Context: India through centre’s COVID relief package has ushered in agricultural reforms. This has also provided an opportunity to reorient the thinking on dairy sector.
Merits of Dairy Sector

• Leads to equitable income: Milch animal holding is far more equitable than land holding. About 85% of the total farmers are small and marginal. While they together own about 47% of farmland, they own about 75% of milch animals.
• Driven by Small and Marginal Farmers: Land prices in India are very high, which makes running large dairy farms unviable. So, dairy farming in India will continue to be dominated by small and marginal farmers.
• Leads to enhanced farmers’ health: Estimates suggest that 48% of the milk produced is consumed by dairy farmers themselves, and 52% is marketable
• Helps Achieve Policy Goals: The livestock sector—within it, dairy—plays larger role in the India’s goal to double farmer’s income by FY23.
• Potential for growth in Value Addition: By 2020, the share of Value Added Products like cheese and paneer, in the organised milk market is likely to increase to 30% from the current 23%.

Challenges of the dairy Sector

• Inadequate Formalisation of Dairy Processing: Of the total surplus, 20% is processed in the cooperative sector, 30% by branded private dairy companies, and the rest by the unorganised sector (milk for sweet shops, loose milk, etc).
• Regionally Imbalanced: UP, AP, Rajasthan, Gujarat, Maharashtra, MP, Haryana, and Punjab together account for 65% of the country’s milk production.
• Highly Skewed Infrastructure: The processing capacity, measured in terms of milk chilling infrastructure (cooperatives), is highly skewed, with Gujarat alone accounting for 46% of this.
• Out-dated Technologies: Most of the milk processing plants with cooperatives are old and need to be expanded or modernised
• Gaps in artificial insemination (AI) and breeding services: Against requirement of 200 mn doses of AI, only 115 mn doses are being produced.
• Increasing Feed Constraint as land is increasingly being put to non-agricultural uses. Percentage of gap to demand in case of concentrates, dry fodder, and green fodder is 39%, 36%, and 57%, respectively.
• Credit Issues: There are basically two challenges: flow of credit vis-a-vis the potential; and mismatch between regional flow of credit to the sector
• Inadequate Refrigeration Capacity: Refrigeration penetration in India is not more than 10-20% at the household and retail level—lower, in rural India (1-2%).

Suggestions

• Enhanced Funding: It is estimated that additional capacity of 75 lakh litres per day, modernising capacity of 75 lakh litres, and milk processing capacity of 12.5 crore tonnes per day can be augmented with an investment of Rs 5,000 crore
• Leveraging Technology: IoT and data analytics has to be harnessed for digitising milk production, procurement, processing, and marketing
• Increase Efficiency: Digitisation should also focus on solutions for herd management, smart milk procurement, cold chain management to increase logistical efficiency
• Secure and seamless: There has be enhanced penetration of livestock insurance to reduce risk and promotion of fintech for dairy farmers for seamless transactions.
• Regionally Balanced development: There is need to promote the dairy sector in newer areas especially in Eastern India
• Bridging the gaps in fodder requirements.
• Creating and modernising dairy infrastructure.