Report on analysis of defunct dairy co-operatives of Anchal State

Dairy Cooperative
Thanammal Ravichandran1, Nils Tuefel2, Alan Duncan3
1 International Livestock Research Institute, India
2 International Livestock Research Institute, Kenya
3 International Livestock Research Institute, Ethiopia

1. Introduction
The International Livestock Research Institute (ILRI) is one of the institutes of the Consultative
Group on International Agricultural Research (CGIAR). ILRI’s mission is to help reduce poverty,
hunger and environmental degradation through livestock research to enhance productivity
and sustainability of agricultural systems in the developing world. In 2012, ILRI initiated the
IFAD-supported project “Enhancing dairy-based livelihoods in India and Tanzania through
feed innovation and value chain development approaches“ (MilkIT), with which it aims to
improve livelihoods in marginal areas through strengthening of dairy feeding and marketing
value chains. The Institute of Himalayan Environmental Research and Education (INHERE) and
the Central Himalayan Rural Action Group (CHIRAG) are ILRI’s partners in implementing this
project in Almora and Bageshwar districts.
The project follows the Innovation Platform (IP) approach for implementation of
interventions where different stakeholders around dairy value chain come together and find
solutions for the existing issues and develop opportunities to develop further. This project
selected 2 clusters, Baseri and Saknara, covering 12 villages in Sult block and 2 clusters, Saing
and Garikhet, covering 10 villages in Bageshwar block. One dairy value chain innovation
platform was formed between the 2 clusters and one feed IP was formed in both the clusters
in each block.
This project has linked the dairy producers with Anchal, which is the state dairy cooperative
for marketing excess milk from villages in the Sult block and initiated 4 dairy collection centres
collecting milk from 8 villages through the IPs in Sult block, collecting a total of 120 litres of
milk per day in the high season. Even though these areas are under the operational area of
Anchal, but initiated the dairy collection only through the IP approach. There were some
issues with Anchal around the payment system and credit facility for purchase of dairy
animals. A District level meeting was arranged to discuss these issues with Anchal officials.
While discussing these issues, Anchal requested a short study by ILRI on the reasons for
previous dairy closures in some villages of the Sult and Bikyasain areas and asked for support
for reopening of the dairy co-operatives which were formed a decade ago but which are not
functioning now.
1.1 Study objectives
1. To find the factors responsible for the inefficiency of the previous dairy co-operatives
2. To find potential avenues for reopening the dairies in these villages
2. Methodology
2.1 Conceptual framework
Following North (1990), we define institutions as ‘rules of the game’ defining the incentives
and sanctions affecting people’s behavior. Rural economies in developing countries are
characterized by a weak institutional environment, high transaction costs and risks, weak
information flows, all these leading them to ‘low level equilibrium trap’ (Dorward et al. 2003)
In this study the State Co-operative institutional arrangements are analyzed based on three
aspects namely actors, enabling environment and the business and extension services
provided by the Coop. Based on the value chain analysis approach (Hellin and Meijer, 2006),
efficiency of the institutions influence decision making at farmer and organizational level.
Enabling environment and the business extension services will be immediate determinant for
measuring the efficiency of institutions. A policy level incentives are the basic determinant for
the setup of institutions and infrastructure. Household level characteristics such as available
resources and food and nutrition security aspect are underlying determinants for the decision
making of farmers for participation in the institutions. This study used the above framework
to build understanding of the institutional efficiency for these dairy co-operatives.

Actors
Resources Household food and
Sampling
Assets nutrition security
Social capital Small-holders Household consumption
Human capital Income
Economic capital Risk and vulnerability
Gender role

Business and Marketing institutions Enabling

extension services State co-operatives environment
Feed supply Private sector Rules and laws
Veterinary services Civil Society Contractual
Breeding services Middle man/ contractor/ Direct agreement
Financial services supply Price policy
Market information Trade standards
Capacity building

Figure 1: Institutional analysis for dairy cooperatives (Modified from Hellin and Meijer, 2006)
2.2 Sampling and data collection and analysis methods
A total of 12 villages from Bikyasain and Sult area were suggested by Anchal co-operative for
study and 10 villages were finally selected for the study. Travel to 2 distant villages was
difficult due to weather conditions. Focus group discussions were used to collect data in which
producers and a secretary were included. Open interviews were followed with certain pre-
defined variables for discussion. Data were recorded in excel format and analysed with
descriptive analysis.

3. Findings/ Results and discussion

3.1 Basic determinant: Policy level decision making
Many decisions are taken at the district level without much involvement from the
farmers/producers. Political lobbying is observed for selection of members and chairman at
district level. There is lack of transparency in the selection process for the chairman, so the
voice of the farmers is not heard at high level. Many tools or schemes are based on the
recommendations from the experts from the plain area where the geographical conditions
are different from the hilly regions. Even though the dairies have been closed for a few years,
farmers reported that there was no initiation from Anchal side to reopen these dairies. All the
equipment given to these dairies is not in a functioning state.
3.2 Immediate determinants:
3.2.1 Enabling environment: Rules and law
Anchal have fixed rules for the dairy co-operative at village level. For example one rule states
that 30 members should be registered to form the co-operative society. But in many villages,
the number of households is less than 30.
3.2.2 Price policy/ contractual agreement
The price paid by the Anchal was not satisfactory to the farmers who supplied milk to the co-
operatives. Farmers reported that they received less than the market price and this was the
main reason reported by farmers for closure of dairy (Table.1). This price system may be due
to inefficiency of monitoring by the secretary. There was no incentive for the secretary to
collect milk except the bonus money received against the difference of litres to kgs which was
small compared to the plain area. This is because the quantity of milk is much lower in the
hilly areas due to less productive dairy animals. Because of this, the secretary paid less money
to the farmers so that he/she could earn income from collection of milk. In Gujarat and other
states, the secretary is paid with a minimum fixed incentive for collecting the milk.
Max price for Max price buff.
Village Name Block Name Why Dairy Closed buff. milk (INR) milk (Year)
Bauli Bhikyasain water scarcity, low price 28 2012
Sainmanura Sult water scarcity, low animals 16 2010
Kunidhar Sult low price 15 2003
Khanulia Bhikyasain low price 15 2007
Sakar khola (I) Sult low price 12 2005
Dangola Sult low price 18 2004
Rikwasi Sult low price, decreased population 15 2006
Distance from road head and low
Adera Sult price for milk 12 2009
 low price for milk, animals
Minar Bhikyasain decreased, better price in market 22 2012
problem of head load with less
money, no secretary to collect milk,
Dheona Bhikyasain animals decreased 18 2009
Table1: Reasons for closure of dairy in Bikyasain and Sult villages
3.2.3 Business and extension services
Anchal provided the feed and fodder seeds to these co-operatives. Only those farmers who
had crossbred cows demanded concentrate feeds. Feeding concentrate feed to local breeds
of cows and buffaloes with low productivity was not felt to be profitable. The Animal
Husbandry Department is the sole service provider for treatment and breeding services but
they had to travel long distances to access the treatment and breeding services. In cases of
emergency the farmers depended on their traditional treatment procedures, and most of the
breeding practices are limited to natural service. Only one co-operative availed the credit
facility for the purchase of dairy animals in the period of 5-10 years when dairies were in
operation. When there is no improvement in the dairy animal population and breed
improvement, it is difficult to increase the milk production. Many farmers were not aware of
the facilities available with Anchal for the credit for purchase of dairy animals.
Treatment AI/NS
Treatment Provider provider How many
VillName BlockName Input Services Provider distance distance credit

Bauli Bhikyasain feed Vet hospital 15 2 No idea

Sainmanura Sult feed Vet hospital 5 5 No idea

medicines,
Kunidhar Sult fodder seeds Vet hospital 15 15 No idea

Khanulia Bhikyasain fodder seeds Vet hospital 10 10 No idea

Sakar khola (I) Sult feed Vet hospital 10 10 No idea

fodder seeds,
Dangola Sult medicines Vet hospital 6 5 No idea
Fodder seeds,
Rikwasi Sult medicines Vet hospital 6 4 No idea

Khadera Sult Feed Vet hospital 15 5 No idea

Minar Bhikyasain Feed Vet hospital 20 4 No idea

Dheona Bhikyasain Feed Vet hospital 16 3 3

Table 2: Details of business services for Bikyasain and Sult villages
3.2.4 Capacity building
The training and exposure visits were limited to the secretary only and many farmers were
not aware of the dairy operations and payment systems. Visits by the Anchal supervisor were
limited to the secretary’s house to check the quality of the milk and checking the records. The
frequency of the visits was once or twice a month and the meetings were organised by the
supervisor. A few trainings or meetings were organised by Anchal in Bikyasain, a nearby town,
or in Pant Nagar University where a few farmers participated. The main topics of these
trainings were feed management and breed improvement. There was not much improvement
in feed management and breed improvement in the surveyed villages following training.
3.3 Underlying determinants:
3.3.1 Household assets: Dairy animals
When we compared the dairy animal population during the period when dairies started and
the current population we found that populations of dairy animal have decreased in many
villages (Figure 2) and famers were not interested to reopen the dairies. Farmers are
interested to reopen the dairy collection in the villages where the population is more or less
static (Table 3). In these villages the surplus milk is available to sell outside even in the lean
summer season.

Dairy Animal Population Trend (now & before dairy

80
started)
70

60

50

40

30

20

10

TotDairyAni_Now TotDairyAni_Before

Figure 2: Dairy animals population trend in Bikyasain and Sult villages

Are farmers interested How much surplus

Village Name Block Name to re-open dairy? milk is available?
Bauli Bikyasain Yes 15
Sainmanura Sult No 0
Kunidhar Sult Yes 25
Khanulia Bhikyasain No 0

Sakar khola (I) Sult Yes 20

Dangola Sult Yes 15
Rikwasi Sult No 0
 Khadera Sult Yes 20
Minar Bhikyasain No 15
Dheona Bhikyasain No 15
Table 3: Status of interest for dairy reopening in Bikyasain and Sult villages
3.3.2 Income and gender roles
Agricultural income is mostly affected by various factors including soil erosion, wild animal
damage to agricultural products, poor income from agriculture due to lack of market and
attractive prices and shortage of labour. That is the main reason for migration to nearby plains
areas for employment. Migration is mostly limited to men and women are left at home. The
only option for women’s empowerment is livestock/dairy animals. Dairy animals are kept for
milk and milk products for household consumption and surplus milk is sold to neighbours or
the market if it is accessible to them. Since the market and city are so far from these villages,
the only option left for marketing milk is with Anchal dairy co-operative which is a monopoly
actor for milk marketing. The main income generated from the dairy is spent by women for
household expenses since all the work is done by women. Those villages with less migration
are interested to reopen dairies for their livelihood (Figure 4).

Members migrated from village for employment

60
Members migrated (No)

50
40
30
20
10
0

village name

Figure 4: Status of migration in Sult and Bikyasain villages

4. Conclusions
This short study indicates that there is a need for improvement in the institutional aspects of
Anchal co-operative. The main reason for the dairy closure is the lack of confidence among
the farmers for the price transparency, biased selection process by the secretary, lack of
support for the credit for purchase of animals etc. The breed improvement, treatment
services and introduction of more animals are important for viability of dairy marketing to
improve livelihoods in these study areas. Farmers are dependent on the Anchal dairy co-
operative for the marketing of milk due to high transaction costs and distance of the villages
from road. Migration of members from the villages to cities is observed for employment and
livelihood. Small holder dairy farming is a potential option for employment generation and
women’s empowerment if appropriate business services are provided. Five villages are willing
to reopen the dairy in their villages out of 10 surveyed villages as they have more dairy animals
and surplus milk for sale.

5. Recommendations
 Restart dairy collection in the 5 villages where farmers are willing to sell milk. Renew
equipment as the old equipment is non-functional
 A cluster-based approach can be followed to combine 2-3 villages for collection of milk
so that the volume of milk will be reasonable to reduce transaction costs
 The Innovation Platform approach can be followed to synergise the schemes for dairy
development where the interventions should be based on the need of farmers.
 Financial institutions like banks/NABARD should be invited for training and awareness
for various facilities
 Field based service provider (community veterinary worker) should be trained for
artificial insemination and first aid treatment services
 Credit facilities from Anchal should be equally distributed among the dairy co-
operatives
 Farmers/representatives should be called for planning of price and input services
 Capacity building of farmers are required for entrepreneurship skills; more women to
be included in the trainings.
 Partnership with NGOs will help for the technical training and monitoring the dairy
activities regularly.
References
Dorward, A., Poole, N., Morrison, J., Kydd, J and I. Urey (2003): Markets, Institutions and
Technology: Missing links in Livelihoods Analysis. Development Policy Review 21(3), 319-
332.
Hellin, J. and M. Meijer (2006): Guidelines for value chain analysis. Available at
ftp://ftp.fao.org/es/esa/lisfame/guidel_valueChain.pdf.
North, D.C (1990): Institutions, Institutional Change and Economic Performance. Cambridge:
Cambridge university press.