Planning Procedure for Settingup a Commercial Dairy Farm in India

October 27, 2023

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Planning Procedure for Settingup a Commercial Dairy Farm in India

Dairy farming is an important activity in India which supports 70 million rural farm households by giving them an additional source of income. It is generally practiced in small scale with an average herd size of 2.4 animals (Hemme et al., 2010). Though, India leads the world with 187 million tonnes of milk production but this comes from 1.5 adult female cows or buffaloes per farm. The milk productivity also stands at the lower side with 4 litres of milk per farm per day. On the other side, demand for milk and milk products is rapidly growing due to rising population, increasing income levels and urbanization. Demand for processed and packed value added dairy products is also increasing due to changing and fast-moving lifestyle. To intercept this increasing demand and avoid shortage, supply also needs to be increased.Increasing the supply continuously that too in a scenario of depleting resources and climate change is only possible by following scientific practices in intensive dairy farming set-up. This opensthe arena for well-planned Commercial Dairy Farms which are now attracting highly qualified professionals besides the traditional dairy farmers.There is a persistent rise in the number of farm households with 10-15 cows (Dairy farms in India become bigger, 2017)and efforts are being made for modernization of dairy owing to its positive returns. The increasing demand, manageable risks, faster returns and low cost of production are the main drivers leading to large scale commercial dairy farmsin India. Commercial dairy farms are the ones in which cows having high milk productivity are raised commercially for milk production. These are usually mechanized dairy farms which rear more than twenty animals and follow advanced techniques of milk production. Starting commercial dairy farming is a tough row to hoe. It can be made profitable only with proper planning and management.Following paragraphs discuss different aspects of setting upa commercial dairy farm.

Milk production in India is estimated at more than 212 million metric tonnes, and India is the world’s largest producer and consumer of milk. This highlights the scope of the dairy business in India and the profits one can earn. Starting a dairy farm in India requires careful planning, industry knowledge and a systematic approach. Dairy farm business offers opportunities for both small-scale and large-scale entrepreneurs. This beginner’s guide will outline essential steps and considerations to help you establish your dairy business in India.

Why start a Dairy Business in India?

Before checking how to start a dairy farm, you must know why it is an attractive business. Dairy farm business in India is a lucrative and rewarding venture for several compelling reasons:

High Demand for Dairy Products: India has a massive and ever-growing demand for dairy products, especially milk. With a large population, dairy products are essential to the Indian diet. This consistent demand provides a stable market for dairy farmers.
Largest Milk Producer: India is the world’s largest milk producer, surpassing countries like the United States and China. The dairy sector in India has immense domestic and international growth potential.
Steady Income Stream: The dairy farm business provides a regular and stable income stream as milk production continues throughout the year. This income stability can help mitigate risks associated with seasonal crops.
Low Entry Barriers: Dairy business in India can be initiated with relatively low capital investment. It makes it accessible to small-scale farmers and new entrepreneurs. Many government schemes offer financial assistance and subsidies for dairy farm businesses.
Export Opportunities: It has the potential to export dairy products to international markets, particularly milk powder, butter, and ghee. Expanding into export markets can significantly boost profitability.

How to Start a Dairy Farm Business in India?

While starting a dairy farm business can be a promising venture, it involves a series of steps to get into the industry. Here is how to start a dairy business:

PLANNING A COMMERCIAL DAIRY FARM

Proper planning is necessary for any venture to be successful. Commercial dairy farms differ from subsistence dairy farming in terms of scale of operation and the amount of investment. Thus, before setting up a commercial dairy farm, factors like breed, herd size, housing facility etc. should be carefully considered. Some of these points are discussed below1. Training: Before starting a commercial dairy farm, it is important for an entrepreneur to undergo training in different aspects of dairying so that he can get proper exposure. These trainings are organized frequently by various public and private institutes. ICAR-National Dairy Research Institute in Karnal, State Agricultural Universities, Krishi Vigyan Kendra (KVK) present in each districtand Department of Animal Husbandry are the major public organizations which conductfrequent trainings in dairying for the benefit of budding entrepreneurs.Training program helps in getting in touch with latest advancement in dairy farming and also enhances the know-how of practices and prospects. Besides regular training programs, customized programs are also available for the individuals. These programs usually provide hand-holding services right from planning till establishment of the venture to the entrepreneur. Private dairy consultants also provide similar services. At his own level, the entrepreneurr can also gain from the experiences of progressive dairy farmers. 2. Site Selection: Once the entrepreneur has decided to set-up a commercial dairy farm, selection of appropriate site is the next important step. Location of the dairy farm has a significant effect on its viability and profitability. Dairy farm can be established either in urban or in peri-urban or rural area. While there is easy availability of feed and fodder in rural areas, close proximity to market is an advantage for urban and peri-urban dairy farms. The cost as well as returns from per liter milk has been found to be higher in peri-urban dairy farms than the rural farms(Patil et al., 2019). Better and efficient management practices followed in the urban and peri-urban farms can be the plausible reason behindthe higher returns(Manivannan et al., 2011). The difference in returns can also be attributed to different prices received due to varied marketing system (relatively shorter marketing channel in the urban areas) (Garcia et al., 2003). Other important points that have to be kept in mind during site selection are the type of consumers, size of market and level of competition. 3. Type of animal and breed selection: Next step in the planning process is selection of the type of dairy animal and its breed. Cattle and buffalo are the main animals reared in India for milk. In the case of cattle, we have both high milk yielding crossbreds like HF Cross, Jersey, Karan Fries etc. and indigenous breeds having better adaptability to the local conditions like Sahiwal, Tharparkar, Gir, Red Sindhi etc.Important breeds of buffalo in India includeMurrah, Jaffrabadi, Mehsana, Surti, Nili Ravi, Bhadavari and Toda. Breed should be selected according to the local climate, resource availability and market. The entrepreneurs must be well-acquainted with the adaptability of different breedsto the local conditions. Though, crossbred cattle in India are popular for their high milk yield butthey are more susceptible to diseases and the initial investment and maintenance expenditure is relatively higher in their case (Lal et al., 2016). They are also more susceptible to heat stress and ticks (Wakchaure et al., 2015). On the contrary, indigenous cattle breeds have lower productivity but they are disease resistant and thermotolerant (Li et al., 2011; Sodhi et al., 2013). Cost of milk production (Rs./ litre) in India is generally higher for indigenous cattle followed by buffalo and crossbred while net returns follows exactly reverse pattern with highest returns in case of crossbred (Lal, P., 2016) (Makarabbi, G., 2016) (Behera, S., 2016) (Nagrale, B., 2017). Indigenous cattle breeds are nowalso regaining popularity due to increase in demand of ‘A2’ milk.Government has also launched multiple schemes for their conservation under ‘Rashtriya Gokul Mission’.Thus, despite lower yield, indigenous breeds can prove profitable to dairy farmers due to premium price for their milk, demand of byproducts (urine, cow dung, etc.) and policy support. Likewise, in certain areas buffalo milk is preferred more for drinking due to its high fat content. Thus, entrepreneur must be well aware about the taste and preferences of the market and government supportfor rearing them before selecting the breed. 4. Housing: Scientifically constructed shed for housing the dairy animals is a prerequisite for their good health and high productivity. Heat stress, poor ventilation and over-crowdingadversely affect the milk yield. A good shedprotects the animal from harsh conditions like high/low temperature, strong sunlight, heavy rainfall, humidity etc.There are two types of housing systems: loose housing system and conventional dairy barn. Loose housing system consists of open space where animals are let loose except at the time of milking when they are brought to the milking area. It is cost friendly method of making cattle shed with easy feeding and management of cattle (Sandoe et al., 1997). Such type of housing is not recommended for heavy rainfall and temperate areas. The second housing system is conventional barn in which animals are confined on a platform and are milked on the same place. These are covered with roofs and sidewalls and are closed places with proper ventilation. These housing systems are less famous because of high cost of construction but animals are less exposed to harsh conditions. Results of various studies concurs that welfare of dairy animals is influenced by housing systems and loose-housing system have a better welfare quality than those kept in tie-stalls. (Popescu et al., 2014). The shed has to be planned carefully considering both available budget and the climatic conditions of the area. 5. Credit: Any business venture requires initial investment.Seed money in commercial dairy farming is required to buy/rent land for farm, construction of cattle shed, purchase of animals, machinery etc. It is reported that approximately one has to invest 7-8 lakhs for establishing a dairy farm with 10 cows with larger share of expenditure on buying 10 cows (Dairy farm project, n.d) for a project period of 6 years. Study of (Ghule et al., 2012) confirms that share of investment on animals is the highest followed by buildings and equipment. They also found that for average herd size of 16 dairy animals, an investment of Rs.12.17 lakhs isrequired.For investing this huge amount one needs finance from different sources.Government of India has started many programs in order to promote dairy farmingat commercial scale in India. Central government provides financial support by providing subsidies through interest subvention or capital subsidy. Dairy Entrepreneurship Development Scheme (DEDS) is a central government subsidy program to promote dairy farming. Under this scheme 25 per cent of the outlay (33.33% for SC/ST farmers) is given as back ended capital subsidy for rearing cattle (upto 10). In order to avail this, the entrepreneurs need to apply to their banks for sanction of the project. Bankable project reports may be generated online inorder to determine the sustainability of the project. Team-CD, a decision support system made by ICAR-National Dairy Research Institute helps in easily generating such reports which can further help the entrepreneurs in preparing their credit proposal. After appraisal of the proposal, loan amount is disbursed in installments. State government also provides support through different schemes for which one need to contact local veterinary officers. 6. Registration: Registration of dairy farm is important inorder to get legal clearance of the enterprise. According to Government of India guidelines, food business operators need license from Food Safety and Standards Authority of India (FSSAI) to carry on their business. One may be exempted from this step if they are member of a dairy cooperative society but need to get registered as milk vendor. The type of registration of FSSAI depends on annual turnover of thedairy farm. Other registrations required are company registration certificate which is required for opening of current bank account. MSME registration is required under dairy products to apply for government subsidy and bank loan. 7. Waste disposal system- With shrinking land size and increasing population, waste disposal issues are surging.Thus, waste disposal plan shouldbe prepared along with the plan for main farm. Different wastes originating from dairy farms are: cow dung, urine, feed waste, bedding material, waste water and dead animals. Most of these can be utilized for different purposes. Cow dung can be converted into manure or biogas. Similarly, feed waste can be used for making compost and cow urine can be used to make bio-pesticides. Setting up of vermicomposting unit, bio-gas production unit, etc. provides additional income to the entrepreneurs. Government of India also gives subsidy for establishing vermicomposting unit.

Setting up a commercial dairy farm requires careful planning and execution to ensure its success. Here is a step-by-step procedure for establishing a commercial dairy farm:

Feasibility Study and Business Plan:

Conduct a feasibility study to assess the viability of your dairy farm in the chosen location.
Develop a comprehensive business plan that outlines your goals, budget, and expected returns.

Choose the Right Location:

Select a suitable location with access to good-quality water, fertile land, and proximity to markets and veterinary services.

Legal and Regulatory Requirements:

Register your dairy farm as a legal entity.
Comply with local, state, and national regulations for dairy farming, including permits and licenses.

Dairy Farm Infrastructure:

Build or renovate the necessary infrastructure, including barns, milking parlors, feeding areas, and storage facilities.
Ensure proper ventilation and insulation to provide a comfortable environment for the cows.

Selecting Dairy Cattle:

Choose the right breed of dairy cattle based on your region, climate, and market demand.
Source high-quality dairy cows or heifers from reputable breeders.

Feeding and Nutrition:

Develop a balanced nutrition plan with the help of a qualified nutritionist.
Ensure the availability of high-quality feed, forage, and supplements.
Establish a feeding schedule and storage for feed.

Milking Equipment:

Invest in milking equipment, such as milking machines, udder sanitization equipment, and storage tanks.
Ensure proper sanitation and milking hygiene practices.

Herd Management:

Implement a robust herd management system to track the health, reproduction, and milk production of each cow.
Maintain detailed records for each cow, including health history and production data.

Veterinary Care:

Establish a relationship with a local veterinarian for regular check-ups, vaccinations, and emergency care.
Develop a health management plan to prevent diseases and manage outbreaks.

Breeding Program:

Implement a breeding program to ensure a consistent supply of replacement heifers.
Choose breeding methods that align with your goals, such as artificial insemination or natural mating.

Milk Quality and Handling:

Implement strict milk quality standards and handling procedures.
Ensure that milking and storage equipment is cleaned and sanitized regularly.

Marketing and Sales:

Establish relationships with dairy processors or local markets for milk and dairy product sales.
Develop a marketing strategy to promote your dairy brand if you plan to sell directly to consumers.

Labor and Workforce:

Hire and train skilled and dedicated farmworkers.
Develop a fair and competitive compensation structure.

Record Keeping:

Maintain detailed records of farm operations, including expenses, income, and herd management data.
Use record-keeping software or tools for accuracy and efficiency.