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Dairy value chain operation and dairy producers: its impact and limitations in
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 CABI Reviews 2022 17, No. 016

Dairy value chain operation and dairy producers: its impact and limitations
in an emerging economy
Avijit Sarkar1, Hemant Gupta2* and Avijan Dutta3

Address: 1Department of Dairy Business Management, Faculty of Dairy Technology, West Bengal University of Animal and Fishery
Sciences, PIN 700037, Kolkata, India.
2
Marketing, Alliance Business School, Alliance University, PIN 562106, Bangalore, India.
3
Department of Management Studies, National Institute of Technology, Durgapur, PIN 713209, India.

ORCID information: Avijit Sarkar (orcid: 0000-0002-5347-3405); Hemant Gupta (orcid: 0000-0001-9553-6446); Avijan Dutta
(orcid: 0000-0001-8897-7833)

*Correspondence: Hemant Gupta. Email: hemant.bpm13@gmail.com

Received: 28 December 2021

Accepted: 24 March 2022

doi: 10.1079/cabireviews202217016

The electronic version of this article is the definitive one. It is located here: http://www.cabi.org/cabireviews

© CAB International 2022 (Online ISSN 1749-8848)

Abstract

Dairy value chain resilience is significant for food security and socioeconomic sustenance. Core value
chain process series: milk production, milk collection, milk processing and sales and distribution duly
facilitated by support activities decide the outcome of this value chain. It has become an opportunity
to provide self-employment, empowerment of women and economic help to scores of poor milk
producers in an emerging economy such as India. On one hand, the dairy value chain can offset the land
and seasonal limitation of agriculture and on the other hand, it can shrug off the constraints gradually
through economies of scale and enable market access to provide more traction for this dairy sector.
Overseeing the value chain with the Three P’s dimensional (people, planet and profit) outlook, milk
producer organizations can address the sector pitfalls and concern more comprehensively with the
help of systematic production, services, risk assessment and periodical core stakeholders’ review.

Keywords: dairy producer, dairy technology, emerging market, India, sustainability in dairy, value chain

Review Methodology: The database of major publishers such as ‘ScienceDirect, Scopus’ and Online library databases such as ‘EBSCO’ and
‘J-STOR’ were searched. The articles were examined initially for relevance with a focus on the title of the topics. The relevance of papers was
assessed based on the analysis of title keywords (e.g. 'dairy value chain', 'dairy sector and an emerging economy', 'supply chain management
in dairy sector' etc.) and abstracts. In case of any gap in clarity through the abstract search, the specific article was quickly scanned. The
research papers include a wide range of inputs such as empirical works, conceptual papers, analytical modelling, survey research papers,
conference papers, technical notes, news articles, review articles, short reports and case studies. Simultaneously, the authors have consid-
ered the understanding of dairy business experts from the dairy Industry to engage with a real-life scenario.

Introduction generation and one-third gross income of rural households

Dairy farming is considered as an appropriate aligned
earning resource for scattered, fragmented and
unorganized small and marginal milk producers in the
Indian rural economy. The livelihood of two-third of rural
population is dependent on the livestock sector, which
provides support as a primary or secondary source of
earning. The livestock sector provides a livelihood for
around 600 million rural families out of which 70% are
small and marginal farmers [1–3]. This sector supports
8.8% population approximately in terms of employment
[1]. The potential of the Indian dairy sector for employment
generation is around 20 million per annum, which is crucial
because of increasing unemployment in the country. Thus,
dairy farming has been instrumental in support of
livelihood and sustenance [2]. Participatory management
by women in dairy farming is common, which provides the
scope for expansion of opportunities for women in local
economies. Dairy farming empowers women and supports
them to assume leadership roles in planning, decision-
making and execution [4]. Further, compatible applications
are noticed when milch animal waste is applied to the

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2 CABI Reviews
agriculture field and agriculture crop residue gets used as
feed for the milch animals [5].
India is a vast populous country where poverty and
hunger eradication, gender equality, the empowerment of
women, improved health, environmental sustainability, etc.,
are actively considered by policy makers. In this context,
the dairy sector has shown its potential to create
opportunities and support the national output by
addressing a series of concerns simultaneously. Similar
issues have been echoed by the United Nations (UN) in
framing the Millennium Development Goals (MDGs),
which have been replaced in September, 2015 as the Agenda
2030 for sustainable development, commonly known as
Sustainable Development Goals (SDGs) [6].
The compound annual growth rate (CAGR) of milk
production in India is 4.8%, and the same is 1.8% in the case
of global milk production. The dairy sector is contributing
around 25.6% to agriculture GDP in India [7], which is
even higher than the combined contribution of rice
(14.4%) and wheat (8.7%) to agriculture GDP (1998–1999)
[8]. The Indian dairy industry is estimated to reach around
18,599 billion rupees by 2023 with a CAGR of 15% during
2018–2023. Moreover, the value-added dairy products
with a margin of 14%–15% can steer 50% faster growth in
the value-added product segment due to increasing
urbanization [1]. Besides, export of dairy products from
India is 1, 13,721.70 million tonnes with a worth of 24.2285
billion rupees in 2018–2019 [3].
In terms of grain and milk production, India has reached
an enviable state. In terms of milk production and
consumption, India is one of the leading countries in the
world. Dairy producers are indirectly connected with end
consumers through a supply chain network. The capability
and capacity of this network decide the end value which is
dependent largely on supply chain management actors.
This further emphasizes the importance of milk producers’
organizations [9].
Agriculture vis-a-vis dairy sector
A major part of the population, especially the rural people,
around 86% in developing countries, is connected directly
or indirectly with agriculture [10]. However, Indian agriculture
is regionally biased as well as having issues of sustainability
[11]. Although India has achieved grain sufficiency in agriculture
despite the limitation in geographical boundaries, soil
fertility, etc. [12, 13], the availability of arable land is
becoming a major constraint day by day.
The total number of operational holdings was 138.35
million in India as per the Agriculture Census of 2015–2016
[3], whereas the marginal and small farmers were around
85% who have less than two hectares land in size, moreover,
because of fewer marginal holdings less output and low
market surplus. Hence, marginal landholders become
sufferers and turn into disadvantageous sections of society
[14]. As per the Second Agricultural Labour Investigation
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Society (ALIS), farmer labour provides 197 days of work
(average) in a year, with the risk of crop failure.The average
annual income of these farmers is very low.Therefore, the
farmers are in distressed and affected by unemployment
[14]. A large portion of the workforce is underfed.
Moreover, poverty, hunger and malnutrition are very high
in India due to less accessibility rather than shortage of
availability especially to the small, marginal and landless
farmers. This limitation can be addressed through the
agriculture allied livestock sectors that have the
potentiality to support and strengthen the livelihood [15].
Thus, a need for dairying becomes evident, which can
strengthen resilience and engage a sizeable workforce in
this sector [15].
The dairy sector has been growing steadily for the last
few decades with more and more engagement of rural
small, marginal and landless dairy farmers, leading to the
healthy growth of milk producers’ organizations. Out of
these poor dairy producers, 45% possess land, whereas
75% possess bovine animals. This indicates that dairying
has not become a barrier for even landless persons. It
supports dairy producers’ livelihood, reduces strain in
unfavourable times, and retains a steady generation of
money. The dairy farmer’s cattle also serve as an asset at
the time of urgency [16]. Dairy farming has been considered
useful in alleviating the poverty of rural masses [17].
A farmer can earn 6500 rupees per month from this dairy
farming [18]. Thus, the dairy sector offers an opportunity
to poor masses with no educational background or skill
back-up. Moreover, around 75% of women are also part of
this dairy farming in India [16].
Consequently, the growth of dairy sector leads to improve
the economic status of the masses [19]. From the nutritional
point of view, milk is also considered as a complete food with
its rich components, which are important for life to combat
malnutrition and diet-related non-communicable diseases
[20]. Moreover, milk is well accepted from a dietary aspect
[21], as it is rich in micronutrients. Therefore, the dairy
sector has the potential to make agriculture and allied
sectors sustainable. Hence, India needs a comprehensive
strategy for the growth of the agriculture and dairy sector
together to secure future prospects [18].
Methodology
Unit of analysis and delimiting
The research papers published in English in peer-reviewed
journals are considered for this review article.The research
papers mean empirical works, conceptual papers, analytical
modelling, conference papers, textbooks, working papers,
news articles, reports and case studies. The database of
major publishers such as ScienceDirect, EBSCO and
Online library databases such as J-STOR was searched.The
review has excluded papers that are published in other
languages.

The search of the literature
A structured keyword search was applied by using the
words such as dairy value chain, the role of the dairy
sector in an emerging economy, supply chain management
in the dairy sector, socioeconomic impact on dairy
producers in developing countries.
These articles were examined for relevance, initially based
on the titles. In cases the scope was clear, the relevance of
papers was judged based on analysis of title keywords and
abstracts. If the scope is not clear through the abstract
search, the specific article was been scanned thoroughly.
Knowledge gap
During the literature review, it has been observed that most of
the research studies on the dairy value chain are restricted to
the discussion on milk and milk products and core value chain
actors. This study has tried to include the supporting value
chain actors also for a comprehensive implementation of value
chain activities. This study has also tried to draw attention
towards generating revenue from selling co-products through
cow dung and unproductive cattle.This can provide a cushion
to low-margin dairy farming businesses especially for small and
marginal dairy farmers where economies of scale are rarely
available. Moreover, this study has further considered the need
for information and communications technology (ICT) in
dairy value chain activities by the cooperative organizations or
milk producers’ organizations for adding input strength in
farming business as well as the triple bottom approach (TBL)
to attain operational sustainability.
Dairy value chain and its multi-faced role
The value-added supply chain offers a competitive advantage
through the creation and subsequent value addition at
respective stages. Hence, value chain management strives
towards better outputs with a proper application of the
5M’s (men, machines, methods, materials and money) of
business management and the laid-down objectives are
decided based on time, cost and quality.
When the value chain considers milk as a primary
substrate, we call it a dairy value chain. Dairy farmers are
the basic part of this value chain network. The value chain
process starts with the production of milk and the
subsequent stages pass through aggregation, processing,
manufacturing, transportation, marketing, and finally
distribution. The value chain actors own the stages and
outputs as the flow of the chain passes through their hands
in course of handling [3]. Value chain actors include input
suppliers, producers, processors, traders and consumers,
who are commercially engaged in the network [22]. Apart
from chain actors, there are chain supporters, who act as
service providers and help to facilitate production. These
actors do not deal with the product directly but their
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Avijit Sarkar et al. 3
services are essential to execute the value chain activities
efficiently.These service providers include banks, microfinance
institutions, insurance companies, transporters, brokers,
NGOs, government agencies, and research centres [23].
Their financial services include loans, pre-financing,
shareholdings, factoring, leasing arrangements, etc.
Consequently, an organizational system becomes essential
to handle all these supply chain sequential activities to fulfil
the needs of consumers’ demand.The value chain development
strategies are used to improve the participation of small-
scale dairy farmers and involvement in the management of
different chain activities [24]. It necessitates milk producers’
organizations to concentrate on primary and support
value chain activities as mentioned below.
Value chain: primary activities
Primary activities consist of the following:
• Milk production: Quality breed milch animal, adequate
feed and fodder, and veterinary aid & care become
essential to make this stage successful.
• Collection of milk and inbound logistics: It includes the
collection of milk at the bulk milk cooling centre and
subsequent transportation at the chilling centre. The
aggregated milk is taken to the milk processing centre.
Milk, a perishable commodity, needs low-temperature
storage and processing at the earliest possible opportunity.
• Milk plant operations: Raw milk is processed to manufacture
market milk and various milk products. Efficient use of
water and steam, recycling of wastewater, and the efficient
recovery of milk solids become the focal point of attention
in course of manufacturing quality milk and milk products.
• Outbound logistics: It includes lifting of products from the
manufacturing site, suitable storage atmosphere and
distribution network for safe arrival to distributor,
wholesaler and retailer.
• Sales and marketing: It includes promotion, market creation,
penetration in the existing market,understanding of customer
needs and requirements, and grievance redressal if any [25].
Value chain: support activities
The following activities support the primary functions as
mentioned below.
• Purchase: Raw milk accounts for major cost allocation as
per the budget of the organization.Apart from, engineering
and utility items, fuels, packaging materials, etc., are
purchased from time to time as per requirement.
• Human resource management:   The role of human resources
is very crucial for the success of an organization. Human
resourcing starts with the recruitment of eligible
personnel and extends the responsibility for subsequent
development through training, skill improvement,
motivation, etc.
4 CABI Reviews
• Administration: Corporate governance and corporate social
responsibility are two pivotal roles that an organization
needs to take care of.
• Research and development: Innovation and customization
are two pillars that need continuous nourishment from
management. New product development and process
customization help to make differentiated products to
keep the value chain enriched and sustainable. The
application of new technology in product manufacturing,
usage of renewable energy and its consumption
optimization are the focus areas in handling the value
chain efficiently.
• Operational infrastructure and application of standard
protocol: Success of value chain is largely dependent on
the facility to manufacture desired end product with
consistency. Simultaneously, in-place standard operating
process (SOP) and periodical validation system give
robustness to the business process.
Figure 1. Dairy value chain framework. Source: Authors’ creation.
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Dairy value chain framework
Follow the Figure 1.
Value chain impact in the Indian context
The dairy sector is a dependable source for rural small and
marginal dairy farmers.These rural farmers are traditionally
weak and economically constrained. They depend on the
seasonal crops or the wage from occasional labour.
As estimated, dairying supports marginal and small-scale
farmers to earn 60%–65% approximate income out of
their total income [26, 27].
This transformation has been translated into significant
socioeconomic changes as mentioned below (Figure 2).
• Socioeconomic impact
• Impact on facility and infrastructure
• Impact on food security and nutrition

Figure 2. Dairy value chain in Indian context. Source: Authors’ creation.
Socioeconomic impact
Dairy producers being part of milk producers’ organizations
come under one umbrella irrespective of caste, creed,
gender and financial status.
Elimination of social inequity
Free open-hearted mixing of hundreds of dairy producers in
course of milk collection and pouring it to chilling centres
have reduced social inequity. The mixing of various ethnic
and social groups through collective action has bonded the
society together [28, 29].
Equality and democracy
Dairy co-operative societies elect management representatives
from their member groups.The management committee is
responsible for all the policy decisions. All the producer
members cast their votes and elect the management
committee representative.
Hygiene, cleanliness and sanitization
The milk producers’ organizations arrange training, awareness
programmes and extension services for their members
of producers. Members are educated regarding the
importance of hygiene, sanitization and cleanliness of both
animals and milkers. They are also informed regarding the
need for cleaned utensils for milk collection [30].
Elimination of misconceptions
Regular sustainable earning and veterinary support through
milk producers’ organizations have helped producer members
to overcome the misconceptions in terms of milk production.
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Avijit Sarkar et al. 5
Health care
Advancement in veterinary science and the availability of
veterinary doctors & medicine have helped dairy producers
to take care of milch animals. Milk producers’ organizations
extend their extension jobs and provide inputs to producer
members from time to time to take care of bovine health.
Nutrition
In line with extension programmes, milk producers’
organizations arrange feed and fodder at subsidized prices.
Advice about feed concentrate, proteins, vitamins and minerals
from veterinary nutritionists is available to producer members.
Improvement in breed quality and yield
Artificial insemination services are provided by veterinary
hospitals to improve the breed quality and milch yield. It also
helps to extend the lactation period of cows and buffaloes.
Empowerment of women
The contribution and earnings of women from the dairy
sector are now a recognized factor. Education programmes
and knowledge enhancement have been a reality through
extension programmes by the milk producers’ organizations.
Women are becoming active members of the milk
producers’ organizations to participate in the management
committee of the producers’ organizations. Their regular
earning has made them self-reliant and provided them a
status in society [31].
Direct economic impact
Milk producers’ organizations have created employment for
rural youth. Earning from dairy farming and milk sale has
stopped the exodus of rural people from villages. Dairying
6 CABI Reviews
is a supplementary occupation for most of the rural population.
It is a dependable opportunity for self-employment [28, 29].
Indirect economic impact
The extension programme of the dairy cooperative has
given the indirect benefit to their member producers. The
cost of milk production is reduced due to the availability of
subsidized feed and fodder, assistance in veterinary doctors
and medicine. Simultaneously, milk producers’ organizations
collect milk from members regularly that helps to eliminate
middlemen, private vendors or traders. Thus, members get
a fair price of their products regularly. In addition, the dairy
producers avail themselves of the benefit of cow dung as
organic fertilizer. Moreover, Gober gas (for use as fuel)
availability from cow dung makes it possible to earn
incremental value from dairy farming [32].
Impact on facility and infrastructure
Dairy co-operative members take an interest directly in
village development for obvious reasons [33]. Members
come forward to help in several developmental activities
as follows:
• Improvement in village road condition.
• Contribution to educational institutions of the village
and help to needy students.
• Contribution for village health centres.
• Contribution for drinking water system.
The milk producers’ organizations may take an interest to
augment value chain impact through the implementation
of ICT.This can help in empowering the dairy producers by
providing better access to natural resources, improved
technologies, effective production strategies, selling and
marketing, availability of banking and financial services.
Impact on improved food security and nutrition
Dairying not only generates additional income but also
provides the best nutrition altogether [34]. Considering
dairy farming as a perfect secondary source for small,
marginal dairy farmers, the availability of this best
nutritional source especially for the poor rural population
cannot be ignored. Part of the dairy farmer’s own produce
gets consumed by the household, which otherwise could
have been a difficult task to purchase from external
sources [35]. Considering a larger segment of malnutrition
of these poor farmers, availability of milk to own household
is of paramount importance.
Potential and limitation
The value chain constraints are mostly related to the
facility, infrastructure or technology gap, which have made
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dairy producers handicapped from exploiting 360-degree
benefits from the dairy business entity [36]. There is a
need to overcome these challenges for further growth and
to retain its momentum [37–40] (see Figure 3).
Sustainability prone or peril
The inherent presence of the triple bottom line approach
(TBL) with milk producers’ organizations is evident with
its drivers and multidimensional linkage. Sustainability
drivers embrace a series of social, economic and
management factors guided by policies from time to time
[41]. With the increasing population, dairy farming and its
application through the dairy industry are ever increasing.
In this journey, an increase in carbon footprint is an
associated challenge that needs to be taken care of. The
increasing use of land and water resources needs to be
moderated. The effort should be initiated towards fodder
production. For dairy industries, consumption of fossil
fuels should be discouraged. The use of cow dung as
organic fertilizer and the complete exploitation of Gober
gas as fuel should be encouraged [42]. Systematic
slaughtering of unproductive or aged animals should come
under active consideration for economic sustenance. In
addition, the farming model should follow economies of
scale with the usage of natural resources economically and
it will help in earning higher profits [43].
Practical contribution
The authors have done a comprehensive discussion on all
the possible outlets to generate sufficient income at small
and marginal farmers. In an emerging economy like India,
small and marginal dairy producers are majorly involved in
milk production. Hence, sufficient generation of income
and its sustainability are the need of the hour which the
authors have tried to indicate with the 360-degree
approach in the operation module.
Conclusion and recommendation
Considering the socioeconomic dimensions of the nation,
agriculture and the allied sectors can play a significant role
to uplift the livelihood of millions of people in Indian rural
community. Although India has done quite good progress
in this sector and reached the highest milk production
status, still it is quite low in milk productivity in comparison
with other developed countries such as New Zealand,
Australia, the USA. Because of trade liberalization, the
dairy sector is not insulated in India. Hence, country
priority should cope up with developed breeding
technology, appropriate rationing and health care of milch
animals, quality-based processing & innovative technology
and appropriate supply chain management to compete
 Avijit Sarkar et al. 7

Figure 3. Potential and limitation of dairy value chain. Source: Authors’ creation.

internationally so that the benefits of this endeavour can addition of cow dung and organized slaughtering in line
percolate down the line to our target segment that are with developed countries to exploit the 360-degree
millions of small and marginal dairy producers. In addition, potential of the dairy sector. The application of ICT in the
extended utilization of this sector is needed through value dairy value chain is also essential to facilitate input

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8 CABI Reviews
provision, disseminate innovation, connectivity in-between
milk producers and value chain actors. Apart from this, the
challenging role of Milk Producers Organizations needs to
be recognized, and its execution is needed to satisfy the
socioeconomic dimensions for India to reach the desired
destination.
Conflict of interest
The authors have declared there is no conflict of interest.
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