Thesis

A COMPARATIVE ANALYSIS ON THE VENDOR, CO-OPERATIVE AND INTEGRATED SYSTEMS ON DAIRY FARMERS

Thesis submitted in part fulfilment of the requirements for the Degree of

MASTER OF VETERINARY SCIENCEin

ANIMAL HUSBANDRY EXTENSIONto the

TAMIL NADU VETERINARY AND ANIMAL SCIENCES UNIVERSITY, CHENNAI - 600 051.

by

D.THIRUNAVUKKARASU, B.V.Sc., & A.H.I.D. No. MVM 00012 (AHE)

DEPARTMENT OF EXTENSIONMADRAS VETERINARY COLLEGE TAMIL NADU VETERINARY AND ANIMAL SCIENCES UNIVERSITY CHENNAI - 600 007 2002

A COMPARATIVE ANALYSIS ON THE VENDOR, CO-OPERATIVE AND INTEGRATED SYSTEMS ON DAIRY FARMERS

D.THIRUNAVUKKARASU, B.V.Sc & A.HI.D.No.MVM 00012 (AHE)

DEPARTMENT OF EXTENSIONMADRAS VETERINARY COLLEGE TAMIL NADU VETERINARY AND ANIMAL SCIENCES UNIVERSITY CHENNAI - 600 007

2002

CERTIFICATEThis is to certify that the thesis entitled COMPARATIVE ANALYSIS ON VENDOR, CO-OPERATIVE AND INTEGRATED SYSTEMS ON DAIRY FARMERS submitted in part fulfilment of the requirements for the degree of MASTER OF VETERINARY SCIENCE in ANIMAL HUSBANDRY EXTENSION, to the Tamil Nadu Veterinary and Animal Sciences University, Chennai, is a record of bonafide research work carried out by Thiru.D.THIRUNAVUKKARASU, under my supervision and guidance and that no part of this thesis has been submitted for the award of any other degree, diploma, fellowship or other similar titles or prizes and that the work has not been published in part or full in any scientific or popular journal or magazine.

Place : Chennai Date : (N.K.SUDEEPKUMAR) Chairman

APPROVED BYCHAIRMAN MEMBERS : :

: (N.K. SUDEEPKUMAR)

(R.KRISHNARAJ)

(S.ARUNACHALAM)

Date :

EXTERNAL EXAMINER

CURRICULUM VITAE

Name of the candidate

:

D.THIRUNAVUKKARASU, B.V.Sc & A.H

Date of birth

:

23.05.1976

Place of birth

:

Rasipuram, Tamilnadu

Major field of specialisation :

Animal Husbandry Extension

Educational Qualification

:

Obtained B.V.Sc & A.H in the year 2000 from Rajiv Gandhi College of Veterinary and Animal Sciences, Pondicherry - 605 009.

Professional experience

:

Served as part time consultant at Chezian Veterinary Clinic, Chennai- 600 041, from September 2000 to July 2002.

Marital status

:

Unmarried

Permanent address

:

Elanthamarathu Kadu, Orambu Village T.G. Palayam Post, Rasipuram Taluk, Namakkal Dist.

Publications made

:

Nil

Membership in professional societies

:

Life member in Tamil Nadu Veterinary Council.

ACKNOWLEDGEMENTI wish to record my boundless pleasure and sincere expression of my heartfelt thanks to the CHAIRMAN of the Advisory Committee, Dr.N.K.Sudeepkumar,Ph.D., Assistant Professor, Department of Extension, Madras Veterinary College, Chennai, for his tireless efforts, laudable counselling, valuable guidance and untiring attention rendered during the entire course of the study.

Equally I express my indebtedness to the members of my Advisory Committee, Dr.R.Krishnaraj, Ph.D., Professor and Head of Department of Extension, and Dr.P.Arunachalam, Ph.D., Associate Professor of Livestock Production and Management, Madras Veterinary College, Chennai for their guidance at every stage of the investigation and enrich it with suggestions and critical comments.

I am much thankful to Dr.S.V.N. Rao, Ph.D., Professor and Head Department of Animal Husbandry Extension, RAGACOVAS, Pondicherry for his valuable practical suggestions and help rendered at the appropriate time.

I am indebted to Dr.N..Akila Assistant Professor, Department of Extension, Madras Veterinary College and Dr.K.Natchimuthu, Assistant Professor, RAGACOVAS for facilitating secondary data collection and giving me the valuable suggestions.

I wish to add my special thanks to Mr.S. Ayyavu, Commissioner of Namagiripet block, Mr.S.Kandasamy, Block Development Officer, Mr.K. Ramaswamy, Chairman and Mr.P.Subramani, Vice Chairman of Namagiripet Block, Mr.C.Pathmanaban, of Block Development Office employee and officials of Registrar office of dairy co-operatives, Namakkal for their valuable assistance in secondary data collection.

I also express my gratitude to Mr. N. Jothilingam, President and Mr.N.Raja employee of Mangalapuram Grama Panchayat for providing the secondary data on the Panchayat.

My special thanks are due to, Mr. S. Palaniyappan, Ex.President MPCS, K.K.Patty, Mr.S.Subramani, Mr.C. Annamalai, Mr.S.Kasi, Mr.R.Murugan and Mr.M. Egambaram, secretaries of various MPCS in the study area. Also I place in record my sincere thanks to Mr.P. Murugan, Mr.G. Rangasamy and Mr.K. Raja secretaries of Hatsun collection centres and Mr.K. Periyasamy, Member of Hatsun, all

of whom facilitated me for data collection. Sincere thanks are due to Dr.A. Serma Saravana Pandian, Research Associate, Department of Animal Husbandry Economics, MVC who assisted me in the analysing of the data.

I wish to add special thanks to Dr. T.Thirumavalavan and Dr.P.Thilakar for their valuable help and assistance throughout the course of the study.

I am thankful to Dr.N.Anbuchezian, Chezian Veterinary Clinic and Dr.G.Guruprabakar, Dr.V.Prabakar, Dr.R.Parimala, Dr.K.Saravanakumar, and Dr.D.Muruganatham, my friends and well wishers for their valuable help, encouragement and monitory support rendered throughout the period of my study.

I wish to thank the employees of Students Xerox, Purasawalkkam for the neat and excellent execution of typing of the thesis.

My thanks are also due to Mrs. and Mr.A.Ganesan my Uncle and Aunt and also my grandparents Mrs. and Mr.S.Arumugam for their encouragement and material support provided during the period of this study.

Last but not the least emotions bound me to express my heartiest thanks to my Parents Mrs. and Mr.R.Duraisamy and my brother Mr.D.Prasad as for their duty forbearance and encouragement throughout my career.

(D.THIRUNAVUKKARASU)

ABSTRACTA COMPARATIVE ANALYSIS ON THE VENDOR, CO-OPERATIVE AND INTEGRATED SYSTEMS ON DAIRY FARMERS Name and degree Degree for which submitted Name of the Chairman : : : D.THIRUNAVUKKARASU, B.V.Sc & A.H M.V.Sc., in Animal Husbandry Extension Dr.N.K.Sudeepkumar, Ph.D., Assistant Professor, Department of Extension, Madras Veterinary College, Chennai - 600 007. 2002 Tamil Nadu Veterinary and Animal Sciences University, Chennai - 600 051.

Year University

: :

With implementation of new economic policy namely liberalisation, privatisation and globlisation under the guidelines of the World Bank the conventional/middleman/ vendor system and Anand pattern dairy co-operatives in Tamil Nadu started to face hectic competition from the organised private dairies at the level of procurement of milk among dairy farmers. Organised private dairies procured milk on contract agreement with dairy farmers. They coordinated various activities ranging from providing input supply upto the marketing as an integrated system. While vendor system continues to exist from time immemorial, the co-operative also exists providing certain benefits to its members. The existence of the three systems necessitated to understand the nature of its members, benefits, level of satisfaction and disadvantages of these procurement systems. This study was thus taken up, keeping in view the above facts. Namakkal district which falls under the Salem-Namakkal milk producers union was selected since it is procuring the highest quantity of milk in the State and it has the three systems of procurement in operation. Of the 15 blocks in Namakkal district Namagiripet block was selected based on the highest milk procurement by cooperatives. Among the 18 Village Panchayats of Namagiripet block Mangalapuram village panchayat was selected which had relatively better distribution of the three procurement systems. 50 dairy farmers in each of the procurement systems were selected randomly to make the total sample size of 150. The design for the study was ex-post facto. The profile of the dairy farmers, benefits, level of satisfaction and disadvantages

of the three milk procurement systems were assessed by personally interviewing the dairy farmers of the three systems. The data so collected were analysed and interpreted. Majority (57.33 per cent) of dairy farmers had made a shift from one procurement system to another. The major change over was shift from vendor to integrated (39.53 per cent) and also to co-operative system(24.42 per cent). This was due to irregularity in payment for milk in the vendor system. The shift of dairy farmers from co-operative to integrated system was also remarkable. The prime reasons as perceived by dairy farmers for the above shift were irregularity of payment and distant location of collection centres. The members of co-operative and integrated system had better land holding, herd size, dairy income, credit behaviour, investment, extension agency contact and economic motivation than the members of vendor system. Between the members of integrated and co-operative system the members of integrated system had better land holdings, herd size and extension agency contact, while co-operative members had better investment, dairy income and credit behaviour. Considering all the three systems members of integrated system had better educational status. Similarly members of cooperative system had better mass media exposure. In case of dairy farming experience the members of vendor and integrated system had higher experience in dairying. There is no marked difference on the level of aspiration among the members of three systems and majority (94.67 per cent) of the dairy farmers had dairying as a subsidiary occupation in the three procurement systems. The results exhibited highly significant difference in case of dairy income, credit behaviour and extension agency contact among the members of vendor and cooperative. Similarly highly significant difference in case of dairy income and extension agency contact among the members of vendor and integrated system exists. The economic motivation showed a highly significant difference between members of cooperative and integrated system.

All (100 per cent) the respondents of the vendor system considered milking and collection of milk at farm as benefits. In case of co-operative system, artificial insemination and treatment of animals were considered as benefits by majority while in integrated system treatment of animals, artificial insemination,supply of feed and regular payment were considered as benefits. Credibility of the system, low risk, stable income, mutual welfare gains, location of collection centre and credit repayment facilities were considered as the reasons for satisfaction by majority members of the three procurement systems. Provision of milk for home needs in dry seasons for its members, existing payment pattern for the milk poured and quantity of milk procured was stated as the reason for satisfaction by majority of members in vendor system. In case of co-operative system non-compulsion on accepting service / product, milk for home consumption during needs, quality of veterinary services, quality feeds and less cost of inputs were stated as reasons for satisfaction by majority of members. While in case of integrated system the existing payment pattern for the milk poured, non-compulsion on acceptance of service / product, quality veterinary services and satisfactory measurements of SNF and fat were the reasons for satisfaction. Majority members of the three procurement systems considered price paid for milk as disadvantage. This was 100 per cent in case of vendor system. The majority members of vendor system considered non-provision of cash advances as disadvantages of the system. In case of co-operative system majority considered non-provision of cash advances, bonus, restriction on quantity of milk procured, existing payment pattern, non satisfactory measurement of SNF and fat as disadvantages. But in case of integrated system majority considered non-provision of cash advances, restriction on quantity of milk procured, cost of inputs and the non-availability of milk for home consumption as disadvantages of the system.

CONTENTS

Chapter No. LIST OF TABLES LIST OF FIGURES I. INTRODUCTION 1.1. 1.2. 1.3. 1.4. 1.5. 1.6. 1.7. II.

Title

Page No.

1-8 2-3 3-4 5-7 7 7 8 8 9-19 9-15 15-17 17-18 18-19 20-33 20-22 23 23 23 24-33 33 33 34-62

Pre-independent era of milk procurement Post-independence era of milk procurement Present situation of dairy sector Objectives of the study Scope of the study Limitations of the study Organisation of the thesis

REVIEW OF LITERATURE 2.1. 2.2. 2.3. 2.4. Socio-economic characteristics of dairy farmers Socio-psychological characteristics of dairy farmers Constraint / disadvantages in the three procurement systems Satisfaction of the dairy farmers in the three procurement system

III.

RESEARCH METHODOLOGY 3.1. 3.2. 3.3. 3.4. 3.5. 3.6. 3.7. Locale of research Selection of respondents Design of study Selection of variables for the study Operationalisation of variables and their measurements Method of data collection Statistical techniques used

IV.

RESULTS AND DISCUSSION

Chapter No. 4.1.

Title Genesis development and functioning of vendor, co-operative and integrated milk procurement systems Change over of the procurement system among the respondents Profile of milk producers in the three procurement systems Benefits obtained by the diary farmers in three systems The satisfaction/disadvantages as perceived by the dairy farmers in the three systems Strategy for the respondents

Page No. 34-37

4.2.

37-41

4.3. 4.4. 4.5. 4.6. V.

41-54 54-57 57-61 61-62 63-70 64-69 69-70 70 71-73

SUMMARY AND CONCLUSIONS 5.1. 5.2. 5.3. Salient findings Implications of the study Future area of research

REFERENCES

LIST OF FIGURES

Figure No. 1.1. to 1.3. 1.4. to 1.6. 3.1. 4.1. to 4.3. 4.4. 4.5. 4.6.

Title

Between Pages 5-6

Picture showing collection of milk and marketing by un-organised dairy sector - vendor system

Picture showing milk collection and testing by organised dairy sector - cooperative and integrated ystem Map showing the study area Picture showing milk market, details on gate fees for market and the consumers

5-6

20-21 35-36

Mode of operation of Traditional marketing system Mode of operation of vendor system Mode of operation of Salem - Namakkal District co-operative union Mode of operation of integrated system (Hatsun Agro Limited) Picture showing milking and collection of milk at farm by vendor

35-36 35-36 36-37

4.7.

37-38

4.8. to 4.9.

57-58

LIST OF TABLES

Table No. 3.1. 4.1.

Title

Page No. 25 37

Variables and their measurements Distribution of respondents based on shift from one system to other systems Distribution of dairy farmers, shifted from one system of procurement to other system Reasons for shifting to vendor system from other systems Reasons for shifting to co-operative system from vendor system Reasons for shifting to integrated system from other systems Frequency distribution of dairy farmers according to their educational status Frequency distribution of dairy farmers according to their occupational status Frequency distribution of dairy farmers according to their level of dairy farming experience Frequency distribution of dairy farmers according to their level of land holdings

4.2.

38

4.3. 4.4. 4.5. 4.6.

39 40 41 42

4.7.

43

4.8.

44

4.9.

44

4.10. Frequency distribution of dairy farmers according to their level of herd size 4.11. Frequency distribution of dairy farmers according to their level of dairy income 4.12. Frequency distribution of dairy farmers according to their level of credit behavior

45

46

47

Table No.

Title

Page No. 48

4.13. Frequency distribution of dairy farmers according to their level of investment on dairy husbandry 4.14. Frequency distribution of dairy farmers according to their level of extension agency contact 4.15. Frequency distribution of dairy farmers according to their level of mass media exposure 4.16. Frequency distribution of dairy farmers according to their level of economic motivation 4.17. Frequency distribution of dairy farmers according to their level of aspiration 4.18 Comparison of profile of dairy farmers in three procurement systems based on Analysis of variance 4.19. Critical differences for the variables having significant difference. 4.20. Distribution of respondents availing input services under the three procurement systems 4.21. Distribution of respondents as per their perceived benefits in different procurement systems 4.22. Distribution of respondents as per satisfaction in different procurement systems 4.23. Distribution of respondents as per dissatisfaction in different procurement systems.

49

50

51

52

53

54 55

56

58

60

CHAPTER I INTRODUCTIONAll living creatures on this earth need food for its growth, supply of energy, maintenance, recovery from diseases and for reproduction. Apart from the above vital functions, food in case of human beings also serve to titillate the sense of taste and appetite to a remarkable degree. These requirements are met from varied sources, all of which contribute to the diet depending on nutritive value. Milk is one such source which plays an indispensable role in the nutrition of human beings. After weaning, throughout the growth phase and into the adult stage milk continues to hold its place in human diet either as fluid milk or in the form of products. In the period of sickness or convalescence when most other forms of food are unacceptable, dairy products are depended upon to provide the needed nutrition. Milk has carbohydrates and milk fat which serves as a ready source of energy. Milk protein compares very well with the standard reference protein proposed by FAO / WHO and even surpasses it to great extent (Mathur et al., 1999). On the other hand milk is a good source of minerals, particularly of calcium and phosphorous which are important in the formation of teeth and bone in an ideal ratio for optimum utilization. It also contains most of the vitamins required by the body in various quantities. So the milk and milk products become vital for human beings because of its nutritional character. This wholesome nutritious food should be ensured to all. Today, India is the largest producer of milk and its output is projected at 78 million tonnes for the year 1998. Even in this situation the per capita availability is placed at around 220 gm / day and further per capta daily intake ranges widely across the country from 20 gm in eastern region to 400 gm in northern region, indicating a tremendous gap between the availability and demand for milk (Reddy and Rao, 2000-01). Still milk continues to top all farm commodities in terms of its contribution to the national economy amounting to rupees 29,269 crores in 1990-91 which is higher than that of paddy and wheat (Kolli and Kulshreshtha, 1997). Indian agriculture is characterized by an economic symbiosis of crop and cattle production. Milk production has been the single major activity to provide supplementary employment and income. Majority of the dairy farmers are landless, small and marginal farmers. The milk before it reaches the consumers involves production, procurement, processing and marketing. Since pre-independence the production, procurement and marketing has undergone a tremendous change. The changes in the production, procurement and marketing during the course of time is very many and draws the attention of researchers for analysis.

1.1.

Pre-independance era of milk procurement

Dairy is a good old profession in India. During the early 20th century the dairy farmer has marketed milk and milk products directly to consumers in the rural and semiurban areas. The direct marketing system continues to exist in certain pockets of our country. The increasing population and industrialization in the late phases of 20th century headed towards increased consumerism and direct marketing was unable to meet their needs. This lead to the emergence of vendor system. The allocation and distribution of milk in vendor system had many defects and the quality of milk was poor and unhygienic. The milk sold to consumers was adulterated. In 1914, Government of India examined 1400 samples of milk in different cities. Most of them were adulterated with water and contaminated with dust (Ghuge and Netaji Powar, 1992).

In 1913, Bombay government passed an anti-adulteration act and milk producers were required to obtain permits from the government. These facts show that the consumers were exploited. On the other hand conventional milk traders (middleman / vendor) carried out the business by exploiting the producers by procuring milk at low prices (Ghuge and Netaji Powar, 1992). In the same year co-operatives and government entered dairy sector with the objectives of supplying milk to the consumer at reasonable prices and buying milk from the producer at fairly remunerative prices. The Bombay government milk scheme was started in 1946 for catering the demand for milk on co-operative lines. Similar trends were noticed in Tamil Nadu too. Milk co-operative societies were organized in Tamil Nadu by the State co-operative department as early as 1920 and the first co-operative dairy with processing and marketing facilities was established at Ayanavaram in Madras city in 1927 (Ramanujam and Saroja, 1990). Even though co-operative mode of operation was initiated earlier, their degree of operation was very less when compared to conventional / vendor system, until the initiation of "operation flood" in 1970. 1.2. Post-independence era of milk procurement

Co-operative milk schemes were established by the government in 1951 at Arey and 1961 at Worli. These dairies were developed and managed by the Dairy Development and Animal Husbandry Department of Maharastra government. In Tamil Nadu, Dairy Development Department was established in 1958 by government with aid from New Zealand. Under the Colombo plan, a cattle colony at Madhavaram, Chennai and a dairy processing unit with a capacity of processing 50,000 litres of milk per day was established in 1963. In 1967, a similar processing plant was established at Madurai, with the funds from UNICEF (Ramanujam and Saroja, 1990). The governments' experience in this field was not encouraging as the managements were inefficient and the amount lost increased over a period of time. So as a part of operation flood phase I the government decided to hand over milk distribution to the milk producers themselves (Ghuge and Netajii, 1992).

Under the operation flood programmes Anand pattern dairy co-operatives were established. Based on the fruits of Anand pattern, the government expanded similar societies throughout the nation. To go ahead with the above work, government established National Diary Development Board in 1965 and Indian Dairy Corporation in 1970 to implement a well known programe "operation flood". This resulted in Anand pattern dairy co-operatives all over the nation linking rural milk producers with urban milk consumers, so as to balance the milk production and marketing. This ultimately reduced the harassment of middlemen at the level of producers as well as the consumers.

The Anand pattern resulted in white revolution, ultimately placing India as the world's largest producer of milk in the global map of dairying. It has improved the overall socio-economic status of rural Indian (Dilip, 1980) and also made the milk available in urban centres regularly, with a better quality at a better price to the consumers (Jain, 1987).

In the year 1994 - 95 the Anand pattern dairy co-operatives had 69,600 Milk Producers Co-operative Societies (MPCS) with 90 lakh members procuring about 3,72,3000 tonnes of milk per year (Dairy India, 1997). Tamilnadu Co-operative Milk Producers Federation (TCMPF) had 10,554 Primary Milk Producers Co-operative Societies (MPCS) and 27.73 lakh members pouring 16.65 lakh litre per day (www.tn.gov.in). 1.3. Present situation of dairy sector

With the great success of Anand Pattern dairy co-operatives, the government of India announced new economic policies under the guidelines of the World Bank in 1991. The new economic policy namely liberalization, privatization and globlisation was implemented by the Government of India. Dairy industry is no exception to this. The essential element of the new economic policy related to dairy industry is that of procurement and production of milk and milk products which had been largely reserved to co-operatives and is now open to all (Sood, 1992-93). After the implementation of new economic policy, the Anand pattern dairy cooperatives started to face stiff competition from the private dairies at procurement to the marketing level. At the national level food giants like Nestle, Smithline, Hindustan Lever, Heritage etc., are operating at a large scale. In this sector 5500 lakh rupees of equity has been invested by private dairy companies namely Anmol Dairy Ltd., Thapar Milk Products Ltd., Vadilal Dairy International Ltd. and JK dairy Foods Ltd., in the year 1994 (Deshpande, 1994). Even with this remarkable change in the Indian dairy scenario the conventional / middle man / vendor procurement system continues to survive on its own without any support from government over decades. The traditional sector supplied 82 million litres per day (82 per cent of urban milk supply) for the year 1995, and projected to supply 110 million litres per day (78 per cent urban milk supply) for the year 2000 (Dairy India, 1997). This data on dairy sector reveals the importance of vendor system (Figure 1.1 to 1.3). While the organized sector (co-operative / government department and private sector) supplied 18 million litres per day (18 per cent urban milk supply) for the year 1995 to meet the urban demand and it was projected to supply 30 million litres per day (22 per cent of urban milk supply) in the year 2000 (Figure 1.4 to 1.6).

Many private dairies on contract agreement with dairy farmers started to operate, in the form of integrator. These integrators supply various inputs to diary farmers and the dairy farmer inturn sells his milk to the integrator. The integrator finally processes the procured milk from dairy farmers and sells it on his own to the consumers. This type of integration from production to marketing is referred to as vertical integration (Narahari., et al, 2000). The degree of integration varies from one private dairy to another. The TCMPF started facing hectic competition from the private dairies. Hatsun Agro limited at Salem, Namakkal and Kancheepuram, Kwality milk foods limited at Kancheepuram, Vijay dairy at Trichy, Nagapatinam and Kumbakonam, Winner dairy at Pondicherry and Villupuram, Akshaya dairy at Salem and Erode are the private dairies operating on contract agreement with the dairy farmers as an integrator. Other than these, many private dairies also operate with the support of vendors. Namakkal district of Tamil Nadu is unique in relation to dairy industry. It falls under Salem-Namakkal district co-operative milk producers union which is the highest procuring (2.87 lakh litres per day) District Milk Producers Union for TCMPF. The largest private dairy "Hatsun" owing to sixty per cent of private dairy market in Tamil Nadu is operating as integrator in this locality (Financial Express, 15 Feb 2002). The vendor system also operates in this area. The above situation necessitates to understand the procurement pattern among the vendor, co-operative and integrated system. Also the advantages, benefits and level of satisfaction among dairy farmers in the three procurement systems need to be analysed to understand the nature of procurement agencies and its members in a systematic manner. Most studies done earlier were on impact of dairy co-operatives. It was hence attempted to compare the impact of the three procurement systems in Namakkal district. With this in view the present pioneering research entitled "Comparative analysis on vendor, co- operative and integrated systems on dairy farmers" was proposed with the following specific objectives. 1.4. Objectives of the study The following are the specific objectives for the study. 1. 2. 3. To study the profile of the dairy farmers in all the three systems. To analyse the benefits obtained by the dairy farmers in the three systems. To ascertain the disadvantages / satisfaction as perceived by the respondents in the three systems.

4. 1.5.

To propose a strategy for the respondents. Scope of the study

The present investigation is the first of its kind in the State of Tamil Nadu. This is a pioneering effort aimed at investigating the nature of vendor, co-operative and integrated systems at the procurement level. This study will bring to lime light the social, psychological and economical characters of dairy farmers in the three procurement systems. The outcome of the study will be useful to procurement agencies in dairy sector and help the policy makers and administrators to modify the strategies if necessary and to procure milk in an efficient manner. The study would also focus various benefits of the three systems. The constraints in the existing pattern of procurement could well be understood and would help to suggest means to choose a better system. 1.6. Limitations of the study

The study suffered from the usual limitations inherent with the limitations of time, physical facilities and conveyance as any scientific investigation undertaken by a student researcher in social science. Since the study was confined to a district, generalization of the results has only limited applications.

1.7.

Organisation of the thesis The study has been divided into the following chapters.

Chapter I

:

General introduction, objectives, scope and limitations of the study are explained.

Chapter II

:

Review of the related studies are discussed.

Chapter III

:

Methodology and tools of analysis used are explained.

Chapter IV

:

Results and findings are discussed and a strategy proposed.

Chapter V

:

Summary and conclusions are presented with policy implications

Having these ideas in mind, relevant literatures related directly and indirectly to the present investigation was reviewed and presented in the succeeding chapter.

CHAPTER II REVIEW OF LITERATUREA comprehensive review of literature is a part and parcel of almost all scientific researches. It is a continuous process. Perusal of the available literature is of great importance in gaining an insight into the research problem under the study. It further helps in the interpretation of the findings. The literature pertaining to the integrated and vendor system are scanty. Literatures specific to the study of dairy integration in India was not came across by the investigator. Hence the literature that are related are reviewed and presented in the following sub heads :

2.1. 2.2. 2.3. 2.4.

Socio-economic characteristics of dairy farmers Socio-psychological characteristics of dairy farmers Constraints / disadvantages in the three procurement systems Satisfaction of the dairy farmers in the three procurement systems

2.1. 2.1.1.

Socio economic characteristics of dairy farmers Education

Chakravarthy and Reddy (1982) found that about half (46.4 per cent) of the members of Primary Milk Producers Co-operative Society (PMPCS) were illiterate. On the other hand almost the same percentage had studies in schools. A negligible number had college level of education (three per cent). About seven per cent reported that they were literate, although they did not have any formal education in Ananthapur district of Andhra Pradesh.

Gopalakrishnaiah (1984) found that among members of MPCS 50 per cent of the respondents studied upto middle school, followed by illiterates (46 per cent) and rest of them studied upto high school and college.

Rani (1990) observed that the 54.55 per cent of members of MPCS were illiterates and 45.47 per cent had education between elementary and middle school.

Subramanian (1992) observed that 86 per cent of the members of MPCS were educated upto middle school level. On the other hand 84 per cent were educated between primary and middle school level in non-MPCS village.

Rao (1992) observed that 45 per cent of the members of MPCS were illiterates followed by primary (20 per cent) school level education.

Nisha (1996) found that majority (41 per cent) of the members in dairy cooperatives were illiterates. More or less equal distribution was found in primary and high school educated category. Very few had higher secondary and collegiate education.

Rao (1997) found that 41.33 per cent milk producers of MPCS area had primary level of education, while 31.33 per cent were illiterate followed by high school level (24.67 per cent) and collegiate level of education (2.67 per cent). He also observed that 36 per cent were illiterate, followed by 34 per cent with primary level, 27 per cent with high school level and three per cent with college education in non-MPCS area.

FAO (2001) observed that educated farmers seemed to prefer growing broilers under partnership with integrator as contract farmers. Around 93.64 per cent poultry farmers were educated upto a minimum level of primary education in integrated system and in non-partnership only 86.67 per cent were educated similarly. In case of layer farming both integrator and non-partnership farmers were educated upto secondary level or collegiate level. 2.1.2. Occupation

Patel et al. (1975) reported that majority (76.67 per cent) of the members of dairy co-operatives had dairying as subsidiary occupation. Chakravarthy and Reddy (1982) revealed that the primary occupation reported by two-thirds of the members of dairy co-operatives was cultivation, followed by 13 per cent as agricultural labour and two per cent dairying. The remaining 17 per cent was involved in various occupations such as business contracts, and teaching. Rao (1992) reported that the majority (52.5 per cent) of the members of dairy co-operatives were engaged in cultivation followed by labour (34.17 per cent), caste occupation (10.83 per cent) and services (2.5 per cent). Nisha (1996) revealed that majority (81 per cent) of the members of dairy cooperatives were practicing dairying as a subsidiary occupation to agriculture and home management. Less than one fourth of the respondents (19 per cent) were practicing

dairying as their primary occupation next to home management. FAO (2001) concluded that in broiler farming nearly two-thirds (62.02 per cent) of the farmers under integrator had agriculture as primary occupation whereas 78.48 per cent had poultry as secondary occupation. Among non-partnership or independent farmers 76.67 per cent of the farmers had poultry as primary occupation while 23.33 per cent had other than poultry (agriculture and dairy) as secondary occupation. 2.1.3. Dairy farming experience

FAO (2001) study found that the broiler farmer under integrated system on an average had 6.8 years of experience in poultry whereas independent poultry farmers on an average had 11.19 years of experience. Layer farmers under integrated system on an average had 9.91 years of experience in poultry whereas independent poultry farmers on an average had 14.42 years of experience. 2.1.4. Land holding

Chakravarthy and Reddy (1982) reported that 17 per cent of the members of MPCS were landless, 29 per cent marginal, 32 per cent small and 22 per cent big farmers. Gopalakrishnaiah (1984) concluded that majority of the members in milk producers co-operative (51.12 per cent) belonged to the category of marginal farmers followed by small (28.88 per cent) and big farmers (20 per cent). Subramanian (1992) reported that 60 per cent members of MPCS were landless, 36 per cent marginal and two per cent small farmers. On the other hand 60 per cent were landless, 32 per cent marginal, and eight per cent small farmers in non MPCS area. Rao (1992) confirmed that majority (97.5 per cent) of the members of MPCS were landless agricultural labourers. Nisha (1996) observed that over one-third (39 per cent) of the members of dairy co-operatives were landless. Marginal and small farmers were more or less evenly distributed while eight per cent had land holding of more than five acres.

Rao (1997) found that 38 per cent of milk producers were medium size farmers having between five and ten acres of land followed by 26 per cent small farmers possessing upto five acres of land, 26 per cent large farmers with above 10 acres of land and 10 per cent landless in MPCS area. In non-MPCS area, 50 per cent milk producers were small farmers followed by 18 per cent each large and landless and 14 per cent medium farmers.

FAO (2001) study revealed that the broiler farmers under integrated system owned more land holdings on an average than the farmers who grew broilers independently. A similar trend was noticed in both these systems among layer farmers.

2.1.5.

Herd size

Gopalakrishnaiah (1984) opined that majority of the members of dairy cooperatives (46.66 per cent) fell in the medium category followed by large (33.34 per cent) and small herd size (20 per cent).

Rao (1992) observed that the majority (77.5 per cent) of the respondents fell under the category of medium herd size followed by small (12.5 per cent) and large (10 per cent) herd size categories.

Rao (1997) opined that 70.67 per cent of respondents possessed medium herd size followed by 20 per cent high and 9.33 per cent low in MPCS area. In non-MPCS area 66 per cent of respondents had medium herd size followed by 24 per cent low and 10 per cent high.

FAO (2001) observed that majority (41 per cent) of the broiler farmers under integrated system owned medium size farms, and 21 per cent large farms whereas among non-partnership or independent farmers majority (43.33 per cent) owned small farms and 30 per cent owned medium farms. Among layer farmers under integrated system over one-half (53.33 per cent) owned medium size farms, while 26.67 per cent owned large farms whereas in case of independent farmers 38.89 per cent owned medium size farms and 31.94 per cent owned small farms. 2.1.6. Dairy income

Patel et al. (1975) observed that gross income per milch animal was significantly higher in case of the milk-producers in MPCS villages than that in the control villages. The average gross income from dairying in co-operative area was 2178 rupees per annum but in non co-operative area it was 1385 rupees per annum.

Naidu et al. (1992) concluded that all the farmers had significantly been benefited by way of increased income through dairying after joining the society. He further noticed a 25.5 per cent increase in dairy income for marginal farmers and 22.5 per cent increase for the small farmers. Subramanian (1992) revealed that the landless, landed and pooled category of milk producers in the society village earned significantly more gross income than their counterparts in the control village. Dayakar et al. (1995) found that there is an increase in gross dairy income in comparison with the non-beneficiaries of operation flood programme. The average gross income for beneficiaries was 7709.28 rupees per annum but in case of non-beneficiaries it was only 4173.82 rupees. Rao and Singh (1995) stated that the net income obtained by the beneficiary household of dairy co-operatives was positive and higher than that of the non beneficiary households due to various facilities and services provided by the dairy co-operatives in the study area. Gross income in case of members of co-operatives was rupees 4553.21 per annum and 2637.66 rupees in case of non-beneficiaries of cooperative system. 2.1.7. Credit behaviour

Subramanian (1992) found that milk producers of the society and nonmembers of the society were found to utilise credit more or less equally. FAO (2001) revealed that the broiler farmers under integrated system were less dependant on financing organisations. Only 46.83 per cent had the tendency to borrow money. On the other hand 70 per cent of the independent farmers had the tendency to borrow money. Among layer farmers under integrated system 89.66 per cent had availed credit facility while 97.22 per cent of independent farmers availed credit. 2.1.8. Investment

Subramanian (1992) stated that the average investment on dairy enterprise by different category of milk producers ranged from rupees 4,533 to 10,450. The landless, landed as well as the pooled category of MPCS village were found to have invested significantly on the dairy enterprise than that of the same category of milk producers of the non-MPCS village.

2.2. 2.2.1.

Socio-psychological characteristics of dairy farmers Extension agency contact

Gopalakrishnaiah (1984) observed that majority of the members of MPCS fell in the medium category in terms of their contact with extension agency. Rao (1992) found that majority (82.5 per cent) of the members of milk producers co-operative society had medium level of extension agency contact followed by low (10 per cent) and high (7.5 per cent) levels.

Rao (1997) concluded that majority (70.67 per cent) of the respondents had medium level of extension contact and the rest had high level of extension contact in MPCS area. In non - MPCS area 86 per cent had medium level of extension contact and the rest had low level of extension contact.

2.2.2.

Mass media exposure

Rao (1982) opined that majority of the beneficiaries of MPCS and nonbeneficiary of MPCS had uniform level of media participation.

Gopalakrishnaiah (1984) observed that majority (46.66 per cent) of cooperative members fell in the medium category followed by high and low in terms of their mass-media exposure.

Subramanian (1992) revealed that the members of MPCS had high level of mass media exposure when compared to control village and the dairy farmers of non cooperatives had low level of mass media exposure.

Nisha (1996) observed that over one-half (53 per cent) of the members of dairy co-operatives had low level of mass media exposure.

Rao (1997) concluded that medium level of mass media exposure was exhibited by majority (85.33 per cent) of the respondents while the rest had high mass media exposure in MPCS area. In non-MPCS area, 95 percent had medium level of mass media exposure and the rest had high level of mass media exposure. 2.2.3. Economic motivation

Gopalakrishnaiah (1984) concluded that majority of the members of PMPCS fell in the medium category in terms of economic motivation.

2.2.4.

Level of aspiration

Subramanian (1982) revealed that the members of MPCS had medium level of aspiration. Rao (1992) revealed that majority of the members of MPCS had medium level of aspirations. Only 11.67 per cent of the respondents had high aspiration. 2.3. Constraint / disadvantages in the three procurement systems

Chakravarthy and Reddy (1982) observed that 26.6 per cent of members of MPCS felt that lack of fodder / cattle feed, and consequently their inability to feed the cattle properly was the reason for loss of interest in the society. Also founded that high cost of inputs mainly feeds and defective milk testing as constraints / problems of members in MPCS. More than one fourth (26.0 per cent) of members of PMPCS mentioned low price for milk offered by the society as one of the reasons for loss of interest in the society. Rao (1982) observed that 53.84 per cent of members of MPCS found inadequate supply of feed and fodder as a problem. And 15.38 per cent of the members of MPCS perceived inadequate provision of loans for the purchase of milch cattle as a problem. And 7.69 per cent members of the MPCS felt that there is malpractice in measurement of SNF and fat. And 7.69 per cent of members of MPCS perceived delay in payment as a problem. And 100 per cent of the members of milk producers cooperative society found low price for milk per litre as a problem. Gopalakrishnaiah and Pochaiah (1989) reported that 55.50 percent of members of MPCS felt inadequate supply of feed and fodder as a problem. And 13.30 per cent of the members MPCS perceived delay in payment of cost of milk as a problem. Also 10 per cent of the members of MPCS perceived non - provision of loans for purchase of milk animals as a problem. Also found that 73 per cent of the members of PMPCS perceived `low price' for milk as a main problem. Thirunavukkarasu et al. (1992) found that inadequate veterinary service and financial assistance to the farmers in the milk producers co-operative society as the chief constraint. Among the members of MPCS low procurement prices for the milk and poor quality of feeds supplied by the federation as constraints. Rao (1997) found that non-availability of balanced concentrate mixture and feed / fodder shortage as a constraint by 12 per cent and 6.6 per cent of members of MPCS respectively. Also observed that 41.3 per cent of members of MPCS perceived lack of financial assistance for purchase of high milk producing dairy animals as a problem. Also observed that non-remunerative price for milk was the major constraint perceived by 84 per cent of the milk producers in MPCS area.

2.4.

Satisfaction of the dairy farmers in the three procurement systems

Patel et al. (1975) reported that 30.67 per cent of members of MPCS favoured milk-co-operatives because of the reason that it offers higher price for milk. He also found that 19 per cent of members of MPCS favoured milk-co-operatives because of regular and prompt payment and 52 per cent of respondents felt that society was helpful in generating stable income. Rani (1990) revealed that large producers availed more input facilities at maximum quantity compared to medium and small producers. Rao (1992) observed that majority (69.17 per cent) of the members of MPCS availed inputs and services facilitated to a medium extent followed by low (27.3 per cent) and high (13.35 per cent) categories. FAO (2001) observed that the reasons for being comfortable with the integrator was extending technical know-how. Among layer farmers the reason for being comfortable with the integrator was cheaper and timely credit in addition to extending technical know-how. Also observed that broiler farmers opinion for being comfortable with the integrator was less risk, less recurring expenses, timely supply of quality inputs and renumerative price. The layer farmers opinion on reasons for being comfortable with the integrator was timely supply of quality inputs and remunerative price. It could be derived from the literature that most research studies done earlier was in relation to dairy co-operative and non-cooperative areas. The researcher has not came across any specific reference to vendor system. However one study related to poultry was made in integrated system. These studies revealed that most members of dairy co-operatives were illiterates having dairy as subsidiary occupation with 6 to 8 years of farming experience. Majority were landless or marginal land holders possessing medium herd size, having a significant level of dairy income, with low credit behaviour and medium level of extension agency contact, mass media exposure and level of aspiration. Lack of fodder/cattle feed, high cost of inputs, defective milk testing, low price for milk, inadequate provision of loan and veterinary services were the constraints recorded. However higher price for milk, regular and prompt payment and generating stable income were the areas of satisfaction perceived by members of co-operative. In case of integrator extending technical know-how, cheaper and timely credit facilities were the perceived benefits. The review of literature helped the investigator to comprehend the results of the earlier studies related to the present field of research. The concepts were operationalised and the methodology so evolved has been presented in the next chapter.

CHAPTER III RESEARCH METHODOLOGYThis chapter deals with the research methods, procedures, tools and statistical tests used in the study under the following sub heads: 3.1. Locale of research 3.2. Selection of the respondents 3.3. Design of the study 3.4. Selection of variables for the study 3.5. Operationalisation of variables and their measurements 3.6. Method of data collection 3.7. Statistical techniques used 3.1. 3.1.1. Locale of research Selection of the study area

Namakkal district of Tamil Nadu (Figure 3.1) was selected for the study, because of the following reasons. i. Namakkal district falls under the Salem-Namakkal district co-operative milk producers union, which is procuring the highest amount of milk (2.87 lakh litres) per day in Tamil Nadu. One of the major private dairies having 60 per cent of private dairy sector market in Tamil Nadu namely Hatsun Agro Limited is operating on contract agreement with the farmers as dairy integrators in this district (Financial Express, 15 Feb 2002). All the three systems of milk procurement namely vendor, co-operative and integrated systems are operating in this area.

ii.

iii.

3.1.2.

Description of study area

Namakkal district is situated 11' and 12'.55" of the northern latitude and 77'.28" and 78'.50" of the eastern longitude. The altitude of the district is 300 meters above mean sea level. It is situated between the dividing portion of two watersheds Cauvery and the Vellar. The Kolli hills, few isolated hills and ridges scattered over Namakkal district along with valleys and rolling topography contributes to the characteristic physiography of the district. The total area of the district is 3363 sq.km., having a population of 13.22 lakhs with a population density of 393 persons per sq.km.. Among this 48.4 per cent are literates. 3.1.2.1. Soil type Five major types of soil namely calcareous, red non-calcareous, black calcareous, alluvial and hill soils exist. Of the above soils the red and black calcareous occupies more than 35 per cent of the total area of this district. 3.1.2.2. Rainfall The mean annual rainfall is about 749.3 mm. The maximum precipitation is contributed by the south-west monsoon (45 per cent) followed by north-east monsoon (33 per cent). 3.1.2.3. Climate The hottest months are between April and August. With the setting of monsoon, the temperature drops steadily and the weather becomes pleasant. The maximum temperature is 37.0C and minimum is 18.0C. 3.1.2.4. Irrigation Ordinary wells and canals are the main source of irrigation for this district, besides numerous minor irrigation sources. Of the total area under irrigation, about 70.66 per cent is irrigated by ordinary wells, 23.74 per cent by canals, 4.24 per cent by tanks, 0.14 per cent by tube wells and 1.22 per cent by other sources. 3.1.2.5. Land use pattern The total geographical area of the district is 3.36 lakh hectares. Of this net area sown is 1.95 lakh hectares. 0.439 lakh hectares of area is under forest cover and 0.247 lakh hectares barren and uncultivable land. Land put to non-agricultural use is 0.326

lakh hectares. Permanent pastures and grazing lands account to only 6969 hectares of land. 3.1.2.6. Cropping pattern Groundnut and millets are grown as the main crops. The other important crops are paddy, pulses, tubers, sugarcane etc. The gross and net area sown were 27.32 lakh hectares and 19.50 lakhs hectares. 3.1.2.7. Cattle population and their production The selected district, Namakkal had 2,08,757 white cattle and 2,81,727 black cattle according to 1994 livestock and poultry census. The milk production in this district was 14.38 million litres in the year 2000 - 2001 which is valued at 1674.44 lakh rupees (District statistical handbook, 2000 - 2001). 3.1.2.8. Rural institutions This district has seven Primary Land Development Banks, 163 Primary Agricultural Credit Societies other than the nationalised banks, 421 Milk Producers Cooperative Societies, and one Veterinary College and Research Institute. 3.2. Selection of respondents

Out of the 15 blocks in Nammakkal district one block namely Namagiripet was selected since it had the highest milk procurement by co-operatives for the year 1999 (Source : Registrar office of dairy co-operatives, Namakkal district). One village Panchayat namely Mangalapuram village Panchayat was selected in Namagiripet block based on better distribution of the three procurement systems in comparison with other village panchayats. A total of 150 respondents constituting 50 respondents each from vendor, co-operative and integrated systems of milk procurement were selected randomly within the five wards of Mangalapuram village panchayat.

3.3.

Design of the study

The research design employed for the present study was ex-post facto design. This research design was used for conducting the study since the variables chosen have already occurred. The vendor and co-operative systems of procurement are operating in the study area since many decades. The integrated system on contract agreement with dairy farmers is comparatively new and is in existence for the last eight years in the study area. 3.4 Selection of variables for the study

After a detailed search from literature and discussion with the experts, 21 variables were listed to study the profile of the respondents. The variables listed were further subjected to experts' opinion on a five point continuum scale ranging from most relevant to non relevant. From the opinions expressed by experts, 12 variables based on mean and co-variance were selected for the study.

3.5.

Operationalisation of variables and their measurements

The operationalisation and procedure followed for the measurement of each variable are presented in this section. The variables along with the instruments used for measurement are abstracted in Table 3.1.

3.5.1.

Definitions

3.5.1.1. Respondent

The respondent for the study is one who is involved in dairy farming which includes management of animals, health care and marketing. The dairy farmer should also be associated with any one of the three milk procurement systems namely vendor, co-operative and the integrated.

3.5.1.2. Vendor system

It refers to the system of organisation where an individual middle man purchases milk from dairy farmers and sells to the consumers.

3.5.1.3. Co-operative system In this study it is the form of organisation wherein the dairy farmers voluntarily associate themselves as members on the basis of equality for the promotion of their socio-economic well being, i e. Primary Milk Producers Co-operative Society.

3.5.1.4. Integrated system

Integration is the association, co-ordination and amalgamation of companies engaged in various stages of production of a particular product or related products, so that there will be a smooth flow of inputs and outputs, from one unit to other, leading to an overall reduction in the cost of production of the final product (Narahari et al., 2000).

In this study integrated system means the association of resources, coordination of dairy related activities, amalgamation of dairy production at varying levels in various stages of the production upto marketing by a private firm. This system is also referred to as " contract farming" and the farmer is referred to as "contract farmer". Table 3.1. Variables and their measurements Sl. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Education Occupation Dairy farming experience Land holding Herd size Dairy income Credit behaviour Investment Socio-psychological variables Extension agency contact Mass media exposure Economic motivation Level of aspiration Scale developed by Balasubramanian (1980) with modification Schedule developed Scale developed by Ray (1969) with modification Schedule developed Variables Socio-economic variables Procedure followed by Sudeepkumar (1992) Schedule developed Procedure followed by Sudeepkumar (1992) Procedure followed by Maheswaran (1993) Animal units developed by Ensminger (1980) Procedure followed by Subramanian (1982) Schedule developed Scale developed by Subramanian(1982) Measurements

3.5.2.

Socio-economic variables

3.5.2.1. Education

Refers to the ability to read and write and the number of years of formal education put in by the respondent at the time of enquiry. It would be measured by giving `one' score for read only and `two' score for read and write and an additional

score for completion of each year of formal education. It would be classified as illiterate, read only, read and write, primary, secondary, higher secondary and collegiate for the purpose of interpretation of the results, as followed by Sudeepkumar (1992).

3.5.2.2. Occupation

It refers to the regular engagement of a person in an activity. Considering the variation in the main and subsidiary occupations of the respondents, the occupational status was measured and scored as below :

Description Dairying as main occupation Dairying as subsidiary occupation

Score 2 1

3.5.2.3. Dairy farming experience

Refers to the total number of years of direct experience the respondent had in rearing the dairy animals. The actual number of completed years of experience in dairy farming would be taken into account for analysis and it was ascertained from the respondents through direct questioning as followed by Sudeepkumar (1992).

3.5.2.4. Land holding

It refers to the area of wet / dry areas of land in acres owned and cultivated by the respondent at the time of enquiry. The total extent of land would be arrived at by using a conversion procedure of equating two acres of dry land to one acre of irrigated land and one score would be assigned to every one acre of irrigated land as followed by Maheswaran (1993). The respondents were classified based on the extent of holdings as follows.

Land size 0 0.01 upto 2.5 acres 2.51 to 5.00 acres 5.01 acres and above Landless

Category

Marginal farmers Small farmers Big farmers

3.5.2.5. Herd size

In this study herd size is operationalised as the total number of milch animals both white and black cattle possessed by the respondents at the time of enquiry. In the present study herd size was arrived at by taking the number of milch animal per household at the time of investigation and each milch animal would be given score as suggested by Ensminger (1980).

Type of livestock Cow, with or without calf at foot Young cattle one to two years Weaned calves to yearlings

Animal unit 1 0.8 0.6

3.5.2.6. Dairy income

Dairy income refers to the gross income of the respondent through dairying alone. The gross income was worked out based on the value of milk produced, sale of livestock and farm yard manure from milch animal as followed by Subramanian (1982). For every one thousand rupees of annual income through dairying a score of `one' would be assigned.

3.5.2.7. Credit behaviour

In this study it refers to the source from which a farmer obtained credit for the purpose of dairying. The rate of interest charged for the loan obtained was taken as the main criteria in deciding the score. The more the interest charged, lesser was the score and vice-versa. A suitable schedule was developed and the scoring procedure and categorisation followed is given below.

Sl. No. 1. 2. 3. 4.

Credit Source Professional money lender Private finance institutions National banks Co-operative banks

Score 1 2 3 4

3.5.2.8. Investment

It refers to the amount invested on the dairy animals, building equipment and their related aspects of the dairying. Every one thousand rupees of investment would be given a unit score as followed by Subramanian (1982). The socio-economic variables namely dairy farming experience, herd size, dairy income and investment were categorised into low, medium and high categories of intervals based on mean and standard deviation.

3.5.3.

Socio - psychological variables

3.5.3.1. Extension agency contact

Refers to the degree to which the respondent contacted the extension agency in order to get information on dairy husbandry, non-dairy animal husbandry activities, agriculture and personal needs. Extension agency means Veterinary Surgeon, Extension Officer of animal husbandry, Agricultural Officer, Assistant Agricultural Officer, Block Development Officer, and specialists from research stations/University. The scoring procedure adopted by Balasubramian (1980) was used with slight modification in respect of the purpose of contact. The scoring procedure followed is given below.

Frequency of contact Once a year Once in 6 months Once in 3 months Monthly once Fortnighlty once Weekly more than once

Score 1 2 3 4 5 6

Purpose of contact Dairy farming alone Non-dairy animal husbandry Agricultural Personal

Score 3 2 1 0

The frequency and purpose scores were multiplied to arrive at individual score of extension agency contact.

3.5.3.2. Mass media exposure Refers to the degree to which an individual is exposed to mass media viz., radio, television, newspapers, magazines, leaflets, bulletins, films and exhibitions with respect to information on dairying. A suitable schedule was developed and the following scoring procedure was adopted. Watching animal husbandry related programmes in television Frequency Twice a week Once a week Twice a fortnight Once a fortnight Rarely Never Score 5 4 3 2 1 0 Hearing animal husbandry related programmes in radio Frequency Every day Twice a week Once a week Once a fortnight Rarely Never Score 5 4 3 2 1 0

Reading farm magazines,leaflets, bulletins, etc. or hearing others reading them Frequency Score Regularly 2 Occassionally 1 Never 0

Attending mass contact programmes and exhibitions Frequency Nil Once a year Twice a year Three or more times Score 0 1 2 3

3.5.3.3. Economic motivation Economic motivation is operationalised in terms of profit maximization and relative value placed by an individual on economic ends. In this study six positive statements constructed related to economic motivation would be judged by the respondent on a five point continuum scale as followed by Ray (1969) with slight modification. The strongly agree was given a score of four, agree was given a score of three and undecided was given a score of two. On the other hand disagree was given a score of one and strongly disagree was given a score of zero.

3.5.3.4. Level of aspiration

In this study it is operationalised as the respondents conception of prospects and expectations of the future performance. The level of aspiration would be measured as the degree to which the dairy farmer aspired to increase the herd size, dairy income, animal housing and milk production in the next three years.

Level of aspiration to increase herd size, milk production and dairy income in the next three years

Description No aspiration Increasing upto 25 per cent Increasing 25 to 50 per cent Increasing 50 to 75 per cent Increasing 75 to 100 per cent More than 100 per cent

Score 0 1 2 3 4 5

Level of aspiration to improve cattle shed in the next three years

Description None Thatched shed Mud walled and thatched Full mud walled and tiled Brick wall, tiled with doors Scientific housing with cement flooring, doors etc

Score 0 1 2 3 4 5

The psychological variables namely extension agency contact, mass media exposure, economic motivation and level of aspiration were categorised as below based on mean and standard deviation.

Scores Sl.No 1. 2. 3. 4. Variables Low Extension agency contact Mass media exposure Economic motivation Level of aspiration 1-5 0 12 2 Medium 6-12 1-5 13-19 3-12 High 13 6 20 13

3.5.4.

Benefits of the procurement system

This was operationalised as various input services and other factors considered as perceived benefits by the respondents in three procurement systems. In consultation with experts, procurement agencies and literature, 14 input services were listed and included for the study. The respondents were asked whether each of the 14 input services were made available by the concerned procurement system. A score of "one" was given for each of the service made available by the procurement system and "zero" for non-availability. Accordingly percentage of availability of each of the services was worked out and presented. Among the services made available by the procuring agency, the type of input service availed by the respondents was presented in percentage. The nature of service in terms of payment was also ascertained and presented. The perceived benefits among the respondents were ascertained by using open-ended questions. The benefits perceived by them other than the inputs were listed by interviewing each of them. The data collected was tabulated and percentage worked out for interpretation. 3.5.5. Level of satisfication / disadvantages of the procurement system

To understand the level of satisfication and disadvantage of the procurement systems, respondents were asked to give their opinion to a list of 16 statements related to the level of satisfication with regard to avilablity of collection centre at short distance, credibility, facilities, quality of veterinary services and other inputs, risk, stable income and mutual welfare gains. Accordingly the level of satisfication and disadvantage was worked out as percentage. 3.6. Method of data collection

An interview schedule was prepared in English and was translated in Tamil for easy administration. Necessary precautions were taken to ensure that the questions in the schedule were unambiguous, clear, complete and comprehensive. The interview schedule was pre-tested among the three categories of respondents, who would not form the sample for the present investigation and suitable changes were carried out before it was finalised. The data were collected by personal interview of the respondent by the researcher. The data so collected were coded and tabulated for statistical analysis. 3.7. Statistical techniques used The following statistical tools were used in the analysis. 1. 2. 3. Percentage Mean Co-variance 4. 5. 6. Standard deviation Range Analysis of variance

Having adopted the above methodology relevant data were gathered and subjected to analysis and the outcome has been reported and discussed in the succeeding chapter.

CHAPTER IV RESULTS AND DISCUSSIONThe findings of the present study along with discussion in light of the objectives set forth are presented under the following sub-heads. 4.1. Genesis, development and functioning of vendor, co-operative and integrated milk procurement systems Change over of the procurement system among the respondents Profile of the milk producers in the three procurement systems Benefits obtained by the dairy farmers in the three procurement systems The satisfaction/disadvantages as perceived by the respondents in the three systems Strategy for the respondents Genesis, development and functioning of vendor, co-operative and integrated milk procurement systems

4.2. 4.3. 4.4. 4.5.

4.6. 4.1.

Tamil Nadu is endowed with vendor, co-operative and integrated systems of milk procurement. A brief discussion on the origin of these procurement systems, its progress and functioning based on the researcher observation, discussion with farmers and consumers are presented below. Before the early urbanisation and to some extent even now, the dairy farmers had directly marketed milk and its products in the rural, semiurban and urban areas. It was generally done by the women folk. In particular to the study area, Namakkal, weaving provides occupation to a large section of the people. The weaving community and other sections of people who are engaged in non-agricultural activities formed the rural market for the dairy farmers. In this market, milk, curd, buttermilk, butter and ghee were sold to the rural consumers at their door step. With the increase in urbanisation, the traditional marketing system changed its

way of marketing. In urban areas milk markets were developed (Figure 4.1 to 4.3). Here the dairy farmers bring milk from the farm and sell it to the consumers directly. This can be well understood from the Figure 4.4. Traditional marketing system was unable to face the emerging challenges due to the increased urbanisation and increase in demand for milk. Even in this situation a low degree of traditional marketing system exists in Namakkal district. 4.1.1. Vendor system As a result of urbanisation and increased demand for milk, the traditional marketing system (selling of milk and milk products directly by the dairy farmers) posed certain difficulties. The vendor system relieved the farmer from the job of marketing milk and milk products. In Namakkal district, after the decline of the traditional marketing system, the vendors tapped the rural markets, neighbouring urban markets and demand of dairy and dairy based industries. The vendor collects the milk at the dairy farm. Milking is (100 per cent) done by the vendor. The milk collected from dairy farmers either as liquid milk or as products are sold to the consumers / private dairies. This can be understood well from the Figure 4.5. Emergence of the organised sector such as co-operative and integrated system forced the vendor system to provide some type of input services to dairy farmers. These input services and perceived disadvantages of the organised sector made the vendor system to survive till today. 4.1.2. Co-operative system As government felt need for hygienic, cheaper and unadulterated milk and to relieve the dairy farming community from the harassment of vendors, "operation-flood" programme was implemented. This resulted in improvement of socio-economic conditions of the farmers and also facilitated availability of better products at a cheaper price to the consumers. The Salem-Namakkal Milk Producers Union was started on July 10, 1978. Namakkal district falls under Salem - Namakkal district which is procuring the highest amount of milk in Tamil Nadu. There exists 421 MPCS in this district. Of these 21 were dormant, and 115 were under liquidation. The co-operatives provide various input services such as veterinary health services, supply of feeds, extension services, artificial insemination and fodder cuttings

to the dairy farmers who are members. In turn the dairy farmers sell their milk to the cooperatives. The milk collected by co-operatives is sold as liquid milk or milk products to rural and urban markets. This can be understood well from the Figure 4.6. 4.1.3. Integrated System Implementation of new economic policy namely liberalisation, privatisation and globalisation lead to the participation of private sector in dairying. These policy changes saw many private dairies at procurement, processing as well as at marketing levels in Tamil Nadu. In Namakkal district of Tamil Nadu a private company namely "Hatsun agro limited" started to operate in the year 1994. It has above 60 per cent of the total private sector market. It is procuring milk from large and small scale milk producers of organised and unorganised dairy farms through supply of various inputs to them through its collection centres. It also collects milk from vendors. Hatsun agro limited has a network of operations in about 600 villages and 450 mini dairy farms (Thinathandhi, March 2002). It is procuring 2.90 lakh litres of milk per day. This is exhibited in Figure 4.7.

4.2.

Change over of the procurement system among the respondents

The composition of respondents in the three procurement systems and their reasons for shifting over if any are presented in this section.

It could be observed from Table 4.1 that more than one-half (57.33 per cent) had made a shift from one procurement agency to another. This can be attributed to the fact that the respondents considered shifting from one system to another due to personal and economic convenience aimed at better service and profit.

Table 4.1.

Distribution of respondents based on shift from one system to other systems n = 150

Sl. No. 1. 2.

Description Not shifted Shifted Total

No. of dairy farmers 64 86 150

Percentage 42.67 57.33 100

The rest 42.67 per cent of dairy farmers remained in the same system of procurement from the day they began commercial milk production. It may be due to their satisfaction over the procurement system.

Table 4.2.

Distribution of dairy farmers, shifted from one system of procurment to other system n = 86

Sl. No. 1. 2. 3. 4. 5. 6. 7.

Change over of the procurement system Vendor to integrated system Vendor to co-operative system Co-operative to vendor system Co-operative to integrated system Integrated to vendor system Traditional marketing system to co-operative system Integrated to co-operative system Total

No of dairy farmers 34 21 17 7 4 3 0 86

Percentage 39.53 24.42 19.77 8.14 4.65 3.49 0 100

Table 4.2 indicates that the major change over was the shift from vendor to integrated system (39.53 per cent) as well as to co-operative system (24.42 per cent). This shift is attributed to the initial periods of formation of the above two systems and the provision of services like artifical insemination, veterinary services, feed supply, price based on quality of milk and assurance of regular payment, bonus, credit facilitation and technical inputs. These made them view integrator and co-operative systems as better alternatives to vendor system.

It is interesting to note that a remarkable shift is noticed from the co-operative to vendor system (19.77 per cent) and integrated system (8.14 per cent). This shift is due to the irregularity in payment for milk, less price for milk and reduction in various input services to the members of co-operative system. The rest of shift over the procurement system was meagre due to various attributes which the respondents considered as personal and profit oriented. Also there is no shift from integrator to co-operative system. In case of farmers under traditional marketing the shift was due to establishment of formation of MPCS in the villages, which facilitated easier marketing.

4.2.1. Change over in the procurement system from co-operative and integrated to vendor system

The Table 4.3 revealed the reasons for shifting of dairy farmers from cooperative to vendor system.

Table 4.3.

Reasons for shifting to vendor system from other systems

Sl. No.

Reasons

No. shifted from Co-operative n = 17 9 4 3 3 1

No. shifted from Integrated n =4 2 1 1 1 -

1. 2. 3. 4. 5. 5.

Irregularity of payment Distant location of collection centre Inability to milk the animal Closure of collection centre Restriction on milk quantity Non-availability of loan

Multiple responses not to total

Irregularity of payment for milk was the main reason for change over from cooperative to vendor, the other reasons being distant location of collection centres, closure of MPCS and unable to milk the animal in that order.

Irregularity of payment for the milk, less rate for the milk, unable to milk the animal and distant location of collection centres were the prime reasons in the descending order for shifting from integrated to vendor system.

4.2.2. Change over in the procurement system from vendor to Co-operative system

The following Table 4.4 reveals the reasons for dairy farmers shifting from vendor to co-operative system.

Table 4.4.

Reasons for shifting to co-operative system from vendor system n = 21

Sl. NO. 1. 2. 3. 4. 5.

Reasons Irregularity of payment Vendor discontinued Co-operative system established Low price for milk Inappropriate measurement

No. of dairy farmers 11 4 4 1 1

Multiple responses not to total

Irregularity of payment, stoppage of procurement and initiation of MPCS were the primary reasons for shifting from vendor system to co-operative system.

4.2.3. Change over in the system of procurement from vendor and co-operative to integrated system

Table 4.5 clearly indicates the reasons for shifting over to integrated from vendor and co-operative.

The irregularity of payment, stoppage of procurement, and unsatisfactory milk procurement price were the prime reasons in the order stated for shifting from vendor to integrated system. The reasons for shifting to integrated system was primarily due to irregularity in payment by the co-operative system.

Table 4.5

Reasons for shifting to integrated system from other systems

Sl. No.

Reasons

No. shifted from Vendor (n = 34) 22 13 7 -

No. shifted from Co-operative (n = 7) 7 1

1. 2. 3. 4.

Irregularity of payment Vendor discontinued Low price paid for milk Dissatisfaction over SNF and fat measurement

Multiple responses not to total

4.3.

Profile of milk producers in the three procurement systems

The profile of the dairy farmers in the three procurement systems are presented in this section.

4.3.1. Education

The educational status of milk producers of vendor, co-operative and integrated systems are presented in the Table 4.6.

The table revealed that over one half of the respondents in vendor and cooperative systems were educated between primary and higher secondary level of education, while in the integrated system a similar educational level was noticed among two - thirds (64 per cent) of the respondents, the rest of the farmers in all the systems were illiterates. The results obtained on co-operative system in the present study concurred with the findings of Chakravarthy and Reddy (1982). It is interesting to note that none possessed collegiate level of education. Comparision of the three systems showed that members of integrated system had better educational status than the other two systems.

Table 4.6.

Frequency distribution of dairy farmers according to their educational status n = 150

Description Illiterate Read only Primary Secondary Higher secondary Total

Vendor system 23 (46) 0 (0) 9 (18) 16 (32) 2 (4) 50 (100)

Co-operative system 22 (44) 0 (0) 18 (36) 10 (20) 0 (0) 50 (100)

Integrated system 17 (34) 1 (2) 16 (32) 13 (26) 3 (6) 50 (100)

Total 62 (41.33) 1 (0.67) 43 (28.67) 39 (26.00) 5 (3.33) 150 (100)

The figures in the parentheses indicate percentages to the total.

The results show that educated people are involved in dairy enterprise as means for livelihood. It may be due to the fact that dairying has proved to be a profitable enteprise among the educated farmers.

4.3.2. Occupation

The frequency distribution of the respondents with respect to their status of occupation is presented in the Table 4.7.

It could be inferred that an overwhelming majority (94.67 per cent) of the dairy farmers in all the three procurement systems had dairying as subsidiary occupation, only a meagre (5.33 per cent) had dairy as their main occupation. It could be concluded that majority of dairy farmers were rearing dairy animals in addition to their crop husbandry, since dairy provided them regular substantial income for their living.

Table 4.7.

Frequency distribution of dairy farmers according to their occupation status n = 150 Vendor system 3 (6) 47 (94) Co-operative system 5 (10) 45 (90) Integrated system 0 (0) 50 (100) Total 8 (5.33) 142 (94.67) 150 (100)

Description Dairying as main occupation Dairying as subsidiary occupation Total

50 (100)

50 (100)

50 (100)

The figures in the parentheses indicate percentage to the total

4.3.3. Dairy farming experience

The level of dairy farming experience among the vendor, co-operative and integrated systems are presented in Table 4.8. In vendor system over three - fourth (76 per cent) had experience from 14 to 43 years. In co-operative systems 80 per cent of the respondents had their experience ranging from medium to high level.

In integrated system more than two-thirds majority (68 per cent) had dairy farming experience from 14 to 43 years (medium level). Comparison of the three procurement systems revealed that the members of vendor and integrated systems had better dairy farming experience. This is due to the fact that the more experienced dairy farmers are seeking better systems in terms of regular payment and input services.

Table 4.8.

Frequency distribution of dairy farmers according to their level of dairy farming experience

System of procurement

Distribution of dairy farmers according to years of experience

Total

Less than 14 (Low) Vendor Co-operative Integrated Total Mean = 28.91 6 (12) 10 (20) 7 (14) 23 (15.33)

14 to 43 (Medium) 38 (76) 25 (50) 34 (68) 97 (64.67)

Above 43 (High) 6 (12) 15 (30) 9 (18) 30 (20) 50 (100) 50 (100) 50 (100) 150 (100) SD = 15.08

The figures in the parentheses indicate percentage to the total

Range = 3 to 65 years

4.3.4. Land holding

The pattern of distribution of milk producers according to their land holdings in the vendor, co-operative and integrated systems are presented in Table 4.9.

Table 4.9.

Frequency distribution of dairy farmers according to their level of land holdings n = 150 Description Vendor Co-operative Integrated Total system system system 9 (18) 34 (68) 7 (14) 50 (100) 3 (6) 42 (82) 5 (10) 50 (100) 0 (0) 43 (86) 5 (10) 2 (4) 50 (100) 12 (8.00) 119 (79.33) 17 (11.33) 2 (1.34) 150 (100)

Landless Marginal farmers Small farmers Big farmers Total

The figures in the parentheses indicate percentages to the total

Considering all the three procurement systems over three-fourth (79.33 per cent) of the dairy farmers were marginal, while 11.33 per cent of them were small farmers. Similar findings were recorded in co-operative system by Gopalakrishnaiah (1984). It is interesting to note that there existed no landless farmers in the integrated system, while four per cent of the farmers under integrated system were big farmers having over five acres of wet land. Comparison of three procurement systems showed that the members of co-operative and integrated systems had more land holdings than vendor system. Comparison of co-operative and integrated systems revealed that the members of integrated system had more land holdings. It is due to the substantially large herd size and better investment made by these two groups of farmers. 4.3.5. Herd size

Table 4.10 revealed that more than three-fourth respondents (76 per cent) in vendor system had a medium herd size ranging from above one and upto six. While 88 and 84 per cent possessed a similar herd size in co-operative and integrated systems respectively. The findings on co-operative were in agreement with Rao (1992) and Rao (1997). Table 4.10. Frequency distribution of dairy farmers according to the herd size

Distribution of dairy farmers based on scores System of procurement 1 (Low) Vendor Co-operative Integrated Total Mean = 3.64 6 (12) 3 (6) 1 (2) 10 (6.66) above 1 and upto 6 (Medium) 38 (76) 44 (88) 42 (84) 124 (82.67) Range = 1 to 18 Above 6 (High) 6 (12) 3 (6) 7 (14) 16 (10.67) 50 (100) 50 (100) 50 (100) 150 (100) SD = 2.47 Total

The figures in the parentheses indicate percentage to the total

It may be concluded that in general the herd size of the farmers belonging to cooperative and integrated was higher than vendor. On comparing co-operative and integrated systems, integrated system members possessed better herd size. Higher land holdings and better input services have motivated them to own a sizeable herd of dairy animals than others. 4.3.6. Dairy income From the overall trends as exhibited in Table 4.11 it could be observed that majority 82, 84 and 78 per cent in vendor, co-operative and integrated systems respectively had annual gross dairy income ranging from rupees 9830 to 39050 . The members of co-operative (16 per cent) and integrated system (18 per cent) had gross annual dairy income above rupees 39050. In case of co-operative system no members had gross annual dairy income less than rupees 9830. The integrated and cooperative members had better gross annual dairy income when compared to the vendor category.

Table 4.11.

Frequency distribution of dairy farmers according to their level of dairy income. n = 150

System of procurement

Distribution of dairy farmers (rupees in thousand) < 9.83 (Low) 9.83 to 39.05 (Medium) 41 (82) 42 (84) 39 (78) 122 (81.33) Range = 4.70 to 55.95 > 39.05 (High) 2 (4) 8 (16) 9 (18) 19 (12.67)

Total

Vendor Co-operative Integrated Total Mean = 24.44

7 (14) 0 (0) 2 (4) 9 (6)

50 (100) 50 (100) 50 (100) 150 (100) SD = 14.61

The figures in the parentheses indicate percentage to the total

This is attributed to provision of relatively better price for milk and supply of various inputs by the agency.

4.3.7. Credit behaviour

The frequency distribution of the respondents with respect to their level of credit behaviour is presented in the Table 4.12.

Table 4.12.

Frequency distribution of dairy farmers according to their level of credit behaviour

System of procurement Vendor Co-operative Integrated Total

Distribution of dairy farmers according to credit behaviour score 0 20 (40) 10 (20) 11 (22) 41 (27.33) 1 11 (22) 1 (2) 7 (14) 19 (12.66) 2 0 (0) 2 (4) 0 (0) 2 (1.33) 3 0 (0) 6 (12) 5 (10) 11 (7.33) 4 19 (38) 31 (62) 27 (54) 77 (51.33)

Total

50 (100) 50 (100) 50 (100) 150 (100)

The figures in the parentheses indicate percentage to the total

The results show that almost two-thirds (62 per cent) and more than one-half (54 per cent) of dairy farmers in co-operative and integrated systems respectively had favourable credit behaviour with co-operative banks. On the other hand most (40 per cent) dairy farmers in vendor system had no credit behaviour. Overall comparison of the three systems show that co-operative dairy farmers had better credit behaviour than other two systems. Comparison of vendor and integrated systems showed that the dairy farmers in integrated system had better credit behaviour. This may be attributed to the reasons that co-operative and integrated systems facilitate credit to dairy farmers through co-operative and nationalised banks.

4.3.8. Investment

The Table 4.13 reveals various levels of investment by the dairy farmers in the three procurement systems.

Considering the overall trend almost three-fourth (74.66 per cent) of the dairy farmers had invested fixed capital ranging from rupees 20,860 to 84,840 for dairying. Nearly two-thirds (62 per cent) in vendor system exhibited similar investment.

Table 4.13.

Frequency distribution of dairy farmers according to their level of investment on dairy husbandry n = 150 Distribution of dairy farmers (rupees in thousand) < 20.86 (Low) 20.86 to 84.84 (Medium) 31 (62) 39 (78) 42 (84) 112 (74.66) > 84.84 (High) 8 (16) 11 (22) 6 (12) 25 (16.67) 50 (100) 50 (100) 50 (100) 150 (100) SD = 31.99 Total

System of Procurement

Vendor Co-operative Integrated Total

11 (22) 0 (0) 2 (4) 13 (8.67)

The figures in the parentheses indicate percentages to the total

Mean = 52.85

Range = 15.73 to 160.42

On the other hand over two-thirds majority of co-operative (78 per cent) and integrated system (84 per cent) invested rupees 20860 to 84840 as fixed capital. No members in co-operative invested less than rupees 20860 as fixed capital.

The above facts indicate a higher investment by members of co-operative and integrated systems in comparison to farmers of vendor system. On comparing members of co-operative and integrated systems, a better investment pattern is noticed among cooperative members. The possible reason for such higher investment could be due to regular ensured returns provided by the co-operative and integrated systems.

4.3.9. Extension agency contact

It is noticed from Table 4.14 that an overwhelming 90 per cent had medium level of extension agency contact in vendor system, while co-operative (92 per cent) and integrated system (98 per cent) exhibited medium to high level of extension agency contact.

Table 4.14.

Frequency distribution of dairy farmers according to their level of extension agency contact n = 150

System of Procurement

Distribution of dairy farmers based on scores Total 1 to 5 (Low) 6 to 12 (Medium) 45 (90) 40 (80) 44 (88) 129 (86.00) 13 and above (High) 0 (0) 6 (12) 5 (10) 11 (7.33) 50 (100) 50 (10