Indians love wheat and milk. These are essential components of an Indian household’s diet, and price stability in both is politically and socially crucial. While export orientation as a broader strategy is desirable, I am not convinced that the dairy sector in India necessarily needs it at this stage.
Some degree of protectionism is justified here. As you rightly point out, the industry is highly scattered, with no single dominant producer. Optimisation is certainly needed, but it is worth asking. Why fix something that is not visibly broken?
The supply shortages you mention may not be of the magnitude often assumed. A large number of independent milk producers still operate outside the cooperative ecosystem and continue to meet local demand. Their presence provides an additional buffer that is often missed in macro-level analysis.
"Fixing" the sector through export orientation is more about importing global standards and increasing the income of our farmers. By pursuing high-margin value-added exports (like mozzarella or A2 ghee), India can help increase our farmers' incomes and generate the capital necessary to modernize its cold chain and improve genetics, which ultimately makes milk more affordable and safer for the Indian households you mentioned.
Secondly, just because we as consumers can't see anything wrong with the sector because we are getting the produce cheaply doesn't mean there isn't any issue. We are able to get cheaper milk and products because government has consistently stabilized the prices. But what about the farmers whose own costs are increasing and their daily income is dependent on the stagnant revenue from milk? There's also the productivity issue. India’s average milk yield is just 987 kg per lactation, less than half the global average of 2,038 kg. Farmers are keeping more animals to produce less milk, increasing both cost and environmental burden.
India’s low milk yield is because indigenous cattle breeds generally have lower yields, but they are also more resilient to local climates, disease, and low-input farming conditions.
The “global standards” you refer to are based on intensive selective breeding and capital-heavy dairy systems(Australia and New Zealand are prime examples). They treat cattle primarily as production assets rather than livelihood assets.
I agree that moving into higher-margin products like ghee and mozzarella makes sense at a higher level. But these pursuits are misaligned with the reality of the average Indian dairy farmer, who typically owns between one and five animals. Such farm sizes are insufficient for consistent production of export-grade value-added products without significant capital investment(Australian farms have up to 300 cattle on average). Also, cooperatives like Amul are slowly entering these segments too.
On farmer incomes, I would still argue that the impact of price controls is more nuanced than it appears. Many small farmers are not solely dependent on cooperatives. They continue to supply local markets directly, where prices fluctuate more freely.
For most Indian farmers, cattle are kept first for household consumption and risk diversification, and only second for market sale, as you too have mentioned in the essay. Expecting them to transition rapidly into export-oriented, capital-intensive dairy producers risks undermining the very social insurance function that dairy currently provides.
I appreciate the fact that you tried to put out a new angle. Your essay genuinely forced me to think more critically. Thank you Abheed for a thoughtful and engaging piece.
Really insightful. I guess this also explains why a lot of foreign players haven't been able to infiltrate India's dairy industry. Not sure, but this does sound like India has 'Robin Hood Mafia' legally functioning since many decades.
Good, but a hard analysis should also include a comparison of per litre price of milk at factory gate. India is costly on that front (due to all these inefficiencies you pointed) and can’t compete. Even for milk products the only time they could export well was just before 2019 elections when the government raised the MEIS incentive rate for certain milk products to 20 percent! A gallon of milk from Costco’s in USA is cheaper than a gallon of Indian tetra pack. Even today.
Any thoughts on animal safety and welfare policies to allow for such large scale productivity? In alot of developed export focused countries with enhanced milk and milk products the price of productivity and innovation is paid by the cattle. Over production, mechanical milking, hormones and additives given to cattle etc.
I agree that large-scale productivity can come at a welfare cost if it is pursued carelessly. But low productivity does not mean high animal welfare.
In India, a lot of cattle suffer from chronic under-feeding, poor housing, limited veterinary care, heat stress, and endemic disease. Low yields often reflect neglect rather than ethical treatment. This is one reason Indian milk is frequently barred from export markets: residues of antibiotics, pesticides, and contaminants are found at levels that don’t meet global standards. These residues are a result of weak regulation, indiscriminate drug use, poor feed quality, and lack of monitoring at the farm level.
In contrast, many export-focused countries actually ban hormones and rely on genetics, nutrition, and health management to raise yields. India’s challenge is that its dairy system absorbs everything and everyone, making exclusion politically and socially difficult. Any move toward exports would require differentiated systems where animal health, welfare, and residue compliance are enforced together, even if that means some producers are left out.
I would urge you to check out how India became one of the biggest exporters of grapes and its probably the safest fruit you can eat because most of them is geared towards exports to EU and US who are quite strict with use of pesticides, etc.
In my opinion, we should keep the Dairy cooperative movement as it is, because it generates rural income and livelihood.
In addition Government should encourage /incentivize the private sector towards dairy farming at an industrial scale like in the western countries and incentivize it for exports only.
That way our exports can increase , at the same time employment opportunities increase, keeping the cooperative dairy sector intact.
The dairy industry can lead to ancillary industries like meat, tannery et al. as part of its ecosystem.
It all depends on the vision we envisage and how effectively it’s implemented, there will be challenges definitely in its implementation .
Key points is the government must stays on the course for its successful implementation and not chicken out due to political considerations et al, then grand success is assured!
Just look at China, how the government is ensuring its private players and industries succeed, eg EV, AI, et al!
Agreed. But I want to push the cooperatives towards export orientation as well. Maybe we can start with some specific regions and push them towards it and see whether value is being created. This is something I mentioned in my blog as well.
Good one as usual bhai
Thanks man!
Indians love wheat and milk. These are essential components of an Indian household’s diet, and price stability in both is politically and socially crucial. While export orientation as a broader strategy is desirable, I am not convinced that the dairy sector in India necessarily needs it at this stage.
Some degree of protectionism is justified here. As you rightly point out, the industry is highly scattered, with no single dominant producer. Optimisation is certainly needed, but it is worth asking. Why fix something that is not visibly broken?
The supply shortages you mention may not be of the magnitude often assumed. A large number of independent milk producers still operate outside the cooperative ecosystem and continue to meet local demand. Their presence provides an additional buffer that is often missed in macro-level analysis.
"Fixing" the sector through export orientation is more about importing global standards and increasing the income of our farmers. By pursuing high-margin value-added exports (like mozzarella or A2 ghee), India can help increase our farmers' incomes and generate the capital necessary to modernize its cold chain and improve genetics, which ultimately makes milk more affordable and safer for the Indian households you mentioned.
Secondly, just because we as consumers can't see anything wrong with the sector because we are getting the produce cheaply doesn't mean there isn't any issue. We are able to get cheaper milk and products because government has consistently stabilized the prices. But what about the farmers whose own costs are increasing and their daily income is dependent on the stagnant revenue from milk? There's also the productivity issue. India’s average milk yield is just 987 kg per lactation, less than half the global average of 2,038 kg. Farmers are keeping more animals to produce less milk, increasing both cost and environmental burden.
India’s low milk yield is because indigenous cattle breeds generally have lower yields, but they are also more resilient to local climates, disease, and low-input farming conditions.
The “global standards” you refer to are based on intensive selective breeding and capital-heavy dairy systems(Australia and New Zealand are prime examples). They treat cattle primarily as production assets rather than livelihood assets.
I agree that moving into higher-margin products like ghee and mozzarella makes sense at a higher level. But these pursuits are misaligned with the reality of the average Indian dairy farmer, who typically owns between one and five animals. Such farm sizes are insufficient for consistent production of export-grade value-added products without significant capital investment(Australian farms have up to 300 cattle on average). Also, cooperatives like Amul are slowly entering these segments too.
On farmer incomes, I would still argue that the impact of price controls is more nuanced than it appears. Many small farmers are not solely dependent on cooperatives. They continue to supply local markets directly, where prices fluctuate more freely.
For most Indian farmers, cattle are kept first for household consumption and risk diversification, and only second for market sale, as you too have mentioned in the essay. Expecting them to transition rapidly into export-oriented, capital-intensive dairy producers risks undermining the very social insurance function that dairy currently provides.
I appreciate the fact that you tried to put out a new angle. Your essay genuinely forced me to think more critically. Thank you Abheed for a thoughtful and engaging piece.
Read something interesting after a long time.
Really insightful. I guess this also explains why a lot of foreign players haven't been able to infiltrate India's dairy industry. Not sure, but this does sound like India has 'Robin Hood Mafia' legally functioning since many decades.
Good, but a hard analysis should also include a comparison of per litre price of milk at factory gate. India is costly on that front (due to all these inefficiencies you pointed) and can’t compete. Even for milk products the only time they could export well was just before 2019 elections when the government raised the MEIS incentive rate for certain milk products to 20 percent! A gallon of milk from Costco’s in USA is cheaper than a gallon of Indian tetra pack. Even today.
Any thoughts on animal safety and welfare policies to allow for such large scale productivity? In alot of developed export focused countries with enhanced milk and milk products the price of productivity and innovation is paid by the cattle. Over production, mechanical milking, hormones and additives given to cattle etc.
I agree that large-scale productivity can come at a welfare cost if it is pursued carelessly. But low productivity does not mean high animal welfare.
In India, a lot of cattle suffer from chronic under-feeding, poor housing, limited veterinary care, heat stress, and endemic disease. Low yields often reflect neglect rather than ethical treatment. This is one reason Indian milk is frequently barred from export markets: residues of antibiotics, pesticides, and contaminants are found at levels that don’t meet global standards. These residues are a result of weak regulation, indiscriminate drug use, poor feed quality, and lack of monitoring at the farm level.
In contrast, many export-focused countries actually ban hormones and rely on genetics, nutrition, and health management to raise yields. India’s challenge is that its dairy system absorbs everything and everyone, making exclusion politically and socially difficult. Any move toward exports would require differentiated systems where animal health, welfare, and residue compliance are enforced together, even if that means some producers are left out.
I would urge you to check out how India became one of the biggest exporters of grapes and its probably the safest fruit you can eat because most of them is geared towards exports to EU and US who are quite strict with use of pesticides, etc.
In my opinion, we should keep the Dairy cooperative movement as it is, because it generates rural income and livelihood.
In addition Government should encourage /incentivize the private sector towards dairy farming at an industrial scale like in the western countries and incentivize it for exports only.
That way our exports can increase , at the same time employment opportunities increase, keeping the cooperative dairy sector intact.
The dairy industry can lead to ancillary industries like meat, tannery et al. as part of its ecosystem.
It all depends on the vision we envisage and how effectively it’s implemented, there will be challenges definitely in its implementation .
Key points is the government must stays on the course for its successful implementation and not chicken out due to political considerations et al, then grand success is assured!
Just look at China, how the government is ensuring its private players and industries succeed, eg EV, AI, et al!
Agreed. But I want to push the cooperatives towards export orientation as well. Maybe we can start with some specific regions and push them towards it and see whether value is being created. This is something I mentioned in my blog as well.