Chapter 2

REVIEW OF LITERATURE

This chapter consists of the review of the conceptual and empirical literature, related to
the topic of Village Milk Co-operatives in Kerala. The Review of Literature consists of
four parts. The first part deals with the theoretical framework used for the study. The
social, economic and political dimensions of empowerment and favourable investment
climate suggested by World Bank for the promotion

and growth of rural prouder

organizations and the Asset Based Community Development (ABCD) model are used for
assessing the performance of Village Milk Co-operatives. The second part comprises of
the conceptual background of co-operative organizations with their significance in the
socio-economic development of the poor. The historical perspectives of dairy
development and dairy Co-operatives in India with special emphasis on the growth of
dairy sector and diary Co-operatives in Kerala are presented in the third part. The fourth
part has provided an overview of the related studies conducted in dairy sector in India
especially in the Post Operation Flood period.
2.1 The Theoretical Framework for the Study of Dairy Co-operatives
The World Bank has recognized that the broad strategy for poverty reduction must rest on
two pillars namely the Investment Climate and Empowerment. The investment climate
creates opportunities for people to have access to markets and invest their resources to
reap future benefits. The empowerment of poor people enables them to freely participate
in the markets, governance and society on their terms of interests. Both concepts can be
applied at the macro or national level as well as at the micro or local level in reducing

13

poverty among the poor people. There is also a realization that the process through which
decisions are made and implemented matters at all levels. (Narayan & Glinskaya, 2007)
2.1.1 Investment Climate
Large domestic and foreign investors critically review the investment policy and
regulatory frameworks of the governments, socio-political situations, property rights,
safety of investment and infrastructural facilities before making any substantial
investment in any country or region. The same must be equally applicable and relevant in
the case of poor people and their organization in taking decisions about their small
investments in the market for getting better benefits. The property rights and access to
markets are critical components of the investment climate. The quality of local
infrastructure, including electricity, water, roads, transport, communication facilities and
quality of local governance, including freedom from harassment by the police and
government officials are determining factors for the success of poor peoples business
organizations. (Narayan & Glinskaya, 2007)
2.1.2 Empowerment
The empowerment is a multi-dimensional construct with social, economical and political
dimensions. People who are endowed with finance, education and technology, social and
political connections capture the resources and shape the institutions to their advantage
where the poor remained outside the process of growth and development. Empowerment
is a process which expands the freedom of choices of poor people to decide and to shape
their lives by attaining control and influence over the resources available in their live
situations. The World Bank has defined empowerment as the expansion of assets and

14

capabilities of poor people to participate in, negotiate with, influence, control, and hold
accountable institutions that affect their lives. (Narayan & Glinskaya,2007)
The four key elements of empowerment are:
*Access to information. Information is power and informed citizens are better
equipped to take advantage of opportunity, access services, exercise their rights.
Information and communication technologies often play a pivotal role in
broadening access to information.
* Inclusion/participation. An empowering approach to participation treats poor
people as co-producers, with authority and control over decisions and resources
devolved to the lowest appropriate level.
* Accountability. State officials, public employees, private providers, employers,
and politicians must be held to account, making them answerable for their policies
and actions that affect the wellbeing of citizens.
* Local organizational capacity. This refers to the ability of people to work
together, organize them, and mobilize resources to solve problems of common
interest. Organized groups and Communities are more likely to have their voices
heard and their demands met. When such membership-based groups federate at
higher levels, they can gain voice and representation in policy dialogues and
decisions that affect their wellbeing. (Narayan, 2002)
Empowerment of poor people is an end in itself and is also critical for development
effectiveness. It is not a stand-alone strategy but a way of doing development, grounded
in the conviction that poor people themselves are the most invaluable partners in the task
of poverty reduction. Empowerment and improved development outcomes are products
of the interaction between the opportunity structure (rules, norms, behaviours) and the
15

agency of the poor and excluded groups.(Narayan, 2002) Empowerment therefore

involves both changing the opportunity structure through changes in institutions and
increasing the agency of poor people to take action on their own behalf.(Narayan &
Glinskaya,2007)
Figure 2.1 Overview of the Empowerment Framework
Opportunity Structure
Institutional Climate
Information
Inclusion and
participation
Accountability
Local organizational
capacity

Social/political
Structure
Openness
Competition
Conflict

Norms, values,
behaviour
Rights, rules,
and resources

Agency of the Poor

Individual Assets
and Capabilities
Material
Human
Social
Political
Psychological
Collective Assets
and Capabilities
Voice
Organization
Representation
Identity

Development Outcomes
Improved incomes, assets for the poor
Improved governance, peace, and access to justice
Functioning and more inclusive basic services
More equitable access to markets and business
services
Strengthened civil society
Strengthened poor peoples organizations

(Source: Narayan & Glinskaya, 2007)

The diagram outlines a framework for understanding empowerment in terms of the
relationship between institutions of the state, market, and civil society (the more powerful
actors) and poor people. It also points to possible intervention points. Four elements have
been found to be consistently important in changing the institutional climate, power

16

relations, and the incentives of actors engaged in unequal power relationships. They are
access to information, mechanisms of inclusion and participation, social accountability,
and local organizational capacity. Change can also come about through direct
intervention in social and a political structure..Agency of poor people has both
individual and collective aspects. Individual agency depends on assets such as health,
education, and finance, as well as psychological dimensions of self-confidence and
aspiration. Collective agency comes from poor peoples own organizations, which enable
their voices to be heard, their identity and dignity to be asserted, and their interests to be
represented.(Narayan & Glinskaya, 2007)
2.1.3 Poor People's Organizations
The capacity of poor people to mobilize and organize themselves for collective action is
an important development asset often forgotten by development planners. The
membership based organizations have emerged successful in addressing common needs
and concerns of people. In the context of rapid globalization, poor people are always
excluded from decisions making in even the issues affecting their livelihood and survival.
The poor people have to unite and stand together to address the problems affecting them
as well as to initiate programmes for their better wellbeing. Rural producers, home-based
workers, slum dwellers, indigenous people, and landless workers were organized in
different regions of the world to address problems and issues affecting their survival and
growth and recorded positive results due to their organized strengths. (Narayan D. , 2002)
2.1.3.1 Rural Producers' Organizations (RPOs)
Seventy percent of the world's poor live in rural areas, where agriculture or agriculture
related activities are the mainstay of their livelihoods. The rural poor have limited access

17

to services or means of production, and limited influence, if any, in local, national, or

global level decision making processes. To lift themselves out of poverty and improve
their livelihoods, rural producers around the world have organized themselves into rural
producers' organizations. RPOs are key actors for any development strategy aimed at
reaching the rural poor. RPOs had created success in
* Development of processing, marketing, and alternative employment;
* Management of collective goods;
* Networking and coalition building for influencing decision making.
The emergence of vibrant, representative poor people's organizations

enabled poor

people to connect with and influence national and global actors.

A 1993 review of the World Bank's role in the development of Co-operatives and
rural organizations concluded that inappropriate policy frameworks and
government interference were the major reasons that many Co-operatives failed to
develop as viable and efficient organizations. The review has recommended that
Co-operatives must be seen as private sector enterprises and that government's
primary role should be not only to control or regulate, but also to establish a
conducive policy environment for their growth. In the 1999 review, the World
Bank emphasized that RPOs are not only key economic actors, but also vehicles
for the empowerment of rural people and for their inclusion in policy dialogues at
the local, national, and global levels. Partnership with rural development actors
and the private sector-including RPOs is necessary to achieve rural development,
but it is a fledgling process that requires long-term support. (Narayan D. , 2002)
Some areas for programmatic emphasis include the following:
* Promoting a conducive environment
-Promote a conducive legal environment in which private initiatives (collective
and individual) are supported by appropriate legislation that is effectively
enforced.
- Promote effective decentralization that provides a favorable environment for
RPOs to generate locally relevant answers to their needs.
18

- Promote decentralized rural finance institutions.

- Promote institutional reforms in the delivery of public services to ensure clientresponsive services and accountability to users.
- Strengthen the capabilities of service providers.
- Promote a dialogue among donor agencies to harmonize approaches and
procedures in support to RPOs.
* Empowerment of rural producers' organizations
- Promote the establishment of forums for RPOs at the local, regional, and
national levels (when they do not already exist), where rural producers can meet,
establish their priorities, and exchange experiences.
- Finance a regional and national RPO capacity-building fund, in which allocation
decisions are made by RPOs themselves.
- Finance "professional facilitators" to help RPOs organize themselves and help
them define transparent procedures to allocate resources and operate their forum.
- Obtain recognition of RPOs from governments and end the mistrust directed
toward them by public services.
- Ensure that RPOs are recognized as partners by governments and donors, and
that they actively participate in: Preparation and negotiations of rural development
policy or strategy and preparation, implementation, monitoring, and evaluation of
rural development projects. (Narayan,2002)
Activities of Rural Prouder Organizations:
Poor people's producer organizations have the potential to play important roles in
improving and expanding access to markets and opportunities. They can coordinate
production activities of rural producers and workers in the informal sector, provide
marketing and/or advocacy services, and execute capital-intensive investments in
infrastructure and processing and marketing.
2.1.3.2 Co-operatives as Poor Peoples Producer Organizations
The United Nations Organization (UNO) in its reports on co-operatives in social
development

underscores

the importance of

co-operatives

to

socio-economic
19

development and how agricultural and financial Co-operatives contribute to long-term

solutions for food security and a more resilient and inclusive financial system, in the light
of the food and financial crises worldwide. It suggests that proclaiming 2012 as an
International Year of Co-operatives is an opportune moment to highlight the importance
of Co-operatives in development. Co-operatives, organized as business enterprises for the
benefit of their members, offer a model of enterprise that is particularly relevant in
difficult economic times and instances of market failures. As a self-help group, a cooperative organization is widely accessible, especially for the impoverished and the
marginalized. Where private enterprise or government is weak, particularly in remote
rural areas, Co-operatives enable local people to organize and improve their conditions.
Co-operatives promote and support entrepreneurial development, creating productive
employment, raising incomes and helping to reduce poverty while enhancing social
inclusion, social protection and community-building. Thus, while they directly benefit
their members, they also offer positive externalities for the rest of society and have a
transformational impact on the economy. (UNO, 2009)
International Co-operative Alliance (ICA) commends UN Proclamation of International
Year of Co-operatives 2012 and observed that UN resolution recognizes that the cooperative business model is a major factor of economic and social development,
promoting the fullest possible participation in the economic and social development of
people in both the developed and developing world, and that, in particular, Co-operatives
contribute to the eradication of poverty. The resolution also encourages all governments
to create a more supportive environment for co-operative development, particularly when
it comes to securing finances for capacity building. (ICA, 2009)

20

The International Year of the Co-operatives is a well timed event that represents the
depth of understanding of the entire co-operative movement, said Pauline Green, ICAs
first-ever woman president. The co-operative model is a better choice and offers the
basis for a more sustainable way to do business when compared to traditional capitalist
models now under scrutiny. What sets this model apart from others is that all cooperatives, whether they are small farmers or large consumer-owned entities, share the
values of democracy, solidarity, equality, self-help and self responsibility, creating
businesses that serve the greater good as opposed to maximizing profit for the very
few.(ICA, 2009)
The United Nations recognizes the co-operative movement as an important partner in the
implementation of the development agenda as shaped by the United Nations global
conferences and summits since the 1990s. The 1995 World Summit for Social
Development in Copenhagen underscored the importance of Co-operatives in a peoplecentered approach to development. Governments adopted the United Nations guidelines
on Co-operatives of 2001 which serve to guide co-operative formation, as well as limit
the role of Governments to one of providing an enabling environment and level playing
field so Co-operatives can operate on a sustainable basis alongside other types of
business. The ILO Recommendation No. 193 of 2002emphasizes the need to promote the
business potential of Co-operatives so they can contribute to sustainable development and
decent employment (UNO, 2009)
Agricultural Co-operatives, which are typically organized as supply and/or marketing
Co-operatives contribute to the development of rural areas. In 2002, International
Federation

of

Agricultural

Producers/International

Co-operative

Agricultural

21

Organization estimated that there were about 569,000 agricultural co-operatives

worldwide. Co-operatives enable farmers to pool limited resources to enhance earnings
capacity through lower input and credit costs and better marketing of products. For
instance, agricultural co-operatives are important in areas where the Private sector, owing
to market failure, is weak or unable to meet the needs of farmers for agricultural inputs or
credit. They also improve the market reach and bargaining power of farmers in marketing
agricultural products. Thus, agricultural co-operatives enable farmers to improve their
earning and productive capacities. (UNO, 2009)
2.1.3.3 Indias Milk Revolution - Rural Producers Co-operative Venture
Dairy co-operative development in India began with the establishment of the Kaira
district co-operative milk producers union at Anand in Gujarat in 1946 in response to
limited opportunities for traditional milk producers. Operation Flood project was built on
this experience when formation of co-operatives became a government priority for
agricultural development in the 1970s.

Beginning in 1974 with three projects in

Karnataka, Rajasthan, and Madhya Pradesh, and following with two national dairy
projects funded through the late 1980s, the World Bank lent more than $500 million to
develop the milk industry through co-operatives (made up of district unions combined
into state federations). The projects have focused on capacity building (strengthening cooperative institutional structures and training) and support to activities and infrastructure
development for increasing production and marketing. The overall objective was to
promote viable co-operative businesses, owned and managed by producers, for collecting
and marketing milk products in order to expand rural incomes and improve dairy
productivity. (Narayan, 2002)

22

India today is home to one of the most successful co-operative ventures in the world, the
Anand pattern dairy co-operatives, which have transformed India from a net importer to
the worlds largest producer of milk and a milk exporter. Producers, mostly small farmers
with one or two cows, are organized into more than 100,000 village-level dairy cooperative societies. These are grouped into district-level unions, which in turn are joined
in state-level marketing federations. The entire federated structure is governed
democratically by the farmer-members, supported by professional managers. By 2003
04, the dairy co-operative movement involved nearly 12 million farmers. Their farms
supplied almost 15 million litres of milk per day to over 750 towns and cities across
India, with an annual value of Rs 880 billion. Among other innovations, Operation Flood
marked the first creative use of food aid from developed countries to prime the pump
for a domestic dairy industry rather than depressing prices for local producers. (Narayan
& Glinskaya, 2007)
The village level dairy co-operative societies are the local level poor peoples prouder
organization who procure milk from the farmers and sell to their apex union for
processing and marketing in the towns and cities. These village level organizations have
created common assets in the villages for the members as well as for the society at large.
The organizations have also empowered the members by facilitating them to own
individual assets and capabilities through dairying and allied activities.
2.1.4 The Community Development Model
Community development is considered as a process and as an outcome. As a process it is
developing and enhancing the ability to act collectively and as an outcome taking
collective action and result of that action for improvement in a community in any or all

23

realms: physical, environmental, cultural social, political and economic. (Phillips &
Pittman, 2009) The facilitating element of community development according to the
community development literature is social capital or social capacity, which describes the
abilities of community members to organize and mobilize their resources for the
accomplishments of consensually defined goals (Christenson and Robinson 1989 cited in
Mattessich and Monsey 2004 cited in Phillips & Pittman 2009)or the resources embedded
in social relationships among persons and organizations that facilitate cooperation and
collaboration in communities (Mattessich and Monsey 2004,cited in Phillips & Pittman
2009).
Social capital or capacity is the extent to which members of a community can work
together effectively to develop and sustain strong relationships; solve problems and make
group decisions and collaborate effectively to plan ,set goals, and get things done(Phillips
& Pittman, 2009).
The four other forms of community capital are 1) Human capital (labour, skills,
capabilities, experience etc.) 2) Physical capital (buildings, streets, and infrastructure) 3)
Financial capital (community finical institutions, community banks, credit funds) 4)
Environmental capital (natural resources, weather, and recreational opportunities) (Green
and Haines 2002, cited in Phillips & Pittman, 2009). Although all forms of community
capital are important, the social capital plays a crucial role in community building and
progress. The more social capital a community has, the more likely it can adapt to and
work around the deficiencies in the other type of community capital. The process of
community development involves social capacity building which leads to social capital
which in turn leads to the outcome of community development. (Philips & Pittman, 2009)

24

2.1.4.1 Community Economic Development (CED)

CED is a process of creating wealth through the mobilization of human, financial,
physical and natural resources to generate marketable goods and services. The concepts
and definitions of community development and economic development are linked and
synergistic. Community development is a planned effort to produce assets that increase
the capacity of residents to improve their quality of life. These assets may include several
forms of community capital: physical, human, social, financial and environmental (Green
and Haines 2002 cited in Phillips & Pittman 2009).
The purpose of community development is to produce asset that may be used to improve
the community and the purpose of economic development is to mobilize these assets to
benefit the community. Both definitions refer to the same community capital assets:
human, financial and physical (environmental and natural). Holistic concept of economic
development include not only wealth and job creation but increasing the quality of life
and standard

of living of the people which is compatible with the community

development definition. The links and relationship between community development and
community economic development are as follows
We maintain that community economic development occurs when people in a
community analyze the economic conditions of that community, determine its
economic needs and unfulfilled opportunities, decide what can be done to
improve economic condition in that community and then move to achieve agreed
upon economic goal and objectives. Economic development theory and policy
have tended to focus narrowly on the traditional factors of production and how
they are best allocated in a spatial world. We argue that community economic

25

development must be broader than simply working about land, labour and capital.
The broader dimension includes public capital, technology, and innovation,
society and culture, institutions and the decisions-making capacity of the
community (Shaffer, Deller and Marcouuiller, 2006 cited in Phillips & Pitman,
2009)
Economic development largely aims to improve employment, income and the economic
base of the community. Economic development is part of community development,
which seeks to build all five community capitals, not only enhancing the communitys
economy but its environment, social structures, attitudes and assets. Economic
development involves many of the elements of community development such as
participation, rethinking, action learning etc. However, it specifically aims to improve the
relative economic position of the community. (Cavaye, 2008)
Local industry development is the primary step towards the economic development of the
community which involves facilitation of relatively small groups of people, who are
engaged in local level production of goods and services. The strengthening of local
producers could be achieved by forming their producer organizations and establishing
necessary channels and linkages for production, processing, value addition and marketing
of their products which ultimately results in the communitys economic development.
The growth and development of local producer organizations results in the creations of
various community assets for the benefit of all members of the community. Besides the
local producer organizations provide assured opportunities for people to engage in
livelihood options related to the production, processing and marketing activities of the
organization.

26

Figure 2.2 The Relationship between Local Industry Development,

Economic Development and Community Development

Community Development
Economic Development
Local Industry Development

The diary co-operatives could be seen as local level rural producer organizations of dairy
farmers with necessary upward critical linkages for processing and marketing of milk and
milk products so that the gains at all levels come back to the benefit of the primary milk
producers.
Communities with social capacity (the ability to act) are inherently more capable of
creating good economic development programmes which they choose to do. When these
communities take action they create and maintain effective economic development
programmes that mobilize the community resources. They also improve their physical
and social nature and become more development ready which leads to success in business
attraction, retention and expansion, and start up. (Phillips & Pittman 2009)
The community development process if practiced in an efficient and effective manner
ultimately leads to the economic development of the community. Community
27

development and economic development are frequently used interchangeably and the
term community economic development is often used to described the integration of
the community and economic development processes (Shaffer et al 2006 cited in Phillips
& Pittman 2009) and it is also used to refer to local economic development
encompassing growth (economic), structural change (development) and relationships
(community) (Haugthtan, 1999, cited in Phillips& Pittman, 2009).
2.1.4.2 Asset Based Community Development (ABCD) A Paradigm shift in
Community Development Approach

The traditional approach in community practice was needs based community development
with emphasis on community organization which is often understood as a process by
which a community identifies its needs or objectives, orders (or ranks) these needs or
objectives, develops the confidence and will to work at these needs or objectives ,finds
the resources (internal and/or external) to deal with these needs or objectives, takes action
in respect to them and in so doing extends and develops co-operative and collaborative
attitudes and practices in the community. (Ross, 1955)
Even though the goal of community organization is to develop co-operative and
collaborative attitude and practices (development of social capital of collaboration), the
major attention is towards the need identifications and resource organization for solving
the problems or meeting the needs of the community.
Many of the problems identified, like poverty, unemployment, inflation etc. are
issues too large for one community to solve by itself by focusing on the causes of
such problems, community may end up wringing their hands or giving up because
of the overwhelming nature of the causes. The approach can create unreasonable

28

expectations that may lead to disappointment and failures over time. People may
identify a set of problems and needs on which no immediate solutions exist with
government or development agency who initiate the process of need
identification. (Phillips & Pittman, 2009)

The need based approach has often presented one sided view of the community with
leaders/agencies have developed a framework where the community is tuned to
continuously rely upon them for external support and guidance for the problems affecting
the community from time to time with minimal opportunities for communitys self
determination.

In the needs-based approach, well-intentioned efforts of government and

development agencies have generated needs surveys, analyzed problems, and
identified solutions to meet those needs, in the process, however, they have
inadvertently presented a one-sided negative view, which has often compromised,
rather than contributed to, community capacity building. One of the main effects
is leadership that denigrates the community. Leaders find that the best way to
attract institutional resources is to play up the severity of problems. Local
leadership is judged on how many resources are attracted to the community, not
on how self-reliant the community has become. Another consequence is that
people in the communities start to believe what their leaders are saying. They
begin to see themselves as deficient and incapable of taking charge of their lives
and of the community. Not surprisingly, community members no longer act like
citizens; instead they begin to act like "clients" or consumers of services with no

29

incentive to be producers. (Kretzmann and MCKnight, 1993 cited in (Mathie &

Cunningham, 2002))
The communitys potentialities and linkages available in addressing the problems were
not sought adequately in the context of readily incoming outside assistance. The projects
were implemented based on the problems identified and addressed forgoing the multiple
dimensions of the community and its problems.

The asset based community development approach is developed by John McKnight and
Jody Kretzmann at the Institute for Policy Research (IPR) at Northwestern University,
USA based on extensive inquiry into the characteristics of successful community
initiatives, and articulated ABCD as a way of counteracting the predominant needs-based
approach to development.

2.1.4.2.1 The Context for the emergence of ABCD

ABCD can also be viewed as a response to global changes in the social, political and
economic landscape. In most countries, liberalization policies have resulted in weakening
of the social contract that gave the government, the responsibility for providing
programmes and solutions to community problems. At the same time, stronger,
accountable forms of governance at the local level and the emergence of effective civil
society have been noticed in the process of democratization, particularly in countries of
the global south. Technological advances in global and local communications provide
opportunities for decentralized economic development for some communities.

30

The decentralized governance with emphasis on identifying the local resources to solve
the local problems has shifted the focus towards looking at the assets existing inside the
community.

The idea is to build the capacity within a community to build and

strengthen a communitys assets. In contrast to focusing on problems and needs, this

approach focuses on communitys capacity, strengths and assets. The community is
guided to see its positive aspects and encourage to work on to developing these assets.
The approach does not ignore the needs and problems but focus first on its strengths and
successes to provide a positive perspective of the community with a vision for the future
rather than its limitations and failures.

ABCD recognizes that it is the capacities of local people and their associations
that build powerful communities. The process of recognizing these capacities
begins with the construction of a new lens through which communities can "begin
to assemble their strengths into new combinations, new structures of opportunity,
new sources of income and control, and new possibilities for production." and to
encourage communities to take charge with confidence in their own capacities.
Communities are helped to build an inventory of their assets and are encouraged
to see value in resources that would otherwise have been ignored, unrealized, or
dismissed. Such unrealized resources include not only personal attributes and
skills, but also the relationships among people through social, kinship, or
associational networks. By mobilizing these informal networks, formal
institutional resources can be activated -such as local government, formal
community-based organizations, and private enterprise (Kretzmann and McKnight
(1993) p6., cited in Mathie, & Cunningham, 2002)
31

Individuals, associations, local institutions, and organizations are useful and

valuable within the asset based community framework. Kertzmann and McKnight
defined asset as the gifts, skills and capacities of individuals, associations and
institutions In fact, the key to ABCD is the power of local associations to drive
the community development process and to leverage additional support and
entitlements. These associations are the vehicles through which all the
community's assets can be identified and then connected to one another in ways
that multiply their power and effectiveness. (Mathie & Cunningham, 2002)

2.1.4.2.2 Approach and Method of ABCD

Asset-Based Community Development can be understood as an approach, as a

set of methods for community mobilization, and as a strategy for communitybased development. As an approach to community-based development, it rests on
the principle that the recognition of strengths, gifts, talents and assets of
individuals and communities is more likely to inspire positive action for change
than an exclusive focus on needs and problems. Seeing the glass half-full as well
as half empty is not to deny the real problems that a community faces, but to
focus energy on how each and every member has contributed, and can continue to
contribute, in meaningful ways to community development. Focusing on
uncovering the merits of all members encourages a spirit of egalitarianism, even
in societies that are hierarchical in structure and differentiated by culture,
educational background and gender. At its core are associations of community
members, both formal and informal. As engines of community action, and as a

32

source of power and leadership, these are considered assets of the community
(Greene, 2000 cited in Mathie & Cunningham, 2002)

While rejecting any kind of blue-print for ABCD, it propose a number of steps to
facilitate the process,

Collecting stories about community successes and identifying the capacities of

communities that contributed to success.

Organizing a core group to carry the process forward

Mapping completely the capacities and assets of individuals, associations, and

local institutions

Building relationships among local assets for mutually beneficial problem-solving

within the community.

Mobilizing the community's assets fully for economic development and

information sharing purposes

Convening as broadly representative group as possible for the purposes of

building a community vision and plan

Leveraging activities, investments and resources from outside the community to

support asset-based, locally defined development
(McKnight and Kretzmann, 1993, pp 345 cited in Mathie, & Cunningham, 2002)

ABCD is a strategy for sustainable community-driven development. Beyond the

mobilization of a particular community, ABCD is concerned with how to link microassets to the macro environment. In other words, there is attention paid to the boundaries
of community and how to position the community in relation to local institutions and the
external economic environment on which its continued prosperity depends.

The Process of ABCD has got four main steps namely 1) community organizing 2)
visioning 3) planning 4) Implementation and evaluation and back to organizing.
33

The components of community capital namely human, social, physical, financial and
environmental (Ferguson and Dickens,1999 cited in Philips and Pittman 2009,p41)are
further enlarged by adding cultural and political components (Green & Haines,2007
cited in Phillips and Pitman 2009.p41).Identifying various assets under each of the
aforesaid capital is termed as assets mapping in ABCD.

ABCD focuses on developing and strengthening all forms of capital that are required for
a community to survive and develop. Kertzman and McKnight the founders of ABCD
had the belief that the key to community revitalization is to locate all of the available
local assets, to begin connecting them with one another in ways that multiply their power
and effectiveness, and to begin harnessing those local institutions that are not yet
available for local development purposes (Kertzman and McKnight (1993) citied in
Philips and Pitman 2009).

The focus in ABCD approach is on the socio-economic capacities of the subgroups in the
community. The strengths and capabilities of various micro level organizations such as
credit unions, village banks, co-operatives and community enterprises are to be assessed
and utilized to achieve the goal of community economic development.

The village milk co-operatives are the local level producer organizations with critical
linkages for dairy based enterprises in the rural villages in India. The dairy co-operatives
have helped the farmers in developing various individual as well as common assets and
capabilities which could enhance the economic development of the villages through
sustainable diary based rural enterprises.

The dairy co-operatives as rural prouder

organizations can accelerate the economic development of the community by revitalizing

34

their strengths and establishing productive linkages for the growth of dairy based
enterprises.

2.2 Co-operatives: Pro Poor Organizations

Co-operative is a way of socio-economic life. The principle of co-operation is as old as

the human civilization itself. Mutual help or working together is the essence of cooperatives. In the modern technical sense, the genesis of co-operative movement
emanated from the ill effects of Industrial revolution such as mass poverty, degeneration
of resource poor people and concentration of wealth among a few people. Co-operation
as an economic system was born as a peaceful revolution against the mercantile economy
and capitalism. The organized strength of the resource poor people and their small
savings are combined in a united way based on the strategy of mutual help for their
survival and growth in a competitive world.

In 1844, in a small town of Rochdale of Great Brittan, 28 flannel weavers united together
with a vow of mutual help and formed the first co-operative organization named as
Rochdale Society of Equitable Pioneers. It was an effort of the weavers to save
themselves from the onslaughts of the owners of the cotton industries. It was a society of
the workers by the workers and for the workers. Even the nomenclature co-operative
was not utilized in the title of the society which may not have been known to them but
they have coined a set of principles which were foundational to their organization. The
organization was established on the principles of open membership, democratic control
and dividend on purchase, limited interest on capital, political and religious neutrality,
cash trading and promotion of education.
35

The success of that co-operative was the inspiration for the promotion of co-operatives in
England and other European countries. Gradually, the movement spread across the world
with the formation of International Co-operative Alliance (ICA) in 1895.

The co-operative principles adopted by ICA was mainly evolved from the principles
followed by the Rochdale Society of Equitable Pioneers. These principles were further
amended by ICA in1934, 1937 and in 1966. Finally in 1995 ICA has revised its
principles and framed a statement of co-operative identity which was endorsed by the
General Assembly of ICA. Presently ICA is the global umbrella organization of the cooperatives working all over the world. (Nayak, 2004) (Bandyopadhyay, 2004)

United Nations Organization (UNO) has declared the year 2012 as the International Year
of Co-operatives to highlight the importance of co-operatives in development. (UNO,
2010) Recognizing that co-operatives, in their various forms, promote the fullest
possible participation in the economic and social development of all people, including
women, youth, older persons, persons with disabilities and indigenous peoples, are
becoming a major factor of economic and social development and contribute to the
eradication of poverty. (UNO, 2010)

2.2.1 Definition, Values and Principles of Co-operation

Co-operative is a form of business organization where people work together by

pooling their resources for business purposes on the basis of mutual benefits. As a selfhelp group, a co-operative organization is widely accessible, especially for the
impoverished and the marginalized. Co-operatives promote and support entrepreneurial

36

development, creating productive employment, raising incomes and helping to reduce

poverty while enhancing social inclusion, social protection and community building.
(UNO, 2009)

What is a co-operative?
Co-operation is a way of life, a philosophy, an approach to human problems based on the
principles of equality and justice. Being self help organizations, co-operatives help to
meet the needs of the members and to generate employment and incomes in the
communities in which they operate. Co-operatives are also enterprises that follow a set of
values and co-operative Principles. International Co-operative Alliance (ICA) in 1995
has accepted and elaborated on co-operative identity, values and principles which are
guidelines by which co-operatives function all over the world. A co-operative is an
autonomous association of persons united voluntarily to meet their common economic,
social, and cultural needs and aspirations through a jointly-owned and democraticallycontrolled enterprise. (ICA, 2007)

Values of Co-operatives:
Co-operatives are based on the values of self-help, self-responsibility, democracy,
equality, equity and solidarity. In the tradition of their founders, co-operative members
believe in the ethical values of honesty, openness, social responsibility and caring for
others. (ICA, 2007)

37

Principles of Co-operatives

1st Principle: Voluntary and Open Membership

Co-operatives are voluntary organizations, open to all persons able to use their services
and willing to accept the responsibilities of membership, without gender, social, racial,
political or religious discrimination.
2nd Principle: Democratic Member Control
Co-operatives are democratic organizations controlled by their members, who actively
participate in setting their policies and making decisions. Men and women serving as
elected representatives are accountable to the membership. In primary co-operatives
members have equal voting rights (one member, one vote) and co-operatives at other
levels are also organized in a democratic manner.
3rd Principle: Member Economic Participation
Members contribute equitably to, and democratically control, the capital of their cooperative. At least part of that capital is usually the common property of the co-operative.
Members usually receive limited compensation, if any, on capital subscribed as a
condition of membership. Members allocate surpluses for any or all of the following
purposes: developing their co-operative, possibly by setting up reserves, part of which at
least would be indivisible; benefiting members in proportion to their transactions with the
co-operative; and supporting other activities approved by the membership.
4th Principle: Autonomy and Independence
Co-operatives are autonomous, self-help organizations controlled by their members. If
they enter to agreements with other organizations, including governments, or raise capital
38

from external sources, they do so on terms that ensure democratic control by their
members and maintain their co-operative autonomy.
5th Principle: Education, Training and Information
Co-operatives provide education and training for their members, elected representatives,
managers, and employees so they can contribute effectively to the development of their
co-operatives. They inform the general public - particularly young people and opinion
leaders - about the nature and benefits of co-operation.
6th Principle: Co-operation among Co-operatives
Co-operatives serve their members most effectively and strengthen the co-operative
movement by working together through local, national, regional and international
structures.
7th Principle: Concern for Community
Co-operatives work for the sustainable development of their communities through
policies approved by their members. (ICA, 2007)
2.2.2 The Co-operative difference
Co-operatives are enterprises that put people at the centre of their business and not
capital. Co-operatives are business enterprises and thus can be defined in terms of three
basic interests: ownership, control, and beneficiary. Only in the co-operative enterprise
are

all

three

interests

vested

directly

in

the

hands

of

the

user.

Co-operatives put people at the heart of all their business. They follow a broader set of
values than those associated purely with making a profit. Because co-operatives are
owned and democratically-controlled by their members (individuals or groups and even
39

capital enterprises) the decisions taken by co-operatives balance the need for profitability
with the needs of their members and the wider interests of the community.
2.2.3 Type of Co-operatives

The co-operative model of enterprise can be applied to any business activity. They exist
in traditional economic sectors such as agriculture, fisheries, consumer and financial
services, housing, and production (workers' co-operatives). However, co-operative
activity spans to large number of sectors and activities including car-sharing child-care,
health and social care, funeral, orchestras and philharmonics, schools, sports, tourism,
utilities (electricity, water, gas, etc.), and transport (taxis, buses, etc). (ICA, 2007)

The co-operatives could be broadly classified into three major types.

1 Consumer Co-operatives: which include financial co-operatives, enable members to

buy goods or obtain services at close to cost price.

2 Producer Co-operatives: which include agricultural co-operatives, enable members to

achieve higher profits through reduced input costs and better marketing

3 Worker or Employee-owned Co-operatives: This may provide the members with

opportunities for employment and skills improvement. (ICA, 2007) (UNO, 2009)

2.2.4 Co-operatives are significant economic and social actors

All over the world, millions of people have chosen the co-operative model of business
enterprise to enable them to reach their personal and community development goals. Cooperatives create and maintain employment providing income; they are responsible for
40

producing and supplying safe and quality food and services to their members, but also to
the communities in which they operate. By putting the Co-operative Principles and ethics
in practice they promote solidarity and tolerance, while as 'schools of democracy' they
promote the rights of each individual - women and men. Co-operatives are socially
conscious responding to the needs of their members whether it is to provide literacy or
technical training, or to take action against the HIV/AIDS pandemic. Through their
varied activities, co-operatives are in many countries significant social and economic
actors in national economies, thus making not only personal development a reality, but
contributing to the well-being of entire populations at the national level. (ICA, 2010)
2.2.5 Co-operative Reach in the Globe
The Co-operative Movement brings together over 800 million members in over 100
countries around the world through 221 membership organizations of ICA. The United
Nations estimated in 1994 that the livelihood of nearly 3 billion people, or half of the
world's population, was made secure by co-operative enterprises. Co-operatives Provide
100 million Jobs worldwide, 20% more than multinational enterprises. These enterprises
continue to play significant economic and social roles in their communities. (ICA, 2010)
2.2.5.1 The Co-operatives in India
Co-operatives in India were started off as an appropriate institutional means to alleviate
the problems of poor farmers from the clutches of money lenders. The co-operative
movement formally began in India with the enactment of First Co-operative Credit
Societies Act of 1904 and had touched all spheres of activities such as credit, marketing,
consumers, processing, housing, fishery, labour and diary etc. Co-operatives were
assigned key positions in five year plan up to period of liberalization of Indian economy
41

in 1992. Eight five year plan (1990-97) stated that co-operatives should function as selfreliant, self-regulated and self-managed organization under the open economic regime.
(Prasad, 2007)
The co-operative movement in India has provided institutional support to the people with
limited means to become self-reliant through self-help and democratic mode of business
and participation. Pandit Jawaharlal Nehru was conscious of the role of Co-operatives for
national development, advocated, Convulse India with Co-operatives. He had pleaded
for positive support of the government to Co-operatives without impairing their
autonomy and independence. (Amin, 2007) India has got a strong co-operative movement
spread across the country with 236 million people with 528249 co-operatives. (NUCI,
2010)
2.2.5.2 The Co-operative Scenario of Kerala
The Co-operative sector has been playing a distinct and significant role in the process of
socio-economic development of the state with special focus on rural population and
livelihood. The co-operative movement in Kerala has a solid foundation and impressive
track record in terms of financial stability and sound infrastructure to generate adequate
funds. The spread and growth of co-operatives in different sectors were nurtured under
development plans with Government initiative and Government finance. Kerala has a
wide network of co-operatives engaged in various promotional activities such as
distribution of credit, marketing, agro processing, consumer activities, public health,
education, insurance and infrastructure development

42

After the formation of Kerala State, the Kerala Co-operative Societies Act of 1969 came
into force with effect from15.5.1969 in order to enact a uniform law on co-operation
applicable throughout the State. Consequent on the introduction of Kerala Co-operative
Societies Act 1969, Societies with unlimited liability ceased to exist and societies with
limited liability came into existence. Thereafter Government of Kerala passed the Kerala
Co-operative (Amendment) Act 1999 which came into force with effect from 1.1.2000
Providing of membership to local body institutions, Deposit guarantee scheme in Primary
Agricultural Credit Societies, Consortium Lending Scheme, Co-operative Development
and Welfare Fund, Independent Election Commission, Separate Audit Wing and
Vigilance Wing, and Co-operative Examination Board are the new provisions made in
the Amendment Act (GoK, 2011)
About 29 million people of the state are members of Various Co-operatives
functioning under the departments of co-operation, Industries, Kadhi Board fisheries,
Welfare and Dairy Development. Kerala has reached a high point in the development of
co-operative movement and their contributions in all fields were remarkable and most of
the apex federations of Kerala are in profits. (Anthati, 2009).
2.3 Development of Dairy Co-operative movement in India
The co-operatives have achieved commanding positions in many segments of national
economy. Dairy Co-operatives are the shining example of the success of co-operative
efforts of small and marginal framers in India. As on March 2010 the Dairy Co-operative
Network in India includes 177 milk unions, operating in over 346 districts, covering
1,40,227 village level societies, is owned by 14 million member farmers of which 4
million were women (NDDB, 2010).
43

2.3.1 The Birth of AMUL and Development of Dairy Co-operatives in India

The marginal milk producers in a small town named Anand (in Kaira District of Gujarat)
had to travel long distances to deliver milk to the only dairy, the Polson Dairy in Anand.
Many a times, the milk went sour as producers had to physically carry the milk in
individual containers, especially in summer season and farmers had incurred huge loss.
The agents of Polson Dairy arbitrarily decided the prices depending on the production
and the season. Milk is a commodity that has to be collected twice a day from each
cow/buffalo. In winter the producer was either left with surplus/unsold milk or had to sell
it at very low prices. The Polson Dairy had been given monopoly rights by the
government to collect milk form Anand and supply it to Bombay city in turn. The farmers
were heavily exploited by the Polson Dairy. Angered by the unfair and manipulative
trade practice, the farmers of Kaira District approached Sardar Vallbhbhai Patel (who
later becomes the Deputy Prime minister of India) under the leadership of the local
farmer leader Tribhuvandas Patel. Sardar Vallbhbhai Patel advised the farmers to form
co-operative and supply milk directly to the Bombay Milk Scheme instead of selling it to
Polson. He sent Morarji Desai (who later became Prime Minister of India in 1977) to
organize the farmers. In 1946 the farmers of the area went on a milk strike refusing to be
further oppressed. Thus the Kaira District co-operative was established in 1946 and milk
collection was also decentralized as most producers were marginal farmers who were in a
position to supply only 1-2 litres of milk per day. Village level co-operatives were
established to organize the marginal milk producers in each of those villages. (Vyas,
2007)

44

The co-operative was further developed and managed by Dr.V.Kurien along with
Shri H.M Dalaya. The first modern dairy of the Kaira union was established at Anand
(which came to be known as AMUL dairy after it brand name). Indigenous R&D and
technology development at the co-operative had led to the successful production of
skimmed milk powder from buffalo milk- the first time on a commercial scale anywhere
in the world. The foundation of a modern dairy industry in India was laid since India had
one the largest buffalo population in the world.
Impressed with the development of dairy co-operatives in Kaira District and its success,
shri Lal Bahadur Shastri, the then prime minister of India during his visit in Anand asked
Dr.Kurien to replicate the Anand Model dairy co-operative all over India. Thus the
National dairy Development Board (NDDB) was formed and Operation Flood
Programme was launched for replication of the Amul Model all over India. (Vyas, 2007)
2.3.2 The Three tier Amul Model
The Amul model is a three tier co-operative structure consists of Dairy co-operative
society at village level affiliated to a Milk Union at the District level which in turn is
federated into milk federation at state level. The three-tier structure was setup in order to
delegate the various functions. Milk collection is done at village level dairy society, Milk
Procurement & Processing at the district milk union and milk & milk products marketing
at the State Milk Federation. This helps in eliminating internal competition and ensures
that each tier has got clearly defined role in the business operation. This structure was
first evolved at Amul in Gujarat and replicated all over the county under the Operation

45

Flood and came to be known as the Amul Model or Anand Pattern of Dairy Cooperatives.
Figure 2.3 Organizational Structure of Anand Pattern Dairy Co-operatives

State Level Dairy Co-operative Federation

District Milk Producers co-operative Union

Village Level Producers Co-operative Society

Dairy farmers at the village

The Anand Pattern co-operative structure comprises village level co-operative societies
(DCSs), which promote district level union, which in turn promote state level marketing
federation. Anand pattern envisaged:

Decentralized milk production by small producers,

Milk procurement by primary co-operatives of milk producers,

Centralized Milk Processing by union of dairy co-operatives and

Marketing of milk and milk products done by federations of unions

46

The primary milk producers democratically govern this entire federal co-operative
structure to ensure that the higher tier organizations are geared to serve the purpose of the
lower levels and the gains at all levels flow ultimately back to the milk producers in a
significant measure. The core feature of Anand

model is the farmer control on all the

three stages that is procurement, processing and marketing of milk and milk products.
The value addition at procurement and processing stages can be realized by the cooperatives only through control over marketing thus making control over marketing
essential and critical features for success. In contrast, many dairy co-operatives
worldwide end up as suppliers of raw materials to private companies as the private
companies own the brands and marketing. (AMUL, 2010)
Village Dairy Co-operative Society
The milk producers of a village, having surplus of milk after own consumption, come
together and form a village dairy co-operative society which is the primary society under
the three tier structure. It has membership of milk producers of the village and is
governed by elected management committee consists of 9 to 12 elected members, based
on principle of one member, one vote. The village society appoints a paid secretary and a
few staff for the management of the day to day functions. The major functions of the
village diary co-operative society are mainly the following

the collection of surplus milk from the milk producers of the village, payment
based on quality and quantity (price bases on FAT& SNF) of milk supplied

47

providing support services to the members like veterinary first Aid, Artificial
insemination services, cattle-feed sales, mineral mixture sales, fodder and fodder
seed sales, conducting training on Animal Husbandry and dairying

selling liquid milk for local consumers of the village

supplying milk to the district milk union

The village milk co-operative is an independent entity managed locally by the milk
producers and assisted by the district milk union. (Vyas, 2007)
District Co-operative Milk Producers Union (Milk Union)
The village dairy societies of a district having surplus milk after local sales come together
and form a milk union. The milk union is the second tier under the three tier structure.
It has got membership of village dairy societies of the district and governed by the board
of directors elected from affiliated village dairy co-operatives.

The milk union is

managed by the appointed professional management team consisting of a Managing

Director and competent staff. The main functions of milk union are as follows

Procurement of milk from village dairy societies coming under its preview

Arranging transportation of raw milk from village societies to the union

Providing input services to the producers like veterinary care, artificial

insemination services, cattle-feed sales, etc.

Conducting training on co-operative development, Animal Husbandry & dairying

for milk producers and conducting specialized skill development and leadership
development training for village dairy society members and staff

48

Providing management support to the village dairy co-operative society along

with regular supervision of its activities

Establishing chilling centers and dairy plants for processing the milk

Selling liquid milk and milk products within its operational area

Processing milk into various milk and milk products as per the requirements of
state marketing federation

Deciding the prices of milk to be paid to milk producers as well on the prices of
support services provided to members. (Vyas,2007)

State Co-operative Milk Federation (Federation)

The milk unions of the state are federated into a state co-operative milk federation.
The federation is the apex tier under the three tier structure. It has membership of all
the co-operative milk unions of the state and is governed by board of directors
consisting of elected representative of each milk union. The state federation appoints
a managing director and competent staff for the professional management of the
federation.
The main factions of the federation are as follows

Marketing of milk and milk products processed/manufactured by milk union

Establishing distribution network for marketing of milk and milk products

Arranging transportation of milk and milk products from the milk union to
the market

Creating and maintaining a brand for marketing of milk and milk products

Providing support services to the milk unions and members like technical
inputs, management and advisory services
49

Pooling surplus milk from the milk unions and supplying it the deficit unions

Establish feed balancing dairy plants for processing the surplus milk of the
unions

Arranging for common purchase of row material used in manufacture

/packing of milk products

Deciding the prices of milk and milk products to be paid to milk unions

Deciding on the products to be manufactured at various milk unions and

capacity required for the seam

Planning long-term milk production and procurement & processing as well as

marketing.

Arranging finance for the milk unions and providing them technical knowhow

Designing and providing training on co-operative development, technical &

marketing functions.

Conflict resolution and keeping the entire structure intact. (Vyas,2007)

2.3.3 The Operation Flood Programme in India

Operation Flood, the worlds largest dairy development programme, was based on the
rich experience gained from the Amul Model dairy co-operatives. This innovative three
tier organization structure has combined the productive capacity of dairy farmers with
professional management and modern dairy technology. Major objectives of Operation
Flood projects were increase in milk production, augment rural income and fair prices
for consumers. Operation Flood programme was implemented in three phases.

50

Phase I lasted from 1970-1980. It was financed by the sale of skimmed milk powder and
butter oil gifted by European Economic Community (EEC) through the world Food
programme; NDDB planned the programme and negotiated the details of EEC assistance.
During this phase, Operation Flood linked 18 of Indias premier milk sheds with
consumers in Indias four major metropolitan cities viz, Delhi, Mumbai, Kolkata and
Chennai.
Phase II commenced in 1981 and lasted till 1985. It increased the milk shed from 18 to
136 and 290 urban markets expanded the outlets for milk. By the end of 1985, a self
sustaining system of 43000 village dairy co-operatives covering 4.25 million milk
producers had come into the network. Domestic milk powder production had increased
from 22,000 tons in the project year to 140,000 tons by 1989; all this came from dairies
set up under Operation Flood. The EEC grant and World Bank Loan helped to promote
self-reliance. Direct marketing of milk by producers co-operatives have increased by
several million litres a day.
Phase III started in 1985 and lasted till 1996. It enabled dairy co-operatives to expand and
strengthen the infrastructure required to procure and market increasing volumes of milk.
Veterinary first aid services, feed and artificial insemination services for co-operative
members were extended, along with intensified member education. This phase
consolidated Indias dairy co-operative movement adding 30.000 new dairy co-operatives
to the 42,000 existing village milk co-operatives organized during Phase II. This Phase
gave increased emphasis to research and development in animal health and animal
nutrition. Innovations like vaccine for Theileriosis, bypass protein feed and urea-molasses
mineral blocks, all contributed to the enhanced productivity of animals. (Kurien, 2007)
51

Impact of Operation Flood

The Amul model (Anand pattern) co-operatives seem to be the most appropriate
organizational force for promoting agricultural development, using modern technologies
and professional management. And thereby generating employment for the rural masses
and eradicating poverty in undeveloped areas. India has demonstrated the superiority of
this approach. The assets and facilities at all levels are owned by farmers and the cooperatives were able to build markets, supply inputs and create value added processing.
Prompt and remunerative payment for produce of good quality has ensured the best
incentive for the farmers to increase production and quality.
The effect of Operation Flood programme was appraised by World Bank and commended
that an investment of Rs.2000 crores over 20 years under Operation Flood has
contributed to increase of Indias milk production by 40 Million Metric Tonne (MMT)
i.e. from about 20MMT in Pre - Operation Flood to more than 60MMT at the end of
Operation Flood Programme. An incremental return of Rs.40, 000 crores annually has
been generated by an investment of Rs.2000 crores over a period of 20 years. This has
been the most beneficial project funded by the World Bank anywhere in the world (Vyas,
2007).
The movement has helped India to attain the status of the largest milk producing country
in the world and per capita milk consumption has increased from 107gms per day in 1970
to over 226grams per day in 2002. The substantial increase in milk production and milk
availability have resulted in the stabilization of milk prices in the country. (Kurien, 2007)

52

The impact of milk co-operatives at micro level, namely on milk production, milk price,
income, employment, the distribution of resources and equity were studied by many
scholars during the period 1984-1996 and the studies have concluded that the dairy cooperatives had a positive impact on the income of the members (Singh & Das, 1984;
Parthsarathy, 1991; Arora & Bhogal, 1996; Singh & Chattaraj, 1996; Koli, 1996; Singh
& Singh, 1998 cited in Kurien, 2007)
The dairy co-operatives have been instrumental in economic development of the rural
society but at the same time have provided vital ingredients for improving health and
nutritional requirement of the Indian society with enhanced per capita consumption of
milk. The wealth created under dairy industry has ploughed back to the society especially
to the millions of rural poor dairy farmers. The corporatization of milk industry has
helped the social development of the dairy farmers and their families.
As per the report of World Bank on the impact of Dairy Development in India, the three
tier Amul model has been instrumental in bringing about the white Revolution in the
country. The Anand pattern has demonstrated the following benefits:

The role of dairying in poverty reduction

The fact the rural development involves more than agricultural production

The value of national ownership in development

The beneficial effects of higher incomes in relieving the worst aspects of poverty

The capacity of dairying benefiting the poor at low cost and create jobs for the
poor

The importance the of commercial approach to development

The capacity of single commodity projects to have multi-dimensional impacts

The importance of getting government out of commercial enterprises

53

The power and problems of participatory organizations

The importance of policy (World Bank Report 1997c. cited in Vyas,2007)

By putting the instruments of development in peoples hand with member control at all
stages of the production and marketing with the professional management support has
led to the socio-political and economic empowerment of millions of marginal dairy
farmers in the county under Operation Flood. (Kurien, 2007)
2.3.4 The Present Status of Dairying in the Country
India ranks first in world milk production, its production having increased from
17 million tonnes in 1950-51 to 108.5 million tonnes by 2008-09. The per capita
availability of milk has increased from 112 grams per day in 1968-69 to 258 grams per
day in 2008-09, but still low compared to the world average of 265 grams per day. (GoI,
2010) The following table has given the details regarding the total production and per
capita availability of milk in India.
Table 2.1 Production and per capita availability of Milk in India
Year

Milk Production (MMT)

Per capita availability (grams/day)

1990-91

53.9

176

2000-01

80.6

220

2005-06

97.1

241

2006-07

100.9

246

2007-08

104.8

252

2008-09

108.5

258

(Source: Dept. of Animal Husbandry and Dairying cited in GoI, 2010)

54

About 80 per cent of milk produced in the country is handled in the unorganized sector
and the remaining 20 per cent is equally shared by co-operatives and private dairies. Over
1.33 lakhs village level dairy co-operatives spread over 265 districts in the county collect
about 25.1 million litres of milk per day and market about 20 million liters of milk per
day in the country. The efforts of the government in the dairy sector are concentrated in
promotion of dairy activities in non-Operation Flood areas with emphasis on building
infrastructure and, revitalization of sick dairy co-operatives and federations and creation
of infrastructure in the states. (GoI, 2010)

2.3.4.1 Reach of Dairy Co-operatives as on March 2010

The following details about the dairy co-operative network of India and its output are the
positive results of Operation Flood Programme (commonly referred to as White
Revolution) implemented in India from 1970-1996.

The Dairy Co-operative Network (As on March 2010) includes 177 milk
unions, operates in over 346 districts

covers 1,40,227 village level societies is owned by around 14 million farmer

members of which 4 million were women

Milk Production

India's milk production increased from 21.2 million MT in 1968-69 to 104.8

million MT in 2007-08 and to 112 million MT in 2009-10.

Per capita availability of milk was 258 grams per day in 2009-10 increased
from 241grams per day in 2005-06, up from 112 grams per day in 1968-69.

India's 3.7 percent annual growth of milk production between 1999-00 and
2009-10 surpasses the 1.8 per cent growth in population; the net increase in
availability is around 2 per cent per year.

55

Marketing

In 2009-10, average daily co-operative milk marketing stood at 211.2 lakh

litres; annual growth has averaged about 6.2 per cent compounded over the
last five years.
Dairy Co-operatives now market milk in all metros, major cities and more
than 2000 towns/cities.
During 2001-2010 the daily milk supply by Co-operatives to each 1000 urban
consumers has increased from 47.7 to 61.9 Kg per day.

Innovation

Bulk-vending - saving money and the environment.

Milk travels as far as 2,200 kilometers to deficit areas, carried by innovative

rail and road milk tankers.

Automatic Milk Collection Unit (AMCU) and Bulk Milk Cooler (BMC) at
grass root level preserve quality and reduce post-procurement losses.

Macro Impact

The annual value of India's anticipated milk production amounts to more than
Rs.1, 745 billion in 2009-10.

Dairy co-operatives generate employment opportunities for around 14 million

farm families.

Livestock contributes 22.2 per cent to the GDP from agriculture & allied
activities.

About 22.45 million people work in livestock sector, which is around 5.8% of
the total work force in the country (NDDB,2010)

The following table has provided the data about the spread of dairy co-operatives in the
length and breadth of the country. About 1.4 lakhs Dairy Co-operative Societies (DCS)
are part of the dairy network of India with 1.40 crores of farmer members who supply
milk to the dairy co-operatives.

56

Table 2.2 Dairy Co-operatives - Progress on Key Parameters in 2009-10*

State / UT

No. of DCS
Organized
(Cumulative)

Farmer
Members
('000)

Women
Members
('000)

Milk
Milk
Procurement Marketing@
(TKgPD)
(TLPD)

Andhra
4911
841
177
1443
1409
Pradesh
Assam
66
3
0
5
12
Bihar
8299
441
64
736
437
Chhattisgarh
751
31
7
24
35
Delhi
3047
Goa
179
19
3
36
75
Gujarat
13890
2809
791
9053
3164
Haryana
6881
313
73
522
384
Himachal
795
33
11
55
18
Pradesh
Jammu &
**
**
**
**
**
Kashmir
Jharkhand
50
1
0
5
239
Karnataka
11902
2052
660
3566
2468
Kerala #
3632
775
162
769
1067
Madhya
5729
266
50
525
447
Pradesh
Maharashtra
22217
1845
452
3151
2807
Nagaland
47
2
0
9
3
Orissa
3203
181
77
241
264
Puducherry
101
39
18
48
87
Punjab
6904
381
54
952
723
Rajasthan
15956
670
205
1654
1365
Sikkim
287
10
1
11
14
Tamil Nadu#
10038
2122
874
2277
1990
Tripura
84
6
1
2
13
Uttar Pradesh
21343
971
265
518
402
West Bengal
2962
210
70
262
655
ALL - INDIA
140227
14021
4015
25864
21125
Note: (1) * refers to provisional, ** for not reported and NA for not available
(2) # includes conventional societies and Taluka unions formed earlier
(3) @ Co-operatives (state) and metro dairies
(NDDB,2010)

2.3.4.2 The Perspective 2010 of NDDB

The National Dairy Development Board (NDDB) was created to promote, finance and
support producer-owned and controlled organizations. NDDB's programmes and
57

activities seek to strengthen farmer co-operatives and support national policies that are
favourable to the growth of such institutions. Fundamental to NDDB's efforts are cooperative principles and co-operative strategies
The Perspective 2010 plan of the NDDB maps the future of dairying in India, setting
realistic goals for strengthening Co-operative Business, production enhancement,
assuring quality and creating a National Information Network. The Plan was realized
with successful completion of the Operation Flood programme and has been developed
by the state milk marking federations and the milk producers co-operative unions in
consultation with NDDB. The Perspective 2010 goals and strategies have been drawn by
its actual implanters- Federation and Unions and supported by NDDB. The plan seeks to
strengthen the functioning of dairy co-operatives as producer owned and controlled
organizations. NDDB support the development of dairy co-operatives by providing the
financial assistance and technical expertise. (NDDB, 2010)
2.3.4.3 National Co-operative Dairy Federation of India (NCDFI)
The National Co-operative Dairy Federation of India Ltd. based at Anand is an apex body
of co-operatives comprising of 23 state level dairy co-operative federations. The NCDFI
formed

in 1970 was registered under the Multi State Co-operative Societies Act of

1984. Its primary objective is to facilitate the working of dairy co-operatives through
coordination, networking and advocacy.
Important activities of the NCDFI are coordinating the sale of different products by its
members to the Ministry of Defence and other institutions, management of Rail Milk
Tankers, coordinating the sale of frozen semen doses and farm produce of the Sabarmati
58

Ashram Gaushala, providing support to members and affiliated organizations in

computerizing their operations and information systems and offering other need based
services to members. The NCDFI also functions as a representative of its members on
different bodies including the National Co-operative Union of India and the International
Co-operative Alliance. (NDDB, 2010)
2.3.5 Dairy Development in Kerala
Cattle rearing had been a very popular household based economic activity in Kerala
associated with agriculture where the cattle waste was the major input for all types of
agriculture. There are sufficient documentary supports to affirm that organized dairy
industry in Kerala has got a tradition of about 80 years. First dairy industrial co-operative
was registered in 1932 as a mutual help co-operative at Thirumala in Trivandrum under
Dept. of Co-operation of erstwhile Travancore-Cochin state.
Dairy co-operatives were also operational in Malabar Region which was part of the State
of Madras and the Calicut Co-operative milk supplies union was started in 1939. There
was a customer friendly practice among dairy farmers where the farmer took the cow and
calf to the houses of the customers and milked the cow in the presence of the customers
and supplied the milk to ensure the quality of milk. When the dairy co-operatives were
formed the farmers brought the cows to the dairy co-operative society and milk it in the
presence of the customers and supply the milk which was popularly known as
Kettikaravu with the intention of ensuring the quality of milk supplied.
(Gopalakrishnan, 1999)

59

2.3.5.1 Dairying in Pre-Operation Flood in Kerala: 1950- 1980

The organized dairy development in Kerala commenced in 1951 through the Key Village
Scheme (KVS) of improving the genetic potential of cattle by cross breeding local cattle
with superior indigenous breeds implemented through the Dept. of Animal Husbandry.
The Key Farm Scheme followed in the period 1952-1954and cross breeding with exotic
breed was initiated in 1955.The Indo- Swiss Project Kerala (ISPK) was constituted under
a bilateral agreement between the Government of India and the Swiss Confederation in
1963 with the aim of evolving a new breed of cattle adapted to the local environment.
The project was located in Mattupetty in Idukki district aimed at developing a breed of
dairy cattle suited to the local conditions, Frozen semen technology for artificial
insemination was introduced for the for time in the country. Fodder development was
also a major component of the project. To ensure continuity and to strengthen the
organization for further expansion, the Project was converted into a Government
Department named as Indo Swiss Project Department. (Prakash, 2005)
During the Fourth Plan Period (1969-70 to 1973-74), the Intensive Cattle Development
Project (ICDP) was launched in the state with the aim of enhancing milk production
through necessary technical and infrastructural support in the rural areas and linking them
with urban dairies. ICDP had established regional artificial insemination centres and sub
centres. About 950 Artificial Insemination (AI) centres were opened in 721 Panchayats
and trained youth were deployed to deliver the AI services to the framers at their door
steps. The cattle population had changed in favour of cross breeds and milk production
too increased considerably during the period. The Indio- Swiss project was helpful for the
dairy sector in Kerala with enhance milk production in rural households.
60

By mid 1970s, the Government of Kerala decided to constitute an autonomous body

named the Kerala Livestock Development and Milk Marketing Board (KLD & MMB)
under the Companies Act 1956, integrating the production, procurement, processing and
marketing of milk under one umbrella. In 1976 the Indo- Swiss project was transformed
as Kerala Live Stock Development and Marketing Board (KLD &MM Board).The
breeding policy of the government of Kerala invested monopoly right to KLD &MM
board for frozen semen distribution in the state. (Gopalakrishnan, 1999)
2.3.5.2 Department of Dairy Development and Dairy Industrial Co-operatives
The Dairy Development Department was established in 1962 by separating the dairy
development functions of Co-operative Department with the purpose of speedy and
focused implementation of the schemes under the five year plans mainly city milk supply
scheme to supply good quality milk to the urban areas. About 150 dairy industrial cooperatives were functioning in 1962 under the control of the dept. of Co-operation. The
dairy development dept was providing technical support for establishing and running
diary co-operative societies in Kerala. First dairy plant in the state was commissioned at
Pattam, Trivandrum in 1962 under the department. Dairy Industrial co-operatives and
milk unions were established in different parts of the State. Since the Government
programme of milk sale ended in huge loss the marketing responsibility was given to the
milk unions. In 1980 there were 1600 dairy industrial co-operatives and 10 district level
co-operative milk unions in the state but most of them were making loss due the
unfavourable marking situation prevailed in that time. The operational areas of a dairy
co-operative were limited to the panchyath. Calicut, Thrissur and Nelambur co-operative

61

milk unions were performing in a satisfactory manner by making reasonable profit

through the marketing of milk and milk products
The technical advancement of dairy sector under Indo-Swiss project, KLD&MM board
and organized extension work of Animal Husbandry and Dairy Development
Departments had resulted in the increased milk production in the state and formation of
new dairy industrial co-operatives for marketing the surplus milk of the farmers in the
years 1974-1979. The production has increased and the price of the commodity came
down and farmers and their co-operatives began to accumulate loss in dairy farming. The
National Diary Corporation did not considered Kerala in the first phase of the Operation
Flood and consequently there were no organized marketing channels of the milk
produced in Kerala. In the year 1978-79, about 1500 dairy co-operatives have formed an
association names as Kerala State Milk Societies Association and began agitation against
government for getting the benefit of national Operation Flood project in Kerala and
consequently in 1980 Government of Kerala sought the assistance of NDDB to include
Kerala in the second phase of Operation Flood project and Kerala Co-operative Milk
Marketing Federation (KCMMF) was registered in 1980. When the Operation Flood
project was implemented most of these dairy industrial co-operative got re-registered as
APCOS (Anand Pattern Co-operative Society) and the asset and liability of the unions
were taken over by the Regional Milk Unions formed under KCMMF which was
popularly known as MILMA. (Gopalakrishnan, 1999)
2.3.5.3 Operation Flood in Kerala: 1980-85&1985-1996
Even though Kerala Co-operative Milk Marketing Federation (KCMMF) was registered
in 1980, the Federation became operational only in 1983. The major responsibilities

62

assigned to the KCMMF were the formation of procurement network comprising village
level milk producers co-operatives and the expansion of the processing capacity. The
South and Central Kerala were brought under the second phase of Operation Flood. The
basic infrastructure facilities for milk processing, marketing net work and formation of
village level societies named as APCOSs and establishment of two regional milk
producers unions were realised in Kerala following the national pattern of Operation
Flood project by utilizing Rs.58 crores of loan sanctioned by NDDB. The existing
processing facilities
KLD&MM Board

in the state which were under the commercial units of the

namely chilling plants, dairy plants and cattle feed plants were

transferred to the Kerala Co-operative Milk Marketing Federation (KCMMF) along with
its brand name MILMA in 1983 through a government order and KLD&MM board was
subsequently changed to KLD Board. In 1985 Regional Milk unions were established in
Trivandrum and Ernakulum. (MILMA, 2010)
The Anand Model, the first integrated dairy development project aimed at establishing
the necessary infrastructure required for sustainable development of dairy sector in the
Country had addressed all critical areas of milk production, procurement, processing and
marketing. Since Kerala had achieved substantial growth in the quality of animal and in
milk production under the ICDP and Indo-Swiss project by 1980, the thrust areas of
KCMMF were procurement, processing and marketing. The extensive net work for
procurement, marketing and hundreds of village level producer co-operatives were
formed under the second phase of Operation Flood in Kerala. The six northern districts
of Kerala were not included in the Operation Flood Project. The dairy development
programme in the northern region of Kerala was implemented through an initial funding

63

for the project on a part-loan and part-grant basis provided by the Government of
Switzerland through the Swiss Agency for Development and Cooperation (SDC). The
Malabar regional union started its operation in 1990. Once the Union attained a
financially sound footing, the SDC withdrew from the scene allowing the organization to
grow and develop independently. (MRCMPU, 2010)
All the three regional co-operative milk producers unions are afflicted and under the
control of KCMMF. Responsibility of procurement, processing and marketing of milk
was vested with KCMMF from its inception in 1983 but these functions were entrusted to
the Trivandrum and Ernakulum Regions in 1986 and to the Malabar Region in 1990.
2.3.6 Kerala Co-operative Milk Marketing Federation (KCMMF)
Kerala Co-operative Milk Marketing Federation (KCMMF), popularly known as MILMA
was established in April, 1980 with its Head Office at Thiruvananthapuram for the
successful implementation of the Operation Flood Project in Kerala. At present the
Milma Federation consists of 8.31 lacs dairy farmers of 2678 village level primary milk
co-operative societies

organized under three Regional Milk producers unions namely

TRCMPU (Trivandrum Regional Co-operative Milk Producers union (TRCMPU),

Ernakulum Regional Co-operative Milk Producers union (ERCMPU), and Malabar
Regional Co-operative Milk Producers union (MRCMPU).
The three tier system of Anand Pattern is followed in Kerala with slight
modification. Instead of the district level milk producers union of the Anand Model,
MILMA had developed three regional milk producers unions for the south, central and
northern regions of the State of Kerala.

64

The MILMA owns thirteen dairies capable of handling 12 lakhs litres milk per day, ten
milk chilling units, two cattle feed plants with a cumulative capacity of 600MT per day,
one milk powder plant of 10MT per day capacity and a training centre and about 5200
retail outlets and providing direct /indirect employment to over 32000 people in Kerala.
The village dairy co-operatives are popularly known as APCOS (Anand Pattern
co-operative society) and the operational area of an APCOS comprises of two wards of a
local Panchayath. The dairy farmers of the area could take membership in the milk
society. As per the Bye-law of APCOS the minimum of 25 members are required to form
a dairy co-operative society. The membership pattern in the APCOS in Kerala varies
from 25 to above 1500 members and the total number of APCOS (both affiliated and non
affiliated) functioning in the state of Kerala as on 31.03.2010 are 2678.
A set of diary co-operatives commonly known as Industrial dairy co-operatives
or Traditional dairy co-operatives are functioning in Kerala apart from the main stream
Anand Pattern Co-operatives (APCOS). These Traditional milk co-operatives were
established before the period of the Operation Flood project (1980) and they had not
opted for re-registration as

APCOS during Operation Flood Project and continued to

keep their administration independent of the three tier system of Anand Pattern followed
in Kerala. Some of these traditional milk societies have their own system of collection
and marketing of milk in their local areas of operation and some others sell milk to the
Regional Milk Unions of KCMMF. (MILMA, 2010). The following table has provided
the details of APCOS as well as traditional milk co-operatives functioning in Kerala as on
31.03.2010.

65

Table 2.3 No. of Dairy Co-operative Societies (DCS) as on 31st March 2010

Region

District

Non
Affiliated
Affiliated
APCOS
APCOS

Total
No of
APCOS

Traditional
Milk
Societies

Total
No of
DCS

Trivandrum

220

81

Kollam

156

64

Alleppey

160

16

Pathanamthitta

105

26

641

224

865

187

1052

Ernakulam

292

32

Kottayam

178

19

Trichur

187

69

Idukki

141

19

798

42

840

139

979

Palakkad

253

23

Malapuaram

124

33

Kozhikode

154

32

52

112

61

88

Total of MRCMPU

783

190

973

159

1132

Grand Total

2222

456

2678

485

3163

Trivandrum
(TRCMPU)
Total of TRCMPU

Ernakulam
(ERCMPU)
Total of ERCMPU

Wayanad
Kanur
Kasaragode

(Source: Annual Report 2009-10, MILMA) (KCMMF, 2010)

A major activity of the APCOS is the daily collection of milk from the farmers on all the
365 days of the year. The average milk procurement by APCOS, the village level milk
societies in the State was 328.8 litres per day in the period 2001-2010 and the average
total procurement by all APCOSs in the same period was 7.99 lakhs per day. The
average procurement of milk form the APCOSs in the Kerala are given in the following
table.

66

Table 2.4 Average Quantity of Milk Procured per day by APCOS

from 2001 to 2010
Year

No of APCOS

2001

2130

Total
Procurement
/day(ltr.)
714301

2002

2250

708137

315

2003

2308

671720

291

2004

2354

732615

311

2005

2399

839977

350

2006

2428

917546

378

2007

2488

853972

343

2008

2563

819901

320

2009

2666

905992

340

2010*

2708

825265

305

Average for the

period **

2430

798942.6

328.8

Procurement per
Society/day (ltr.)
335

Source: KCMMF * As on August 2010 citied in (GoK, 2010), ** computed)

The MILMA is engaged in various activities like production of cattle feed, strengthening
of APCOSs, veterinary services to farmers along with its major activity of Procurement
of milk and marketing of processed milk and milk products. By the end of Operation
Flood project, the village milk societies were established in all Panchayths

of Kerala

with the necessary infrastructure and marketing facilities for dairy development. Even
though some APCOS became non-functional, the data have shown that new APCOS are
getting formed in the rural areas of Kerala. The details regarding the No. of APCOS,
membership, average milk procurement and sale, production of cattle feed and milk
products for the period 2003-2010 are given in the following table.

67

Table 2.5

Performance of Kerala Co-operative Milk Marketing Federation

(KCMMF) from 2003 to Aug 2010
Period

No.

Particulars
2003

2004

2005

2006

2007

2008

2009

2010

2535

2590

2648

2686

2791

2860

2970

3001

2308

2354

2399

2428

2488

2563

2666

2708

6.97

7.32

7.45

7.41

7.69

7.89

8.21

8.4

1.15

1.25

1.31

1.44

1.51

1.56

1.75

1.81

0.4

0.44

0.44

0.44

0.45

0.5

0.53

0.54

No of registered APCOS*

No of functional APCOS*

No of members*(Lakhs Nos)

No of women members*( Lakhs )

No of SC/ST members*(lakhs Nos)

Average milk procured /day from

APCOS (MT)

772

732

840

918

853

820

905

825

Average milk marketed /day by

KCMMF (MT)

737

774

839

915

958

952

1063

1072

Direct employment generated (no of

persons)

7484

7586

7807

7833

7964

8228

8596

8676

Cattle feed sold(Lakh MT)

1.04

1.12

1.13

1.21

1.17

1.14

0.99

1.13

Qty of ghee produced (MT)

2299

2606

2673

3111

2802

3186

2789

3149

Qty of ghee sold(MT)

2258

2438

2605

3217

3157

3264

2868

3437

13

10

14

12

0.03

0.03

0.03

0.03

0.37

0.32

0.34

0.21

39

37

38

32

25

21

267

194

0.42

0.47

0.5

0.48

0.45

0.41

0.41

0.25

8
9
10
11
12
13
14
15

No. of Veterinary routes

No of cases treated(lakhs nos)
No of emergency Veterinary routes
No of cases treated(lakhs nos)

*cumulative, (Source: KCMMF cited in GoK 2010)

About 8-10 % of the APCOSs became non functional due to

various operational

problems but at the same time new APCOSs are registered, showing
18.4%

an increase of

in the number of APCOSs formed in the period from 2003-2010. The

membership in APCOS had also recorded 20% increase in the same period but the
increase in women membership was only 5.7%. The average women membership in
68

APCOSs was 16.5% to 21.5% during the same period much below the target of 50%
women membership in Dairy Co-operatives set by NDDB for enhancing women
participation in Village Dairy Co-operatives. (NDDB, 2010)
Milk Procurement
The thirteen dairy processing plants with a total capacity of 11.40 lakhs per day and 10
milk chilling plant under KCMMF(MILMA) and 209 Bulk coolers installed in APCOSs
under integrated dairy development project (IDDP) and Clean Milk production(CMP)
projects of NDDB are the facility under KCMMF for procurement of milk in the State.
The following table has provided the details regarding the procurement of milk by unions
under KCMMF.
Table 2.6 Milk Procurement per day by the Milk Unions
under KCMMF (2007-08 to 2009-10)(in lakh kgs)
Regional Union
TRCMPU
% change over the previous year
ERCMPU
% change over the previous year
MRCMPU
% change over the previous year
Total
% change over the previous year

2007-08

2008-09

2009-10

2.37

2.19

1.98

- 7.6

- 9.59

1.97

1.76

1.75

-10.65

- 0.56

3.2

3.61

3.98

9.6

10.24

7.54

7.46

7.71

- 1.06

3.35

(Source: Annual Report 2009-10, MILMA.) (KCMMF, 2010)

The procurement of milk by Trivandrum and Ernakulum Regions of KCMMF has

declined in the period 2008 to 2010 but the Malabar Region has shown an increasing
69

trend in milk procurement. The total quantity of milk procured by the Regional Unions
in the years 2007-08, 2008-09 and 2009-10 were 2748.45, 2664.5 and 2811.37 lakhs kg
respectively. (KCMMF, 2010)
Figure 2.4 Procurement Trend of Milk by KCMMF from 2002 to 2010
9
8
7

7.48
6.77

6.4

7.95

7.53

7.3

7.7

6.51
5.96

Lkg/Day

4
3
2
1
0
2002

2003

2004

2005

2006

2007

2008

2009

2010

(Source: Annual Report 2009-10, MILMA) (KCMMF, 2010)

The milk production in the state as well as procurement of milk by MILMA has
registered a declining trend in the early part of the decade from 2002 to 2004 but the milk
procurement has increased from 2005 onwards with marginal variations

in the later

years. The various schemes implemented by the government for dairy sector from 2005
onwards have resulted in marginal increase in the production and procurement of milk in
the state.
Marketing of Milk and Milk Products by MILMA
The demands of milk and milk products have increased in the state and the milk procured
by the regional unions from

the village milk societies was not sufficient to meet the

70

daily demand. MILMA has to depend on import of milk from other states to meet the
daily requirement. The total quaintly of milk marketed by the Regional Unions under
KCMMF in the years 2007-08, 2008-09 and 2009-10 were 3473.88, 3580.65 and 3911.96
lakhs litres respectively. (KCMMF, 2010) The milk sale by MILMA has recorded an
increasing trend for the period 2005-10. Apart from milk, there are 19 products are
produced and marketed by MILMA and major milk products

are Ghee, Butter, Ice-

cream, Curd ,Milma Plus and Sambharam, Peda and Palada mix. The milk scarcity has
affected the sales of major milk products of MILMA in the financial year 2009-10.
Table 2.7 Milk Sales per day by the Milk Unions under KCMMF
(2007-08 to 2009-10) (in lakh ltrs)
Regional Union
TRCMPU
% change over the previous year
ERCMPU
% change over the previous year
MRCMPU
% change over the previous year
Total
% change over the previous year

2007-08

2008-09

2009-10

4.02

4.03

4.36

0.24

8.18

2.45

2.57

2.74

4.89

6.61

3.02

3.19

3.62

5.62

13.37

9.49

9.79

10.42

3.16

6.43

(Source: Annual Report 2009-10, MILMA. (KCMMF, 2010)

The sale of milk by the unions has recorded marginal increase over the years and in the
financial year 2009-10 it has registered an average 6.43% increase over previous year.
The seasonal variation in milk production (lean-flush season) and drop in the
procurement of milk by the Trivandrum and Ernakulum regions (Ref. to Table 2.6) were
managed by milk brought from other states and purchase of skimmed milk powder. In the
71

financial year 2008-09, there was an average deficit of 2.98lakh litres per day which
was managed by buying 2.40 lakhs litres per day from neigbouring States and using
skimmed milk power(SMP) to produce

reconstituted milk of

0.58 lakhs ltrs/day.

(KCMMF, 2009) and in the year 2009-10, the deficit was 3.80 lakhs litres per day which
was again managed by the purchase of 2.58 lakhs litres per day from outside the state and
using SMP to produce 1.22 lakhs litres of milk per day. (KCMMF, 2010)
Figure 2.5 Trend of Procurement and Sales of Milk by KCMMF
Procurement/day(lakhs ltrs)

12

Sales/day(lakhs ltrs)
10.71
10

9.28

9.52

9.81

8.5
7.98
8

7.19
6.21

7.37

7.72
7.26

7.31

7.09

2008

2009

7.48

6.32
5.79

0
2003

2004

2005

2006

2007

2010

(Source: Annual Report 2009-10, MILMA. (KCMMF, 2010)

The deficit in milk procurement to milk sales was 15.8% in 2003 which has increased
over the period with slight variation in 2006 & 2007 but from 2008 onwards the deficit

72

has increased steadily with 30.2% in 2008 and in the year 2009 and 2010, the deficit was
38.4% and 43.2% respectively. During this period (2003-2010) the sales has increased by
48.9% but the procurement has increased only by 20.45%. KCMMF has to purchase milk
from outside states to meet the internal demand for milk. Kerala is fast becoming a milk
deficit state. As per the statistics of all check-posts in Kerala, in the year 2010 there was
an import of 18.05 crores litres of milk from other states indicating an average shortage
of 4.94 lakhs ltrs per day in Kerala. (GoK, 2010)
Financial Performance of MILMA
The turnover of the three milk producers unions and of the Federation are given in the
following table
Table 2.8 Turnover of MILMA Federation and Unions from 2007-08 to 2009-10
(Amount in Crores)
Year

TRCMPU

ERCMPU

MRCMPU

KCMMF

TOTAL

2007-08

283.40

172.19

238.25

141.28

835.12

2008-09

333.43

214.50

308.82

161.87

1018.52

% Increase over Previous year

17.66%

24.57%

29.62%

14.57%

21.96%

2009-2010

362.62

231.07

357.45

193.64

1144.78

% increase over previous

year

8.75%

7.72%

15.75%

19.63%

12.40%

(Source: Annual Report KCMMF, 2009, 2010)

The turnover of all the three unions and apex federation has increased over the last three
years from 2007-08 to 2009-10 but apart from the apex federation, KCMMF, for all the
unions the percentage increase over the previous years has substantially reduced in the

73

year 2009-10. The following table has provided the details regarding the profit and loss
of the Regional Unions and the Federation of MILMA.
Table 2.9 Profit/Loss of the Unions and Federation of MILMA
from 2007-08 to 2009-10 (Amount in Crores)
Year

TRCMPU

ERCMPU

MRCMPU

KCMMF

TOTAL

2007-08

(-)4.72

(-) 1.18

0.91

(-) 4.57

(-) 9.56

2008-09

1.04

2.21

1.66

1.15

6.06

2009-2010

0.18

2.78

1.21

(-)0.75

3.42

(Source: Annual Report KCMMF, 2009, 2010)

The milk unions and the federation have gained marginal profit in the year 2008-09 in
spite of the rise in the raw material cost of cattle feed and the strict governmental control
of milk price in the state. The federation has incurred loss in the year 2009-10 due to the
unprecedented rise in the raw material cost of cattle feed which has badly affected the
financial viability of the cattle feed plants of MILMA.
2.3.7 The Govt. support system for Dairy Development in Kerala
The peculiarity of dairy sector in Kerala is that different government agencies are
working for dairy development and for the welfare of dairy farmers with more or less
similar programmes and services along with MILMA formed under the Operation Flood
Project. Department of Dairy Development (DD), Department of Animal Husbandry
(AH), Kerala Live Stock Development Board (KLDB) and Kerala Dairy Farmers Welfare
Fund Board (KDFWFB) are the agencies operational for the growth and development of

74

dairy farming in Kerala. The programmes and services of these agencies are briefly
described below.
2.3.7.1 Department of Dairy Development
The Department of Dairy Development established in 1962 has statutory functions under
the Kerala Co-operative Societies Act 1969 and the Milk and Milk Products Order
(MMPO) 1992 issued by the Government of India under the Essential Commodities Act.
The Department has the responsibility to monitor the 18 dairies registered under the
MMPO in the State. The objectives of the department are to enhance milk production and
rural consumption of milk, provide facilities for profitable dairying, Administration of
Dairy co-operatives under the powers of Kerala Co-operative Societies Act, register and
control milk processing plants under Milk and Milk Products Regulation under the
Food Safety and Standards Authority of India and to check and ensure quality of milk
produced and marketed in the State.
The department is the nodal agency for Fodder Development and Rural Dairy Extension
Services.

Dairy farmers, housewives, dairy co-operators and dairy co-operative

employees are imparted training in different aspects at the Dairy Training Centres of the
Department. Besides developmental programmes, there are 3163 Primary Dairy Cooperatives, three regional Unions and one Apex Federation (MILMA) under the
administrative supervision of this Department. Financial assistance is extended to dairy
co-operatives in addition to technical advice under the plan fund allocation. (GoK, 2010)
The Director of Dairy Development is the Head of the Department with Headquarters at
Pattom, Trivandrum. The District offices are headed by the Deputy Directors of Dairy
Development. The cutting edge level of the department is the Dairy Extension Service
75

Unit (DESU), functioning under a Dairy Extension Officer (DEO) at Block level. The
District Milk Quality Control Unit headed by an Assistant Director of Dairy
Development i.e. Quality Control Officer(QCO) is attached to the respective district
office. There are five Dairy Training Centres of the Department viz at Trivandrum,
Oachira, Kottayam, Alathur and Kozhikode each headed by a Deputy Director of Dairy
Development/Principal. The Sewage farm at Valiathura, Trivandrum functions under a
Deputy

Director

of

Dairy

Development/

Superintendent.

(GoK,

2010)

The Dairy Development Department offers the following services to the farming
community and to the general public:

1. Dairy extension and Advisory services in modern scientific cattle management,

feeding, fodder cultivation, fodder preservation, utilization of farm waste, value
addition by conversion of milk into milk products etc.
2. Preparation of schemes to be implemented by the department, LSGDs and other
bankable schemes.
3. Assist farmers in establishing dairy units.
4. Provide information regarding mechanization of farm activities
5. Provide planting materials for the propagation of fodder crops
6. Provide training in various aspects of dairying
7. Conducting exhibitions, contact classes, demonstrations etc.
8. Provide facilities for testing quality of milk to ensure safety of public health
9. Test the quality of milk samples brought by public and provide the results.
10. Provide any information related to dairying as requested by the general public
11. Assist farmers in organizing Dairy co-operatives for marketing surplus milk
12. Conduct enquiries based on complaints received from public (GoK, 2010)

76

Table 2.10 State/Central Schemes implemented by Dairy Development

Dept. in the year 2009-10
Scheme &Objectives

Programmes

1.Milk Shed Development :

1.1 milk shed development

(to enhance cattle population / milk production in

the State )

1.2 need based assistance for farmers

2 Fodder Development

2.1 small holding fodder cultivation

(Dept. is the nodal agency for fodder production

in the State. Schemes aim at reduce cost of
production of milk )

2.2 Azolla cultivation

1.3 purchase of milking machine

2.3 Fodder cultivation unit through DCS

2.4 Fodder Tree cultivation
2.5 Cultivation of Short duration Fodder crops
2.6 Irrigation Assistance
2.7 Fodder Marketing Centres
2.8 Assistance for Mechanization in Fodder harvesting
2.9Assistance for Mechanization in Fodder harvesting

3 Cattle feed subsidy (Incentive for farmers in

milk production )

3.1 Cattle feed subsidy

4 Extension and Advisory services

4.1 Dairy Farmers Contact Programme

(Transfer of information /technology among

dairy farmers and general public about quality
milk production practices)

4.2 Quality Awareness Programme (QAP)

4.3 Consumer interface programme
4.4 District & Block level cattle show and seminar.

5 Modernization of Dairy Co-operatives

5.1 Operational Assistance to newly registered societies

(Financial assistance for revival/improvement in

infrastructure facilities of dairy co-operatives)

5.2 Assistance for revival of Defunct Societies

5.3 Assistance for the purchase of Chemicals,Glass wares
& Repair of lab equipments.
5.4 Need Based Assistance to Dairy Co-operatives

6 Strengthening quality control labs

(Monitoring the quality of milk marketed in the
state )

6.1 Equipments for the District Quality Control

Laboratories
6.2 Special Quality Testing Drive during Festival Seasons

7 Central Scheme

7.1 Enhancement of rural marketing facilities

(Centrally funded schemes to enhance the

infrastructure facilities in rural areas for milk
production)

7.2 Rural infrastructure development fund

7.3 Need based assistance to farmers for mechanization
of farmers
(Source: dairykerala.org (GoK, 2010))

77

2.3.7.2 Department of Animal Husbandry

The major objectives of the department are implementation of breeding policy, transfer of
technology from lab to field, evolve schemes to retain traditional livestock farmers in AH
Sector, supply of good quality gem plasam, and promote fodder production, effective
control of animal diseases, treatment, vaccination and creating public awareness
regarding proper animal care. During the last 50 years Animal Husbandry Department
has made very significant growth.To its credit, Department has 2638 institutions under
the State Directorate of Animal Husbandry. Out of the same 852 are Veterinary
Dispensaries and 213 are Veterinary Hospitals headed by qualified veterinary graduates
and post graduates. Apart from this, 47 Veterinary Poly Clinics, 14 District Veterinary
Centres, 9 Mobile Clinics, and 1 Motor Boat Clinic are functioning with specialist
veterinary surgeons and Para-veterinary staff.Artificial Insemination programme has
another 1358 centres manned by qualified Para-veterinary staff.
2.3.7.3 Kerala Livestock Development Board (KLDB)
KLDB was initially constituted as an autonomous body named the Kerala
Livestock Development and Milk Marketing Board (KLD & MMB) integrating the
production, procurement, processing and marketing of milk under one umbrella as a
follow up of Indo Swiss Project Kerala (ISPK). Since the commercial units of the Board
namely chilling plants, dairy plants and cattle feed plants were transferred to the Kerala
co-operative Milk Marketing Federation (KCMMF) when it was registered under the
Kerala Co-operative Societies Act in 1980, the activities of KLBD were confined to cattle
breeding, frozen semen production and distribution, fodder development, training and the
name of the agency was modified as Kerala Livestock Development Board (KLDB). The

78

activities of the Board are carried out by the two technical wings viz: Animal Husbandry
and Fodder Development. KLDB has now come a long way bringing in new technology
and prosperity to this sector. The several bull stations, semen banks, breeding centers for
pigs, goat and cattle, progeny testing units, training centers and a number of other centers
show the progress

that

it

has

made in

its

three decades

of existence.

The Major objectives of the KLDB are to provide inputs required for cattle
breeding in line with the breeding policy of the State,

promote fodder production

under field condition in support of economic milk production, offer training courses
in animal husbandry and fodder production,

develop Malabar goats through the

production and supply of selected breeding stock and to produce and supply good
quality piglets for breeding and fattening.

2.3.7.4 Kerala Dairy Farmers Welfare Fund Board

The demand of dairy farmers for pension was realized through the promulgation of an
ordinance to form Dairy Farmers Welfare Board on August 24th, 2005. This being the
first one in India itself and Kerala Dairy Farmers Welfare Fund (KDFWF) act came in to
effect in 2007. At present 1.6 lakhs members (75% of total pouring members) have
already enrolled in the fund. 23535 eligible dairy farmers are receiving regular pension
at the rate of Rs.300/month and 831 nominees of deceased pensioners are receiving
family pension at the rate of Rs. 150/month. As per the KDFWF Act 2007, the Board has
formulated a comprehensive social welfare scheme for the members called Ksheera
Deepam (GoK, 2010)

79

The following table has provided details about the financial assistance given to dairy
farmers under the various programmes of KDFWFB.
Table 2.11 Financial Assistance given to Dairy Farmers from Kerala Dairy
Farmers Welfare Fund Board (KDFWF)
Sl.
No

Programme

Pension for dairy farmers

above the age of 60

Family Pension

Details of the programme

Financial
Assistance

For members of welfare fund

as per the KDFWF act 2007

For the legal heir of the dairy

farmer

Rs. 300/month

Rs.150/month

For the marriage of daughters

3

Marriage assistance

of the members of welfare

Rs.1000.

fund
4

Educational merit

For the Children of the

scholarship

member farmers

Dying in harness

For the legal heir of the

allowance

deceased member

Best Dairy farmer

Insurance

Best farmer in the district for

the year
Health and life insurance

Rs. 1000-2500

Rs.1000

Rs. 2000
Rs. 2000-50,000

(Source: Annual Report KDFWF, 2010)

Pension, Family Pension, health and life insurance, marriage assistance and merit
scholarship for children of dairy farmers and award for best dairy farmer are the major
attractions of the welfare fund scheme. This was a long standing demand of dairy farmers
to set up a welfare board and grant pension to the dairy farmers which was realized
through the KDFWF act of 2007.

80

The following table has provided the details regarding the number of dairy farmers who
have benefited out of the schemes of KDFWF from 2005 to 2010.
Table 2.12

Period

Pension

No. of Dairy Farmers who have benefited from the

Schemes under KDFWF

Family

Marriage

Education

Pension

Assistance

scholarship

Insurance

Best

Dying in

Farmer

harness

award

allowance

2005- 06

7080

2006- 07

17506

2007- 08

23119

310

231

10

135

2008- 09

23535

709

906

792

21

710

2009-10

24001

1080

1673

1257

333

26

1803

(Source: Annual Report KDFWF, 2010)

State of Kerala became a model in India by setting up of a welfare board with pension
schemes for dairy farmers in the State. The KDFWF board became fully operational from
2007-08 on wards with more farmers began to benefit out of the schemes of Welfare
Fund.
2.3.7.5 Financial Assistance to Dairy Farmers from Govt. Agencies in Dairy Sector

Department of Dairy Development (DD), Department of Animal Husbandry (AH) and

Kerala Live Stock Development Board (KLDB) are having a set of porgrammes for the
development of dairy sector in the State. These programmes are implemented through
need based schemes implemented under the yearly plans of the respective departments.
The centrally sponsored schemes are also routed through the respective department. The
block level dairy extension office and the village level veterinary hospital are the nodal
centers for a farmer to approach to know about and benefit from the schemes of the
government. Some of the APCOSs organize awareness programmes for their member
farmers about the upcoming government schemes in dairy sector.
81

Table 2.13 Government Schemes for Dairy Farmers in Kerala

Dept.

No

2
3

DD*

4
5
6
7
8

9
10

AH*

Details of project
a. Two cow/buffalo unit
b five cow/buffalo unit
c 10 cows/buffalo unit
d. 20 cows/buffalo unit

Subsidy
Rs. 14400(30%)
Rs. 44000(30%)
Rs.75000 (30%)
Rs.150000 (30%)

Purchase of Milking
Machine
Fodder
development
Purchase of Chaff
cutter
Azolla

Electrical milking machine

Rs.10000 (20%)

Land <30cent
Land >30 cent
Cost of machine up to Rs20000

Free supply of seed/

Rs.10000 (50%)
Rs 10000(50%)

Azolla cultivation

Rs.350-Fee distribution
of the Kit (50%)

Irrigation of fodder
cultivation
Heifer Rearing
Need
based
assistance

For farmers having fodder

cultivation land > 50 cent
Rearing of 30 heifer
Purchase of Farm equipment
for framers having more than 2
cows/buffalos
Farmers who supply milk to
dairy co-operatives
Supply of cattle feed for Six
Months
Cattle feed for male calf above
six months old

Subsidy for cattle

feed
Cattle feed for
pregnant cow
protection of male
calf

Female
protection

5
1

Artificial
insemination
Goraksha
Vaccination against
foot&mouth disease
Health clinics
Gorekha

Gosurakha

KLDB*

Project
Milk shed

calf

Cattle feed subsidy, medicine

and vaccination for 4-6 month
old calf
services free of cost

Rs.10000 (50%)
Rs.4.5 lakhs (50%)
Rs.10, 000 (20%)

Rs. 0.50/one kg
of cattle feed
Rs.3,000 for six months
50% subsidy for
cattle feed, medicine
and insurance scheme
Subsidy and insurance
up to Rs.7500
Rs. 35

Service free of cost

Free service

Fertility promotion services

Artificial
insemination
programme implemented via
AH Dept
Insurance for cows/buffalos

Free
Rs. 35 subsidy for
one insemination

4.11% is the premium

for 2 years 50% subsidy
up to Rs10, 000, Rs 50
for veterinary certificate
and Rs.100 for claim
certificate.
DD*-Dairy Development Department, AH*- Animal Husbandry Department, KLDB*-Kerala
Livestock Development Board. (Source: Monthly Bulletin of Dairy Development Department
April2010) (Dairy Development,GoK, 2010)

82

In the financial year 2009-10, the government agencies have implemented about 17
schemes out of which some are free services and others are subsidy linked projects.
(Dairy Development,GoK, 2010).
2.3.7.6 Financial Assistance given by the Regional Milk Unions
The Regional milk unions also have schemes for the promotion of dairy farmers
coming under the respective union. The details are given in the following table.
Table 2.14 Financial Assistance to Dairy Farmers through the Milk Unions
Region

No
1

9
1

Project
Dying in harness
allowance
Education
scholarships
Transportation
assistance
Production
incentive
Cattle feed
distribution
Cattle insurance
De-worming
assistance
Adoption of
heifer
Milk Machine
Interest subsidy

Milk Machine

Supply of 50 milk machine

Interest subsidy for farmers for purchase
of cows for first year
Purchase of milk machine

Cattle insurance

Insurance for cattle

TRCMPU

3
4
5
6
7

ERCMPU

Details of project
Assistance to the family of the diseased
dairy farmer
Financial assistance for higher education

Subsidy/Grant
Rs.10,000

Transportation charge for bringing cattle

from other state
Profit of the union is shared with farmers
as production and lean season incentive
Free distribution of cattle feed

Rs.1000.

1300 cows of mini dairy farms

Two times in the year 50% subsidy for
the medicine
Adoption of 300nos of heifer

Yearly allocation

profit margin yearly

260 farmers get the
benefit(Rs 39.75 lacs)
Rs.1.26 lacs
Rs.12.25 lacs
Rs.67.59 lacs (plan in
process)
25% subsidy
Rs. 1200-4800
Rs.1000.
Rs.100

Incentive in lean Support for farmers who pour milk in Rs 3 /liter for farmer and
season
APCOS in lean season
Rs.1 for APCOS
5
Treatment of
Assistance for treatment of cow
subsidy paid by union
Animal
1
Hay Bane
Paddy straw bane subsidy
Rs.2.50/kg
2
Hay pellet
Paddy straw pellet subsidy
Rs. 3.00/kg
3
Medical Exp.
Medical exp payment for farmers
Rs.8.93 lacs paid
for farmers
4
Life insurance
Accident/death insurance scheme
Rs. 9.20 lacs paid
for farmers
5
Education
Scholarship for children of farmers Rs.1200/year/child
scholarship
under Janasree Bhimayojana scheme
6
Cattle insurance
Insurance for cattle
Rs. 4.00 lacs paid
7
Cattle shed
Subsidy for construction of cattle shed
Rs.2000/farmer
scheme
(Source: Monthly Bulletin of Dairy Development Department April2010) (Dairy Development,GoK, 2010)
MRCMPU

83

2.3.8 The Present Status of Dairy Sector in Kerala

The government agencies of the Department of Dairy Development (DD),

Department of Animal Husbandry (AH), Kerala Live Stock Development Board
(KLDB), The Major Co-operative agency MILMA, other co-operative dairy agencies,
and private sector dairy agencies including the charitable institutions are operational in
Kerala to enhance the production in the dairy sector and to promote dairying as a
livelihood option for the poor and marginal farmers of Kerala.
2.3.8.1 Livestock Development in Kerala
Livestock sector in Kerala is livelihood intensive and also a major contributor to
Gross State Domestic Product (GSDP), it could be as high as 40 percent of the
agricultural GSDP in Kerala. Contribution of livestock sector to the GSDP is not made
visible because it is always clubbed with Agriculture and allied sectors. Livestock
production has been traditionally practiced in the State mainly as an extensive, low input
subsistence system integrated with crop production. (GoK, 2010)
The details of livestock population as per the livestock census of Animal Husbandry
Department of the Government of Kerala are given below:
Table 2.15

Live Stock Population of Kerala

(In lakhs)

Species

Year
2003

2000
2007
Cattle
24.90
21.22
17.40
Buffaloes
1.11
0.65
0.58
Goats
15.98
12.13
17.29
Pigs
0.88
0.76
0.59
Poultry
149.13
122.15
130.94
Source: census of AH Dept. cited in Economic Survey, 2010 (Gok, 2010)

As per the livestock census there was substantial decrease in the population of cattle and
buffaloes in the state. But the population of goats, pigs and poultry has recorded an
84

increase in the 2007 livestock census. The cattle population in Kerala has registered 18%
decrease in the 2007 census compared to previous census of 2003.The trend in cattle
population in the state of Kerala as per the last seven census of AH department is given in
the following table:
Table 2.16

Trend in Cattle Population in Kerala

(In lakhs)

Total Cattle Population

Indigenous cattle

Crossbreed cattle
(Indigenous +Crossbred)

Year
Population

Population

Population

1977

16.51

54.92

13.55

45.08

30.06

100.00

1982

16.44

53.08

14.53

46.92

30.97

100.00

1987

17.22

50.29

17.02

49.71

34.24

100.00

1996

11.09

32.66

22.87

67.34

33.96

100.00

2000

5.33

21.41

19.57

78.59

24.90

100.00

2003

3.87

18.00

17.35

82

21.22

100.00

2007

1.19

7.00

16.21

93

17.40

100.00

Source: Census of AH Dept. cited in Economic Survey, 2010 (Gok, 2010)

Cattle population in Kerala which was 30.06 lakhs in 1977 has declined to 24.90 lakhs in
2000 and to 17.40 lakhs in 2007. The crossbreed cattle population which stood at 22.87
lakhs as per 1996 Census has decreased to 17.35 lakhs numbers by 2003. It further
declined to 16.21 lakhs and in percentage terms it has increased to 93% in 2007. This
increase in proportion of crossbred population was made possible by expanded health
care facilities and artificial insemination services available in the State. (GOK, 2010)

85

2.3.8.2 Production of Milk in Kerala

India continues to be the largest producer of milk in the world with a total production of
108.5 million tonnes in 2008-09 where Keralas contribution

was only 2.54 million

tonnes (2.38% of the total milk production in India). The major share in the production of
milk in the state is from crossbreed cows (88.56 %) and the indigenous cows contribute
about 5.56% of the total milk production. The goat milk has got a share of 4.18% and
buffalo milk has got only 1.69% in the total milk production in the State. The details
regarding the production of milk in the state from different types of milch animals for the
period 2002-2010 are given below.
Table 2.17

Annual Production of Milk in Kerala

(lakhs tones )
Cows

Year

indigenous

crossbred

Total of
Buffaloes Goat
cows'
milk
milk
milk
22.65
0.48 1.06
19.92
0.40 0.79
19.12
0.38 0.75
19.47
0.37 0.79
20.03
0.30 0.86
21.23
0.27 0.97
23.11
0.36 1.03
23.66
0.44 1.26

Total milk
production

2002-03
1.76
20.89
24.19
2003-04
1.36
18.56
21.11
2004-05
1.09
18.03
20.25
2005-06
1.08
18.39
20.63
2006-07
0.98
19.05
21.19
2007-08
0.98
20.25
22.47
2008-09
1.43
21.68
24.51
2009-10
1.32
22.34
25.37
Average for the
1.25
19.9
21.15
0.38 0.94
22.47
period*
% of production
5.56
88.56
94.13
1.69 4.18
100
from each
category*
*computed (Source: Economic Survey Department of Animal Husbandry cited in (GoK, 2010)

The total milk production in the state of Kerala in 2002-03 was 24.19 lakh tones which
has declined in the subsequent years but from 2006-07 onwards recorded an upward trend
and it has increased to 25.37 lakh tones in the year 2009-10.The demand for milk and

86

milk products are increasing, but the gap between requirement and production continues
to remain unfavourable and Kerala continues to depend on the neighbouring states to
meet the daily requirement of milk in the state. The year wise estimate of milk production
in India and Kerala are given below.
Table 2.18

Year wise Estimate of Milk Production

Sl.No.

Year

1
2
3
4
5
6
7

2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10

Milk production (lakh tones)

%
%
change
change
India
over
Kerala
over
previous
previous
years
years
881
1.6 21.11
- 12.8
925
4.9 20.25
- 4.1
971
5.0 20.63
1.9
1009
3.91 21.19
2.7
1048
3.86 22.47
6.04
1085
3.53 24.51
9.08
1125*
3.59 25.37
3.57

%
contribution
of Kerala
2.4
2.2
2.1
2.1
2.2
2.38
2.26

* Provisional
Source: Economic Survey Department of Animal Husbandry cited in (GoK, 2010)

India continues to be largest producer of milk in the world with a total production of 1085
lakhs tones in 2008-09. Even though the milk production in Kerala has recorded an
increasing trend from 2005-06 the percentage change in growth over the previous years
has reduced in the year 2009-10.The average annual growth rate of milk in Kerala and
India from the period from 1950-51 to 2009-10 is given in the following table.
Table 2.19 Average Annual growth rate of Milk Production in India & Kerala
Sl.No.
1
2
3
4
5
6
7
8

Year
1950-51 to 1960-61
1960-61 to 1970-71
1970-71 to 1980-81
1980-81 to 1990-91
1900-91 to 2000-01
1997-98 to 2001-02(IX plan Period)
2001-02 to 2006-07(X plan Period)
2006-07 to 2009-10

India
1.64
1.15
4.51
5.50
4.16
4.32
3.64
3.69

Kerala
2.50
2.52
12.52
6.41
4.24
3.78
- 4.86
6.18

Source: based on sample survey reports of Animal Husbandry Department cited in (GoK, 2010)

87

The dairy sector in the county had recorded a growth rate of 4.51% in 1970-71 to 198081 in the first phase of Operation Flood project and maintained above 4% growth rate till
2001 but it has slightly declined in the subsequent years but demonstrated an upward
trend in the period 2006-2010.
Though Kerala was not covered under the first phase of Operation Flood, the growth rate
in Kerala during the period had increased to 12.52% from 2.52% of the previous decade
which was basically due to the impact of the various dairy development activities
undertaken in Kerala such as Indo-Swiss project (ISPK) and Intensive Cattle
Development Project (ICDP) which were focused on breed improvement through cross
breeding and other input services for increasing milk production in the State. The growth
rate was 6.41 % in the Operation Flood phase in Kerala. The growth rate has declined in
the last stage of Operation Flood (1990-96) to 4.24% and it was further declined to 3.78%
in IX th Plan Period (1997-2002) and it became negative in X th plan period. But Kerala
could retain a positive growth rate of 6.18% in the period 2006-2010 as a result of the
organized efforts of the government to promote dairy development in the State.
Per Capita availability of milk is one strong indicator to understand the effect of dairy
development activities in relation to Human Development as well as International
standards in dairy development programmes.

India ranks first in the world milk

production but the per capital availability of milk in India is below the world average of
the per capita availability of milk. In the year 2008-09 the per capita availability of milk
in India was 258gms per day where the world average in the same period was 265grams
per day. The following table has provided details of per capita availability of milk in
India and four southern states from the period 2001-02 to 2008-09.
88

Table 2.20 The per capita availability of Milk in the Southern States in India
from 2001-02 to 2008-09 (in grms/day)
State

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

Kerala

234

203

173

169

171

172

181

197

Tamilnadu

219

198

198

204

231

232

231

234

Karnataka

249

229

190

194

197

200

204

215

209

231

238

250

260

269

299

317

225

230

231

233

241

246

252

258

Andhra
Pradesh
All India

Source: Annual Report of NDDB2009 cited in Economic Review (Gok, 2010)

The per capita availability of milk in India has gradually increased from 225gms per day
in 2001-02 to 258grams per day in 2008-09. All other southern states have got higher per
capita availability of milk than that of Kerala from 2003-04 onwards. Keralas per capita
availability of milk was higher than that of national average in 2001 but in the subsequent
years it has declined and far behind national average and in 2008-09, the per capita
availability milk in Kerala was only 197 grams per day.
2.3.8.3 The Support Systems for Dairy Development
A strong Feed and fodder base, good quality Animal Care and Breeding Support and
availability of Processed cattle feed are essential support systems required for cost
effective and profitable dairy farming. The rapid urbanization taking place in Kerala has
baldy affecting the fodder base for dairy farming. The escalating cost of raw material has
89

affected the cattle feed production and consequently the regular supply of quality cattle
feed at affordable price to the farmers which is an essential requirement for milk
production. The cost of cattle feed had increased and the dairying has became a non
variable livelihood option for the marginal farmers and consequently farmers began to
quit the sector in search of better livelihood options which in turn has reduced the milk
production in the state in the post Operation Flood scenario.
2.3.8.3.1 Feed and Fodder base for Dairy Farming in Kerala
Regular availability of green fodder is an essential requirement for reducing the cost of
production in dairy farming. The shift in cropping pattern in the state of Kerala with the
area under paddy cultivation has come down by more than 50 percent over the last two
decades resulted in drastic reduction in the availability of paddy straw for feeding cattle.
Realizing this situation, KLD Board and Dairy Development Department have given
adequate importance to fodder development and implemented programmes for increasing
the fodder base in the state. Special focus has been given to fodder and feed production in
Kerala to overcome the crisis during eleventh plan period. Popularization of high yielding
fodder varieties like CO3 and large scale intercropping in coconut holding are
implemented with the support of local governments.
Fodder varieties like Hybrid Napier and Guinea and CO3 were supplied free of cost to
the dairy farmers by the Dairy Development Department. The details regarding the
production and supply of fodder seeds by KLB Board are given in the following table.

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Table 2.21 Production and Sale of fodder seeds by KLD Board

Sl.No

Year

Qty of seeds
produced(MT)

Qty of seeds
supplied(MT)

2005-06

6.53

----

2006-07

14.80

15.52

2007-08

46.80

44.41

2008-09

52.40

45.43

Stem cutting/root slips produced and sold(Lakhs Nos)

1

2007-08

40.41

40.41

2008-09

48.66

48.66

Source: KLD Board Reports cited in (GoK 2010)

KLD Board produced 52.40 M.T of fodder seeds during 2008-09 against 46.80 M.T of
seeds in 2007-08 and the supply of fodder seeds by KLD Board has increased in the same
period from 44.41 M.T to 45.43 M.T. The production and supply of stem cutting/roots
slips have also registered increase in the year 2008-09 over the previous year.
The Dairy Development Department is the nodal agency for promotion of fodder
cultivation in the state. The total area covered under fodder cultivation had decreased
from the year 2005-06 but the department programmes have helped to reverse the
decreasing trend from 2007-08 onwards and in the year 2009-10 the total area brought
under fodder cultivation in Kerala as per the records of dairy development department
was 2883ha.
As part of the fodder promotion programme the department has helped the farmers to
cultivate maize, azola and fodder trees. About1.40lakhs fodder tree seedlings, 42fodder

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slip multiplication units and 5000 azola kits were supplied and maize cultivation was
extended up to 190 ha of land in the year 2009-10 (Dairy Development,GoK, 2010). The
following table gives the details regarding the supply of fodder seeds and root slips and
area covered under fodder cultivation.
Table 2.22 Supply of fodder seeds /root slips and Area covered under
fodder cultivation

Sl
No.

Year

Total qty
of seeds
supplied to
farmers

Area
covered

(in MT)

(in Ha)

(in lakh)

(in Ha)

(in Ha)

Fodder root slips

/stem cuttings
supplies (nos.)

Area
covered

Total area covered

under fodder
cultivation

2003-04

4.48

1798

282.5

1412.5

3210.5

2004-05

Nil

Nil

375

1840

2230

2005-06

Nil

Nil

240

1600

1600

2006-07

22.5

250

246

1640

1890

2007-08

NA

621

NA

1770

2391

2008-09

15.24

381

270.75

2235

2625

2009-10

9.32

233

318

2650

2883

(Source: Monthly Bulletin of Dairy Development Department April2010)

(Dairy Development,GoK, 2010)

2.3.8.3.2 Animal Care and Breeding Support

India is having a largest breeding infrastructure in the world with 159 bull semen stations,
152 frozen semen banks and more than 50000 Artificial Insemination centres. The poor
quality of semen produced in the semen stations in the county has badly affected the
conception and the conception rate in the country is in between 20% to 45% where as in
the developed countries the rate is above 50 percent. KLD Board is involved in the

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production and distribution of frozen semen in Kerala and in the year 2009-10 KLDB has
produced 24.08 lakhs doses of frozen semen with an increase of 18.02% over the
previous year.
The Artificial Insemination (AI) centres are functioning under the Animal
Husbandry department and AI centres are providing the services fee of cost to the
farmers. The details about the AI centres and the number of inseminations conducted are
given the following table
Table 2.23 No of Artificial Insemination Centres and Artificial Insemination
conducted from 2003-04 to 2009-10
Sl No

Year

No of AI
centres

No of AI
done

No of AI
done per
centre

Recorded
Calving

No of AI per
calving

2003-04

2538

1231407

485

353764

2004-05

2445

1176318

481

357718

2005-06

2445

1179801

483

355011

2006-07

2541

1204000

474

383000

2007-08

2550

1075000

443

358457

2008-09

2562

1216932

475

405644

2009-10

2577

1298550

504

326700

(Source: Animal Husbandry Department cited in Economic Review 2010 (GoK 2010)

The number of insemination done in the year 2009-10 was 12.99 lakhs and calving
recorded was 3.27 lakhs but in the previous year the number of insemination done was
12.17 lakhs with 4.05 lakhs of calving. The average no of insemination needed for
calving was around 3 over the last 6 years but in the year 2009-10; this has increased to
four indicating poor quality of semen supplied or other reasons contributing towards the
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low fertility among the cross breed cows in Kerala. Low level of fertility of cross bred
animal is a commonly reported situation in the State.
2.3.8.3.3 Cattle Feed production in the State
At present three cattle feed plants are functional in the state; two cattle feed plants under
KCMMF (MILMA) at Pattanakkad in Alleppey district and Malampuzha in Palakkad
district respectively and Kerala Feeds Ltd. at Kalletumkara, near Thrissur. KCMMF has
got a unit at Erode under custom packing arrangement. The production capacity of Kerala
Feeds was 650MT/day and that of KCMMF was 600MT/day. The production of three
plants was insufficient to meet the demand of cattle feed in the state and many private
suppliers purchase cattle feed from neighbouring state and supply in the state. The details
regarding the production of cattle feed are given below.
Table 2.24 Production of Cattle Feed in Kerala from 2004-05 to 2009-10
(in lakhs MT)
Factory

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

Pattanakkad(KCMMF)

0.58

0.60

0.66

0.58

0.53

0.56

Malampuzha(KCMMF)

0.34

0.18

0.52

0.56

0.47

0.57

Erode CPA(KCMMF)

0.18

0.30

--

--

--

--

Kerala Feeds Ltd.

1.26

1.39

1.41

1.81

1.89

2.14

Total

2.37

2.47

2.59

2.95

2.89

3.27

Source: Annual Reports of KCMMF and Kerala Feeds cited in Economic Review 2010 (GoK, 2010)

In the year 2009-10 KCMMF has produced 1.13 lakh MT of cattle feed and major
customer was APCOSs (62%) and the production of Kerala Feeds was 2.14 lakh MT. The
Kerala feeds' has a good network of 400 dealers and 450 co-operatives.
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The shortage in supply of raw material and unprecedented increase in price of the raw
material have affected the production and regular supply of cattle feed by KCMMF. The
increasing price of cattle feed has been affecting badly the dairy sector in the state for the
past many years.
2.4 Related Studies
The various aspects of dairying in India are studied extensively by scholars in the context
of the implementation of Operation Flood Project. The literature available has covered
the history and growth of dairy industry in India, evaluation of dairy co-operatives and
impact of Operation Flood project, size of farms, quality of animal breed, and supply of
feed, economics of milk production in different geographic zones and income generation
and women empowerment through dairying.
The researcher has given below a review of studies of the period 2000 to 2010 which
deals with the various aspects of Village Milk Co-operatives. The major studies are
scripted under the following heads: 1.Major constraints and challenges of dairy farmers
2.Challenges faced by Dairy Co-operatives

3. Co-operative Identity and member

participation in Dairy Co-operatives 4.Leadership in Co-operatives 5.Linkages and

Extension Services in Dairy Sector 6.Community Assets of Dairy Co-operatives
7.Performance of Dairy Co-operatives in Kerala.
2.4.1 Major Constraints and Challenges of Dairy Farmers
Dairying has been accepted world over as an instrument of silent socio-economic
revolution among the resource poor rural people in developing countries, following the
success model of Indian dairy co-operatives. Even though the dairying offers economic,
95

food and social security to the dairy farmers, the emerging challenges are how to increase
the income and employment potential of the resource poor families of dairy farmers. The
challenges before the dairy sector are the genetic up- gradation of cattle to enhance
productivity, improvement in quantitative and qualitative availability of feed and fodder,
control of epidemics, adequate budgetary support, judicious control of cattle population,
extending the existing Artificial Insemination (A.I) net work, strong extension linkages
and input delivery system through extension support and effective procurement network.
The Price of milk has not registered commensurate with the increase in cost of
production, thereby decreasing the net margin of profit to the producers. Hence revising
of milk price at regular intervals is a necessary requirement to protect the resource poor
dairy producers in the country. (Bhanj S.K & Tripathi, 2004)
(Chaudhary, 2004) had studied the constraints of milk prouder members of the selected
Dairy Co-operative Societies (DCS) in Jaipur and Dausa districts of Rajasthan. The
irregular and inadequate supply of cattle feed, low conception rate in buffaloes, irregular
society meeting, delay in payment of milk and discrepant and discrete testing of FAT and
unsuitable timing for delivering milk in winter season were the major constraints
experienced by dairy farmers.
With the introduction of new economic policy under the guidelines of the World
Bank and other donor agencies the conventional/middleman/vendor system and Anand
Pattern Dairy Co-operatives in Tamil Nadu started facing competition from the organized
private dairies at the level of procurement of milk among dairy farmers. The milk
producers in the co-operative and integrated contract system (organized dairy sector) had
larger herd size, better dairy income, higher educational level, better credit behaviour,

96

larger land holding and better extension agency contact and mass media exposure and
economic motivation. The farmers under vendor system were found to be socioeconomically and professionally weak and they need special care from the development
agencies. Efforts are to be made to motivate these farmers to enroll in organized dairy
sector. (Thirunavukkarasu & Sudeepkumar, 2006)
An analysis of the development of dairy sector in India had suggested that the geographic
factors and local specificities had significant roles in the performance of diary sector and
the policy planners have to provide adequate weightage for local situations in making
polices and programmes for equitable economic growth of rural India where diary sector
could play a positive role. Although India's co-operative dairying programme is lauded as
a model of successful rural development, lack of uniformity in replication of the
programme across rural India has raised questions about the meanings of success.
Differences between dairy co-operatives become especially apparent when crossbred
cows are considered, so that the promotion of crossbreds by dairy development agencies
has not always resulted in their actual adoption by farmers. This article seeks to explain
the mixed reception accorded to crossbred cows by focusing on the link between
development and place. By discussing both official discourses and local perspectives, the
article enables two kinds of understanding of dairy development. First, the rise and fall of
support for crossbred cows within India's national plans suggest that contrasts between
official policies and local practices of dairying need to be attentive to the dynamics of
both discourses and places. Second, the comparison between two villages, one utilizing
crossbred cows and the other water buffaloes as principal dairy animals shows that
evaluations of success or failure cannot be made simply on the basis of adoption or

97

rejection of crossbred cows but requires engagement with place-specific agricultural

economies and social relations. Given the liberalization of India's dairy sector, official
discourses and material experiences of co-operative dairying become significant for
ascertaining future possibilities for small-scale farming and equitable economic growth in
rural India. (Basu, 2009)
Sarker &Ghosh have studied the various constraints faced by milk producers of both Cooperative and Non-co-operative household based on dairy farms in West Bengal. The
constraints identified were classified under (i) infrastructural (ii) economic (iii) marketing
(iv) technical & (v) socio-psychological. Poor veterinary services, low milk yield of milk
animals, unavailability of cattle feed and fodder seed on credit and unavailability of
emergency veterinary services were the major infrastructural

constraints faced by

farmers of both co-operative and non cooperative dairy farms. The economic constraints
identified by both groups were high cost of cross breed cows, increasing cost of cattle
feed and mineral mixture, low price of milk offered and high cost of veterinary
medicines. The major marketing constraints were lack of credit/advance payment from
societies/vendors, not able to market value added products of milk, and irregular sale of
milk. The technical constraints expressed by the farmers were lack of technical guidance
in dairy farming, poor knowledge about feeding and health care and poor conception rate
through artificial insemination and lack of knowledge about cheap and scientific housing
of animals. The socio-psychological constraints of the dairy farmers were lack of time for
animal care due to preoccupation with domestic/agricultural work, lack of cooperation
and coordination among farmer members and lower socio-economic conditions with low
purchasing power. The study has revealed that severity of constraints of dairying were

98

more intense for non cooperative dairy farms compared to co-operative dairy farms and
has suggested that for expanding milk production, the co-operative dairy farms other than
Non-cooperative farms have better strengths in facing the constraints of dairy farming.
(Sarkar & Ghosh, 2010)
A Study on the cost of milk production in eight villages of Dhule District of
Maharashtra (India) to know the cost of production of milk in the study area has revealed
that the 83.76% was variable cost and the remaining 16.24% was fixed cost. In variable
cost, the cost of feed stuff was 73.39% and the remaining 26.61% was for labour,
veterinary services and interest on working capital. The cost of feed stuff was the main
component in the production of milk and findings were in conformation to other
estimates of cost of milk production. The implications of the cost study for dairy farmers
was that they have to make efforts to minimize the feed cost by cultivation of green
fodder and scientific dairy management to minimize the variable cost to increase the
profit (Patil, 2010)
2.4.2 Challenges faced by Dairy Co-operatives
Analyzing the contribution of Operation Flood towards Rural Development in India,
Verghese Kurien, the architect of Operation Flood made the following observations:
The successful Amul model was replicated in the county under the Operation
Flood Programme. The combination of the conventional wisdom of farmers and
expertise of professional managers and technocrats was instrumental for the
success of Operation Flood programme. The selfless and visionary leadership
ensured the strong foundation for long term growth along with the technological
breakthrough such as manufacture of milk power from buffalo milk. Milk is the

99

only agricultural commodity in India where increase in production has not

resulted in reduction of price to the farmers. On the contrary, the return to the
framers has only increased year after year. Dairy co-operative have provided the
framers a steady source of income enhancing their earning and enabling them to
improve their standard of living. Favourable income generation prospects in rural
areas are helping to some extent in slowing down the migration from rural to
urban areas. Through the dairy co-operative we have put the tools of development
in the hand of the people enabling them to decide what they want to create, what
they need. These co-operatives have also served as effective tool for management
of unemployment. Dairy co-operatives have been the biggest employment
generator for women in modern India. Throughout the country women from 11
million families tend to their buffaloes and cows at home while their husbands till
in the fields. Income from dairy is the womens contribution to the total family
income. (Kurien, 2004)
Regarding the challenges faced by Dairy Co-operatives in the country, Kurian has
strongly advocated that autonomy alone could strengthen the co-operative movement:
The government has to play a supportive role of facilitating

the dariy co-

operatives with no interferance in the affairs of co-operatives and make sure that
co-operatives are not politicized in any way.While extending support to the cooperatives, government should not take over any of the functions of cooprartives
and there by preventing co-operatives becoming government entities.The affairs
of co-operatives should only be managed by professionasl who are not only
appointed by farmers

but are also accountable to the farmers

for their

100

performance. While ensuring a level playing field for the co-operatives, the
government should ensure that the control

over the managemnt of the co-

operative remains in the hands of the genuine staeholders- the farmers. Only then
dairy co-operative can continue to play their vital role of creating a socioeconomic revolution in rurla Inda. (Kurien, 2004)
By the organized efforts of dairy co-operative movement, India could emerge as the
worlds largest prouder of milk (the world wide milk production in 2007 was estimated at
676 million tonnes out of which Indias production was estimated at 102million tones).
The co-operatives milk business comes from small and marginal farmers (having land
<2 hectares) together with the landless, account for more than 75 per cent of those
13million rural milk producers who raise 60 percent of the cattle. The dairy co-operative
system represents more than 13 million dairy farmers affiliated to about 1.22 million
primary co-operative societies, which sell their products to one of the 198 milk
producers unions/dairies, which in turn, are supported by State Co-operative Milk
Marketing Federations. Average milk procurement by dairy co-operatives during 2007-08
was about 22.5 million kg per day with an increase of 4 percent over the previous year.
To retain the process of growth, the dairy co-operative leadership should give space to
the professionals to run the co-operative business in the profitable manner. This has been
the key to success in the case of Gujarat where the leadership has allowed the milk unions
and federation to be managed by the professionals and the results are there for everyone
to see. Under the present co-operative laws, Registrar can play a very important role and
therefore the interference by the political party in power in the affairs of the business of
co-operatives affects the very basic fabrics of co-operative organizations. The

101

government has initiated many reforms for co-operative development from 1991 aiming
to strengthen co-operatives as autonomous member based and member controlled
enterprises. However, the slow progress in their implementation has been the basic
limitation in converting such reform initiatives into concrete gains. The national cooperative policy 2002, facilitating an all round development of co-operatives in the
country, upholding the values and principles of cooperation and ensures that cooperatives work as autonomous, self-reliant, democratic and professionally managed
institutions accountable to their members. The recommendations of High Powered
Committee(HPC) on reforms in co-operative act based on the national co-operative
policy was also

favoured that

co-operatives could be expected to function as

autonomous and competitive entities helping for the cause of Bhart Nirman (Ghanekar,
2008)
The success of Amul was basically due to its dedicated leadership with high moral
tradition and professional management with positive support from state and central
government with minimal of bureaucratic control and political interference. Though
Anand model was replicated by establishing dairy sector co-operatives in the country,
these dairy co-operatives have to face many challenges in the form of dormant
membership, lack of participation of members in the management of co-operatives with
very low awareness regarding co-operative institution, poor leadership at grass root level
dairy co-operatives, bureaucratic control and political interference and over politicization.
Even though, co-operatives have registered success in many sectors in India, the
changing economic environment demands more operational freedom and professionalism
for co-operatives to compete with the corporate sector. (Vyas, 2008)

102

(Kaur, 2008) had studied the extent of womens contribution in dairy farming in Punjab.
Though women play a predominant role in dairy farming, the under estimation of their
contribution in dairy and other productive activities, is a major stumbling block in the
way of strive towards more equal distribution of resources. To increase womens access
and control commensurate to their participation in dairy work, affirmative action is
required in many areas such as to increase women membership in dairy co-operatives,
more number of women dairy co-operatives, increased representation of women in
administrative and field staff of dairy development directorate, credit schemes and
incentives for women in dairy. Following the model of Panchayat Raj act, one third of
the elected members of the board of DCS and Milk producers Unions could be reserved
for women. The study also suggested that improvement in dairy animals and provisions
of small plots of land for the landless can go a long way in solving the problems of
employment and poverty.
2.4.3 Co-operative Identity and Member Participation in Dairy Co-operatives
Muenkenr has identified the advantages of co-operatives in the globalised economy.
The local roots (knowledge about local situation and work in proximity of local
resources/members/customers), trust in the democratic leadership, networking and
horizontal and vertical integration (small local units have access to the knowhow and
resources of a regional, national, even international organization), own interest combined
with concerted action with others, pooling of resources for common objectives and
concentration on members socioeconomic needs over profit generation. (Muenkner,
2004)

103

The co-operatives allow combining the modern trends of a globalised economy

and society in an optimal way by combining self interest and individualism with
cooperation, group discipline and social responsibility. In the globalized economy where
States withdraws from economic and social activities

where private initiatives are

encouraged, the co-operative form of organizations could be strengthened to make

society more equitable and just. The co-operative advantage emerging out of the cooperative values and principles of co-operative organizations could be modelled to form
people organizations for the welfare of the society. The existing co-operative
organizations have to assess whether their major stakeholders (cooperators, co-operative
managers, and leaders) are clearly aware of the practical importance of co-operative
values and principles for the success of their endeavours. The chances of co-operatives
to succeed would be greatly enhanced if all persons engaged in their operations(members,
leaders, managers and staff of primary co-operatives and federations)would identify
themselves seriously and publicly with the ideas of co-operative self-help and its
concept(Beuthien,Volker:

commentary

to

Germany

co-operative

Societies

Act,Munich,2000,pxxxvii cited in Muenkner,2004)

Bandyopadhyay after analyzing the hundred years of co-operative movement in India has
commented that the members accountability, education, training and active involvement
of members in all activities of the organization are important components for the success
of co-operative movement. The member participation in the affairs of the society has to
be enlarged to improve the commitment of members to the co-operative society. A
feeling of my society may be developed among the members through training,

104

awareness generation and active participation for the higher level of performance of the
co-operative society. (Bandyopadhyay, 2004)
Saket has made the observation that in an era of decentralization, participation becomes
an important component of governance in all institutions which are based on democratic
values and principles. An analysis of major co-operatives have shown that co-operative
institutions have not grown to their full potential basically due to poor democratic
governance with very limited participation of members in the management of cooperatives. Since the strength of co-operatives lies in their strong member base, cooperatives need active member participation which can provide a great momentum to
their activities. Members active and creative participation in decision making would
channelize their energies in the creative direction for the growth of the institution. Cooperatives must undertake measures to evoke strong member participation in Cooperatives by way of regular education and awareness programmes for their members.
(Saket, 2004)
Subburaj, Lopoyetum and Karunakaran have analyzed the socio-economic and cooperative management factors influencing the performance of dairy co-operative farmers
and their involvement in managing the affairs of the dairy co-operative societies in
Dindgual (Tamil Nadu). The members participation in co-operative management imply
participation in the decision making process, implementation of decisions regarding
business affairs and in evaluation and control on the working conditions of their cooperative organization. The study revealed that members have only low level of
participation in dairy co-operatives and they had not shown keen interest in the affairs of
their co-operatives. The low level of participation of members in the activities of the

105

dairy co-operative society has got negative impact in the growth of dairy co-operatives in
the study area and co-operative organizations must motivate and encourage its members
to be fully active in the management of dairy business activates. (Subburaj, Lopoyetum,
& Karunakaran, 2004)
Participation of rural poor in dairy co-operatives was studied by analyzing the case
studies of two co-operatives; Piparia Womens Milk Co-operative Dairy in Kheda district
and Malan Milk Producers Co-operative Dairy in Banaskantha district of Gujart. These
respondents were asked on the socio-economic conditions of their household, extent and
nature of their participation in dairy co-operatives, and in cases of households that did not
participate in these institutions, the reasons for not participating. The paper argues that
inequality in ownership of land and caste relations are the greatest obstacles to the
participation of poor households in the two dairy co-operatives studied. Land and caste
relations are central to the local political and power relations in rural Gujarat. There are
various ways in which access to land and positions in the caste hierarchy determine the
possibilities of participation in the co-operatives. In addition, an important feature of rural
society that prevents the poor from actively participating in the co-operatives is
widespread illiteracy among the scheduled castes and tribes and women. The lack of
awareness and skewed power relations has contained any demand from below for
democratizing the functioning of the co-operatives.
The two case studies described in the paper indicate that public interventions directed
towards breaking caste barriers, removing disparities in ownership of land and providing
mass education would go a long way in empowerment of the rural poor in Gujarat and in
enabling them to participate actively in these income generating institutions. There is also

106

an immediate need for taking steps for introducing more democratic functioning in the
co-operatives. (Rawal, 2003)
2.4.4 Leadership in Co-operatives
Lopoyetum, Mutai& Selvamani have argued that a Paradigm shift in co-operative
leadership is required in the era of economic liberalization and globalization. Effective
and efficient leadership is the prime engine for the development of all organizations. An
effective co-operative leadership has to instill more confidence in members by directing
them to get good results which can be reflected in the total business of co-operative
organization. The co-operative leaders must have knowledge about general co-operative
movement and its systems, community development, social and economic development
programmes/schemes and the changing trends in global economic scenario. Dynamic
attitude of the leader is an asset of an organization and co-operative organization should
build up dynamic and sound leadership thorough training and education (which is one of
the principles of co-operative movement). The leaders must have the clear vision to
empower their organizations to compete with the private organizations in the open market
economic system. (Loopoyetum, Mutai, & Selvamani, 2004)
Co-operative being both

a movement and an economic system the co-operative

leadership should have professional competency to lead the organization to its goals of
social development and economic growth. The crucial problem of member alienation
from their co-operatives could be tackled by strategies to change the role perception of
members in co-operatives. The leadership has to take up the challenge to change the
existing legislations to liberate Co-operatives from the bureaucratic control of
government to function as peoples organization owned and controlled by the members
of the co-operatives themselves. (Sagolsem, 2007)
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A co-operative association formed on the basis of equality for the promotion of common
economic interests need leadership to bind the members together to achieve their objects
(socio-economic) by concerted action and initiatives. The co-operatives derive their
strength from the synergy of the people and their adherence to co-operative principles
and values. The peculiar nature of the co-operative organization (combination of values,
philosophy, peoples movement and business aims) demands a style of leadership made
up of fair mix of courage, vision, robust common sense, and sincerity of purpose,
commitment to co-operative values, democratic practice and professional management
skills to lead the organization to its socio-economic objectives. The co-operative
leadership in India is infested with many weaknesses of traditional factors of cast, family
status, lack of education and awareness of co-operative advantages, interlocking of cooperative leadership with political leadership with politicization of co-operatives
leadership (Daniel Thorner, Agricultural co-operative in India a Field study report
1966.p11 cited in Shah, 2008,) and suppression of emerging leadership by the existing
leadership. (Shah, 2008)
The co-operative societies in credit, sugar, fertilizer and dairy sectors in the country have
recorded success stories in spite of the inherent weaknesses found in Indian co-operative
system basically due to the strong visionary leadership from within combined with
professional management. The changed economic context of competitive environment
demands the co-operative leaders at various levels (local, regional, state) to demonstrate
strong leadership roles to motivate the members and employees to work for the objectives
of the organization. A co-operative leader is one who has faith in co-operative values,
principles and movement, faith in capacity of the people to change, faith in the

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associative process and democratic governance and faith in science and technology.
(Shah, 2008)
The process of globalization has provided both opportunities and challenges for all
business organizations with an advantage for private sector in terms of their professional
management, strong capital base and latest technology but the process has led to creation
of financial crisis at the global level followed by an economic crisis .In the prevailing
slowdown environment, efforts are required to be made to develop competent and
dynamic leadership. Leadership education and training process are to be strengthened
for co-operative leaders and managers to develop a competitive edge for co-operatives to
face the market forces to achieve the socio-economic goals of their organizations.
(Sharma, 2010)
2.4.5 Linkages and Extension Services in Dairy Sector
Five milk producers co-operative unions, from the state of Andhra Pradesh in India, tried
adoption of Farmer Participatory Need-based Extension (FPNE) approach with the
objectives of improving the productivity and quality of milk production by improving
effectiveness and efficiency of services, farmer awareness and functioning of villagelevel dairy co-operative societies (DCS). The National Dairy Development Board,
Anand, facilitated trials for adoption of FPNE by the co-operative milk unions.
The process of adoption of FPNE approach starting with orientation and sensitization of
the co-operative milk union staff for participatory situation analysis, identification and
characterization of priority needs/constraints and actions taken by the co-operative milk
unions to overcome some of them. The main outcome of the process is - sensitization of
major stakeholders like management team, extension officers and producer members of

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the co-operative milk unions towards the need to continuously interact for sustained
improvement in productivity and quality of milk. Another outcome is the realization to
establish linkages with other organizations, from related fields, to overcome the
constraints. The trials also showed that participatory and systems approach can help in indepth understanding of rural dairy business systems, perception of producers, particularly
that of women producers, identification and characterization of constraints and in
choosing appropriate approaches or technologies to overcome the constraints, with due
involvement of producers. The exercise has drawn attention towards need to improve
services, inputs, fodder resource, some animal health problems, types of dairy animals
preferred and information needs of the producers. There is a need to adopt holistic and
systems approach for sustainable development- instead of considering dairy in isolation
there is need to link development of natural resources may be through other
organizations. Hence, the concerned organization should be prepared to establish linkages
with other development and research organizations to overcome constraints or solve
problems by taking benefit of their strengths and expertise. (Roy & Rangnekar, 2007)

(Landge & Tripathi, 2006) had studied the training needs of Kisan Mitras (Village level
extension functionaries) in agriculture and allied areas in Bareilly district of Uttar
Pradesh. In live stock sector the Kisan Mitras gave preference to feeding, processing of
milk and milk products, breeding of cattle and buffaloes, health care of animals and
financial management and feed conservation techniques. The training in the aforesaid
aspects of dairy farming could help the Kisan Mitras for providing enhanced extension
education and training in Animal Husbandry to farmers in the villages.

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In a study conducted among dairy farmers (N=225) in 15 villages in Nagpur District

(Maharashtra) to analyze training needs ,dairy farmers had expressed their willingness
to have training in various aspects of dairying namely: animal health care and disease
control, breeding and management of animal, feeding and management of animal and
clean milk production. Majority of farmers (62.67%) expressed their training need about
animal health care and disease prevention as their most important need, might be because
of lack of technical knowledge about health and clinical aspects, heavy economic losses
because of diseases and unavailability of timely veterinary services in remote and rural
areas in emergency situations. These findings were supported by earlier studies (Meena,
1994). cited in (Patil, Gawande, Gobade, & Nande, 2009)

A study was conducted among the co-operative dairy farmers of Kannur district in
Kerala, India regarding the adoption of health care practices. The level of adoption on 22
dairy health management practices by the framers was ascertained after exposure to the
interactive video-DVD. On exposure to the health care management practices through
DVD, all the respondents were convinced about the use of scientific management
practices and cent percent were willing to adopt the practices symbolically. The study
revealed that knowledge dissemination could be effectively done through video-DVD at
rural household, an educational interactive video-DVD on dairy health management
practices was thought as appropriate tool to disseminate knowledge input. The study also
stated that though the milk co-operatives were organized institutions, it was found that
they have not focused much attention on knowledge and skill enhancement of their
member-farmers. The study throws light on the scope of improving the Indian dairy
sector in terms of enhancing knowledge and skill on animal health care to enhance
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productivity so as to minimize economic loss (Vidya, Manivannan, & Sudeepkumar,

2009)
Cyber extension, the use of Information and Communication Technology (ICT) to
improve rural livelihoods is one of the key areas which have potential to change the
economy of livestock, agriculture, and rural artisans in India. Livestock and rural
outreach services can derive the advantage of ICT to provide effective delivery of
information related to animal health care and production to the end users. The
information access which is increasing at the rate of 50 per cent per annum and improved
communication are certain to have significant effects, most of them positive on the
livestock outreach services along with other rural services. Provision of simplified
version of information through cyber extension backed by easy to follow text and audiovisual illustrations in local languages highlighting the animal husbandry technology
would prove to be cost effective and powerful tool in building up of the capacities of the
farmers. India will benefit much more from this cyber extension as the clientele have
been in almost outer orbit of information and communication system. ICT will bridge this
gap very effectively in very little time.
The focus of this paper is on relevance of cyber livestock outreach in India to reach the
un-reached with a holistic approach. It also aimed to focus attention on social
consequences of slow adoption of the ICT in the livestock outreach services and in
finding the ways of overcoming the constraints. The proposed model includes a mutually
complementing and sustaining each other Cyber Livestock Extension (CLExtn) and
Information Shop with an estimated investment of Rs 3600 million. (Sasidhar & Sharma,
2006)

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2.4.6 Community Assets of Dairy Co-operatives

(Jayachandra & Naidu, 2006) have studied the impact of dairy co-operatives on income,
employment and creation of assets of marginal and small farmers in Rangampet milk
producer co-operative society (Chittor dt, Andhra Pradesh). The study had identified
significant increase in income, among marginal and small farmers after joining the dairy
farming through the co-operative society. Farmers have been able to get new (full-time
and part time) employment opportunities through dairying. The values of their assets
have also increased after engaging in dairy activity. The findings of the study has
indicated that dairying offers a vast scope for increasing the income, employment
opportunities, and assets value of marginal and small farmers whose marginal and
average productivity is low and dairying could be identified as an appropriate and
beneficial occupation to increase the purchasing power of rural farmers.
Mulkanoor Co-operative Rural Bank and Marketing Society (MCRB) in
Karimnagar Dt, (Andhra Pradesh), with 50 plus years of co-operative services has been a
successful model of Multi-purpose co-operative society meeting all the needs of the
farming community under one umbrella. It has organized women in to thrift groups and
later encouraged them to start micro-enterprises to create additional income for families.
The members of the thrift group has later formed a separate body called Mulkanoor
Women co-operative milk union(MCMU) to run a dairy unit with 25,000 litres of chilling
capacity per day The organization has got 14000 women members covering 102 villages.
The study of MCMU showed that women organized in the thrift groups have instilled
confident in them to take up bigger ventures. They were able to tap the necessary
financial resources and other institutional support for running a successful dairy unit

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under co-operative form of business. In the context of rapid privatization, the cooperative efforts could create success in spite of all competitions and challenges from the
market. The organization of poor people on co-operative form of business has got
immense scope as an alternate economic model in rural areas in the context of
privatization (Reddy, Rao, & Reddy, 2006)
Women dairy co-operatives were off shoots of White Revolution to encourage women
to form women dairy co-operatives to productively engage in dairying as an income
generating livelihood activity. Women Dairy Co-operatives were found to be favourable
platforms to empower women thorough the co-operative process of Dairy Management.
An analysis of the strengths of Vasundhara Dairy (Valsad District Co-operative Milk
Producers union, Gujarat) has revealed that women dairy co-operatives have indirectly
elevated the social status of women to a great extent and have facilitated in bringing
about social change in the dairy villages in Valsad District. Women dairy co-operatives
have created opportunities for women to participate in the democratic process under cooperative movement and enhanced their skills in co-operative governance of business
process thorough dairy related business enterprises (Mulani, 2006)
The new economic environment of free market in the context of globalization
demands all business organizations

to compete in the open market for survival and

growth. Dairy co-operatives have to organize their business more effectively and
efficiently to sustain and grow in the context of multiple competitors in the field. The
growth rates of milk production and the per capita availability of milk are very
impressive and registering positive trends in India which is an opportunity for dairy cooperatives to enlarge their market share. The favorable opportunity requires financial and

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technical support for dairy co-operatives to modernize their operations to sustain in the
new economic environment. (Lopoyetum & Selvamani, 2006)
Dairy co-operatives have been acclaimed as effective instruments for economic uplift of
the rural poor as they provide opportunities for gainful employment, ensured a steady
source of income and improve the stand of living of farmers. The dairy co-operatives
have made a positive impact in slowing down the migration of people from rural to urban
areas. However, the co-operative sector at present handles only 16% of the countrys
marketable surplus of milk leaving a vast scope for bringing more dairy farmers into the
co-operative fold and ensure them a better livelihood and the consumer, quality milk and
milk products at reasonable price. (Meena & Jain, 2007)
Dairy co-operative movement in Karnataka has generated enormous employment
comprising of

direct, indirect and part-time employment. People employed at

Federation, unions and at village level co-operatives and in the transportation process are
around 29000 thousands. The indirect employment was also generated through various
activities related to dairying in veterinary services, milk transportation and milk sales
through agents. Co-operative dairy activity has generated substantial and regular income
for the dairy farmers. Co-operative dairying has helped the farmers to acquire skills in
scientific method in agriculture, to think of health and hygiene of animals and families,
to overcome caste-creed limits, participation in democratic process in the village milk
societys governance In the context of privatization with corporate entering in agri-based
enterprises, the peoples organizations like diary co-operative are to be strengthened by
governments to sustain the socio-economic development created by dairy co-operative
societies in the villages. (Miranda, 2007)

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Gilson John had studied the impact of private sector dairy units on the beneficiaries and
the society at large. The study was conducted among the village dairy units promoted by
four private sector dairy agencies working in the Ernakulum district of Kerala State The
study has identified the increase in the income level among the dairy farmers,
improvement in their health status, promotion of saving habits, facilitation of repayment
of loans, providing employment opportunities, and advancement in the socio-cultural life
of the farmers, etc., as the positive impacts of dairying

under the private sector dairy

agencies. The dairying has helped the farmers to possess certain financial assets and
consumer durables and helped them to alleviate rural poverty to a great extent over the
period. The study has recommended that as far as possible, dairying should be combined
with other farming activities for enhancing income of the family because of the
complementary nature of livestock rearing and agriculture. The rural producer
organizations (the village level dairy units) are to be freed from the political overtones,
affiliations and conflicts to protect the larger interest of the members. The study has
identified the crucial issue affecting the farmers namely the problems of pricing of milk
and milk products in the state. The future of dairying in Kerala is highly depending on
evolving a scientific pricing system with farmers getting adequate return from dairy
farming in the context of escalating cost of inputs in dairy farming. Scientific pricing of
milk on a regular basis by a state level commission with statutory powers is to be
constituted ,consisting of

the representatives of dairy farmers, co-operatives and

private sector dairy agencies and state government to protect the interests of dairy
farmers as well as the general public is recommended in this study to resolve the issues
of pricing of milk and milk products in the state. (John, 2007)

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A Study was undertaken with specific objectives of evaluating the working of dairy cooperatives, to assess cost-return structure and their impact on milk production, income
and employment in Kolar district of Karnataka. The physical performance of the societies
in the study area revealed that the overall physical indicators had an increasing trend
except the number of employees working in the societies. The profits also showed
increasing trend. On an average, an animal in the study area realized a milk yield of ten
litres/day and about 247 to 283 days of employment days were created yearly for the
dairy farmers as an effect of dairying. (Srikanth, 2008)
(Ramanujam & Periaswamy, 2008) after analyzing the impact of Operation Flood
programmes and the subsequent development of dairy sector have concluded that the
dairy co-operatives have played significant role in the rural economy of India. Along with
the growth in dairy and allied activities they have inculcated in the farmers a democratic
approach to the problems of their lives and also increased their awareness about their
rights in the society. The multiple linkages of the co-operatives in agriculture
employment, income, health, nutrition have contributed towards the socio-economic
development of villages of India. The level players of the co-operative dairy system
consist of individual farmers, their groups (co-operative society and their unions) and the
government. Proper networking among them and the participation of all the stakeholders
of the co-operatives are essential for the development of rural poor. The dairy cooperatives could be considered as suitable for rural development of developing countries.
Analyzing the grass-root experience from field about the role of dairy co-operatives in
socio-economic development of women in rural areas of Tamil Nadu:

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Women in rural areas feel those dairy co-operatives are like their second home.
Rural women look upon dairies as providing them with primary occupation, in
contrast to men for whom dairies are next to farming. Most of the women who are
engaged in dairy activities are above 40 years of age. Dairy offers them an indoor
income generation activity. The income from dairy is the real monetary
contribution of rural women to their families, which often helps them to meet the
expenditure incurred for their children education and medical treatment. The
increased income from dairying has also concretized womens self-confidence
and economic independence.the women groups want the government to
make efforts to create awareness about dairy co-operatives among members and
non-members and the dairy co-operative have to make efforts to further enhance
and enrich the lives and livelihood of rural members, especially among women,
through their business and social activities. (Selvamani & Rani, 2009)
2.4.7 Performance of Dairy Co-operatives in Kerala
A study on Operation Flood in Kerala A critical evaluation by J James has made an
evaluation of Operation Flood programme at macro and micro levels namely at State,
Regional and Village levels, evaluating the performance at MILMA Federation, Regional
unions and APCOS respectively. The study revealed that the federation at the state level
was financially strong enough to take up more dairy activities, however it has to improve
its performance at all levels to attain self sufficiency, if it has to sustain in the long run.
The Federation has to implement cost control measures to improve its profitability. It has
to increase its market share in both liquid milk market and other milk products in the
market. The federation, together with the three regional unions, is capable and strong

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enough to take up more dairy activities in both the procurement and marketing of milk
and in the provision of technical inputs to the dairy sector. Efficient utilization of assets,
reduction of production and office cost, capturing of more market share are the three
important phases where the federation and the union have to concentrate to make these
institutions efficient and viable in the long run. (James, 2001)
The village co-operative societies according to the study are financially strong but have
not been fully utilizing their capacity. These societies are the best infrastructure facilities
available in the state to take up any dairy development projects in the future. Even though
these societies manage the milk collection and marketing well, the management of dairy
inputs is not to satisfaction of farmers. The societies are efficient enough to procure more
milk if the Unions and Federation are capable of marketing the milk thus procured. Any
assistance to the farmers in the form of subsidy must be distributed through the cooperative so that already strong bond between the farmers and the dairy society can be
further strengthened in future. Dairy farming activity is profitable if the farmers can
minimize the cost of dairy farming by adopting scientific diary management. (James,
2001)
(Sulaiman & Pillai, 2006) have done an assessment of the quality of services of Dairy
Co-operatives in Thriruvananthapuram district, Kerala and found that even though Dairy
Co-operative Societies (DCS) are rendering continuous services to member farmers, the
working of DCS were not up to the expectations of members. Members were not satisfied
with various efforts of the DCS in improving the efficiency in the marketing of milk
produced by the farmers. The low procurement price of milk, partial collection of milk in
flush season, indifferent attitude of the staff, lack of transparency in the quality

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inspection, delay in getting the sales proceeds were the causes for members
dissatisfaction with the DCS. The study have suggested that there must be a system for
re-fixing the procurement price of milk on a regular basis based on the increase in cost
of production of milk. Farmer friendly environment at DCS, collaboration with other
agencies for capital assistance for dairy farming, supply of feed and fodder by society at
subsided rates, veterinary and other technical support for farmers, extension education in
maintaining quality production etc., were other recommendations of the study to improve
the quality of services of DCS.
Even though, the milk collection and marketing network has spread in all villages in
Kerala the farmers were facing many problems in dairy farming. The major problems
identified were the escalating cost of milk production arising out of the increasing price
of cattle feed and non availability of gracing land and green fodder due to the rapid
urbanization in Kerala and low procurement price of milk in the state because of the
governmental control of milk price. The younger generation has not opted dairying as a
livelihood because of the low socio economic status attached to dairying and low
profitability of dairy farming. The dairy co-operative system (MILMA) was not able to
gain the full confidence and support of dairy farmers since framers had the regular
complaint that the unions and federation (MILMA) were not really oriented towards the
interest of the producers. Dairy farming in Kerala has got prospects if the homestead
farming changed

in to commercial farming of medium and large size dairy farms

(Veerakumaran, 2009).

A study by Raghu Kumar.S examined the role of dairying in the livelihood of rural
people in Kerala. Livelihood strategy of dairy farmers depends upon the livelihood assets
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they possess and the institutions and policies which are linked to dairy farming. Dairying
in Kerala is mainly a household activity and one of the livelihood strategies of large
number of rural households which provides them an additional income which they can
use to improve their wellbeing. Dairying has helped the rural households in asset creation
in the form of savings in banks, possession of gold ornaments and household equipments
etc. Besides, dairying has also helped them to tide over their vulnerable situations of
diseases, death, agricultural loss and unemployment. The dairy co-operative society, the
village level formal institution has helped the farmers to avail financial services as well as
other input and marketing services required for dairy farming. In spite of the increasing
demand for milk, the farmers were not able to enhance milk production by enlarging the
farms due to the existing financial and operational constraints of dairy farming peculiar to
Kerala situation, like increasing cost of production and low level of profitability from
dairy farming hence the dairying is getting limited to a household based subsidiary
livelihood option. The study recommends further in-depth analysis regarding the existing
institutional linkages in the dairy sector to identify the possibilities of enhancing dairying
as livelihood option in rural areas in Kerala in the context of increasing demand for milk
and milk products. (Kumar, 2009)

R.Hali committee constituted by Gov. of Kerala with nine specific terms of references
namely to attain self-sufficiency in the production of milk, egg and meat, as envisaged in
the 11th Five Year Plan, the re-constitution of the functions of Kerala Co-operative Milk
Marketing Federation Ltd. (Milma) by ensuring more income to dairy farmers,
establishment of manufacturing unit of dairy products at prime centers, with the technical
assistance of Dairy Dept., enhancing the procurement of milk ensuring better price to the
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farmers, Automation & networking of Dairy Co-operatives, the production of clean milk,
ensure the availability and procurement of raw materials required for the manufacturing
of cattle feeds and formulate comprehensive proposal for extending fodder cultivation
with the assistance of State Government/Government of India., efficient financial
management at cattle farms and its modernization, and commencing a financial
organization and agencies connected with livestock and poultry development in Kerala,
has submitted the report with 58 recommendations

with the proposed total direct

assistance in cash and kind of Rs. 963 crores during a period of 3 years from 2009-2011
for providing services to the farmers of the sector and a sum of Rs. 277crores is included
for institutional

support for the same period. A major recommendation was that

MILMA should emerge as a front line development movement of dairy farmers with the
co-operation and participation of all stakeholders. The strengthening and modernization
of Primary Dairy Co-operatives of the State was also highlighted in the
recommendations. Primary Dairy co-operatives are the real link between thirty million
milk consumers at one end and one million strong dairy farmers at the other end. In rural
areas they hold a place of prominence in the development process going on in the crop
production activities also apart from being the frontline leaders guiding production,
collection, primary processing and transport of milk daily twice to dairy plants. More
than the above activities they also organize sale of milk including door delivery locally.
Kerala is blessed with over 3000 such primary societies, which are grouped in three
Regional Co-operative Milk Unions. The Department of Dairy Development has been
identified as the Registrar of Co-operatives as for these milk co-operatives of the State
are concerned. The primary societies are really governed by dairy farmers numbering out

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14 lakhs and all the wealth created by Milma at all the three levels during the last three
decades would be termed as contributions of these primary societies. The primary
societies form a unique development movement in a rural life and its impact covering the
entire state is very visible and direct. The organization needs modernization in all fronts
to equip it for attaining sustainable self-sufficiency in the area of milk production and
allied sectors. The annual turnover of Milma has crossed Rs.1000 crores and there are
primary societies with a turnover exceeding Rs.20 crores annually. Strengthening of
primary dairy co-operative is a vital need of the time and it is a must for enhancing
quality milk and meat production and improves the living standard of over 14 lakhs
families directly involved in the production and marketing process (Hali, 2009)
The Kerala Co-operative Milk Marketing Federation (KCMMF) has undertaken a study
on Cost of production of milk in Kerala. The primary data on cost of milk production
has been collected from 1536 households in nine districts of the state through household
survey in two stages covering the rainy (flush) and summer (lean) periods of milk
production in the state. The costs factored in the study are feeding, labour, breeding and
health care, cost of dry animal maintenance, interest on investment (cost of cows) and the
depreciation of cows. The average cost of production of milk in the state is Rs.26.75 and
the corresponding net cost of production is Rs.26.27.The actual cost of production is far
in excess of the procurement price(Rs.18.63)fixed for cow milk (Fat 3.5% and SNF
8.5%)in the State. As per the study nearly 48% of the overall cost is on feeding and 32%
on labour and 12% on maintenance of cows during the non lactating period and the
remaining 8% for breeding and health cover interest on investment on cows and loss in

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value of cows during lactation. The high cost of production has rendered dairying an
uneconomic and non remunerative and several farmers made an exit out of dairying.
The study had recommended to keep the milk price sufficiently high so as to protect milk
production in the state. The study also suggests the farmers and their organization namely
the MILMA should have all the rights to decide the price of what they produce and
survive in the market economy. An index bases pricing policy based on four aspects
namely the feeding cost, the wage rate and bank rate of interest and the consumer price
index (CPI) shall be developed for scientific pricing of milk in the state. (KCMMF, 2010)

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