Welcoming the creation of a cabinet rank ministry for Animal Husbandry and Dairy, RG Chandramogan, Chairman and MD, Hatsun Agro Product Ltd, India’s largest private sector dairy company, said it was an indication of the Centre’s long-term commitment to the sector.

He felt the move would help the Centre in addressing the challenge of increasing farmers’ earnings given the impact dairy farming can have in raising farm incomes. Chandramogan had interacted with Giriraj Singh, Union Minister of Animal Husbandry, Dairying and Fisheries, when he was Bihar’s animal husbandry minister. Singh had toured Hatsun Agro’s facilities a few years back.

Outlining some of the expectations of the industry, Chandramogan said it is important that a level playing field be created between cooperatives and the private sector.

Private capacity surge

The private sector has been at the vanguard of capacity addition in the dairy processing segment for well over two decades. Since 1993 till a couple of years ago, the private sector created more capacity than cooperatives.

Industry experts point out that as early as 2011, the National Dairy Development Board (NDDB) had said it is estimated that the capacity created by the private sector “in the last 15 years equals that set up by cooperatives in over 30 years”.

Indeed, the private sector accounts for more than half the installed processing capacity in the country today, Chandramogan said.

Industry estimates peg private sector processing capacity at about 700 lakh litres per day against about 430 lakh litres in the cooperative sector.

At the same time, the private sector has been hindered by the subsidies extended to cooperatives, say industry sources. Subsidies, they assert, inhibit overall growth as private sector capacity utilisation is hit due to unfair competition.

For instance, States such as Karnataka and Rajasthan subsidise milk production. In Karnataka the subsidy is as much as ₹6 a litre, which is one-fourth of the milk price.

For instance, States such as Karnataka and Rajasthan subsidise milk production. In Karnataka it is ₹6 a litre, which is one-fourth of the milk price. This puts farmers in States that do not pay such subsidies at a disadvantage as they will earn less. Similarly, those supplying to private processors, even in Karnataka and Rajasthan, may not earn as much.

On the flip side, the private dairy firms may struggle to attract milk suppliers as they will be under pressure to match the cooperatives' subsidised rates.

It is important to introduce cost-efficient systems to support farmers, said Chandramogan, such as encouraging use of green fodder to reduce dependence on cattle feed, which is costly.

There is huge potential for dairy sector growth in the eastern region, including Bihar and Odisha, he added. This region can have major production centres that can meet the demand in more urbanised regions, he said.

While per capita milk availability in the northern and western parts of the country is over 300g a day, in the southern parts it is between 150-300 g and in the east it is less than 150 g, according to data published in Dairy India, a leading industry journal.

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