Crisis in India’s dairy sector

GS 3 :  Economics of Animal-Rearing

Source : The Indian Express dated 28/05/2021

Context : In the first wave of the Covid-19 pandemic, agriculture and allied sectors put up a spectacular performance with an annual growth of 3.4 per cent while the economy contracted by (-)7.2 per cent in 2020-21.
But the second wave of pandemic has thrown the milk producers from the frying pan to fire.

Importance of dairy sector in India

Dairy is one of the biggest agri- businesses in India and a significant contributor to Indian economy. A government initiative known as Operation Flood (1970–1996) helped India to boost its milk production. India’s milk production has grown by over 10 times since 1950.

  • It is the largest single agricultural commodity with ~4 per cent share in economy.
  • India is the largest producer of milk globally with an estimated ~188 million MT production in 2019-20.
  • In the farm-dependent population comprising cultivators and agricultural labourers, those involved in dairying and livestock constitute 70 million. It accounts for approximately one-third of rural household income in India.
  • In the total workforce of 7.7 million engaged exclusively in raising of cattle and buffalo, 69 per cent of them are female workers, which is 5.72 per cent of the total female workforce in the country.
  • Dairy is the only agri-product in which around ~70-80 per cent final market value is shared with farmers.
  • A growth rate of 6 per cent per annum in milk production provides a great support to farmers, especially during drought and flood.
  • It serves wide range of consumer needs too – from protein supplements and health foods to indulgence foods such as yogurt and ice creams.
  • India exported dairy products worth $ 187 Million in 2019-20.

Challenges due to Covid 19 pandemic

In February 2021, the Union finance minister admitted that milk producers face an unprecedented livelihood crisis.

  • Production of milk is subject to seasonal fluctuations — animals, particularly buffaloes, produce more during winter-spring and less in the summer.
  • In order to cope with this fluctuation, the farmers usually convert the surplus milk of the “flush” season (winter) into skimmed milk powder (SMP) and ghee/butter for reconstitution in the “lean” months (summer).
  • The above balancing model is, however, being rendered dysfunctional by the demand destruction caused in the post-Covid shutdown of hotels, restaurants, hostels, canteens and mithai shops.
  • Lockdown induced closure of shops had cut down the demand for milk and milk products.
  • Severe shortage of fodder and cattle feed has pushed up the input cost.
  • Private veterinary services have almost stopped due to Covid-19, which has led to the death of milch animals.
  • A self-imposed ban on door-to-door sale of liquid milk by households both in urban and rural areas, forcing farmers to sell the entire produce to dairy cooperatives at a much lower price.
    • On average, fat-based pricing in dairy cooperatives is 20 to 30 per cent less than the price in the open market.

Other issues plaguing the sector

  • Low productivity
    • Despite being the world’s largest milk producer, India’s productivity per animal is very low, at 987 kg per lactation, compared with the global average of 2 038 kg per lactation.
  • Shortage of organized dairy farms- Dairy farming is largely a subsistence activity.
    • Dairy sector in India is organised only to the tune of ~35 per cent .(which is still better compared to fruits and vegetables sector where we see processing levels to be around 3-5 per cent.)
  • Quality
    • FSSAI (Food Safety and Standards Authority of India) pointed out in a survey that 70% of the Urban and 31% of rural supplies don’t meet standards.
  • Infrastructure
    • Indian markets with the greatest growth potential are also among the least developed in infrastructure and consumer awareness. Supply chain has become increasingly complex in cities with multiple retail outlets.

Government initiatives

  • Schemes/Programmes of Department of Animal Husbandry and Dairying
  • National Livestock Mission
    • to reduce the gap in demand and availability of feed and fodder
    • conservation and improvement of indigenous breeds
    • higher productivity and production in a sustainable and environment friendly manner
  • Rashtriya Gokul Mission (RGM)
    • for development and conservation of indigenous breeds through selective breeding in the breeding tract and genetic upgradation of nondescript bovine population
    • has 2 components
      1. National Programme for Bovine Breeding (NPBB)
      2. National Mission on Bovine Productivity (NMBP).
  •  Dairy Processing & Infrastructure Development Fund
    • To modernize the milk processing plants and machinery and to create additional infrastructure for processing more milk.
  • Dairy farmers have been included in the Kisan Credit Card programme
    • A zero risk scheme for banks as the diary cooperatives would deduct the loan installment from the sale proceeds of milk supplied by farmers and remit to the bank every month.
  • National Programme for Dairy Development
    • To create and strengthen dairy infrastructure for procurement, processing and marketing of milk and milk products by the State Implementing Agencies (SIAs) .
  • National Animal Disease Control Programme (NADCP)
    • For control of Foot & Mouth Disease and Brucellosis by vaccinating 100% cattle, buffalo, sheep, goat and pig population.
  • Other measures include
  • The NAIP (Nationwide Artificial Insemination Programme)
    • Under the programme, 9.06 crore artificial inseminations will be performed and is expected to lead to the birth of 1.5 crore high yielding female calves.
    • Consequently, 18 million tonnes of additional milk will be produced as average productivity will be enhanced from 1,861kg per animal per year to 3,000kg per animal per year.
  • Dairying was brought under MGNREGA to compensate farmers for the income loss due to Covid-19

Way forward

  • Increasing productivity- Appoint more AI technicians
    • Indigenous cows produce 3.01kgs of milk per cow per day, while the yield of exotic crossbred cows is 7.95kgs.
    • In August 2020, the department reported a requirement of 2.02 lakh artificial insemination (AI) technicians in India whereas the availability is only 1.16 lakh.
  • Ensure a Minimum Support Price for milk
    • in line with that of 24 agricultural commodities announced by the CACP
  • Milk Processing opportunities: 
    • Considering that by 2025, Indian milk production will grow to 270 MMT, companies will need to invest in processing infrastructure.
    • Quality-friendly technologies such as the Bulk Milk Coolers (BMC) that brings down the time taken to collect milk to about ‘45 minutes’ are needed.
    • Milk can be processed into a range of high-value-added products. This creates huge investment opportunities in the sector to the tune of $ 10 Billion.
  • Expedite approval of Kisan Credit Card loans
    • Out of the total 1.5 crore farmers in 230 milk unions in India, not even one-fourth of the dairy farmers’ loan applications had been forwarded to banks as of October 3, 2020.


When it comes to agricultural value chains that can simultaneously deliver on multiple development goals, few agri-products can rival dairy, which improves farmer livelihoods, creates jobs, supports agricultural industrialization and commercialization, and enhances nutrition for the masses.
Hence the required support should be provided to the sector to navigate this crisis period without further issues.

Leave a Reply

Join UNBEATABLES -PMI Batch 2022

Lead by IAS,IPS,IPoS Officers


PMI Batch 2022

Lead by IAS, IPS, IPoS Officers

%d bloggers like this: