Dairy cooperatives

Booklet No.105 Agricultural Cooperatives: ACS-16

Contents Preface I. Introduction II. Need of Dairy Co-operatives III. Growth and Development IV. Status of Milk Production V. Marketing and Consumption VI. Price Fixation and Control on Marketing VII. Organisational Structure VIII. Operational Analysis IX. Financing of Dairy Co-operatives X. Problems of Dairy Co-operatives XI. Suggestions for Improvement XII. Recommendation of the Ninth Indian Co-operative Congress XIII. Conclusion Preface Milk is one of the most important item of human diet, especially vegetarian diet. Besides, milk is an important source of income of a large number of people, especially poor farmers. Since these farmers produce milk in very small quantities, they face a number of problems in it selling it at remunerative prices. Dairy co-operative can provide a suitable solution to this problem. Dr. K. T. Chandy, Agricultural & Environment Education I. Introduction Milk is recognized as the most valuable and whole- some food for man, being nutritive as well as a protective food. According to the Nutrition Advisory Committee of the Indian Council of Medical Research, a balanced diet for an adult Indian should include 285 g of milk per day. But, against this requirement the actual intake per head is much less being only 140 grams. It ranges from 37 in Kerala to 396 in Punjab. It has been much low as compared to New Zealand, Denmark, Holland, Australia or USA where the per capita consumption is over 1700 g per day. Most of the milk is produced in rural areas, while the profitable market for milk and its products is largely urban. In view of these peculiar problems it has been rightly recognized by the Planning Commission that "producer's co-operatives should be organized in villages to supply milk to the urban milk supply schemes, milk powder making plants and to the consumers". This would not only ensure adequate supplies of fresh milk to the urban consumers but also bring profitable returns to the producers. II. Need of Dairy Co-operatives The dairy industry in India has developed somewhat different from that in other advanced countries. On account of the increasing pressure on land and continued fragmentation of agricultural holdings, there are no medium or large privately owned dairy farm. Efforts by some manufacturers of dairy products to set up such farms did not succeed and they have also come to depend mainly on milk collected from small producers in the rural areas

either by their agents or by the co-operatives. Dairy co-operatives are very essential to Indian conditions because of the following reasons. 1. Most of the milk is produced in rural areas while the profitable market is based in urban areas. 2. Most of the milk is produced in small quantities by small farmers, which renders the transportation to the consuming areas very difficult. 3. Lack of suitable transport facilities, non-reliability of veterinary services in the rural areas, inadequacy of properly organized system of processing and marketing and lack of cheap and nutritious feed and fodder. 4. Producer has often no direct link with the consumer and hence, the price received by him is rather low. 5. There are no medium or large privately owned dairy farms because of the increasing pressure on land. III. Growth and Development Though the dairy co-operatives have played a significant role in marketing of milk and other dairy products in many developed countries, in India, such co-operatives have not developed properly though the dairy co-operatives started much earlier in our land. A. Origin of dairy co-operatives in India The first dairy co-operative society was registered in 1913 at Allahabad in U.P. and was called "Katra Cooperative Dairy Society". Thereafter a number of dairy co': operative societies were registered at Baroda, Belgaum, Dhulhia, Bhagalpur, Hublij Bungalkot, Calcutta etc. They were however, small societies mainly formed with a view Ito meet the consumer demand for milk from people residing in a specified area in which the society was operating. Between World War I and II, a number of co-operative milk supply unions were registered in different states. The principal among which were the Madras G3-operative Supply Union, the Surat City G3operative Milk Supply Union, the Coimbatore Milk Supply Union, the Calcutta Milk Supply Union and the Lucknow Milk Supply Union. By the end of the thirties there were 19 milk supply unions covering 264 primary societies with a total membership of 11,262 or about 44 members per society. During the Second World War, the increased demand for milk and milk products for the army and acute shortage of milk in various urban areas gave a new push to the organization of milk co-operatives. As a result number of milk supply societies were registered in different parts of the country, particularly in the Bombay and Madras State. Most of the cities however, continued to be consumer oriented. The Kaira District Co-operative Milk Producers Union at Anand (AMUL) was formed in 1946 and constituted an important landmark in the development of the dairy co-operative movement. Around this time the Government of India also decided to make arrangements for the supply of hygienic milk to Bombay city and this resulted in organized collection of rural milk produced in Kaira District and its bulk transportation by train to Bombay for distribution. This was the first organised link-up of rural milk-shed with major urban markets. B. Development through Five Year Plans. No specific provision was made in the First Plan for dairy development. In the second plan a provision of Rs 19 crores was made against which Rs 10 crores were spent. This amount is mainly provided for setting up of co- operative milk union, creameries and milk product factories, and for increasing the output of milk by 30~40 per cent. For this purpose, the producers were to be supplied with improved milch breeds, technical advice, as also the

facilities for improving production and storage of fodder. In the Third Plan, the policy was to develop dairy projects with emphasis on milk production in rural areas linked with plans for marketing surplus milk in urban centres. It was envisaged that the supply and collection of milk would be undertaken by producers' co-operatives in villages and the processing and distribution of milk products would be organized through plants as far as possible on co-operative lines. Twenty six new milk supply schemes, out of which twelve in co-operative sector, were taken up .during 1961-69 in cities with a population of one lakh and above, as well as industrial townships. During the Fourth Plan, it was envisaged that as far as possible 11 dairy programmes should be organized in the co-operative sector and it would be necessary to work towards a progressive co-operatisation of government milk plants, so that the entire chain of operations, from milk collection, transport, pasteurization and distribution get integrated. By 1968-69, there were 3,200 milk societies with a membership of 6.6 lakhs. There were 135 milk supply union with a membership of 28,566. During the Fifth Plan Period as (on December 31, 1978), there were 190 dairy plants in India, of which 80 were in co-operative sector as against 168 dairy plants and 41 dairy cooperatives on Dec. 31, 1975. There were 160 milk supply unions with a membership of 43,933. The total milk and milk product sale was of the order of Rs 205.8 crores in 1977-7 & as against Rs 156.76 crores in 1975-76. In Sixth Plan, there were 31,851 primary milk supply co-operative societies with a membership of 30 lakh. These co-operative handled milk and milk products of the order of Rs 359 crores during 1981-82 as against Rs 70 crores during 1973-74. The primary milk supply cooperartives. Were federated into 209 unions. State level federations functioned in Uttar Pradesh, Gujarat, Maharashtra and Punjab. At the national level, a National Federation of Dairy Co-operatives was constituted. At the end of 1985, there were 50,919 dairy co-operatives in the country with membership of 58.21IakhS. The business of these co-operatives was to the tune of. Rs 676. 40 crores during 1984-85. By June 1988, In the Seventh Plan, there were 251 milk supply societies with 64,600 members. Total money spent for the business operation was Rs 1200 crores. During 1986-87 NCDC sanctioned Rs 493 crores for establishment of an integrated dairy project by the Tirunelveli District Milk Union in Tamil Nadu. Up to March 1987, NCDC had provided RsiO..93crores for 23 dairy co-operative units and Rs 2.18 crores for 14 feed mixing units, all of which have been commissioned. C. Formation of the National Dairy Development Board Inspired by the success achieved by the Kaira District Co-operative Milk Producers Union, Anand (AMUL), the Ministry of Agriculture constituted a National Dairy Development Board (NDDB) on 26th September 1965 to organize and oversee the planning and execution of dairy development programmes on a national scale and to provide technical guidance to various states in setting up projects for overall development of milk production, processing and marketing in the country by making available, on request, technical and consultancy services on all relevant aspects. In 1969-70, NDDB developed an ambitious integrated scheme for development of the dairy industry and marketing of milk, which is commonly known as 'Operation Flood'. The plan of operation for the project was signed by the Government of India and the World Food Progranme (WFP) on the 4th March 1970. The project was' initially scheduled for a period of 5 years.

WFP supplied 1,23,973 tonnes of skim milk powder and 41,510 tonnes of butter oil. These commodities were used for recombination and sale as tonned milk in the cities of Bombay, Calcutta, Madras & Delhi and some other centres approved by the Indian Dairy Corporation. D. Recommendations of the National Commission on Agriculture The National Commission on Agriculture also studied in detail the scope for organizing milk producers in rural areas with the twin objectives of increasing milk production and for ameliorating the economic condition of the weaker : sections of society, particularly marginal farmers and landless labourers, by providing them with a source of additional income through the maintenance of milch cattle and sale of milk at remunerative prices. The commission recommended that steps should be taken to establish strong co- operative organizations of primary milk producers allover the country. The commission also recommended that government should adopt a rational pricing policy for milk, which will take care of the interest of both the producers and the consumers. The prime objective of organising the producers on cooperative lines is to prevent exploitation of the products who belong to weaker sections by middlemen which is still very common areas where the dairy co-operatives have not developed adequately. E. Recommendations from the co-operative Registrars A conference of co-operative Registrars was held on 16th to 17th November 1977 and proposed following recommendations for the prosperity of dairy co-operatives. 1. For expanding the programme of dairy development through cooperatives, programmes for integrated development of milk shed area of each dairy plant should be drawn up for implementation in the co-operative sector and on the basis of such integrated programmes, assistance should be provided by the institutional agencies. 2. In order to develop and strengthen dairy structure in the states it would be desirable to aim at establishing cooperative dairy organizations at the state level to replace the corporations. 3. All the new dairy/milk plants should be established mainly in the co-operative sector. 4. A managerial support (as subsidy) for a period of 3 years may be provided to the weaker sections of community who are the members of dairy co-operatives. The experience over the years has shown that to achieve reasonable measure of success, the dairy co-operatives should be producer-oriented. One of the main reasons for the stunted growth of the movement during the period; between independence and 1970, appear to have been the emphasis in many states on consumer oriented dairy co-operatives. IV. Status of Milk Production, Marketing and Consumption Of the total milk production, officially estimated to be 30 million tonnes in 1979-80, about 35% was buffalo milk, 42% cow milk and 3%.goat milk. In the 1989-90the milk production was 51.5 million tones. An estimated 5% of milch animals are kept by specialized producers in urban and semi-urban areas, often in milk colonies. Thus, the: dairy industry in India depends mainly on production of I milk in the rural areas by a large number of small producers. According to the National Commission on Agriculture, 1 liquid milk consumption accounts for 45% of total milk output, while 39% is converted into ghee and butter, 8% into curd and 5% into 'khoa' or similar milk sweets, with cream, milk powder and other dairy products absorbing the remaining 3 per

cent. The organized sector (modem dairies) handled only about 7% of the total milk production in 1980. Most of the milk was consumed in the area of production. However, some surplus milk produced in remote areas, has tradition- ally been marketed over longer distances mainly in the form of ghee around towns and cities. Traders acquire milk in the villages, transporting it by various means and selling it directly or through other intermediaries to urban consumer or small/scale manufacturers. The main task of the dairy co-operatives is to change this system, break the domination of the traders over the producers and provide a stable market to the producers at reasonably firm and remunerative prices. Presently, the collection of milk from the rural producers by the organized sector is being done satisfactorily, by the dairy co-operatives wherever they are functioning. They do, however, face serious competition from a number of private vendors and dealers in the unorganized sector, who are a force to reckon with, as they have no social obligations, or scruples regarding prices and quality, no elaborate or expensive facilities and, therefore, little capital investment. This makes it hard for the co-operatives to defeat the private vender' in a competitive economic system unless they can provide in addition to a stable market, steady price, an integrated service including feeding, management assistance and disease control to their producer members. V. Price Fixation and Control on Marketing The dairy co-operatives can provide a satisfactory and integrated service to the producers only if they have control on the marketing of the milk collected from their members and also in determining the purchase price for the producers by government and public sector agencies in many areas leaving the co-operative to act just as a collecting agency. As many as 118, out of 119, dairy plants in operation during 1981 were in the public sector. All the dairy plants in the metropolitan cities which constitute the biggest market are in the public sector, except one or two. In the districts, there is a mixed pattern of co-operatives and government dairies operate side by side in several states. Mode of control of dairy plants in different state is enumerated below. 1. Haryana, Andhra Pradesh Rajasthan & Tamil Nadu: -All the main plants are under the control of co-operatives at primary, districts & state levels. 2. Maharashtra: -All the plants except two are owned and operated by state agencies. 3. Madhya Pradesh: -All the plants are in the process of being transfer- red to the co-operatives. 4. Andhra Pradesh:-All the major dairies are with co-operative federation and the rest are controlled by milk commission. 5. Kamataka, Orissa, Assam: Almost all the plants are & Bihar owned by the government or the state dairy development corporations. 6. Kerala -Only one plant is under the co-operative. The sale price of milk is subsidized and kept low and the prices paid to the co-operatives are far from remunerative except in Maharashtra. As a result, the rural dairy plants, milk supply to the cities have not been able to receive i an economic remunerative price and these plants not only did not earn any profit but incurred losses. A self-reliant dairy co-operative structure capable of self sustaining growth is possible only when they have freedom to pay remunerative prices to the products at a price which will not only cover the cost of collection and processing but also have some margin for meeting depreciation and interest charges and a small profit on the investment which could be used for further development of the movement. This is possible only if the dairy plants are also owned by

the co-operatives who should also have the freedom to fix prices on an economic basis which is fair to both producers and consumers. VI. Organizational Structure The most rational organizational parameters for dairy co-operatives would be (A) primary milk producers co-operatives, (B) district milk producers co-operatives, and (C) state dairy federation (state level). A. Primary milk producer's co-operatives These village level co-operative societies should be operationally and financially viable. Such societies should be in a position to collect at least 309 to 500 litres of milk daily depending on the margin available between purchase price and the sale price. The society should be viable even with a collection of 300 litres if the margin is adequate. If the margin is fixed at a low level, the society will have to collect around 500 litres. Thus the primary milk producers cooperatives are concerned with: 1. helping the members to increase their produce of milk; and 2. arranging for its profitable sale in the consumer markets through the milk supply unions. B. District milk producers co-operative union Primary milk societies are federated to district milk producers co-operatives. They own chilling and pasteurization plants located in different areas. The capacity of pasteurization plant should be decided with regard to: 1. The quality of milk which could be marketed locally in the urban areas of the district; 2. the possibility chilling and transporting surplus milk after meeting the local. demand, to the nearest metropolitan city dairy for pasteurisation and distribution. C. State dairy federation It is a state level co-operative federation which would be able to support and guide district unions, absorb surplus milk available with the district unions for distribution in the big cities and also convert any surplus milk received from the district unions into milk powder and other products either for sale, or for later use for recombination in times of scarcity particularly in the lean season. It is important that the federation should have control over the it dairies and the market in at least one major city which could Ic absorb surplus milk and the number of federations to be I formed should be based primarily on this consideration of the availability of a ready market within its area of operation. It is important to note that. this is only an outline organisational pattern and there should be no rigidity in applying it. In some districts of Maharashtra, tehsil level milk producers unions have worked successfully which are owned by the government milk scheme. The actual organizational structure should only take into account, the special regional and other local factories affecting the growth of the co- operatives, ownership of the dairies, price control on milk and milk products etc. VII. Operational Analysis During 1981-1982, out of 31,851 milk co-operatives, 16,686 worked at profit, 370 showed losses while the remaining shared neither profit nor loss. The VII plan envisaged to increase the milk production from 38.8 million tonnes to 51 million tonnes and proposed to increase the average milk procurement from the rural areas from 5.53 million litres per day in

1984-85 to 11.5 million litres per day by 1989-90. It also proposed to increase the number of families to be concerned from 3.40 million in 1984-85 to about 10 millions in 1989-90. Similarly, it proposed to increase the number of primary milk producers co-operatives to 50,000 in 198990. It is envisaged to develop further the National Milk Grid to meet the requirement of the four metropolitan cities and other big cities especially during the lean season. This grid will also\'help to even out the inter-regional differences between the supply and demand for milk. Table 1-3 shows the milk production from 1951 to, 1990, achievements and target of Operation Flood, and comparative returns per Rs 100 invested in different farming systems respectively. Table 1: Milk production from 1951 to 1989-90 Sl. No. 1 2 3 4 5 6 7 8 9 Year 1951 1961 1971 1981-82 1985-86 1986-87 1987-88 1988-89 1989-90 Production (million tonnes) 17.4 20.4 22.5 34.3 44.0 45.0 45.9 48.7 51.0

Table 2 : Operation Flood achievement target Sl. No 1 2 3 4 5 6 7 Type of achievement Number of farms (millions) Dairy co-operative societies (thousand Average procurement per year ( m lit/day) Peack procurement per year Milk processing capacity Milk powder capacity Liquid milk marketing Achievement During 198186 2.7 29.4 5.3 6.6 7.3 244.0 3.7 Target 1987-94 3.00 23 5,2 7.1 7.0 480.0 5.7

Table 3: Comparative returns per Rs 100 invested in different fanning systems Sl.No. 1 2 3 System Specialised dairy farming Mixed farming Arable farming Cattle based Buffalo farm (Rs) based farm(Rs) 117 114 156 127 124 126

VIII. Financing of Dairy Co-operatives The dairy co-operatives need long-term finance for establishing processing units, pasteurization plants, investment on building, plant, machinery etc. They need medium term

finance for the purchase of livestock for replacement, and short term payment for wages and salaries, etc. In the early stages of development of dairy co-operatives, the bulk of their requirement was met by government. At present the most important source of finance for milk co-operatives is borrowings from stat~ governments and central financing agencies like National Co-operative Development Corporation (NCDC). A. Assistance from NCDC Under NCDC's scheme for the development of dairy co-operatives, the corporation provides financial assistance for the establishment of integrated dairy projects through the state co-operative dairy federations. An integrated project includes the establishment of a milk chilling centre of 10,000 and milk processing plant of 50,000. It will also provide technical inputs to milk producers organization, such as mobile veterinary care, artificial insemination, etc. and will also formulate fodder development programmes. The project cost includes the creation of new or expansion of the existing chilling and processing facilities and also for the setting up of cattle feed plants by the district milk unions and State Co-operative Dairy Federation. NCDC assistance is available only in the areas outside the Operation Flood. B. Pattern of assistance NCDC's assistance is disbursed in the pattern shown in table 4. Table 4 : Pattern of assistance by NCDC Sl.No 1 2 3 State From NCDC to the state govt Co-operatively 70% of the block developed states cost of the project as loan Co-operatively 60% loan and 20% under developed subsidy state Cooperatively least 75% loan and 20 % developed states subsidy From state govt to the society 70% as loan 30%as subsidy/ share capital 60% loans 40% loans 60% loans 40% subsidy

NCDC's assistance is routed through the state government or the state co-operative bank for a period of 14 years in the fond of reimbursement finance. Assistance is first released by the state government to the concerned society and then an equal amount is claimed from the corporation later on. Twenty-five per cent of the sanctioned assistance is released as ways and means of advance after the society has acquired land and placed orders for the machinery. Further assistance is given in relation to the progress in the implementation of the project. C. Condition of eligibility for NCDC assistance 1. The marketable surplus of milk in the area under the operation of the proposed unit should be sufficient to run the unit to its full capacity within two years of its operation. 2. The organization of milk collection routes in the area should be such that the expenses incurred on transportation from milk producers to the dairy are minimum. 3. The bye-loans of the society should be the same as that of the Anand pattern dairy cooperatives. The dairy co- operatives should have experience of 2 to 3 years in the handling of milk.

4. The area around the proposed unit should have sufficient potential for the sale of milk/milk products. The society should indicate whether it will be selling milk to the dairy unit or to the consumers directly, and also whether the society will supply milk to the dairy unit in its own transport or if the dairy unit should make its own arrangements for transportation. 5. The milk unions interested in the assistance from the corporation should be financially sound and they should have professionals working with them, to take care of the working of the project. D. Procedure for NCDC's assistance Societies interested in the NCDC scheme should control the state Registrar of cooperative societies (RCS) or the regional project office of NCDC for necessary guidance. Application formats are available at these offices. Societies that fulfill the terms and conditions should apply to the state RCS in the prescribed manner. Advance copies of the application should be sent to either NCDC's Head Office or Regional Office. A society's proposal should be accompanied by the State Government's recommendation. The financial assistance after the appraising the viability of the project by an expert team. The size of the unit is determined on the basis of the marketable surplus of milk in the area of its operation and the potential of marketing of milk and milk products in the area. IX. Problems of Dairy Co-operatives One of the most important factors for the poor performance of milk co-operatives is that they have not realized the crucial importance of increasing yield per animal by better breeding and feed. A major weakness of primary dairy co-operative is that they function merely as milk vendors purchasing milk from their members and selling to dairy plants in co-operative or public sector. Dairy co-operatives thus face several difficulties and problems, chief among them are discussed here. A. Inadequate support from government Inadequate recognition of the role played by dairy co-operatives in increasing milk production and in ameliorating the economic condition of the weaker section of the society particularly marginal farmers and landless labourers, by providing them a source of additional income through the maintenance of milk cattle and sale of milk at remunerative prices. B. Ownership of dairy plant A majority of the processing plants and the marketing organization in three out of the four metropolitian cities are still owned and controlled by the central and state governments. Apart from the annual losses suffered by : these plants (estimated at Rs 30 crore), it also makes it necessary for government to find further resources for financing the modernization and expansion of these plants. C. Regional imbalance Very few areas of Operation Flood programme are getting its benefit. In other areas, the development has yet to take place because of poor infrastructure and difference in the pattern of financial assistance.

D. Low capacity utilization of dairy plants A large number of dairy plants both a co-operative and public sectors have not been able to achieve a satisfactory level of capacity utilization primarily due to inadequate milk availability in the area. The low capacity utilization resulted in the doubling and trebling of processing costs per litre of milk which could not be recuped by increasing milk prices. Hence many dairies incurred heavy cash losses in addition to depreciation and interest charges. E. Non-viability due to losses As a result of inadequate capacity utilization, low margin on sales and other related factors, many of the units have i incurred losses and become non-viable. While in the case of the government operated dairies, the losses are met by the state or central government, the cooperatives have to bear the losses and resort to additional borrowing from banks to replenish their working capital which in turn leads to higher interest charge and further losses thus creating a vicious circle. F. Lack of working capital The pattern of financing adopted generally did not make any provision for working capital. As a result of representations made by the National Cooperative Dairy Federation, the Government of India has since accepted that it is necessary to make provisions for working capital in the financing of dairy projects. While this will help the new projects, it is necessary to make suitable arrangements for meeting the working capital needs of the existing dairy plants also. G. Inability to repay loans In the case of sick industrial units, the financial institutions including banks review the financial structure of the units and their profitability and cash flow and revise the schedule for repayment of loans. There is need for a similar arrangement in the case of dairy projects which are now incurring losses. H. Marketing strategy to meet competition Preliminary studies have indicated that one of the major reasons for the inability of different units to meet competition from private trade is their failure to meet the local demand adequately out of the milk collected. Competition from the trade can be met effectively if only the milk collected by the co-operatives is used in the first instance to meet at least 70 to 80% of the local demand including small towns, before transferring surplus milk to the cities. Therefore, the marketing strategy for the co-operatives should be oriented in that way. 1. Absence of a rational pricing policy Absence of a rational policy on milk prices, lack of a consistent price structure, and existence of hazard controls and subsides on milk prices in urban centers is a major factor inhibiting the growth of the dairy co-operatives. Such policy also indirectly defeats the basic objective of helping the weaker sections to earn to bit more by producing milk for the urban market. Therefore, milk pricing and price structure ought to be reviewed at stated intervals and linked to the general price structure of agricultural product, cost of milk production and in particular the cost of animal replacement, feed and fodder prices. X. Suggestions for Improvement Dairy co-operatives should play an increasing role in future in the regeneration of the rural life. In future, as far as possible, all milk supply schemes should be started on co-operative basis, and the schemes which are currently being run by the government should also be

transferred to the co-operative sector. A few suggestions given under would help developing dairy co-operatives. 1. Co-operative societies of milk producers should be formed in the villages situated within a radius of about 30 miles from 10wns with a population of 30,000 or more. 2. The societies should be formed in the area which lies beyond a distance of 10 miles from a town. If members of the society are interested, a collected agency and supply society should be organized. 3. A minimum daily quantity of milk should be prescribed. Minimum of 300 lb should be aimed at though it varies according to the local conditions. 4. The function of the village primary society or the middle supply will be notified to the milk union at the commencement of each month, the approximate quantity of milk its members can supply daily, disburse payments to its members at the end of each month, and distribute among members any subsidy given by the union. 5. The cow shed should be constructed in a common place where members of the society may be able to supervise it. The funds for constructing the shed should be provided by the state. 6. The ordinary financial needs of the members viz., the purchase of improved cattle breed or cattle feed, will be ratified by loan and advance made by the villages primary society or the milk supply society. These societies will draw their funds from loans from the milk union or the central co-operative banks. 7. The milk union will be entirely producers organization, formed by a federation of the village societies organized for milk supply. Milk from a group of village should, if necessary, be first collected at a primary collecting centre and transported to the union. 8. The main function of the union will be to collect milk from villages, transport it to the towns and market it to the advantage of the producers. The f milk arrangements to be made by the unions must include: a. guarantee to the producers of a fair price for a standard quality of milk; b. the appointment of a superior for a group of villages; and c. the provision of speedy transport vehicles and sanitary milk containers to move the produce from the village to the union office. 9. The state should bear the entire expenditure of the unions for purchasing transport vehicles and milk containers and 50% of their working expenses during the first five years. 10. An attempt should be made to organize co-operative societies for the distribution of milk wherever possible. 11. In large cities the consumers may be served best with establishment of Milk Marketing Board. The board should have representatives from Government, the municipalities, cooperatives from milk supply union and producers of milk. They would be authorized to: a. purchase raw milk from milk unions; b. pasteurise and distribute it to consumers; c. process surplus milk into milk products; and d. guarantee to the union a fair price for milk of tested quality. 12. In the towns where co-operative societies for the supply of milk already exist and are functioning well or can be organised, no milk marketing boards need to be set up. 13. In order to make an effective contribution to the organisation of milk supply to the towns, about 300 milk unions will have to be started within a period of five year. The state should bear capital costs to the extent of 50 per cent. 14. In larger cities where producers experience great difficulties in maintaining dry cattle, special co-operative societies should be organised for doing the work of salvaging the dry animals.

15. Co-operative dairy farms should be established in the outskirts of towns and cities, and owners of milch cattle particularly 'gowalas' (milkmen) and others should be induced to form cooperative societies. The societies should provide milling yard, dairies, stud bulls, veterinary aid, storage accomrnodation for feed, etc. Each member will look after his own cattle stationed in the stables and deliver milk to the dairy societies. 16. Such societies should be offered, by Government or local bodies, sites on attractive terms for keeping their cattle at convenient distances from the cities. These societies should adopt improved methods of milk production and provide facilities for proper grazing, silage making, etc. They should also be able to supply milk regularly to the milk union or consumers milk distributing societies in the urban areas. 17. In those areas where there is no local market for liquid milk or where milk is generally in surplus or where the manufacture of milk products is an important cottage industry, co-operative societies should be organised to undertake the manufacture of dairy products such as butter, ghee, khoa, casein etc. and these co-operatively made products be 'Agmarked'. XI. Recommendation of the Ninth Indian Co-opera- tive Congress 1. All dairy co-operatives should make a supreme effort to increase milk collection and utilization of the installed capacity of dairy plants by a minimum of 20% during 1982 (which had been declared as the 1. "Year of Productivity". 2. The central and state governments should recognize the role played by dairy co-operatives at all levels in increasing the milk production and in ameliorating the economic condition of the weaker sections of society. The work related to artificial insemination, disease control, etc. now done by Animal Husbandry & Veterinary Department should be transferred to the District Cooperative Milk Producer's Union. ; 3. The dairy plants owned by the government/public sector agencies may be transferred as early as possible to Dairy Co-operatives so as to enable them to handle the collection processing and marketing of milk thus provide an integrated service to the small producers. 4. The government of India should review the allocation of resources under Operation Flood II with a view to provide larger resources to the underdeveloped states particularly in the eastern and north eastern regions to take appropriate steps to ensure that these allocations are speedily utilized. 5. The government of India may appoint a small committee of experts to study the working of the dairy plants where average annual capacity utilization has been less than 70% of the target, and recommended measures for rehabilitation of these units and for making them financially and operationally viable. 6. The Indian Dairy Corporation may be directed to review the financial position of the cooperative owning plants installed under Operation Flood and in appropriate case reschedule the payment of interests and principles on the loans sanctioned for these plants to prevent these cooperatives from incurring continued losses and becoming a viability instead of an asset. 7. The financing institutions like NCDC, IDC, etc. may be directed to provide adequate working capital loans to the co-operative union and federation adversely affected by the losses caused by low capacity utilization. 8. The government should urgently evolve a national policy on milk prices designed to encourage milk production and better income to the rural milk producers. 9. The imported skimmed milk products (SMF) and butter oil should be allotted to various dairies only at prices equivalent, in terms of fat and SMF content, to that paid by the dairies for fresh milk. 10. Special efforts may be made to promote and develop dairy co-operatives under the NCDC programmes in areas not covered by the Operation Flood Programmes. The small and marginal farmers should be given such help, and finance from Operation Flood II may be mainly

diversified to the economically viable milk plants and milk procurement and distribution schemes. XII. Conclusion From the early days, milk production was entirely on a decentralized basis and the collection of milk was by private marketing agencies. Due to the absence of a system of dairying based on commercial rural milk production, collection, bulk transportations, processing and marketing of milk and milk production to meet the demand of the growing population, the gap between demand and supply in cities continued to grow and acute shortage was felt in many areas. Private vendors took full advantage of milk and also charged high prices for poor quality milk. This situation still continues in our nation. To tackle this problem the best remedy is to start co-operative milk supply societies. These co-operatives can bridge the gap between urban and rural areas as well as demand and supply of milk of its products. %%%%%%%%%%%%