A note on the achievements of the dairy cooperatives

A note on the achievements of the dairy cooperatives, challenges being faced by them and policy / legislative changes required to ensure democratic, autonomous and professional functioning of the dairy cooperatives

Achievements of the dairy cooperatives during the last 100 years

During the pre-independence era, public and private agencies dominated the dairy industry, although government policy did not favour any one organizational form. Early efforts to organize dairying along cooperative lines were made immediately after the enactment of the Cooperative Societies Act, 1912. The present day Anand Pattern dairy cooperatives trace its origin to the establishment of a dairy cooperative at Anand in 1946 under the direction and guidance of Sardar Vallabhbhai Patel. The dairy farmers of the then Kheda District of Gujarat organized themselves to form a dairy cooperative in order to directly undertake sale and processing of milk collected from member dairy farmers of the district.

The government of India took some steps to improve the quality of milch animals and their productivity through the Key Village Scheme, launched as part of the First Five-Year Plan (1951-56) and the Intensive Cattle Development Plan, launched under the Third Five-Year plan (1961-66). However, in the absence of a stable and remunerative market for milk, production remained more or less stagnant. During the two decades between 1951 and 1970, milk production grew by barely 1 per cent annually, while per capita milk availability declined by an equivalent amount.

During the 1960s, various state governments tried different strategies to develop dairying, including establishing dairies run by their own departments, setting up cattle colonies in urban areas, and organizing milk schemes. Almost invariably, dairy processing plants were built in cities rather than in the milk sheds where milk was produced. This urban orientation to milk production led to the establishment of cattle colonies in Mumbai, Calcutta, and Madras. The objective was to meet the demand for milk and milk products in big cities through improvements in milk collection, processing, and distribution.

The Operation Flood (OF) programme implemented by the National Dairy Development Board (NDDB) from 1970 to 1996 played the key role in bringing about the transformation in dairy development in the country. The OF programme established milk producers cooperatives in villages and made modern technology available to them. The broad objectives were to increase milk production ("a flood of milk"), augment rural incomes, and transfer to milk producers the profits of milk marketing that were hitherto enjoyed by well-to-do middlemen.

The importance of Operation Flood lies in its focus on small rural producers. Lucrative alternate employment opportunities are often not available in Indian villages, making dairying an attractive option for many villagers. Low capital intensity, a short operating cycle, and steady returns make dairying a preferred activity among marginal (less than one hectare of

land holding) and small farmers (those having 1-2 hectares of land holding), who make up about 57 per cent of rural households in India. Dairying is feasible even for the landless, who depend for fodder on common grazing and forest lands. Nearly 70 million Indian households hold a total of 98 million cows and buffaloes. A majority of milk producers have one or two milch animals, and these small producers account for some 70 per cent of the milk production. On average, 22.5 percent of the income of rural households is contributed by milk.

The Operation Flood programme is based on what are known as Anand Pattern dairy cooperatives, referring to their origin in Anand District in the state of Gujarat. Starting in 1970, NDDB replicated the Anand Pattern cooperatives through the OF programme all over India. Under the Anand Pattern structure, individual farmers are joined in village-level dairy cooperative societies (DCS), which are joined to form district-level unions, which in turn are joined in state-level marketing federations. In each state, the Anand Pattern features:

  • decentralized milk production by the small milk producers;
  • milk procurement by the village-level dairy cooperative societies;
  • centralized milk processing by the district-level unions; and
  • marketing of milk and milk products by the state-level federation.

The primary milk producers democratically govern this entire federal cooperative structure to ensure that the higher-tier organizations serve the purpose of the lower levels and that the gains at all levels flow back to the milk producers in significant measure. The core feature of the Anand Pattern model is farmer control of the three stages following production, that is, procurement, processing, and marketing of milk and milk products.The value added at the procurement and processing stages can be realized by the cooperatives only through control over marketing, which is therefore an essential requirement for success. In contrast, many dairy cooperatives worldwide end up as suppliers of raw material to private companies that own the brands and control marketing. By cutting out the need for middlemen in procuring and selling milk, the Anand Pattern cooperatives have helped to reduce seasonal price variations and have enabled the farmers to enjoy the fruits of their labour instead of surrendering most of the profit to corrupt and exploitative middlemen.

Consumers too have benefited. In 2003, dairy cooperatives accounted for the major share of processed liquid milk marketed in India. Milk reaches consumers in 750 towns and cities through the National Milk Grid network. Over the years, brands of dairy products created by the cooperatives have become known for quality and value.

The achievements of the dairy cooperatives are summarized in the box below.

Achievements of the Dairy Cooperatives in India till 2003-04


  • The dairy cooperative network is owned by nearly 12 million farmer members.
  • These producers are grouped in nearly 1,08,574 village-level dairy cooperative societies.
  • The societies are grouped in 170 district-level unions spanning 338 districts.
  • The unions make up 22 state-level marketing federations.

Milk production

  • Indias milk production increased from 21.2 million metric tons in 1968-69 to 88.1 million metric tons in 2003-04.
  • Per capita availability of milk increased from 112 grams per day in 1968-69 to 231 grams per day in 2003-04.
  • Indias 3.8 percent annual growth of milk production surpasses the 2 per cent growth in population; the net increase in availability is around 2 per cent per year.


  • In 2003-04, average daily cooperative milk marketing stood at 14.87 million litres; annual growth has averaged about 4.2 per cent compounded over the last five years.
  • Dairy cooperatives now market milk in about 200 class I cities including metros and some 550 smaller towns.
  • During the last decade, the daily milk supply has increased from 17.5 to 52 litres per 1,000 urban consumers.


  • Bulk vending saves money and conserves the environment.
  • Milk travels as far as 2,200 kilometres to areas of shortage, carried by rail and road milk tankers.
  • India produces 95 per cent of its own dairy equipment, saving valuable foreign exchange.

Macro impact

  • The annual value of Indias milk production amounts to about Rs.880 billion.
  • Dairy cooperatives generate employment opportunities for about 12 million farm families.

The table below presents select data on the growth of the dairy cooperatives during the three OF phases and after the programme.

Achievements of Operation Flood, 1970-2002

IndicatorOF phasesPost-OF phase
Phase I>Phase IIPhase III

Date started

July 1970

October 1979

April 1985

April 1996

Date concluded

March 1981

March 1985

March 1996

March 2002

Investments (Rs. million)





No. of federations/apex milk unions operating





No. of milk sheds covered





No. of dairy cooperative societies set up (thousands)





No. of members (millions)





Average milk procurement (million kg/day)





Liquid milk marketing (million litres/day)





Processing capacity


Rural dairies (million litres/day)





Metro dairies (million litres/day)





Milk drying capacity (mt/day)





Technical inputs


No. of Artificial Insemination centres (thousands)





No. of AIs done (million/year)





Cattle feed capacity (thousand mt/day)





Growth in womens dairy cooperatives

Milch cattle in India are mainly tended by women. Amul realized this and built womens empowerment activities as an important component of its dairy development programme. In the early phases of OF, the strategy was to train women in modern animal husbandry practices, and a large number of training programmes were specifically organized for them. Special incentives were given to all women dairy cooperative societies in order to encourage participation of women in governance of the cooperatives. According to NDDB annual report, 2001-02, the number of women who are members of dairy cooperatives has increased to 2.47 million in 2001-2002 from 0.62 million in 1986-87.

Growth in milk production and availability

Milk production in 1968-69, before the launching of Operation Flood, was only 21.2 million metric tones. It increased to 31.6 million metric tones by 1980-81, 53.9 million by 1990-91, and 84.6 million by 2001-2. The annual growth rate was 4.08 per cent during the first phase of Operation Flood. It was much higher (7.85 per cent) during the second phase, and production continued to grow at 5.05 per cent per year during the third phase.

As a result of substantial increase in milk production, milk consumption in India has risen from a low of 112 grams per day in 1968-69 to over 226 grams per day in 2002.

The increase in milk production and availability helped stabilizing milk prices over the years. Today most of our cities and towns receive adequate supply of hygienic milk, and the small farmers and landless labourers who make up the majority of dairy cooperative members now have a regular source of income.

Market dominance of the dairy cooperatives

Today milk is processed and marketed by 170 district-level unions, which are federated to 22 state-level marketing federations. Over the years, cooperative brands have earned the reputation of being known for quality and value. Some of the brands that have earned consumer confidence are Amul (in Gujarat), Vijaya (Andhra Pradesh), Verka (Punjab), Saras (Rajasthan), Nandini (Karnataka), Milma (Kerala) etc. Each of these brands has become market leader in its own state or traditional area of operation and gradually expanding its presence in other states. Presently, the Gujarat Cooperative Milk Marketing Federation (of Amul brand) is the largest food company in India. The success of Amul proves that cooperatives can successfully compete with even multinational companies.

Empowerment Elements

Empowerment is a multidimensional construct. As suggested by the World Bank for assessing the Operation Flood programme on three dimensions: social empowerment, economic empowerment, and political empowerment.

Social Empowerment

Social empowerment deals with issues of exclusion and inclusion. They become important in a religiously diverse, multicultural, and highly stratified society like India where rural poor face many forms of exclusion. While Operation Flood is not an all-purpose development program and cannot hope to sweep away economic and social inequalities that existed in rural India for centuries, it has nonetheless had a profound impact on the social landscape of the countryside.

In its 1976 report on rural employment, the National Commission on Agriculture observed:

Next to crops, animal husbandry programmes have the largest employment potential. The most important features of these programmes are that they provide subsidiary occupation, offer gainful employment at the location itself, and make better utilization of female and child labour. . .Most of these programmes are particularly suitable for weaker sections of the rural community and have re-distributive effect on rural income in favour of them.

Renowned Sociologist BS Baviskar explains that Operation Flood was considered a means of overcoming the barriers of caste, class, and power, something earlier rural development programs had been unable to do.

Since milk production does not require much land, but family labour which the poor have amply, the landless poor can easily and profitably participate in the white revolution, deriving employment and additional income from it. Since milk is not a polluting substance in the Hindu religious ideology, people belonging to any caste, even the lowest, can and do participate in producing milk. . . . Also cooperatives which organize only milk producers can successfully bypass the constraint of village power structure.

Furthermore, although OF was not designed to eradicate the problems of poverty and unemployment, it is true that millions of landless, marginal, and small farmers who were engaged in milk production benefited greatly from the increased income and employment opportunities generated by OF. Of the farm families covered under OF, 21 per cent had no land and another 66 per cent were marginal and small farmers owning less than two hectares of land. Over 70 percent of the participating households had just one or two milch animals. Thus, OF turned out in practice to be a pro-poor programme that made the distribution of incremental income from milk among rural milk-producing households more equitable.

As far as empowerment of women is concerned, this took place mainly through the women dairy cooperative societies (WDC). In the WDCs women find themselves empowered, as they are authorised to make their own decisions in meetings held outside the home. Income from WDCs enables the women to make most household expenditures without being dependent on their husbands. OF has also played an important role in generating employment for women. With 3.5 million milk suppliers, "it is reasonable to assume that 5 percent represented women who were able to stay at home rather than go out for work. This withdrawal of women from the labour force will have created an additional 175,000 labouring jobs, predominantly for the very poor," reveals the assessment report of the World Bank in 1998.

Cooperative dairying also empowers people at another level. The village dairy cooperative is a clean, well-lit, and orderly place. The villages have gone through a similar transformation ever since the cooperatives began to operate. When the people of a village see cleanliness, sanitation, hard work, and discipline in the cooperative, and when they know that the cooperative serves them well, it probably inspires them to bring more of these qualities into their own lives.

The women members of dairy cooperatives visit dairy cooperative unions and are shown the mysteries of artificial insemination under a microscope. The knowledge of conception in animals helps them to better understand their own lives and to begin to control what was simply assumed as a matter of fate.

When our village people see a veterinarian cure an animal that would otherwise have died, they learn about the efficacy of modern medicine. They see that with feed and care better milk is produced and as their animals improve their income from milk increases and they become hopeful of better housing and future. And they learn that fate does not determine their future—that they can take control of their own destinies.

Economic Empowerment

The economic empowerment aspects of OF deal with connecting people and their institutions with markets.

In the pre-OF era, milk pricing was not used as an instrument of dairy development. No effort was made by any government to ensure a remunerative price to the producer, but the consumer price of milk supplied through government-run city milk schemes was invariably subsidized. This had two adverse effects on dairy development. First, in the absence of a year-round remunerative price for milk, the producer did not have any incentive to increase milk production through better breeding, feeding, and management of animals. Therefore, milk production increased at a miserably low rate of 1 per cent per year in the pre-OF era. Second, by selling milk for less than its cost and less than the open market price, city milk schemes incurred huge losses year after year, and as a result were not able to save and plough back any money into modernizing and expanding their activities. Thus, the milk pricing policy followed before 1970 was both anti-producer and anti-dairy development.

For the first time, OF accorded the highest priority to ensuring a year-round and dependable market at remunerative prices for rurally produced milk. Indeed, OF was originally conceived as a marketing project. The producer price of milk in most OF areas is determined by the state government concerned and is set at a level that is considered remunerative to the milk producers. Although the cost of milk production is not explicitly considered in setting the producer price, there is evidence to show that the terms of trade over the last decade or so have been favourable to the milk producers. The time-series data on the producer price of milk and the wholesale price of oilcakes, which account for nearly three-fourths of the total cost of milk production, confirm this. Over the period 1987 to 1996, the compound annual rate of growth in the producer price of milk was 10.9 per cent as compared to 5.8 per cent in the wholesale price of oilcakes.

The strategy evolved by early dairy cooperatives in Gujarat proved decidedly superior to alternative ones being tested in the 1960s, such as the Key Village Scheme or the system under which government-owned milk plants collected and processed milk produced by contractors. The Anand Pattern emphasized keeping cattle in the hinterland and transporting milk to cities by farmer cooperatives, rather than transporting cattle as well as fodder to cities. Thus the system had strong comparative advantage. As a result, the early dairy unions in Gujarat—such as Kaira, Mehsana, Sabarkantha, Banaskantha, and others—rapidly emerged as large and successful farmer organizations, with hundreds of thousands of members dominating the economies of their domains.

Operation Flood was not conceived as an all-purpose poverty eradication program. It cannot be, because it focuses on a single productive activity, dairying, while the ranks of the rural poor include many different categories of the disenfranchised: the old, the infirm, tribals, the landless, small farmers, artisans, and so forth. Nonetheless, it is notable that the increased income from milk under OF encouraged a process of change in other activities of the milk-producing households and contributed to their overall socio-economic development.

Political Empowerment

The political empowerment aspect of the milk revolution deals with connecting poor people with the government. The OF programme was able to connect the grassroots-level dairy cooperatives not only with the state and central governments, but also with international agencies. On the first International Day of Cooperatives on 1 July 1995, United Nations Secretary-General Boutros Boutros-Ghali observed:

Cooperative enterprises provide the organizational means whereby a significant proportion of humanity is able to take into its own hands the tasks of creating productive employment, overcoming poverty and achieving social integration. They constitute a model for a people-centred and sustainable form of societal organization, based on equity, justice and solidarity.

As "schools of democracy," cooperative enterprises also contribute to the promotion of social stability. It is clear that governments, although they may create an enabling environment, cannot achieve or maintain sustainable development without an interactive social partnership, actively involving all of civil society in an empowered, democratic manner. Thus, with its globe-spanning dimensions and diversity and its insistence on social partnership, participatory democracy, empowerment, and "people-centred sustainable development," the cooperative movement reflects a strong, deep current of humanism that forms the bedrock of social development.

Challenges being faced by the dairy cooperatives and interventions required to strengthen them

With the opening up of the economy preferential treatments of yesteryears are no more available to the dairy cooperatives. They are now required to compete in the open market. The terms of the World Trade dictates removal of all safeguards put in place earlier to protect the dairy industry from unfair outside competition. As a result, gradually internationalization of our dairy business is taking place. This transformation demands the dairy cooperatives to improve their performance; be it in marketing or quality of products or governance. A few dairy cooperatives like Amul have done well in the past in these areas. There are others who are catching up albeit in slow pace and there are many who need to substantially improve to come to the terms of open market competition.

While trying hard to improve their performance and professionalising their functions and governance, the biggest obstacle that the dairy cooperatives face today is political and bureaucratic interference. Business decisions are often guided by other than business considerations. The cooperative laws are unable to provide the protection the dairy cooperatives require to function as independent business entities. To end this dismal state of affairs, the most important intervention needed to professionalise the functioning of the dairy cooperatives is to liberate them from the clutches of the archaic cooperative laws enacted to establish State control over the affairs of the cooperatives. Additionally, in line with the developed countries, there should be minimum laws to control the affairs of the cooperatives. Registrars of cooperatives should be responsible only for registration of cooperatives, their byelaws and arbitration as and when required. Routine management and governance should totally be left to the wisdom of the owners (i.e. members) of the cooperatives. It is heartening to note that some States have already taken some positive steps in this regard by enacting liberal cooperative laws; there are others who are also in the process of doing so.

Currently, the management in majority of the dairy cooperatives carries some or the other political leanings. As a result, it has become a common practice that the management of dairy cooperatives, irrespective of performance, gets superseded or suspended as and when opponent political parties come to power. In consequence, to ensure continuity of and protection to good management, depoliticalising cooperative institutions is a must. As business institutions, the dairy cooperatives from time to time are bound to take hard decisions. Irresponsible outside interference in the affairs of the dairy cooperatives is sure to deteriorate performance, eventually making them unfit for competition. To arrest the trend, the members need to be educated on governance matters. Adopting standard management practices to restrict arbitrary decision-making in a way could also be helpful. Also, a few restrictions in the cooperative laws could be introduced such as limiting term of members of governing bodies, setting up independent bodies to hold free, fair and timely election and audit in cooperatives.

Improving quality of products poses a big challenge to the dairy cooperatives. In todays highly competitive market demand for superior quality products is on the rise. The dairy cooperatives are aware of this trend. They know that there is enormous scope to enhance their share in the world market too, given that India is the highest producer of milk and that too at the lowest cost. But to capture the world market the necessary prerequisite is product quality needs to match international standards. Improvements in product quality are required to enhance and retain their share in domestic market also. As quality upgradation is a long process, it calls for, besides commitment of the management, substantial investment in hygienic milk production, upgrading plants and machinery, upgrading manpower skills and setting up facilities for cold-chain storage and distribution of milk and milk products starting from the farm level. Presently, the dairy cooperatives do not have the capacity to make such huge investments requiring the Government support to create institutional facilities for research and development, credit, training and education etc.

Poor productivity of milch animals constrains rapid development of the dairy industry. Systematic planning and integrated policies and programmes for animal breeding, genetic upgradation and feed and fodder management could only improve the situation. For all these to happen, the Government has to intervene and create funds (may be called Dairy Development Fund) for such programmes to be implemented on mission mode integrating various schemes.

Excess manpower and low skill level of employees are areas of great concern for the dairy cooperatives. The dairy cooperatives need to shed excess flab in manpower in order to match manpower productivity as per market demand. Skill sets of the employees need to improve to benchmark desired performance. Since the dairy cooperatives generally do not have capacity to hire high-calibre professionals, the only out is to invest in extensive training and education to upgrade the skills of the existing manpower. The employees need to be educated about the merits of scientific and modern management practices and processes.

Securing members participation in the affairs of the cooperatives is another area where the dairy cooperatives need to work hard. To earn allegiance of the members, cooperatives need to be responsive to their needs. The dairy cooperatives have to work out suitable strategies so that they can satisfactorily meet the requirement of the members. They can do so by providing required support services to their members for veterinary care, input supply and selling their milk and all these have to be done at reasonable cost. Members need to be encouraged to participate in the business affairs of their cooperatives and they could no longer be treated as mere suppliers of milk. Deputation of government officers to head the affairs of cooperatives has to stop to secure members participation. Legal provisions to hold free, fair and timely election are must and have to be ensured by the Government.

Policy and legislative framework and changes required in cooperative legislation to keep pace with the changing socio-economic environment

Revamping the cooperative laws

As stated earlier, cooperative laws are mostly outdated. They need to be tuned with changing time. Governance and management of cooperatives are best to be left to the wisdom of their owners i.e. the members. Ideally, there should be minimum provisions in laws to control the affairs of cooperatives. Registrars role needs to be cut short to registration and arbitration. On the other hand, the Government should set up independent bodies for cooperative audit and holding elections. The Multi-state Cooperative Societies Act, 2002 is a good piece of legislation in this direction and may be made a model while revamping the cooperative laws of our country. For all these to happen, the first requirement is - there should be minimum laws, and thereby minimum interference by Government functionaries including registrars. Where the Governments stake is less than 50 per cent, the Government should not have any control over the management and governance of those cooperatives.

Recognising federalism in cooperatives

Presently, the dairy cooperatives in all the States have three-tier structure. At the bottom of the structure, there are village-level dairy cooperative societies as primary members. The second tier consists of district-level milk processing unions and at the top of the structure, there are state-level milk marketing federations. They have also formed a national-level cooperative federation as their apex representative body. Each one of these tiers has their own distinct functions to contribute to the federal structure. Though these cooperatives are different entities by law, they function as parts (or business subunits) of a single structure. Thus, it becomes extremely unfair to the primary members to tax their income at each tier of the structure.

Moreover, such multiple taxes sharply inhibit capital formation and consequently investment required to be made by the dairy cooperatives. It also places them at disadvantage when compared with their competitors in private trade.

Hence, it is proposed that the Government may consider exempting the dairy cooperatives from payment of income tax at each tier of their pyramid. If implemented, this would be in line with the relaxation offered to the Banking cooperatives. There is also a need to bring down the income tax applicable to the dairy cooperatives to a level of 20 per cent as being followed in the advanced dairying countries such as the USA, the EU, Australia and New Zealand.

Revising VAT rates applicable to dairy products

Today, most of our dairy products including UHT milk, Flavoured Milk, Milk Powders, Infant Milk Food, White Milk Food, Butter, Ghee, Cheese, Ice cream etc. are products of mass consumption. These products are manufactured from the milk supplied by millions of rural milk producers, majority of who are small and marginal farmers and landless labourers. Almost one forth of them is women. To these milk producer families, income from milk supplied to the cooperatives constitutes a major source of their daily income. Levying high VAT rate would increase the prices of dairy products adversely impacting their consumption. Thus, we have a situation where on one hand there is increase in the prices of dairy products and on the other there is no input credit on milk available, which constitutes 80% of total input cost of dairy products. This would definitely adversely affect the income flow to these millions of milk producers.

The present VAT rate structure has only three categories of rate, i.e. exemption, 4% and 12.5%. This has resulted in shifting of majority of dairy products to a very high rate of 12.5%. In the pre-VAT scenario these products were attracting average 8% local sale tax. The input credit benefit is not available to dairy products as milk constitutes the more than 80% input cost, therefore, the benefit of input credit will not reduce the tax burden as anticipated but will increase in the effective tax rates on consumers. This will ultimately lead to increase in the consumer prices of dairy products and also adversely affect the common man. In view of this, we strongly recommend to introduce 8% VAT rate category for value added dairy products to avoid any steep increase in the consumer prices of dairy products.

We wish to draw kind attention to the following:

While the products like fresh milk and pasteurized milk are judicially exempted from VAT, Flavoured Milk, Fresh Cream and Sweetened Condensed Milk are classified under 12.5% VAT. Other milk powders like Whole Milk Powder, Infant Milk Food Powder and Dairy Whitener etc. are also classified under 12.5%.

Flavoured milk is fresh milk with sugar, flavor and colour. Children and young adults generally prefer Flavoured milk. It is nutritious and healthy product. In fact, the Government should encourage such healthy products. Thus, we strongly recommend that Flavoured milk should also be treated as fresh milk only and should be exempted from VAT.

We would like to submit that all Milk Powder (Skim milk powder, Whole milk powder, Baby food (Infant Milk Food Powder, fortified with vitamins) is merely dried milk. It is basically a product containing less than 2 percent moisture and with suitable packaging can have a shelf life of twelve months. Furthermore, milk powders are not normally consumed as such but transported over long distances area that are perennially short on milk supply. Milk powders are reconverted in to liquid milk by adding water. Milk is balanced source of nutrition to infants, lactating mothers and whiten tea and coffee. Since dairy cooperatives uses the milk powder for recombination during the lean season, the cost of milk so produced goes up significantly due to high rate of VAT. Thus, we strongly recommend all milk powder should be classified under 4% VAT.

Further, the essential commodities like Ghee and Butter have been classified under 12.5% VAT category. Ghee and Butter are items of mass consumption. Ghee and Butter are used as a cooking medium since ages in India; therefore these products should attract the same rate of VAT as do Vanaspati and Edible oils, i.e., 4% only. High incidence of VAT (12.5%) on Ghee and Butter would also put the organized sector at direct disadvantage vis-à-vis the unorganized sector since the cooperative faithfully pay the tax where as the same is not the case for private traders.

Indigenous dairy products like, Shrikhand, Paneer, Gulabjamun etc. are common mens sweets. Such products are by and large produced and sold by unorganized sector. To provide hygienic and nutritious products to consumers at affordable prices, the dairy cooperatives has started marketing these products of late. Any high incidence of VAT on these products will inhibit the scope of market expansion for these products by organized sector at this initial stage. Therefore all indigenous sweets produced and marketed by the dairy sector should be classified under 4% VAT category.

Taxes on other Dairy Products like Cheese, Ice cream etc. needs to be rationalized by classifying these products under proposed 8% category. Especially Ice cream manufactured by honest tax paying organized sector provides nutritious and healthy food option to children and young adults of all classes of society. The current price of Ice cream has brought down by vigorous and painstaking efforts of players like Amul. Due to these efforts Ice cream, which was considered a luxury, only a few years back has been brought within the reach of a common man. The classification of ice cream under 12.5% category will undo the work put in by players like Amul and most other cooperative unions in last few years to make ice cream affordable to masses and again push this product to a category of luxury item available to only a few.

In the present VAT scenario, CST is not going to be abolished and no input credit is available for inter state purchase. In view of this, increase in tax will lead to increase in price to customers At this point, it should also be noted that dairy products have shown a very high price elasticity, therefore any such increase in prices is likely to depress the consumption of these healthy products and therefore adversely affect the remuneration available to milk producer farmers for their milk production.

To summarize, the following area to be looked into:

To expand the existing category of fresh and pasteurized milk to include all types of milk whether pasteurized, Concentrated with or without sugar, Flavoured milk and packed cream under exempted VAT Category.

To put all types of milk powders whether skimmed milk powder, whole milk powder, Vitaminised milk powder, Dairy Whitener, White Milk Food and Infant Milk Food Powder under the 4% VAT category.

To include all indigenous dairy products like Shrikhand, Amrakhand, Paneer, Gulabjamun etc. under 4% VAT category.

To include Butter and Ghee in 4% VAT category like Vanaspati and Edible oils instead of 12.5% VAT category.

To include all other remaining dairy products like Cheese, Cheese Spread, Ice Cream etc. under 8% VAT category.

To include all categories of cattle feed and molasses, being inputs of milk production, under 0% VAT category.

In the interest of the consumers from all sections of society, the Government should reconsider the decision regarding dairy product classification in the VAT regime. We firmly believe that, this will increase consumer demand, boost milk production volumes and improve rural milk producers incomes resulting into overall social development.

Increasing the import duty applicable to milk powder and butter oil to prevent subsidized import

Currently, the world trade is highly distorted. Most of the advanced dairying countries subsidise whole or a major portion of their domestic milk production. They also impose several restrictions to stop import of dairy products. Many of these countries offer high support price to stimulate milk production. Through various policies and facilities they frequently subsidise exports.

However, in India, the milk producers do not get any such support. They only want their government to protect them from the distorted world trade of subsidized commodities to flood their market. Each year, the Director General of Foreign Trade (DGFT) issues notification for Tariff Rate Quota (TRQ) for import of Milk Powder including Skimmed and Whole Milk powder, Milk food for babies etc. at a concessional duty of 15 per cent. It is felt that this concessional duty of 15 per cent to import milk powders should be raised to 60 per cent to protect the milk producers from unfair world competition. Similarly, we would like urge our Government to increase import duty on butter oil to 75 per cent with immediate effect to protect the dairy farmers.

Amending policy regulations on Import of milk products

Under the liberalized import regime, the Government has allowed import of food products in consumer packs also. Often these imported products do not meet the Indian standards of quality and packaging, which is applicable to the domestic manufactures. There is a tendency that developed countries dump products of inferior quality to India. It is therefore necessary that the Government enforce the regulation on imports that are violating the laws of the land to protect the interest of the consumers. Additionally, due considerations on sanitary and phyto-sanitary measures should be given while approving import of milk and milk products.

Introducing integrated food laws

Presently, manufacture and supply of milk and milk products are governed by a plethora of food laws such as the Prevention of Food Adulteration Act,1954; the Standard Weights and Measures (Packaged Commodities) Act, 1976; the Industrial Development and Regulation Act, 1951, the Agricultural Produce (Grading and Marking) Act, 1937 as amended in 1986 (AGMARK); the Milk and Milk Product Order, 1992; the Infant Milk Substitutes, Feeding Bottles and Infant Foods (Regulation of Production, Supply and Distribution) Act, 1992; the Insecticides Act, 1968; the Consumer Protection Act, 1986 (COPRA); the Water (Prevention and Control of Pollution) Act, 1974 and the Air (Prevention and Control of Pollution) Act, 1981; the Bureau of Indian Standards (BIS) Act, 1986; the Export (Quality Control and Inspection) Act, 1963 etc. Moreover, implementation of these laws comes under the control of a host of ministries including Ministry of Agriculture, Ministry of Food Processing, Ministry of Consumers Affairs, Ministry of Health, Ministry of Company Affairs, Ministry of Law etc. Each one of these ministries has their own departments and systems of administrations requiring numerous clearances and inspections invariably leading to inefficiency and corruption. Therefore, it is proposed that instead of so many food laws the Government should come out with an integrated food laws governing the dairy business under one ministry.

Any other incidental or consequential matter as deemed necessary

Recognition of cooperatives as a distinct sector of economy

In line with the National Policy on Cooperatives, cooperatives are required to be recognized as a distinct economic sector and integral component of the socio-economic system deserving special status from our Government. The cooperatives have the potential, if governed properly, to solve many of our problems especially in rural areas. Hence, the Governments policy initiatives for cooperatives are extremely important. Since the dairy cooperatives are limited resource farmers organizations and poor in capital formation, they are vulnerable to open and unfair competition requiring the Governments policy support to protect them from unfair and unequal competition whether they are from outside or inside.

Creating obligation for private trade including multi-national companies operating in dairy business

During the past decades the dairy cooperatives have invested substantially in developing their individual milk sheds, educating member farmers, etc. Thus, it would be unfair for the Government to allow private and multinational companies to set up dairy business in milk sheds already developed by the dairy cooperatives. Companies would be allowed to reap benefits for which they did not make any prior investment and so, it would be invariably at the cost of the cooperatives. Further, cooperatives, by law, are required to contribute a portion of their business surplus towards education fund maintained by the National Cooperative Union of India, New Delhi. On the other hand, private trade does not have any such obligation, they would continue in business as long as it is profitable. They would not have any sincere intention to invest in developing their milk sheds or to create infrastructure facilities in their individual area of operation. Therefore, it is proposed that the Government should come out with some policy directives by which private trade and multinational companies would be required to invest a portion of their business surplus in developing their milk shed or upgrading genetic resources of milch animals or fodder availability etc. in their area of operation. This would go a long way in developing the dairy industry of the country as a whole.

Abolishing deputation of Government employees in dairy cooperatives

Past experiences reveal that competent and committed professionals working for cooperatives for reasonably long period of time, in most cases, holds the key to the success of cooperatives. It is no wonder that the best performing dairy cooperatives today are headed by professionals and not by government officers posted on deputation. Therefore the Government needs to discontinue the practice of deputing government officers to head the dairy cooperatives.