Milk Production – Overview
India is the leading milk-producing country worldwide, accounting for one-fifth of the global milk production. Over the last decade, production has increased at 5.5% annually, with 187.7 million tonnes of milk being produced in FY 2018-19.
Unlike the West, India’s dairy industry is highly unorganised. About 60% surplus milk is handled by the unorganised sector (milkmen), while the remaining 40% is procured by the organised sector comprising dairy co-operatives and private companies. In developed countries, about 90% surplus milk is handled through the organised sector.
As the dairy industry is unorganised, technology advancements in the sector have been minimal. Lack of technology in this sector has resulted in high wastage and inconsistent quality & quantity of milk for many small farmers. According to research conducted by the Chambers of Commerce and Industry of India (Assocham) and MRSS estimates, about 3% of the milk produced gets wasted annually.
The volume of wastage, coupled with increased demand for dairy products, may hamper India’s plan to produce about 300 million tonnes of milk by 2024. In addition, average milk yield of cows in India is lower than US counterparts—1,248 kgs of milk per cow in a year compared with ~10,000 kgs of milk per year. Indian dairy farmers must increase produce and focus on reducing wastage to meet the target.
Adopting technology solutions can help in increasing production efficiency and reducing wastage in the supply chain. Digitalisation will play a crucial role in making the transformation possible.
Digitalisation will have a profound impact on the ‘Milk Production’ segment in the value chain. In India, dairy farming is unorganised, so technology penetration is relatively less; however, in the last five years, a few start-ups have mushroomed in this space. These firms aim to increase farmer productivity and reduce wastage.
Cattle management is one of the key areas where digitalisation can have a significant impact. By leveraging the Internet of Things and advanced analytics, farmers can track the feeding pattern of cattle and monitor their health. This is likely to improve cattle productivity and increase milk yield. However, cattle monitoring through AI-based solutions is still at a nascent stage in India and only a few companies are offering this solution.
One such company offering cattle management solution is Prompt Equipments. The company tied up with the Indian Institute of Technology, Mumbai, to offer a wearable belt ‘BovSmart’. The belt utilises AI and the IoT to monitor cattle breeding and send timely alerts to farmers. Another company, Stellapps Technologies (Stellapps), provides a similar mooOnTM solution, which helps in maximising cattle productivity and herd management through a wearable device for cattle and a mobile application, which provides recommendations to optimise herd performance. According to Stellapps, milk yield can be increased by 20% and cattle health expenses can be reduced up to 50% through this solution. About 4.5 lakh cattle are monitored through Stellapps solution.
Apart from cattle management, the other potential areas of dairy digitalisation are supply chain and farmer payments. Supply chain of the Indian dairy industry is quite complex owing to its dependency on various factors such as ambient temperature, availability of cold chains and short shelf life. The fragmented Indian dairy industry further adds to the complexity. Digitalisation solutions such as the IoT and advanced analytics can help by sharing real-time data with different stakeholders, and detecting any deviations in the quality and quantity of milk during phases of transportation in the value chain.
Another potential benefit of digitalising dairy supply chain is better decision-making. Real-time data and advanced analytics help automate activities such as order tracking, inventory management, payments tracking and sales growth and facilitate better understanding of customer purchase patterns. A few start-ups digitalising dairy supply chain in India include Stellapps, Mr. MilkMan and Trinetra Wireless.
Dairy co-operatives and milk unions are also focussing on introducing digital payments to farmers as opposed to using the traditional cash mode. As a large chunk of India’s dairy industry is controlled by small farmers, the process of digital payments has its own set of challenges as most small farmers do not have a bank account. However, dairy co-operatives such as the Gujarat Co-operative Milk Marketing Federation (GCMMF), famously known as ‘Amul’, are opening bank accounts for dairy farmers and instantly transferring payments to them. In 2017, Fino Payments Bank also tied up with Gokul Dairy and Mother Dairy to digitise payments in the milk industry.
Digitising payments should not stop only at depositing money to farmer bank accounts. Considering the Indian dairy industry is majorly controlled by small farmers, it is imperative for corporates to develop solutions to provide farmers access to low-cost financing and insurance.
India’s dairy sector is unorganised and so, its future rests on supporting small dairy farmers. Advent of the latest technology and digitalisation have been slow in the sector, resulting in lower productivity and wastage. However, the scenario is changing with start-ups entering the space and bridging gaps in cattle management and supply chain. The future looks bright for the Indian dairy sector, as digitalisation is expected to usher in a new phase of growth.