Small Dairy Farmers Across India are Struggling for their Livelihoods

Public policy decisions taken by the government of India in the name of improving accessibility and quality of milk over the past four decades have systematically destroyed local systems of milk production, procurement and distribution.

Dairy farmers in Odisha have been pouring milk onto the roads, protesting a recent decision by the Orissa State Cooperative Milk Producers’ Federation Limited (OMFED) to reduce milk procurement by 30% from April 1 this year. The federation’s decision has resulted in a steep decline in milk procurement as well as procurement prices. Small dairy farmers, whose livelihoods depend on selling milk, have been the hardest hit. This is not just the predicament of small dairy farmers in Odisha, but that of small and marginal farmers across the country: a grim situation that was first experienced by farmers in north India towards the end of 2014, continuing through 2015 and 2016 in several parts of India and affecting states which have experienced the ‘white revolution’, including Maharashtra, Karnataka, Telangana, Andhra Pradesh, Tamil Nadu, Goa, and now Odisha.

Small dairy farmers in Andhra Pradesh and Telangana, particularly those who own cows, continue to struggle: their cost of production varies between Rs. 28-30 per litre of milk, while dairies procure cow’s milk at Rs. 18-24 per litre. In 2015, dairies in Maharashtra were procuring cow’s milk from farmers at Rs. 18-19 per litre as opposed to rates in 2014 at Rs. 26-27 per litre for cow’s milk and Rs. 29-30 per litre for buffalo’s milk. Currently, farmers in Odisha are being paid between Rs. 19.96 and Rs. 25 per litre for cow’s milk (based on primary data gathered by us at the Food Sovereignty Alliance-India (FSA) from the OMFED collection centre in Kendrapada, Odisha). A litre of bottled water today costs nothing less than Rs. 30. Ironically, in all these states, dairy processors – both private and cooperative – have blamed farmers for poor quality of milk, citing this as the reason for lower prices.

In the wake of the massive milk crisis, FSA carried out a detailed investigation in 2015, to understand the genesis of the problem. Our forthcoming study (The Milk Crisis 2015: the story behind the numbers) demonstrates how private and cooperative dairy processors are wrongly blaming small farmers, whereas the crisis is squarely located in the integration of Indian dairies into global markets, to which they export skimmed milk powder (SMP). The initial trigger for the current milk crisis in India was a slump in global SMP prices due to a glut of SMP, reportedly caused by a fall in imports by China and Russia. This was further exacerbated by the withdrawal of milk quotas in the European Union (EU) in April 2015. These low global prices affected Indian exports of SMP: in 2013-2014, exports of nearly 1.3 lakh tonnes of SMP valued at Rs. 2,717.56 crore fell to 30,000 tonnes in 2014-2015.  The US Department of Agriculture in its December 2015 edition of Dairy: World Markets and Trade reports that the slump in farm-gate milk prices through this period has occurred globally, driving small farmers across the world out of production and shifting production to large farms.

In 2015, Indian dairy processors, such as Amul, announced their intention to dispose of excess SMP stocks in the domestic market as recombined liquid milk (milk from combining SMP, butter fat and water). This in turn depressed the procurement prices of fresh liquid milk. There were sharp spikes in imports of subsidised butter fat, primarily from the US and the EU towards the end of 2015 and in the first quarter of 2016, possibly linked to the heightened demand for butter fat for preparing recombined liquid milk. Cheap butter fat imports threatened to further depress procurement prices, as they have in the past.  This slump in Indian milk procurement prices has happened despite relatively high import tariffs in India – ranging from 30-70% – on SMP and butter fat.  Rising input costs and plummeting procurement prices are pushing small farmers out of production and into further debt.

From local markets to cooperatives 

Public policy decisions taken by the government of India in the name of improving accessibility and quality of milk over the past four decades have systematically destroyed local systems of milk production, procurement and distribution. Between the 1970s and 1990s, significant public investment – popularly known as “Operation Flood” – built India’s three-tier cooperative dairy system (comprising village level cooperative societies, district level unions and state level federations), protecting producer prices and regulating consumer prices. India’s neoliberal capitalist economic reforms in the 1990s identified dairy as one of the country’s high growth engines and policies thereafter gradually abandoned all pretence of protecting small dairy producers. Policies to liberalise the dairy sector included legislative amendments (for example, The Milk, and Milk Product Order, 1992. S.O. 405(E). 1992.), that facilitated the emergence of the domestic private dairy industry. In 2011, the government facilitated the entry of foreign dairy players, allowing 100% foreign direct investment in food processing, including milk and milk products, as also provided several tax breaks to foreign investors.   

In the wake of liberalisation, the organised cooperative sector was advised to enhance its competitiveness and rise to the challenges of liberalised markets. This was to be done by expanding procurement, processing and sales, diversifying product ranges, modernising the supply chain from producer to consumer, cutting costs through economies of scale, expansions and mergers. Many unions unilaterally disassociated from state federations, registering themselves as independent producers – companies which are institutional forms that favour market competitiveness and free the cooperative from welfare concerns for their members. Cooperatives brands such as Amul expanded vastly, with Amul’s revenues reportedly growing by over 170% between 2009-10 and the 2015 fiscal year.

Thus it comes as no surprise that Amul aggressively entered Hyderabad and other parts of Telangana and Punjab in 2015 in order to sell liquid milk and dispose of its surplus SMP stocks. The Gujarat Cooperative Milk Marketing Federation Limited (GCMMFL), the cooperative body that manages Amul, also signed a memorandum of understanding with OMFED to buy 50,000 litres of milk per day for its Kolkata Division.

The GCMMFL also has plans to distribute milk across the northeast. Milk and its products have become commodities, and each cooperative as well as private dairy in India wants to expand its dairy to maximise production and push for new markets. What is worse, to keep profits intact, milk is being pushed as a necessity in areas where it was never part of local food cultures and diets: for example, in Adivasi areas of central India and in the northeast, where people have traditionally sourced their protein and calcium from biodiverse diets consisting of millets, pulses, meat and vegetables.  

Farmers in turn have been advised to expand, intensify and ‘modernise’ their production by replacing local breeds with high-producing exotic milk breeds to enhance production and to decrease their costs of production through expanding herd sizes. Despite the fall in procurement volumes and prices, government development programs continue to promote dairying and finance farmers with loans to purchase high-yielding milch animals. This approach pushes small farmers to specialise and intensify production, then get trapped into debt and finally lose their livelihoods. There is little chance of their being able to go back to dairy farming thereafter.

From cooperatives to corporations

Sadly, it is increasingly evident that cooperatives are making choices that are no different from those made by private dairy corporations. They are no longer structured to protect the common and collective concerns of small farmers. Rather, they are driven by profit margins. Amul or for that matter any dairy cooperative that is dumping its SMP stocks into a new region – with the SMP produced from milk procured at prices that are lower than the cost of production from farmers in another geographic location – is destroying the livelihoods of local dairy farmers. This is also a form of cultural hegemony.  It is evident that India’s dairy growth aspirations are centred around corporations capturing the space of existing ‘informal’ and ‘unorganised’ markets, where 70-75% of all milk and milk products continue to be traded.

Consumers celebrating the fall in milk prices in several parts of the country are unaware of the difference between fresh and recombined liquid milk and the impact of falling prices on small dairy farmers. In light of the rapid integration of Indian dairy processors into global markets, national milk prices may increasingly become more volatile, which will in the long run directly affect consumers. Volatile procurement prices push small dairy farmers, vendors and dairy processors out of the system, ultimately leaving consumers at the mercy of a few large dairy players. This has been the pattern across the global north, where the trade is controlled by a handful of dairies. Ironically, some of the top global dairy companies are registered cooperatives, which now function completely like corporations!  

Neither state nor the central governments have taken serious heed of the devastating impact of this crisis on small dairy farmers. Some state governments – Telangana, Tamil Nadu and Karnataka – did respond by providing short-term price support to small milk producers who supply to state cooperatives. However, no concerted effort has been made by the central government to provide any safety nets or protection for small producers. The central government has not made financial support available to small farmer in order to enable them to re-diversify their farming systems, nor has it given any support for local markets in which milk may be produced in a more realistic fashion for local consumers. It has not taken any steps to prevent the monopolising of the value chain by a few big players.

Milk producers in Odisha and other states, while continuing to put pressure on their dairy cooperative federations, need to also consider strategies such as organising themselves into non-centralised and localised milk producer collectives that link directly to local consumers. This would enable them to step away from an extremely volatile and vulnerable global system of commodity production, which is not controlled by people. The only hope for the future lies in localised peoples’ milk markets built from agro-ecological livestock-based cultures in which livestock is reared not as machines to produce single commodities, but as an important and multifaceted component of food and farming.

Srikrupa R., Sagari R. Ramdas and Radha Gopalan are with the Food Sovereignty Alliance-India.