03 chandel small_ruminant_milk_india

Policy Interventions for mainstreaming of Small Milk Producers in Contemporary

Production System – a Value Chain Analysis of Indian Dairy Sector

B.S.Chandel and Rishikanta Singh

National Dairy Research Institute, Karnal (Haryana)-132 001 India

Presentation layout Introduction

Smallholder milk production system and value chain

Dairy Value chain analysis

Critical issues in the value chain

Conclusions & Policy interventions

Introduction Smallholder milk producers dominate the milk

production in developing countries

In India, small and marginal farmers contribute (68 per cent)

Milk production by these households address vital

issues of their livelihood, nutrition and employment

The paper looks at mainstreaming of small milk producers

• Addressing the issue of livelihood & poverty• Augmenting the milk production at competitiveness

Smallholder Milk Production System & Dairy Value Chain

Typical integrated production • Crop residues-surplus family labor- household activities• Convert waste into high value products• Comparative advantage to produce at lesser cost

Marketed surplus • Individual household (50%)• Aggregated (70%)

Marketed mainly through unorganized sector• Milk vendors (58%)

Figure 1: Dairy Value Chains of Small Milk Producers

Figures in parenthesis indicates percentage of the total marketed surplusDCS: Dairy cooperative Societies; SMPMUs: Small Milk Product Manufacturing Units

Consumer (5%)

Small milk Producer

Milk Vendor (58%)

Contractual /contractor (3%)DCS (9%)

Cooperative union/federation

Private Processing Plants

Wholesaler

Retailer/ Retail outletsRetailer

Creameries/ sweet shops (20%)

SMPMUs (5%)

Dairy Value Chain Analysis The analysis helps policy maker to

• Identify exogenous variables to stimulate the desired changes,

• Determine competitiveness and power exercised by different players and

• Understand the complexity of inter-linkages in the value chain.

Approach• Institute of Development Studies at

University of Sussex, Kaplinsky and Morris (2001), Schmitz (2005)

Dairy Value Chain Analysis- Continue

Dairy value chain was analyzed for its• Structure, competitiveness, integration,

actors, governance and policy questions

Simple tabular analysis and total factor productivity were used to supplement the argument in the results

Competitiveness of Smallholder Milk Production System

Average milch animals/household or farm (No.)

Average Productivity (L/animal/day)

Cost of maintenance (Rs/animal/day)

Cost of milk production (Rs/L)

Total Factor Productivity (TFP)

Karnal, Haryana: Subsistence farming (for milch buffalo)

2.27 6.800 186.86 27.07 0.0364

4.90 6.460 178.31 27.16 0.0362

8.29 5.73 168.85 28.77 0.0339

Jabalpur, Madhya Pradesh: for commercial dairy farms (90% buffaloes) 70 6.025 207.20 34.39 0.0266

238 6.200 204.04 32.91 0.0282

598 5.700 178.75 31.36 0.0288Sources: Compiled from Singh (2013) and Sharma (2013).

Veterinary Services Animal Health Service Providers

• Public animal health department, cooperative unions and private veterinarians.

Service Delivery System (Ahuja 1999)• Cooperative and private services- 80% at doorstep• Government units was less than 20 per cent

Smallholder milk producers’ dependence-High

Expansion of veterinary health facilities required- 35-60%. • From 7000 milch animals to 1000-1500 milch animals per

veterinary institute

Distribution of Crossbred technology

Herd size categories

Average milch animals/ household (No.)

Average crossbred milch animal/ household (No.)

Proportion of households (%)

Proportion of crossbred milch animls (%)

Small 2.27 (100.00)

0.84 (37.00)

49.00 23.70

Medium 4.90 (100.00)

2.14 (43.67)

37.00 45.66

Large 8.29 (100.00)

3.79 (45.72)

14.00 30.63

Source: Compiled from Singh (2013)

Choice of Marketing Channels and Price

Particulars Plains Hills PooledAverage milk production/household/day

8.4 4.5 6.3

Milk Marketed surplus/household/day

4.8 1.5 3.1

Proportion of milk marketed through different channels (%)

Cooperatives 22.8 55.3 33.0

Direct to consumers 16.4 10.6 14.9Open market (inclusive of milk vendors)

60.7 34.1 53.7

Average price (Rs/L) received from different market channels

Cooperatives 14.5 14.5 14.5

Direct to consumers 17.2 14.9 16.5Open market (inclusive of milk vendors)

17.6 16.4 17.0Source: Adopted from Bardhan et al., 2012

Institutional Support for Marketing Marketing Channels

Marketing through Organized sector (12%) Marketing through Unorganized sector (88%)

Short term advantages of the unorganized sector The flexible payment schedule, even advance payment also

possible Flat rate of milk which favours the farmers producing low fat

milk like cow milk Higher milk price

Retardy growth of cooperative institutions

Lack of institutional framework for mainstreaming in private sector

Drifting of Cooperative Movement

1980-81 1990-91 2000-01 2008-09 2009-10*0

20000

40000

60000

80000

100000

120000

140000

160000

Dairy Coop. Societies (No.)

1980-81 1990-91 2000-01 2008-09 2009-10*0

50

100

150

200

250

Producer Members (No.)

Milk Procurement (KgPD)

Liquid Milk Marketing (LPD)Pe

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oo

pe

rati

ve

So

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ty

Reasons for retardy growth- Cooperative Institutions

More political representation in management

Large cooperative societies- increased operational cost

Lack of representation of milk producers in federation/union

Out of the market price fixation and government interference

Lack of diversification in product-mix

Other issues High transactions costs

Fresh milk marketing

Clean milk production

Demand specific milk production

Direct communication between the producer and consumer

Policy interventions emerging from dairy value chain analysis

Improve veterinary services especially public and up-gradate local breeds to strengthen milk production capacity of smallholders

Strengthen institutional framework to bring small holder under the ambit of organized marketing,

Modernization of informal sector to reduce transactions cost and handling losses of milk,

Encourage fresh milk marketing and clean milk production for quality and demand specific production.

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