TheDairySite.com - news, features, articles and disease information for the dairy industry

USDA GAIN: Dairy and Products


22 October 2012

USDA GAIN: India Dairy and Products Annual 2012USDA GAIN: India Dairy and Products Annual 2012

2012 dairy production was marked, paradoxically, by localized drought and periods of over production of non-fat dry milk (NFDM). Higher than expected production, coupled with an export ban on milk powders (February 2011- June 2012) have resulted in growing NFDM stocks. The Indian Government is aggressively promoting milk production, notably through the 416 million dollar National Dairy Plan. Fluid milk, NFDM and butter production all continue to grow, although 2013 NFDM growth is expected to be lower due to large stocks carried over from 2012.
USDA Gain Report - Dairy and Products

Commodities:

Dairy, Milk, Fluid
Dairy, Milk, Nonfat Dry
Dairy, Butter

Production:

India produces approximately 17 percent of the world’s total dairy production, and consumes virtually all of this production. India follows a “low-input/low-output” dairy production model characterized by production costs and yields amongst the lowest in the world. India also maintains the world’s largest bovine herd, although the typical producer milks less than five animals. Over the last several years, India has experienced strong growth in demand for dairy products, which is estimated between 6 and 8 percent annually, approximately twice the growth rate of supply (3 to 4 percent annually). Given Indian’s preference for dairy over other proteins and rising dairy prices, the sector is attracting new public and private sector investment. New investment in the sector has resulted in increases to the pace of overall growth and a slow shift away from the low-input model.

The 2012 production cycle was marked, paradoxically, by localized drought and periods of over production of non-fat dry milk (NFDM). Industry source in states reporting drought (such as Maharashtra, Gujarat, and Karnataka) explained that in several instances, farmers who experienced crop failures were quick to fall back on dairying. Citing remunerative prices, industry sources further explained that feeding cattle had become more profitable, and farmers were seeking ways to maintain revenue farther into the season. Interviews with livestock feed producers and suppliers confirmed that while intensive use of commercially manufactured feeds is not yet the norm, farmers have become more willing to purchase feed mixtures in order to increase productivity. Feed manufacturers additionally noted that sales of cattle feed are growing and that in many cases feed mills are operating at capacity. This scenario, further fueled by state- government interventions such as Maharashtra’s payment of 2 rupees per liter to producers, actually pushed the Indian dairy sector into brief periods of overproduction. As a result, efforts to stimulate dairy production have succeeded in creating remunerative conditions for producers, despite unfavorable weather.

As a result of strong prices, active government support, and growing demand, Post forecasts calendar year (CY) 2013 fluid milk production at a record 135.50 million tons, 5 percent more than CY 2012. This estimate may fluctuate slightly in response to fodder availability and overall monsoon conditions in 2013. CY 2012 milk production is estimated at 129 million tons, 4.87 percent up over CY 2011. CY 2011 fluid milk production is raised at 123 million tons, 1.23 percent higher than previous estimates reflecting strong monsoon and good fodder availability.

While fluid milk production is expected to continue increasing in 2013, 2013 NFDM production is only expected to face marginal increases due to large stocks carried over from 2012. NFDM stocks grew significantly in 2012 as production grew in response to remunerative prices and the Government of India’s (GOI) 2011/12 prohibition on milk powder exports. (The GOI implemented a milk powder export ban between February 2011 and June 2012 in an effort to control domestic food inflation). As a result, Post forecasts CY 2013 NFDM production to increase by 5,000 metric tons to 455,000 metric tons. The CY 2012 production estimate for NFDM remains unchanged at 450,000 metric tons. Post increased NFDM production estimates for CY 2011 by 20,000 metric tons to 430,000 metric tons, reflecting high production on account of strong procurement prices.

Post forecasts 2013 production of combined butter and ghee (clarified butter) to increase by 5 percent over 2012 to 4.75 million metric tons, following India’s rising production trend. CY 2012 butter production estimates are revised up 2500 metric tons to 4.525 million metric tons. CY 2011 butter production has been revised upwards by 10,000 metric tons to 4.33 million metric tons due to good milk production and a favorable 2011 monsoon.

PRODUCTION POLICY

In 2012, the National Dairy Development Board (NDDB) initiated the “National Dairy Plan” (NDP). The NDP was created in response to growing consumer demand for dairy products as well as sustained food inflation. It aims to increase milk production in India by 6 million tons annually over the next 15 years. The first phase of the plan, NDP I, has a financial outlay of 416 million dollars (more than 20 billion rupees) and will have an implementation period of 6 years. While the NDP will be managed by NDDB, most activities will be carried out by end implementing agencies (EIAs), who will be approved by NDDB. EIAs may include:
  • State cooperative dairy federations;
  • District cooperative milk producers unions;
  • State livestock development boards;
  • Registered societies/trusts and non-governmental organizations (NGO’s);
  • Producer companies;
  • Subsidiaries of statutory bodies;
  • Indian Council for Agricultural Research (ICAR) and state institutes engaged in breeding and fodder development activities.
NDP I’s stated objectives are:
  • To help increase the productivity of milk animals, and thereby increase milk production to meet India’s growing demand for milk; and
  • To help provide rural milk producers with greater access to the organized milk processing sector.
In order to achieve these goals, NDP I will focus on three major areas:
  • Increase productivity through scientific breeding and feeding;
  • Promote and strengthening village-based milk procurement systems;
  • Project management and training.
In addition to the National Dairy Plan, the Department of Animal Husbandry, Dairying and Fisheries (DAHD), Ministry of Agriculture, implemented the four following schemes in financial year 2012-13 (April-March):

1. Intensive Dairy Development Program (IDDP): This program is being implemented by the state dairy federations/district milk unions and has the following six objectives:
  • Development of milk cattle;
  • Increase milk production by providing technical inputs services;
  • Procurement, processing and marketing of milk in a cost effective manner;
  • Ensure remunerative prices to milk producers;
  • Generate additional employment opportunities;
  • Improve the social, nutritional and economic status of residents of comparatively more disadvantaged areas.
2. Strengthening infrastructure for quality & clean milk production : This program is being implemented through the state government by district cooperative milk unions/state level milk federations. The objectives of the program are:
  • Build infrastructure to ensure milk quality from producer to consumer;
  • Improve milking practices at the farmer level;
  • Build awareness on the importance of clean milk production amongst producers.
3. Assistance to Cooperatives: The GOI seeks to revitalize underperforming dairy cooperative unions at the district level and cooperative federations at the State level. The program is being implemented by the concerned district cooperative milk unions/state dairy federations.

4. Dairy Entrepreneurship Development Scheme: This program is being implemented through the National Bank for Agriculture and Rural Development (NABARD), and has the following objectives:
  • Creation of modern dairy farms for the production of clean milk;
  • Encourage heifer calf rearing for conservation and development of good breeding stock;
  • Create structural changes in the unorganized sector to promote initial milk processing at the village level;
  • Upgrade technology to handle milk on a commercial scale.
The Dairy Entrepreneurship Development Scheme was started in September 2010 and is approved to continue through financial year 2012-13 (April-March).

While breeding stock development continues to take place through the Ministry of Agriculture’s research programs, the GOI has also taken steps to allow the importation of high quality genetics. Currently, India allows imports of bovine semen (subject to strict quality norms). Additionally, the GOI launched the ‘National Project for Cattle and Buffalo Breeding’ (NPCBB) in October 2000. This program aims to improve Indian indigenous breeds on a priority basis over a ten-year period with an allocation of USD 255 million. The project envisions genetic improvements of indigenous cattle and buffaloes, development and conservation of important indigenous breeds, and the building of a sustainable breeding policy with a focus on increasing milk production. According to DAHD, the project has many achievements, including the significant increase of in-milk animals and the number of crossbred cattle over the last decade. Following the success of NPCBB, the GOI is likely to continue this program through the 12th Five Year Plan period (2012 -2017).

The GOI is seeking to improve feeding practices and develop quality feeds and fodders in order to improve livestock productivity in India. Animal feeding in India typically relies on agricultural byproducts rather than grain-based feeds or specialized fodder. Use of capital-intensive feeds is growing in India, but still represents a small share of total feeding. According to DAHD, “the GOI has released funds under the Centrally Sponsored Scheme and distributed 'mini-kits' of high yielding fodder varieties to assist the States in their endeavor to augment the availability of quality feed and fodder. The Accelerated Fodder Development Program (AFDP) launched in the financial year 2011-12 as a component of Rashtriya Krishi Vikas Yojana (RKVY) has also provided additional funds to the selected States. Further, Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS) funds can also be utilized for improving availability of fodder”.

The GOI launched the National Mission for Protein Supplements in Indian Financial Year 2011-12 with an allocation of more than USD 65 million. This mission undertakes activities to promote animal based protein production through livestock development, dairy farming, piggeries, goat rearing and fisheries in selected areas of the country. The mission was strengthened in Indian Financial Year 2012-13 with the announcement of the NDP.

The private sector also provides extension services including artificial insemination, veterinary care, and livestock management training. As genetic improvements become more available, it is expected that Indian producers will continue to use higher yielding foreign cattle/local breed hybrid crosses, often provided through their milk procurement company’s own extension services.

REGULATION OF MILK AND MILK PRODUCTS IN INDIA

The Food Safety and Standards Authority of India (FSSAI) regulates food safety in India. Dairy products are regulated under the Food Safety and Standards Regulations (FSSR), which replaced the Milk and Milk Products Order, 1992 on August 5, 2011. The FSSR applies equally to domestic and imported food, and requires that food business operators (including food processors, manufacturers, exporters, or importers) hold a license to carry out business in India. Individuals are not allowed to start or carry out any food business without a license from the FSSAI. The FSSR also prohibits the use of animal-derived rennet in cheeses. For details please refer to GAIN1174 and IN1197.

While the FSSAI sets standards for the safety of domestically produced and imported milk and milk products into India, the Ministry of Agriculture’s DAHD is responsible for issuing sanitary permits for milk and milk product imports into India.

Consumption:

According to NDDB, demand for milk is growing at approximately twice the growth rate of production. The major factors driving growth in milk consumption are increased demand due to population growth, growing household incomes, increased demand for value-added milk products, and India’s preference for dairy products over other protein sources.

Although difficult to verify, industry sources report that approximately 30 percent of Indian dairy production is handled by the organized sector (16 percent by cooperatives and 14 percent by private sector firms), and 70 percent is handled by the unorganized sector. Historically, the Indian industry reported that up to 50 percent of India’s milk production was consumed on farm. However, given strong prices, increasing production, and a growing urban population, it is likely that on-farm consumption is decreasing. Additionally, given Indian consumer preferences and trust for branded milk products, it is possible that the unorganized sector’s market share is slowly decreasing.

India consumes nearly all the dairy and dairy products it produces. Indian consumption of nonfat dry milk is forecast to exceed Indian production in 2013, reflecting the utilization of carryover stocks from CY 2012. CY 2013 fluid milk consumption is set to match 2013 fluid milk production. Butter consumption is forecast to match domestic production in 2013.

PROCESSING

The Indian processed dairy sector is expanding. Industry estimates project 15 percent growth in the processed dairy segment in the next five years. Sources indicate that growth in the processed dairy sector is being driven by an expanding middle class demanding a greater diversity of choices. Growth is further being enabled by the expansion of modern retail facilities, especially in tier 1 cities. Products such as yogurts, ice creams, dairy drinks, and western-style cheeses, as well as dairy products with enhanced nutritional properties are growing in popularity. Given this scenario, the processed dairy sector is poised for growth, although this will depend greatly on the stability of dairy supply as well as the expansion of necessary infrastructure and the cold chain system.

Trade:

Export: India consumes almost all of its domestic dairy production. India also exports milk powders (casein) at significant levels, and occasionally ships smaller volumes of butter and other products to neighboring countries if favorable prices and demand occur. However, on February 18, 2011, the GOI prohibited the export of milk powders (including skimmed milk powder (SMP), whole milk powder, casein and casein products, dairy whitener, and dairy-based infant formula,) in order to help control rising Indian dairy prices. The ban on SMP exports was lifted on June 8, 2012, following a production surge in 2011 and 2012 that resulted in higher than anticipated SMP stocks. However, other milk powders remain prohibited for export. (For details on prohibited goods and the modalities of the rule change see Notification: India Lifts Ban on Skimmed Milk Powder Exports). Industry sources have indicated that due to global SMP pricing, it is unlikely that significant volumes of Indian SMP will be exported in CY 2012.

Given the above factors, Post forecasts CY2013 NFDM exports at 5000 metric tons, reflecting high stocks. CY 2012 estimates for export of NFDM are also revised to 3,000 metric tons based on India’s decision to lift export ban on SMP. CY 2011 estimates are revised to 3,000 metric tons, based on trade data. CY 2011 butter exports are revised upwards to 11,000 metric tons on updated GOI statistics reflecting higher 2011 production and trade data. CY 2012 butter exports have been revised up to 15,000 metric tons to reflect favorable exports on account of strong global prices. Total CY 2013 exports of butter are also forecast at 15,000 metric tons, reflecting sustained strong domestic production.

Imports: Due to strong domestic demand and concern over seasonal shortages in 2011 and early 2012, the GOI allowed NDDB duty-free imports of NFDM and butter up to 50,000 tons and 15,000 tons respectively during 2011-12 (April-March). While only 30,000 metric tons of NFDM were allowed duty-free in 2010, the quota was expanded in spring 2011 to 50,000 metric tons. The tariff rate quota policy remained unchanged for 2012-13 (April-March). Post has revised CY 2011 NFDM imports down at 32,000 tons reflecting trade data. Post forecasts ‘nil’ CY 2013 NFDM imports, reflecting large stocks (96,000 metric tons). CY 2012 NFDM imports have been revised down by 5,000 metric tons to 25,000 metric tons, estimated on revised trade data.

CY 2013 butter imports are forecast at 5,000 metric tons, assuming that the tariff rate quota (TRQ) will remain at zero duty for 15,000 metric tons. CY 2012 butter imports are revised upwards to 12,000 metric tons against a previous estimate of 5,000 metric tons, reflecting the zero-duty TRQ of 15,000 metric tons of butter, butter oil and anhydrous milk for 2012-13 (April/March). CY 2011 imports are set to ‘nil’ reflecting trade data.

Policy:

Trade Policy:

India allows imports of milk and milk products without quantitative limitations, although tariff rate quotas apply and an import permit is required. NFDM imported above the TRQ attracts a 60 percent basic duty and above quota butter oil imports are charged a 40 percent basic duty. Table 1, at the end of this report, gives an account of the tariff structure of various dairy products.

Historically, India has only imported milk powder and butter in limited quantities when it was believed that domestic production was insufficient or to help control inflation concerns. As incomes and population grow, (and consequently consumption), India may require additional supplies and imports of butter and NFDM, absent significant domestic production growth. India consistently exports milk powders, (particularly casein), although these exports represent a small percentage of India’s total production and have stopped following India’s 2011 export embargo on dairy products.

Although India allows milk and milk product imports, in most cases both import permits and sanitary certificates are required. For the import of livestock products (including milk and milk products), an applicant has to apply at least 30 days in advance with form A/B (Department of Animal Husbandry and Dairying). Exports of U.S. dairy products to India are effectively prohibited under India’s current dairy sanitary import protocol. Imported dairy products, like domestic dairy products, must adhere to all relevant food safety laws and quality standards. These include the quality standards set by the Bureau of Indian Standards (BIS) as well as the food safety standards covered in the Food Safety and Standards Regulation, 2011.

On January 31, 2012, the GOI’s Ministry of Agriculture issued a draft notification proposing a veterinary certificate for the import of milk and milk products from various countries including the United States. The notification was sent to the WTO on January 31, 2012. The comment period ended on March 31, 2012. The full text of this announcement can be accessed on the website of Department of Animal Husbandry, Dairying and Fisheries at Veterinary Certificate for Import of Milk and Milk Products into India. The WTO notification can be accessed at: Notification G/SPS/N/IND/75: India Milk and Milk Products (for further details, please refer to GAIN IN 2017). The department has also created a sanitary import protocol in the case of bovine semen in India, which it revised in 2011 (Guidelines for export /import of bovine germplasm (Revised 2011). (Please refer to GAIN report IN1122 for more information).

On June 8, 2012, the GOI amended its export promotional measure, the Vishesh Krishi and Gram Udyog Yojana, to include SMP. These programs incentivize exports through a duty credit scrip at 5 percent of the free on board value of the export. Details of the Vishesh Krishi and Gram Udyog Yojana programs can be found under heading 3.13 of the Foreign Trade Policy 2009-2014. The public notice for the amendment to the Vishesh Krishi and Gram Udyog Yojana programs can be accessed at: Public Notice: VKGUY to Cover Skimmed Milk Powder Exports.

On July 2, 2012, the GOI extended the import prohibition on milk and milk products from China until July 23, 2013 or until further orders. This ban includes milk and milk products, chocolates and chocolate products, candies, and confectionary or food preparations with milk or milk solids as an ingredient that have originated in China. The import ban was taken as a precautionary measure after melamine adulteration was found in Chinese milk powder imports. (A related notification, number 04 (RE – 2012)/2009-2014, was issued by the Directorate General of Foreign Trade (DGFT), and can be accessed at DGFT).

DOWNLOAD REPORT:- Download this report here

Our Sponsors

Partners


Seasonal Picks

British Field Crops 2nd edition