With cow nationalism taking centre-stage and several state governments banning cow slaughter, cattle breeding in India is set to see changes. The cost-benefit economics of cow breeding may prompt farmers to turn to the more financially viable option of buffalo breeding, explains R S Sodhi, Managing Director, Gujarat Cooperative Milk Marketing Federation-Amul. Edited Excerpts:

It is learnt that Amul is venturing into marketing of vegetables and fruits apart from milk. What is the plan?

In January we had signed a memorandum of understanding (MoU) with the State government to help vegetable farmers get remunerative prices for their produce. Currently, NDDB is preparing a roadmap for that. Nothing immediately planned as of now. We have to see all dimensions. We have all the logistics chain and retail outlets in place. But there shouldn't be wastage and damage that will result in a loss. We will work out a plan and then roll out.

Recently, there has been an uproar over cow nationalism with several states banning cow slaughter. As a dairy cooperative what do you think about the move and its implications?

This issue has multiple dimensions to it. First, the immediate impact is that people will keep these animals for more years and milk them for longer periods. Till now after fifth lactation or at around 8 years of the age, they sold the cows to a slaughterhouse because its milk production dropped significantly. But the animal still has 4-6 more productive years to its life after the fifth lactation — but at one-fourth the previous quantity. So, when you are forced to keep it, milk production will increase. This means you have a productive animal for more years. As a result, the total milk availability will increase in the country.

But the average cost of production of cow milk will increase. And the cost of breeding will have to be borne by the farmer and not by the dairies. This will prompt farmers to prefer the buffalo over the cow. This is a reverse of what we saw about 30 years ago, when there was 80 per cent buffalo milk and only 20 per cent cow milk. Now we have almost 50:50 contribution of buffalo and cow milk in the total milk production of about 160 million tonnes per annum.

The number of cows is 2/3rd of the total 300 million cattle, buffalo being the remaining 1/3rd. Why did farmers turn to cow? Because the realisation from cow milk was better than from buffalo.

So, we see the share of cow milk in the total milk getting reduced and that of buffalo increasing. About three years ago, fat prices and skimmed milk prices were same. But today fat prices are three times higher. So, there are obvious reasons for farmers to turn to buffalo as it is more lucrative than the cow.

Then why would milk producers turn to cow breeding at all, if that is going to be a costlier affair?

Ultimately it is the farmer and milk producers who will decide. But looking at the consumption pattern of dairy products, people have started consuming high-fat products like ghee, ice cream, cheese; this makes buffalo breeding more attractive.

We have seen only upward price movement in milk prices. Why don't demand-supply economics apply to milk prices?

Demand supply economics applies to commodities such as dals, where prices fluctuate based on the supply. They don't consider valuation of buffer stocking. Therefore, we see fluctuations of prices in such commodities. And as a result of such fluctuations the sowing pattern of those crops also gets affected.

In milk, in the world markets like New Zealand and Australia, the demand-supply mismatch does affect prices. But that isn't seen in Gujarat, where we have successfully pulled Amul out of the demand-supply cycle. We keep buffering and never let the pricing affect the buffering. Irrespective of pricing, the buffer keeps building up. Otherwise this whole sector will collapse.

In the commodity market, the middleman is the one who benefits out of the price fluctuation. The farmers don’t get the benefit. And they get disinterested in the crop and switch to other crops. If we let the same happen to milk, the farmers will not produce milk. Then we will be dependent on imports. The day India goes into import of dairy products, the world markets will shoot up two-three times from current levels. The volatility or ups and downs in milk prices is not good for the producer nor for the consumer.

What is the Amul's milk pricing model?

We see that farmers get remunerative prices so that they are not at loss. Our objective is to encourage them to produce more and stay in dairy farming. For finished products, we price them in such a way that they are affordable to average consumers and we can reach the masses.

We don't believe in premiumising our products — not that we do not have premium ingredients; those are still affordable to mass consumers. And we pass on 80-85 per cent of the retail milk prices to the producer.

What is going to be the biggest challenge for Amul and cooperative dairies in coming times?

Our biggest challenge is to keep dairy farming lucrative, contemporary and what they say, cool and sexy, for the well-educated lot of the next generation. They don’t want to do dairy farming the traditional way. So, we have to explore commercial dairy farming like a startup. Make in Rural India.

Modern techniques and fancy infrastructure with computerised systems to give the young generation a feel of doing something modern. To make this happen and make dairy farming commercially viable, you have to give them price.

The second biggest challenge is that we can’t afford more animals; we already have 300 million milch animals. We now have to increase the productivity of these animals through better feeding practices and breed.

For breeding several initiatives have been taken, but much is required to be done for feeding practices. Also, the cooperative sector is an organisation For the farmers, by the farmers and to the farmers. The challenge is to ensure selfless political leaders and committed professional leadership with the highest level of integrity take charge of the sector so that the farmers’ interests can be protected.

Lastly, a very big challenge is in the form of foreign dairy products and the threat of their dumping in India. MNCs are trying their tactics on the Indian government to allow free import of dairy products. If that happens, it will destroy our growing dairy industry. Till now we have been lucky that whichever governments have come, they have ensured the interests of the dairy farmers. But we have to be vigilant and ensure that our policy makers remain aware about the interests of Indian dairy farmers.

Are you concerned about the competition from MNCs and Indian players such as Patanjali?

In this sector, we have to compete with ourselves. The dairy industry is huge and has been growing over the years. It has a great potential in India. We are the largest producer in the dairy industry with about 37 per cent market share, but still only 1/3 rd of the sector is organised and 2/3 is unorganised.

...we welcome competition. It will only expand the pie. So, if somebody wants to come into the segment, there is enough market, but you have to collect milk. But most companies enter the dairy segment to make value-added products. They don't consider milk procurement, and that's why they can't compete with Amul.