Dairy farming has been a traditional source of livelihood and it has a deep connection with India’s agricultural economy. India has emerged as a leader among the milk-producing nations especially after Operation Flood and the growth of milk cooperatives in the country.

Importance and achievements of dairy sector for India

• India is the largest producer of milk. It is India’s biggest agri-produce (165.4 MMT in 2016-17).
•  India has one of the largest stocks of cattle and buffaloes: more than 50 percent of the world's buffaloes and 20 percent of its cattle
• 70 per cent of those earning their livelihood from milk are women.
• In the year 2014-17, milk production increased by 16.9% ; income of farmers increased by 13.79% to Rs. 33 per liter as compared to Rs. 29 per liter during 2011-14.
• It contributes a large share of the agricultural gross domestic product (GDP).
• It has a crucial role in overcoming nutritional deficiency.
• Dairying provides a source of regular income, whereas income from agriculture is seasonal. Thus it minimizes risks to income. There is some indication that areas where dairy is well developed have less incidence of farmer suicide. Livestock is a security asset to be sold in times of crisis.
• Dairying provides a source of regular income, especially to the small and marginalized farmers. In addition, livestock is a security asset to be sold in times of crisis.

However, dairy sector is facing crisis today. Milk procurement prices are falling in several milk-surplus states in western and northern India due to factors like:

1. Overproduction which is a problem due to eclipse of small dairy farms by the rise of mega dairies.
2. While dairy farmers are suffering from low procurement prices, consumers are paying a high price for milk.
3. Infrastructural issues and policy lacunae coupled with predominance of unorganised sector.
4. India’s SMP (Skimmed milk powder) exports plummeting due to falling global SMP prices. This is attributed to China and Russia stopping import of SMP and factors like EU scrapping its milk quota in 2015 which regulated the production of milk.

Over production is a worldwide problem due to eclipse of small dairy farms and the rise of mega dairy. While dairy farmers are suffering from low procurement prices, consumers are paying a high price for milk. Though overproduction is a major issue, it is compounded by various infrastructural and policy lacunae which need to be cured. Also, only about 20 percent of dairy sector is organised. Organised sector has more capacity to bear losses. The recent slide in milk prices affected mostly the unorganised sector. Lack of cooperatives and linkages with food processing industry has thus, compounded the problem of dairy sector.

Suggestions to tide over supply demand mismatch include:

• Enhance the demand by creating a buffer stock of SMP to improve the market sentiment and increase the price line.
• Dairy products may be introduced in mid-day meal schemes. An example of the Karnataka government’s Ksheera Bhagya scheme in which free milk is given in government-run schools may be replicated. Targeting the 115 aspirational districts identified by NITI Aayog to fight malnutrition will improve demand of milk, which will benefit both the producers and consumers.
• Introducing SMP to the futures market platform.
•  Bring SMP under the Merchandise Exports Incentive Scheme like butter and ghee to encourage large private players in the industry.
• Incentivise investments in value-added products.
• Modernize the informal dairy sector.
• Making dairy sector globally competitive by increasing in the productivity of its milch animals.
• Putting strategies in place strategies to capture world market through investment, mergers and partnerships across the globe.

With the above measures in place, the challenges can be turned into an opportunity to bring in a sustainable dairy sector in India.