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Fore School of Management

A Business Proposal on Empowering Dairy Farmers

Submitted to:
Prof. Sriparna Basu

Submitted by:
Akshay Garg (251072)
Manish Kumar (251096)
Table of Contents
Page No.

Executive summary .. 2

Introduction .. 3

Problem .. 3

Background ... 4

Purpose ...... 5

Benefits .. 6
To the farmers
To the company

Feasibility .. 7

Budget and time frame ... 10

Conclusion ... 11

References . 12

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EXECUTIVE SUMMARY
A proof of concept application using Information Technology (IT) in the dairy sector was
developed by the Centre for Electronics Governance at the Indian Institute of Management,
Ahmedabad.

This proposal is to establish automated and technology driven milk trading system and evolve
the dairy sector of Bihar to effectively compete with the large organised dairies in the
developed countries. It includes delivery of education via internet kiosks, which will be set-
up in rural areas, use of information systems and involvement of Non-Government
Organizations to successfully execute the initiative.
The proposal also aims at helping the dairy farmers in the state of Bihar with timely messages
and educating them on the care for their milch cattle and enhance the production of quality
milk. It also aims at assisting the dairy unions in effectively scheduling and organizing the
veterinary, artificial insemination, cattle feed and other related services. The process uses
Personal Computers at the milk collection Centres of the Dairy Cooperative Societies (DCS)
having connectivity to an Internet Service Provider (ISP).

The application includes two components

Dairy Portal (DP)

Dairy Information Services Kiosk(DISK)

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INTRODUCTION
India is the world's largest producer of milk, and is the leading exporter of skimmed milk
powder, yet has little to no other milk product exports. Dairy farms produced about 730
million tonnes of milk in 2011, from 260 million dairy cows. The ever increasing rise in
domestic demand for dairy products and a large demand-supply gap could lead to India being
a net importer of dairy products in the future.

Indian dairy sector contributes the large share in agricultural gross domestic products.
Presently there are around 70,000 village dairy cooperatives across the country. The co-
operative societies are federated into 170 district milk producers unions, which is turn has
22-state cooperative dairy federation. Milk production gives employment to more than 72mn
dairy farmers. In terms of total production, India is the leading producer of milk in the world
followed by USA. The milk production in 1999-00 is estimated at 78mn MT as compared to
74.5mn MT in the previous year. This production is expected to increase to 81mn MT by
2000-01. Of this total produce of 78mn cows' milk constitute 36mn MT while rest is from
other cattle.

Keeping in view the large CSR budget possessed by the company, it is proposed that a similar
kind of co-operative movement in the milk industry be implemented in various districts in the
fast developing state of Bihar, taking inspiration from the immensely successful movement in
Gujarat.

On these lines, the application developed by JK Infotech Ltd. aims at helping the dairy
farmers with timely messages and educating them on the care for their milch cattle and
enhance the production of quality milk. It also aims at assisting the dairy unions ineffectively
scheduling and organizing the veterinary, artificial insemination, cattle feed and other related
services. The application uses Personal Computers at the milk collection Centres of the Dairy
Cooperative Societies (DCS) having connectivity to an Internet Service Provider (ISP). The
application includes two components - a Dairy Portal (DP) and a Dairy Information Services
Kiosk(DISK). This proposal presents JK Infotech Ltd. efforts to design and implement the
DISK and Dairy Portal. The details of the implementation of the plan and the financial are
henceforth discussed.

PROBLEM
Over the last decades, market liberalization, globalization, rapid urbanization, rising incomes
and changing diets, etc. have been all changing agriculture at an unprecedented speed and in
diverse ways. They are creating new markets, stimulating demand for high-value products,

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and making it possible for farmers to produce food and other products for the market. These
developments offer opportunities for farmers, but they also produce challenges and risks.

India may be the world's largest raw milk producer but the dairy sector is marked by
poor on-farm efficiency and low productivity. The country's dominant co-operatives
have struggled to improve the model employed by their farmer members. India's dairy
sector is dominated by large co-operatives, which struggle to boost efficiency amidst Indias
entrenched informal village-based supply system and Bihar is no exception. The
Confederation of Indian Industry (CII) said that India's dairy system suffers from low input,
low output and low productivity per animal.

Bihar too have potential to be at the forefront of milk production but its inefficient business
process from milk collection to processing it seems a farfetched idea.

BACKGROUND
The co-operative movement began at Amul Dairy in Gujarat and is now replicated in 70,000
villages in about 200 districts of India. The village milk co-operative is a society of primary
producers formed under the guidance of a supervisor or milk supply officer of the Co-
operative Dairy Union (district level co-operative owning the processing plant). A milk
producer becomes a member by buying a share from the co-operative society and agreeing to
sell milk only to the society. Co-op members elect a managing committee and a chairperson
responsible for the recruitment of staff to manage the day-to-day operations of the society.
Each society has a milk collection centre where farmers take their milk in the mornings and
evenings. The number of farmers organised into village milk producers' co-operative societies
is now over one million, and the daily procurement of milk by the co-operatives is 13 million
litres per day.

Following the repeal of quantitative restrictions on food imports by the Government of India
under a WTO agreement, the Indian dairy sector faces a strong challenge from the large
organised dairies in the developed world. To meet this challenge, the co-operative dairy
sector has to further improve the production, collection, processing and marketing of milk
and milk products.

PURPOSE
The purpose of this proposal is to improve the production, processing and marketing of the
milk and milk products. It will help in increasing the profits of the farmers.

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The rural area has sufficient production of milk but due to poor communication and lack of
knowledge among the farmers the production process is not that effective and efficient as it
should be.

The two components can greatly influence the daily sector of Bihar making it more profitable
both for the farmers as well as the consumers.

Dairy Information Services Kiosk (DISK)


With the initiatives of National Dairy Development Board (NDDB), out of 70,000 dairy
cooperative societies in the country, around 2500 are using the PC connected electronic
milko-tester machines and exposing 5,00,000 people daily to the benefits of IT. These
systems introduced very satisfactory milk collection methods and facilitated immediate
payments to farmers based on the quality and quantity of milk delivered.

The success of these systems coupled with inexpensive connectivity opportunity offered by
Internet, motivated IIMA to enhance the PC at the Automatic Milk Collection Systems into a
Dairy Information Services Kiosk (DISK) and offer an extensive knowledge and service
delivery mechanism through a Dairy Portal.

Current developments in IT enable creation of cost effective solutions that strengthen the
exchange of useful information between farmers and the union, in addition to opening a
window to the world of opportunities. Personal Computers have become extremely powerful
in terms of their capacity to handle complex data, software and connectivity with the external
world. Through regional language and graphic user interfaces, these systems have become
user friendly and can even use by less educated users.

The Personal Computers have been in the Automatic Milk Collection Systems at the milk
collection Centres to process the data collected by the electronic milko-testers. They have
worked flawlessly at several rural societies for more than five years. Local agencies have
gained experience and expertise to handle such systems in rural societies.

The DISK project was conceived with two components:

1) an application running at the society level that could be provided Internet connectivity

2) a Dairy Portal at the district level serving transactional and information needs of all
members and staff in the district co-operative structure.

The software used at the society level was developed to provide:

Data analysis and decision support to help a rural milk collection society in improving its
performance i.e. increasing milk collection.

Data analysis to improve productivity and yield of milch cattle.

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Farmers with facilities to place orders for goods and services offered by different agencies
in the co-operative sector and seek information on subjects of interest.

Dairy Portal
The Dairy Portal is designed to provide an interactive dairy information and education
channel to the members of the DCS (farmers) and others in the dairy sector. The services to
be offered at these centres would include:

1) Delivery of information related to dairying, including best practices in breeding and


rearing milch cattle, scheduling of government and other private sector agency services, and
collecting feedback on the quality of service provided to the catchment area;

2) Access to a multimedia database on innovations captured by SRISHTI (an NGO working


with IIMA) from hundreds of villages, covering agricultural practices, medicinal plants,
home remedies, tools and implements, etc., and a multimedia format that has captured the
description of the innovations provided by innovators and a visual presentation of the
innovations;

3) use as a communication centre offering services like email, fax and Internet telephony (if
Internet telephony is permitted);

4) Internet Banking Services and Automated Teller Machines (ATMs), which will enable the
milk societies to credit payments directly to sellers' bank accounts. (The sellers already have
plastic card identifiers. The card identifier may have to be upgraded to smart cards carrying
biometric identification. The cards can be used to withdraw cash from ATMs);

5) a way for farmers to download Government Forms, receive documents (from a


Government site) and order supplies and agricultural inputs from manufacturers; and

6) a means of communicating with farmers via the automatic printing process of daily
payment slips.

BENEFITS
The DISK application has been tested for two societies on the IIMA EGovernance centre
platform. A portal with illustrative content in Gujarati and English has been developed and is
accessible as a beta site. Currently the application is being pilot tested in two co-operative
village societies of Amul dairy in Kheda district. Nearly 600 such systems are in operation in
the Kheda district in Gujarat. There are 70,000 village societies in India, of which 2,500 have
been computerised.

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To the Farmers:

The benefits to milk farmers include payments that are now based on a reliable and
transparent measurement of fat content and weight. Under the previous system the fat content
was calculated a few hours after the milk was received because the measurement process was
cumbersome. Malfeasance and under-payment to farmers were commonly alleged, but
difficult to substantiate. In addition, milk for testing was stored in plastic bottles, which led to
unhygienic conditions. Farmers may now receive immediate payment for their milk, rather
than waiting ten days as under the previous system. Moreover, queues at the milk collection
centres are short, saving farmers considerable time. Among the benefits to the co-operative
societies is a reduction in the number of employees. The computer system also is able to keep
accurate and up-to-date records, reducing the likelihood of fraud or corrupt practices (e.g.
temporary use of the funds by individuals).

With Internet connections these frequently visited co-operative centres could be used as a
communication point offering services like email and fax. Farmers also could download
government forms, receive documents (from a government site) and order supplies and
agricultural inputs from manufacturers.

To the company

1 Improving name recognition Individuals will start to attach our brand or name
with the cause. If they also support that cause, theyll be more likely to buy your
product, even if it costs a bit more.
2 Boosting brand reputation among consumers Social media is huge right now, and
as consumers talk about the brands they prefer, those that value socially responsible
businesses with socially responsible services will discuss your brand and recommend
it to others.
3 Increasing sales and positive consumer sentiment A satisfied customer is one
who is likely to return again to your storefront for purchases.
4 Assisting in efforts to recruit and retain talented employees for your company
5 Employees will be better motivated and staff productivity will increase.
6 Improving the quality of life in communities where you do business The
stronger you can help your community become, the more revenue your business will
see.

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FEASIBILITY

Porters Five forces model

Potential
Entrants

(Low) Industry (Moderate)

Supplier Power Rivalry Buyer Power

(Low)

Threat of
Substitutes

Porters Five Forces Model. Porters five forces industry analysis can be used to get a general
over view of the threats to the profitability of the dairy business. Through the model does not
help in analyzing firm specific demand; it gives some information of its business
environment.

Buyer Power

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Buyer power is determined by various factors such as switching costs, the relative
volume of purchases, the standardization of the product, elasticity of demand, brand
identity, quality of the products.

On one end are the large instrumental buyers i.e. big hotels and restaurants which ask
for discounts, extended credit periods and the other end are small retail outlets like
general stores which have no power to negotiate with the firms.

The power of buyers is relatively high when buyers are large, consisting of individual
customers, grocery stores, convenience stores, and restaurants nationwide. Since
retailers purchase ice cream products in large quantities, this gives buyers substantial
leverage over price.

Customers are able to substitute one brand to any point in time. There are many
brands to choose from, so the buyers cost of switching to competing brand is already
low.

Supplier Power

The suppliers to dairy industry include dairy farmers, paper container manufactures,
and suppliers of various products. The principal inputs are commodities available in
competitive markets.

Factors affecting the bargaining power of suppliers include the threat of forward
integration and the concentration of suppliers. There exist numerous potential
suppliers of ingredients. The ingredients provided by each supplier are not unique or
greatly differentiated. Furthermore, ice cream manufactures are able to switch
between suppliers quickly and cheaply.

Also, many suppliers viability is tied to the well-being of large, established


companies. Therefore, the bargaining power of suppliers of ingredients is rather low.

However, being a milk co-operative, it has to empower the milk producers and
farmers so that they get a remunerative return. Therefore, a certain power is vested in
the hands of the farmer societies.

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Threat of Substitutes

There is no perfect substitute to Milk because of its very nature. However, many other
products are available like Milk powder etc. Since substitute products are readily available
and attractively priced, the competitive pressures posed by substitute products can be
considered low.

Potential Entrants

The barriers to entry in the industry are moderate due to the brand preference and
customer loyalty towards the larger and more established companies.

Other obstacles to new entrants include the requirement for large sources of capital,
specialized mixing facilities and manufacturing plants.

In addition, the accessibility of distribution channels can be difficult for an unknown


firm with little or no brand recognition.

Industry Rivalry

Implementing a project approved by NDDB is a part of CSR plan. The project sustainability
is the prime thing for the company. As it is a step by the company, for the society, there is no
competition involved.

BUDGET AND TIME FRAME

Part of this investment for the project can come from the users, provided they are shown the
value of the information and services that rural kiosks can deliver. Building useful content in
local languages is necessary. In the dairy sector the district unions are willing to spend
because they stand to gain as the system described above increases the efficiency and
effectiveness of the services delivered by them to rural farmers. In other arenas, organisations
like Grameen Bank (which already has invested) and other NGOs can find it advantageous to
invest in rural kiosks.

The budget for the CSR Framework needs to be decided on the basis of the costs associated
with implementing IT, providing mobile and telecom services, hiring NGOs and partnering
with external organizations. The total cost estimate of the projects which is required for set-
up is INR. 80,00,000. There will be cost of running it on monthly basis which is INR
1,00,000. This will take around 6 months. Help from local people would be taken.

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Details of which are as follows:

Set-Up Cost
PROJECT Units Rate (INR / unit) Amount (INR)
Field Work 4,000 hrs. 50 2,00,000
Kiosks construction 15 40,000 6,00,000
Computer Systems 16 25,000 4,00,000
Software 20 5,000 1,00,000
Contract with Telecomm 1 5,00,000 5,00,000
Hi-Tech machinery 20 3,00,000 60,00,000
RFID Technology 20 10,000 2,00,000

Subtotal 80,00,000

Ongoing Cost on Monthly Basis

Volunteers Salary 12 5,000 60,000


Inspectors Salary 2 20,000 40,000

Total Monthly Cost 1,00,000

CONCLUSION
1. The council for e-governance of IIMA has invested significant resources in
conceptualizing, developing and implementing DISK and Dairy Portal. The Amul
Dairy has offered support to pilot test these proofof-concept products and the results
are very encouraging. There is still an unlimited potential to be tapped from the
opportunity provided by the ICT application

2. If the Internet could be accessed from rural areas, the pilots demonstrate that useful
content and services from the government and other institutions can be delivered to
poor rural populations through information kiosks. Several state governments are
indeed planning to establish such kiosks in rural areas. In building these applications
in rural areas the role of small private sector is extremely important.

3. In extending the network of rural kiosks it is important to build upon the work done
by other agencies than to start afresh. The fact that 2500 rural locations were already
using IT offered a great opportunity to extend the application and its utility.

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4. The project can also fulfil all the purposes of the company as the company will be
able to utilize the CSR fund, this will improve the image of the company and on other
hand the milk sector of the state can be converted in profitable sector within the state
of Bihar. Though there are certain hurdles that we might face such as the farmers need
to be educated properly about the technology and make aware of the benefits the
project will bring. But the benefits will outweigh the costs of undertaking this project.

REFERENCES
National diary development board
http://www.nddb.coop/
The official site of Bihar state Milk Co-operative Federation
Ltd.:http://www.sudha.coop/.
Empowering Dairy Farmers: A portal and dairy information and services kiosk case
study International conference on achieving connectivity for the rural poor in India
(2001, May 31 June 3)
Bihars Milk production on rise - http://www.indiancooperative.com/dairy/bihars-
milk-production-on-rise
District wise Milk production in Bihar -
http://www.sudha.coop/DataFiles/CMS/file/Districtwise%20Milk%20Production
%20-%20Bihar.pdf

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