PRICING OF MILK AND MILK PRODUCTS IN INDIA : Calculation of milk payment based on fat and two axis pricing policy of Dairy Cooperative Society (DCS)

PRICING OF MILK AND MILK PRODUCTS IN INDIA : Calculation of milk payment based on fat and two axis pricing policy of Dairy Cooperative Society (DCS)

The Annual growth rate of Milk production in the country has come down to 3.83% in the year 2022-23 from 5.77% during the year 2021-22. However, as per the latest Official Statistics released by Food and Agriculture Organization (FAOSTAT) of the United Nations, India maintains the position of the largest producer of milk in the World.

Diseases like Lumpy Skin Disease (LSD) was the main reason behind the slower growth of Milk Production in 2022-23.

In the fiscal year 2022-23, there was a 4% increase in India’s milk production, reaching a total of 230.58 million tonnes. Over the span of the past nine years, India has observed a 58%  surge in its milk production.

Uttar Pradesh contributed the highest share of milk production at 15.7%, followed by Rajasthan (14.44%), Madhya Pradesh (8.73 %), Gujarat (7.49 %) and Andhra Pradesh (6.70 %). As per the numbers, the highest annual growth rate was recorded by Karnataka (8.76%) followed by West Bengal (8.65%) and Uttar Pradesh (6.99%).

 

There are three approaches to fix price of milk and these are:

1. Pricing on pro-rata fat basis: Price of milk is fixed in proportion to the fat content of milk considering the minimum SNF content. This method is good for buffalo milk.

2. Pricing on two axis basis: Price of milk is fixed in proportion to two main constituents of milk i.e. fat & SNF.

3. Pricing on equivalent fat unit basis: The SNF units are converted into equivalent fat units in proportion to the relative market prices of fat and SNF.

Pricing of milk on fat basis

There are two important information to be known in calculating price of milk on fat basis. One is price of fat fixed by the Cooperative Society and another, fat percentage of milk. Suppose, the price of fat fixed by the Society is Rs 370 per kilogram and the milk brought by farmer contains 6 per cent fat.

Price of milk (Rs/litre) = {(fat percentage/100)*quantity of milk}x price of fat = {(6/100)*1}x370 = 0.06 x 370 = Rs 22.2 per litre

The above calculations have been done without considering the weight-volume difference. Based on specific density of heavy cream, one litre of fat is equal to 0.978 to 0.994 kilograms depending upon temperature. The exact calculation of pricing should consider this factor. Accordingly, the price of milk (Rs/litre) = {(fat percentage/100)*quantity of milk} x 0.978x price of fat = {(6/100)*1}x 0.978 x370 = Rs 21.71 per litre

Pricing of milk on two axis basis

The co-operatives, fixed the milk price on the basis of two axis pricing policy (i.e.) considering the both fat and SNF (solid not fat). In this method, the prices of fat and SNF are calculated separately. There is no uniform pattern followed throughout the country to give weightage to SNF fat value. The price of fat & SNF are fixed by the Milk Unions depending on the price of ghee (butterfat) and skim milk powder (SMP). Based on the relationship between the prices of these two products and quantity of milk required to prepare a given quantity of SMP, in practice, price of SNF is taken 2/3 rd of the price of fat i.e. if price of fat is Rs 370 per kilogram, the price of SNF is considered 247 (2/3*370). The union had fixed standards in the pricing of milk. Let us suppose that the fat percentage in the given sample of milk is 4.00 and SNF percentage is 8.00.

The price of milk will be computed as:

Price of milk = {(percentage of fat/100)*quantity of milk}x price of fat + {(percentage of SNF/100)*quantity of milk}x price of SNF. = {(4/100)*1}x 370 + {(8/100)*1}x 247 = Rs 34.56 per litre.

Had the SNF constituent not considered, one litre of milk with 4 per cent fat could have fetch price only equal to Rs 14.80 per litre. The estimation of fat contents in milk is easy and therefore, it is done at the Cooperative Society level or village level. The determination of SNF in milk is difficult and time consuming. Hence, SNF contents are either consider at specified minimum level or estimated at Union level/District level.

Milk prices are generally determined by the forces of demand, supply and the price policy. The milk price, both production and selling, varies from region to region and from state to state commensurate with the production pattern and seasonal as well as regional variations in the country. The lean and flush season production ratio varies as high as 30: 70. As stated earlier, both the milk producers & the consumers price difference are equally high between the milk surplus region/ states to the milk deficient region/ states in the country. In India, ghee, milk powder and especially skimmed milk powder are the major price drivers.

Role of Milk and Dairy Products

The milk and dairy products have a prominent place in the global food products market. Due to factors like rising concerns about vegetarianism, health advantages of milk and dairy products over non-vegetarian foods, and ecological balance, the use of milk and dairy products is increasing globally. This has resulted in increased worldwide production of milk. Countries like India, Ukraine, and Brazil are emerging as leading exporters of nonfat dry milk product category. The milk and dairy products market of the world is poised for long-term growth due to recovery in world dairy prices. The projected rise in the prices for most of the dairy products is an important factor driving the growth of the global milk and dairy products market. However, extreme volatility in prices can also hamper the industry’s growth. Also rising prices of milk and dairy products are a potential pressure point for food inflation.

It has been observed that between 2005-06 to 2023-24, the prices of essential commodities have gone up by nearly 92 per cent. Prices of milk and milk products have also witnessed a sharp increase. On the contrary, the per-capita income of an average Indian in the metros has gone up by 68 per cent. Once milk prices go up, the prices for milk-based products like butter and cheese also go up. The prices further impacted by the festivals season which sees a spike in the demand and consumption of milk based products, especially sweets. Over the years, milk procurement costs have increased significantly, as costs of all major inputs for milk production have increased. Other input costs like packaging material and transportation have also increased. Major players in dairy processing industry say that, though they have been revising prices over the past two years to counter the increasing costs, the rise in MRP (Maximum Retail Price) has not been adequate to cover the rise in cost of milk production. In order to partially recover the costs and sustain operations for the rest of the year, they are forced to revise the price of some of the milk variants.

Pricing of Milk and Milk Product

Indian dairy sector has made remarkable progress over the last few decades. The co-operative movement, especially Operation Flood, has been an important driver of this progress and has played an important role in facilitating the participation of smallholders in this expanding sector. Despite three decades of cooperative movement in India, however, a large proportion of milk and milk products in India continues to be marketed through the informal or unorganized sector. Although the share of organized market has steadily increased over the last three decades, the informal sector comprising middlemen, private milk traders and direct sale from producer to consumer, still accounts for nearly 80 percent of marketed milk and milk products in the country. Trends indicate that, the informal sector will continue to play its dominant role in milk marketing in the foreseeable future.  Further, nearly 85 percent of all the milk that enters the national exchange economy finds its way into the urban areas. It is therefore the urban demand that is the main source of cash for rural milk producers.

It is estimated that of the 4700 cities and towns in India, only 1578 are served by an organized milk distribution network. Only 35% of the milk marketed is packed, of which 94% is in pouches. The informal market thrives on poor willingness of consumers to pay the extra costs of formal processing and packaging. The informal market usually does not incur those costs and hence the market margins between farmer and consumer could remain smaller.  This also implies that the informal market agents can afford to offer higher prices to farmers and lower retail prices to consumers.

Two-Axis Price Policy

The determination of price of milk in an informal market is purely qualitative and depends partly on local demand and partly on the presence of organized buyer in the region. On the contrary, in organized sector, milk receives price on the basis of some specified quantitative parameters. These parameters usually constitute percentage of Fat, Solid-not-Fat and Protein in milk. In India, double axis or two-axis system of milk pricing is commonly followed in organized milk market, which was first recommended by Royal Commission on Agriculture, constituted in 1919 by Government of India and re-suggested by Milk Pricing Committee in 1972. The two axis pricing policy on the basis of fat contents and SNF for fixation of procurement prices of milk has been considered scientifically rational.  The minimum SNF content desired for cow milk is fixed at 8.5% and that for buffalo milk is 9% for accepting milk at the collection centres of these dairies and the price is mainly determined by the percentage fat content of the milk. Incentives for better quality milk and penalties for not meeting minimum acceptable standards are prevalent in the organized dairy sector in India.

The important problem in milk procurement pricing using this system is two sources of milk viz. cow and buffalo milk. This problem has arisen due to the Fat and SNF contents in the cow and buffalo milk, buffalo milk contains more fat percentage whereas cow milk contains low fat and the price of buffalo milk is always higher than that of cow milk. Most dairy plants have some kind of a purchasing policy, which have some kind of relationship to what the plants get from the sale of their milk product. Different State Governments has adopted different methods of payments and prices. Some pay less for cow milk, some pay the same purchase price for both milk and take a calculated risk that some adulteration of buffalo milk may be passed on as cow milk. Product factories generally pay strictly on the basis of fat.

Consumer preferences reveal that the market for value added milk products is small and most buyers are unwilling to pay for processing of any kind. Formal processes not only spend on quality control, packaging and transportation but also on trade taxes and are thus able to market to a niche segment only with their relatively high price. Liquid milk accounts for more than 80% of the total value of milk production.  A variety of milk products (ghee, butter and cream being the important ones) that are produced, partly due to economic considerations and mainly to utilize the unsold milk. They, generally, are ill-equipped for the purpose and report difficulties in marketing the by-products. Therefore, the prices of milk products are spatially discriminated to capture considerable share in the consumers payment.

Indian Society of Agribusiness Professionals in its comparative analysis of the producers share in consumers rupee across different marketing channels reports that the producer gets maximum share (82-100%) when they directly sell to the consumer. However, direct sales are not always feasible for small farmers as some of them are locked by the middlemen who offer them credit for the purchase of inputs and animals. Even in high production areas such as Haryana, sales to a marketing agent/middleman are one of the common disposal mechanisms. At an aggregate, the producers get lowest remuneration when they sell the milk to the cooperatives (50-75%). For example, in the early 1990s,  Orissa Milk Federation(OMFED) offered lowest price compared to any other channel in Orissa, the price realized by farmers from informal sector was Rs. 9.5 to Rs. 10 per litre, whereas cooperatives paid between Rs. 8.00 and Rs. 8.50. Further, the middlemen who bought from them made instant cash payments whereas it took 12-15 days to realize payments from the cooperative system.

We often complaints about the rise in prices of milk and milk products. It is not right to single out only the prices of milk and milk products in isolation. The rise in prices of milk and its products has to be compared with the rise in prices of other products. It is also imperative to consider the models that will include input prices, technology and government policies rather than only considering two axis pricing policy, in milk procurement price determination. Due to composition of cow and buffalo milk there are two prices and also there are inter-state and inter-regional differences in produces as well as consumers prices of milk and milk products. It is, therefore, important to understand the dynamics of various marketing channels, including buying and selling behavior of buyers and sellers, price movement and the ability of different market agents in reaching out to the producers as well as consumers. In order to ensure adequate supply of milk and milk products for consumers at reasonable prices, there is a need to examine the impact of important milk marketing channels in terms of economic efficiency so as to be able to work out strategies and policy measures to improve the overall pricing mechanism for milk and milk products.

MARKETING OF MILK AND MILK PRODUCTS: AN ECONOMIC ASPECT

There has been a considerable progress in the overall production in the dairy sector. Without a proper marketing, the country would not attain the expected rate of growth in dairy farming. Marketing is a flow of goods and services from producer to consumer and users. In this process the activities include moving the goods from the point of production to the point of consumption.  The activities like creation of time, place, form and  utility are involved. According to Philip Kotler, marketing as a human activity directed at satisfying the needs and wants through exchange process. The performance of the trade activities involved in the flow of goods and services affect the marketing efficiency and producers share in the consumer rupee. A marketing system consists of different milk marketing channels. That marketing channel is considered good in which producer get the highest share in consumer rupee and consumer share is highest in producers rupee. The interest of the  Producer is to get the highest possible returns from their milk. Between them, there are marketing intermediaries or middlemen who perform various marketing functions like transporting and retailing. All the intermediaries/middlemen are also interested to make highest profit from the milk business. The present lesson provides information on the economic aspect of marketing of milk and milk products through a empirical study conducted in Rajasthan state.

Important Milk Marketing Channels in India

 

Sr. No.	Milk Marketing Channels	Number of intermediaries
1	Producer � Consumer	0
2	Producer � Halwai/tea shops � Consumer	1
3	Producer � Milk Vendor � Consumer	1
4	Producer � Milk Vendor � Contractor – Consumer	2
5	Producer � Dairy Co-operative � Milk Plant � Consumer	2
6	Producer- Milk trader-Processor-Retailer -Consumer	3
7	Producer-Dairy Cooperatives-Milk transporter-Processor-Retailer-Consumer	4

 

Costs Involved in Marketing of Milk and Milk Products

Cost components

The marketing agencies made capital investment on building, transportation vehicles, and dairy equipments and incurred various variable costs time to time with respect to human labour, purchase of milk, fuel, repairs, electricity etc. Therefore, the expenditure on various items was classified according to their fixed and variable nature.

 Fixed costs

Fixed costs are those costs, which are incurred whether or not the production is carried out or do not change with the level of production. These costs include interest on fixed capital and depreciation on buildings and equipments. In addition to this actual expenditure incurred in obtaining the driving license and road tax was taken into account while calculating the fixed costs.

 Variable costs

Variable costs include cost of raw milk actually purchased, fuel cost as expenses incurred on petrol for the vehicle, electricity was used for running electric equipments, light etc. and expenses on labour used.

 Price Spread

The economic efficiency of marketing system is generally measured in terms of the price spread of an agricultural commodity. Smaller the price spread, greater will be the efficiency of marketing system. Price spread was calculated as the difference between the price paid by the consumer and price received by the producer farmer.

  Producers Share in Consumers Rupee 

It is the price received by the farmer expressed as percentage of the retail price. It is calculated as

P_s = (P_f / P_r) * 100

Where,

P_s = Producer�s share in consumer�s rupee.

P_f = Producer�s price.

P_r = Retail price.

Marketing Efficiency

Marketing Efficiency through different channels was compared by using the Acharya�s formula.

MME=FP/ (MC+MM)

Where,

MME = Modified measure of marketing efficiency.

FP    = Price received by the Producer.

MC   = Marketing cost

MM = Marketing margins.

 Disposal Pattern of Milk                     

Availability of efficient milk marketing facilities ensures the progress of dairy enterprises. Specially, in case of highly perishable commodities like milk, since it requires quick disposal or conversion into milk products at the farm level. Disposal pattern of milk is demonstrated in Table . In the study area, both organized and unorganized sectors of milk marketing were functioning.  In the organized sector, three co-operative societies were functioning and in case of unorganized sector, milk vendors, halwaies and contractors were the main marketing agencies involved in milk business. It can be observed that in overall 79.77 per cent of total marketed surplus was disposed through the unorganized sector, whereas 20.23 per cent of the total marketed surplus was disposed off through the organized sector.

 Disposal of milk to different milk marketing agencies (In percent)

Category of households	Unorganized sector					Organized Sector  (Milk Cooperative Society)	Total
	Milk vendor	Halwai	Tea Shop	Consumer	Total
Small ( 1-2 milch animals)	76.90	3.15	2.89	2.89	85.83	14.17	100.00
Medium ( 3-6 milch animals)	55.69	2.99	9.58	0.60	68.86	31.14	100.00
Large ( 7 and above milch animals)	61.05	10.10	6.25	0.00	77.40	22.60	100.00
Overall	67.86	5.03	5.29	1.59	79.77	20.23	100.00

 

Out of the total marketed surplus, 67.86 per cent was marketed through vendors, 11.91 per cent through halwai, teashops and consumers taking together. Among the different categories of sample households, medium herd size category marketed their 31.14 per cent of the marketed surplus through the co-operative sector, while only 14.17 per cent of the marketed surplus of small herd size category was marketed through the co-operative societies. This indicates that still the sample households are mostly dependent on unorganized sector for disposal of their milk.

Performance of Milk Marketing Channels

In the study conducted, Investment pattern of intermediaries, cost and returns, marketing efficiency were worked out only for following channels:

1. Producer � Consumer
2. Producer �Halwai � Consumer
3. Producer � Milk Vendor(A) � Consumer
4. Producer- Milk Vendor (B)- Contractor- Consumer

The other active channels were dropped because of time constraint on the part of researcher.

Producer share in consumer rupee

It is the price received by the farmer expressed as a percentage of the price paid by the consumer. Table 25.3 shows the share of producers and marketing agencies in the consumer�s price in all the four channels.

In channel-I, as producer sold direct to the consumer, producer received complete amount of consumer�s price. Hence, producer�s share in consumer�s price was100 percent. In channel-II, producer�s share was 76.51 per cent, whereas halwai�s share accounts for 23.48 per cent. In channel-III, the producer�s share was 75.92 per cent and the share of milk vendors was accounted for 24.07 per cent. In channel-IV, the producer�s share (67.54 %) was found lower than other channels. The share of milk vendor-B and contractor was found to be 12.30 per cent and 20.15 per cent, respectively. Average price received by the producer in channel I, II, III and IV is Rs. 12.68, Rs. 11.40, Rs. 11.25 and Rs. 10.71 per litre, respectively, whereas consumer paid Rs. 12.68, Rs. 14.90, Rs. 14.82 and Rs. 15.85 per litre in channel I, II, III and IV, respectively. Producer�s share in consumer rupee was observed highest (76.51 %) in case of channel-II after the producer-consumer channel-I (100 %).

Table 25.3 Share of producer and various agencies in consumer�s price in different channels

Agencies	Marketing channels
	Channel- I	Channel- II	Channel- III	Channel- IV
Producer�s share (%)	12.68 (100)	11.40 (76.51)	11.25 (75.92)	10.71 (67.54)
Halwai	–	3.50 (23.48)	–	–
Milk Vendor-A	–	–	3.56 (24.07)	–
Milk Vendor-B	–	–	–	1.95 (12.30)
Contractors	–	–	–	3.19 (20.15)
Consumer�s price (Rs.)	12.68	14.90	14.82	15.85

  

�Note: Figures in parenthesis indicate share of milk marketing agencies in consumer rupee.

 Price spread  

This refers to the difference of price paid by the consumer and price received by the producer. It interprets that smaller the price spread higher the efficiency of marketing system.

Table  shows the price spread in different channels of milk marketing. The data shown in the table reveal that price spread was zero in channel-I. It was found lower in channel-II (3.50) in comparison to channels �III (3.56) and channels-IV (5.15). It can be said that channel-II was more efficient among different agencies of milk marketing. In channel-II, marketing margin was found lower than channel-III. However, in channel-II, the producer received higher price.

Marketing cost, marketing margin and price spread in different channels

(Rs. / Litre)

Particulars	Marketing channels
	Channel- I	Channel- II	Channel- III	Channel- IV
Net receipt to producer	12.68	11.40	11.25	10.71
Marketing cost	–	1.58	1.54	2.55
Marketing margin	–	1.92	2.02	2.60
Consumers price	12.68	14.90	14.82	15.86
Price spread	–	3.50	3.56	5.15

 

  Promotion of milk and milk products

The fourth �P� of the marketing is promotion. Certain key questions associated with promotion are:

�         Where and when the marketing messages are to be provided to the target market?

�         How to position the product?

�         Which is the best promotional mix?

�         What promotional mix is adopted by the competitors and how does that influence the choice of your promotional mix?

These are just a few of the questions that can help in building a promotion campaign. Advertising is one way to promote a product and can be accomplished through a multitude of media outlets. Various media outlets used for advertising are radio, television, newsprint, magazines, signage, and the Internet. However, advertising can be expensive and even cost prohibitive for small companies in some situations.

Building relationship with local media people and encouraging them to write information stories about the business or product can also be very helpful. The marketer should keep the media informed of any special activities associated with the product or business. Participating in various fairs like India International Trade Fair, Dilli Haat, Kissan Mela, and Dairy Mela etc. is a great way to get consumers to try the product, and retailers generally like any activity that encourages customer traffic. Promotion is all about the product exposure and brand awareness. Marketers need to be creative and be visible on repeated occasions in order to make the customer aware of the product.

The information on disposal pattern of milk in the study area revealed that in the unorganized sector, the milk vendors were dominating and collecting 67.86 percent of the total marketed surplus whereas in organized sector, milk producers co-operatives societies procured only 20.23 percent of total marketed surplus. This indicates that the unorganized sector was dominating in collecting the surplus milk. There is a general impression that the unorganized sector exploits the milk producers. The channel were taken into consideration for comparison where at least one agency involved in milk marketing and thus the producers share in consumers rupee was highest and the  price spread was observed lowest in case of channel-II, hence, channel -II was considered  the more efficient than channel III and IV. Channel-II was the most efficient channel in comparison to the other channel where milk-marketing agencies are involved.

Among different milk marketing agencies milk vendors were preferred by the households as they pick up milk form the door step and advances loan to the producers while halwaies were preferred because of maintaining a good relation with households and higher price was found to be the main reason of preference for both dairy cooperative societies as well as for direct consumers.

 SYSTEM OF MILK PROCUREMENT FROM RURAL MILK PRODUCERS                                                                                                          

India is a largest milk producing country in the world. Milk production in India during the last two decades is increased from 53.9 million tons in 1990-91 to 112.5 million tons in 2009-10. Consequently, per day per capita availability of milk has also increased from 176.9gram (g) to 263.9 g during this corresponding period.  Milk in the rural India is produced in the scattered villages where 70 percent of the milk is produced by the resource poor households like landless laboures, marginal and small farmers. Therefore, collection of milk from the scattered farmers, majority of them are having 2-3 milch animals is a challenging task. Processing is an important component in the value chain of perishable commodities. Among the agricultural commodities, milk is highly perishable and need either to be immediately chilled or transformed from raw product into processed products.  The perishable nature of milk is a major limitation for the milk producers. Milk producers had to sell their milk to private companies through middlemen. To eliminate the middle men from the milk marketing system a programme on the advice of Sardar Vallabhbhai Patel was formulated in the year 1946. The milk producers of Kaira district in Gujarat, registered the Kaira District Cooperative Milk Producers Union, and was started, now popularly known as AMUL. Therefore, the co-operative movement gained momentum. Impressed by its socio-economic impact suggested replicating the AMUL model across India. Thus National Dairy Development Board (NDDB) born in 1965.

Under the Operation Flood Programme launched by NDDB, Indian dairy sector went through a paradigm shift. The main component of the programme involved:

�         Organizing dairy cooperatives at the village level,

�         Creating the physical and institutional infrastructure for milk procurement,

�         Processing, marketing and production enhancement services at the union level and establishing dairies in Indias major metropolitan centers.

The organized modern sector is handling around 20 million litres per day, in more than 400 dairy plants making India the hottest milk market of the world. India is the largest milk producer in the world but only 20% of its milk production is being processed by the organized sector. Thus, about 80% of the total production is still in the unorganized fold. In order to boost their milk procurement, many dairies have setup societies or collection centers in the rural areas. The society network has reduced the role of the unorganized doodhiyas (milk vendors) in milk procurement as also protected the interest of the producers in the villages. This has assured a remunerative price and market support to the producers.

Sectors of Milk Procurement from Rural Areas

 Organized sector

�         Milk Supply Chain Model: Milk Producer�s Cooperative Societies.

 Unorganized sector

�          Milk Supply Chain Traditional Unorganized Dairying System (Vendors, Halwaies, Direct consumers, Contractors).

 Procurement of Milk by the Organized and Unorganized Sectors

After milking the animals, milk being a perishable good, it is to be immediately cooled, boiled or dispose off to the milk marketing agencies. In the present system, milk is procured from the rural milk producers by the milk cooperative societies in the Organized system of milk marketing and the milk vendors, halwaies, creameries, contractors and direct consumers, the agents of unorganized sector. The agencies of unorganized sector like vendors, creameries halwaies etc., collect milk from the rural milk producers from their farms, whereas in case of organized sector, the producer have to go to the milk collection centres established by the milk cooperative societies.

Due to organizational or economic difficulties, it may not be possible to cool the milk on the farm. In areas far away from the dairy plant it may be troublesome to collect milk and take it directly to the plant. In such cases, especially if there are many small suppliers, it is preferable to take milk first to a collection point, and then transport it from there to the dairy plant or milk collection centre.

Can collection

Milk that is available in cans, whether on the farm or at the collection point, can be picked up and transported by many convenient means of transportation (bicycles, small barrows or trucks). The cans should be protected against the sun, both while they are at the roadside awaiting collection and during transportation. It is advisable to use insulated, or even refrigerated trucks to transport cooled milk in cans over long distances and under high ambient temperatures. When there are many individual suppliers, there are many different types of milk cans, providing logistic and cleaning problems. It is, therefore, advisable to use standard shape milk cans with a smooth surface.

Bulk collection

Milk available from the farm in bulk, for instance from farm cooling tanks, should also be picked up in bulk. It is not a good practice to use cans to transport milk that is already available in bulk (storage) tanks, because there is an extra risk of contamination. Furthermore, the temperature of milk in cans is more difficult to control than milk in bulk, and filling, emptying and cleaning of milk cans demands much labour and is costly affair. Truck-mounted tanks or road tankers can be used for the transport of milk in bulk. The tanks should be insulated and may be covered by a shield to protect against strong sunshine. On the farm, or at the collection centre, the loading hose from a milk transport truck is connected to the outlet valve on the storage tank, and the milk is pumped over. Pumping is stopped as soon as the cooling tank has been emptied, thereby preventing air from being mixed into the milk. The tanker is fitted with a flow meter and pump so that the volume is automatically recorded. In other cases, the storage tank has to be calibrated to make dip-stick measurements reliable. The tank of the bulk collection vehicle is divided into a number of compartments in order to prevent the milk from slushing around during transportation.

 Milk collection points and centres

In scarcely-populated areas, or areas where individual suppliers are far away from the dairy plant and difficult to reach, milk has to be transported over long distances. Transportation to the dairy plant will also take much time. In these cases, it is advisable to collect and cool milk in a milk collection centre (MCC) before transportation takes place.

The difference between a collection point and a MCC is mainly based on cooling and size. A milk collection point can be a small, central place where small suppliers can deliver their milk. The reception capacity is likely to be between 50-500 litres a day in cans or milk containers. There is no cooling equipment present at the milk collection point, so the milk should be collected and brought to the MCC within two hours after milking. At the MCC, there is always cooling equipment and, in most cases, quality testing facilities are also available. The milk must be collected and cooled to <4C not later than three hours after milking has been completed.

The traditional system of milk collection in the dairy cooperative societies included mainly to accept milk by

�         Volumes,

�         Carrying out fat testing by Gerber method and

�         Entering the milk Fat and SNF data manually in the registers.

This at that times resulted in unreliable data, possible malpractice leading to loss of fat and thereby eroding the confidence of the members. In order to avoid such issues, a unique system to automize milk procurement operations of village milk cooperative society was developed.

The Automatic Milk Collection Station is an integrated unit, combining different functions of a milk collection center, such as measuring the weight, fat content and providing the price output of the milk poured in the center.

The equipment also helps the milk co-operatives/ milk collection centers in maintaining summary of milk collected and supplied together with the rate on a daily, monthly and yearly basis. This state-of-the-art equipment operates both on battery and main electricity line and is able to process and record 120-150 milk collections per hour. The system comprised of an Electronic Milk Weighing Unit, the Electronic Milk Tester and Data Processing Unit.

Low cost, energy-efficient, environment friendly smallholder enterprise is a better option for the entrepreneur. Milk quality is a serious constraint, especially for the small dairy holder. Lack of institutional support vis–vis supply chains are affecting the growth of the smallholder dairying. Lack of accessibility to the benefits of research/education/ manpower system by the smallholder. Milk production and processing should commensurate as well as easily accessible to the smallholder. Smallholders are prone to higher financial risk due to unaffordable high cost funding and poor price realization.

�         Milk cooling requires an adequate supply of electricity and water. These are not always available on the farm and sometimes can only be arranged at relatively high costs.

�         Even though electricity and water may be available, the volume of daily milk production may be too small to justify a cooling system, and it would be too expensive to cool a small amount of milk on the farm and also too expensive to collect it. Due to regulations, smaller amounts of milk are sometimes cooled on the farm, but this milk is then expensive to transport. In such cases, it is possible to transport the cooled milk in an insulated vessel to a collecting point, where a tanker collects milk from several suppliers.

�         Bulk collection of milk on farms not only requires a supply of water, electricity and a certain daily production of milk, but also good road access for milk transport trucks.

�         If a dairy intends to introduce bulk collection of cooled milk in areas with many low producing farms (where the milk is not cooled), substantial resources are required.

 

MILK COLLECTION SYSTEM AND PRICING POLICIES

In most of the developed countries, production of milk is confined to rural areas, while demand is mostly urban in nature. Hence, the milk has to be collected and transported from production points to processing including chilling centers and distributions points in cities.

In rural India, milk production is largely a subsidiary activity to the agriculture in contrast to organized dairying in Western countries. Small farmers and landless labourers usually maintain 1-3 milch animals. As a result, small quantities of milk are produced, in a scattered manner all over the country. This situation makes the task of milk collection complex.

With the growth of the organized dairy industry in India, a trend towards establishing modern farms has gained momentum for milk production with a herd of 100-300 cows/buffalo in line with the practice adopted in advanced countries. These farms have the facilities of machine milking and bulk milk cooling.

Milkshed

It is the geographical area from which a city dairy receives its fluid milk supply. The allocation of definite milk sheds to individual dairies for the purpose of developing the same is now being considered in India.

 Rural Milk Collection

 Undertaking extensive surveys in the milkshed area to establish a dairy plant

Availability of milk at various collection points is ascertained based on

• The number of animals
• Future potential of milk availability, and
• The presence of the competitors

Route planning

• Taking into account milk availability,
• Road access to collection points and their distance from the site of the dairy plants.

Planning the location of the primary collection and chilling centers

Type of Systems

In India, four systems of milk procurement (viz., Direct, Contractor, Agent and Co-operative systems) are popular. The organized sector with 575 processing plants and milk product factories in the Co-operative, Public and Private sectors has not captured major share in the milk trade which is still dominated by the traditional sector. It has been estimated that about 67% of total milk production is marketed, out of which 51% is the share of traditional channels and remaining 16% is through the organized sector. The low capital demands of traditional systems make it hard to replace. The organized dairies collect milk through one or combination of the following systems:

 Direct system

In this system, organized processor (Public, Co¬-operative or Private) collects milk directly from the producers by establishing village procurement centers.

Contractor system

The processors purchases milk from the contractor according to the terms of contract such as quality, quantity, price, etc.

Agent system

The processor appoints agents to procure milk in particular area. Payment for the milk is made directly to the producers while the agent gets the commission.

Co-operative system

At the village level, the farmers form a co-operative society, which establishes the milk collection centres’. The society collects milk twice a day and delivers it to the milk collection centres where the milk is weighed, tested and the price paid to farmers. The payment is based on fat content or fat + SNF content in the milk. The village society supplies/sells milk to its own District co-operative dairy plant. It transports milk in cans by trucks or through insulated road milk tankers, preferably via a chilling centre. Besides milk collection, the society also provides the technical input services such as the A.I, veterinary aid; concentrated cattle feed and fodder seeds. They also give counselling to the society members to enhance milk production.

Chilling Centres/Bulk Milk Cooling Centres

If the dairy plant is far away from the collection centre, then the collected milk is first brought to a centralized chilling centre/ bulk milk cooling unit. Here, milk is cooled to 4°C and stored in insulated storage tanks of 5000-20,000 L capacity. Subsequently, the chilled milk is transported in insulated Road milk tanker to the dairy plant. The transportation of milk from the chilling centre to the dairy plant usually takes place once a day.

 Efficiency of Systems

Each system has its own merits and demerits. The efficiency of any system can be measured through analysis of various indicators like:

• Regularity in milk collection
• Efficiency of milk collection in lean months to the milk collected in flush months
• Quality of milk procured
• Cost of milk procurement

 Problems of Milk Procurement

In order to make plants financially viable and sustainable, the procurement system has to be such that the plant runs efficiently. The principal problems in milk procurement which have a direct bearing on capacity utilization and operational efficiency are well recognized. The major problems listed below demand managerial skills to ensure adequate milk supplies to dairy plants, throughout the year:

• Perishable nature of commodity, improper cleaning of milking vessels, hind quarters of animals, udder of the animal and the barn.
• Commitment for lifting small surpluses of milk from thousands of farmers.
• Wide fluctuations in milk output based on seasons.
• Procurement of milk from farmers – members and non-members of the co-operative societies, problem of payment of price and sharing of inputs.
• Lack of infrastructural facilities like cooling at village level, unreliable electricity supply, non-availability of spare parts of machinery. Due to these about 2-5% of milk received is C.O.B. positive especially in summer.
• Poorly developed roads and transportation systems cause undue delay in milk procurement
• Cost of chilling and transportation is high.
• Procurement problems are more specific to hilly regions, drought prone areas, tribal areas, forest, etc.
• Quality of raw milk; chemical and microbiological hazards; cleaning of milking utensils and sanitation of milking areas.
• Problem of adulterants, neutralizers, preservatives, pesticides, antibiotics and other additives in raw milk.
• Unhealthy competition among vendors, contractors, co-operative milk unions and other agencies engaged in milk procurement; administrative demarcation of zones under MMPO for each plant is of no practical help.

Pricing Policy for Raw Milk

The price of raw milk determines the level of profit, so it plays a crucial role in encouraging milk producers’ to produce more milk per animal and per household. Productivity, composition and marketable surplus of milk vary from animal to animal, season to season and place to place. A good pricing policy for raw milk collection has to take care of three variations as given under.

 Seasonal variation

This is due to seasonality in calving, availability of green fodders and climatic stress. From the pricing point of view, there are four seasons:

• Flush – November to February
• Transitory to lean – March and April
• Lean – May to August
• Transitory to Flush – September and October.

Compositional variation

Fat and SNF are two major constituents of milk which are considered for price fixation. The ‘2-axis pricing policy’ gives importance to both fat and SNF; the per Kg (rate) price of fat and SNF are fixed in that ratio at which these occur naturally i.e. around 2/3 of fat per kg price for each kilogram of SNF. This type of pricing discourages adulteration. Basic price is fixed for basic composition and for each 0.1 additional value, bonus is added and for shortfall deductions are made.

Spatial variation

Price of agricultural commodities varies from region to region. Milk producers near cities get more price than those located far off. Procurement cost of milk can be minimized by getting more milk from nearby areas or obtaining milk from existing milk shed areas.

Rational milk pricing policy

• A guaranteed price and market to the producers’ throughout the year
• A regular supply of wholesome milk at a reasonable price to the consumers
• An attractive margin of profit to the milk processors and product manufacturers

 Fixing the price from producer’s viewpoint

The price should be related to the cost of milk production. The system must ensure a fair margin of profit to the producers. Due consideration has to be taken about seasonal variations in production (supply) and demand, consumer’s price index based on market trends.

Fixing the price from milk processor’s viewpoint

Price fixation should consider the following:

• The stage of operation of the plant
• Plant capacity utilization
• The market objective of the plant
• Consideration of the size of the population that is to be covered by the milk scheme
• Distribution of people in different occupational and income groups that are to be served
• Total cost of transportation, processing/manufacturing and distribution

 Pricing Systems

Various pricing systems functioning in the country for milk procurement are given below:

 Pricing on fat content

A very large section of dairy industry is buying the milk on fat basis, disregarding the SNF content of milk. This is practiced by most private dairies. The advantage involves discouraging adulteration with water or separated milk or, mixing of cow milk with buffalo milk. A disadvantage of this system is that it discourages production of cow milk. The price paid per kg of fat was Rs. 425/- in 2011.

 Pricing on volume or weight

This method is also known as flat rate. It saves time and is simple to calculate but encourages adulteration i.e. watering or skimming. It is popular in the unorganized sector.
 Pricing on total milk solids

The traditional milk traders generally price the milk on the basis of total milk solids. They consider the yield of Khoa to be produced from the milk to be purchased. This system encourages partial skimming or adulteration with cheaper non-milk solids.

 Pricing on species of milch animal

In this system, consideration is given to the species of animal from which the milk is obtained i.e. cow or buffalo. Normally buffalo milk fetches more price than cow milk. This system encourages the adulteration of buffalo milk with water or cow milk.

Pricing as per cost of milk production

The price should be related to the cost of milk production and ensure a fair margin of profit to the producer. It should take into account the seasonal variation in production and demand.

 Pricing according to the use of milk

This practice is followed mainly for milk products. Milk procurement for a specialized dairy product such as cheese requires selection of raw milk by avoiding mastitis, colostrum, late lactation, and antibiotic-free milks. The milk should be free from detergents, sanitizers, pesticides, insecticides, aflatoxins, mycotoxins, heavy metals and even off-flavours.

Two-axis pricing of milk

Liquid milk plants have a differential pricing system for flush and lean months based on the fat and SNF content of milk, with provision for the payment of a premium for a higher fat and SNF content than the specified standard. According to this pricing policy, the price of milk is calculated by fixing a predetermined rate for fat and SNF. This system discourages adulteration and provides a common pricing approach to both cow and buffalo milk. The requirement by Food Safety and Standards Rules (FSSR) – 2011 (erstwhile PFA) for cow milk is 3.0% – 4.0% fat and 8.5%-9.0% SNF while those for buffalo milk 5.0%-6.0% fat and minimum 9.0% SNF throughout country. This is done with a view to encourage the milk production through high-yielding indigenous and cross breeds and to give adequate incentive for production of cow milk. In this context, National Dairy Development Board (NDDB) has suggested the ‘two-axes milk pricing’ policy.

Two Axes Formula

India has been producing large quantities of buffalo milk when compared with any other country. This milk being rich in fat content always attracted good price in comparison to cow milk. The fat portion being visible (giving thickness), separable (yielding cream) and measurable (in percentage) made it easier to decide milk price.

 Kilo fat system

A system based on ‘kilo fat’ became a practice for purchase of buffalo milk. Under this system, an amount in rupees per kg of fat means an amount payable on that quantum of milk which would yield one kg of fat. For example, when the rate per kg fat is Rs. 425, it means that the said amount will be paid for 16.66 L of buffalo milk with 6% fat (minimum standard):

1 kilo (1000gm) fat ÷ 60 gm/L (6%) = 16.66 L

On this basis, the price per L works out to: Rs 425 ÷ 16.66 = Rs 25.51/ L

If cow milk with 3.5% fat (min standard) were to be purchased under kg fat system, it would fetch Rs 7.70 per L as shown below:

1000 gm ÷ 35 gm/L (3.5%) = 28.57 L
Rs 425 ÷ 28.57 = Rs. 14.87/L

This works out to 58% of the rate paid for buffalo milk, an injustice to cow milk producer.

Double axes pricing

With a view to pay for buffalo milk and cow milk on the rationale of their two components, viz. fat and SNF, a system was devised called as Double–axis milk pricing. The purchase rate for fat and SNF are determined based on previous experience or ruling market prices/ consumer appreciation for buffalo milk fat (white ghee) vis-à-vis cow milk fat (yellow ghee) and for buffalo milk SNF vis-à-vis cow milk SNF (i.e. SMP). Accordingly, the difference between prices paid for buffalo milk and cow milk is reduced. Suppose the rate of Rs. 425 per kg fat (which can neither be purchased nor it is the selling rate for ghee normally) is translated into Rs. 190 per kg fat and Rs. 158 per kg SNF, then the purchase price for buffalo milk and cow milk is determined as shown below:

 Purchase price for buffalo milk and cow milk

*Calculated in grams per L of milk × price per grams of component.

In this way, the cow milk is paid to the extent of 78% of the rate for buffalo milk. This also matches with 80% TS in cow milk compared to buffalo milk.

Note:

• A ready reckoner can be prepared depending on actual rates decided from season to season. For every 0.1 % increase in fat and SNF, the value per L can be worked out for buffalo/cow milk.
• In above calculation, volume to weight conversion has not been considered. For calculation of kg fat/kg SNF, the milk volume is to be multiplied by specific gravity and the weight thus arrived is multiplied by fat or SNF % and then divided by 100. However, under the Anand Pattern, farmers are paid on volume and the DCS is paid on weight basis. Hence, the above calculations holds good and serves as a guideline to pay the farmers.
• Incentives for quality milk production are sometimes given in form of premium price offered based on microbiological tests such as MBR and Resazurin Reduction.

Milk Collection Centre

The information collected in the survey form has to be analyzed to understand the pattern of dairying in that village for establishing the milk collection centre. These include:

• The breeds of cows and buffaloes
• The number of animals in milk and dry
• The level of animal husbandry practices
• Lactation period
• Availability of green and dry fodder
• Artificial insemination

Daily Routine in Milk Collection Centre

• Organoleptic testing of milk wherein stale, sour, adulterated milk shall be rejected.
• The timing of milk collection shall have to be adhered to
• Milk procurement should be in both the shifts (morning and evening). Unless cooler or bulk cooler is used at the Milk collection centre (MCC), milk should be transported to the dairy in each shift.
• The farmers should be trained to carry milk in clean vessels, and the milk cans at the MCC should be cleaned adequately.
• The milk samples should be tested for fat content and SNF. A trained person should be assigned such task and should be supervised.
• The route vehicle should reach the dairy dock at an interval of every 20 min. All the vehicles should report in such a fashion that the milk reception is over within the stipulated time.

 Raw Milk Reception Dock

• The milk cans are loaded on conveyor in a specific sequence and each can is inspected for abnormal colour, taste, smell, etc.
• A sample is immediately checked for Clot-on-Boiling (COB) test and the milk is received MCC-wise and samples are drawn for further testing in the laboratory. These samples are checked for acidity, MBRT, and for adulterants like sugar, starch, urea, soda, water, preservatives, etc.
• The results of milk weight, fat and SNF percentage are communicated to the MCCs through the transport vehicles on a ‘truck sheet’. It brings information filled in by the MCCs regarding the vehicle arrival and departure time, number of milk cans sent and complaints, if any. Potassium dichromate is usually used to preserve the sample for analysis.
• If the acidity of the collected milk is more than 0.15% lactic acid (LA), it should be treated as sour milk. Methylene Blue Reduction Test (MBRT) of the raw milk at the time of reception should be minimum 30 min.

 Equipment at the Milk Collection Centre

• Milk collection tray
• Milk strainer
• Milk sampler
• Sample bottles
• Sample bottle tray
• Milk measures: 2 L/ 1 L/ 0.5 L/ 0.2 L
• Plunger
• Al alloy/plastic milk cans
• Plastic bucket and mug

Equipment and Glassware for Milk Testing

• Gerber centrifuge
• Butyrometers with stand
• Butyrometers shaking rack
• Lactometer with jar
• Thermometer
• Milk pipettes with stand
• Acid bottle with tilt meaure
• Alcohol bottle with tilt measure
• Lock stopper
• Jerry cans for acid/ alcohol

 Registers

• Pass books/monthly cards
• Purchase registers
• Testing note book
• Payment registers
• Members’ registers
• Cash book
• General ledger
• Dead stock register

Sophisticated Equipments used in Milk Collection Centers

Electronic milk tester

This instrument measures fat percentage, which is displayed quickly and accurately on a digital readout. It follows the system of dilution, mixing, homogenization and photometric measurement. It requires small volume of milk sample and can perform 120-150 tests per hour with auto zero facility. Its fat measuring range is 0 to 13%.

 Electronic SNF tester

This instrument is designed to perform 100 tests per hour and it gives instant digital display without the help of a chart or table. It does not require any chemical and is microprocessor-based. Its SNF measuring range is 0 to 12%. It can be used in conjunction with Electronic Milk Fat Tester.

 Portable milk analyzer

This instrument is designed to measure fat (0.5 to 12%), SNF (6 to 12%), protein (2 to 5%), density / corrected lactometer reading (20-40) and added water (0-60%) for milk sample in about a minute. It does not require chemicals and is suitable for cow, buffalo and mixed milks. It works on ultra-sound technology and is useful in field as well as in laboratory.

 Infra red milk analyzer (Milko-Scan)

It was J.D.S. Goulden of the National Institute for Research in Dairying, Reading, England who demonstrated in 1961 that the difference spectrum of water and homogenized milk at 5.73, 6.46, 7.9 and 9.6 µ could be used to estimate percentages of fat, protein, solids-not-fat and lactose in milk.

 Principle

The infrared milk analyzer measures absorptions of infrared energy by carbonyl groups (at 5.7 ?) in the ester linkages of fat molecules, by peptide (6.46 ?) linkages amino acids in protein molecules, and by hydroxyl groups (9.6 ?) of lactose molecules. The method is specific for measurement of intact fat, protein and lactose in milk. SNF is estimated by adding a constant to instrument values for protein and lactose, making this method more accurate and less time consuming than direct determination with the instrument.

 Apparatus

A prototype infrared milk analyzer (Mark I IRMA) was developed in 1964 by the research and development section of Sir Howard Gruble Parsons, England. Development of the Mark 2 IRMA began in 1966. It had an improved optical design, automatic sampling and analysis combined with the various types of automatic reporting equipment. These instruments were the split beam, dual cell type which compared the infrared absorption of the sample to that of water at specific wave lengths selected by the prism or diffraction grating. The major limitations of these instruments were relatively long light path, complex optical system, relatively unstable infrared energy source, poor signal- to-noise ratio, moisture-sensitive detector, sensitivity to scattering, and outdated electronics (transistors and tubes) which were susceptible to decay. Most of these limitations were due to the state of art at the time the instruments were developed and, regardless of these factors, they worked well and were accurate enough to establish and serve in milk analysis.

In 1975, Foss Electric Co., introduced the first single cell, dual wavelength infrared milk analyzers (Milko-Scans 203 and 300). They used optical filters to isolate the specific wave lengths absorbed by fat, proteins, and lactose and reference wavelengths not absorbed by these components, thus eliminating the need for a diffraction grating. This approach was implemented to reduce water displacement and scattering effects. A number of other changes also were made, such as reducing the number of mirrors, shortening the light path, using lower energy and more stable infrared source, and using solid state electronics. The use of a single cell makes the instrument more susceptible to water vapour, and to circumvent this problem, it is provided with a moisture-proof compartment. These instruments also use automatic electronic corrections for cross interference effects and are capable of assessing one of two additional variables, either water or total solids.

The milko-scan 100 series represents a second generation of the single cell, dual wavelength instruments manufactured by Foss Electric Company. A number of changes were incorporated in this instrument based on the experience gained with the Milko-Scans 203 and 300. Some of the changes incorporated were removing the servo comb, reducing the number of mirrors from 9 to 2, using a thermostatted filter housing, relocating the chopper, improving transmission characteristics of the filters, and using an improved detector. All primary instrument-signals are processed electronically to apply the cross corrections which are set directly into the instrument. Like the Milko-Scan 203, the Milko-Scan 104 is capable of determining fat, protein, lactose, and water or total solids. But it is semiautomatic rather than a completely automatic instrument.

Electronic weighing scales

These weighing scales are available in various capacities from 2 kg to 500 kg.

Raw milk reception dock (RMRD) automation system

This system takes care of reception of milk in cans coming from several villages. The system is modular in nature, flexible and can be upgraded. It draws a milk sample and premixes it automatically and collects it in a bottle, which is sent to laboratory. After weighing, the milk is drained automatically into dump tank and the drain valve gets closed automatically. The weighing and milk testing data are displayed with single key operation.

The system involves Windows Server 2000/2003 Pentium IV, Windows 98 ME/XP nodes for milk testing station and weighing station, Milko-Scan or Electronic Milk Tester and networking accessories. The system provides various outputs viz. truck sheet, milk collection report, time management report, analysis report and a summary report.

 Bulk milk cooling tanks

These tanks when loaded with milk can cool it down from 30°C to 4°C in 3 h. The tanks are available in 250 L, 500 L, and 2 to 5 KL capacity. The integral condensing unit is hermetically sealed and uses R-22 refrigerant. These are built with stainless steel and with agitator assembly, on/off switches for agitator and, cooling and digital display of temperature. A model is available which claims that it senses the quantity of milk in tank and proportionately switches on the required refrigeration system, saving energy.

Milk Procurement: Holistic Approach

Under Operation Flood and the World Bank-aided dairy development programmes, much emphasis was given on organising milk procurement on the famous Anand Pattern. This pattern paid a solid foundation on which the mammoth infrastructure of village Dairy Cooperative Societies (DCS), District Milk Unions and State Milk Federations has been built. This was done over forty years ago but the infrastructure is sustained even today mainly due to adequate milk procurement which is the real lifeline of dairying.

With the liberalisation of the Indian economy in 1990, many dairies have been set up in the private sector which have organised milk procurement in competition with the cooperative set-up. This has not been always successful since it lacked some or many of the features of the Anand Pattern. Even now if any dairy organisation has to be successful, it has to imbibe the features of the Anand Pattern and then make an attempt. What are these features of milk procurement on the Anand Pattern?

Is milk procurement an art? Is it a science or a technology? Has it got anything to do with philosophy? All these questions can be answered in affirmative, if milk procurement has to be organised successfully. Let us see how milk procurement — a subject often considered non-technical — is in reality a grand mix of all the faculties mentioned above.

Milk Procurement – an Art

By definition art is a human creative skill and its application. In this context, milk procurement is nothing short of creation which requires skill and its application. Organising Milk Collection Centres (MCC), under a cooperative system or otherwise, in a skillful manner is a basic requirement for milk procurement. This has to be done by a team of dedicated workers whether called as supervisors or officers. They have to be properly selected — whether undergraduates or graduates (in Animal Husbandry, Veterinary Science, Agriculture, Dairy Science, Commerce or Arts); they should be young, preferably bachelors, energetic, bright, talkative and most importantly willing to work in villages day and night.

The recruitment should take place at least six months ahead of the commissioning of the dairy plant. After selection, these persons have to be given at least two months’ training depending on their educational background. Once trained, they can be put on the job under the leadership of one experienced person.

Depending on the area of operation and the quantity of milk to be procured, the procurement team should organize their work in a phased manner. It should be properly realised that organising MCCs and/or Milk Collection Routes (MCR) requires lot of patience and perseverance since it involves innumerable visits to the villages to collect information, meet farmers, organize meetings etc. It should be understood that the farmers do have their priorities of farming operations and the team has to overcome these hurdles and make visits even at odd hours to get its ideas through.

A systematic approach starts with a village survey to estimate marketable surplus milk and find out the potential for future growth in milk production apart from connectivity, road conditions, etc.

The information collected in the survey form is to be properly analysed before taking a decision to start MCC. It is difficult to lay down any criterion for minimum quantity of milk collection for MCC. However, it is more likely that a MCC likely to collect less than 150 litres per day will be unviable. Similar surveys are conducted in all potential villages falling on all the main and secondary roads across the length and breadth of the operational area. After establishing viability in a series of villages, a MCR is designed while taking into account number of villages, quantity of milk available per shift, distance from dairy, distance from village to village, road condition, time taken for milk transportation from first pickup point to the time of reaching the dairy plant, which should be less than four and half hours.

Simultaneously, arrangements are made to hire a suitable vehicle to carry maximum quantity of milk per haulage. The dairy organisation should never own the fleet of procurement vehicles since the hired vehicles ensure timely running and allows fixing of responsibility of milk sourage due to late arrival on the contractor. Needless to say, vehicle maintenance by the contractor ensures efficiency. A typical legal contract with the transport contractor incorporates the duties and responsibilities, terms of billing and payment, the dairy’s prerogative to send employees, mail, any material like acid/alcohol/cattle feed etc to the MCCs on the MCR.

Before actually starting any MCC, other arrangements are required to be made at village level. A couple of meetings with the farmers/village women will help in confidence building. During these meetings only such assurances be given which are possible to fulfil. Any tall talk may not help in the long run. For each MCC a time schedule is fixed for milk collection apart from selecting a convenient place. At the selected place the MCC will collect and test milk, and keep the records. Each MCC has to be provided with a set of equipment and registers. Each MCC shall have to be supplied chemicals for milk testing, and washing. At every MCC a local person has to be appointed and trained in milk collection, testing, record keeping and in ensuring the MCC is neat and clean. The training programme shall be tailor-made as per the background of the persons appointed to run the MCCs. While taking a decision about starting a MCC, the entire cost of running may be worked out on per litre basis. It is recommended that the procurement exercise may be taken up under some guidance or by recruiting a key person with experience.

SCIENTIFIC APPROACH

A scientific approach is required in milk procurement at every stage. Before starting a MCC, the information collected in the survey form has to be analysed to understand the pattern of dairying in that village. The breeds of cows and buffaloes, the number of animals in milk and dry, the level of animal husbandry practices, lactation length, available green and dry fodder, artificial insemination etc will help to guess the potential of milk production and futuristic calculation. While organising MCR, the perishable nature of milk, its microbiology, biochemistry shall have to be kept in mind. At each MCC certain discipline shall have to be enforced by organoleptic testing wherein stale, sour, adulterated milk shall be rejected. Also, the time schedule fixed for milk collection has to be strictly adhered so as to assure milk utility.

The dairy organisation should always procure milk in both the shifts (morning and evening). Unless cooled in bulk cooler at the MCC, milk should be transported to the dairy in each shift. These days the farmers are accustomed to bring milk in plastic kettle, or buckets made of aluminum or stainless steel. It would be good, if the MCC provides clean (and hot) water so that the farmers can rinse and clean the empty vessels before taking them home. The farmers should be trained to bring milk in clean vessels, and the milk cans at the MCC should be washed with liquid cleaner or washing soda.

At MCC, the milk samples should be tested for fat content and SNF calculations. A person has to be trained for this function which further needs constant supervision. Mere supply of milk testing chemicals or even their sale to the MCC does not guarantee that the milk samples will be tested, and the same holds good for washing chemicals which calls for constant supervision. All the glassware used for milk testing along with sample bottles needs to be washed after every shift.

The milk collection routes have to be given a time schedule so that the route vehicle reaches the dairy dock at the interval of every twenty minutes. All the vehicles should report in such a fashion that the milk reception is over within the stipulated time.

At the Raw Milk Reception Dock, the milk cans are loaded on conveyor in a particular sequence and each can is inspected for abnormal taste, smell, colour etc. A sample is immediately checked for Clot on Boiling test (COB) and then the milk is received MCC-wise and samples are drawn for further testing in the laboratory. These samples are checked for acidity, MBRT, and for adulterants like sugar, starch, urea, soda, water and preservatives, etc.

The results of milk weighment, fat and SNF percentage are communicated to the MCCs through the transport vehicles on a truck sheet which is a two-way communication. It brings in information filled in by the MCCs regarding the vehicle arrival and departure time, number of milk cans sent and complaints if any. To respond to such complaints, the dairy makes arrangement to preserve the milk samples by addition of potassium dichromate and under cold storage.

If acidity in the collected milk is more than 0.15% of lactic acid, it should be treated as sour milk. MBRT at the time of reception should be minimum 30 minutes. Milk failing in organoleptic acceptance is to be treated as sour milk.

The dairy organisation has to adopt a milk pricing policy, which should have scientific and economic base. A pricing system ascribing price for both fat and SNF portions in milk on the basis of relative prices of ghee and skim milk powder respectively in the market, called as two-axis pricing, is perhaps the best solution. It rationally evaluates cow milk and buffalo milk and gives justice to the cow farmer and the buffalo farmer.

Similarly, the dairy plant has to make arrangements to receive milk which is sour or even curdled and make suitable deductions from the payment. Generally sour milk is levied penalty per litre and curdled milk could be bought for one-fourth rate of good milk. However, it is imperative for the dairy to have arrangements to convert sour milk into ghee and casein. Such a payment system also ensures that the farmers supply good milk and proper care is taken at MCC.

As per the pricing policy, milk purchase rates have to be decided from time to time while taking into account the production season (lean/flush), milk available, prices paid by the competitors, and the dairy organisation’s ability to pay the best prices.. The milk payment charts are prepared in the form of a ready reckoner giving slabs of fat percentage on the horizontal axis and the quantity of milk on the vertical axis. The prices per litre, a part in decimal, and in multiple of litre can be read by correlating the volume and the actual fat%.

It is clarified here that although the pricing is based on both fat and SNF, in actual practice the rates per litre are worked out on the basis of assuming 8.5% SNF in cow milk and 9% SNF in buffalo milk. This arrangement is quite practical since the percentage of SNF is not widely variable whereas for percentage of fat there is a wide variation. Secondly, it is highly cumbersome to calculate SNF percentage in each case unless the MCC has any specialised instrument to do it instantly. In contrast, the testing for fat is easier and demonstrable. The pricing policy and the milk payment chart also consider the commission payable to the MCC on per litre basis or kg fat basis.

The choice of milk cans and use of ice in milk procurement should have scientific basis. These days milk cans are available in stainless steel, aluminium alloy and mild steel. Each type has its own advantages and disadvantages. The mild steel milk cans should be avoided in milk procurement since they are very heavy to handle, get rusted, dented and damaged and require maintenance (welding, tin plating) which may be costly.

Use of ice in milk procurement should be reduced as a matter of policy. This is because it is a very inefficient way of cooling milk from outside the cans. If the use of ice is coupled with use of cylindrical ice cones then it amounts to adding insult to injury. The metallic cones holding ice lead to contamination of milk with the dirt sitting on outside apart from entry of ice water due to leaky cones, lesser capacity use of each milk can and loss of milk while handling the cones at the dairy dock. All these aspects have been studied minutely at a cooperative dairy and it was concluded that the use of ice cones has more problems than solutions. Therefore, a dairy organisation may as well decide to start a milk-chilling centre at a far off place (60 km beyond) and bring chilled milk in a milk tanker, rather than using ice in the field.

Milk procurement for a specialised dairy product like cheese requires a high level scientific approach. For this, the milk procurement team should be experienced and properly trained. Milk required here has to be wholesome, with its entire natural contents (fat, proteins, minerals) present in a particular species’ milk (cow/buffalo).

The abnormal milk due to mastitis, colostrum, late lactation is not acceptable here. The high somatic cell count due to mastitis (clinical/subclinical) leads to quality problems in cheese. Similarly the milk has to be free from off flavors, free fatty acids, residual antibiotics, traces of detergents, sanitisers, pesticides, insecticides, aflatoxins, mycotoxins and heavy metals. All these requirements call for specialised approach in dairy extension and milk procurement involving lot of care in animal health, feeding and milking practices apart from proper handling of milk and equipment at production and collection points.

TECHNOLOGICAL  ASPECTS

The milk collection system at MCC under the Anand Pattern is quite simple in design as it is meant for rural folks. Even today when any new dairy organisation decides to start milk procurement, it has to think about this user-friendly system in a simple form as explained above. However, during the last 25 years several new technologies have been developed/adopted which have simplified various operations/steps involved in milk collection, testing and cooling apart from bringing efficiency and reliability. These have been tested over time and can be regarded as dependable. But, these technologies require larger capital investment, recurring costs, and good service back-up and can become affordable for a dairy organisation with a product mix that gives value addition. Some technologies, which can be directly applied, are mentioned below:

Electronic Milk Tester: This is an instrument for measurement of fat percentage, which is displayed quickly and accurately on a digital readout. It follows the system of dilution, mixing, homogenisation and photometric measurement and runs on mains or battery. It requires small volume of milk sample and can perform 120-150 tests per hour with auto zero facility. Its fat measuring range is 0 to 13%.

Electronic SNF Tester: This instrument is designed to perform 100 tests per hour and it has instant digital display without the help of a chart or table. It does not require any chemical and is microprocessor-based. Its SNF measuring range is 0 to 12%. It can be used in conjunction with Electronic Milk Fat Tester.

Ultrasonic SNF Tester: This instrument is portable with a measuring range of 0 to 20% SNF and is therefore suitable for all types of milk. It can test 80 samples per hour and give digital display. It operates on AC power supply 100-250 volts.

Portable Milk Analyzer: This instrument is designed to measure fat (0.5 to 12%), SNF (6 to12%), protein (2 to 5%), density/corrected lactometer reading (20-35) and added water (0-60%) in a milk sample in about a minute. It does not require chemicals and it is suitable for cow milk, buffalo milk and mixed milk. It works on ultra sound technology and is useful in field as well as in a laboratory. It operates on AC power supply of 220 volts.

Electronic Weighing Scales: These weighing scales are available in various capacities from 2 kg to 500 kg. These are microprocessor-based and the reading is given in green/red display. It has inbuilt battery backup and a memory for recording 200 weighments. The scale is protected from overloading and it has litre-conversion facility.

Automatic Milk Collection Unit: It is a specially developed integrated unit combining several units. It includes Electronic Milk Tester, CLR measuring instrument, Electronic Weighing Scale, a personal computer with 80 column printer, Digital Display Unit on farmer side and operator side and Uninterrupted Power Supply unit with MCC Accounting & Management software. This maintains complete records and all transactions of MCC. This system can perform up to 150 operations in an hour. The sequence of operations requires pouring of milk in a weighing container, collection of sample at the time of pouring, entering the member code through the keyboard, measuring of fat, CLR and calculation of payment and printing of payment slip. For a typical Anand Pattern DCS there is society accounting & management software, which covers all financial procedures like ledgering, profit & loss account and balance sheet. The package has been developed in various regional languages including Hindi, Gujarati, Kannada, Telugu, Marathi and Gurumukhi.

Bulk Milk Cooling Tanks (BMCT): These tanks when loaded with milk can cool it down from 30^oC to 4^oC in three hours. The tanks are available in 250 lit, 500 lit, and 2, 3, 4 and 5 KL capacity. The integral condensing unit is hermetically sealed and uses R22 refrigerant. These are built in stainless steel and with agitator assembly, on/off switches for Agitator and Cooling and digital display of temperature. A model is available which claims that it senses the quantity of milk in tank and proportionately switches on the required refrigeration system and saves energy. However, those desirous to install BMCT should note that often the farmers get a wrong signal and feel than now they can bring milk anytime and the milk collection hours get extended. Thus, there is more time lost between milking and the milk received at BMCT leading quality deterioration.

Raw Milk Reception Dock (RMRD) Automation System: This system takes care of reception of milk brought in cans from several villages on various MCRs. The system is modular in nature, flexible and is adapted to upgradation. It works in humid climate inside the RMRD. It draws a milk sample and premixes it automatically and collects it in a bottle, which is sent to laboratory. On weighment the milk is drained automatically into dump tank and the drain valve gets closed automatically. The weighment and milk testing data are displayed with single key operation. The system involves Windows Server, Nodes for Milk Testing Station and Weighing Station, Milko Scan or Electronic Milk Tester and networking accessories. The system provides various outputs like truck sheet, milk collection report, time management report, analysis report and a summary report.

Over the years many dairies in the cooperative/private sector have incorporated some or many technologies mentioned above to modernize their milk procurement system. Schreiber Dynamix Dairies Ltd at Baramati in Maharashtra has implemented a complete system at village level incorporating Bulk Milk Coolers and various automatic milk collection, testing and accounting systems — all under one roof. These stations are owned by the (private) dairy but the operations are managed by the DCSs (affiliates of the milk union). Milk collected in the bulk coolers is carried in milk tanker to the main dairy, thereby eliminating the use of milk cans and there are no milk chilling centres either.

One innovative idea in milk procurement has been the use of milking parlours (automatic/semi-automatic) on community basis where the farmers bring their milch animals at appointed time and the animals are milked by following hygienic practices before, during and after milking. This also ensures identification of mastitis, clean milking without the touch of human hand and elimination of all milk vessels since milk is passed to the milk tank for chilling.

PHILOSOPHICAL APPROACH

It is widely accepted that the Anand Pattern of milk procurement is ideal not only for milk but also for other commodities. It has been practiced all over India quite successfully over the last few decades. What are the reasons for the remarkable success of this pattern? These are perhaps philosophical.

It is well known that the Anand Pattern emerged as a result of the agitation by farmers against their exploitation by middlemen and the not-so-friendly attitude of the then government. So a dairy organisation has to understand that the farmers would resist exploitative practices and the policies which are not friendly to them. In fact, it is to be underlined that in extreme cases, the farmers would overthrow such a regime.

The Anand Pattern started as a movement. It had good leadership which did not allow politics to enter the organisation. This may sound very utopian these days but it is a fact that political interference can ruin good work which has taken years to build.

In the Anand Pattern, milk producers have been made not only business partners but also owners of the dairy. Their elected representatives are in a position to take policy decisions. With the same analogy if the private dairy organisations create a situation whereby the milk producers are made direct or indirect partners by offering them a part of equity, milk procurement would be assured and a good foundation laid for future growth.

Employees working in an Anand Pattern organisation have to keep in mind that they are employees of the farmers. This understanding makes a lot of difference in providing smooth delivery of any service which is perceivable by the farmer. Employees of any private dairy have to inculcate similar trait while dealing with milk producers.

The dairy organisation has to design systems and subsystems keeping milk producers in focus. The milk producers may be encouraged to organize themselves as groups or associations work on democratic lines and allow them to manage their MCC. If any agent is appointed, it should be ensured that the milk producers are properly served and there are no complaints. In any case it would be deplorable if milk producers were kept at the mercy of an agent/vendor and such a set-up would not last long. In other words, even if a cooperative society is not formed, the milk procurement should be organised by eliminating middlemen or by banishing their exploitative practices. This alone can build the confidence of milk producers in the system.

Milk pricing policy is very important for both the dairy organisation and the milk producer. While the dairy organisation should see its economics, it should not let the milk producer suffer in his business. In fact, it is better to realize that more the milk producer gets margins, the more would he be inclined to stay in the business. Therefore, any pricing policy, which reduces his margin, will one day boomerang and the producer will either go to the competitor or will close down his business. For deciding remunerative pricing from time to time, a dairy owner could actually rear a couple of milch animals to understand the milk production economics.

While receiving milk at the dairy dock, the dairy organisation should practice high degree of ethics in weighment and quality decisions. It should use standard equipment and procedures and direct the laboratory to practice professionalism and integrity. The automatic systems mentioned above can help in this respect provided there is an honest approach. Needless to say, the guilty should not escape and the innocent should not be punished. It is good practice if the dairy maintains MCC-wise milk samples with added preservatives and in cold room for three days so as to entertain and solve amicably complaints, if any.

A very important feature of the Anand Pattern is timely payment for milk which is very relevant for any dairy anywhere. In fact, it is very astonishing that payment for milk is made on twice-a-day basis and there is no parallel example for any other commodity. Here it is to be noted that the DCS is committed to make the payment should the milk producer approach for it. No way it is binding on a milk producer to take his money twice a day by standing in a queue! The crux of the issue is that the milk producer is given a written commitment in his passbook about the amount due to him. This automatically means that he is no way responsible for any further loss.

The dairy organisation should give topmost priority to release milk payment to the MCCs. At most dairies, the frequency is once in a week or in ten days. Let this be followed like religion so that MCCs are also in a position to pay the farmers accordingly. It should be noted that the Anand Pattern does not have place for any advance or loan to a farmer but at the same time places great emphasis on paying the farmer promptly.

Many dairy organisations in the cooperative sector and some in the private sector are providing various input services to improve productivity and lower the production cost. This arrangement is mutually beneficial to the farmer as well as the dairy as it ensures increased milk flow round the year and from year to year.

One reason for replicating the Anand Pattern all over India was to create a flood of milk. At the same time, planners had recognised the potential of dairying as an instrument to bring about socio-economic changes. If all dairy organisations set their mission around this philosophy, they would be more than rewarded. In other words, you organize the farmers and you have organised milk procurement.

Supply Chain Management: Dairy Industry in India

The Indian dairy industry has been through an advancement right from the British period until today. The nation is the world’s biggest milk maker, representing more than 13% of world’s aggregate milk creation. Milk creation contributes 22 % to agricultural GDP. It has made some amazing progress throughout the years from a milk generation volume of 23 million tons in 1973 to 132.4 million tons in 2013. Today, the Indian Dairy industry is at a mammoth size of US$ 70 billion. Presently, just 20% of the milk creation originates from the sorted out segment (organized) including co-agents and private dairies. The extent of Indian dairy industry in both organized and un-organized areas is expected to double to $140 billion by 2020, because of growing demand and rising disposable income.

According to NDDB, the Indian dairy industry is good to go to experience high development rates with demand to reach 200 million tons by 2022 from 132 million tons in 2013.

Regardless of the increment in dairy creation, a demand supply crevice has ended up basic in the dairy business because of the changing utilization patterns, different demography, and the quick urbanization of rural India. With this quite a bit of quick changes in the area, supply chain network assumes an essential part in getting the outcomes productively.

Supply chain network has ventures to get a good or service from the supplier to the client. Supply chain network management is an essential part for organizations, and numerous organizations endeavour to have the most enhanced supply chain network on the grounds that it normally means lower expenses for the organization. Supply chain network incorporates various organizations, for example, suppliers, makers, and the retailers.

Indian Dairy Industry

The Indian dairy industry is chiefly constituted of 22 state milk federations, 110,000 dairy agreeable social orders including more than 12 million milk makers. There are likewise some real private players in the field which further enhanced the dairy area of the nation to be specific: Amul, Britannia, Nestle, Mother dairy and numerous local players, to give some examples. Gujarat Cooperative Milk Marketing Federation (GCMMF) which showcases Amul brand of milk and dairy items has ascended to the rank of 15 amongst the top dairy associations of the world as per a latest survey by International Farm Comparison Network (IFCN), a main, worldwide dairy knowledge association.

Key Facts of Indian Dairy

• Ranks 1st in world milk production (115 million metric tons)
• Value of milk output from livestock (at current price) is around INR 2400 Billion
• Value of dairy products market is around INR 4000 Billion
• Only 5 per cent of the milk is sold through retail chains
• 65 – 70 per cent is delivered to the homes by milk agents
• Carton milk or packaged milk has been growing at 24 per cent annually

Supply chain of Indian Dairy Industry

 Steps are:

1. Supply of inputs for dairying in form of fodder, animal feed plant, vetenery aids for the animal (cattle and buffalos).
2. Milk is taken out from the mulching animal on the daily basis by the dairy farmers (large, medium and small scale farmers).
3. Collection of milk by collection centres (various milk cooperatives societies).
4. Milk collected by the cooperative societies are sent to the dairy plants where chilling of milk, processing and packaging of milk and milk product, transportation of milk and milk product is carried out.
5. The transportation of chilled milk and milk products from one place to another is done through the means of refrigerated vans, or insulated milk tankers vans of private, government and cooperatives societies.
6. Final processed milk and milk products are transported to various retails outlets, supermarkets, and to retails markets from where the processed milk and milk products finally reaches to their end customers.

Issues and challenges in value chain of dairy industry

Issues and Challenges at the Procurement stage

1. Meeting seasonal spikes in demand and ability to measure the quality of procured milk at the source.
2. Complex logic of payments to producers based on fat, solid non-fat (SNF) and quality of milk received.
3. Keeping track of truck and tanker routes, as well as capabilities for viewing, monitoring and payment based on route or distance.
4. Visibility into the shelf life and stock-outs of raw material.

Issues and Challenges at the Production and Standardization stage

1. Manual and time-consuming processes for milk standardization calculation, handling production planning based on nonstandard raw material, addressing growing food concerns from consumers.
2. FAT accounting and effective tracking of FAT loss in the production process.

Issues and Challenges at the small suppliers’ level

1. Inadequate feeding of animals
2. More disease incidence
3. Low genetic potential of animals
4. Lack of chilling capacities
5. Exploitation of farmers
6. High production costs
7. Delayed payment of dues

Issues and Challenges at Collection location Level

1. Milk base mainly consisting of small holders
2. Involvement of too many intermediaries
3. Gaps in information
4. Absence of a screening system
5. Lack of Infrastructure
6. Manipulation of the quality of milk by the farmers

Issues and Challenges at the Processing stage Level

1. Seasonality of production and fluctuating supply
2. Absence quality standards
3. Adulteration and Food safety
4. Lack of trained and skilled workers

Issues and challenges at the Storage and Logistics stage Level

1. Lack of cold storage facilities
2. Gap in the cold chain and transport facilities

Issues and Challenges at the Co-operative Level

1. Less number of member farmers
2. Lower participation in the decision making process
3. Losses
4. Low prices of milk
5. Inefficient services
6. Insufficient Infrastructure

Issues and challenges for Marketing

1. Majority of the Market is still unorganized
2. Acceptability of the Consumer base
3. Less penetration to the rural Market
4. Lack of transparent milk pricing system

Exceptionally aggressive Indian dairy industry has risk/challenges for the survival in the worldwide dairy market in future. Extension is high for the development of the dairy business in future. The advancement of Indian dairy industry is because of auxiliary changes realized by the coming of dairy cooperatives.

With a Compound Annual Growth Rate (CAGR) of 16 percent, dairy industry in India is expected to reach USD 118 billion in 2017. Utilization in India is principally skewed towards customary items. Interestingly, buffalo milk represents the biggest share of the aggregate milk created in the nation. Since net revenues are high when contrasted with cow milk.

The Indian dairy sector is dominated by the unorganized sector comprising of 70 million rural households. The per capita availability of milk in India stands at 289.4 grams per day and is anticipated to reach 336 grams per day in FY 2017. Despite being the one of the largest milk producing countries in the world, India accounts for a negligible share in the worldwide dairy trade. Multiple limitations restrict competitiveness in world markets. The ever-increasing rise in domestic demand for dairy products and a large demand-supply gap could lead India to be a net importer of dairy products in the near future.

Compiled  & Shared by- This paper is a compilation of groupwork provided by the Team, LITD (Livestock Institute of Training & Development)

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 Reference-On Request