India’s Dairy Model: Competitiveness, Efficiency, and Emerging Challenges

India Dairy Sector Challenges Latest News

• Unlike crops such as maize, where US farmers enjoy far higher yields and lower prices than their Indian counterparts, India’s dairy sector remains globally competitive. 
• While American corn is far cheaper due to productivity advantages, this price edge does not extend to milk. 
• India’s unique low-cost dairying model—built on smallholder farmers feeding cattle crop residues and byproducts—keeps milk production costs low. 
• This makes Indian milk prices competitive internationally, even without large-scale industrial farms, highlighting dairying as one of the few agricultural sectors where India matches global efficiency.

Dairy Industry in India

• India has been the largest milk producer for over two decades, contributing about 25% of global milk output and 5% to the national economy. 
• In 2024, production was estimated at 239 million metric tonnes (MMT).
• The dairy sector employs over 80 million farmers, serving as a key livelihood source for rural households, especially small and marginal farmers.
• India’s dairy market was valued at USD 135.3 billion in 2024, projected to grow to USD 274.09 billion by 2032 at a CAGR of 9.33%.

Production and Export

• India is not only the largest milk producer but also among the leading global exporters of dairy products. 
• Major producing states include Uttar Pradesh, Maharashtra, Himachal Pradesh, Madhya Pradesh, Rajasthan, Punjab, and Tamil Nadu.

Government Initiatives

• To boost productivity and support farmers, several initiatives have been launched, including:
  • Rashtriya Gokul Mission
  • National Dairy Development Board (NDDB) programmes
  • State Cooperative Dairy Federations
  • National Programme for Dairy Development (NPDD)
  • Dairy Entrepreneurship Development Scheme (DEDS)

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Price Competitiveness in Milk

• The Federal Milk Marketing Order (FMMO) in the US fixes monthly minimum prices for four classes of milk – fluid, soft dairy products, cheese, and butter/powder. 
• In July 2025, these averaged about Rs 36.7 per litre for milk with 3.5% fat content.
• Indian dairies, such as in Maharashtra, paid farmers Rs 34 per litre for comparable milk quality. 
• This places India’s farmgate milk price at par with or slightly below the US, and significantly lower than the European Union’s Rs 55.6 per litre.

Yield Comparisons

• Milk yields in India are much lower – only 1.64 tonnes per cow annually, compared with 4.6 tonnes in New Zealand, 7.3 tonnes in the EU, and 11 tonnes in the US.
• Despite low yields, India’s production costs remain competitive because dairying is labour-intensive. 
• Tasks like feeding, milking, cleaning sheds, and managing fodder are performed manually at relatively low wage costs. 
• In contrast, Western dairy farms rely heavily on costly automation and machinery.

Processing and Marketing Efficiency in India’s Dairy Sector

• In the US, whole milk retails at about Rs 100.4 per litre, while Indian cooperative brand Amul sells toned milk at Rs 55–57 per litre. 
• After adjusting for fat content, Indian farmers receive 55–57% of the consumer price, compared to just 35% in the US. 
• This highlights India’s strong farm-to-consumer efficiency. 
• The Gujarat Co-operative Milk Marketing Federation (GCMMF) goes further, sharing over three-fourths of the consumer rupee with farmers—paying them Rs 44–45 per litre for cow milk and Rs 65–66 for buffalo milk, much higher than private dairies. 
• Such efficiency stems from streamlined procurement, processing, transport, and marketing systems within cooperatives, which aim to maximise farmers’ share in the final retail value of milk.

Challenges to India’s Dairy Competitiveness

• India’s dairy sector is currently competitive mainly due to low-cost and unpaid family labour, with farmers focusing on recovering only out-of-pocket expenses like feed or veterinary care. 
• However, this model is becoming unsustainable as farm labour grows scarce and costlier, and even family members face rising opportunity costs with better education and alternative jobs. 
• Unlike New Zealand, India lacks large pastures for low-cost grazing, and unlike the US, it cannot rely on heavy mechanisation due to high capital and energy costs. 
• While the US produces milk from just 24,470 large farms, India depends on over 50 million small farmers and 110 million animals. 
• To stay globally competitive, the future of Indian dairying will require selective mechanisation, genetic improvement of breeds, better breeding technologies, and cultivation of high-yield protein-rich fodder grasses. 
• Sustaining competitiveness must shift from reliance on cheap labour to efficiency and productivity gains.

Source: IE | FB | IE