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Accounting for the Diversity in Dairy Farming

Nilabja Ghosh ( is with the Institute of Economic Growth, New Delhi.


“Economics of Dairy Farming in India” by M Dinesh Kumar and O P Singh (EPW, 14 October 2017), provided an analytical and conceptual critique for a special article co-authored by the current author, “Do Producers Gain from Selling Milk? An Economic Assessment of Dairy Farming in Contemporary India” (EPW, 24 June 2017). The author reiterates some of the issues implicit in the special article in order to stimulate further questions on these issues.

Bias in regional coverage, “silence” on some valuation issues within a farming system approach, inconsistency with macro-tendencies, and negl­ect of nutrition value were some of the flaws pointed out by the discussion article, “Economics of Dairy Farming in India” (EPW, 14 October 2017), in the earlier special article, “Do Producers Gain from Selling Milk? An Economic Assessment of Dairy Farming in Contemporary India” (EPW, 24 June 2017) co-authored by the author. Limitations and abstractions, inevitable in any research, have been transparently laid out in the special article. All figures reported were “estimates” and further research, surely, can offer improvements. Moreover, the broad objective of the article was to capture some contemporary scenarios of the dairy sector based on sample surveys, rather than making any general statement about the economic benefit of the dairy sector in the country. And the regional coverages and sample sizes have been clearly documented in the article for readers to make their own inferences.

Although sample and sub-sample averages can help in summarising the key indicators, these hardly dissemble the heterogeneities within the sample. With the meth­odology used in the article, it is patent that northern India performed better economically as compared to the eastern states, but there are wide divergences even within the nor­th­ern region as there are between the eastern states. Delhi, for instance, stands out as most profitable in dairy, but the benefits come at a high ecological cost of maintaining villages and livestock within the confines of a congested city. Such cases are likely to abound in other cities too. Success stories on dairy are much more commonly documented in research-based reports, but the article exposes the vulnerabilities of the sector.

Cost and Revenue Estimations

Estimation of costs, particularly for farm-grown and or unpaid inputs is extremely important, as rightly emphasised in the discussion article. However, it is stated clearly in the methodology of our article (Ghosh et al 2017) that our estimation takes into account only the paid outcosts incurred on purchased inputs, while the costs of all farm-grown inputs, including those appearing as by-products of the farm, are excluded. Unpaid family labour, too, is not included in the cost. The approach presumes zero opportunity cost of such inputs, which is not improbable in land-scarce regions (Kumar and Singh 2017). In the case of Bihar, for example, our study found that green fodder (millets, grass and jai) are often grown on flood-prone lands that would otherwise remain fallow. The rent paid for fodder land if leased-in is, however, accounted for (Ghosh et al 2017). Moreover, neither pointed out in our article nor addressed in the discussion article is the issue of estimating the economic cost to society for subsidised inputs, such as medicines, artificial insemination, and animal nutrients, which are provided by public agencies. In fact, our cost estimates of these inputs in the study do not fully reflect the economic cost to society.

This treatment of cost is admittedly conservative and is open to adjustments. If in real life some of these inputs are not actually free to the producer or society, this kind of valuation would generate underestimation of cost. Dairy farming would then be less profitable or more loss-making than is suggested in the article. Economic implications of dairying would be found to be even worse if the method follows an extremely fastidious method of imputing market prices for evaluating all inputs. Admittedly, some of the returns in the output side have also been lost sight of, but they are merely incidentals. External outcomes other than those mentioned in the article (cow dung and urine) are also pointed out. No commercial household processing for sale is ­reported by our respondents. While the discussants have not spelt out their expectations, a more rigorous approach factoring in the non-market costs would certainly generate lower returns than those reported for the specific study and thereby reinforce the conclusion.

The revenue clearly does not include any imputed value of the milk retained for household consumption. In its search for an explanation as to why farmers maintain animals despite the low market returns, this (subsistence) motive is speculated as the best possible reason for producing milk. The potential cost of procuring the same milk from the market (mentioned in the paragraphs preceding the concluding section) outweighs the financial loss, suggesting that consumption is cheaper via production than it is through market. Not undermining the nutritional significance of dairy farming for the producers’ family, the article assesses dairy from a commercial perspective and exposes the weakness of market.

Land and Dairy Intensification

According to the critics, in western states like Gujarat, high input costs accompany high revenue in intensive dairying even with irrigated fodder cultivation, while in semi-intensive dairy in northern India, inputs are gathered from the farms. On the other hand, in eastern India where dairy is traditional, the discussants expect both revenue and cost to be low, animals to graze in the wild and family labour and biomass to be abundant. Growth of dairy is associated with developments in marketing, price rises and other demand-side factors, and with lower need for land and water on the supply side. The discussion concedes that smallholding sizes hinder intensive dairy, though cereal-based cropping patterns help to supply feed. Positive results in the west and the north are reported by several studies, including a study by this author (Ghosh 2010). The survey in the eastern study regions did not succeed in finding enough “wild” common land available for grazing to produce productive and healthy herd of animals at a low cost. Animals do graze within human habitation and markets in search of food and food wastes, but this observation is common in all the survey regions. Despite all its regulations, even Delhi is no exception. The study finds higher returns in Delhi where nearly all inputs are purchased, but, in the other study ­regions, the farming system remains a major source of feed, though marketing channels are different, and prices and returns
are lower.

Self-reporting of Cattle Breed

Information about the breed of the animals is usually obtained from the farmers who were in turn informed or misinformed about this by the animal sellers. In Bihar, some of our respondent farmers expressed doubt about the credibility of the animal sellers’ information, when their animals failed to catch up with their yield expectations, notwithstanding that inadequate nutrition could also make hybrids less productive than anticipated. The rising regional trends in milk production set against these findings are intriguing. Other emerging models of commercial production not covered in the household survey may arguably be a factor, but the rationale behind the trends certainly deserves more exploration and leaves room for research.

In Conclusion

Field interactions of authors and the current debate further affirm the diversity of dairy economics. Various models of dairy farming are gaining visibility, but, combined with the existing reality, differentiated choices can be made at the policy level. The current state of economic reforms calls for a focus on the areas of weaknesses, a review of dairy as a policy for poverty alleviation rather than business, and a rethinking on the National Dairy Development Board’s strategies in this light. The study finds that at least some sections of dairy farmers still linger at the margin of profit and loss, and are still driven by subsistence needs rather than commercial gains. This is a matter of concern especially in a transforming economy. As the pressure on land resources mounts and markets get integrated and formalised, like other industries, dairying will have to be rooted in its comparative advantage. Further, dairy as an economic activity is not merely associated with human welfare, but also with ethical animal-rearing practices. Stray quest for feed is not a ­desirable model of animal husbandry. Open meadow lands for grazing are a basic entitlement both for animal welfare as well as sustainability of animal husbandry practices. Alternatively, governments must explore policy tools, including viable livelihood generation to increase the purchasing power of the poor to meet their nutritional security. The discussants (Kumar and Singh 2017) have critiqued the article for the “lack of familiarity with livestock farming” on a subjective ground. While specialisation is important in social science, consultation with varied interest groups and
disciplines is equally vital. Too much dependence on familiarity can constrict the vision of the study.


Ghosh, Nilabja (2010): “Economic Empowerment of Farm Women through Viable Entrepreneurial Trades,” consolidated report of coordinated studies from Agro-Economic Research Centres (AERC), submitted to Ministry of Agriculture, Government of India.

Ghosh Nilabja, Amarnath Tripathi, M Rajeshwor and Roopal Singh (2017): “Do Producers Gain from Selling Milk? An Economic Assessment of Dairy Farming in Contemporary India,”
Economic & Political Weekly, Vol 52, Nos 25–26, pp 88–96.

Kumar, M Dinesh and O P Singh (2017): “Economics of Dairy Farming in India,” Economic & Political Weekly, Vol 52, No 41, pp 77–79.

Updated On : 3rd May, 2019


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