MILK & DAIRY

Presented By: Diksha L-2019-BS-01-MBA(AB)

Dinkar L-2019-BS-02-MBA(AB)
 INTRODUCTION
 India has been the leading producer and consumer of dairy products worldwide since 1998 with a sustained growth in the availability of milk and milk
products. Dairy activities form an essential part of the rural Indian economy, serving as an important source of employment and income.
 India is endowed with a largest livestock population in the world having a total bovine population of 304 million compared to the world's total bovine
population of 1400 million.
 India’s milk production is growing by 35.61% during the last six years to 198.4 Million tonnes In 2019-20.
 Indian dairy industry has grown at ~12 per cent during last 5 years, with value-added products driving market growth. It is a significant contributor to
farmers' income as approximately 70 million farmers are directly involved in dairying.
 Dairy is the only agri-product in which around ~70-80 per cent final market value is shared with farmers and it accounts for approximately one-third of
rural household income in India
 The rural sector has an estimated share of 57 per cent in the total consumption. The per capita consumption in the urban areas (592 ml) remains higher
than the rural areas (404 ml).
 During 2019–20, India exported 51,421.85 metric tonnes of dairy products, at a total value of Rs 1,341.03 crore (US$186.71 million).
 Consumption
 Milk consumption levels are not uniformly distributed across India. The people of northwest India are significant consumers; northeasterners
consume less. States with higher consumption of meat and eggs are noted to have lesser consumption of milk, as dairy products are one of the few
sources of protein for vegetarians.
 Per capita consumption of milk over 30 days was 4.333 litres for rural households and 5.422 litres for urban households as of 2011–12.
 As of 2018, fluid milk consumption was projected at 67.7 million tonnes, and was growing at a rate of 6–7 million tonnes annually.
 Ghee is the most consumed among value-added dairy products.
Products in dairy sector: Milk, Flavoured Milk, UHT Milk, Goat Milk, Camel Milk, A2 Milk, Organic Milk, Curd, Probiotic Products,
Flavoured & Frozen Yoghurt, Buttermilk, Lassi, Ghee, Butter, Cheese, Paneer, Cream, Khoya, Dairy Whiteners, Skimmed Milk Powder, Ice
Cream, Sweet Condensed Milk, Dairy Sweets and Whey are the different products in the dairy sector.
India's Milk Product Mix
TECHNOLOGICAL ADVANCEMENTS
Health Tracking Devices for Cattle: Health disorders reduce the productivity, longevity and reproductivity of cattle. However, thanks to wearable animal
gadgets, farmers can track, monitor and manage cattle’s health, nutrition, behavior, pregnancy, milking frequency, milk production anomaly and activity
level in real-time.

Cattle Monitoring Drones: The cattle monitoring drones can keep track of the cattle and herd them back from fields to barns. Some drones are equipped
with thermal sensing technology, which helps to track the cattle from the heat of their bodies. Drones can also capture the pictures of pasture areas and
relay information

Product Traceability for Customers Through Blockchain: These days, customers like to know the journey of their dairy products from farm to table. This
is done by putting a QR code on the packaging which customers can scan on their mobile devices to get information on the origin of the milk – how and
where it was collected and packed, how old it is, what kind of transportation and cold milk chain facilities were used, etc.

Farm Management Technology: Farm management software can help automate and digitize end-to-end production and operations activities. It can give
a holistic view of all farm activities, manage records, generate reports and detect inefficiencies.
Robotic Milking Machines: Robotic milking machines are enabling farmers to eliminate the pressure on physical labour, maintain a hygienic milking process,
milk the cows anytime of the day instead of following a fixed schedule and improve the milk production.

Milk Freshness: Technology is now making it possible to detect the freshness of milk and store it for a longer period of time. Australia-based food technology
company Naturo has developed a technology that can keep natural milk fresh in the refrigerator for at least 60 days without using any additives or preservatives.
US scientists have pioneered a new pasteurization technique which increases shelf life of fresh milk from 13 days to 40 days without changing its taste or
nutritional value.

Automated Cattle Traffic Management : Automated cattle traffic management system has computer-controlled gates which opens and closes electronically.
These gates can sort the livestock on the basis of their readiness to milk. The livestock ready to be milked is moved to the milking area while the others are either
put in the waiting area or returned to the barns.

Biotechnology: Biotechnology is a relatively emerging field in the dairy industry. However, it is being touted as one of the most disrupting dairy technology of
the future. The potential of dairy biotechnology lies in the areas such as increasing disease resistance in livestock, scientific feeding of cows, embryo transmit
technology, artificial insemination, development of new molecules and vaccines for prevention and disease management of animals, dairy
enzymes/proteins/probiotics, food-grade bio-preservatives, etc.
Employment opportunities: The Indian Diary industry which is in the developing stage provides gainful
employment to a vast majority of the rural households. It employs about 8.47 million people on yearly basis out of which 71%
are women. Jobs in Indian dairy industry are mainly in the fields of production and processing of dairy products.
MILK PROCUREMENT AND PROCESSING
The organized dairy sector (both cooperatives and private) is presently handles about 15 per cent of total milk production in the
country. Thus it indicates, there is a wide scope for processing of milk and manufacture of milk products for domestic
consumption as well as export.

OBJECTIVES OF THE PROJECT

The financial assistance is extended for processing of milk with the following objectives.
To enhance the keeping quality of milk
To avoid the economic losses to farmers by procuring the milk in time from them
To manufacture various milk products as per market demand
To provide quality products at affordable prices to the consumers.
TYPE OF PROJECTS
The types of milk processing projects that are normally considered for financial assistance are:

i) Bulk Milk Cooler (BMC) / Milk Chilling plants

This involves collection of milk from villages, chilling the milk to 3-4 degree Celsius and transporting to the main dairy for further processing and
manufacture of products. In majority of cases these are part of the milk processing facility

ii). Market Milk Plants / Milk Processing Plants

It involves procurement of milk from the villages, chilling, standardization, homogenization, pasteurization, packing of market milks of various kinds
(whole, standardized, toned and double toned milk) as well as manufacture of milk products.

POTENTIAL AREAS
India is leading in production of milk and dairy is one of the major subsidiary activities of most of the farmers. Despite of highest production in the
world there is always a demand supply miss match for milk and milk products. The demand for milk and milk products is at its peak during festive
occasions like Diwali, Id, Holi, etc. In order to meet the demand during its peak, the milk needs to be converted to various milk products due to its
perishable nature. But there is lack of processing infrastructure in the country. Therefore, there is good scope for financing milk processing activities in
entire country
PROJECT DETAILS
Land and Location
i) Ample space is required for buildings, future expansion, parking of transport vehicles and for empty cans. About two acres of land is required for a milk
processing plant handling about 10000 liters of milk per day (8 hours). However, the built-up area to total area should be normally around 1:3. The exact design
and details of the built up area has to be decided in consultation with the plant and machinery supplier or with a professional dairy consultant.
ii) The location of a plant should be close to the milk producing area in case of products manufacturing unit and if liquid milk is the main product it should be
close to the consumption centres.
iii) The location of site should have proximity to road/rail facilities, services, such as water, electricity and effluent mains, social infrastructure, etc.
iv) Subsoil of the site should be firm with proper drainage. It is always advisable to conduct soil investigation for load bearing before setting up dairy processing
plant.

Site Development
i) Preferably the entire site should be fenced with barbed wire or compound wall is constructed with gates at suitable places
ii) Internal roads should be of tar/bricks/WBM depending upon the soil conditions, rainfall and the number of vehicles moving every day.
iii) At the Raw Milk Reception area there should be provision for unloading cans from different types of vehicle.
iv) Proper drainage arrangements should be made to ensure cleanliness.
 Layout and Buildings
The civil works comprise of main processing building, which includes Raw Milk Reception Dock, Main processing hall, provision for manufacture of other
products, cold storage, CIP, Laboratory, quarters, office, garages, security post etc. The factory building for the milk reception, quality control, processing,
packing and storage of milk products should be as per BIS specifications. The total covered area depends on the processes involved, products manufactured, the
quantity of milk handled and the equipment chosen product manufacturing. About 4000 sq.ft. area of building is required for handling 10000 liters of milk. The
essential sections of a milk processing plant are given in below.

The milk processing plant shall have the following essential facilities.
i) Raw Milk Reception Dock (RMRD) - consisting of can conveyor, can washer, weighing balance, dump tank etc.
ii) Processing Hall - cream separator, chiller, homogenizer, pasteuriser and other related machinery are installed.
iii) Storage area- for milk storage tanks.
iv)Products manufacturing area-depends upon the type of products, quantity of milk handled and the machinery to be installed.
v) Packing area-for packing of liquid milk and other products.
vi) Cold storage-for keeping the milk and milk products before sending to market.
vii) Quality Control Laboratory-for testing the quality of milk and milk products.
viii) Utilities area-for installing boiler, generator set, water treatment plant, maintenance and store area for spares.
ix) Waste water treatment plant area-for treating the dairy effluents before releasing to the fields.
x) Quarters and office area-for all the essential staff.
xi) Vehicle parking area-both for the milk procurement and distribution vehicles.
xii) Input supply area- for providing veterinary service, supply of feed, fodder seeds, etc.
Technical Collaboration
Normally the technical collaboration may be for supply of machinery, technical know-how for manufacture or marketing of products. If any collaboration
arrangement is there, name of the firm, country and term of agreement is required to be mentioned in the project. While entering in to agreement with machinery
supplier, provision should be made for getting the training to the technical staff employed in the unit.
Manufacturing Process
The operations involved in the manufacturing process should be given in the form of a flow diagram.

Flow Diagram for a milk processing unit of 10000 LPD

 Infrastructural Facilities for Raw Material and Utilities
Raw Material
The principal raw material is milk. The extent of milk procurement area, milch animal population, average milk yield, percentage of animals in milk,
marketed surplus etc. will determine the size of the plant. The method of procurement, transportation of milk and input supply to the farmers is required
to be highlighted. The availability of other inputs such as packing materials, disinfectants and consumables should be ascertained.
Utilities
i) Power: Normally a three phase electricity supply is required for milk processing plants. The power requirement depends upon the load to be
connected and the necessary approval from SEB should be obtained for connection. Depending upon the position of power supply, standby generators
may be considered for connecting the essential sections.
ii) Water: A milk processing plant requires the water in the ratio of 2:1 (2 liters of water for 1 liter of milk processed) for cleaning of equipment's, cold
storage and drinking purposes (source of water supply, quantity available and suitability for the purpose has to be mentioned). Accordingly, the size of
the well is required to be designed and depends on the quality of water, the water softening plant may be considered.
iii) Steam: The steam requirement (kg/hr) depends upon the processes involved and the source of steam may be met by coal/oil/gas fired / electric
boiler.
iv) Fuel: The fuel is need for various processing operations. The type of fuel will depend upon the type of boiler used for steam generation. It is
therefore necessary to assess the requirement of LDO/coal/gas and also ascertain the easy availability before purchase of boiler.
v) Compressed Air
It will be required for various pneumatic operations flow control operations as well as for cleaning purposes. The total requirement of compressed air
and the capacity of the compressors are required to be furnished.
vi) Vehicles: The vehicles required for procurement and distribution of milk depends on the quantity of milk to be handled. The number of
vehicles required, source of supply, rental charges etc. need to be furnished. Depending upon the need, the requirement of vehicles may be
considered in the project cost. Generally, insulated vehicles will be required to transport chilled milk and reefer vans for transport of finished
products like ice cream, cheese, etc.

vii) Other Services: A maintenance workshop is an integral part of milk processing for carrying out repairs and maintenance of equipment.

Manpower
While selecting the site, the availability of manpower should be looked into and the total requirement of manpower depends on the operations
involved and the quantity of milk handled. For a plant handling 10000 litres of milk per day the manpower required is given below:
Environmental Aspects and Pollution Control
The process involved is milk pasteurization and processing of milk into toned milk and products such as cream and ghee. The effluent will be in the form of
washed water and milk solids apart from the detergents and sanitizers used in the plant. There are no hazardous effluents generated from a milk processing
plant. However, construction of effluent treatment plant is necessary for treating the effluents before discharging for proper disposal. The final effluent
should meet the requirements of Pollution Control Board and is necessary to get clearance from them. The treated water can be utilised for irrigation or
creating a biotic zone where plants can be grown in and around the dairy plant.

Schedule of Implementation
Generally, it takes about 4 to 6 months period for getting the DPR, obtaining loan sanctions, approval of plans, finalizing the suppliers and construction of
various civil structures and installation of plant and machinery. Hence, during first year of operations, only six months of milk procurement can be assumed.
Proper planning needs to be done so as to take up various activities without any break. The activity wise schedule of implementation is to be given in the
project.

Products
The major products and by-products proposed to be manufactured along with quantities, composition in terms of fat and SNF and costing should be
indicated.

Marketing and Selling Arrangements

The market for the product (domestic and export), type of arrangements for distribution and sales, commission and additional incentive to be given, the
proposed network and the advertisement plans should be furnished. Detailed market survey report is required to be submitted. In the present model, the
product range proposed includes toned milk, cream and ghee. The proportion of these products (product mix) needs to be decided as per the market
requirements and it can be varied depending upon market situation and lean and flush seasons.
Business Prospects
It involves the present demand-supply for various products, gap in supply and expected demand for various products. The major competitors and their
present share are to be ascertained. The company projections for the next 3-5 years and the basis for projection may have to be furnished. The product
wise quantities and countries where it is to be exported need to be mentioned.

CAPITAL COST OF PROJECT

Broadly the capital cost includes the cost of land, development of land, fencing, internal roads, civil works (Plant building, office, quarters etc.), plant and
machinery, preliminary and preoperative expenses, margin money for working capital, etc. The project cost of 10000 LPD model milk processing plant is
given below.
ECONOMICS OF THE PROJECT
The project at a glance for the 10000 LPD milk processing unit is given in below. Based on the various techno-economic parameters, the
economics of the project has to be worked out for the project period or till the repayment of bank loan. The items of income includes sale of
liquid milk and milk products. while the expenditure includes the cost of raw material, transportation and commission, power, fuel, packing
distribution, wages and salary, repairs and maintenance, insurance, advertisement and other overheads. The income as well as expenditure for
each year has to be worked out and then it should be subjected to cash flow analysis.
Project at a glance for 10000 LPD milk processing plant
FINANCIAL ANALYSIS

WORKING CAPITAL
Working capital is the most crucial input for viability of any milk processing unit. Nowadays, banks are free to finance working capital based on
actual need of the borrower. A provision of adequate working capital needs to be considered by the financing banks. The banks provide Cash Credit
Limit, commonly known as CC limit to the borrowers for meeting their day to day expenses.

FINANCIAL ASSISTANCE
The project so formulated considering the above aspects should be submitted to the nearest branch of the bank for availing credit facility for
establishment of milk processing unit. The bank will then examine the project for its technical feasibility, financial viability and bankability. After
ensuring the technical feasibility and financial viability, the project is sanctioned by the financing bank. The loan is usually disbursed in stages for
various components depending upon the progress of the project. The end-use of the loan is verified and constant monitoring / follow-up is done by
the bank.
Means of Finance
Financing to food processing falls under priority sector lending. The loans to units meeting the criteria of MSME are classified under MSME sector.
Such units can be financed by any scheduled commercial banks, Regional Rural Banks and Cooperative Banks. Important terms and conditions of
financing such units are discussed in this section.
Margin money
The promoters of the units need to bring their margin as per the requirement of financing banks and also as per RBI guideline issued from time to
time. The margin money varies from minimum 10 per cent to 25 per cent of project cost. We have assumed margin money of 25 per cent in this model
project.
Bank loan
The promoters of the units can approach any financing bank for finance. It is compulsory to take bank loan to avail various subsidy schemes of
government. Therefore, the promoters who are desirous of availing subsidy should adhere to the means of finance i.e. the quantum of bank loan &
margin prescribed under the scheme.

Grant & subsidy

There are numbers of incentive from Sate Government for promotion of food industry. Some of the states have formulated their Agro Industry Policy.
The new comers should go through these guidelines. Various incentives are available depending upon location of the unit from District Industry
Centres (DIC). Therefore, to take maximum advantage of these incentives, entrepreneurs may contact the District Industry Centres in their state.

Ministry of Food Processing Industry, GoI is implementing a centrally sponsored scheme for known as National Mission on Food Processing (NMFP)
jointly with State Governments. The scheme will be operational during 12 th five Year Plan. Subsidy is available under this scheme for various
purposes under food processing industries. GoI has appointed State Nodal Agencies for implementing this scheme in different states. The details of
the schemes and the list of State Nodal Officers are given at www.mofpi.nic.in.
The subsidy may also be available under the credit linked subsidy scheme "Integrated Scheme for Agriculture Marketing (erstwhile
Development/Strengthening of Agricultural Marketing Infrastructure, Grading and Standardisation) of GOI as per the scheme guidelines.
Interest rate
The banks are free to charge rate of interest above its base rate within overall RBI guideline issued from time to time. It generally varies from customer to
customer based on credit appraisal of the borrower. Base rate of a bank is a minimum lending rate below which bank is not allowed to lend. However, we have
considered an interest rate of 14 per cent for working out the bankability of the model project.

Security
As per RBI guidelines, the banks are required to take adequate security for the loans extended by them. The borrowers should plan projects in such a manner
that they have enough fixed assets to offer as security against bank loan. Various types of securities generally considered
by the Banks are given here:
Primary Security
The land and buildings acquired through the bank loan are mortgaged to financing banks. The mortgage can be registered or equitable in nature. The plant,
machinery and other miscellaneous fixed assets acquired by bank loan shall have to be hypothecated to the bank. The value of all these assets is known as
primary security for the bank.
Collateral Security
As the value of primary assets, especially buildings and plant and machinery is not enough to cover the bank loan, the banks insists for mortgage of any other
property or asset of the company or promoters. This is known as collateral security.
Hypothecation of Stocks
All stocks, inventories and debtors are hypothecated to financing banks as security against the bank loan extended by them.
APPROVALS AND PERMISSIONS
The unit based on its location has to obtain various approvals and permissions from statutory agencies. An indicative list of
approvals and permissions required are as under:

• MMPO registration with Commissioner, Dairy Development, concerned state or relevant authority under Food Safety and
Standards Act.
• NOC from fire services Department.
• Approval of plan by gram panchayat/municipality
• Clearance from Pollution Control Board.
• Registration with District Industries Centre or small industries department.
• License from Factory inspector for installation of boiler
 Factors affecting the competitiveness of the dairy sector

Demand conditions
Market size and growth Market growth is due to high per capita consumption,  increasing population and
health consciousness

Consumption patterns Consumption of processed and packaged dairy products is increasing in urban
areas

Sophistication of consumers Consumer awareness on product quality is increasing but in a very small portion of
the population

Impact of market opening on demand Consumers now have a variety of quality products
 Market Structure
Performance Still large share of produce; 85% of marketable surplus goes
through informal channel

Competitive structure Little  competition to cooperatives because private sector was

not allowed in the sector until recently
Entry of supermarkets in retailing of milk is increasing the
competitive structure
Governance (value chain type) Governance of cooperative structures is constaining efficiency
and expansion
Farmer organization Immense scope for improving management and governance
through farmer organizations
Marketing chain capacity and efficiency Scope for enhancing efficiency of distribution
Distribution channels Cooperatives have a well-developed distribution channel in
urban areas
Flow of milk through different channels
Share of
Total production
marketable % of production Use
(million tonnes)
surplus
100% 100
45% 45 Home consumption
Marketable surplus sold in urban and rural
55% 55 markets (informal and formal)
Sold in urban markets as loose unpackaged
34.5% 19% 19 milk
Sold as processed products through informal
40% 22% 22 markets
Sold as packaged milk through formal markets
14.5% 8% 8

Sold as packaged milk products through

12.7 % 7% 7 formal markets
 Factor conditions
Herd
Herd inventory Very large number of indigenous animals with low productivity and a
small portion of cross-breeds
Breed Lack of policy focus on strengthening indigenous breeds
Very poor awareness of quality feed, which hinders productivity
Feed Farmers not interested in quality feed because of the low price of milk
Increasing feed costs
Veterinary medicine Availability is not an issue
Veterinary medicine costs Duplicate or cheap medicines
Human capacity
Farmer technical capacity Knowledge and new techniques are not accessible
Support services technical capacity Accessibility to good quality veterinary services is an issue in many
parts of the country
Organization and managerial capacity Organizational and managerial capacity of farmer cooperatives is very
poor
Credit or finance market
Formal credit mechanisms Access to formal credit mechanisms is very poor
Informal credit mechanisms Accessible but at very high interest
External economies
Transmission of learning Very poor extension support services, leading to very poor knowledge
transfer
Social capital and trust Strong social capital and trust in the villages, which can sustain dairy
farmer organizations if properly managed
Related and supporting industries

Processing capacity Lack of processing capacity in the country, including primary processing by
bulk chilling

Processing capacity There are government subsidies on bulk chilling and processing
infrastructure

Transportation and distribution Because of low productivity, transportation costs for procurement are high

Dairy farmer services Availability of health and breeding services could be enhanced; extension is
almost non-existent

Specialized finance and credit Exists on paper but is very difficult to access
Relevant research capacity and use Good research capacity
 Government and Enabling environment
National sector regulation
Key regulatory actors (ministries) Department of Animal Husbandry is under the Ministry of Agriculture, hence focus on livestock is
underemphasized, particularly in light of the high value of the sector.
Price regulation Rice setting by cooperatives
Food safety Regulated through the Milk and Milk Products Order
Informal regulations Very difficult to control quality in traditional channels
Huge premium on fat content of milk compared with formal regulations; thus buffalo milk fetches
much higher price
Formal sector support
Domestic sector (national) Approaches being taken to modernize the sector
Subsidy support Various subsidies available for milk processing and testing infrastructure
Inward investment promotion Very little investment on the promotion of health or quality of milk
Provincial/local
Key regulatory actors (ministries) State Department of Animal Husbandry, Dairying and Fisheries is the implementing agency at the
state level
Informal regulation & transparency Lack of milk testing equipment and thus transparency, leading to low payments

Formal sector support Availability of services in remote areas through the government
THANK YOU