9 Summary of Findings and Actions Identified/ Facilitated 24

1.10 The Way Forward 26

1.11 Key Contributions of the Research 27

1.12 Learning from the Research 28

1.13 Policy Changes and Approaches 28

Annexure I - Summary of the Findings and the Actions Identified/Initiated 31


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AP Andhra PradeshAPDDCF Andhra Pradesh Dairy Development Cooperative FederationAR Action Research CALPI Capitalisation of Livestock Programme Experiences IndiaCBO Community Based OrganisationCMS Catalyst Management Services Private LimitedDIIS Desktop Interactive Information SystemDoAH Department of Animal HusbandryDRDA District Rural Development AgencyFAO Food and Agriculture OrganizationHH HouseholdsIC IntercooperationIIM-A Indian Institute of Management, AhmedabadISAP Indian Society for Agribusiness ProfessionalsILRI International Livestock Research Institute, NairobiLACG Local Actions Core Grouplpd Litre per dayMBRT Methylene Blue Reduction TestNDDB National Dairy Development BoardNDRI National Dairy Research InstituteNRMPA Natural Resource Management Programme, Andhra PradeshOMS Organised Milk SectorPPLPI Pro-Poor Livestock Policy Initiative PRA Participatory Rural Appraisal RRG Research Reference GroupSDC Swiss Agency for Development and CooperationSHG Self Help GroupSMILDA State Management Institute for Livestock Development, APSNF Solids Non-Fat T0R Terms of ReferenceTMS Traditional Milk SectorTS Total Solids

Abbreviations


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The Action Research Teamsincerely acknowledgesthe contributions of hun-

dreds of milk producers, milkvendors, consumers andprocessors who shared informa-tion on the traditional milk mar-ket and cooperated at everystage, making this research pos-sible, effective and realistic.

Our special thanks to all ourpartners in the government, par-ticularly Mr Neerab KumarPrasad, Dairy DevelopmentCommissioner and Dr Ravikumarof the Department of AnimalHusbandry, government ofAndhra Pradesh, the representa-tives of the District RuralDevelopment Agency, Khammam, publichealth authorities and the cooperative andprivate dairies which supported the actionresearch, provided information, facilitatedthe process and participated in variousactivities on the field.

The contributions towards implementa-tion of the action research by Dr SathishKulkarni and his team from the NationalDairy Research Institute and Mr K.Jayanand and Mr K. Venu Madhav of thetwo facilitating agencies - ACTIVE andSECURE - in their work with the commu-nities at the field level, were vital forsmooth conduct of the research.

The research team is thankful to repre-sentatives of the collaborating agencies,namely Prof. Vijay Paul Sharma and Prof.Vinod Ahuja of the Indian Institute ofManagement, Ahmedabad, Ms RupaMukerji of Intercooperation in India,Hyderabad, Dr N. Anantham and DrSrinivasa Rao of the State ManagementInstitute for Livestock Development inAndhra Pradesh and Dr HanumanthaReddy of the Andhra Pradesh DairyDevelopment Cooperative Federation.We extend our appreciation to all ourother partners - Dr Steven J. Staal of the

International Livestock ResearchInstitute, Dr A. K. Joseph of CALPI andMs Rebecca Katticaren of the NaturalResource Management Programme,Andhra Pradesh - who, in addition toguiding the action research through theResearch Reference Group, also visitedthe research sites periodically and provid-ed vital inputs and suggestions in makingthis initiative rigorous, effective andfocused.

We especially acknowledge the financialassistance from CALPI, the Swiss Agencyfor Development and Cooperation and thespecial staff support from it as also ILRI,NRMPA, the government of AndhraPradesh and other partners for spearhead-ing this study of the traditional milk sector.

We trust that this report will provide enor-mous insights into the dynamics of the tra-ditional milk sector and valuable learningsfor improving it not only within India butalso in other developing countries.

N. RaghunathanTeam Leader Action Research on the Traditional MilkMarket, Catalyst Management Services,Bangalore

Acknowledgements

The quest for improvements: the researcher - vendor interaction


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The Swiss Agency for Developmentand Cooperation and theIntercooperation in India have been

actively involved in the livestock livelihoodsand Natural Resource Management(NRM) domains in India for a few decades.Capitalisation of Livestock ProgrammeExperiences India (CALPI) capitalises onthe vast experiences, competencies andpartnerships generated through its variousprogrammes to positively influence theeconomic, legal and policy frame condi-tions affecting poor livestock keepers, bothmen and women.

India has made significant progress indairy production and marketing in the past 30 years. However, market accessfor smallholder livestock producers stillremains a major constraint in many parts of India. An estimated 77 per centof the milk marketed in India reaches the consumers through the TraditionalMilk Sector, which covers many low-potential areas and serves millions ofsmall milk producers, consumers, ven-dors and market agents, generating highlivelihood support and employmentpotential.

The ‘Action Research (AR) to Improvethe Traditional Milk Sector’ formed oneamong the 17 activity lines taken up byCALPI. It followed a unique design char-acterised by a multi-stakeholder partici-patory process involving a consortiaapproach and resource pooling. Theresearch was guided and directed by aSteering Committee, led and chaired bythe Dairy Development Commissioner ofthe state. The active participation of pro-ducers, consumers, vendors and marketagents alongside partners of the AR,ensured authenticity and ownership ofthe data collected.

Although, geographically, the AR cov-ered only limited areas of Khammam andVjayawada districts of Andhra Pradesh, ittook into account almost all the aspects ofthe sector. With active participation of allconcerned stakeholders including thegovernment, the AR identified a numberof required interventions. While someinterventions have already been complet-ed, some are currently on and the othersare scheduled for the future. Those for thefuture include stakeholder institution-building and development, capacitydevelopment of key stakeholders,improvement in milk quality and milkprices involving both the producer andconsumer, improvement in the scale ofvendor operations, milk productivityenhancement, and policy advocacy.

This summary report is one among thefive outputs expected of the AR, capturingin a nutshell, the key outcomes of theresearch as also the outcome of theactions taken up and proposed. The oth-ers comprise the main report and itsannexure consisting of the data outputs,the process documentation, a DesktopInteractive Information System pack in aCD and the video highlights. Being oneamong the very few authenticreports/publications available on TMS,this report might find versatile use as aninstrument for improving the marketaccess of the low-potential areas, thusimpacting millions of resource-poor farm-ers. It also has the potential to stimulate anumber of policy reforms, triggeringtremendous growth in the areas devoid ofany worthwhile market access.

Rupa MukerjiDelegateIntercooperation in IndiaHyderabad

Foreword


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This report containsthe summary of theAction Research

on the Traditional MilkSector conducted in theKhammam andVijayawada districts ofAndhra Pradesh, India,between April 2005 andJuly 2006. It aimed atunderstanding thedynamics of the tradition-al milk market and identi-fying interventions forimproving the sector. TheAR was initiated, support-ed and funded by CALPI,a programme of SDC andthe Intercooperation.

The action research was carried out bya team led by Catalyst ManagementServices, Bangalore. The others in theresearch team comprised experts fromthe Department of Animal Husbandry,AP, the National Dairy ResearchInstitute, Bangalore and the two facilitat-ing non-governmental organisations,ACTIVE and SECURE. Representativesfrom ILRI, CALPI and NRMPA have, inaddition to providing conceptual anddesign support, contributed valuableinputs and suggestions.

The implementation of the AR generatedwide interest and participation from thestate dairy development and the animalhusbandry departments, the District RuralDevelopment Agency, the Velugu pro-gramme, a vast number of producers,vendors and consumers and a wide spec-trum of partners. The TMS in India iswidespread, with immense potential forstimulating growth in dairying, impactingthe lives and livelihoods of millions ofresource-poor farmers, consumers andmarket intermediaries/vendors dependenton it. To sustain the livelihoods of these

millions and to trigger accelerated growthin milk production, particularly in the low-potential areas, the sector deservesinvestment support and hand-holding bythe government and other developmentagencies.

The support to the sector may be in theform of infrastructural facilities to improvethe quality and food safety aspects of milk,the scale of operations at the vendor level,the returns to producers on the milk supplied and the value for money to consumers, and capacity building of thestakeholders. It also provides space for a review of the minimum criteria for coverage of areas under dairy develop-ment, the food standards and regulatorymechanisms. In this respect, it is hopedthat the observations and findings of theAR will provide pointers to the way aheadin stimulating milk production and support-ing livelihoods in the areas served by thesector.

AK JosephSenior Programme Coordinator CALPI

PREFACE

Milk producers mould their plans together with the Action Research team


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An Action Research to Improve theTraditional Milk Sector

Main Project District - Khammam

Map I


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1. Background and Rationale The Indian dairy sector has made signifi-cant progress in the past 30 years. Thecountry is now the largest milk producerin the world, with dairying providing animportant livelihood support for the ruralpoor in India. The profitability of dairyenterprises, to a large extent, is depend-ent on the efficiency of the marketing net-work. However, market access for small-holder livestock producers remains amajor constraint in many parts of India.Realising the need to address the issue,CALPI1 took up 'livestock products mar-keting' as one of its major thrust areaswith the aim of supporting small livestockholders in improving their incomesthrough better market access.

An estimated 77 per cent of the milk mar-keted in India, (some 1,340 lakh litre perday in 2005-06) reaches the consumersunprocessed through the Traditional MilkSector (TMS). TMS covers many low-potential areas and serves an estimated46 million small milk producer households,some 111 million consumer households(See Table 1) and a few million marketagents/vendors. This sector provides highlivelihood support and employment poten-tial for a vast number of urban and rural

poor. In this respect, TMS has vast size,spread, reach and impact potential on thepoor. A review of the growth of the sectoralso indicates that if it is addressed appro-priately, the sector has the capacity to mit-igate regional imbalances leading to equi-table development.

CALPI, with technical support from thePro-poor Livestock Policy Initiative(PPLPI) of FAO (Food and AgriculturalOrganization), commissioned a deskstudy of the informal milk market throughthe Indian Society for AgribusinessProfessionals (ISAP). It identified some ofthe strengths, deficiencies and data gapsand highlighted the need for a compre-hensive study of TMS to understand its

functioning. It concludedthat the unorganisedmarket agents are likelyto continue playing criti-cal roles in the market-ing of milk, and it isimportant to understandthe micro-dynamics ofthe market behaviour ofvarious market agentsso as to capitalise ontheir strengths for thebenefit of poor rural pro-ducers and urban con-sumers. A methodologyfor understanding the

dynamics, engagement with the tradition-al sector in new interventions and to bringtogether stakeholders and facilitatingactions at the habitations were consid-ered important, while bringing in method-ological rigour and conceptual focus.Further consultations with the IndianInstitute of Management, Ahmedabad(IIMA), the International LivestockResearch Institute (ILRI), other partnersand the Steering Committee of CALPI ledto a consensus for integrating both quali-tative and quantitative methods through

Parameter Total Covered Left out % left out by OMS2 of OMS2 of OMS2

Districts 597 338 266 44Villages 6,22,035 1,88,365 4,50,000 70Milk producing house holds (Min.) 66.94 20.33 46.61 70Quantity of milk marketed Min. mt 63.19 14.19 49.00 77Milk purchasinghouseholds (Min.) 143.6 32.3 111.5 77

Source : Derived using data from Dairy India 2007, NDDB Annual Report 2005-06,

Animal Husbandry statistics, Department of AH, Dairy and Fisheries, Govt. of India.

Milk Market Overview - 2005-06

1 Capitalisation of Livestock Programme Experiences India, a programme of SDC and IC2 Organised Milk Sector

Towards Accelerated Growth in DairyingAn Action Research to Improve

the Traditional Milk SectorSummary Report

Table I


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an Action Research (AR) process. Theprinciples of AR are summarised in Box I.

1.1 Objectives and MethodologyBased on the outputs of the deskresearch, CALPI initiated this AR tounderstand this sector and facilitateactions to strengthen it. The major objec-tives of the AR are summarised in Box II.

The AR was conducted by CatalystManagement Services (CMS) and theNational Dairy Research Institute (NDRI),in partnership with two facilitating agen-cies (SECURE and ACTIVE) and steeredby a Research Reference Group (RRG).It was actively supported and backed bypartners from the Department of AnimalHusbandry (DoAH), government ofAndhra Pradesh, CALPI, ILRI, NRMPA,Intercooperation, the State ManagementInstitute for Livestock Development inAndhra Pradesh (SMILDA) and theAndhra Pradesh Dairy DevelopmentCooperative Federation (APDDCF). TheAR was also extended conceptual, tech-nical and steering support by two senior

faculty members of the Indian Institute ofManagement, Ahmedabad. The details ofthe research partners, their roles andnature of involvement are presented inthe main report of the AR. The membersof the RRG, who guided and steered theprogramme and the role played by theRRG are presented in Box III.

The study was conducted in theKhammam district of Andhra Pradesh(AP), after a careful selection process4.AP scored high in the selection processbecause of the balance in the presence ofthe organised and the traditional milk sec-tors. Within AP, the district selection wasdone using the criteria of dairy animal pop-ulation, the balance between cow and buf-falo populations, estimated milk productionand the extent of milk marketed throughTMS. Khammam (See map 1 on page 8 )was selected as the quantum of milk soldthrough TMS was in the mid range (i.e.200,9305 tonne per annum which is 61 percent of the total production and 91 per centof the total milk marketed in the district),and the cow-buffalo ratio was almostequal. The estimated milk production toowas in the middle range (329,6505 tonneper annum) as compared to the other dis-tricts in the state. The local consumption in

Action Researchv is a flexible spiralprocess that allows action (improvements,changes) and research (understanding,knowledge) to be achieved at the sametime. At each stage, the strategies, methodsand activities are reflected upon andrefined. AR bridges the gap between thedeciders and the doers. People affected bythe decisions (milk producers, consumers,channel partners, etc.) join those who planthe processes, carry them out and regulatethe decisions (like NGOs, CBOs, dairy deptofficials, health authorities). They (the peo-ple who decide as also those afftected bythe decision and carry them out), remain atthe centre of assessing the process andeffects, extracting learnings, taking deci-sions and implementing them. The processgenerates participation and thus guaranteescommitment for action. It integrates bothqualitative and quantitative approaches.

1. To test an Action Research Methodologyto understand the dynamics of TMS andexperiment field actions for improving thesector.

2. To facilitate community-identified spon-taneous decisions and actions.

3. To identify additional information needsto clearly understand TMS and its con-straints and opportunities.

4. To test the relevance of the methodolo-gy to identify and address the con-straints and opportunities.

5. Through these, contribute to sustain-able livelihood options for poor produc-ers and supply of assured quality of milkto the consumers.

Objectives of the Action Research

3 Derived from : URL ftp:// ftp.scu.edu.au/www/arr/aandr.txt; http://www.scu.edu.au/schools/gcm/ar/arp/aandr.html

4 The process followed for sample selection are explained in the main report and the process documentation.5 Derived from data of A.H.Dept., SMILDA, APDDCF and the house hold survey of milk producers under the AR.

Action Research3

Box I

Box II


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the producing households amounted to athird of the milk produced - see section1.6.2. (Page-20)

Three mandals (Khammam, Konijerlaand Dammapeta) in the district and twovillages6 (covering five habitations) wereselected based on the sampling methodology suggested in the RRG(using secondary data on dairy animalpopulation, milk production, and cow-buf-

falo proportion, proportion of traditionaland organised sector milk procurementetc.). The preliminary study in thesehabitations showed that in most of them,the communities were not into dairying asa livelihood option, even though the live-stock population was high. The RRG clar-ified that the scope of the AR was limitedmainly to working with market players andissues related to the traditional milk mar-ket and to some extent with the organised

Name Designation and Organisation1 Mr P M Kuriakose / Dairy Development Commissioner & Managing

Mr Neerab Kumar Prasad, Director, APDDCFChairperson of the RRG

2 Dr Piedy Sreeramulu / Additional Director, Dept. of AH, AP / Dr K. Ravikumar Joint Director AH, Khammam dist

3 Dr B. Anantham / Joint Director, SMILDA / Dr K. Sreenivasa Rao Vet. Asst. Surgeon, SMILDA

4 Prof. Vinod Ahuja Professor, IIM, Ahmedabad

5 Prof. Vijay Paul Sharma Professor, IIM, Ahmedabad

6 Dr Steeven J. Staal Agricultural Economist, Market Oriented Smallholder Dairy, ILRI, Nairobi

7 Ms Lucy Maarse / Delegate, Intercooperation Ms Rupa Mukerji

8 Ms. Rebecca Katticcaren Senior Programme Coordinator, NRMPA, Hyderabad9 Dr Satish Kulkarni Principal Scientist and Head, Dairy

Technology, NDRI, Bangalore 10 Mr N. Shiv Kumar / Director, Catalyst Management Services, Bangalore

Mr N. Raghunathan11 Mr L. Narendranath Consultant, CMS12 Dr A. K. Joseph Sr Programme Coordinator, CALPI

Research Reference Group

The Action Research was guided, steered and supported by a Research Reference Group (RRG) comprising:

Role of Research ReferenceGroup● Planning the research (fine tuning objec-

tives, methods, tools, protocol, etc)● Planning the actions - developing mod-

els● Steering and monitoring the process

and the progress● Advising on research sites and poten-

tial collaborators ● Bringing in different sectoral, country

and international experiences andperspectives

● Providing known and tested method-ologies and expertise

● Collaborating, sharing, networkingand advocating

● Analysing, learning, documentingand disseminating

● Critically reflecting at various pointsto understand what works well,when, where, how and why

Box III

6 'Village' here refers to Revenue Village and 'Habitations' include all localities in a particular hamlet and comes

under the revenue village boundaries.


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sector for the purpose of understandingthe comparison. Therefore, issues suchas 'productivity of animals' in these habi-tations, 'bringing farmers into the dairy

market' etc were assigned low priorityunder the AR. The final sample wasdrawn based on field findings of the pilotstudy and clarification/guidance by RRG.

The preliminary study in these habita-tions also threw up another factor - mar-ket competition profile - that seemed toplay an important role in deciding thedynamics in the sector. Two profilesemerged from the pilot study - one, thepockets where all three players (coopera-tive, private dairy and vendors) operateand two, the pockets where only vendorsoperate. During the same period, the pilotstudy in the Vijayawada market provideda field methodology to identify habitationswith different competition profiles, workingbackward from the market. Based onthese, it was decided by RRG to modifythe methodology used to identify habita-tions that have these two competition pro-files (on the production side). At the sametime, it was also decided to cover four dif-ferent kinds of markets. (For the finalsamples, see Box IV.)

The study also had a number of interac-tions with the state DoAH, DRDA, munici-pal authorities and the cooperative and theprivate dairies. Scientific sample collectionand quality tests7 by NDRI were conduct-ed. These tests were used to determinethe practices and dynamics of TMS andthe quality of products being sold mainly

At the habitations:● Social mapping, using transect walk and

participatory exercises● Seasonality analysis, particular reference to

dairy sector● Dairy timeline, milestones● Dairy livelihood analysis - identifying prob-

lems, actions● Individual interviews with producers - 30 per

habitation● Vendors interviews - all vendors in the habi-

tation● Habitation level individual interviews with

consumers - 30 per habitation● Case studies ● Formal and informal discussions● Veterinary camps● Producer-vendor meetings

● Observations of entire dairy day cycle withvendors, producers

● Interviews with key informants in the habita-tions

At the Market:● Mapping of vendor points using key inform-

ants, observations● Interviews with household consumers - total

of about 1,000; and institutions such ashotels, hostels

● Interviews with vendors and private dairies● Observations in creameries, transit points● Scientific tests for quality through samples ● Interviews with key informants from govern-

ment and communities ● A number of reflection meetings within the

team

Tools and Approaches Used in the Action ResearchBox V

Four markets with varying profiles werecovered - rural (villages; eight habitations),semi-urban (town market - Satupalli), urban(district market - Khammam) and wellevolved market (corporation - Vijayawada).A total of 949 producer house holds, 819household consumers, 179 institutionalconsumers, 75 market intermediaries (65vendors, 2 creameries, one ghee-makerand 7 dairies ) were covered through semi-structured questionnaires, focus group dis-cussions and observations.

Eight habitations were covered in the pro-duction side. Two profiles of habitationswere selected - one set with an exclusivetraditional market chain and the other with acombination of organised (coop and pri-vate) and traditional market chains. Fourhabitations in each profile were covered.Besides, five habitations where the studywas originally initiated were later droppedas the focus of the study was clarified byRRG as being habitations where a reason-able quantum of milk flows through the tra-ditional milk market, and not one of bringingfarmers into milk market.

Samples for the Action Research

Box IV


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under the traditional milk chain. For facili-tating actions, a number of meetings/ inter-actions were held with a variety of stake-holders - about 20 interactions in each ofthe habitations studied. These includePRA exercises, meetings with SHG/pro-ducer groups, vendor groups, local leadersand meetings together with the AHD staff.At the vendor association level too, atleast two meetings per month were con-ducted during the project period apart fromother small group interactions.

The methodology adopted for the studycovered both flush and lean seasons andwere spread over one year (August '05 toJune '06). The study involved extensivedata collection using tools and techniquesdeveloped, tested and vetted through theRRG mechanism (Box V). The data col-lected was both quantitative and qualita-tive, using structured questionnaires, PRAtools, observations on the field relating toboth within the habitations and markets,enquiries leading from these observations,informal interactions, meetings and work-shops. Raw milk samples were also col-lected from various points in the chain forlaboratory assessments. The study fol-lowed principles of AR wherein the prob-lems related to traditional milk marketswere participatively identified, analysed

and spontaneous solutions developed andfacilitated with stakeholders. Five meetingsof the RRG were conducted during thecourse of the AR process. Groups of RRGmembers made extensive visits to thefield, both to the habitations and the mar-kets, on three different occasions and hadwide ranging interactions with the produc-ers, vendors and their associations, con-sumers, creameries, private dairies, coop-eratives and the field research teams. Thefindings emerging from the research wereshared with RRG members periodicallyand suggestions were incorporated in theresearch process and used for midcoursecorrections. A detailed documentation of allthe processes that were followed has beendone by the study team (refer ProcessDocumentation). A desktop interactiveinformation system that brings together allthe documents (proposals, tool kits, data-bases, analysis, reports), photographs andvideo documentation of the entire AR isunder development.

1.2 Characteristics of TMSAs the first step, the study focused on themain characteristics of the traditional mar-ket. Although traditional products like ghee,sweetmeats, paneer etc., form part of TMS,they were not covered under the AR.Based on consensus within RRG, for the

7 Tests for fat, solid non-fat, adulterants in milk and bacterial load to determine the shelf life.

Milk producer milks the animal

Milk producer poursmilk to the vendor

Vendor adds water VendorTransports milkto the town/city

Direct sales by vendor toindividual and institutional

consumers and cream separation units

Milk productssold toconsumers

Traditional MilkChannel

Figure I


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purpose of this AR, TMS was characterisedas the channels of supplies, either by pro-ducers directly or by vendors, sellingunprocessed8, unbranded milk in looseform or filled in plastic packets or bottles9 inflexible quantities and prices10. The marketoperates through informal agreements bothat the producer and consumer levels. Theprocessing, if undertaken, uses traditionalmethods (mainly creameries11, ghee-mak-ing). The geographical boundaries of oper-ation by TMS are limited to an area12 inwhich the cycle of procurement and salecan be completed in about five hours.

1.3 Channels of TMSFor the purpose of this AR, two mainroutes for TMS were identified: (i) produc-er-to-consumer (including neighbourhoodsales) and (ii) producer-to-vendor-to-con-

sumer. Two categories of vendors wereidentified from the research - vendorswho are also primary milk producers andvendors as pure market agents. The pro-ducer-vendors were found more openand willing as they have a stake in everylevel of the value chain starting from pro-

duction to marketing. Any improvementmade in the value chain improves theirincomes. Compared to other vendors, theproducer-vendors were more involved inthe study, willing to learn, attend training,try out innovations and proactive in sug-gesting actions. Their interests alsoappear to be different as compared to theother categories of vendors. Other play-ers in the channel were creameries13 andproduct-making units and the consumers(both households and institutions). Thedetails of the traditional milk channel andthe vending cycle and key players aredepicted in figures - I and II respectively.

Vendors cater to different kinds of con-sumers at the market level - households,institutions, dairies, bulk coolers and milkproduct manufacturers. Vendors havemilk with varying quality to cater to the dif-ferent needs of the consumers. At theprocurement level, sometimes vendorscollect milk from the agents, or from coop-erative and private dairies to handle anyshortages (in all-three operators' habita-tions). Usually, any left-over milk from themarket (due to consumers not available,lesser quantum purchased, etc), is soldto dairies or bulk coolers at a substantiallylower rate (without checks on quality).

In Vijayawada, among the large-scalevendors, the cream separation processwas observed. These creameries are situ-ated at the main transit points (such as busstand, railway station) where milk from thevillages is brought into the town, the creamis separated, and the milk is taken for sup-ply to consumers. This practice was notobserved in a major way in either theKhammam14 or Satupalli markets.

Milk vendors then supply the milk leftover after distribution to the dairies or bulk

8 100% of milk supplied by operators covered in the research in all three markets; very few centres in Satupalli

and Khammam sell refrigerated loose milk through retail outlets and refrigeration facilities.9 52% of the milk is sold in loose form, 28% in PVC bottles, 12% in plastic bags, 8% other 10 100 ml onwards; even measures such as one-glass, half-glass, or even 'for Rs 6', etc.11 Mostly in Vijayawada market, used mainly by large-scale vendors (operating at 70 litre and above per day)12 In terms of distance, this could go up to 70 km in places where train/bus services are available and the mar-

ket is large (e.g. Vijayawada).13 In Vijayawada about 30-odd creameries are operational. In Khammam, there are four creameries, but are

used very sparingly as most large-scale vendors supply to institutions where quality check for fat is conducted.14 Four creameries in Khammam and one in Satupalli

In search of scarce fodder


15


coolers. In a few cases in the Satupalliand Khammam markets, the vendors sellthe excess milk to retail milk outlets,which have refrigeration facilities.

1.4 Size of TMSThe results of the study show that TMShas enormous size15 , spread, reach andimpact potential. In the study area, TMSis present in large proportions even inplaces where there are a large number ofplayers from the organised sector. Withincreasing urbanisation, the proportion ofmilk handled by TMS in the marketseems to be diminishing. For e.g.Vijayawada has 42 per cent of the marketunder TMS compared to Satupalli (98 percent) and Khammam (88 per cent), butstill substantial quantities are handled byTMS in these markets and will continueto do so for long.

In Khammam town, an estimated 1,700vendors operate. In the production andmarket channels, TMS provides an impor-tant livelihood option for large numbers ofsmallholder dairy farmers and milk ven-dors. At production points where there isno presence of the organised sector dueto difficulty in access and unviable quanti-ties for operation, TMS provides the mostimportant market linkages for rural pro-

ducers (e.g. habitations such asKondavanamala and Chinnagollagudem,which are about 8 km away from the mainroad). Moreover, in habitations which areclose to an urban market, the producershave an incentive to sell directly to theurban consumers. Even in habitationswhere all three operators have a pres-ence, more than 50 per cent of the quan-tum of milk is sold through TMS. This isindicative of the fact that the sector pro-vides an effective livelihood option for thesmallholder dairy farmers, vendors andalso caters to the needs of consumers.

Based on the market share of TMS in thetowns covered under the AR and the rateof growth of each of the channels asderived from the secondary data sources(table - I), it can be reasonably assumedthat TMS is likely to stay for manydecades to come and that it is important tofocus on this segment, both at the policyand operational levels. In spite of its size,coverage and impact potential, the sectordoes not receive the kind of attentionrequired for its improvement from anyagency (government or other develop-ment organisations). Planned investmentsfocused on dairy development are notmade in these low potential areas, servedmainly by the traditional milk system.

15 According to secondary sources (APDDCF, 2003-04 list of private dairies/competitors in the federation milk-

shed; and statement showing procurement and sales in APDDCF Ltd, year-wise/unit-wise) about 91% of the milk

produced in the district is handled through TMS, i.e... approximately 301,000 tonne of milk per year.

Vending Cycle and Key Players

MilkProducers Milk Vendors

Rs. 11-12/lit

Agents-PrivateDairies

Rs.195/- Per kg.fat

left-over milk @ Rs.12/IIt

Cooperative-Agent/Paid Secretary

Rs. 192/- Per kg.fat

Collection at home

Creameries

Householdconsumers

Rs. 10-12 per lit.

Institutionalconsumers

Rs. 8-16 per lit.

ConsumersPrices forvarious fat &SNF combi-nations

Curd, Ghee

Coop Dairy

Dairies, BulkCoolers

Milking in frontFixed priceOther services

Figure II


16


1.5 Milk Producers - Profile and Operations

1.5.1 Milk ProductionThe habitations studied were mainly buf-falo tracks, with very limited number ofcows being reared. In these, 42 per centof the households were primary milk pro-ducers (proportion similar in all-threeoperator and vendor-only habitations).

The average animal holding per milk producer household was 2.8 overall andslightly higher at 3.1 in all-three operatorhabitations. About a third of the milk producers owned only one or two buffaloes. About three-fourths of the milkproducing households did not reportdairying among the top two sources ofincome for their households. In terms ofsocial categories, about half of the house-holds were from backward castes (suchas Yadavas and Kuruvas), who are traditionally known for livestock rearingand milk production. Some developmentprogrammes by the government andother agencies focus on dairying as animportant supplementary livelihood optionand provide credit for buying animals.These have resulted in a marginalincrease in the number of milk producersand animals over the years especially inhabitations that have irrigation facilities(such as Ananth Nagar and R. C. Puram).In the habitations studied, dairying is asupplementary source of income for most

milk producers, with limited animal holding and milk production.

The average milk production per animalwas 2.38 litre per day (lpd) for the flushseason and 1.77 lpd for the lean season.At these levels, milk production is consid-ered an unviable option if investment isconsidered16. Overall, 60 per cent of milkproducing households handled quantitiesless than 5 lpd. In terms of breed, lessthan a fifth of the animals in the habitationwere graded buffaloes, and the rest wereof local breeds.

In terms of animal management prac-tices, 60 per cent of producers kept theanimals outside their houses without proper shelter. Dry grass was the mostused fodder (70 per cent of producers),with only a tenth of producers reportinggreen fodder for feeding the animals. Useof rice bran for feeding was observed in allthe three operator habitations, which isalso linked to availability of irrigation facilities. The hygiene and sanitation levelsat the milking points and in places whereanimals are kept were extremely poor. Thenormal hygienic practices to be followedwhile milking (cleaning of udder, place of

milking, etc.) were rarely observed acrossdifferent habitations and profiles of producers. Stainless steel or aluminiumvessels were used by producers whilemilking.

16 According to calculations, at least 4 lpd per animal is required for commercial viability for the producer.

Detailed calculations of profitability and cash flow for small-holder dairy farmers included in the main report.

The vendor’s day begins early

Milking - the most rewarding task of the day


17


Incidences of cattle diseases werereported17 to be high as a result of pooranimal management and lack of preven-tive and treatment services in habitations.The main health observed included foot-and-mouth disease, HaemorrhagicSepticemia, Mastitis, Anoestrus Ovary,mosquito bites (during paddy harvestseasons) and death of calves due toworm infestation. Treatment services atthe habitation level were generally poorparticularly for habitations that were awayfrom veterinary institutions (such asKondavanamala, R. C. Puram, Basava-puram). The services by DoAH were usu-ally limited to conducting occasional vet-erinary health camps at a central location,about two to three km away from thesehabitations.

The use of Artificial Insemination (AI)services was found to be limited, with 23per cent of milk producers not havingaccessed these services in the last twoyears. Forty-three per cent reportedaccessing this service only once duringthis period. The usage of these serviceswas found higher in all-three operatorhabitations due to better accessibility. Theutilisation of services of Gopalmitras18

was reported only by 17 per cent of theproducers (only 4 per cent in vendor-onlyhabitations). In terms of satisfaction levelswith AI services, about 40 per cent of theproducers reported either average levelsof satisfaction or dissatisfaction. Therewere no breeding bulls available even inhabitations which were far from veterinaryinstitutions. The inter-calving period wasaround 18-24 months, much higher thanthe generally preferred 13-15 months.

The milk production in the research siteswas characterised by a holding rate of 2.8to 3.1 animals per holding household, lowproductivity (flush 2.38, lean 1.77 lpd) andpoor animal management practices lead-ing to inefficient and commercially unviabledairy operations. Lack of commercial ori-entation to dairying by producers, their lack

of understanding of scientific animal man-agement practices, combined with poorveterinary services and accessibility issueshave led to the current situation in milk pro-duction in the research sites. These issuesrelated to production have in turn affectedthe quality of milk and the price that it cancommand in the market. Improvements inthese areas are a must for improvingsmall-holder incomes from dairying.

1.5.2 Post ProductionOn an average, about a third of the milkproduced in the habitations was con-sumed within the milk producing house-holds, with the quantum of milk consump-

tion remaining the same between leanand flush seasons. With the lean seasonproduction going down by about 30 percent, the quantum of marketable surplusmilk was reduced to that extent.

Sales to neighbourhood, milk vendors,cooperative and private dairies were themain channels used by producers.Eighty-five per cent of the milk producedin the morning and 45 per cent of the milkproduced in the evenings were sold. Mostvendors did not procure in the evenings,as the demand for the milk in theevenings is much less compared to morn-ings and the time taken for completing acycle would extend their work to morethan 16 hours. Therefore, procurement by

17 Through veterinary camps conducted as a part of entry-point activities and as a part of collaborative actions

with DoAH and community organisations.18 A cadre of para-veterinarians engaged in AP under the National Project for Cattle and Buffalo Breeding, gen-

erally chosen from the community where they are to work and are supported by the Andhra Pradesh Livestock

Development Agency and the state animal husbandry department

The journey with milk begins


18


vendors in the evening was limited in allhabitations studied. In all-three operatorhabitations, producers sold milk mainly tothe organised sector (cooperative or pri-vate) in the evenings. In fact, producerswho sold milk to vendors in the morningalso sold evening milk to the organisedsector. However, in vendor-only habita-tions, evening milk was either stored andmixed with morning milk or used forhousehold consumption. Effective stor-age of milk using locally appropriatemethods was one of the areas identifiedby vendors to improve market access.

In all-three operator habitations, duringflush season, about 50 per cent (23 per-cent through vendors and 27 percent tohousehold and institutional consumers) ofthe milk is sold through TMS. This propor-tion increased to 57 per cent of the mar-keted milk in lean season, wherein theshare of organised sector came down. Invendor-only habitations, 76 per cent wassold to vendors and 24 per cent was solddirectly to consumers in the lean season.

The reasons for milk producers choosinga particular channel for sale are varied. Incase of vendors and private dairies, pro-ducers prefer them for regularity of pay-ment and reliability of the person collect-ing milk. It is to be noted that the operationof private dairies is similar to that of ven-dor operations, wherein these dairiesappoint local level agents to procure milk.In most cases, the producers select theprivate dairy based on the agent. In a fewcases, ex-vendors have taken up suchagencies in their own habitations. In caseof cooperative societies, the reasons forpreference were mainly reputation (well-known government dairy) and correct orhigher price, which is quality-based. Inhabitations where cooperatives operatethrough agents, the reliability of the per-son and the confidence that the producerhas on the agent have been reported asreasons for preferring the channel. Thecooperatives collect milk from fixed cen-tres. The private dairies also have theirfixed centres. The vendors with doorstepcollection, personal relations, flexiblemethods and other non-price incentivesfulfill some of the basic needs of the pro-ducers. In the case of consumers as well,

most of these non-price incentives prevail.

With regard to the price received by theproducers, the average price reportedfrom vendors ranged between Rs 11 and12 per litre. Producers selling directly tothe consumers got higher prices depend-ing on the market accessed and the levelof adulteration with water. For producersselling to private and cooperative dairies,the price ranged between Rs 14 and 15per litre (worked out on the basis of theannounced price of Rs 19.20 per litre for10 per cent fat in case of cooperative andRs 19.50 in case of private dairies). Duringthe lean season, cooperative and privatedairies increased the price by Rs 1 perlitre, which was not practiced by vendors.The price offered by vendors was similarthrough the seasons, ranging between Rs11 and 12 per litre, irrespective of all-threeor vendor-only habitations.

Prima facie, the price paid by TMS to pro-ducers seems lower than that paid by theprivate and the cooperative channels. Only51-59 per cent of the consumer rupeereaches the producers through TMS.However, producers value many non-priceincentives such as acceptance of froth inthe milk sold, no separate sample milk forfat test, door-step collection/delivery ofmilk, personal contact with the farmers,morning wake-up call, help in milking, lim-ited grocery supplies, milk price realisation

Skimming the profit


19


on a monthly basis etc., the value of whichis not reflected in the 51-59 per cent shownabove. Different profiles of producersattach different values on these non-priceincentives. For example, to a poor milkproducer in an inaccessible habitation,supply of groceries and supply of milk dur-ing the dry period were more important,whereas for a large producer, the conven-ience of door-step procurement and help inmilking were given priority.

Even in villages where many vendors ormilk channels operate, the price paid byvendors to producers, irrespective of thequality of milk, is the same. There seemsto be an understanding among the ven-dors on the common price that should beoffered to the producers in the habitations.Occasional deviations from this unwrittenrule were reported (e.g. Kondavanamala),but only for a very short time. Price wasnot considered the most important factorwhile deciding on the vendors (rather therelationship, regularity of payment and thenon price incentives among others, wereconsidered important).

1.6 Milk Vendors - Profile andOperations

1.6.1 Profile of VendorsMost of the vendors in all the three mar-kets were mainly men (close to 95 percent). Women vendors operated in mar-kets that were proximate and within walk-ing distance from their habitations (e.g.Peddagollagudem) or in markets thatwere accessible by train or bus from theirhabitations (e.g. Khammam and Vijaya-wada market, where women vendorsfrom habitations in the periphery of thetowns operated).

In terms of social categories, similar toproducers, about two-thirds of the vendorswere from the backward caste category(traditionally in the dairy business). Onlyabout 10 per cent of vendors were fromscheduled castes (SC) or scheduled tribes(ST). Close to half of all vendors wereeither large or medium farmers (with landholdings of more than 5 acre19). Fieldobservations revealed that about two-thirdof the vendors were also milk producers.

Three-fourths of the vendors studiedhad been in the milk vending business forover five years, with only 5 per cent ofthem being new entrants to the businessin the last two years. Most vendors report-ed that milk vending was a business thatdemanded untiring efforts, the ability totake risks and required maintaining anongoing effective relationship with bothproducers and consumers. As such, newentrants to the milk vending business inthe last couple of years seemed very low.Moreover, most of the new entrants in thelast two years were either relatives orfriends of the existing vendors, who pro-vided them with some minimal contacts tostart the business. The demands of thisbusiness, as cited above, have beenreported as barriers that prevent manynew faces from entering this business.

About 75 per cent of vendors reported'milk vending' as their main occupation.For a fourth of vendors, agriculture wasthe main occupation, with milk vendingbeing the supplementary income source.In most vendor families, milk vending hadbeen the main family occupation over theyears, with their relationship with produc-ers and consumers passed down throughthe generations. As has been discussedearlier, most producers reported 'relation-ship' as an important factor for choosingto supply to a vendor. The relationshipgoes beyond just the milk business totheir participation in family and othersocial occasions. This 'bonding' between

19 Average land holding 3.9 acre

Getting ready for the market


20


the producer and vendor is valued veryhighly while deciding on the TMS for sup-ply by producers.

An analysis of the vendor profile indicatesthat most vendors were from families thathad been in the business of milk vendingfor a long time and it was their main sourceof income. A large proportion (about two-thirds) of these families could be classifiedas being economically better off, giventheir land holding and caste profile.

1.6.2 Scale of OperationsForty-five per cent of the vendors handledmilk quantities below 20 lpd, and about 31per cent between 20 and 50 lpd. The min-imum quantity handled was 6 lpd, withmore than three-fourth handling below 50lpd. The average quantity of milk handled

per vendor was about 38 lpd. Therewas no fluctuation in the quantum ofmilk handled by vendors between leanand flush seasons. During lean sea-son, vendors looked for more produc-ers and, at the same time, some of theorganised sector operators did notoperate in habitations that had loweroutputs.

Most vendors (61 per cent) reportedusing packed milk or milk powder tocompensate for any supply shortage.About 10 percent vendors reported

purchasing milk from other vendors and,either adding or dropping, a few produc-ers or consumers. Similarly, about 10 per-cent vendors providing higher rates dur-ing the lean season to the agents of pri-vate and cooperative dairies to procureadditional quantities were observed. Incase of milk left over after sales, mostvendors supplied the excess produce toprivate dairies and bulk coolers at verylow rates, some times even at Rs 2 perlitre (in case of Satupalli). However, thequantum of milk and the frequency of thissituation were very limited (very few ven-dors reported this happening in the threemonths prior to the survey period).

1.6.3 Selection of Habitations andProducers

It was observed that vendors selected habi-tations based on the consistency and relia-

Trains carry milk over long distances

Figure III


21


bility of the supply of milk available to themfrom these habitations. The total quantumfrom the locality and quality of milk wereother factors that decided the selection ofhabitations. Within these habitations, theselection of producers were based on the'quality of milk', followed by quantum. Thefrequency of selection of habitations andproducers for most vendors was once in sixmonths (46 per cent of vendors reporting).The main challenge for vendors was toretain the producer, ensuring consistentsupply and maintenance of quality. Themost common strategy adopted by vendorsto this effect was to ensure regular pay-ments to producers. One of the learningsfrom this study is that vendors also operateon monthly payment terms, both with theirconsumers and their producers.

1.6.4 Milk procurement and EnsuringQuality

In all the cases, the place of procurementby vendors was the door-step of the pro-ducer. Vendors ensured quality of milksupply by being personally present (or afamily member being present) while milk-ing. This demands a large amount of timeand effort from the vendors. In a fewcases, milking is done in the absence ofthe vendor, when the price paid was usu-ally Re 1 less than the regular rate offered.Case studies of vendors' day-cycle showthat the time spent on procurement wasbetween two and four hours depending onthe number of producers covered by them.Most vendors started their working day asearly as 4.30 am.

1.6.5 Price and other Non-price IncentivesThe average price paid to producers (asreported by vendors) was Rs 10.75 perlitre. The average price was Rs 11.20 perlitre in case of small-scale vendors com-pared to Rs 10.60 in the case of large-scaleoperators. Apart from the price, vendorsprovided other non-price incentives such asloans/advances (31 per cent vendors) andinformation on animal management (concentrate feed, fodder, Vet. services -20

per cent). Vendors supplying grocery items,helping in milking operations, supplyingmilk during dry periods etc. were alsoobserved during field interactions. A higherproportion of large vendors provided non-price incentives such as loans/ advances.Very little variation was found in the ratesoffered by vendors between all-three operators and vendor-only habitations.

1.6.6 Handling PracticesIrrespective of the scale of operations ortype of habitations or profile of vendors,all vendors are reported to adulterate milkwith water before it was sold (reported inthe interviews and during observations).The data based on the test results by theNational Dairy Research Institute (NDRI),Bangalore shows that 67 per cent of theconsumer samples in Khammam, 88 percent in Satupalli and 55 per cent inVijayawada were diluted. There are differ-

ent levels of adulteration with water by thevendor based on the price offered by theconsumer20. The lowest quality milk (soldat around Rs 10 per litre21) was adulter-ated with water to the extent of 75 percent to 100 per cent. The highest qualitymilk (sold at around Rs 18-20 per litre)was adulterated with water to an extent of 10 to 20 per cent. The scientific testcarried out by NDRI confirms a degree ofcorrelation, though weak, between milkprice and milk solids. The perceptions ofthe consumer with respect to the propor-

20 In some locations, vendors usually keep three to four cans, of which one is invariably water, but looks white

as a small quantity of milk is added to make it look like milk. When the consumer asks for milk, the vendor usu-

ally asks what price and based on the price, a combination of thick milk and water is added in quick time to make

the milk for that price.21 General understanding among vendors is that it is 50:50 milk, i.e. 50% water and 50% milk for Rs 10 per litre.

Handling milk, the vendor's way


22


tion of water added in the milk purchasedby them are consistent with the findings ofthe scientific tests.

Many small-scale vendors sell milk inPVC bottles and some medium and large-scale vendors use plastic canswhich are not made of food-grade plas-tics. These cans are not easy to cleanproperly thereby increasing the microbialload in repeat uses adversly affecting themilk quality.

Most vendors do rudimentary tests tocheck the thickness of milk by dipping fingers into the milk. In creameries too, allthe operations involve contact with milkand its products with bare hands. Thewater used for adulteration is not filtered.The hygiene and sanitary conditions increameries are areas of concern.

1.6.7 Vendor operations - overallCase studies of vendors show that thegross margin from milk vending opera-tions ranged from 41 per cent for smallscale operators to 49 per cent for large-scale vendors. The details are presentedin figure III. i.e. about Rs 75 per day forsmall-scale operators and Rs 700 per dayfor large scale vendors. If one considersopportunity costs and other direct costs,then the net margin for a small-scale ven-dor works out to only Rs 10 per day (6 per

cent of the sale amount realised). For thelarge-scale vendor (100 lpd), the net mar-gin works out to Rs 500 per day (37 percent of sales realisation).

The scale of operations by most vendorsis generally very low given the time andeffort spent on operational activities. Eachvendor balances the quantity of milk han-dled at his/her level - 'collects only whats/he can sell and sells only what s/he cancollect'. This restricts the quantity of milkhandled by each vendor, making itunfavourable to the vendors. The processof collection (including milking in pres-ence), transport and distribution of milk atthe doorsteps of consumers requires oversix hours of the vendor's time every day.Thus, the cost of labour (based on oppor-tunity cost) on a per litre basis remainsexceptionally high.

Poor handling practices and adulterationof milk with water and neutralisers by ven-dors affect the quality of milk supplied toconsumers. The scientific tests conductedby NDRI show that the deterioration of milkquality in terms of milk solids and microbialload is highest at the vendor level.

1.7 Consumers - Profile, referencesOf the total 819 urban consumers cov-ered in the study, 94 per cent purchasedmilk. Of this, 60 per cent purchased milkfrom TMS, with 98 per cent in Satupalli,86 per cent in Khammam and 39 per cent

Vendors serve a variety of consumers


23


in Vijayawada. In terms of quantum ofpurchase, 64 per cent of milk purchaseswere from TMS (98 per cent at Satupalli,88 per cent at Khammam and 42 per centin Vijayawada).

Per capita milk purchase was the highestin Vijayawada at 227 ml per day, followedby Satupalli at 222 ml and Khammam at217 ml. Per capita consumption was thehighest for higher income categories (at 348 ml per day in Vijayawada) andgradually reducing (with the low-incomecategory at 161 ml per day).

Access to the traditional milk marketwas the highest among the high-incomegroup (52 per cent of households report-ing purchase from TMS), followed by theupper-middle income group (48 per cent).In the low-income categories, access tothe organised sector was the highest with59 per cent reporting preference for thischannel.

The main reasons of preference for TMSwere the 'quality of milk (thickness andtaste)' followed by 'availability at righttime' and 'home delivery'. In case of theorganised sector too the 'quality of milk(thickness and taste)' was the main rea-son for preference, followed by 'availabili-ty at the right time'.

About 65 per cent of the consumers pur-chasing from TMS reported that the milkwas diluted with water. This proportionwas the lowest at 58 per cent inVijayawada (where price and competitionis high, and there is a practice of creamseparation), compared to the high-est at Satupalli at 88 per cent. InKhammam, 67 per cent of con-sumers reported that the milkwas diluted.

In terms of usage pattern, 40per cent of the milk purchasedwas for tea and coffee, 32 percent for curd and 21 per cent for consumption by children. The usage pattern is different for each town, with the highestproportion of milk used fortea/coffee in Vijayawada (43 percent), compared to the highest

proportion of milk being used for making curd in Satupalli (43 per cent). Milkis not consumed in its raw form by any of the consumers. When handling practices and quality issues with respect to TMS were discussed, most consumersfelt that these did not affect them as they boiled the milk before use. Given thisstrong rooted perception on milk quality, it is important to develop and disseminatescientific evidence on the quality of milk and the effect of using low quality milk, to change the behaviour of the consumers.

1.8 Quality of Milk in the TMSThe scientific tests conducted by NDRIacross the channel show that most of theproducer samples consistently conformedto total solids figures. Less than half of vendors' samples conformed to legal quality standards with respect to totalsolids. However, at the point of sale thedilution takes place depending on the pricerealised from each consumer. As a resultof this, more than three-fourths of consumer samples did not conform to legalstandards with respect to total solids,although almost all samples were diluted to some extent. The details are infigure IV.

Institutional consumer samples (fromhotels, tea shops, etc.) had the poorestconformation rate.

The smaller-scale vendors had a higherproportion of samples meeting the requi-site standards vis-à-vis larger vendors.

Figure IV


24


The average total solids in milk sold during the lean season was marginallyhigher than that during the flush season, with producer samples showingthe highest level and the institutional consumers showing the lowest level ofsolids.

The correlation between price paid (asreported by the consumers) and milksolids from these tests is moderate (cor-relation coefficient 0.50122 for total solidsand 0.441 for fat). It supports the percep-tions of the consumer with respect towater mixing.

No chemicals or thickeners were foundin milk sold at any level during the flushseason. However, during the lean sea-son, about 50 per cent of the vendor sam-ples were found to carry neutralisers(sodium carbonate).

Milk quality assessment carried out on the basis of Methylene Blue Reduction(MBR) test is reflected in figure V. While at the producer level the quality of milk wasconsistently good, at the vendor and con-sumer level about two-thirds of the sampleswere of 'fair' or 'poor' quality (with MBR timeranging from five minutes to one hour). Thesamples from institutional consumers (suchas hotels) showed very poor quality interms of MBRT.

Though most of the milk through vendorroute is diluted, the criticality of this quali-ty is not felt at the consumer level, asdiluted milk less often clots on boiling.

1.9 Summary of Findings andActions Identified/ Facilitated

1.9.1 Summary of Findings● TMS has enormous size, spread,

reach and impact potential. Withincreasing urbanisation, the propor-tion of milk handled by TMS in themarket is diminishing, but at a veryslow rate. Still substantial quantitiesare handled by TMS in these markets.An analysis of the macro data at thenational level indicates that at thepresent rate of displacement, TMSwould take six to seven decades toreduce to ten percent share of themarket. It is therefore important toaddress the gaps (Annexure-I) in TMSand also build on the strengths of thissector to contribute to overall milk pro-duction in the country.

● At the production and market points,TMS provides an important livelihoodoption for large numbers of smallhold-er dairy farmers and milk vendors. Atthe production points where there isno presence of the organised sectordue to difficulty in access and unviablequantities for operation, TMS providesimportant market linkages. Even at theresearch sites, where all three operatorshave a presence, more than 50 per centof the quantum of milk (57 per cent inlean season) is sold through TMS.

● In spite of its size, coverage andimpact potential, the sector is notfocused on by any agency (govern-ment or other development organisa-tions) for its improvement. Plannedinvestments focused on dairy devel-opment are not made in these low-potential areas served mainly by thetraditional milk system.

1. The key features of TMS are:● Provides the most important market

access for milk produced in low pro-ductive and inaccessible areas.

● Provides livelihood opportunities forlarge numbers of producers and ven-dors, and addresses the consumerpreferences in markets (price, flavour,taste, size, etc.).

Figure V

22 Significant at the 0.01 level - 2 tailed


25


● Price plus services at the producerlevel (advances, wake-up call, help inmilking, supply of milk during dry peri-od, supply of groceries, etc).

● Doorstep procurement and milk deliv-ery.

● Emergency support for producers.● Long personal relationships, going

beyond generations.● Constant prices; no quality checks; no

samples for quality checks, acceptfroth at producer level.

● Acceptance of fluctuating quantitiesand qualities of milk; even small quan-tities (both at consumer andproducer level).

2. Areas of improvement inTMS are:

● Improvements in the qualityof milk handled through TMSso that issues of food safetyand conformation to legalstandards are ensured.

● Quality based pricing at bothproducer and consumer level.

● Operational inefficienciesdue to low quantities han-dled, handling practices,methods used for procure-ment, etc.

● Lack of institutions and platforms thatenable sharing, negotiations andworking together to address commonissues.

● Low productivity due to lack of incen-tives for higher productivity & lack ofservices.

● Establishment of some minimum infra-structure for quality testing, preserva-tion, storage etc.

● Review of legal standards forunprocessed, unpacked milk beingsupplied by TMS

1.9.2 Actions identified/facilitatedThe AR generated vast insights into theworking of TMS in research sites. Thechannel through which milk is being soldwas mapped, with variations in differenttypes of markets. During the process, aseries of actions were identified by theproducers and vendors, on a wide rangeof topics including input supply, breedimprovement, quality, price and otherparameters. The actions already imple-

mented include creation of a platform ineach habitation for bringing up dairy/ven-dor-related issues, resolving productionlinked problems like supply of Travis,breeding bulls, fodder seeds, organisa-tion of veterinary camps, training in cleanmilk production, sharing of quality andprice issues with vendors and generatingsolutions, exploring quality tests, storageand preservation options, fulfillment ofquality standards, sharing of informationwith consumer groups, exploring con-sumer education etc. Seeing the positiveenergy being generated by the AR, the

district staff of DoAH, APDDCF and theVelugu programme and the VendorAssociations (VA) actively participated inthe AR and pledged their support to stim-ulate improvements. Most of theseactions were taken up through linkageswith existing institutions, with only facilita-tive support from the study team.

The few field strategies that emergedfrom the AR during consultations with various stakeholders were facilitated bythe study team. The detailed actions thatwere tried out on the field and the supportprovided and expected from each stake-holder is given in Annexure I. Theseactions may be classified into the followingareas:

● Capacity Building: building capaci-ties of all players in the TMS channelin the areas of clean milk production,

The vendors after their training at NDRI, proudly

exhibits their certificates


26


handling practices, awareness onquality and legal standards, etc.

● Institution Building: of milk produc-ers, vendors and consumers; and facil-itating sharing platforms.

● Exploration of Technology andOperational Solutions: mainly topromote and facilitate quality-basedpricing, better handling practices,establishment of minimum infrastruc-ture for quality testing, preservationand storage and improving opera-tional efficiency.

● Productivity Enhancement: throughlinkages and collaborations with gov-ernment departments and local CBOs.

● Policy-level Initiatives (See section1.13 on Policy Implications)

1.10 The Way ForwardThe AR has opened up opportunities forplanners, policy makers and senior gov-ernment representatives to view this sec-tor as an area of potential and wide-spread intervention for livelihoodimprovement and sectoral growth. It alsohighlights potential actions for addressinglong-term threats of quality and food safe-ty aspects not addressed hitherto.

The experience also highlights how thetraditional and organised sectors work instep with each other to achieve the goalsof increased production, better incomeand sustainable livelihoods. There are anumber of strengths and good prac-tices/principles in each of these sectors,

which the other can learn and adapt foroverall improvement. There shouldn't bea feeling of one sector replacing the otherin the long run. It is important to under-stand areas of improvement and addressthem through the strengths and the basebuilt over the years in each of the sectors.The grass-root level actions prove that asynergetic approach by a number ofagencies can contribute towards effectingpositive changes.

The pilot action research has opened upa number of opportunities with a variety ofstakeholders in TMS in the research sites.Institutions of producers and vendors havebeen organised and some actions initiated.Capacity building of these institutions,facilitation of platforms of producers andvendors, linkages with government andother agencies to address production andproductivity related issues, exploration ofpossibilities for quality-based pricingthrough innovative institutional models,etc. are at various levels of implementa-tion. There is a need to logically follow this

process and build capaci-ties of institutions to sus-tain these so that thepotential benefits of the ARfacilitated so far is fullyrealised and pendingactions with the vendorscompleted.

The presence of localfacilitating agencies(NGOs) combined withthe work done and rapportbuilt with vendors and pro-ducers associations so far,provide an excellent base

A mediated dialogue process between producers and

vendors

Introduction of quality testing leads to new dynamics

in TMS


27


for taking these actions forward.Moreover, the vendors appeared to bequite keen to learn and improve their oper-ations. The Vendor Associations are keento facilitate the process, given their inter-est in long-term benefits and sustainablelivelihood options. The training of vendorsat NDRI brought in improved awarenessand the realisation of the need forimprovements. The vendors have alsocome forward to facilitate formation ofProducer Associations and, in the longrun, Consumer Associations to facilitatebetter relationships with them. They perceive that the onslaught of privatedairies poses a major threat to TMS andtherefore, are likely to cooperate better.The category of vendors who are also primary producers appear to be moreopen in their approach to learning, trainingand reviewing their ways of working. Theirinterests also appear to be different ascompared to those of other categories ofvendors. The capacity developmentefforts therefore need to be tailor-made tosuit both the vendor categories. Based onthese opportunities, some immediateactions proposed are:

● Improving the quality of milk handledby vendors so that it conforms to legalstandards.

● Improving the price spread and non-price incentives for the vendorsthrough improving the scale of opera-tions, productivity, marketing andfinancial management skills and find-ing solutions for reducing losses(through storage and other technolo-gies). These are likely to result inincreased price for the producers.

● Establishing and nurturing producerand consumer organisations, throughcapacity building of local facilitat-ing agencies and exploring opportuni-ties for institutionalisation of theseefforts in government or other agen-cies.

These could be done through capacitybuilding of the vendors, producers andconsumers and their associations, providing basic infrastructural facilities forquality testing, facilitating and handholdingsupport to address various issues collec-tively.

Wider dissemination of information fromthe AR though a number of initiatives -publications, presentations and wide cir-culation of outputs of the research - needto be undertaken so that other states andregions can benefit from the learning.Policy awareness exercises and sensiti-sation of policy-makers, regulators, devel-opment agencies and investors to therealities of the sector and potential solu-tions and interventions are other meas-ures that need urgent attention.

1.11 Key Contributions of theResearch

The AR process has been effective inobtaining reasonably accurate and hardground-level data on the traditional milkmarket players, their shares, the dynam-ics in operations; particularly with differentmarket profiles. The process has brokenthe barrier by engaging these 'unorgan-ised' players in a continuous dialogue andworking with them. The study has alsoprovided scientific validity to quality-relat-ed issues through laboratory tests andlinked them with consumers' preferences.

The study has thrown up an importantfinding - that producers and consumerssee inherent advantages in TMS, even inplaces where the organised sector ispresent. Each type of operator brings inadditional advantages both at the con-sumer and producer level; in fact a com-bination of channels is preferred by bothproducers and consumers. It is thereforeimportant to make options available,which they can choose from. At the sametime, issues related to quality and priceneed to be addressed effectively.

A trevis installed under the AR


28


The study has proven that with systemat-ic and consistent effort, one can work with players in this sector and create plat-forms for producers and vendors to cometogether to their benefit. Focused effortsand facilitation at different levels can leadto coordinated efforts of various stake-holders in solving the problems of dairyfarmers.

The enormous size and spread of TMSand the nature of its operations clearlypoint to the need to appreciate its relevance and accept and work with theplayers so as to improve the quality ofmilk supplied by them and enhance efficiency.

The study has also developed and testeda methodology, tools and analysis method-ologies that can be readily used to under-stand and work with TMS.

1.12 Learning from the ResearchThe informal milk market, being one ofthe least studied, but sensitive areas,requires extra care and effort to obtainaccurate and transparent information.

Multiple actors, some with divergentinterests, call for very effective and effi-cient AR to ensure participation, learningand improvements simultaneously.

AR is a process-oriented approach.However, there is a need to have dead-lines and specific outputs for administra-tive and accountability purposes. There is

always a conflict betweenthese two requirements,which needs careful balanc-ing at various levels.

An institutional mecha-nism for undertaking suchAR needs to bring in multi-skill teams at various levelsto ensure quality, least start-up time and effective techni-cal support. The composi-tion of an RRG mechanism(mix of academic-research-practitioners, policy-imple-menters, government-non-government and communi-

ties, international-national-local, multi-disciplinary like social, market, manage-ment, gender, animal sciences), alongwith the rigour brought in throughanalysing results periodically and fieldvisits motivated the members to contribute more than was originallyplanned.

The promotion of the traditional sectorshould not be seen as detrimental to thegrowth of the organised sector. These two are complementary to each other,keeping the producers and consumers atthe centre of development. By havingboth, the consumers and producers havethe option to make informed choices.There are opportunities for learning fromeach other.

While handling sensitive subjects suchas quality issues in TMS, there could bevested interest groups using these out-puts for their benefit. This can potentiallyspoil the relationship with the groups withwhom the study teams worked closelyand developed confidence. There needsto be a system of periodically identifyingand assessing these risks from externalfactors and a strategy to address thesefrom time to time.

1.13 Policy Changes and ApproachesThe foregoing chapters demonstrate that TMS is a sleeping giant with vastpotential for growth and development.About 77 percent of the milk marketed inIndia passes through this channel.Millions of producers, consumers and

Learning through the Action Research


29


market intermediaries are dependant onthis segment. If supported and nurturedeffectively, it has all the ingredients tousher in another white revolution. Thereasons as to why this segment deservesthe attention of the policy makers, planners, development agencies,researchers and academia are summa-rized in Box VI.

Traditional systems of market-ing, as mentioned earlier, bringin some inherent advantages,particularly for the poor and mar-ginalised in low milk potentialareas. Any improvement in thissector will directly benefit theseproducers. The observationsand findings of the ActionResearch provide ample point-ers for changes in the approach-es and policies. There are anumber of suggestions whichemerged during the researchprocess as also during the sub-sequent deliberations. These

need further exploration. Details of someof the recommended changes inapproaches and policies are indicated inBox VII. Some of these are pointers forpolicy actions for agencies supportingdevelopment of livelihoods of the poor.Interventions in this area could be pro-moted as part and parcel of livelihoodsimprovement programmes for the poor.

1. In recent years, milk production in India hasstarted showing erratic growth patterns. Inthis context, stimulating dairy production,particularly focused on TMS deserves spe-cial attention.

2. TMS covers a vast number of low-potentialdistricts and markets. Millions of resource-poor farmers and market intermediariesearn their livelihoods through TMS. Inorder to realise the national goal of a'socially inclusive and regionally balancedeconomic growth', it is important that thegovernment does not ignore these millionsand the low-potential regions .

3. Growth trends in various segments of themilk value chain demonstrate that TMS islikely to exist for a long time to come - atleast 6 - 7 decades to drop down to a levelof 10 percent of the milk marketed in India.

4. The quality of milk served by TMS hasscope for improvement. It deserves highattention from the angle of food safety, netreturns to the milk producers and the value

for the consumer's rupee.

5. Investments in dairy production hithertowere focused in about 250 high-potentialdistricts of the country. In spite of its vastsize, reach, spread and impact potential,the TMS or the areas served by themreceived no worthwhile investment or sup-port. With small selective investments, thelow-potential areas served by TMS couldstimulate milk production to reach a thresh-old level faster so as to attract other chan-nels also to join, compete and drive stillfaster growth - exploring synergies.

6. The enterprise of small-holder dairy farm-ers with low producing animals seems to beeconomically unviable. It is feared that bet-ter availability of credit for purchase of live-stock under the poverty-alleviation pro-grammes may be aiding in the creation ofmore such unviable enterprises. Marketaccess through TMS and appropriate poli-cy support to provide better animals,deserve attention.

Reasons why the Traditional Milk Sector should be supported

Box VI

Seeing is believing: milk producers on an

exposure visit to a fodder plot


30


1. The selection of districts/areas for invest-ments under the dairy programmes arebased on the criteria of minimum produc-tion and viability levels specified by theorganised sector for the high potential dis-tricts. The criteria may be made flexible,need-based, stakeholder-driven and opento include low potential areas served byTMS as well.

2. The quality standards for processed milkprovide a number of options in terms of fatand solids-non fat (SNF) levels, both forsuppliers and consumers. However, for rawmilk sales (which is mainly from TMS) inKhammam, there is practically only onestandard which is of whole buffalo milk (5per cent fat and 9 per cent SNF).Consumers, however, prefer and avail arange of qualities and prices even fromTMS. Allowing two-three standards forunprocessed milk would enable vendorsalso to accept and operate within a legalframe.

3. The efforts towards improving TMS andstimulating production in low producingareas should not be seen as directed atdisplacing any one channel by another, butat synergising and supporting each other. Itshould stimulate milk production in the lowproducing districts to reach the minimumthreshold levels in a shorter time so as toattract other channels also to join the com-petition for the benefit of the poor.

4. Given the current growth trends in milk pro-duction, for further financial investments inhigh-potential districts, priority may begiven to the commercial routes.Government resources may partly bediverted to stimulate production and mar-keting in low-potential areas as well.

5. There seems to be a large gap in the imple-mentation of regulatory and monitoringmechanisms at the grassroot level.Provision of licenses, handholding to con-form to the legal standards for milk, period-ical checking of milk quality, grievance han-dling mechanisms, etc. seem to be lacking.It is important to address these issues,keeping in mind the flexibility, thestrengths, the market access and the liveli-hood opportunities that TMS provides forthe communities and habitations whichremain un-reached by the OMS. The Govt.

may promote an enbling regulatory envi-ronment for TMS.

6. Providing some minimum infrastructuralsupport in terms of processing, preserva-tion and transport of milk especially aimedat improving the quality, economy of scaleand efficiency of operations would enablevendors to adhere to the minimum qualitystandards for milk and enhance the returnsto the milk producers.

7. Adequate impetus needs to be provided forbuilding 'consumer awareness' and creat-ing platforms of consumers and traditionalmilk operators to dialogue for improvementin quality, price etc. Govt. support for train-ing and capacity building of vendors needto be extended side by side with regulation.

8. Promotion of appropriate stakeholderbased organizations (Vendor Associations,Producer Associations, ConsumerPlatforms etc) and facilitation of dialogueprocesses among them are of considerableimportance in improving TMS.

9. The Livestock Service Delivery Systemsunder the government and other agenciesneed to be reviewed from the angle of stim-ulating production in the areas uncoveredby the organised sector. The servicesshould also aim at improving the quality andproductivity of the animals, thereby the via-bility of the small-holder milk productionsystem.

10.Fixing minimum productivity norms for theanimals to be distributed under theantipoverty programmes, providing effec-tive market linkages, ensuring continuouscash flow at the producer level through aseries of credit options (rather than stop-ping at single credit) etc. would help thefarmers enormously.

11. Introduction of quality-based pricing sys-tem under TMS is bound to improve thereturns to the producers and the options tothe consumers.

12.There are a number of perceptions regard-ing TMS, many of which are ill-founded.The government could facilitate a processof awareness building through variousstakeholders, by which the right picturecould be presented to producers, con-sumers, market agents and the public atlarge about TMS.

Suggested changes in approaches and policies

Box VII


31


1

2

3

4

Annexure I - Summary of the Findings and the Actions Identified/ Initiated

1. On a number ofactions as listed,Dept. of AH, Dept.of DairyDevelopmentAPDDCF, theVelugu programmeetc. have helped alot in fulfilling theneeds of the pro-ducers.

2. The central and thestate govts mayconsider workingwith, supportingand training andextending basicinfrastructural sup-port to TMS wher-ever it demon-strates its will toconform to the qual-ity and food safetyregulations.

3. The criteria forselection of districtsand deployment ofdevelopment fundsfor dairy pro-grammes may bereviewed to set abalance betweencommercial routesfor developed areasand developmentfunds for low pro-ductive areas.

4. The state govtsshould extend sup-port and financesfor building up mini-mum infrastructurefor weighment,bulking, preserva-tion, storage andquality tests of milk.

5. HID support forinstitution building,quality, food safetyaspects and use ofinfrastructure.

6. Mobilise govt sup-port for quality reg-ulation and aware-ness building bydesignated authori-

Actions already taken up i. Creation of an informal plat-

form in each habitation forbringing up dairy/ vendor relat-ed issues and resolving pro-duction linked problems.

ii. Some of the issues resolvedinclude supply of Travis, breed-ing bulls, fodder seeds, organi-sation of Vet. camps, training inclean milk production, sharingof quality and price issues withvendors.

iii. Training of a batch of vendorsby NDRI in hygiene, sanitation,quality standards, milk testingetc. based on a course contentmutually agreed with the ARteam.

Actions identified1. Strengthen/ organise associ-

ation of vendors through SelfHelp Organisation. Supportin strengthening and institu-tion building.

2.1. Train and build the capacityof vendors at the local levelon milk composition, testing,preservation, PFA standards,hygiene, sanitation.

2.2. Handhold vendors and theirassociations in how toadhere to the PFA stan-dards.

2.3. Vendors need further train-ing to improve their econo-my of scale and efficiency ofoperations.

2.4. Training of vendors to takeup quality-based transparentpricing.

2.5. Local facilitators and con-cerned govt staff /serviceproviders to train vendors ininput coordination.

2.6. Vendors need special coor-dination and facilitation skillsto be an effective inter-phase between livestockservice providers and pro-ducers.

3. Vendor associations need toenforce adherence to thePFA standards for milk by allits members This would also

Sl. Findings Actions identified/ Support from No. Initiated Govt & others

Contribution of Traditional Milk Sector (TMS)i. TMS has enormous size, spread, reach and

impact potential. In Khammam, an estimat-ed 1,700 vendors operate. They account forabout 61% of the milk produced in the dis-trict.

ii. 99% of households (HH) in Satupalli, 89%in Khammam and 43% in Vijayawada pur-chase milk from TMS, accounting for 98%,88% and 42 % of the marketshare respec-tively. The segment is likely to stay for along time to come.

Scale of Operationsi. Most vendors operate at small scale - 45%

operates at less than 20 lpd and a quarteroperates at more than 50 lpd.

ii. The operational cycle takes about 6 hoursof vendor time each day.

iii. Each vendor balances the supplies at one'slevel- 'procures only what one can sell andsells only what one can procure'.

Quality of Milki. Adulteration at producer's level is close to

nil. 67% of vendor supplies in Khammam,88% in Satupalli and 55 % in Vijayawadawere found water mixed. A negative correla-tion exists between price and dilution withexceptions.

ii. No chemicals or thickeners were detectedduring flush season. About 50% of vendorsamples carried neutralisers during lean sea-son.

iii. In some cases, a part of the evening milkgets mixed with morning milk with outpreservation.

iv. Consumer awareness on SNF and bacterialcontent is limited. Thickness and other infor-mal assessment methods dominate qualityassessment.

v. Poor hygiene and handling practises at ven-dor level. The Methylene Blue ReductionTest time is very short showing high bacteri-al load.

vi. Legal standards of raw milk may require areview and modification (9% SNF & 0.5 %fat in processed skimmed milk falls withinstandards, whereas 8.4% SNF & 7% fat inraw unprocessed milk does not).

Price i. Price paid by TMS is generally lower than

that by other channels. Even where manyvendors operate, a sort of price cartel is inposition and the price remains the same,irrespective of quality.

ii. The level of consumer rupee reaching the


32


Annexure I (Contd.) - Summary of the Findings and the Actions Identified/ Initiated

improve the price spread.4. Facilitate establishment of

Producer and ConsumerAssociations/ link groups tointer-phase production, qual-ity, price service negotia-tions.

5. Facilitate producer and con-sumer education and capaci-ty building in milk quality andfood safety parameters.

6. Work closely with vendorsand producers associationsto come together and dis-cuss issues to be facilitated.

7. Build capacity and training oflocal facilitators to effectivelywork with vendor, producerand consumer associations.

8. Facilitate establishment ofminimum infrastructure forweighing, bulking, preserva-tion, storage, quality testsetc. at the level of vendor/stakeholder associations.

9. Build the capacity of theactors. Facilitate public qual-ity testing facilities.

10. Share the findings of the ARwith the vendors, producersand the consumers associa-tions.

11. Presentation of findings togovt officials of DoAH,APDDCF, district officials,others with policy outreach.

12. Wider dissemination of find-ings to be arranged (withoutdamaging the country'sinterest) through circulationof this report, e-conferences,workshops etc.

13. Work with the policy makers,planners and concernedgovt officials to accept andsupport TMS whereever itdemonstrates its determina-tion to conform to the qualityfood safety standards formilk.

Sl. Findings Actions identified/ Support from No. Initiated Govt & others

5

6

7

8

ty. Also, hand-holdto conform to PFAstandards.

7. Support in producerand consumer edu-cation and aware-ness building.Existing govt andpublic institutions toextend support intraining. Govtextension staff tosupport this.

8. Govt AH depart-ments to extendtraining, extensionand inputs deliverywith special focuson public goodservices.

9. Legal standards ofmilk may require areview. e.g. 9%SNF & 0.5 % fat;(total solids 9.5%)falls within qualitystandards when it isprocessed milk,where as 8.4% SNF& 7% fat (totalsolids 15.4%) is notin TMS in Khammam.

10.Design support forappropriate milkcontainers especial-ly for TMS.

11.Effective coordina-tion of the activitiesof the concernedgovt departmentslike AH, Health,Rural Development,Forests etc. at thedistrict, mandal andvillage level.

producers is low at 51-59%.iii. There are many non price incentives which

the producers/ consumers value. iv. Quality based pricing is not practised by

vendors at producer level.v. A correlation (though moderate) exists

between the price paid by consumers andthe total solids level of milk

vi. There are no strong producer organisationsto negotiate the price

Institutional structurei. Building strong vendor organisations/ asso-

ciations is important to begin improvementsin TMS.

ii. Organisational development to be taken upto facilitate training, infrastructure building,self regulation of quality standards & effi-ciency.

iii. Building producer associations and con-sumer platforms are important to improvethe terms of trade, transactions and qualityand to act as pressure groups.

Producer / consumer perceptions i. Both producers and consumers value the

vendor's services including non price incen-tives. In spite of high frequency of watermixing, 60% - 74% of consumers perceiveTMS milk to be thick, creamy and tasty.

ii. The satisfaction levels of both producersand consumers remain high.

Capacity Building/ Trainingi. Vendors lack awareness on milk quality

parameters, economy of scale, financial opera-tions and marketing and facilitation skills.

ii. As a result of awareness building, the ven-dors underwent training at NDRI in testingprocedures, food quality standards, storage& preservation, hygiene & sanitation etc.They even met part of the training costs.

iii. The producer - vendors are more eagerthan only vendors to learn and improvetheir operations.

iv. Producers and consumers are generallyunaware of milk quality parameters, termsof trade and related aspects.

Productivity Enhancementi. Productivity levels of animals are low at

1.77-2.38 lpd. ii. Livestock service delivery is weak or absent. iii. Vendors expressed willingness to facilitate

and inter-phase with service providers in preventive vaccinations, de-worming,doorstep breeding services, supplementaryfeeding, extension etc


The Swiss Agency for Development andCooperation (SDC) is the developmentarm of the Federal Ministry of Foreign

Affairs of the Government of Switzerlandengaged in international development cooper-ation. SDC works in India with a focus onpoverty reduction in the semi-arid rural regionsof the country.

Starting in 1963 with a technical collaborationin milk production, SDC's partnership withIndia's development agenda is spread over adiverse set of engagements covering naturalresource management, rural finance and livelihoods, decentralisation, empowerment ofthe discriminated, environment and pollution,humanitarian assistance as well as human andinstitutional development. SDC partnersinclude civil society organisations, Governmentdepartments, public sector entities, researchbodies, advocacy groups, professional associ-ations and other development agencies.

SDC India's goal is to support processes thatrender sustainable and equitable rural devel-opment in India. These processes are peopleinitiated, people owned and people controlled.

Swiss Agency for Development andCooperation (SDC)Chandragupta Marg,Chankyapuri, New Delhi -110 021Tel: + (91) 11 - 2687 7819 / 20Fax: + (91) 11- 2687 3631Email: [email protected] site: www.sdcindia.in

Capitalisation of Livestock Programme Experiences India

CALPI is a programme of SDC implemented by IC. It's objective is to capitalize on SDC-IC's richexperiences to significantly inspire changes in the economic, administrative, legal and policy frameconditions in the livestock sector in such a way that the priorities and challenges of the rural liveli-hood systems are effectively addressed and the rural poor, particularly women benefit from theemerging opportunities. The Action Research to improve the traditional milk sector is one amongthe seventeen activity lines supported by CALPI in the livestock- livelihood-environment domains.

CALPI, B - 34, Sarvodaya Enclave, New Delhi - 110 017,Tel: +(91) 11 2686 8536, Fax: 2656 7738, E mail: [email protected]

Intercooperation is a leading Swiss non-profit organisation engaged in developmentand international cooperation. It is regis-

tered in Switzerland as a foundation and isgoverned by 21 organisations representingthe development community, civil society andthe private sector. IC is a resource and knowl-edge organisation with 550 professionalsworking in 22 countries including India,Pakistan, Bangladesh and Nepal. IC workswith a number of agencies like SDC, WorldBank, IFAD, GtZ, SECO, EU, ITTO etc.

IC's early experience in India (started in 1982)was focused on providing technical expertiseto livestock and dairy programmes of SDCthrough a series of bilateral projects with thestate governments in Kerala, Rajasthan,Andhra Pradesh, Orissa and Sikkim. In 2006,IC was registered in India as an independentorganisation. It now works with governments,technical and research organisations, NGOsand Community Based Organisations. IC'sworking domains in India comprise Livestock,livelihoods and environment, Vulnerability andadaptation to climate change and Local governance & civil society.

Intercooperation in India (IC)8-2-351/r/8, Road No.-3Banjara Hills, Hyderabad - 500 034Tel: + (91) 40 - 2335-5891 / 2Fax:+ (91) 40 - 23356275 Email: [email protected] site: www.intercooperation.org.in


CALPI PROGRAMME SERIES 2

In this Action Research, the TraditionalMilk Sector (TMS) refers to channelsserved by either producers or vendors,

serving unprocessed, unbranded milk inloose form or in plastic bottles or pouches inflexible quantities and prices. The sectoraccounts for an estimated 1,340 lakh litre ofmilk per day, constituting 77 per cent of thetotal milk marketed (2005-'06) in India. Itprovides the major market access for milk toan estimated 450,000 low productive villagesand some 46 million producer households(70 per cent each of the total villages andproducing households) in the country. Anestimated 110 million milk purchasing house-holds (77 per cent of the total) and a few mil-lion market agents/vendors are daily contrib-utors to this segment in India.

This document provides a short summaryof an Action Research (AR) conducted inselected habitations and diverse markets ofKhammam and Vijayawada districts ofAndhra Pradesh. It covers the whole spec-trum of activities ranging from production toconsumption. The document encapsulatesa summary of the findings, the actions iden-tified and taken up, the lessons learnt, poli-cy implications and finally, the way forward.

The aim of this publication is to focus theattention of policy makers, planners,researchers, academia and developmentagencies on this neglected market segmentwhich has vast spread, reach, coverageand impact potential.

In the context of the widening imbalancesin income and growth across regions andsections of society, the Government ofIndia is orchestrating a shift in its develop-ment strategy to ensure a "socially inclu-sive and regionally balanced economicgrowth". In this respect, the actionresearch and its recommendations are wellaligned to the government's vision for cre-ating a 'caring India'.


Towards Accelerated Growth in Dairying

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