The battle for India’s milk market

In March 2024, things changed. Kumar, 37 years old, enrolled with Akshayakalpa Farm & Foods, an organic dairy business to supply milk. After some handholding from the company, his herd and feed management practices improved dramatically. Today, he has nine cows that yield 75 litres of milk a day. The milk also has higher total solid content, an indication of better quality, which ensures a better price.

Kumar says he makes a profit of ₹18,000 per month from his dairy farm now. “I want to add another five cows and eventually take the milk output to 200 litres,” he told Mint, as he readied his cows for milking on a Saturday evening.

Kumar’s turnaround story is a rarity. India has 80 million dairy farmers and only a fraction of them have embraced change. Others still follow primitive management practices, suffer from poor yield and see little profit.

Operation Flood, launched in 1970, transformed India from a milk deficient nation to one that is self-sufficient. In 2024-25, India produced 248 million tonnes of milk and consumed 243 million tonnes.

“Operation Flood also made India the largest producer of milk in the world accounting for 26% of the global output,” said R.S. Sodhi, president, Indian Dairy Association (IDA) and the former managing director of Gujarat Co-operative Milk Marketing Federation, which owns the Amul brand. But, that operation did not impart efficiency.

The famed co-operative model offered livelihood to millions of farmers with one or two cows each. It gave them a source of supplementary income and improved their economic status. But it created a fragmented dairy farming sector that was inefficient. While India has the largest number of cows and buffaloes in the world—numbering over 61 million— the milk yield per cow is one-eighth of what is realised in the US, New Zealand or Australia, according to a study by IMARC Group, a global market research company.

Low yield makes the entire value chain uncompetitive. Plants abroad that produce value-added milk products, such as flavoured milk, cheese, butter and milk powder, benefit from huge economies of scale. “We are no match for them,” said K. Rathnam, chief executive officer (CEO) of Milky Mist Dairy, a large private dairy company.

This explains why the Indian government, despite enormous pressure from the US, is resisting any tariff concession here—India and the US are negotiating a trade pact but India’s unwillingness to open up the agriculture and dairy sectors have become a sticking point. Removal of protection right now will result in a flood of imports that could cause social upheaval, eventually hitting India’s self-sufficiency in milk.

The big question though is if India’s dairy sector can be reformed, going ahead.

Size matters

India’s dairy structure is unique. Like we mentioned earlier, it has over 80 million farmers producing 248 million tonnes of milk. Of the total milk produced, only 54% is available for marketing as the rest is consumed by the farmers themselves. Of the 54% available, about 70% is handled by the unorganized sector (neighbourhood milk man who aggregates milk and distributes locally) and the balance by the organized sector, which is co-operatives and private players.

Every state has a co-operative that collects the milk and processes/distributes it under their own brand. In Gujarat, it is Amul. Then there is Nandini (Karnataka), Aavin (Tamil Nadu), Verka (Punjab) and Sudha (Bihar) to name a few. In recent years, private companies such as Parag Milk Foods, Hatsun Agro Product, Heritage Foods, Milky Mist Dairy, Dodla Dairy and many more have grown in size. They too procure from the farmers.

The litany of woes is long.

First is the herd size. “In the US, the average herd size is 300. In India, it is just three to four cows,” said Sashi Kumar, founder & CEO, Akshayakalpa.

Secondly, most farmers in the country treat dairy as a ‘side business’, to supplement their agricultural income. “They do not follow any modern practices when it comes to herd and feed management,” he added.

Third, consider the type of cow farmers need to buy. “To optimize milk yield, one needs to buy the right cattle for the right agro-climatic condition,” said M.P. Veeramani, an executive at Akshayakalpa. In hot climates, country cows do better but farmers end up buying Holstein Friesian (HF) breed or HF cross, which typically gives better yield only in temperate climates.

Big house, good diet

Once the cattle are bought, they need to be housed properly. The shed has to be designed for temperature control and hygiene. “After milking, the udder pores remain open. The animal could get infected in a dirty shed. Once infection sets in, they take months to recover and milk output drops,” Veeramani said.

Also, the shed should be big enough for the animal to move around. Tying up the cow is bad practice. “If you tie the animal, it gets stressed, resulting in low milk output,” he further said. In the US, there are large grazing lands where animals roam freely and feed on the grass. In India, with little place to let the animals graze, most farmers tie them up in dirty sheds for the whole day.

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Herd management apart, food intake is very critical as animal health has a direct bearing on milk yield. As a thumb rule, 450 grams of compounded cattle feed is needed for every litre of milk. A balanced diet including supplements such as calcium, vitamins and minerals are needed for body metabolism and milk production. Most Indian farmers just feed the animal paddy straw. “Straw just fills the animal’s stomach and produces cow dung but not milk,” the executive pointed out.

Another challenge is breeding. In its lifetime of 12 years, a cattle can lactate seven times. Cows deliver milk only after they get pregnant and deliver the calf. Natural breeding is unpredictable and it is important to adopt good artificial insemination practices to impregnate the cow. Not many farmers go for it. They miss the breeding cycle, impacting milk output.

The India attraction

While India’s milk production play is weak, its consumption story is strong. Its 1.45 billion people consume 98% of the milk the country produces. This demand for milk is only expected to grow sharply with economic growth, which would leave more disposable income in the hands of the people.

Other growth triggers include a large working population that prefers ready-to-eat dairy products, changing consumption patterns (shift away from cereals to dairy products) and a large vegetarian population that sees milk as an important source of protein.

India’s milk consumption, according to IMARC, is expected to rise by 100 million tonnes to 331 million tonnes in the next decade.

“It is not surprising that the world wants access to the biggest and fastest growing dairy market,” said IDA’s Sodhi. “The domestic demand in the US and New Zealand is flat while production is increasing. They desperately need a market.”

Call for protection

Dairy players give three reasons for not opening up the sector.

In the US, the dairy sector is an industry. They have 25,000 farms with 10,000 to 15,000 cows each. Some even have more than 50,000 cows. On the other hand, in India, there are over 80 million small farmers. “It is industry vs livelihood,” Sodhi said.

Second, India’s population is expected to total 1.65 billion by 2047. Demand for dairy products will continue to rise sharply. It is thus critical that India remains self-sufficient in milk. “Allowing duty free imports will see flooding of cheap products. This will hurt milk procurement. Farmers will shift away from the dairy sector. This will compromise India’s self-sufficiency and milk prices will start rising,” Milky Mist’s Rathnam said.

Sodhi recalled a similar situation. “In the mid-1990s, India allowed a small portion of edible oil to be imported. Cheap imports came in and Indian farmers stopped growing oil seeds and today, we import 65% of our needs,” he said.

Third, while Amul may be the only strong pan-Indian brand, India has many regional brands which command a strong brand loyalty. Any foreign brand coming into India will have no choice but to undercut the market to gain share. Companies such as Lactalis, Danone and Fonterra have surplus capacity and deep pockets to disrupt Indian companies.

Experts, however, argue that the protection should not come in the way of reforming the sector.

IVF needed

All we need to do is to get more from less. In other words, get more milk from fewer cows,” said Rathnam.

Akshayakalpa’s Sashi Kumar says through ‘extension services’, the average yield of cows that his company procures milk from has risen to 4,000 kg per animal per year from 1,500 kg earlier. But that is still three times lower than 12,000 kg levels in the US and New Zealand.

Extension services teach farmers good dairy farming practices.

In addition, better government support, which today is predominantly subsidies oriented, may be required. IDA’s Sodhi also called for higher budgetary allocation for the dairy sector in line with its contribution. The dairy sector contributes 31% to the agricultural gross domestic product (GDP) but the allocation made is just 4%, he added.

Globally, a lot of importance is given to the progeny during breeding. Good progeny leads to higher milk output. Also, sex-sorted semen ensures female calves which increases milk output in the long run. “A cow can conceive only once a year but IVF (In Vitro Fertilization) technology can be used to take a sex-sorted semen from a good progeny and impregnate dry cows. That way, we can create a large pool of high yielding female calves,” Sodhi said.

Efforts, he added, should be made to make infertile cows (almost 25% of all female cows) fertile. “If that is achieved, milk output will increase by 15%,” he said.

Globally, a lot of importance is given to the progeny during breeding. Good progeny leads to higher milk output. Also, sex-sorted semen ensures female calves which increases milk output in the long run.

If milk yield increases, India’s dairy sector will become more competitive as it will also benefit from economies of scale. Exports, which are beginning to make a mark in a small way, can accelerate. As per government data, export of milk and cream, butter, ghee and butter oil has doubled in the last three years in volume terms. Bangladesh, United Arab Emirates and other West Asian countries are big importers of Indian dairy products for now.

“Three years ago, Indian exports happened at break-even price levels. Now, Indian brands are beginning to get good margins. It is clear evidence that they are becoming competitive in a market dominated by global brands. India is set to become a prime player in the global dairy sector,” said Mukesh Saxena, senior analyst, India Ratings & Research. Amul, Mother Dairy and Britannia Industries are some of the major exporters.

Most importantly, Indian farmers must understand that dairy is a profitable business on its own—and not just a source of supplementary income. This awareness is yet to sink in.

D. Raja of Velur village, in Chengalpattu district of Tamil Nadu, understands this better than anyone. Despite making a profit of ₹20,000 per month by adopting modern dairy management practices, he is fighting a battle within his family.

“His father still believes growing paddy should be the main source of income and is against expanding the dairy business,” Akshayakalpa’s Veeramani said. “This, despite dairy making more money.”