Can milk drive food processing and packaging in India?

February 06, 2010 | By Naresh Khanna

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In a statement made to the Lok Sabha in end-November 2009, KV Thomas the Minister of State for Agriculture said that milk production in the country is planned to be raised to 180 million tonnes by the 2021-22 financial year. This would not mean any great increase from the annual growth rate of 3.9% in the past decade. Nonetheless, the National Dairy Plan of the government drawn up by the National Dairy Development Board has an outlay of Rs. 17,371 crore over the next fifteen years to increase the productivity of this sector. One does expect that similar to the anticipated leap in disposable income, there is an inflection point in the consumption of milk that will in the coming years, lead to a steep increase in it being processed by industry into pasteurised and homogenised milk, and products such as flavoured beverages, butter, ice-cream and cheese.

Already, while milk production is growing at 3.9% annually, the annual rates of ice cream and cheese production have grown in the double digits in the last two decades and this trend should continue for the next decade. The issue is how much milk in any form -- (processed or packed) reaches the market through the organised sector.

Our guesstimate (based on undocumented sources) is that half the milk is used directly for producing ghee (clarified butter), buttermilk, butter, paneer (cottage cheese), mithai (milk-based sweets) and ice-cream at home or by fragmented and mostly unorganised industry. Thus far the amount of milk processed and packaged into flavoured beverages, butter, ice-cream, confectionary and cheese is relatively small, perhaps adding up to 21 million tonnes in 2009-10.

While we expect milk production to increase by about 24% to 139 million tonnes by 2015-2016, we expect that the amount of milk used for processed and packaged milk products will grow almost three times as quickly from 21 to 36 million tonnes (approximately 71%). Apart from milk itself, this is an approximate indication of the organised processing and packaging opportunity.