Indian Dairy Association (West Zone)

It is really an honour and privilege to be invited to inaugurate the 34th Dairy Industry Conference here in Bangalore. First, I would like to add my own words of welcome for the foreign participants of this conference. I welcome them to Bangalore and to India. I hope, you get a chance to see some parts of the country.

The dairy industry has made remarkable progress in India over the past two decades. The milk production, which was about 40 million tonnes in the early 1980s, is now estimated to be almost 90 million tonnes in 2005-2006. India has been the largest milk producer in the world over the last few years. So, this is, in aggregate terms, quite a remarkable achievement.

I remember the time when we were importing milk. Now, this achievement is the result of a concerted effort by many participants. While the most important participants are undoubtedly the millions of small milk producers, the organized sector has also contributed to this progress.

Here it is appropriate to mention that the dairy industry has had some very distinguished leaders who have interfaced with the government policy and in many ways have led the government’s dairy policy. I have in mind the previous Chairman of the NDDB, Dr. Verghese Kurien, and his successor Dr. (Miss) Amrita Patel. Since the mid 1980s I have interacted with both of them from the government side.

I have to say that very few industries have had two such distinguished and dedicated spokesmen who have diligently taken up the cause of the industry with the government. And, they have received strong support from the government. Whenever I met them, I was reminded of what the government is not doing, and I acknowledge that this is entirely appropriate. It’s a good thing for an industry to have leaders who keep reminding the government of what it is doing and what it is not. True, there are many more things, which we should be doing but we are not doing.

I am really impressed by the range of topics chosen for the Conference and the list of distinguished participants that you are going to interact with over the next couple of days. I am conscious that I am myself hardly knowledgeable to inaugurate this Conference. But, there is perhaps some relevance of myself being here. We in the Planning Commission are about to undertake the work associated with the formulation of the Eleventh Five Year Plan for the period from 2007 to 2012. As part of that work, we undertake a comprehensive review of the policies in each area, trying to look at the successes, but most importantly to know what is wrong, what is inadequate, what needs to be strengthened. Especially, what new policy initiatives are needed to face the challenges that lie ahead. Therefore, from our point of view this conference is very timely!

I invite the organisers to help us by submitting to me what they regard as critical recommendations emerging from the Conference, and which they feel the government should take note of. I can assure you that we will give you full attention, and, hopefully, put some of the issues raised by you on the Plan agenda.

Now, I will share with you what the government thinks of the dairy industry. All industries have grown, but very few industries in this country have actually increased their relative share or rank in the world production. But, the dairy industry has done so. It is also an industry characterised by an interesting structure. We know the milk production is dominated by small producers, majority of them having only one or two animals. What is more, it is precisely this group that accounts for almost 70 per cent of the total milk production. So, it’s really a small holders-driven industry. Whatever happens in the industry, the benefits are bound to be widely spread. And, that’s an extremely important feature at a time when we are all interested in finding ways of stimulating inclusive growth, which actually begins in rural areas.

There are other aspects of the industry, which make it different from the rest of the world. It’s neither a very energy-using industry nor a capital-intensive one. In fact, in terms of feed etc. it relies on residues and byproducts. So, in that sense it is a highly eco-friendly industry that recycles materials rather than adding to ecological imbalance. It contributes very substantially to income generation in rural areas. Growth of the industry, over the years, has meant that almost 22 per cent of the income is now coming from the livestock. It’s really the income accruing to that segment of population, which is lower down in the income-earning range.

Even more important is the phenomenon, which has been noticed in some studies that the prevalence of a strong livestock sector has essentially been a form of income support that withstands drought conditions. There have also been studies, which indicate that the degree of stress or distress experienced in periods of drought is less in those areas where there is a substantial dependence on the livestock. So, in that sense it complements the rest of the agricultural system by providing a very important underpinning of potential income support.

The dairy industry has a rather small organized sector component -- whether we are referring to the public sector, corporate sector or private organized sector. Some figures, which I have seen, suggest that only about 15 per cent of the total output is accounted for by this sector, and there is 35 per cent output coming from small private operators, which are operating locally.

In terms of structural change as we look ahead, the question arises: What is necessary for the dairy industry to cope with the new challenges of the future? One certainty in near future is that the organized sector or private sector, like the cooperative sector, would also have a larger role in the industry. In the developing scenario, we expect that the integration of the producer with the organized sector will be an important component of the structural transformation!

I realize that a very important thrust has been placed on the cooperative sector. But, now, one of the key issues is what is happening to the cooperative sector. Is it really as strong as it needs to be in order to carry forward this economic revolution? I am really interested in knowing what are the conclusions of the Conference in this regard.

There is a perception in the country that the cooperative form of organisation has got weakened and it needs to be freed from the intrusive control by the government. When the cooperatives were developing, the initial involvement of the government was meant to support them, and of course that was desirable. But the way these things happened over the time, what began as a support structure has actually become a bit of a control mechanism. And, the control is not necessary for creating a structure that will be able to withstand the pressure of competition, especially in these days of liberalisation where the private sector or the organized sector will also be competing. So, I think one of the issues on the agenda is whether the cooperative sector needs to look at other methods of organization.

Some time ago, changes were made in the Company Act to facilitate setting up of the producer companies, which is how the cooperatives are organized in the rest of the world. The real issue is what use should the cooperative system make of this window re-designation, as the producer companies are an important area of policy. I hope in this conference this issue will receive some attention. I would really welcome hearing that there is a consensus on the issue, and what are the key things the industry wants the government to do.

Generally, it’s clear that we will be looking very hard to see what support we can give to this sector. Although in terms of aggregate production, the dairy sector has done very well, two issues cannot be ignored. One relates to productivity. It cannot at the moment be called a high productivity industry. What goes into the productivity are of course many things. I know that NDDB Chairperson, Dr. Patel will be addressing these issues, so I don’t want to touch upon them.

It will be very interesting to see from this Conference what do people perceive the government can do to support different interventions, be it in the area of breeding, disease control or other things related to technology, feed etc. that would lead to higher productivity. Another important issue relates to the quality of milk. As we move ahead, first of all, quite understandably, there will be a great deal of pressure to raise quality standards to protect the consumer interest. A very large part of the industry is not organized and some of its organized part does not necessarily have sufficiently good access to technology to ensure quality. As we have already got the quantity number right, now we need a corresponding revolution on the quality front. This becomes even more important in a world that is globalising, particularly if want to export either milk or milk products which logically we should be wanting to.

At present, the international trade is so seriously distorted by excessive subsidies in the developed world that it is very difficult for anyone in the developing world to compete in this area. But, it would be odd for the world’s largest and low-cost milk industry not to carve out its export niche. However, on the export front, a major problem would be adhering to safety and quality standards. We need to address this issue urgently. Even if it is not possible for entire dairy industry, surely it is necessary for a sufficiently large segment of it to upgrade its quality to demonstrate that it can in fact compete in the world market. So, that is a very important area.

The government has a very large number of schemes for the dairy industry. We have the Intensive Dairy Development Scheme, which is a Centrally-sponsored scheme for the development of milch cattle aimed at increasing the milk production by providing technical services. We also have the Integrated Dairy Development Programme, which is in operation since the 8th Plan. Its aim is to create necessary infrastructure for milk procurement and processing in non-Operation Flood areas. We have another scheme for providing assistance to the cooperatives. Its objective is to revive the federations and cooperatives that have accumulated losses. The NDDB has already identified 43 cooperative unions for assistance under the scheme.

We have launched a new Centrally-sponsored scheme for strengthening the infrastructure for quality and clean milk production. It will address some of the challenges, which I have mentioned earlier. Under the scheme, provision is made for training the farmers in good milking practices. It provides 100 per cent grant to States for this training, apart from making provision for detergents, stainless utensils, and strengthening laboratory facilities. And then there is the National Project on Cattle and Buffalo breeding launched in 2000-2001, which aims at providing the artificial insemination facility at the farmer’s door. Twenty-six States have participated in this programme, 6751 mobile artificial insemination centres have been set up, 15 sperm stations have been strengthened, and 45 frozen semen banks and 23 training centers have been established.

As we move to a new Plan period, we cast a very critical look at these programmes. In fact, our job in these days of zero-based budgeting and self-criticism is to ask ourselves: “Are these schemes doing what they are supposed to be doing not just in the dairy industry but across the board.” The government focus now is on distinguishing between expenditures or what are called outlays and actual outcomes. Some of the dairy industry schemes have been subjected to independent evaluation. Not all the schemes have been found to be doing well.

Frankly, I hope this Conference would help us to ascertain whether the schemes are really helping us, or, more importantly, is there a way of redesigning or merging the schemes, which would actually make a strategic difference. We really look forward to receiving feedback from you whether these schemes are well designed, or to what extent these are serving their purpose. Whether we should do something different from what we are doing now, or we simply need to fund the ongoing schemes to a greater extent.

Looking ahead, the dairy industry has a very large agenda, whose prime objectives are productivity enhancement, institutional and structural change, quality upgradation and making an impact on the global trade. The last objective, I feel, also depends on the outcome of the ongoing Doha Round negotiations and the success of the developing countries in persuading the industrialised countries to cut down their extremely high subsidies. I do not want to pre-judge what will happen. But one thing is certain that these subsidies will destroy the world trade in future. These must be phased-out, if not immediately, then certainly over a period of time. It is an area where opportunities will widen, and we will have to do a lot of restructuring domestically so that we can be ready to take advantages of the opportunities when they open up!

With these words, let me thank you once again for inviting me to inaugurate the 34th Dairy Industry Conference, and I look forward to hearing more knowledgeable people who are going to speak after me on this subject.