[Indian Economy] Indian Dairy Model – Problems, Challenges, Suggestions and China Dairy Model

The Indian dairy sector, largest milk producer in the world, is now facing challenges to meet the growing gap between the demand and supply. The sub-optimal milk yield thus has been a cause of concern of late.

Based on this some experts had suggested India follow the Chinese model of Milk and Dairy products. However, before going into details, we need to have an analysis regarding both the Chinese model and its Chinese counterpart.

The Chinese Model:

• Grew on a different set of problems and situations.
• A milk scandal erupted in China in 2008 when the industrial chemical melamine was found in dairy products nationwide.
• Supported by township and country governments.
• Farmers are grouped into a farm model in which all the cows are milked by machine.
• A local investor/builder constructs the dairy facility, supplying all the capital. The village director settled the debt with the builder by identifying individual producers to purchase stall space within the barn.
• While the operation is run by a village committee, individuals own the stall space and assume full management of their cows, including feeding.
• Milking machines, however, are owned by the company, in the China case, the New Hope Dairy Cattle Company.
• A member of the collective supervises the milking and keeps records of the amount of milk produced by each cow.
• A local company collects the milk. Best example is provided by Dairy United, which is presently the biggest farm in China. This is also related to be sustained during the era of Chinese Milk Crisis, as discussed above.
• Dairy United is one of the fastest-growing and most innovative Chinese dairy producers. Unlike most corporate and cooperative dairies that purchase cows on the market, Dairy United leases dairy cows from local farmers, giving it access to its primary asset without a large up-front investment, and letting the firm grow its dairy herds with new borns. In return, farmers receive fixed payments biannually, but relinquish control rights and residual claims to the firm. Thus, Dairy United’s leasing is helping transform Chinese milk production from a backyard, labour-intensive activity to a more industrialized mode of farming.

Difficulties in the Model: One of the obvious constraints to extending this type of operation are geographical access to facilities.

The Indian Model:
In India the dairy cooperative model has been perceived to be central to the development of its dairy industry, the largest in the world and one that has been based on integrating small and marginal farmers into a business environment.
However, while successful in numerous states, in particular the Amul cooperative in Gujarat, not all have flourished.
In many other areas of India, the cooperative movement has been less successful in empowering farmers and transforming dairying into a means of development for rural people.

Thus the cause of concern for the Dairy industry in India is as follows:

• High cost of production and low productivity of animals
• Lack of Production; processing and marketing infrastructure
• Import of value-added products and export of lower value products
• Poor financing of small co-operatives
• Competition with the Private sector
• Delayed payments and dividends among other issues

In this situation, replicating the Chinese model in the India scenario has manifold cultural, socio-economic constraints. There lies the critical need of democratically selected model and in aprticular the need to avoid state managements. Unlike China, India does not have an equally strict regulatory authority in this sector, which can watch over the stability of prices and provision of regular salary to the farmers who will be leasing their cows.

What India needs to:
1. Expansion of co-operatives as they form the base of our dairy industry
2. Financing self-help groups to take up dairying
3. Also employing more female workers into the industry
4. Meeting the demand for fodder whose cost is raising
5. Focus on buffalo milk based specialty
6. Increasing the process of milk which is negligible right now.
7. Focus on better health services to the cows,
8. Adequate credit to the dairy farmers at easier terms, so that they can maintain more cows and giving education to dairy farmers to provide healthier food to cows, so as to increase their yield.

Also, comprehensive strategy for producing quality and safe dairy products should be formulated with suitable legal backup.

The 12th FYP also focuses on the dairy sector and there is a need to boost this sector through a “specific approach” rather than replicating the Chinese model.