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dairy in industry- a fast growing sector,professional sector and a potential one which is assured of providing jobs and employment
T E CHN I CA L DIGEST ISSUE 9, 2006 For Private circulation only 24 Opportunities And Challenges in The Indian Dairy Industry Dr K.G. Karmakar 1 and Dr G.D. Banerjee 2 Dairy industry is of crucial importance to India. The a variety of import restrictions to protect its country is the worlds largest milk producer, domestic dairy market. accounting for more than 13% of worlds total milk Milk Processing production. It is the worlds largest consumer of dairy products, consuming almost 100% of its own milk The milk processing industry is small compared to production. Dairy products are a major source of the huge amount of milk produced every year. Only cheap and nutritious food to millions of people in 10% of all the milk is delivered to some 400 dairy India and the only acceptable source of animal plants. A specific Indian phenomenon is the protein for large vegetarian segment of Indian unorganised sector of milkmen, vendors who collect population, particularly among the landless, small the milk from local producers and sell the milk in and marginal farmers and women. both, urban and non-urban areas, which handles around 65-70% of the national milk production. Dairying has been considered as one of the activities aimed at alleviating the poverty and unemployment In the organised dairy industry, the cooperative milk especially in the rural areas in the rain-fed and processors have a 60% market share. The drought-prone regions. In India, about three-fourth cooperative dairies process 90% of the collected milk of the population live in rural areas and about 38% as liquid milk whereas the private dairies process of them are poor. In 1986-87, about 73% of rural and sell only 20% of the milk collected as liquid milk households own livestock. Small and marginal and 80% for other dairy products with a focus on farmers account for three - quarters of these value-added products. households owning livestock, raising 56% of the bovine and 66% of the sheep population. According Domestic Consumption to the National Sample Survey of 1993-94, livestock The huge volume of milk produced in India is sector produces regular employment to about 9.8 consumed almost entirely by the Indian population million persons in principal status and 8.6 million in itself, in a 50-50 division between urban and non- subsidiary status, which constitute about 5% of the urban areas. Increasingly, important consumers of total work force. The progress in this sector will result the dairy industry are fast-food chains and food and in a more balanced development of the rural non-food industries using dairy ingredients in a wide economy. range of products. Policy Trade The total amount of milk produced has more than tripled from 23 million tonnes back in 1973 to 74.70 In spite of having largest milk production, India is a million tonnes 26 years later in 1998. The very minor player in the world market. India was tremendous rise in milk production is primarily the primarily an import dependent country till early fallout of the dairy farming policy reflected in seventies. Most of the demand-supply gaps of liquid Operation Flood. Following the success of dairy milk requirements for urban consumers were met by farming policy, the Government has set up a dairy importing anhydrous milk fat / butter and dry milk processing policy, reflected in the Milk and Milk powders. But with the onset of Operation Flood Products Order. In addition, the Government uses Programme, the scenario dramatically changed and 1 Managing Director, NABARD 2 Deputy General Manager and OIC, Dimapur RO ½ ¢Æ¸ Å ¥¸ ¸¸½¬ 25 ¿Å 9, 2006 ¢¸¸ú ¸¢£¸¸¥¸¸ í½÷¸º commercial imports of dairy products came to a halt products are those which have low cost of production. except occasional imports of very small quantities. In Therefore, in order to increase the competitiveness the 1990s, India started exporting surplus dairy of Indian dairy industry, efforts should be made to , , commodities, such as SMP WMP butter and ghee. reduce cost of production. Increasing productivity of The Agricultural and Processed Food Products Export animals, better health care and breeding facilities and Development Authority (APEDA) regulated the export management of dairy animals can reduce the cost of and import of dairy products till early 1990s. However, milk production. The Government and dairy industry in the new EXIM Policy announced in April 2000, the can play a vital role in this direction. Union Government has allowed free import and export of most dairy products. (ii) Production, processing and marketing infrastructure The major destinations for Indian dairy products are Bangladesh (23.1%), UAE (15.4%), US (15.6%) and If India has to emerge as an exporting country, it is Philippines (8.9%). In terms of products, SMP is the imperative that we should develop proper most important product accounting for about 63% of production, processing and marketing infrastructure, total export volume, followed by ghee and butter which is capable of meeting international quality . (11.7%) and WMP Export figures clearly demonstrate that the Indian dairy export is still in its infancy and the surpluses are occasional. Indigenous milk products and desserts are becoming popular with the ethnic population spread all over the world. Therefore, the export demand for these products will increase and hence, there is a great potential for export. On the other hand, there has been a sharp increase in import of dairy products (especially milk powders) after trade liberalisation. As per the latest report of Foreign Trade Statistics of December 2004, the imports of dairy products (milk and cream) has requirements. A comprehensive strategy for reached a cumulative total of 22.145 million tonnes producing quality and safe dairy products should be for the period April - March 2004, as compared to formulated with suitable legal backup. only 1473 million tonnes for the same period during the previous year. The main reasons for sharp rise (iii) Focus on buffalo milk based speciality in imports are huge export subsidies given by Dairy industry in India is also unique with regard to developed countries (mainly the US and EU). India availability of large proportion of buffalo milk. Thus, has recently concluded a tariff rate quota to deal with India can focus on buffalo milk based speciality US, EU and Australia on imposing custom duty of products, like Mozzarella cheese, tailored to meet 15% on imports of SMP and WMP upto 10,000 the needs of the target consumers. tonnes and 60% on imports beyond this level. (iv) Import of value-added products and export of Key Areas of Concern in the Dairy Industry lower value products (i) Competitiveness, cost of production, With the trade liberalisation, despite the attempts of productivity of animals etc. Indian companies to develop their product range, it The demand for quality dairy products is rising and could well be that in the future, more value-added production is also increasing in many developing products will be imported and lower value products countries. The countries which are expected to benefit will be exported. The industry has to prepare most from any increase in world demand for dairy themselves to meet the challenges. T E CHN I CA L DIGEST ISSUE 9, 2006 For Private circulation only 26 (v) Provisions of SPS and TBT New Challenges of Globalisation and Trade Liberalisation - Perspective 2010 At the international level, we have to ensure that provisions of SPS and TBT are based on application The NDDB has recently put in place Perspective 2010 of sound scientific principles and should become de- to enable the cooperatives to meet the new challenges facto barriers to trade. of globalization and trade liberalization. Like other major dairying countries of the world, the Indian Operation Flood Era cooperatives are expected to play a predominant role Dairy sector witnessed a spectacular growth between in the dairy industry in future as well. However, India 1971-1996, i.e. Operation Flood era. An integrated is in the mean time, attaining its past glory and is once cooperative dairy development programme on the again becoming DOODH KA SAGAR. But, what proven model of Anand pattern was implemented percentage of this SAGAR is handled by the in three phases. The National Dairy Development cooperatives - just a little over 7%. Since liberalization Board was designated by the Government of India of the dairy sector in 1991, a very large number of as the implementing agency. The major objective was private sector companies / firms have, despite MMPO, to provide an assured market round the year to the established dairy factories in the country. The share rural milk producers and to establish linkage between of the total milk processing capacity by private sector rural milk production and urban market through is 44% of total installed capacity of 73 MLPD (Million modern technology and professional management. Litres Per Day) in the country. Therefore, the total share Milk production grew from 21 million tonnes in 1970 of the organized sector, both cooperatives as well as to nearly 69 million tonnes in 1996 - more than three the private sector is barely 12%. What is, therefore, fold, at the compound growth rate of 4.5 per cent. disquieting is that as much as 88% share of the total Some ten million farmers were enrolled as members milk production is commanded by the unorganized in about 73000 milk cooperative societies. By 1996, sector - who specializes in selling sub-standard, milk cooperatives attained a dominating share of the unpasteurised milk more often than not adulterated Indian dairy market - butter 96%, pasteurized liquid with harmful chemicals. milk over 90%, milk powder 59% and processed Besides, growth in milk production is likely to continue cheese 85%. India was reckoned as a major threat at the present rate of 4.4% in the near future. Who is in the dairying world. In retrospect, it was by no going to handle this incremental milk? We must bear means an easy task. Let us all salute the visionary in mind is both income and price what we must bear and the architect of the white revolution in India, Dr. in mind both income & price elasticity account for Verghese Kurien, without whose dynamic leadership approximatily 15% of the total expenditure of food. all this may not have been possible. The dairy Demand for milk, at current rate of income growth is cooperative movement has continued to grow in the estimated to grow at 7% per annum. Interestingly, post Operation Flood-era. demand for milk is expected to grow steadily over the next two decades as the low income rural and urban families who have higher expenditure elasticity would also increase their income due to new economic environment. Let us now look at some other economic indicators. According to the World Bank, India is the fourth largest economy in the world going by the purchasing power parity estimates. Further, India has been identified as among the first 10 emerging markets in the world. India has the vastest domestic market in the world with over one billion consumers - a majority of whom are vegetarians with drinking of milk as habit. The untapped potential of the dairy sector is immense and opportunity to set ½ ¢Æ¸ Å ¥¸ ¸¸½¬ 27 ¿Å 9, 2006 ¢¸¸ú ¸¢£¸¸¥¸¸ í½÷¸º up a new dairy venture is great. In the works of Dr. ghee, skimmed milk powder and whole milk powder. Amrita Patel, Chairperson, NDDB, there is enough There are 7 large-scale cheese manufacturers and place under the scheme for both private and 14 manufacturers are producing infant foods and cooperative sectors. Notwithstanding the above malted milks. There is immense scope for the potential it is cautioned that, entering dairy sector is broadening of the products range and some of the not going to be a cakewalk. products, which are likely to have considerable demand in the coming decade, have been identified. Conclusion The cheese market, presently valued at about Rs.80 crore is growing at about 9% annually. There are Globalization and Liberalization are the Mantras of the more than thousand varieties of cheese, which have new economy today, which is now on the fast track. been listed out of which cheddar; mozzarella, gouda Industrial production is rapidly moving forward. The and processed cheeses are being manufactured in dairy industry is no exception. With the World Trade India. Pizza is becoming a very popular item in the Organization (WTO) coming into effect, from 01 April market. This segment alone commands 5% of the 2001 and the imports and exports getting liberalized share in the cheese market and other area is in the global economy, the dairy industry, which fermented milk products. Dahi even though is a includes dairy products, faces both an opportunity Rs.15000 crore market, the share of the organized for growth as well as a threat for its growth. sector is only around 10%. This product has There is no doubt that there is tremendous scope immense potential for growth. Varieties of milk for the growth of the dairy industry in the new shakes are also increasing wherein milk and fruit pulp millennium. The product mix of world dairy trade is are mixed in different proportions to produce likely to shift further towards cheese. This has been different beverages. Some of the milk and fruit based developed in the world markets. As the market opens beverages which are likely to have demand are a up, consumption trends associated with these combination of milk with mango, banana, sapota, markets will have increasing influence on the world strawberry, papaya, etc. Some of these beverages trade. Whole milk powder is likely to continue to be can also be produced in dehydrated form and can a substantial beneficiary and growth substiantially be an excellent health food. in the middle eastern countries. There are varieties in traditional milk based sweets, As standards of living in the importing country rises, manufactured in the country. The market size is exporting countries will increasingly concentrate on around Rs.12000 crore. However, there are very few whole milk powder and cheese with the assistance nationally known brands in this category. Many of of butter and skimmed milk powder. There is vast the organized dairies are involved in the manufacture potential for the export of dairy products, the cost of varieties of milk based sweets: pedha, paneer, of milk production in India being the lowest. The shirkhand, etc. These are now restricted to certain major factor influencing production of bye products areas only but can go national. As the world is getting is the newer uses that may be developed through R integrated into one market, quality certification is & D support. Milk proteins are being utilized becoming essential in the market. However, there increasingly replacing animal and vegetable proteins are very few plants in the country, which have in special bakery products and instant foods. successfully obtained ISO, HACCP certification. Through the application of membrane proven There is scope for introducing newer plants adopting process, milk proteins isolates are being produced. newer processes by the dairy industry in the country. These are being utilized for ice milk mixes and other Packaging of dairy products is also another very such applications. promising area. NRI and overseas investments can Most of the dairy plants in the Government, take place in manufacturing dairy processing Cooperatives and Private Sector produce almost equipment, fruit packaging equipment and similar dairy products like varieties of milk, butter, equipments for biotechnology related dairy industry.
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