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Innovating Institutional Support for Sustainable Production of Dairy Industry in the Changing Paradigms

Ashish Kumar Shambhvi
Vol 7(5), 50-59

The Indian population and the agricultural sector is at the cross roads of industrial evolution with unorganized rural farmer at one side to organised industries on the other. The demand for the agricultural products specially the livestock products has increased in the last few decades and is expected to increase over the coming time. As a result the agricultural practices in India are becoming more intensive with the passage of time. However, with the limited resources, the environmental and health concerns have started acting as the limiting factors. In the current scenario there is the challenge is to find ways of increasing productivity to meet the food security, along with sustainability. This paper reconnoiters the dairy industry as the base for the study. The government as the central agency is often struck in terms of developing policies, programmes, quality control parameters etc. due to the wide diversity prevalent in the country. Scientifically and economically linked integrated crop/livestock systems can play a significant role in improving milk security and the environmental issues but will require innovative and appropriate technological developments, institutional arrangements and supportive policies so as to fulfill that potential in the coming decades.

Keywords : Agri-commodity Value Chain Sustainable Development Dairy Industry Institutional Building Farmers India


India is an agrarian economy, characterised by small land holdings and mixed farming systems prevalent in most parts. Livestock is an integral part of the farming system and plays an important role in national economy and socio-economic development of rural households. Livestock contribute about 50% of the income of poor households in crop–livestock systems in agriculture-based states of India, (Deshingkar et al., 2008). The milk and milk products form the major part of the produce with large ruminants like cattle and buffalo playing central role in production. Post the 1970’s; the Indian dairy industry has seen a tremendous improvement in efficiency of production. The operation flood laid the foundation of investing in technology and establishment of organised supply chains. The intensification of the industry resulted in the increase of milk production from the 22.8 million tonnes in 1971 to 135.6 million tonnes in 2013, bringing India to top in terms of total milk production world-wide [FAO, 2015]. However, still in the current scenario the potential pressures and associated challenges with food security, health issues, economic growth and environmental issues an urgent need exists for a critical assessment and innovation to meet the future needs of the Indian dairy industry. This calls in for the new technological and policy innovations in the agriculture sector. For an innovation in the agricultural it requires an alignment of technical, societal, structural and administrative dimensions. This requires a setting up of platforms for all the stakeholders to come on board. Mostly till now the approach has been top down with the research and analysis done in the institutions based on their perception and then its extension to the fields. The other way around is usually not considered. There has been limited analysis on how the co-evolution of innovation processes takes place. But in the last decade the policy makers and innovation scholars have shared an increasing concern to operationalize innovation due to the collective action of stakeholders engaged in co-producing innovation.

This paper addresses this gap and conceptualizes the role of different stakeholders in this process of co-evolution. In this study, the dairy development program is used as a platform for constructing the role of different partners to further enhance productivity and improve this sector. All the stakeholders are not always able to acclimatize adequately to emerging issues and their response time varies. Thus, this forces to consider these platforms dynamically and for the mechanisms that reinforce feedback, learning and adaptive management in innovation processes. Additionally, without the strong governmental support for the innovation co-production processes the efficiency factors reduce effectively and is localised to their geographical limits. This study will enable the stakeholders to better comprehend the issue. Scientific research in this domain in India is scant; therefore, paucity of literature pertaining to this appears to be a virtual limitation to further elucidate these issues.

Indian Livestock Sector: The Journey So Far

India is bestowed with the largest livestock population world-wide (Fig. 1). India is holding the top most position of milk producer in the world post 2000, with the total milk production reaching 135.6 million tonnes in 2013 at the growth rate of 3.97 % (FAO, 2015) (Fig. 2). The major restraints for the dairy sector were low per capita production of the animals, large population, limited and degraded resources such as pastures, fodders and the lack of post-harvest facilities (Kumar, 2015). The agrarian sector in India brought a new dawn for human survival against shortage of grains through Green revolution but it then witnessed a kind of stagnation or a decline in growth rate whereas, the dairy sector is still showing a promising alternative to the traditional agricultural practices.



The journey to the top milk producer dates back to the time of independence when there was an acute shortage of milk and milk products. The lower milk production was recognised as a threat by the Indian government as a result “National Dairy Development Board” was established in 1965. The key objectives at that time were to replace the exploitation of the farmers with empowerment, tradition with modernity stagnation with growth and development of Indian rural poor with the dairying (NDDB). The milk output of the country has increased substantially after 1970 with the implementation of the Operation Flood (OF) Programme. The establishment of semen stations and frozen semen supply chains during the fourth five-year plan [1969-74] laid the foundation of cross breeding in cattle with exotic dairy breeds. Operation Flood is defined as “one of the world’s largest rural development programmes” (World Bank). The central objectives of the Operation Flood have been establishment of milk cooperatives which on one hand procures processes and markets the milk and milk products but on the other hand provides services, management and technological inputs to the members. “Operation Flood can be viewed as a twenty-year experiment confirming the Rural Development Vision” as per World Bank Report 1997c (FAO). Before Operation Flood, the erratic supply chains with huge margins to middle man existed. The margin gap between producers and consumers was reduced and organised supply chains of milk producers and smallholder producers to modern processing plants effectively incorporated millions of small farmers into clean milk marketing channels (Kurian, 2000). From the market’s perspective, a new supply chain is established between the consumers and the produces.

By the turn of the century, dairy emerged as an industry. Kurian stated, “During the last three decades, dairy cattle and buffalo production has undergone a major transformation with dairy industry becoming a viable tool to diversify the agricultural production” (FAO, 2006). The individual, private and the government agencies started to recognise this as a promising industry within the agriculture sector. However, still the dairy industry in the country is highly variable with socioeconomic variations of the community, geographical location, size, population, species, breeds, etc. playing the key roles. The influences of the consumer preferences can be traced back to the end of the 1990’s with significant interest of agencies in establishing linkages between milk, milk products, and health. The key aspects of changing lifestyle pattern, rapid migration to the urban areas, high purchasing power and higher acceptability of ready to eat food products played the significant role. The connexions of human health with milk and milk products were established and the hazards can be categorised into three main categories: biological, chemical and physical (Tipu et al., 2007). In India, the adulterants and/or preservatives are the major health hazards, particularly for infants (Larson et al., 2009). The international developments have significant effects on India food industry as well due to Codex, FSSAI, etc. The overall health status of the milk is challenged with the new discoveries. There has been a transition of milk safety concepts from basic analysis such as microbiology, toxicology, etc. to the highly sophisticated analysis challenging the whole production chain from farm to consumer. Various studies have reported positive correlations of milk consumption with stroke (Hu et al., 1999), coronary heart disease (Ganmaa, 2012), endometrial cancer (Larson, 2006), ovarian cancer (Song, 2013) and prostate cancer (Qin et al., 2007, Kenny M. 2013). The industrial evolution of dairy from unorganised to as highly sophisticated one with the participation of various private agencies has resulted in the stiff competition. But still all forms of supply chains can be traced in the country (Fig. 3). The consumers have more options with the range of the products, quality, etc.


The quality assurance with high prices is not an issue nowadays for the producers. The origins of the new findings such as organic farming, flavoured milks, etc. are continuously affecting the ongoing evolution of the dairy science and industry.

Debate and the Discussion

The Indian population and the agricultural sector are at the cross roads of industrial evolution with unorganised rural farmer on one side to organised organic dairy farms coming on the other, with the well-developed supply chains of raw materials such as in Gujarat and Punjab, etc. to large unorganised dairy hubs of milk products such as Saharanpur, Aligarh, etc. Similarly, there are extremes in terms of consumers varying from uneducated masses with reduced exposure to availability and to well-educated consumers with sharp selection of products considering various underlying factors such as brand value, organic vs. inorganic. The government as the central agency is often struck in terms of developing policy, programmes and quality control parameters due to the wide diversity prevalent in the country. The multiplicity of agencies involved in the sector because animal husbandry is a state subject further complicates the situation. The agencies involved vary from livestock development boards to animal right wings and then to processor or market development boards to the quality control agencies such as FSSAI, etc. To cover different aspects and to cover the whole supply chain in this study the stakeholders involved are divided into different categories (Fig. 4).

  1. At the farm level
  2. The farmer


Around 70% of the Indian population is associated with the agriculture sector either directly or indirectly. With low average land holdings, the mixed farming system is most common system of farming in the country. Over a period of time there is a trend of movement of farmers with low returns moving to the urban places and working as the labour force. This is often associated with the increasing problem of the informality in the industrial areas and big cities. The forces behind increasing farm size and economies of scale have long been referred to as agriculture’s “technology treadmill” (Cochrane, 1958). Milk is a commodity with properties difficult to distinguish one producer from another. This, along with many producers competing for the sale of milk, means that in today’s market, little possibility exists for farmers to influence the price they receive. Thus, reducing the cost of production is considered the primary management strategy available to producers for any increase profits. This is most of the times not possible for the poor Indian farmer.

The Animal

The animal welfare issues as per our classification are required to be covered here but to establish its linkages to the consumer pattern it is discussed later.

The Processor

Currently the processors vary from individual small level dealers, milk societies, cooperatives to private MNC’s. Due to the open competition, most of these have targets of maximum production of milk throughout the year to cut the processing costs and to maximize the profits. The intensification of animal agriculture has resulted in disruptive effects on the environment, food availability, rural populations, biodiversity and animal welfare (Fraser, 2008; Croney and Anthony, 2011), resulting in intense criticisms of food animal industries by social, animal, and environmental protection movements. One argument used to defend the intensification of animal agriculture is that increased efficiencies will allow improved production and thus, better potential to feed 9 billion people in the world by 2050 (Capper et al., 2009; Hall et al., 2009; Godfray et al., 2010a). One point that is to be considered here is that market forces play very important role in determining the sustainability issues with “Profit margins” as its central measure.

The Consumer and the Citizen

The society and to be specific the ‘population’ who is at the receiving end of the supply chain plays two roles simultaneously: one is of consumer and other is of the citizen. Consumer issues determine the individual preferences of the products for the self-consumption or the family whereas as a citizen it can determine the policy issues, NGO’s perspectives, common practices of animal welfare, etc. The increasing awareness among the consumers about the food safety and adulteration issues calls for verification and check mechanisms to be put in place. Indian dairy supply chain in the current scenario is lacking a major backbone in terms of transparency and traceability. With the animal welfare issues gaining importance among the population, the same can influence the acceptability of the products and hence, its economics in the market. The surveys on the consumer attitude clearly indicate that food safety is the highest priority (Vanhonacker et al., 2010; Ingenbleek and Immink 2011). But while purchasing, the consumer purchasing behaviour indicates that point-of-sale price is their highest priority (Harvey and Hubbard, 2013), suggesting a trade-off between price and attributes. Dagevos and Sterrenberg (2003) state that relationships between consumer attitude and purchasing behaviour are complex and may be best understood by distinguishing between the individual’s role as consumer and as citizen. The citizen is the role we play when participating in attitude surveys. The survey-taking persona is rarely in a position, when buying food, to consider all factors needed to make a rational and fully informed, socially responsible decision (Ingenbleek and Immink, 2011). Further evidence of this disconnect between the response of the same person in surveys compared with in-store purchasing information is provided by Hoogland et al. (2007), who argue that consumers rarely understand and value package label describing food production standards, even when the label information was in line with their personal values. The problem due to the cheap price of milk with the upper class of society can be linked to the wastage issues, which makes it easy for these consumers to just buy another carton of milk but the actual production effort and energy behind that is never paid. Thus, consumer awareness and participation also acts as a central factor for the production chain.

Animal Welfare

The animal welfare awareness has impact not only on the farm production but also on the consumer purchasing behavioural patterns. The disease, out of production animals, low milk production, injury, poor growth rates and reproductive problems are not only bad for the animal but also for the viability of the dairy and the economics of the farmer. However, only focusing on animal functioning is not sufficient; animal welfare goes beyond health and includes concerns about naturalness (e.g., access to pasture) and affective states of animals (e.g., pain; Fraser et al., 1997). Important welfare concerns include the high prevalence of lameness, calf-feeding practices, the fate of bull calves, pain mitigation during disbudding or dehorning, cow-calf separation, and restrictive housing (e.g., individual calf pens and tie-stall housing; Vanhonacker et al., 2009; von Keyserlingk et al., 2009). A growing body of evidence also exists that society places considerable value on cattle having access to the outdoors (i.e., pasture), where they have fresh air and freedom to roam naturally (Ellis et al., 2009; Boogaard et al., 2011). The past decade has seen the emergence of several very successful streams of research addressing practical problems in the care and housing of dairy cattle, but practice on farms is sometimes slow to adjust to or adopt findings of this research. The innovative small scale agencies confirming the registration of farmers and the animals to prevent the exploitation of the out of production animals in terms of slaughter houses and stray cattle etc. can be effective measure in India where beef is banned and the problem of stray cattle is on the rise. But this dimension of the dairy industry is rarely explored and demands for immediate attention which is lacking attention from a long time.


The agricultural industry in India has undergone a lot of structural and functional changes in the last few decades but considering the existing potential and the future demands of growing population there is a lot that can be done. Considering the dairy industry, the earlier ‘one cause-one solution model’ will no longer be going to serve the ultimate purpose but the complete dynamic analysis of all the stakeholders is required to be taken into account from the animal to the consumer. The overall limitation of the resources in terms of land, water, etc. will always play the key role in determining the basis of the future policies. Scientifically and economically linked integrated crop/livestock systems can play a significant role in improving milk security and the environmental issues but will require innovative and appropriate technological developments, institutional arrangements and supportive policy so as to fulfill that potential in the coming decades.


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