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COVE R ST ORY I N D I A: WOR L D L E AD E R I N MI L K
Indias share
in world milk
production.
Source: National Dairy
Development Board
17%
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n Hindu mythology there
are references galore to
rivers owing with milk.
Twenty-rst-century India
has albeit redened this
myth to emerge as the milk
bowl of the world. India
became the largest producer of
milk in the world, outstripping
the US, almost 15 years ago, and
today accounts for 17 per cent of
global milk production. According
to the Economic Survey 2012-13,
milk production has gone up
from 53.9 million tonnes (MT)
in 1990-91 to 127.9 MT in 2011-12.
In 2012-13, the country produced
more than 133 MT of milk.
The measure of Indias milk
success can be gauged from a gov-
ernment report of 2011-12 that put
the compounded annual growth
rate (CAGR) of milk higher than
the average exponential growth
of Indias population in the
period 2001 to 2011. Yet the best
is still to come. Milk demand in
the country is expected to rise
to 203 billion litres a day in a
decade, a 64 per cent rise over
the current 124.16 billion litres.
The National Dairy Development
Board (NDDB) has forecast milk
demand to peak at 200 million
tonnes by 2017.
But India is not just leading in
milk production. It is also the
largest consumer of milk in the
world. Commensurate with its
production capacity, the per capita
availability of milk increased
from 176 grams per day in 1990-
91 to 290 grams per day in 2011-12.
The world per capita availability
of milk in 2011 was 289.31 grams
per day. The milk economy of
the country has been growing
at a sustained pace and it would
not be premature to say that
India would achieve its estimated
requirement of 150 MT of milk by
the end of the 12th Five Year Plan
period (2012-17).
Maharaja
of Milk
Meticulous planning, scientifc
approach and sustained effort
ensure Indias continued run as the
worlds No.1 milk producing nation.
BY SANGITA THAKUR VARMA
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COVE R ST ORY I N D I A: WOR L D L E AD E R I N MI L K

Unique Endeavour
Behind the success of Indias milk sec-
tor is the story of more than 50 years
of a sustained government endeavour
to build this tiered enterprise, with its
roots rmly planted in rural India and
its fruits reaching worldwide. Indias
dairy movement is a well-documented
part of history, almost folklore, and
forms the basis of studies and discus-
sions on strategic farming movements.
India's almost 70 million dairy farm-
ers have a lot to look forward to, with
the government gearing its machinery
to tackle the rising demand for milk
domestically and worldwide. According
to Indian Dairy Market Report & Forecasts
20122017 by research agency IMARC,
driven by strong growth in both urban
and rural demands, the market for milk
products in India is expected to surpass
`981,586 crore (US$ 163 billion) by 2017.
As per the Economic Report 2012-13,
the government has invested in an in-
tensive dairy development programme,
strengthening of infrastructure for
quality and clean milk production, and
has devised a plethora of schemes for
assistance to cooperatives. It has insti-
tuted a dairy entrepreneurship develop-
ment scheme among other targeted
programmes for the sustained progress
of the sector. The National Project for
Cattle and Buffalo Breeding has been
under implementation since 2000.
In March 2012, a new scheme called
the National Dairy Plan Phase I was
launched. The programme is working
on improving productivity of milch
animals, strengthening and expand-
ing village-level infrastructure for milk
procurement, and providing produc-
ers greater access to the market in the
dairy sector. In Union Budget 2012-
13, the government provided further
impetus to the dairy sector announcing
the launching of a `2,242 crore (US$
37.23 billion) project with assistance
from The World Bank, to improve the
productivity of the sector.
From an annual growth rate of
barely one per cent in milk production
between 1951 and 1970 to around 4.11
per cent in 2013, the sector has grown
tremendously over the years. In the
last few years, the surge in demand
for dairy products is estimated to have
been between 6 to 8 per cent annually,
which is almost double the growth
rate of supply, according to a Global
Agricultural Information Network
(GAIN) report. The market size of the
dairy industry in scal year 2010-11 was
`292,067 crore (US$ 48.5 billion).
According to Gyan Research and Ana-
lytics, the market is growing at a CAGR
of 16 per cent, and is estimated to reach
`710,596 crore (US$ 118 billion) in 2017.
Whatever the numerical differences
in forecasts, one thing that stands con-
rmed is the Indian dairy industrys
continued rise up the growth trajectory
and the governments commitment to
unlock the potential of the dairy sector
through a second instalment of Opera-
tion Flood.
Budgetary Support of National
Dairy ProjectPhase I
Milk Production
in India in Last
Six Years
*IDA-International Development Association
(Subsidiary of The World Bank)
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
1
0
7
.
9
1
1
2
.
2
1
1
6
.
4
1
2
1
.
8
1
2
7
.
9
1
3
3
.
7
Estimate of Milk Production
(Million Tonnes)
`Crore
Component IDA*Credit GOI Share Total Outlay
A Productivity Enhancement 1027 114 1141
B
Village-based milk procure-
ment system for weighing and
testing quality of milk received,
and making payment to milk
producers
439 49 488
C
Project Management and
Learning
118 13 131
Total 1584 176 1760
Source: Ministry of Agriculture, Government of India
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I N D I A: WOR L D L E AD E R I N MI L K COVE R ST ORY
Operation Flood:
A Billion-Litre Idea
With more than 70 per cent of its
people residing in its villages, India had
a special agenda in strengthening its
dairy economy. Dairy farming effective-
ly puts the controls in the hands of the
milk producers eliminating the middle-
men, cutting down their dependency
on crop cultivation, subject to vagaries
of nature. Milk production becomes
a subsidiary source of dependable
income even for the marginal farmer
with one or two milch cows/buffalos.
As such, the founding fathers of the
dairy movement in India envisaged it
as an instrument of rural development
and prosperity. This vision has led to
the establishment of the largest milk
industry in the world with its unique
characteristics. It comprises largely
marginal and small farmers who own
70 per cent of the countrys bovine
herds. It is a strange peculiarity that the
Indian milk industry which accounts
for the worlds largest bovine herd,
comprises the typical dairy farmer who
milks fewer than ve milch animals at
his home. (Source: GAIN).
In 2013, most of the milk in the
country is still being produced by its
small, marginal farmers and landless
labourers. However, the movement had
widened to include more than 14.78
million farmers under its ambit of
1,48,965 village level dairy corporative
societies by March 2012 (Annual Report,
Department of Animal Husbandry,
Dairying and Fisheries, Ministry of
Agriculture, Government of India).
The governments interest in the
dairy industry dates back to the rst
Five Year Plan when modernisation
of the sector became a burning neces-
sity to bridge the demand-supply gap
for hygienic milk in the countrys
expanding urban pockets.Thus, dairy
development as a priority, though on
a small scale, was initiated during
195155. Despite introduction of some
schemes and incentives like the milk
schemes in city centres and Key Vil-
lage Scemes (KVS), the dairy sector
remained almost a non-starter with
total milk production reaching 18 MT
during the period. It was during the
2nd Plan period that the government
implemented focussed programmes
targeting production, marketing and
consumption of milk. The focus also
shifted to the establishment of village
level milk producers cooperatives and
by the end of the Plan period the coun-
try had made much progress. There
were 2,257 milk cooperative societies
operational and 77 milk supply unions.
The 3rd Plan nally saw the urban
orientation of the dairy movement giv-
ing way to a more realistic rural model.
The rural production centres were
connected with the urban marketing
centres through procurement links via
a network of producers cooperatives.
The states were brought into the net-
work with the establishment of Dairy
Development Department in each state.
In 1965, towards the end of the 3rd
Five Year Plan, the National Dairy
Development Board (NDDB) was
instituted at Anand in Gujarat, mark-
ing a landmark moment in the history
of dairying in India. This provided a
major llip to the dairy movement, as
the nodal agency would embark on
a reorientation journey of the dairy
sector which would change the course
of dairying in India by the next decade
(See box for NDDB Chairmans Perspec-
tive on page 24).
In 1970, India was to witness the
launch of the revolutionary Opera-
tion Flood or the White Revolution
modelled on the successful Kaira
District Cooperative Milk Producers
Union Limited (Amul) of Anand, in
Kaira District of Gujarat. Kaira District
Cooperative Milk Producers Union
became the rst formally registered
milk producers union of India in 1946,
and was later made famous by the
visionary, late Dr Verghese Kurien, the
milkman of India. The Anand model,
which linked the milkshed of Gujarat to
the marketing centres of Mumbai, pro-
vided the pilot for the establishment of
effective supply chain networks around
the country. Operation Flood was also
conceptualised by Dr Kurien, who was
the honorary chairman of the NDDB
and the Indian Dairy Corporation
(IDC), the funding and executing body
of the various programmes launched by
the former.
Operation Flood makes an interesting
slice of history and reveals much about
the legendary vision of Dr Kurien. The
1970s were a time when any edgling
dairy industry would have quailed
under the threat of the dairy surpluses
building in the much more advanced
dairy economies like Europe, as it
posed the threat of cheap imports. This
would have spelt a premature death
for the Indian dairy sector, which was
just about nding its feet. But not so
for Dr Kurien, who saw a million-dollar
opportunity in this threat. Thus, with
126,000 tonnes of skim milk powder
and 42,000 tonnes of butter oil to
nance it, post an agreement with
World Food Programme, Operation
Flood was agged off. In 20 years of
Up to 31st October
2012, plans of about
100
dairy
cooperatives,
with a total outlay of

`
2,745
crore (US$ 452.3
million), had been
approved by
NDDB under the
Perspective Plan
Source: Annual Report 2012-13, Department of
Animal Husbandry, Dairying & Fisheries, Minis-
try of Agriculture, Government of India
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COVE R ST ORY I N D I A: WOR L D L E AD E R I N MI L K
its existence, the programme spawned
many successful clones of Amulrst
the cooperatives and later, post the
liberalisation of the Indian economy in
1991-92, the private sector spin-offs.
Solid Turnaround
The 170 producers cooperatives that
are the result of this nationwide move-
ment have become successful brands
in their own right. From the leading
brand Amul of Gujarat Cooperative Milk
Marketing Federation Ltd, which has
pan-India presence, to Vijaya (Andhra
Pradesh Dairy Development Coopera-
tive Federation), Verka (Punjab State
Cooperative Milk Producers Federation
Limited), Saras (Rajasthan Cooperative
Dairy Federation Limited), Nandini
(Karnataka Milk Federation), Milma
(Kerala Cooperative Milk Marketing Fed-
eration Ltd), and Gokul (Kolhapur Zilla
Sahakari Dudh Utpadak Sangh Ltd),
most state cooperative dairies have a
statewide presence with some exporting
to neighbouring states and even coun-
tries. These dairy cooperatives together
account for the major share of processed
Minister of Bihar requested Dr Kurien,
Chairman NDDB, to take over the man-
agement of both the plants and help the
rural milk producers by ensuring their
smooth operation.
Dr Kurien accepted the challenge
and accordingly the management of
Patna Milk Plant and Cattle Feed Plant
were taken over by him on October 6,
1981, recounts Sudhir Kumar Singh,
Managing Director, Patna Dairy Project
(PDP). On December 15, 1981, the rst
pouch packets of milk rolled out of the
plant. The milk collection in 1981 was
a mere 5000 litres. Today, Patna Dairy
collects more than 3 lakh litres of milk
per day and markets more than 2 lakh
litres per day in Patna.
The success of the dairy in a tradition-
al town like Patna, in a state like Bihar
was not easy. It required building a
groundswell of public opinion through
inuence groups. We invited teach-
ers, doctors, school children, womens
clubs, nurses, among other opinion
builders, and organised plant visits to
dispel myths surrounding the dairy
process, says Singh. The media was
also used as a platform to educate the
masses, he adds. The per capita milk
MILKING PROGRESS: Small and marginal farmers with fewer than
fve cows underpin the success of the Indian dairy industry.
EQUAL OPPORTUNITY: The government emphasis on gender
inclusion in the dairy sector has resulted in womens empowerment.
liquid milk marketed in the country.
The story of dairy farming in Karna-
taka is that of grit and determination.
Karnataka Milk Federation (KMF) is
the second largest dairy cooperative in
India after Amul. Established in 1975,
it has, to its credit, brought prosperity
in even rain decient regions of the
state like Kolar-Chikkaballapur where
monsoon mostly plays truant. Yet the
area boasts of 1,674 milk cooperatives
that keep its rural economy vibrantly
alive.There are 12,000 dairies within
the ambit of KMF, scripting the success
story of its popular brand Nandini.
In fact, Amul and Nandini together
account for more than 50 per cent of
the total average milk procurement by
the cooperatives.
In 1981, Dr Verghese Kuriens inter-
vention saved Patna Dairy Project from
possible ruin. Today it would make its
saviour proud. The Bihar State Dairy
Corporation owes much of its success
to the architect of the dairy movement.
Established in 1977, with a dairy of one
lakh litres per day capacity and a cattle
feed plant of 100 MT per day capac-
ity, it ran into rough weather due to
poor management. In 1980, the Chief
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I N D I A: WOR L D L E AD E R I N MI L K COVE R ST ORY
consumption in the city which was a
low 105 gm has shot up to 182 gm per
person per day. Though lower than the
national average of 252 gm per day, it
is picking up fast, Singh is condent.
Patna Dairy now has more than 1,500
milk outlets in the city where milk is
available morning and evening.
Bihar today has six milk unions that
collect 18 lakh litres of milk per day and
market it through the milk federation
Bihar State Milk Co-operative Federa-
tion Limited (COMFED) under the
brand name Sudha. We altogether
have 15 milk plants in Bihar, three in
Jharkhand and three cattle feed plants
as well, Singh informs. The surplus
milk being produced under the umbrel-
la of COMFED is being supplied to
cooperatives in neighbouring states
like OMFED in Orissa, Mother Dairy
and Delhi Milk Scheme both in Delhi
and Dairy Development Corporation in
Kathmandu, Nepal. Recently, we have
also started marketing our milk prod-
ucts under our brand Sudha in Delhi,
informs Singh. We have 28 products
in our basket, but no doubt Sudha Peda
is the most popular, says Singh. PDP
is planning to take Sudha pan India
with marketing already begun in Delhi,
Allahabad and Varanasi.
The best change that the success of
the dairy project in Bihar has ushered
in is that it has stopped the export of
milch cows to other states. Earlier,
pregnant milch cows were exported
to West Bengal and other states. Now
they sell the milk to the cooperatives
instead. This has stopped livestock
drain from Bihar and opened employ-
ment opportunity at the village level,
Singh concludes.
It is due to such successful examples
that The World Bank summed up the
20-year Operation Flood programme
as an experiment conrming the rural
development vision. Operation Flood
has also been recognised as a replicable
and sustainable model of development
for other countries.
Fluid of Maximum Benets
Post Operation Flood, the Indian dairy-
ing sector came of age armed with tech-
nology, funds and numbers. The small
and marginal farmers of the country
having demonstrated their capability to
MOOD OF THE NATION: In states like Jharkhand, with a large rural
base, dairying is being promoted as an instrument of progress.
ONE UP: Private players have brought in advanced technology
to keep Indias dairy industry a step ahead of the rest.
Government approved
National Dairy Plan
Phase-I (NDP-I) in
February 2012, with a
total investment
of about

`
2,242
crore (US$ 368.27),
to be implemented
from 2011-12 to 2016-
17 to meet the project-
ed national demand of

150
million tonnes of
milk by 2016-17 from
domestic production
Source: Annual Report 2012-13, Department of
Animal Husbandry, Dairying & Fisheries, Ministry
of Agriculture, Government of India
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COVE R ST ORY I N D I A: WOR L D L E AD E R I N MI L K
assimilate mechanised processes and
adapt to the demands of an advanced
sector like dairying, were now riding
the success wave of the dairy coopera-
tive movement.
From being primarily a dairy import-
ing country, with commercial imports
of dairy commodities in 1950s and
1960s, comprising 50 to 60 per cent of
the dairy industry's total throughput,
India has today become the largest
exporter of dairy products. In 2012-13,
the country exported 87.82 thousand
MT of dairy products worth of `1,412.1
crore (US$ 234.5 million), accord-
ing to Agricultural and Processed
Food Products Export Development
Authority (APEDA). The major export
destinations for dairy products were
Bangladesh, Egypt, Arab Republic,
United Arab Emirates, Saudi Arabia,
Algeria and Yemen.
Indias journey up the ladder to No. 1
position could not have been possible
without the contribution of the private
dairy sector. At the time of de-licensing
of the dairy sector in 1992-93, the milk
production of the country stood at 58
MT. With the opening up of the sector,
a number of small and big private dair-
ies entered the space changing the con-
text of the market. In fact, it was esti-
mated that the capacity created by the
organised private players Like Hatsun
Agro, Parag Milk Foods, Chitale Dairy,
Modern Industries and Gopaljee Dairy
Foods, Tirumala Milk Products, VRS
Foods, Sterling Agro Industries, and
others in 15 years, outpaced the capacity
created by the cooperative movement in
30 years (Source: NDDB Annual Report
2010-11). The private dairies are also
behind the new technology driven dairy
movement that has overtaken India
with more value-added milk products
being produced.
R G Chandramogan, Chairman and
Managing Director, Hatsun Agro,
credits the founding father of the coop-
erative movement, Dr Kurien, for the
success of the private sector. Global
leadership of dairy industry was initi-
ated By Dr Kurien. His model of collect-
ilk is the single largest agricultural
commodity in value in the country,
valued at approximately `400,000
crore (US$ 66.42 billion). The
achievement in milk production is particularly signif-
cant because unlike developed milk producing coun-
tries which are in the temperate zone with a mild cli-
mate, India is a tropical country with a hot and humid
climate, not particularly conducive to milk production.
Also, unlike these countries where milk is produced
by a few thousand farmers with large herds, in India,
it continues to be produced by millions of small farm-
ers. Of the 150 odd million rural households in India, nearly half keep milch animals, which indicates
the signifcance of dairying as a source of livelihood. Milk contributes to about one-third of gross
income of rural households; in the case of landless households it is nearly half.
OPERATION FLOOD: THE GAME CHANGER
NDDB implemented Operation Flood in three phases between 1970 and 1996 with a total invest-
ment of over `1,700 crore (US$ 282.3 million). Operation Flood was launched to support an
ambitious nationwide programme for development of milk production through an extensive network
of village milk producers cooperatives which were federated to district unions which process and
market the milk. It was fnanced through a combination of food aid from the World Food Pro-
gramme (WFP)/European Commission (EC) and loans from The World Bank.
It was the frst programme in the world to use food aid for development. Gifted dairy commodi-
ties, i.e., milk powder and butter oil received as food aid played a twofold role. Firstly, the recon-
stituted milk from milk powder and butter oil enabled cooperatives to capture a dominant share of
the market for milk and secondly, the funds generated from the sale of commodities were used to
fund the establishment of the vast infrastructure required by cooperatives to link millions of farmer
producers with the market. More importantly, the food aid was monetised at prices at par with the
domestic market, which ensured that there was no adverse effect on the incentive for domestic
milk production. Operation Flood, in fact, laid the foundation for self-reliance in milk with commercial
imports of milk products ceasing by 1976.
By the end of Operation Flood, NDDB had provided technical and fnancial assistance to set up
15 state cooperative dairy federations, 170 district milk unions covering about 73,000 village dairy
cooperative societies and about 93 lakh milk producers. Dairy cooperatives were procuring about
110 lakh kilograms per day and marketing close to 100 lakh litres of liquid milk per day. Operation
Flood had supported the setting up of an aggregate processing capacity across the country of
about 190 lakh litres of milk per day, milk powder manufacturing capacity of close to 1,000 MT per
day and cattle feed manufacturing capacity of 5,200 MT per day.
The stimulus provided between 1970 and 1996 resulted in milk production in the country in-
creasing from 22 to 66.2 million metric tonnes. It also introduced modernisation in processes and
product innovations in many traditional and western milk products. Notably, Operation Flood made
dairying a remunerative occupation for millions of Indias rural people by linking them to a market.
By 1997, India became the largest milk producing country in the world.
Post Operation Flood, NDDB has continued to provide technical assistance and fnance to coop-
Towards a
Sustained
Growth Path
Dr Amrita Patel, Chairperson,
National Dairy Development
Board, on the agencys role in
Operation Flood and its vision
for India's dairy industry.
25
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I N D I A: WOR L D L E AD E R I N MI L K COVE R ST ORY
ing milk from fragmented millions of
farmers to augment a sizable volume
became the model for not only coop-
eratives but also to dairy corporates in
India. The initial model of Kurien was
to avert poverty in rural areas and pro-
vide nutrition to urban masses. Today,
it is working not only to avert poverty
but also to bring prosperity to the rural
farmer. The company that ventured
into the milk business in the year 1993,
physically handles 2.3 million liters a
day and is ahead of the next biggest
private dairy in India by 50 per cent.
If Hatsun is working with the farmer
to develop fodder in a scientic man-
ner to reduce his cost and enhance
protability that leads to prosperity, as
Chandramogan says, Chitale Dairy in
Pune prides itself on the technological
shift it has brought into dairying with
cloud computing, mobile technology,
business intelligence and RFID. Dair-
ies like Chitale and Hatsun are going
a step ahead by also venturing into
research and development aimed at
improving production performance.
Though Chitales entry into the dairy
sector in 1939 is older than the history
of organised dairy farming in India,
the credit for its modernisation goes
to the second generation family scion
Vishwas Chitale, CEO and CTO, and
grandson of founder Bhaskar Ganesh
Chitale. Chitale Dairy which processes
more than a billion litres of milk annu-
ally on its 250-acre farm in Bhilwadi vil-
lage in Maharashtra, is also pioneering
the concept of farmer-owned satellite
farms to whom it provides 25 per cent
of the cost and the technical knowhow.
Hatsun also provides a bouquet of
services to the small milk producers
like introducing them to banks for
nancing of milch animals, knowledge
sharing on modern methods through
training camps, seminars and discus-
sions and regular veterinary services.
India continues to be the largest producer of
milk in the world since the last 15 years. The
estimated milk production was about 133.7
million tonnes in 2012-13 and 127.9 mil-
lion tonnes in 2011-12
Source: Ministry of Agriculture, Government of India
Per capita availability of milk at the national
level increased to 290 gram per day in 2011-
12 from 260 gram per day in 2007-08
Source: Ministry of Agriculture, Government of India
India has the largest livestock population in
the world with 57.3 per cent of the buffalo
and 14.7 per cent of the cattle population
Source: Annual Report 2012-13, Department of Animal Husbandry, Dairying & Fisheries, Ministry of
Agriculture, Government of India
eratives to enable them to expand and grow
their operations. Today more than 149 lakh
dairy farmers are members of about 1.5 lakh
village dairy cooperatives and receive about
`21,500 crore (US$ 3.57 billion) annually
for their milk. NDDB has been encouraging
participation of women in dairy cooperatives
and nearly a third of the members in village
dairy cooperatives are women.
SHOWING THE WAY AHEAD
NDDB is a statutory body set up by an
Act of Parliament (NDDB Act of 1987). Its
support to the dairy farmers community is
largely through the dairy cooperative net-
work. The body assists cooperatives to pre-
pare investment plans and provides fnancial
assistance to dairy cooperatives for various
activities. Developing human resource has
been a major activity of NDDB. It also assists
milk unions in promoting hygienic milk pro-
duction processes through capacity building
and infrastructure upgrades.
IN MISSION MODE
Mission Milkthe next revolution is the
symbol for the National Dairy Plan (NDP)
Phase I, to indicate the signifcance of the ef-
forts required to sustain India not only as the
largest milk producer in the world, but also in
meeting the countrys requirements through
domestic production. The NDP will put in
place a scientifc approach and systematic
processes to take the country on a path to
improving the genetics of milk producing ani-
mals in a consistent and continuous manner.
With incomes rising, the demand for milk
is also growing much faster and has been
projected to reach 200210 million tonnes
by 2021-2022. NDP, fnanced by The
World Bank and Government of India, is a
multi-state initiative. It will work to increase
the coverage of more milk producers by
the organised sector comprising both the
cooperative and private.
India, as the largest milk producer in the
world, has demonstrated that it is possible
to be self-suffcient to meet the countrys
growing requirements. It is now working
towards sustainable and stable growth.
(As told to Sangita Thakur Varma)
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COVE R ST ORY I N D I A: WOR L D L E AD E R I N MI L K
All these efforts are directed at keeping
the production pipelines stable.
There are smaller farms like Vaishno
Devi Dairy Products, Parag Milk Foods,
Prabhat Dairy, Dodla Dairy, Creamline
Dairy Products, SMC Foods, etc., that
produce between 510 lakh litres of
milk per day.
In 2012, Hatsuns turnover was
around `2,200 crore (US$ 400 mil-
lion). It plans to take two to three of its
milk products to the national market
soon. Efforts have already started,
informs Chandramogan. The company
that ventured into exports seven years
ago has exported its products to around
38 countries including Canada and
Singapore. Today in India we are in
a position to produce milk products
to match international standards.
Response in the international market
has been very good and they continue
to patronise us, he adds.
The transition of the Indian consum-
er to hygienically packaged milk is due
to the efforts of the dairy sector. Pack-
aged milk offered a standard product
for the customers and the milkman at
the gate was also becoming extinct,
says Chandramogan. This transition,
however, happened gradually over a
period of 30 years. The private sector
also contributed signicantly especially
in South India, taking the packaged
milk to customers in small towns too.
Hatsun played the lead role in this
transition to small towns, adds Chan-
dramogan. Today, Hatsun is the largest
seller of packaged milk with a volume
of 1.3 million liters per day in India.
The success story of Parag Milk Foods
was written by its boss perspicacious
business vision. In 1992, when the milk
cooperative dairies and even the new pri-
vate entrants on the dairy horizon were
still grappling with issues like handling
milk production and establishing supply
chains, Parag Shah entered the fray with
an investment of `1 crore (US$ 166,334).
Not one to succumb to the herd men-
tality, Shah soon carved out a niche
for himself in the value-added milk
products segment like skimmed milk
powder and started exporting butter,
milk powder and butter oil to 47 destina-
tions. In 2008, he literally said cheese,
venturing into producing it on a large
scale, when India was just waking up to
the smell of the hand-tossed pizza with
mozzarella topping. The gamble paid off
with private equity funds following the
scent of success.
In 2008, Motilal Oswal Venture Capi-
tal Advisors invested `60 crore (US$
9.98 million) in private equity funding.
In September 2012, IDFC Alternatives
invested `155 crore (US$ 25.78 million)
for 22 per cent stake, and Motilal Oswal
diluted 20 per cent of its stake in favour
of IDFC making three times the prot
on its initial investments in this deal.
Last heard (May 2013), International
Finance Corporation (IFC) was planning
to invest `102.20 crore (US$ 17 million)
in Parag Milk Foods expansion plans
(Source: DealCurry). The total project
cost for expansion of its distribution and
procurement networks and production
of value-added products like cheese,
UHT milk and whey is valued at `196.59
crore (US$ 32.7 million). IDFC has
already funded `83.57 crore (US$ 13.9
million) through its equity investment.
Parag Milk with a processing capacity
of two million litres per day and a plant
in Manchar, Maharashtra, and a second
plant in Palamner in Andhra Pradesh,
is on a high growth trajectory curtsey
its diversied product portfolio. It is
also planning to expand its footprint
further down south with another plant
in Andhra Pradesh. Its brand names
Go, Gowardhan and TopUp are fast
gaining popularity. There are other
private dairies like Prabhat Dairy, a
rather small Pune player that handles
600,000 litres of milk per day collected
from 50,000 farmers at its factory at
Srirampur that attracted PE investment
to the tune of `100 crore (US$ 16.63
million) in 2012 from Rabo PE and
Abraaj capital (Source: DealCurry).
Indias `33,200 crore (US$ 5.5 billion)
dairy business throws up different suc-
cessful models. Keventer was among the
pioneering urban processing dairies in
Indialike Polson and Express Dairy. In
1984, Edward Keventer Ltd, the 101-year-
old company, changed hands to become
Keventer Agro Ltd. In 1994, the new
entity branched out into the dairy busi-
ness as Metro Dairy, Indias rst dairy in
public private partnership (PPP).
Metro Dairy was set up in 1996,
Global leadership of the dairy industry
was initiated by Dr Kurien. His model of
collecting milk...became the model for not
only cooperatives but also corporates.
R G Chandramogan, Chairman & Managing Director, Hatsun Agro
27
www.ibef.org JUNE-JULY 2013
I N D I A: WOR L D L E AD E R I N MI L K COVE R ST ORY
Metro Dairy is
Indias frst dairy
in the public
private partnership
mode, with the
West Bengal Milk
Federation owning
47 per cent of the
equity shares. It
is funded by The
World Bank.
Mayank Jalan
Managing Director,
Keventer Group
The total urban
demand for milk
in Jharkhand is
50 lakh litres per
day. The total
production of
of all dairies...
including private
ones adds up to
20 lakh litres.
Mukul Prasad Singh
Project Director,
Jharkhand Dairy
Project
The transition
of Indian
consumers
to hygenically
packaged milk
is due to the
efforts of the
dairy sector...
over a period of
30 years.
R G
Chandramogan
Chairman & Managing
Director, Hatsun Agro
Milk is the only
commodity
that has to be
collected twice
a day, every day
of the year...
cooperatives are
the only logical
system for the
dairy industry.
Late Dr Verghese
Kurien
Father of Indian
Dairy Movement
We invited
teachers,
doctors, children,
women's
clubs, nurses...
and organised
plant visits to
dispel the myth
surrounding the
dairy process.
Sudhir Kumar
Singh
Project Director,
Patna Dairy Project
funded by The World Bank under the
Operation Flood programme, informs
Mayank Jalan, Managing Director, Kev-
enter Group, adding the West Bengal
Milk Federation holds 47 per cent of
the equity shares. With a capacity to
churn out 4,00,000 litres of milk per
day, Metro Dairy sells 2.5 lakh litres
of milk per day and around 44 lakh
litres of ice cream per annum. It has
a market share of around 22 per cent
of the liquid milk market in Kolkata
Urban Agglomeration and 35 to 40 per
cent of the ice cream retail market in
Greater Kolkata. The consumption of
liquid milk in Kolkata is estimated at
around 13.5 lakh litres per day. Of this,
11.5 lakh litres per day is catered to by
the organised sector. This requirement
excludes the requirement of milk for
the sweetmeat industry, informs Jalan.
The mechanical engineer from
University College, London, and an
alumnus of London School of Econom-
ics has ensured that for the last few
years the company has been returning
prots. The accumulated prot cur-
rently stands at `30.4 crore (US$ 5.06
million). The net worth of the company
is `41 crore (US$ 6.82 million). The
company has paid back to the West
Bengal Milk Federation through divi-
dend, commission and service charges
nearly 400 per cent of the initial equity
invested in the company, Jalan says.
The company turnover in 2012-13 was
around `250 crore (US$ 41.06 million)
and Prot after Tax was `9.9 crore
(US$ 1.63 million). The company is
now in the process of setting up an ice
cream plant in Malda in North Bengal
to manufacture ice cream/frozen
desserts, with an initial capacity of
producing 36.5 lakh litres per annum,
says Jalan sharing Metro Dairys future
plans. Metro Dairy procures all its
liquid milk from the West Bengal Milk
Federation, which is the apex body
of the district level milk unions. The
district level milk unions have various
village level societies of cooperative
milk producers, who have animals
producing the milk, he says, explaining
the cooperative structure that is the
bulwark of this PPP company.
Dairies like the Jharkhand Dairy
Project (JDP), late comers on the dairy
scenario, are determined not to miss
the bus. Mukul Prasad Singh, Project
Director, JDP, says, The total urban
demand for milk in Jharkhand is 50
lakh litres per day. The total produc-
tion of all dairies in the state, including
private ones, adds up to 20 lakh litres,
and JDP produces a fraction of its
capacity, a mere 3 lakh litres. With 8
plants, JDP has a capacity to produce
20 lakh litres per day, informs Singh.
The state dairy markets its products
under the brand name Medha. Given
the demand, it can be concluded that
Jharkhand is thirsting for milk. Oppor-
tunities such as these are waiting to be
milked in India, with the government
providing the right impetus.
With inputs from Kumar Vikash and S Ojha
(Based on Secondary Research and Interviews)