Within the next sixty days, the decks could be cleared for one of the largest private investments in dairy development and milk production in India.
That is when thousands of cows from New Zealand are expected to arrive in Nellore, Andhra Pradesh.
The project is being set up by Global Dairy Health Ltd in partnership with Fonterra Co-operative Group of New Zealand and Iffco in India.
Fonterra is the market leader with its own consumer dairy brands in Australia and New Zealand (besides other centres in Asia, Africa, the Middle East and Latin America).
It is also the biggest milk cooperative in the world, processing more than 9 times what Amul does in India.
In November last, the three companies signed a memorandum of understanding to jointly conduct a feasibility study for pilot dairy as the first step towards establishing large-scale, world-class dairy farms in India.
The Nellore project would be as large as any commercial project. It will be spread across 160 acres of the 3,000 acres that Iffco has in its possession (where it wanted to set up a special economic zone).
To ensure that none of India’s rules are violated, Global Dairy has proposed a quarantine facility for all the cows at Nellore itself, where they will be kept under observation, and then housed in world-class cow-sheds where temperatures would be controlled and proper feed given to them.
The cattle would be of the same variety and kept ‘insulated’ from other local animals to ensure the strains don’t mix.
Once the economics and the production facilities are put into place, and the ‘pilot’ project is found acceptable, the Global Dairy-Fonterra-Iffco consortium plans setting up at least 10 other such dairy farms in other states in India.
The plan is to reach a milk production level of at least 1 million tonne within the next four years.
“This could make it the biggest dairy not only in India but the whose of South Asia,” said Paresh Chaudhary, director, Global Dairy, who earlier worked with Hindustan Unilever and Reliance Industries.
The figure may look small compared with the 108 million tonne being produced in the country, making it the largest milk producer in the world.
Even the cattle being imported is insignificant compared against the 115 million milch bovine in India.
But what will make the project unique is that instead of producing anywhere between 5 litres and 17 litres of milk per milch cow per day, these imported cows will give as much as 30 litres per day.
“But this does not mean that production costs will come down,” explains Chaudhary.
“Instead of the usual feed that cattle are given by cattle owners in India, we plan, under Fonterra’s supervision, to feed these imported cows maize and corn.
This could push up our milk production costs, but will not affect our economic viability.”
Historically, India has been one of the lowest-cost producers of milk in the world.
According to the International Farm Comparison Network, milk production costs in India are around $25 per 100 kg against almost $43.7 for the world.
But with farmers clamouring for higher prices, in view of poor availability of cattle feed, diminishing grazing lands, diversion of oil-cakes from animal feed to exports, milk prices are bound to rise.
The reason why the consortium has such ambitious plans is simple. India’s milk production continues to grow at around 3% a year. Even though per capital consumption is growing only at 1.5% annually, improved disposable incomes have caused a surge in milk consumption.
For instance, the demand for ghee (clarified butter) is growing at over 8%, while that for butter and cheese consumption has been leaping by 10%.
Demand for dairy products is already outstripping supply causing India to import small amounts of milk and milk products.
India’s annual yield per animal per annum is just around 975 litres compared with 9,000 litres in Netherlands.
That is where the consortium project could become a game-changer.