GUJARAT DAIRY CLUSTER

Industry Analysis and Competitiveness Project

By
Astha Arora (17S110)
Barnava Chatterjee (17S511)
Garvit Rawal (17S517)
Manish Madhav (17S526)
Sourav Ghosh (17S550)
Sushikh Bose (17S554)
India Overview:

India is a country with rich cultural heritage and is one of the oldest civlizations. It

boasts of a rich heritage, ethic-cultural diversity and peaceful co-existence of multiple

religions. Post the country becoming Independent, India has made significant progress

and has grown into an agricultural and industrial economy.

1.1 Geography

The country is located in South Asia stretching over majority of the Indian

subcontinent. The total area amounts to around 3.3 million sq. km. It is ranked the 7 th

largest country in the world. It is surrounded by the Indian Ocean from the southeast

and the Arabian Sea from the southwest.

1.2 Population

Currently India is the second most populated country in the world behind China and

the population of the country is 1.33 billion people. In terms of density of the population,

India is considered to be one of the largest in the world with more 270 people living

per sp. km. and more than 30% of the country’s population lives in Urban Areas.

1.3 Country’s Endowments

Factor Endowments facilitate the country’s growth both on the social front and as well

as on the economic front. Economists usually classify endowments as land, labour

and capital. The following are some of the endowments which are advantageous to

the country’s development: -

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Large and Young Population

The huge supply of labour, both skilled and unskilled have ensured that the labours

costs are inexpensive and availability across Industries. Especially for the agricultural

as well as the Industrial Manufacturing Sectors. The labor demographics are

favourable like the median age in India as on 2016 is 27.6 in comparison to China’s

37.1

Climatic Conditions

The presence of the Himalayan Mountains which serves as a natural barrier and being

located in the north of the equator helps to block the winds from Asia helping India to

enjoy a warmer climate in comparison to other similar countries. Favourable bio-

diverse conditions of species and plants i,e wet tropical/ dry tropical lands, mountain

climate etc.

Large Size

India’s sheer size of area viz., 3.3 million sq. km. and also being 7th largest country in

the world with easy access to sea and plenty of fertile land helps the industrial and

agricultural economy of the country.

There other side of things, where the country’s endowments serve as hindrances

to the development and some of them are listed below:

Lack of Infrastructure

The country’s road, railways, ports and airports have been maintained poorly by the

government. This has resulted in logistics and transportation costs going through the

roof and weakening the ability to conduct business effectively and affecting the entire

environment in general

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Lack of Financial Resources

Government’s policies and regulations have become a barrier for existing and new

investor to ply their trade with ease and has restricted influx of new cash coming into

the country. In general, affecting the access of capital for various stakeholders.

Depleting Natural Resources

Indian as a country, is not rich in terms of natural resources. Apart from Coal, India

boasts of very few minerals (oil, gas, metals, minerals etc.) The large population size

also plays a negative role with resources getting depleted at a rapid pace and India

becoming more active on the Import side.

2. Economic Performance

India is the 8th largest economy in the world and has been growing rapidly over the

last decade or so. The per capita GDP growth rate is above 5% making India one of

the fast-growing economies in recent times across the world.

But still the population levels still living in poverty is high and the average level of

human and social development is limited. The growth in these areas is similar to that

country’s like Nigeria and Kenya (similar GDP levels).

UNDP’s HDI ranks India in the 131st place which is a combination of health indicator,

knowledge levels, standard of life etc.

2.1 Export Diversity

The major export sectors of the country are fuels, precious metals and textiles. A year

ago, pharmaceutical exports made up 4% of all of India’s exports amounting to around

12.6 billion USD.

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2.2 Labour Productivity

Service Industry accounts for more than 50% of the total economy whereas

Agricultural and manufacturing contributed between 15-20% to the GDP in terms of

value added. However, the contribution from Agriculture and manufacturing has been

declining over the years which projects the Service sector as the major contributor to

the growth of country’s GDP.

3. R&D and Innovation

Education sector is an area of specialization for the country and contributes to

the growth of several sectors especially the Pharma sector. Education focusses

primarily on Engineering and Science. More than 50% possess a PhD in these

areas. These streams are well supported by the Government which provides

funds/ schemes focussing on R&D and tax deductions for research centres and

universities.

China still leads India in this area despite the country taking dedicated

initiatives, the sheer volume of difference in investments in R&D between China

(1.79% of GDP) and India (0.82% of GDP) plays a significant role.

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4. Porter’s Diamond for India

5. Gujarat’s Competitive Position

State Overview:

Gujarat is one of the leading industrialised states in India which is also

considered as the petroleum capital of India. The state capital being Gandhi

Nagar with a geographical area 1 196,244 Km² and a population of 6.04

Crore** There are 45 ports, 18 domestic airports and one international airport.

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Gujarat is the 3rd largest manufacturer of denim in the world, the world’s

largest producer of diamonds, accounting for 72 % of the world’s processed

diamond share and 80 per cent of India’s diamond exports and also boasts a

total of 74 SEZs.

Gujarat accounts for the largest share in the total investments in the food

processing sector of India.

Economic Overview:

The Gross State Domestic Product at current prices are INR 887,900 crores**

(USD 130 Billion) in 2015-16 with a growth over previous year of 10.93%. The

per capita income is INR 1,07,624 with 14.82% change in Per Capita Income

over previous year. The FDI inflows to the state is about INR 90156 crores**

(USD 13.2 Billion for the FY00-FY17.

Gujarat Dairy Cluster:

Gujarat is one of the largest milk producing states in India with the

contribution of 7.75% share in the total milk production of India.

The state having 17 Cooperative dairy milk unions & 25 private dairy plants

has a milk collection of 3.45 billion liters with over 3 million milk producers,

affiliated to more than 15,000 Primary Milk Cooperative Societies.

Milk contributes to 22% to the Agricultural GDP of Gujarat and is one of the

biggest sectors for supporting livelihood in the state.

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 Gujarat is host to more than 10,000 companies in the food processing

sector. An indicative of key companies and their district of presence in

the state is given below.

Porter’s Diamond Framework for Gujarat’s Dairy Cluster:

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Factor conditions:

Strong infrastructure consisting of 18 co-operative dairy milk unions & 25 private

dairy plants which are affiliated to 15,000 Primary Milk Co-operative Societies. All

thanks to the concept of Gujarat Cooperative Milk Marketing Federation Ltd. It was

all the result of the local farmers getting disappointed with the policies of the local

trade cartel. The farmers approached Sardar Vallabhbhai Patel for a solution. They

were advised to get rid of the local middlemen. 1946 marked the establishment of

GCMMF under the chairmanship of Dr Verghese Kurien, the father of White

Revolution of India

The Delhi-Mumbai Industrial Corridor starts at Mumbai and ends at Delhi while

passing through the heard of Gujarat. It is one of the world’s largest infrastructure

development project marking itself at $US 90 Billion and it is still ongoing. It consists

of 24 industrial regions, 8 smart cities, 2 international airports, 5 power projects and

2 mass rapid transit systems and two logistics hubs. This allows the milk supplies of

Gujarat to reach just about anywhere within the stipulated time by operation heads. It

is one of the key infrastructural supports to spreading the reach of the Gujarat Dairy

cluster to the entire nation and beyond. The corridor consists of 24 key nodes which

are connected to important industrial or commercial pockets.

Large amounts of animal resources are maintained by Gujarat. Out of 102 lac

households, around 42.6 lac are engaged in Dairy and Animal Husbandry sectors as

their primary or secondary source of income. A significant push was given by Gujarat

Livestock Development Board (GLDB) started in 2003. They optimised the bovine

population through artificial insemination in organized breeding. Their objective is

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also to bring all breeding agencies of the state under one umbrella. Medical facilities

were established with funding from the government to harness artificial semination.

The head office of Gujarat Livestock Development Board – Gandhinagar is situated

at Krishibhavan, Sector 10A, Gandhinagar. There is also training centres dedicated

to cattle breeding at Morbi and Patan in Gujarat.

The technology involved in the production of Milk in Gujarat is a part of White

Revolution II by Dr. Kurien. Initially, all the milk producers in the villages had to wait

for the milk collection truck from 5:30 am to 7:30 am because the milk could not be

kept at the optimum processing temperature. Milk would be loaded in aluminium

cans of 35-40L. The chilling centre could be as far as 150km. The same procedure

had to be repeated for evening’s milk scheduled between 5:30 pm to 7:30 pm, just to

be placed at the chilling centre at 11 pm. The farmers had to milk their cows and

buffalos at 5 am/ 5 pm or else they would miss the collection truck. The Bulk Milk

Coolers (BMCs) changed everything. With an average capacity of 3,000 to 5,000

litres and going all the way up to 10,000 litres, they changed how these farms

operated. With BMCs, the farmers could store all the milk locally and maintain it at

the temperature of 4°C till the truck has collected till morning, afternoon or even the

evening. The trucks had insulated milk tankers that could maintain 5-6°C even in

Gujarat summers and deposit the milk to a collection point.

Hassle free financing through DPAP (Drought Prone Areas Program), SAFL

(Sustainable Agro Commercial Finance Ltd.), IRD and different institutions like Tribal

Development Board, Social Welfare Board and Scheduled Caste Economic

Development Corporation, etc.

Intensive Cattle development Programme (ICDP) with 640 sub-centres for

information dissemination and training. A few institutes have also been set-up to

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educate the farmers on cattle handling and breeding programs like Junagadh

University, Ahmedabad RSFPD, etc.

Demand Conditions:

Rising population and income levels of the common household is promotion more

and more purchases of dairy products. Especially repeated purchases. India faces

1.2% of annual change since 2016 and a current population of 1.35 billion (2018).

The per capita income of India is growing at a rate of 8.6% per annum. This simply

rewards people with more purchasing power and boost the industry in turn.

The advent of GCMMF in 1946 cut out the involvement of middlemen, hence

allowing the farmers a greater share of profit. This still, by-and-large is a relatively

policy free sector of business as the Anand Pattern structure cuts out all the scope

for middlemen.

In recent years, the consumer is becoming more and more health conscious. This

generates a demand for fat-free and skimmed milk with minimal carbohydrates. This

is also giving way to newer methods to process dairy products in advanced ways to

reduce fat content.

Related & Supporting Industry

One of the main reasons behind the success of Gujarat Dairy Cluster is that it had a

strong support from the related and supporting industries. The establishment of

High-Tech Dairy Farming Unit project in the Kutch region provided a huge boost to

the supply of milk. This project particularly came up because of the high demand of

milk in the region.

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The establishment of Cattle Feed Manufacturing & Processing Unit came up in order

to supply cattle feed for the huge cattle population present in the region keeping in

mind the future demands of the cattle population for milk production.

Establishment of Organic milk and milk product manufacturing and processing unit-

This project aims to establish integrated 22 Investment Environment and

Opportunities in Food Processing: Gujarat modern animal husbandry with a modern

milk processing unit, to manufacture range of organic milk products under strict

hygienic condition so that the milk is untouched by human hands and air. The entire

process will be automated and carried out in a vacuum sealed environment

A large number of Food Processing Units both in terms of quantity and variety, have

helped to boost the cluster. More than 10,000 Food Processing Units are present in

Gujarat out of which there are some 492 dedicated units catering particularly to the

dairy industry. Some notable mentions in the dairy food processing units include

Amul Dairy, Anand Mother Dairy, Gandhi Nagar G T Foods, etc.

There are around 560 cold storage units which act as a boon to the dairy industry

because of the perishable nature of milk. Spread across geographies, these cold

storage units help to preserve the raw milk as well as finished products.

Establishment of Biodegradable Packaging for Food Products-Bioplastics are used

as alternatives to conventional fossil fuel-based plastics and are increasingly being

used in Food Contact Materials (FCMs). The Irradiation Unit in Bavla, Ahmedabad (1

of the 12 such Irradiation Centres in India) can work in low, medium and high doses

of radiation. Radiation helps to kill germs and preserve pack contents. Both these

supporting industries have helped in the success of tetra packs as a reliable &

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efficient packaging material for milk and milk-based products which has impacted the

dairy industry in a positive way.

Firm Strategy & Rivalry

There is always a first mover advantage in such clusters. The Gujarat Dairy Cluster

formed the Gujarat dairy co-operative known as Kaira District Co-operative Milk

Producers’ Union. The Kaira Union is based on the 3-tier Anand Pattern structure

which consists of collecting milk from various village level co-operative societies and

processed by district unions themselves.

The cluster was immensely benefited due forward integration i.e., production of

processed milk & milk-based products from the surplus milk. This helped in

solidifying the dairy cluster by developing a market for the surplus milk.

The Gujarat Dairy Development Corporation (GDDC) was set up in 1973 with a view

to supporting dairy development programme for the districts which lagged behind. By

the end of 1995-96, 18 out of 19 districts had been covered under the co-operative

Milk Producers union. Out of 18 dairy plants, 12 dairy plants were under GCMMF

(Gujarat Co-operative Milk Marketing Federation Limited) and 6 dairy plants viz.

Jamnagar, Surendranagar, Amreli, Bhavnagar, Junagadh and Kachchh are under

GDDC. GCMMF marketed brands such as Amul, Sagar & Sugam with a view to

avoid competitive marketing and benefit the farmers as a whole by reducing

unnecessary expenditure

Government

The governments – both central & state have played a huge role in shaping the

Gujarat Dairy Cluster. Dedicated Five Year Plans -Various schemes such as Dairy

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development Scheme, Scheme for Gir Cattle Improvement, Establishing Cattle

Breeding farms & Supplementary Cattle Breeding Centres, setting up Intensive

Cattle Development projects (ICDP) with 640 sub-centres, etc. have helped to boost

the dairy industry as a whole in Gujarat.

From time to time the Gujarat government continues to help the dairy industry

through benefits & subsidies so that the dairy cluster remains competitive in national

as well as international markets. Gujarat govt. recently offered subsidy of Rs. 300

crores on export of 60,000 tons of skimmed milk powder through GCMMF amid

slump in international milk prices

Central government’s ongoing dairy development projects such as National Dairy

Plan Phase I (NDP I), National Programme for Dairy Development (NPDD) and Dairy

Entrepreneurship Development Scheme (DEDS) are some of the dedicated

programs that are specifically designed for the dairy industry so that it develops into

a larger and more efficient industry as a whole.

GLPC (Gujarat Livelihood Promotion Company Ltd.) facilitation helped to purchase

improved breeds of cattle and buffaloes and were linked to respective districts milk

unions. This helped people of the marginalized sections of the society to procure

cattle of good breeds and also helped them to finance these purchases. It also linked

these people to the respective co-operative milk unions so that they can directly

become members of the milk unions and sell milk to the co-operative society thus

being an end-to-end solution for these people.

Under Van Bandhu Kalyan Yojana over 14,000 SHG members (primarily tribal) were

identified for dairy farming. These people were provided cattle at a subsidized rate

and basically given a means to earn their livelihood. This served as a dual benefits

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initiative as it provided employment to the unemployed and also helped to increase

the milk production to cater to the needs of the growing demand for raw milk.

Cluster Map:

The Gujrat Dairy cluster is an amalgamation of major and minor milk aggregators

and producers.

The product offerings of this cluster can be ranging from basic day to day consumer

goods related to milk, Dairy products which acts as raw materials to other related

industries like ghee and “Khoya” to sweets industry.

The strength of this cluster is characterized by dense local clusters with a very strong

base of specialized local suppliers.

Find below the Figure containing Cluster Map:

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The Government of India showed a clear inclination towards this cluster by allocating

both time and resources to the cluster. Gujarat dairy co-operatives have a 3-tier

structure termed as ANAND PATTERN Co-operatives. The milk is collected at

village level co-operative societies and processed by district unions themselves.

While district unions them-selves market the liquid milk, the marketing of surplus milk

and milk-products is undertaken by state level federation viz. Gujarat Co-operative

Milk Marketing Federation Limited, Anand (GCMMF). The dairy development on co-

operative basis was obviously a great success in north and central regions of the

state so much so that it caught people’s imagination whereas in Kachchh and the

district in the Saurashtra region it lagged marginally. The State Government

established Gujarat Dairy Development Cooperation (GDDC) in 1973 with a view to

supporting dairy development programme for the districts which lagged behind. By

the end of 1995-96, 18 out of 19 districts had been covered under the co-operative

Milk Producers union. Out of 18 dairy plants, 12 dairy plants are under GCMMF and

6 dairy plants viz. Jamnagar, Surendranagar, Amreli, Bhavnagar, Junagadh and

Kachchh are under GDDC. There are 5 milk product factories also.

Government has also set up an association for the state called GLPC. Gujarat

Livelihood Promotion Company (GLPC) is the executive arm of Mission Mangalam,

the implementation agency for NRLM. It has been registered under The Companies

Act, 1956.

GLPC works through strategic partnership between large industries and Sakhi

Mandals / Self Help Groups / Producer Groups / Service Groups / Collectives of the

poor, through decentralized Micro Enterprise Ventures. The promoting companies /

entrepreneurs redesign the process where intensive tasks as job-works are

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undertaken by Self Help Groups in their respective homes or villages as self-

employment activities.

The supporting industry for this cluster consists of banking and finance institutions

consisting of mainly government banks like Canara, Bank of India, Oriental Bank of

commerce and some private players like ICICI offering specialised schemes for this

cluster and following a comparatively lenient credit policy at competitive lending

rates. Transportation and logistics, I s very crucial pertaining to the industry as the

commodity is perishable. There is certain logistics vendor like Jaipur Golden who

supports this type of transportation pan India and are dedicated towards the cluster.

Along with this, IRCTC has also started the transportation facility for Gujarat vendor,

Taking the products across India. Education and research forms a huge factor in

success of this cluster with institutes like IRMA, MIDFT, Anand University offering

courses specialising in domains related to Dairy and aiding the production.

The Indian dairy industry traditionally comprised unorganized milk producers who

were scattered in rural areas and depended on middlemen to sell their produce. The

input to the Diary Cluster is Dairy Animal is veterinary services, Dairy Animal Feed

producers, Dairy Product Manufacturers and cattle breeding. Vertinarary services

play a major role. The cattle needs regular medical services so unprofessional and

professional vets are serving this industry.

Dairy Product Manufacturing involves a lot of process like Pasteurization,

Homogenization, reception of raw milk, Fermenting, Drainage etc. Refrigeration is

the major energy consuming load in the plant, followed by other utilities like boiler,

compressed air system, pumping system and others. Storage equipment also form a

major part in the Dairy product manufacturing machines.

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Because cattle are the primary resource of this industry, Cattle breeding plays a

major role in dairy cluster. It was originated from Rohtak, Hisar, Jind and Gurgaon

districts of Haryana. For profitable commercial dairy production Murrah, Surti,

Mehasani, Jaffrabadi, Badhawari etc. are common and popular buffalo milch breeds.

Artificial and natural both insemination is used for the process.

The supporting services include Marketing Services, Packaging Suppliers,

Insurance, Logistics, Co-operatives and Cold Storage. The primary milk co-

operatives are the central agency of the grass-root extension activity.

Simultaneous efforts to encourage production and to arrange for marketing the

surpluses are necessary.

There are several by-products like ghee, cheese, cream etc. These products are

sold in various packaging of glass bottles, tetra packs, plastic packs etc. Numerous

methodologies of packaging technology for food have developed over the years.

New ideas of active packaging, intelligent packaging and engineering science offers

innovative solutions that play a vital role for up or monitoring food quality and safety

and increasing shelf-life.

The Government agencies like I.R.D.P and Western Ghat development agency are

helping the milk producers by financing them. Various banking agencies are also

engaged in extending loans for purchases of milch animals. State Bank of India has

a special scheme of loaning for purchase of milch animals under Government

Guarantee. Even though the loans were sanctioned for the purchase of high yielding

breeds of buffaloes such as Murrha, Jafarabadi and Mehsana, but the farmers used

to purchase the animals of local breeds in local weekly market. 2. The majority of the

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milch animals were purchased in the local markets. Thus, the financing policies were

not successful increasing the number of milch animals in the region.

Comparison with International Cluster (Dutch Dairy Cluster)

The Dutch dairy cluster is composed of approximately 30 000 dairy farmers, usually

gathered in large cooperatives which process the milk, transform it into different dairy

products and in some cases distribute it.

Most of those cooperatives do not distribute the dairy products abroad and instead

sell their products to consumer-packaged goods companies.

The cooperative model, strongly rooted in the Dutch Dairy history, makes dairy

processing very concentrated. The major player, Friesland, the 6th largest

international player processes 60% of the Dutch milk. The rest of the production is

handled by 20 other local cooperatives.

Diamond Model for Dutch Dairy Cluster

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Dutch Dairy Cluster Map:

Internationalization of the Dutch dairy cluster

India has a need for high-level technology and knowledge to improve the efficiency

and quality of the dairy chain.

Dutch expertise and technology in the whole dairy chain is innovative and unique.

The Netherlands has the reputation of being “World’s best performing dairy nation” in

terms of efficiency, sustainability and integral approach to the dairy chain.

On 16 December 2015, the Netherlands Enterprise Agency and 8 companies and

educational institutes (coordinated by NAFTC) from the Dutch Dairy sector, signed a

strategic PPP memorandum of agreement.

The aim of this partnership includes

 Accelerate and facilitate the exchange of knowledge, networks and market

insights between India and the Netherlands

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  The Dutch Dairy Cluster India is a consortium of companies that have joined

forces to provide adequate solutions to the Indian dairy chain.

 Solutions covering areas like generics, feed, animal health, farm management

and food processing technology is one of the main reasons for the

establishment of the cluster.

 Together with the relevant Indian public and private stakeholders and the

Dutch government an Indo-Dutch approach encompassing dairy farming,

handling and processing will be developed.

 This PIB program is focused on the effective positioning of the Dutch Dairy

sector in India and providing practical high-tech solutions to Indian dairy

industry.

Comparison between the Gujarat dairy cluster and the Dutch dairy cluster

We have drawn a comparison between the two-cluster based on analysing the

clusters. Most notably there are more similarities rather than dissimilarities when it

comes to the 2 clusters. A specific comparison chart is drawn below to illustrate the

point:

Netherlands Gujarat Cluster

 International recognition for high  Reputation spans internationally.

productivity, quality and safety Known as the ‘Oyster’ of the

 Education and research global dairy industry

developed in the “golden  Top research and rural

triangle”, Unique knowledge base management colleges like IRMA,

and application Anand Agricultural University

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  Netherland’s climate and soil are  Temperature is humid as it is

good for dairy cows and for the located in the Tropic of Cancer.

grass they eat Presence of Jinjwa grass in

 Good access to potential markets Gujarat helps in cattle feeding

across the whole European and  Caters to the dairy product needs

international markets of entire India and accounts for

 16.1% of all Dutch export to Asia 7.75% of India’s needs

 Important European Transport  Contributed to make India the

hub largest producer of milk in the

 Presence of best quality World

roadways, railways and airways.  Transportation is one of the best

 Being part of the European Union in the country.

helps in inter country  Presence of 42 ports and good

transportation quality roads

 Highest number of domestic

airports in India (18)

Recommendations for the Gujarat Cluster:

Issues Recommendations

 Increase of Private Players in the  Cooperatives Model should be

Industry causing lower benefits adopted more and given more

(profits/ margins) to farmers. importance to take care of the

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 interest of the farmers, even if

they run into losses sometimes.

 Inability to export to the world’s  Initiate actions to revoke the ban

largest importer of dairy imposed by the country which

products, China, because of a can be a huge boost for this

retaliatory ban imposed by that cluster’s growth in terms export

country against India’s import volumes.

restrictions on some non-dairy

 Sustain interest in Dairy and  Strict measures to ensure better

Farming amongst the next breeding and feeding practices.

generation. and protect the Indian market

from the dumping of dairy

products from other countries.

Generate employment at rural

level

 Rising Production levels; Fall in  Expand Inter-country Distribution

demand forcing to cutting down practices by leveraging the

on prices as well as stock piling quality of product produced in the

up. cluster.

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