83200 South Asia RURAL LIVELIHOODS - THE PEOPLE SECTOR SERIES 2 NOTE NO. 1 Rajasthan: Milking Profits from Dairy Farming Sanchita Ghosh, Samik Sundar Das & Asmeen Khan Twice a day, men and women Unlike income generated from crop production, which is seasonal in Rajasthan, from the Bhomiya Baba common dairying is a source of a stable income bringing in cash on a daily basis and providing livelihoods security. This gives small farmers an important economic incentive to interest group huddle around the adopt dairying for their livelihoods. In India, dairying is recognized as a catalyst for milk collection centre of Gola ki social and economic development. Besides being a source of liquidity and insurance against crop failure, milk is the only product where the farmers realize 60-70 percent2 Dhani dairy cooperative society of the consumer price. (DCS) in Dausa district, awaiting Development Through Enterprise their turn to pour milk. The milk The Rajasthan DPIP supports the formation of Common Interest Groups (CIGs) is tested, measured and collected comprising 10-15 members at the village level. It then helps CIGs to identify and in cans. A receipt slip for volume, implement economically beneficial subprojects and provides them with matching grants to get their enterprises off the fat content and price is given by ground. Dairy accounts for 45 percent of all the milk tester, which the milk activities within animal husbandry groups producers use to claim payment and 22 percent of all CIGs initiated under the project. every ten days. Jaipur milk union’s trucks pick up milk collected by the Partners Vital to DCS twice a day. On average the Dairy Success The Rajasthan Cooperative DCS delivers up to 1,000 litres per Dairy Federation (RCDF) is a day and nearly 2,000 litres per day registered society set up in 1977 in the flush season. This way, the to act as the implementing agency for dairy development DCS links the rural poor to markets programmes in Rajasthan. under the World Bank assisted As North India’s leading milk cooperative institution and an District Poverty Initiatives Project apex cooperative organization of (DPIP)1 in Rajasthan, India. the state, RCDF has established 1 DPIP was launched in July 2000 in seven of the poorest districts and 7039 villages across the state of Rajasthan. 2 Source: Dairy India 2007 report Figure 1. Institutional arrangements for dairy members. All who need the cooperative’s services and production and marketing are willing to accept the associated responsibilities can gain membership. Each cooperative is expected to carry CIG / SHG out the continuing education of its members, elected leaders and employees. CIG / SHG DCS Milk Union RCDF Milk cooperatives in a district form a Milk Union that, CIG / SHG DCS ideally, has its own processing facilities and coordinates transportation of milk from the village DCS to its milk CIG / SHG processing plant. It also provides technical input services CIG / SHG such as animal health cover, breeding advice, feed and fodder, etc., to its members. The Milk Union processes and sells the milk and milk products in order to generate milk routes, producers’ institutions, a network of revenue and offers a ready, reliable and remunerative collection centres and processing facilities, and backward market to the milk producers round the year. linkages for cattle feed, animal health services and financial products. This has led to a thriving consumer The top tier in this system is the State Level federation market for its branded milk products. RCDF follows (RCDF) whose main function is to market milk and the National Dairy Development Board (NDDB)3 milk products outside the state, oversee the inter-Union model of providing capacity-building inputs to milk movement, provide technical and managerial producers, organizing and federating them upwards into support and liaise with the state government and institutions and investing in the infrastructure required funding agencies (figure 1). Each DCS and Milk Union, to scale up milk procurement. To leverage these strengths though affiliated, operates as an independent entity, and for the project, RCDF became a natural partner in the is responsible for their institution’s economic viability. design and execution of the dairy intervention and so Each tier of the organizational structure performs has successfully collaborated with the DPIP to promote a unique function. This constitutes decentralised institution building for dairying. production by the small producers, procurement and services by the cooperative, processing by the union, In this dairying model, CIGs are the basic unit at the and marketing by the state federation. Thus, this model village level, which unite to form a Dairy Cooperative has evolved into an integrated approach to systematic Society (DCS). These cooperatives are organizations of dairy development. producers whose function is to collect milk from their Bundling Benefits Under the RCDF arrangement, pre-existing dairy CIGs located on RCDF’s existing milk route and the new CIGs formed by RCDF are linked to the operating DCS. Meanwhile, the CIGs formed by NGOs under the DPIP may also be connected to such milk routes or else new routes are established to reach them. RCDF is paid a facilitation charge of US$375 per CIG by the project for their service of organising and sustaining CIGs through a comprehensive dairy support system. This entails asset building, technical know-how, 3 NDDB is an apex organization set up by the Indian Ministry of Agriculture in 1965 at Anand, Gujarat to replicate the Amul pattern of milk procurement, processing and marketing through three-tier structure comprising village cooperative society, district cooperative union and state level federation. 2 operational support, market and financial linkages, Under the DPIP matching grant to the CIG, an initial and capacity building and infrastructure development one-time grant for production support (e.g., cattle feed, essential for a sustainable dairy unit. The total number fodder seed, vaccinations, etc) is provided, in addition to of CIGs associated with RCDF is more than 3500, funds to support structures such as cattle shed, manger including many of those that are formed by NGOs and and chaff cutter, and milk testing equipment for the linked to RCDF for marketing. collection centres (see table 1). Asset building Technical know-how Animal health care services and breeding and production RCDF assists the CIG in purchasing two high quality enhancement facilities are provided by RCDF to milk animals per member at an interval of six months members on a cost-recovery basis. A telephone hotline to a year, and at least one breeding bull per village (or and doctor is available on call for a fee of US$2.50. This CIG) to assure reproductive capacity. It is a participatory is a significant benefit for members, as private doctors procurement process, with every member of the CIG charge close to US$17.50 for emergency visits. involved in deciding what breed of cattle or buffalo they need. Members are required to undergo a three The availability of a first aid worker in each village or day capacity building foundation course on milk and a cluster of five villages is another significant feature animal management before they receive the animals. of the dairy package. Skills and services that livestock All CIG members constitute the Purchase Committee, farmers need on a daily basis (such as animal first aid, which selects and buys the livestock themselves from vaccinations, drenching and spraying for parasites) and villages in Haryana, Punjab and Gujarat and are for which they do not need a full veterinarian are being assisted by qualified veterinarians, backed by the State built at the village level. Youth volunteers undergo a Animal Husbandry Department or RCDF. Such an 15-day hands-on training program with the assistance arrangement assures fitness, quality and fertility of the of the State Department of Animal Husbandry and are animals. During the process, the CIG members are then given a medical kit to work with. This service has exposed to the excellent animal management practices aided timely treatment of animals, regular health check- of three flourishing states of India. ups, vaccinations, and first aid during animal health emergencies. 3 Table 1: Sample Dairy Sub-project with DPIP assistance Sl. Items Cost per CIG Beneficiary Beneficiary DPIP No Contribution Contribution Contribution % Rs. Rs. 1 Cost of animals (Rs.15,500 per buffalo, 2 for each 65,000 20% 93,000 372,000 member, 15 members per CIG) 2 Chaff cutter (Rs.2,000 per machine, one for three 10,000 10% 1,000 9,000 members, maximum 5 per CIG) 3 Cattle Transportation (Rs.1,000 per animal, 30 animals 30,000 10% 3,000 27,000 per CIG) 4 Cattle Insurance (2.25% for cattle cost, 30 animals per 10,463 10% 1,046 9,416 CIG) 5 Milk cans, utensils and other equipment (maximum 15,000 10% 1,500 13,500 Rs.15,000 per CIG) 6 Production grant for 1 month (for 1 animal per 27,000 10% 2,700 24,300 member, maximum Rs.1800 per member) 7 Cost of bull including transportation, insurance (Rs. 20,000 20% 4,000 16,000 20,000 per bull, one bull per CIG) Total Sub-Project Cost (Rs.) 577,463 106,246 471,216 Operational support, market and financial also distributed by the Milk Union and DCS amongst linkages its members, proportionate to their supplies. RCDF grants a subsidy of 90 percent in DCS registration fee Groups that are on a milk route linked to RCDF get an to below-the-poverty line CIG members. However, to assured market, twice a day collection and transparency become a DCS member, each CIG member has to meet in price-setting, with prices publicly displayed at the the membership criteria jointly set by the affiliated Milk society collection centers. In contrast, non-RCDF dairy Union and RCDF of being able to supply a minimum CIGs typically sell milk in local markets to private traders of 280 litres of milk in 180 days at a stretch. and establishments who purchase only what they require on that particular day, resulting in significant wastage Cattle insurance is mandatory at the time of animal of milk and lower returns to producers. RCDF is able purchase. RCDF provides Saras Life insurance (Saras to pay its members higher rates by passing on savings Suraksha Kavach) with 12 percent of the premium created through the investment in added infrastructure, borne by the member and the remainder supported by which results in reduced spoilage, transportation and the respective DCS, milk union and RCDF. In addition, processing costs. a group health insurance scheme (Saras Samuhik Arogya Bima Yojna) is available with 50 percent of the The CIG members enjoy all the benefits that the RCDF cost borne by RCDF and the rest by the respective Milk cooperative network offers. The present pricing system Union and DCS. is fixed and decided by RCDF and milk unions based Capacity building and infrastructure development on fat content and SNF (solid non-fat, i.e., protein, lactose, etc). Payment is determined automatically every Selected Milk Unions are operating centers for training day based on the total volume and percent fat content members in DCS operations. These trainings are for the of the milk delivered by the members. Each member positions of DCS secretary, Management Committee is paid once in every ten days for the milk supplied, member, Artificial insemination (AI) workers, milk with no limit for the supply volumes. In addition, an tester, first aid worker, Chairman, and in dairy animal annual bonus is awarded in proportion to their business management and various refresher courses. Extension turnover with the DCS. The price difference earned activities are carried out at DCS and Milk Unions to from the value addition to milk and margin in sales is enhance active participation of the producer members 4 RCDF – Key Highlights Year of Establishment: 1977-78 Brand: Saras Product: Milk, Milk products and Cattle feed Milk procurement and marketing: No. 1 in North India Avg. milk procurement: 1.55 million liters per day Affiliated Milk Unions: 19 Registered dairy cooperative societies (DCS): 9,050 Registered members: 615,000 Registered women DCS: 2,595 Payment to producers (2004-05): US$ 154 million in the DCS and create awareness about improved were inaccessible before due to distance and the risk of animal husbandry practices. Visits to dairy plants spoilage. Some 28 BMCs have been established by the demonstrate the processing of the milk collected from project, leading to new milk routes, incremental income the producers. Producers also take field visits to acquire on chilled milk and more feasible transportation for the knowledge and skills from progressive models of dairy Milk Union. development in other parts of India. In turn, they educate other animal owners about the practices and Lessons Learned benefits of cooperatives. The patronage of RCDF and a well conceived dairy Technology has played an important role in building package scheme has provided a strong framework, capacity of the local producers. Systems for milk reducing the risks of failure and ensuring high probability collection and testing systems are automated with the of success. Inducting members’ animals in two stages to installation of electronic milk testers. Meanwhile, auto ensure uninterrupted household cash flows, mandatory milk collection stations have created a transparent and insurance of the animals, inclusion of support structures fair procurement system. Bulk Milk Coolers (BMCs), such as shelter, manger and chaff cutter to promote stall on the other hand, have played a critical role in feeding and maximisation of fodder utilisation, an initial building organized milk procurement in areas which one time grant for production support and the supply Benefits to a livestock farmer Benefits to RCDF • Allows participation and empowerment in the • Aligns with their organization objective of cooperative set-up, and decision-making with an promoting economic development of animal opportunity to lead at all the three levels (DCS, milk husbandry/ farming community, and the dairy union and RCDF) industry • Provides access to assured milk marketing routes • Increased procurement through a growing base of • No limit on supply volumes livestock farmers • Availability of technical knowledge and skills and • Greater profits through economies of scale and financial linkages at subsidized rates reduced overheads • Optimum, fair and transparent pricing system with • Assured supply and consistent quality of milk, annual bonus distribution and therefore new markets to explore and cater • Immediate cash income and increase in savings, to resulting in a positive effect on health and education • Cooperative spirit and the viability of village level of family DCS (backbone of RCDF) is critical to continue • Reap benefits from other Government schemes and sustain the momentum of growth for RCDF linked to dairy development through RCDF 5 Subuddhi’s change of fate Subuddhi, a farmer living ‘Below the Poverty Line,’ has a family of five in Ramgarh village in the Dausa district of Rajasthan. He owns 2 acres of land and grows wheat, millet, sorghum, cluster beans and lucerne for subsistence and fodder. He became a member of the Bhumiya Baba dairy CIG in March 2004 when it was formed with 15 Members. The project financed his purchase of two buffaloes and a calf, bought in July 2004 and October 2005 from Haryana. In addition, he received a subsidy for a livestock shelter, manger and a chaff cutter. With the RCDF intervention, he was soon linked to and registered as a member of Gola ki Dhani DCS. Now he owns 3 adult buffaloes and one 12-month old heifer. His animals are stall-fed with dry and green fodder and concentrate feed, and are milked twice a day. He pours milk at the collection centre both times in the day. of milk testing equipment to help start milk marketing Production Income / Expenses for Jan-Dec 2007 were key elements of the project package. Milk consumption at home: 660 litres (1.5-2 litres The participatory milk animal procurement process a day) involving every member of the CIG, supported by professional experts, has resulted in the induction Total sale volume to DCS: 3920 litres of excellent quality of livestock. The animals have Rate per litre: Rs.17.15 (7 % F and 9 % SNF) acclimatised well in their new environment and are in Total sale value from DCS: Rs.67,228 healthy condition. Bonus Received from DCS: Rs.13,446 Dairy development under the DPIP owes its success to well organised CIGs, systematic capacity building of the Total milk Income: Rs. 80,674 groups and their aggregate institutions, establishment of Expenses during the year for feeding and managing strong forward and backward linkages, and the assured three adult buffaloes and one heifer (Rs. 30 per sustainability arising from the integration of large animal per day): Rs. 43,800 numbers of the CIGs to the cooperative milk marketing system under RCDF. Model cooperatives such as DCS Net Income from DPIP Dairy Business in 2007: have progressively eliminated middlemen, bringing the Rs. 36,874.00 producers in direct contact with the consumer market. Dairy development hinges on the CIGs set up by the Bhomiya Baba Dairy CIG has also emerged as a rural poor who find that collective action has improved Self Help Group (SHG), with members saving their lives and livelihoods. CIG linkage with DCS has Rs.50 per month. The SHG has started inter- provided livestock farmers with better access to inputs, loaning since 2004 at 1 percent monthly interest skill development, animal health services and optimum rate. The group has saved Rs. 45,000 and has no returns on investment in a more cost effective manner. bad debts so far. Increasingly, dairy CIGs are emerging as Self Help Groups for their members, encouraging savings and 6 servicing the farm/household level credit needs of members. Access to instant cash credit as working capital for the animals and household emergencies, has insulated the enterprises and the households from different kinds of uncertainties and risks. The record low numbers of insurance claims for animal mortality testifies to the good management and maintenance of milk buffaloes by the CIG members. While claims may not always capture all cases of death among livestock, they are indicative of the low mortality dairying sub-sector, women are mostly seen looking rate. Total insurance claims for mortality for the entire after livestock animals. The dairy cooperative set-up project period up to end April 2007 were 762 out of has encouraged participation and empowerment of such a total of 74,820 milk cattle supplied (1.08 percent women, creating a space for them to be decision-makers mortality rate). at the village level. With better incomes, more children are attending school and there is visible improvement in Strengthening infrastructure in dispersed and the living conditions of households. unconnected areas has established better market access. Installation of 28 bulk milk coolers at village level Economic Impact DCS has increased connectivity and expanded RCDF’s Dairy activity generates incremental income for network for milk collection. households and reduces the longstanding problems of unemployment and underemployment. Regular Achievements payment by the DCS has ensured uninterrupted flow Under the DPIP-RCDF partnership, 3,500 CIGs are of cash income for fulfilling consumption needs of now producing over125,000 litres of milk daily. With the members. CIGs have also migrated to a Self Help 40 percent of this as marketable surplus, RCDF is Group (SHG) working pattern, accumulating savings procuring 40,000 litres from these groups on a daily and initiating inter-loaning activity within the group to basis, resulting in additional income of US$ 30-35 per enable further enterprise development. month to each CIG member, and enabling the dairy CIGs to accumulate a total US$ 575,000 in savings. Household Nutrition and Food Security The IRR for such dairy activities ranges from 25-36 Availability of milk for consumption promises better percent4. food security and guarantees improved health and nutrition for rural households, especially for women Impact of intervention and children. Social Impact Access to services Since access to and distribution of livestock is more Members are exposed to community development and equitable than that of land, the programme has resulted group dynamics, their skills are built and voices heard, in more inclusive rural growth benefiting both men and they have access to credit and other facilities such as and women in Rajasthan. Livestock assets used in dairy insurance schemes etc. production provide a key avenue for capital accumulation and financing other productive activities. It acts as Future Directions insurance for the resource-poor, thereby improving the • There is significant potential for continued growth social status of the rural poor in society. Well-organised in dairy activities in the state as illustrated in dairying also promotes gender and social equity. In the table 2. This is due to rapidly increasing demand in the nearby urban centres of Jaipur and Delhi and 4 DPIP Rajasthan Evaluation Report: Non-Farm Livelihoods, Animal Husbandry the large gap between total milk production in the and Natural Resource Management Activities (Adarsh Kumar) state and organized procurement. 7 Table 2: Rajasthan: Milk Supply Statistics energy needs, has great potential in the State while vermi-composting is a low cost and easy method to Lakh litres enhance soil productivity and increase crop yield. Total Annual Production 100 • Smallholders must manage their herds in order to Marketable Surplus 80 maintain a steady supply of milk. The number of RCDF Organized Procurement 15 milk animals that can be reared is dependent on the size of landholding, the availability of cattle feed, “Unorganized” Procurement: 65 and labour. The optimal number of buffaloes that Private Sources/Local can be maintained under the prevailing conditions Establishments for smallholders is four. * Source: RCDF Staff • With the expansion of dairy activities and to promote increased milk production, there is a need • Further investment is required in infrastructure to develop persistent and productive pastures for to scale up milk procurement. In dairying, there high nutritive quality of cattle feed and to expand are clear economies of scale to be realized, but the use of qualified veterinarians and/or trained aggregation of production is required to make youth professionals (para-vets) for animal health investments in needed infrastructure viable. For and breeding. example, a series of BMCs are necessary to build • More private sector participation would create up the volumes required to invest in an insulated competition among market players and thereby, tanker that can transport the milk to Jaipur and greatly benefit the members of CIGs, fetching other major urban centers. them better prices and services. Under the project, • Increased emphasis on environmental investments in addition to collaborating with RCDF, such in the livestock sector through adoption of bio-gas participation is being encouraged through NGO plants and vermi-composting shall be beneficial. supported dairy initiatives, utilising private sector Biogas, as a supplement to fuel wood for household partnerships. Series 2. Note No. 1. January 2009. Sanchita Ghosh is a marketing consultant and Asmeen Khan and Samik Sundar Das are Senior Rural Development Specialists in the South Asia Sustainable Development of the World Bank. The authors would like to thank Dr. Gopalakrishna Kurup and Adarsh Kumar for their helpful comments and inputs. Vikas Sharma (Rajasthan DPIP) reviewed this note, and Natasha Hayward and Smriti Lakhey of the World Bank edited the text. Photos courtesy of the Rajasthan District Povety Initiatives Project and the World Bank. Livelihoods Learning Notes are published by the Rural Livelihoods Cluster in the South Asia Sustainable Development Department of the World Bank, 1818 H Street NW, Washington DC 20433, USA. For additional copies contact Melissa Williams (mwilliams4@worldbank.org). The findings, interpretations, and conclusions expressed in this note are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affiliated organizations or to members of its Board of Executive Directors or the countries they represent. 8