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The ‘Traditional’ value drivers of price, taste and convenience have been supplemented by ‘Evolving’ drivers of health and wellness, safety, social impact and experience. Overarching these drivers is a desire for transparency from food companies. Evolving consumer trends such as the demand for healthy and ‘clean label’ products, increased demand for ‘functional foods’ and the growth in protein consumption will drive innovation in the sector. While having strong technological capabilities is key to taking advantage of these trends, it is not sufficient. Though the dairy sector is currently dealing with a number of challenges, favourable long term consumer trends and developing technologies provide a number of opportunities. This report looks at these challenges and opportunities at the producer, processor and retailer levels. It then outlines some of the overarching themes presented by these challenges and opportunities, and looks at how the dairy industry as a whole needs to adapt. As of date, the Agricultural Market Intelligence Center, Anand Agricultural University, Anand has carried out three lectures under the theme of food processing & value-addition, three webinars on Impact of COVID – 19, Trade in Fruit & Vegetables Products and Dairy Commodities, and Value addition, along with one workshop on ‘Methodology for price forecasting, market competitiveness, and export opportunities assessment for dairy & food products’ under the capacity building component of the project with huge participation from post-graduate students, research scholars, faculty members and other stakeholders across the country. In general, about 1500 registrations were recorded in the organized lecture series while around 2500 registrations were recorded in the webinars.

1.1. Global Dairy Scenario Global milk production is forecast at 852 million tonnes in 2019, an increase of 1.4 per cent from 2018 (DAHD, 2019) – a smaller rate of growth, reflecting downward revisions made for India and the European Union. Much of the anticipated output expansion will originate in India, Pakistan, China, the European Union, and Brazil, partially offset by declines in some countries including Australia, Colombia, and Argentina. In India and Pakistan, herd expansions drive output growth, while in China, farm efficiency improvements underpin higher growth. The output is increasing in the European Union, although slowly as dry weather limited the supply of milk during the summer, whilst rising dairy herds and stable milk prices are supporting higher production in Brazil. By contrast, the output may decline in Australia and Colombia due to dry weather, whereas in Argentina, rising feed costs and restrained consumer demand may dampen production. Elsewhere, in the United States, higher milk yields hold up the growth momentum, whereas, in New Zealand, favourable weather corroborates a positive production outlook (DAHD,19).

In India, about 46 per cent of the milk produced is either consumed at the producer level or sold to non-producers in the rural area, the balance 54 per cent of the milk is available for sale to organized and unorganized players. The organized sector comprises of Government, Producers’ Owned Institutions (Milk Cooperatives & Producer Companies), and Private players which provides a fair and transparent system of milk collection round the year at the village level. The unorganized/informal sector involves local milkmen, dudhias, contractors, etc. and they are mostly found to be opportunistic, as there is no uniformity of milk price paid to producers and it varies depending upon the situation. The possibility of adulteration of milk is higher among these unorganized groups. In the areas where competition is high and the presence of the formal sector is strong, the unorganized sector generally gives higher prices and at the same time, the unorganized sector doesn’t offer remunerative prices to the producers where the organized sector is not present.

Cheese, butter, whole milk powder, and skimmed milk powder are a major part of the world’s dairy trade. The demand for worldwide dairy exports is highly concentrated. With a share of 12 per cent, New Zealand is the largest exporter of dairy products, followed by Germany, Netherlands, France and the US. Germany has been the world’s major dairy importer as well with a share of 10 per cent. Other large dairy product importers are China, Netherlands, France, Italy and Belgium. Before 1999, India was a net importer of dairy products. The successful implementation of the ‘Operation Flood’ program and trade reforms caused the direction of India’s dairy trade to change marginally. India has been a net exporter of dairy products since 2000. Statistics show that India’s export share of dairy products over world dairy exports increased marginally from 0.1 per cent in 2001 to 0.5 per cent in 2019, while its import share of dairy products over world dairy imports increased marginally from 0.018 per cent in 2001 to 0.04 per cent in 2019. The Middle East, South Asia, South East Asia, and the USA are the major markets for India’s dairy products. Conversely, India is a favorable market for the European Union, New Zealand, Australia, UAE, and US dairy products.

In monetary terms, value-added’ per unit of the product is the margin between its selling price and cost of production. However, in the dairy and food industry, value addition refers to, extra, features of a product that are beyond the expectations of a consumer at little or no extra cost. In this context, the addition of value to milk can involve monetary value added to a liter of milk by turning it into milk products, enhancing the convenience of quality, shelf life, or health characteristics using processing and packaging interventions. 4.1. Conversion of Milk into Conventional Products It is an age-old tradition to add value to milk by processing it into milk products. The primary aim was to increase the shelf life of milk that would otherwise be highly perishable. With inadequate facilities to preserve liquid milk fresh in the rural areas’ conversion of milk into a variety of milk products would be an ideal option to effectively preserve the huge quantities of milk procured during the flush season’ In the processing of milk products such as cream, butter, cheese and ghee, by-products such as skim milk, buttermilk, whey, and ghee residue are obtained’ Many of the dairy plants, particularly in India’ are usually confronted with the problem of by-products utilization, especially that of whey and ghee residue in an economical manner. Membrane separation processes have presented new possibilities for the production of newer intermediate products from dairy by-products that can be used for value addition in dairy and food industries.

Livestock is considered one of the essential variables in the revenue of a farmer. The sector (excluding fisheries) contributes 30 per cent to India’s agriculture gross domestic product, and it is valued at more than Rs. 9 lakh crores. India is also one of the largest producers of milk in the world; around 70 million rural households are engaged in professions linked to dairy. India is also the second largest exporter of bovine meat after Brazil. This sector provides a substantial income to farmers and supports the economy by generating enough demand in the rural and semi-urban regions. This animal husbandry sector comprising dairy and poultry is extremely valuable for farmer’s income security, and Covid-19 has the potential to disrupt this sector. In developing countries such as India, where dairy farming is one of the most important sources of livelihood for 60 million rural households, 80 per cent of whom are landless, small and marginal farmers who depend on dairy for daily income, the crisis is extreme. Thus, even a small decline in the growth of the dairy sector significantly affects a large chunk of our population which are already vulnerable due to low income, poor savings, and lack of livelihood alternatives. Small production in multiple households leads to more reliance on efficient transportation for procurement. In addition to this, the Indian dairy sector is still dominated by the unorganized sector which handles more than 50 per cent of the marketable surplus. Milkman and vendors collect a small quantity of loose milk from different households and then supply it to urban consumers, roadside eateries, hotels, and sweetshops. Closure of shops and restrictions on transportation has ruthlessly disturbed this arrangement. Even in the formal sector out of the total milk processed 65 to 70 per cent is sold as liquid milk which is immediately vended after packing and only 30 per cent is processed into other dairy products like ghee, butter, cheese, curd, ice-cream, milk powder, etc. Thus, the formal sector also lacks sufficient infrastructure and storage facilities for processing and storing surplus milk after value addition.

The GOI is pushing to strengthen infrastructure for the production of quality milk, as well as for procurement, processing, and marketing of milk and milk products through the following Dairy Development Schemes: 6.1. Dairy Entrepreneurship Development Scheme (DEDS) Dairy Entrepreneurship Development Scheme (DEDS) was started in September 2010. This scheme is being implemented through NABARD which provides financial assistance to commercially bankable projects with loans from Commercial, Cooperative, Urban and Rural banks. Objective of the scheme To generate self-employment and provide infrastructure for the dairy sector, to set up modern dairy farms and infrastructure for the production of clean milk, to encourage heifer calf rearing for conservation and development of good breeding stock, to bring structural changes in the unorganized sector so that initial processing of milk can be taken up at the village level, to upgrade traditional technology to handle milk on a commercial scale, to provide value addition to milk through processing and production of milk products.

7.1. Challenges in Milk Quality Demand for milk and milk products in India is growing very rapidly, owing to urbanization, customer convenience, and the change from loose to packaged milk products. At present, the dairy sector is rising at about 10-12 per cent annually. Based on population growth projections and an increase in urbanization over the next four decades, India is projected to need approximately 600 million tonnes of milk per year to meet the demand for milk and milk products. This means that India’s milk production needs to grow at around 3.2 per cent CAGR for the next 40 years (FICCI, 2020). Main reason of poor quantity of milk is due to unhygienic and poor condition of animal farms and dairies. Even due to high demand in foreign country we cannot export such poor quality of milk product. Many times, Indian milk products get rejected in foreign nations due to unhygienic milking milk contains high number of microbial counts. Reasons behind the quality affected in India are due to poor health of animal, polluted water and food and Unclean surrounding in farm. So, it is necessary to consider all this challenges in improving milk production. Currently most of the milking animals are not screened on regular interval of time. So, there is lots of chances that some diseases can transmitted to human beings. Farmers use antibiotics and chemical drugs to increase the production of milk this will also affect the quality of milk. These issues can be avoided by regular screening of animals in animal husbandry and also maintaining history records of health, feed etc. Quality of feed should be checked regularly. There must be pollution control in the feed and water used in cattle farms (Bhagyalaxmi, 2020).

a) A Key GDP Contributor: Dairy and Livestock sector form the backbone of agriculture with 28 per cent contribution in GDP and the progress in this sector is dependent on innovative measures to increase the value for farmers as well as customers. b) Doubling Farmer’s Income : Doubling Farmer’s Income by 2022 can be achieved by improving crop and livestock productivity, efficiency to utilize resources, increased intensity of cultivation and diversification in high value cash crops, processing and value addition of food and animal products. This price realization can be assured through market reforms and efficient market linkages. c) Unorganised sector – a challenge : The Indian dairy sector is still characterized by strong presence of unorganized sector. Apart from the Cooperative dairy sector, in the last few years there has been a considerable growth in Private Dairy sector and Milk Producers Organization like Maahi in Gujarat. If small dairy farmers are provided with sufficient ‘value addition’ training and support, they can increase their income considerably. d) Value addition : Further, the milk processing plants can also go for value addition and innovation and in turn pay remunerative prices to milk producers.

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