Contemporary Crisis in India’s Dairy Sector

The brief cites data from the National Statistical Office on year-on-year percentage change of gross value added (GVA) for crops and livestock, In 2014-15, the livestock sector registered a 7.4 per cent growth against the previous year. In the same year, crops had registered a negative growth of -3.7 per cent. The data thus shows that people rely on livestock when agriculture is experiencing losses.

India’s dairy sector accounts for 23 per cent of the world’s total milk production but the herd sizes of most producers are tiny, made up of just one or two milch cattle.

Despite being an integral part of the rural economy which supports a vast number of farmers, India’s dairy sector does not receive adequate institutional attention in the form of policy regulations and support. Unlike like the agriculture sector, it also lacks services of a government body like the Commission for Cost and Prices (CACP) to regulate prices or estimate costs of production, the brief adds.

The year-on-year production of milk increased in the period between 2013 and 2020, but the prices received by dairy farmers reduced. This was further aggravated by the covid-19 pandemic.

Discussing the impact of domestic policies on the dairy sector, the brief examines how the ban on cow-slaughter has complicated the management of old cattle by increasing the economic responsibility and burden of farmers. This has led to a fall in average milk production due to the lower rate of replaceability of milch cattle.

There was an overall decline of 5.6 per cent across India in the procurement price of milk because of the covid-19 pandemic, worsening the crisis in the dairy sector. As the demand for milk fell across the informal sector which still dominates milk procurement, average prices of milk also fell in various states. The gap was then partially filled by cooperative societies.

Fodder and feed costs consistently make up the largest share of overall dairy production costs for rural households and they’re heavily dependent on international prices, the brief notes. The availability of importable feed stocks and supply of maize have decreased since the Russia-Ukraine war. The resultant increase in domestic feed costs has led to decrease in livestock nutrition as rural households without access to land and free fodder cannot afford buying as much commercial feed as before. The situation is aggravated by the decline in area available under commons for grazing.

The brief notes the Lumpy Skin Disease epidemic in cattle as another element contributing to the dairy crisis. The epidemic, which started in May-June 2022 in India, infected more than 29.45 lakh cattle, killing 1.55 lakh of them. In cases where the infected cattle survived, the disease left an impact on the milk yield and caused major losses in milk production.

Cooperative societies have proven extremely crucial to the stability of the country’s dairy sector and to dairy farmers, especially marginal ones. A sample survey conducted among 6,000 households under the National Dairy Plan I across Gujarat, Punjab, Karnataka and Bihar revealed that Dairy Cooperative Society members had lower production costs and received higher incomes on an average than non-members.

Despite this, the Economic Survey of India 2018-19 found that only 20 per cent of all milk sold by producers was procured by cooperatives and private dairies. As much as 32 per cent was sold in the unorganised market and 48 per cent was consumed locally.

The brief outlines some reasons to explains why producers might choose to sell to private dairies and informal markets over cooperatives. Dairy cooperatives are stringent about the SNF value of milk, the brief notes and refuse to procure milk with even a slight variation in the required SNF value. SNF value stands for the ‘Solid Not Fat’ value which indicates the substances in milk apart from water and fat. Another reason is that the payment mode followed by most cooperatives is longer than the daily payments made by informal and private procurement channels.

Focus and Factoids by Karen Chhaya.