115

PROCUREMENT AND MARKETING OF MILK

The performance with respect to procurement and marketing of milk by the

Tirunelveli Milk Producers Cooperative Society is presented in this chapter in order to

evaluate the performance and functioning of the Society.

The farmers, as members of the Milk Producers Cooperative Society, should

focus only on supplying quality milk and become financially self-sufficient, said

former minister Alangur Shrinivas.68

Indian dairy industry is one of the fastest growing sectors in India. It has

registered incredible growth in the last several years. We are proud to say that our

country holds number one position in the world in milk production with 100.9 million

tonnes of milk produced during 2006-07.

Despite the impressive growth in milk production in the last three decades,

productivity of dairy animals remains very low and milk-marketing systems primitive.

Marketing of the majority of the milk through unorganized sectors is likely to

dissuade small dairy farmers from expending production, which is absolutely

necessary to keep up with the strong demand growth. In a recent study, Datta and

Ganguly (2002) 69

estimated Indian milk demand for 2020 under various GDP growth

rates. The study reported that if the current growth continues for the next twenty

years (the nation has been growing at a rate between 5 and 7 percent over past five

years), milk consumption is likely to more than double by 2020.

68

‘ Deccan Herald’ , Sunday, 19, September, 2010. 69

Datta, T. N. and B. K. Ganguly.. “Analysis of Consumer Expenditure Pattern in States with Special

Reference to Milk and Milk Products”. National Information Network, NDDB (National Dairy

Development Board), 2002.

116

3.1 GROWTH AND IMPORTANCE OF DAIRY CO-OPERATIVES IN MILK

PROCUREMENT

Dairying is a centuries-old tradition for millions of Indian rural households;

domesticated animals have been an integral part of the farming systems from time

immemorial. Milk contributes more to the national economy than any other farm

commodity-more than 10.5 billion dollars in 1994-95. In the context of poverty and

malnutrition, milk has a special role to play for its many nutritional advantages as

well as providing supplementary income to some 70 million farmers in over 500,000

remote villages More importantly, the farmers earn an average 27.3 percent of their

income from dairying, with as high as 53 percent for landless and as low as 19 percent

for the large farmers.70

In India, the efforts for organising dairy industry and trade on co-operative

lines were made immediately after the enactment of Co-operative Societies Act, 1912.

Dairy co-operatives are acclaimed as effective instruments for economic uplift of the

rural poor, as they provide opportunities for gainful employment and income. The

opportunities provided by dairy co-operatives for easy sale of milk, periodic payment

and incentive bonus, act as stimuli for the farmers to take up dairying on a more

permanent and regular basis. These factors led to the growth and development of

dairy co-operatives.

Before 1947, the administrators did not see any need to spend money on

improvement of dairying. During the Second World War, the situation in milk supply

was still worse. The civil supplies department introduced the subsidised milk scheme

in 1944 under which milk was distributed for children, invalids and expectant mothers

at subsidised rates.

70

Dairy India Yearbook 1997, Priyadarshini Vihar, Delhi, India.

117

Since independence, dairy development has been getting increased attention

and the outlay has been increasing plan after plan, and the growth of outlay has been

faster since the Third Plan. From a mere 7.81 crores in first five year plan, the plan

outlay in the fourth five year plan had shot up to 139 crores71

. Most of the outlay on

dairying and milk supply has gone into setting up milk processing plants, and chilling

and marketing facilities for milk. Rapid urbanization, improvements in transport and

communication and progress of technology have all speeded up the expansion of dairy

industry in selected milk sheds. Attempts were made in different parts of the country

to organise dairy co-operatives. At the early stage, three different types of dairy

co-operatives were established by the consumers, distributors and producers, though

ultimately the producers co-operatives found patronage and encouragement.

3.1.1 Producers Cooperatives and Milk Union

This type is the most widely prevalent one in the country. They are called

either milk supply societies or milk producers societies. It is the genuine organisation

of milk producers. It promotes the interest of the producers without at the same time

affecting the consumers’ interests. It has greater growth potential. Milk producers are

the members of the Society who produce both cow milk and buffalo milk.

The two tier structure of dairy cooperatives evolved by the Kaira District

Co-operative Milk Producers’ Union Limited, popularly known as ‘Amul’ met with

great success. During the evolutionary stages, the milk co-operatives were established

under a two tier system whereas now they are established under a three tier system.

Efforts to increase milk production by dairy farmers are strongly influenced by

the degree to which demand signals are transmitted through the marketing system.

Co-operatives have played an important role in transmitting the message of urban

71

, V. Kulanthaiswamy, “ Co-operative Dairying in India “, Rainbow Publications, p.16.

118

market demand to them. Since the demand in the urban scenario is rapidly increasing

so is the supply generated by the farmers.

A number of field studies conducted by independent researchers emphatically

confirm the role played by milk co-operatives in the progress of the dairy industry.

Millions of small farmers isolated in various parts of the country have gained the

strength to sustain their livelihood. The co-operatives have provided gainful

employment and brought them close to the market.

The Primary Milk Society is the foundation of the Cooperative structure. The

efficiency of the movement solely lies in the strength of these Societies. Primary Milk

Societies are organised at the rate of one society per village. The purpose of such a

society is to promote the economic interests of its members by improving quality, and

increasing quantity of milk production per buffalo or cow and to provide necessary

guidance and assistance to its members and supply milk to the Milk Unions. These

societies also supply cattle feed etc. to their members with a view to enhancing milk

production. The Managing Committee of the Society comprises members elected by

those members who are eligible to participate and vote in the General Body Meeting.

The Primary Milk Societies (PMS) functioning at the village level join to form

a Milk Union for carrying out such activities which are conducive and essential for

the socio-economic development of milk producers, by procuring and processing of

milk and marketing of milk products. The Board of Directors comprising nine

members elected out of the Chairmen of affiliated Primary Milk Societies run the

day-to-day administration through the Chief Executive Officer. These Unions either

process milk at their own level or pass the same to the milk plants of other milk

unions for processing. They also organize new Primary Milk Societies at the village

level.

119

3.1.2 Growth in procurement of milk

Today, with about 100 lakh farmer producers, Indian dairy farmers have been

shown the way to prosperity and health. The ideal conditions for long term growth in

procurement have been created.

• Modern technologies in animal breeding and feeding have been adopted by a

significant number of farmers.

• Modern consumer processing and marketing facilities have been created all

over the country.

• Technical input services including animal insemination, balanced cattle feed /

bypass proteins feed, better fodder varieties and emergency veterinary health

services - have not only helped in raising and sustaining milk production but

have also ensured a better quality of life in the villages.

Recognising the importance of the sector, the notable programmes taken up by

GOI are key village schemes, intensive cattle development projects, crossbreeding

projects through bilateral assistance, operation flood programme and technology

mission on Dairy Development. In 1970 under the aegis of National Dairy

Development Board, "Operation Flood" programme was launched to modernise the

dairy sector and flood the four metro cities with milk from dairy cooperatives. By the

end of September, 1999, 82000 village milk producers cooperatives were organised

through 102 lakh farmers and with an average rural milk procurement of 13.13

million liters per day.

Having made significant strides in production and processing, our country is

topping the world as the highest milk producer. Now it is time to upgrade the quality

of milk by increasing the efficiency of procurement as well as the testing of milk for

quality. In India, the milk pricing is based on the fat percentage and to some extent

120

Solid Not Fat (SNF) in milk. The determination of fat is based on the butyrometer

method which is one of the oldest technologies adopted by the Milk Collection

Centres / Milk Cooperative Societies. From 1980's many of the societies have been

using Milko testers for testing the fat percentage in milk as this is a rapid method

compared to former one.

Of late, Milk Collection Centres/Cooperative Societies are installing automatic

milk collection stations (PC based milk collection stations, smart automatic milk

collection stations and automatic milk collection stations) which measure the weight

of milk, fat contents and give a print out of payment slip to farmers in each shift. The

system also facilitates storing ten days/monthly/yearly data and printing of cumulative

summary of shift as and when needed. The state of art equipment is able to perform

120 to 150 operations in an hour.

3.1.3 Milk-Marketing System

A schematic diagram of milk marketing channels in India is presented in

Figure 3.1.

121

FIG. 3.1 MILK MARKETING SYSTEM IN INDIA

Source: Journal of Food Distribution Research 35(2), July 2004.

India has the largest cattle and buffalo population in the world. More than 67

percent of dairy animals are owned by marginal and small farmers, which constitute

the core milk-production sector in the country. Many of these farmers own dairy

animals primarily to supply milk for their own consumption. Slightly more than 30

percent of the milk produced in the country is retained in producer households.

Eighty percent of milk is marketed through the highly fragmented unorganized

sector, which includes local milk vendors, wholesalers, retailers, and producers

themselves. On the other hand, the organized dairy industry, which accounts for about

20 percent of total milk production, comprises two sectors: government and

cooperatives. Even though cooperatives provide a remunerative price to the producer,

the unorganized sector plays a major role in milk marketing because of three factors.

Government Village

Co-ops.

Private

District level Milk Pro-

ducers Coop. Union

Village level Milk Pro-

ducers Coop. society

Consumer

Retailer

Producer

Milk Vendor

Wholesaler

122

The first factor is the pricing policy of the cooperatives: their purchase price is based

on the fat content of the milk, whereas the private sector pays a flat rate per liter of

milk. The second factor, which motivates the milk producers to sell milk to private

vendors, involves the type of milk animals reared by the producer. Crossbred cows

yield more milk with a lower fat than do buffalos. The crossbred cow population has

increased over years because of artificial insemination and improvements in

management practices. The third factor is payment policy. The private sector can pay

their producers every day, whereas the co-operatives pay weekly or fortnightly.

Producers sometimes have to fight with the co-operatives to get their payments. Within

the organized sector, the co-operative sector is by far the largest in terms of volumes of

milk handled, installed processing capacities, and marketing infrastructure. The

eighty-two thousand Dairy Co-operative Societies (DCSs) across the countries have a

strong membership of nearly 10 million landless, marginal, and smallholder

milk-producer families. Although the organized sector handles less than 20 percent of

the production, it has an installed capacity to process about 33 percent of

India’s total milk production. The cooperative and private sectors have more or less

equal processing capacities.

3.1.4 Role of Cooperatives in Milk Marketing

Operation Flood, launched in 1970, introduced cooperatives into the dairy

sector with the objectives of increasing milk production, augmenting rural income,

and providing fair prices for consumers. The three phases of Operation Flood

succeeded in fulfilling a major part of their objectives. During its first phase,

Operation Flood linked eighteen of India’s premier milk sheds with consumers in

India’s four major metropolitan cities: Delhi, Mumbai, Calcutta, and Chennai.

Operation Flood’s Phase II (1981–1985) increased the milk sheds (collection centers)

123

from 18 to 136 and 290 urban markets expanded the outlets for milk. Phase III (1985–

1996) enabled dairy co-operatives to expand and strengthen the infrastructure required

to procure and market increasing volumes of milk. Phase III consolidated India’s

dairy cooperative movement, adding 30,000 new dairy co-operatives to the 42,000

existing societies organized during Phase II. Milk sheds peaked to 173 in 1988-89

with the numbers of women members and Women’s Dairy Cooperative Societies

increasing significantly.

Today there are 22 state federations in India, with 170 district-level unions,

more than 76,000 village-level cooperative societies, and 11 million milk-producer

members in different states. These cooperatives collect an average of 15 million liters

of milk each day. Fresh liquid milk, packed and branded, is marketed in over 1000

cities and towns in India by these cooperatives; annual sales turnover exceeds 80

billion Indian rupees.

3.1.5 Milk Procurement by Dairy Cooperatives

Most of the rural people, especially women, make their livelihood by rearing

milch animals and by supplying milk to the Cooperatives. Keeping this in view and to

improve the rural economy and to enhance the personal income of the stake holders in

rural area, Government of Tamil Nadu directed the Tamil Nadu Cooperative Milk

Producers’ Federation and District Cooperative Milk Producers’ Union (DCMPU) to

raise the procurement price of cow's milk from Rs.12.00 to Rs.14.08 per litre and that

of the buffalo’s milk from Rs.14.00 to Rs.18.00 with effect from 10.03.2008 and the

milk cost as per the revised procurement price is being disbursed to the Milk

producers.

In Tamil Nadu State, milk is procured by the Tamil Nadu Cooperative Milk

Producers’ Federation through 17 District Cooperative Milk Producers’ Unions

124

(DCMPUs) covering 30 districts. The quantity of milk procured by the District

Co-operative Milk Producers Unions as on 31.03.2010 is furnished in the adjoining

page in Table No.3.1.

According to Table No.3.1, 17 District Cooperative Milk Producers’ Unions

have procured 22.37 lakh litres of milk per day (LLPD) during 2009-10, with the

maximum amount of 437 thousand litres per day being collected by the Salem union.

TABLE NO.3.1

MILK PROCUREMENT BY DCMPUs

(As on 31.03.2010) (In thousand litres per day)

Sl.No. Name of the Union 2009-10

1. Kancheepuram-Tiruvallur 48

2. Villupuram 158

3. Vellore 280

4. Dharmapuri 149

5. Salem 437

6. Erode 228

7. Coimbatore 227

8. Nilgiris 21

9. Madurai 208

10. Dindigul 45

11. Trichy 282

12. Thanjavur 30

13. Pudukottai 13

14. Sivagangai 30

15. Virudhunagar 11

16. Tirunelveli 64

17. Kanyakumari 6

Total 2237

Source: Dairy Development Policy Note for the year 2009-2010.

125

3.1.6 Average milk procurement by DCMPUs:

The average milk procured by the District Cooperative Milk Producers’

Unions in Tamil Nadu per day for the years from 2001-02 to 2009-10 is shown in the

following table.

TABLE 3.2

AVERAGE MILK PROCUREMENT IN DCMPUS PER DAY

(In Lakh Litres)

Year 2001-2002 17.49

Year 2002-2003 15.79

Year 2003-2004 17.26

Year 2004-2005 20.56

Year 2005-2006 21.59

Year 2006-2007 22.10

Year 2007-2008 21.64

Year 2008-2009 22.00

Year 2009-2010 (up to June) 22.30

Source: Report published by TamilNadu Co-operative Milk Producers' Federation

Ltd.

Table No. 3.2 clearly shows that the average milk procurement per day in the

State of Tamil Nadu has increased from 17.49 lakh litres in the year 2001-02 to 22.30

lakh litres in 2009-10.

From the information available in Table No.3.2, the line chart in the adjoining

page is prepared to explain the increasing trend in average milk procurement per day.

126

FIG .3.2 AVERAGE MILK PROCUREMENT PER DAY

Figure No.3.2 shows the trend in the average milk procurement per day. There

is gradual change in the years from 2001-02 to 2009-10. But in the year 2004-05, the

increase in the procurement is remarkable. After that, a stagnant position is shown in

the average procurement of milk per day.

3.1.7 Milk Sales in District Unions and Chennai Metro

Standardised milk, Buffalo milk and double toned milk are being sold by the

Federation through 218 Automatic Vending Machines (AVM) to the city consumers.

Milk products are also sold in certain AVM Units. Sachet milk sales are also carried

out in AVM units.

The quantity of local milk sales by District Co-operative Milk Producers'

Unions during the year 2009-10 is given in Table No.3.3.

0

5

10

15

20

25

Average Milk Procurement per Day

Average Milk Procurement

per day

127

TABLE NO. 3.3

MILK SALES IN DISTRICT UNIONS AND CHENNAI METRO

(In thousand litres per day)

Sl.No Name of the Union 2009-10

1. Kancheepuram-Tiruvallur 1

2. Villupuram 33

3. Vellore 74

4. Dharmapuri 17

5. Salem 153

6. Erode 70

7. Coimbatore 168

8. Nilgiris 18

9. Madurai 193

10 Dindigul 13

11 Trichy 108

12 Thanjavur 15

13 Pudukottai 7

14 Sivagangai 33

15 Virudhunagar 5

16 Tirunelveli 57

17 Kanyakumari 18

Total 983

18 Chennai Metro sales 1032

Grand Total 2015

Source: Dairy Development Policy Note for the year 2009-2010.

Table No.3.3 shows that the total sales for the period is 2015 thousand litres

per day. Of the total sales, Chennai Metro sales alone contributes 1032 thousand litres

and the remaining 983 thousand litres being sold by the 17 DCMPUs.

128

3.2 PROCUREMENT AND DISTRIBUTION OF MILK BY THE TMPCS LTD.

In this part of the study, the researcher deals with the two major functions of

the Society namely procurement and distribution of milk. The researcher has made an

attempt to draw a short biographical sketch about the physical performance of

TMPCS Ltd. The necessary data to design this chapter has been collected by the

researcher from various records, documents and annual reports of the selected

Society. Some informal but useful interviews were also conducted with the officials

of the Society.

3.2.1 Number of members

A member is one who owns share in the Society. Thus, anyone can become

the member of the Society by purchasing the share of the Society. A person can buy

more than one share, but now, the Society follows a rule that if a person wants to

become a member, then, he should have at least one milch cattle of his own. The

Table No.3.3 explains the membership of the Society from the year 1999-2000 to

2009-10.

From the table, it is evident that there is a slight increase in the total

membership of the Society. The total number of members supplying milk to the

Society has also increased in the beginning years of research. This is due to the fact

that the Society pays for the milk promptly and dividend is also paid regularly to the

members. The preference of the members for selling the milk to the Society arises

mainly due to the ready price paid by the Society for milk. The second reason being

the amount of bonus given by the Society. Only very few members prefer the Society

for safety purpose.

129

TABLE NO.3.4

MEMBERS OF THE SOCIETY

Sl.No Year Total

Members

Members supplying milk

to the Society

Trend

value

1 1999-2000 7326 920 1021.12

2 2000-01 7380 939 990.29

3 2001-02 7387 950 959.40

4 2002-03 7389 958 928.51

5 2003-04 7332 907 897.62

6 2004-05 7731 945 866.73

7 2005-06 7483 994 835.84

8 2006-07 7467 888 804.95

9 2007-08 7461 839 774.05

10 2008-09 7453 626 743.16

11 2009-10 7449 568 712.27

Source: Records of the TMPCS Ltd.

There is increase in case of members supplying milk to the Society for the

study period only up to 2005-06. The number of members supplying milk is at a

maximum of 994 during that period. After that, it decreases and reaches 839 in the

year 2007-08 and 568 in the year2009-10.

The total members supplying milk to the Society was 920 in 1999-2000. It has

decreased to 568 members in the year 2009-10.The least square method is applied and

the straight line equation Yc = a+bx is fitted for the given time series data on the

members supplying milk to the Society. It gives us the result Yc= 866.73 -30.89 x.

From this, it is evident that the members supplying milk to the Society has decreased

130

by 30.89 per year during the study period. The trend in the decrease of membership of

the Society and the actual membership of the Society is presented in the form of a

graph given below.

FIG.3.3

TREND VALUE FOR MEMBERS SUPPLYING MILK

Assuming the same trend to continue, the researcher has computed the total

members who may be supplying milk to the Society in 2010-11, 2015-16 and 2020-

21. Thus, it is estimated that the membership might have increased from the present

number of 568 in 2009-10 to 681 in 2010-11.Then, it would decrease to 527 in 2015-

16 and 372 in 2020-21 if the same trend prevails.

3.2.2 Number of milch cattle

The term milch cattle refers to the cow or buffalo. The total of milch cattle

owned by the members is given in Table No.3.5

0

200

400

600

800

1000

1200

19

99

-20

00

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

20

09

-10

20

10

-11

20

15

-16

20

20

-21

Members supplying milk

Trend Value

131

TABLE NO.3.5

MILCH CATTLE

Year Number of

milch cattle

1999-2000 1220

2000-01 1241

2001-02 1266

2002-03 1366

2003-04 1310

2004-05 1284

2005-06 1213

2006-07 1206

2007-08 1076

2008-09 890

2009-10 777

Source: Records of the TMPCS Ltd.

The members must have milch cattle of their own to supply milk to the

Society. It can be seen from the Table No.3.5 that the number of milch cattle owned

by the members those who are supplying milk to the Society is increasing during the

first four years of the study period and decreasing during from 2003-04 to 2009-10.

This may lead to an overall decrease in the total milk supplied by the Society which in

turn will lead to a decrease in the profit of the Society.

Table No.3.4 shows that there is also a decrease in the number of milk

supplying members during these years. Thus there is a direct relationship between the

number of members supplying milk to the Society and the number of milch cattle

owned by them. This can be proved by the Karl Persons’ co-efficient of correlation

applied for these two variables. It is denoted by ‘r’. The calculated r is 0.95. from this,

it is proved that there is a high degree of positive correlation between the two

132

variables which indicates that if the number of members supplying milk to the Society

decreases, the number of milch cattle owned by them also decreases and vice versa.

3.2.3 Number of workers employed

The number of workers employed in the Society from the year 1999-2000 to

2009-10 is given in Table No. 3.6

TABLE NO.3.6

WORKERS EMPLOYED

Source: Records of the TMPCS Ltd.

For the efficient functioning any organization, sincere and efficient workers

are needed. Like this, the Society also gives employment opportunities to the people

in its area of operation. The table no. 3.6 shows that the number of workers employed

in the Society has decreased from 173 in 1999-2000 to 103 in 2009-10. The main

reason for this heavy fall in the number of workers is that the Society is functioning

with its own funds and hence if the Society employs many workers then it has to keep

a large amount for the payment of salary to the workers. This will definitely affect the

Year Workers employed

1999-2000 173

2000-01 166

2001-02 164

2002-03 151

2003-04 135

2004-05 131

2005-06 135

2006-07 128

2007-08 116

2008-09 110

2009-10 103

133

financial position of the Society. That may be the reason for the reduction in the

number of workers employed.

3.2.4 Procurement of milk

Milk is the raw material for this special type of industry and it is obtained only

through procurement from the members, union and other institutions. The TMPCS

Ltd., procures milk from the members who live in the nearby villages. For milking

their cows, the members have to bring them to the milking sheds built by the Society

for this purpose. There the milking is done and the Society collects the necessary milk

from the members. Here it is to be noted that the Society purchases the milk by

strictly checking the members from adding water to the milk. In general, Lactometer

should be used for this purpose. But, due to lack of time, no such device is used by the

Society. A chemical called potassium permanganate is mixed with water and this

solution, which acts as a germicide, is used for cleaning the udder, particularly the

teats of the cows and buffaloes, before milking. Then, the collected milk is brought to

a central place, where testing is made for its content of fat and sweet non fat (SNF).

For procuring the milk from the members, the TMPCS Ltd. was using its own van

purchased for this purpose. But, the maintenance expenses were very high as a result

of which the operating expenses reached the maximum amount in the year 2006-07.

Therefore, the Society had no other way except to sell the van. And now, the Society

uses a hired van for procuring milk from the members.

To increase milk production, TMPCS Ltd. helps the milking members in the

form of loans and subsidies through nationalised banks for the purchase of milking

animals. It is recovered from the payment for milk and settled to the banks monthly

once.

134

Payment for milk is made once in ten days. A thrift fund 20 paise per litre is

retained and returned with interest during Pongal time. To encourage members and

make them to supply more milk, additional purchase price is given during Deepavali

time from the profit earned by the Society. Cattle feeds are supplied at subsidized

rates. A cash Prize is given during Co-operative vara vizha to one male and one

female member whose cattle produce the maximum milk during the year. Bonus to

milking members and dividend @ one Rupee per litre are given every year.

TMPCs Ltd. procures milk from its members, union and other institutions

which include District Livestock Farm, Sankarankoil Milk Producers Society and

Melanatham Milk Producers Society. Thus, the total milk procured by the Society is

reached by adding the milk supplied by all the three. The total milk procured by the

Society from the members, union and other institutions is presented in Table No.3.7.

135

TABLE NO.3.7

MILK PROCUREMENT (IN LAKH LITRES)

Sl.No Year From

Members

From

Union

From

Other

Institutions

Total milk

procurement

Actual

increase/

Decrease

Percentage

Increase/

Decrease

Trend

Value for

milk

from

members

1 1999-2000 17.4 22.3 0.19 39.9 - - 18.54

2 2000-01 17.9 20.8 0.31 39.0 -0.9 -2.26 18.75

3 2001-02 18.3 18.9 0.21 37.4 -1.6 -4.11 18.95

4 2002-03 18.6 17.3 0.08 35.9 -1.5 -4.01 19.16

5 2003-04 18.4 15.6 0.10 34.1 -1.8 -5.01 19.36

6 2004-05 22.2 14.8 0.16 37.1 3 8.80 19.57

7 2005-06 22.9 14.6 0.07 37.5 0.4 1.08 19.78

8 2006-07 22.5 14.2 - 36.7 -0.8 -2.13 19.98

9 2007-08 21.4 14.2 0.13 35.8 -0.9 -2.45 20.19

10 2008-09 18.77 14.9 1.96 35.6 -0.2 -0.56 20.39

11 2009-10 16.94 15.10 1.46 33.5 -2.1 -0.59 20.60

Source: Records of the TMPCS Ltd.

It is observed from Table no.3.7 that the milk procured from the members

shows an increasing trend while the milk procured from other two sources shows a

declining trend from 1999-2000 onwards. Generally, when the number of members

who are supplying milk to the Society increases, then the quantity of milk supplied by

them also increases But here, though the number of members supplying milk to the

Society is in a fluctuating trend, the amount of milk produced by them has been

steadily on the increase from 1999-2000 to 2006-07 .Thus, the Society procures more

milk from its members themselves and hence there is a decline in the procurement

136

from other sources. However, the procurement of milk from members decreases

afterwards.

The total milk procured from the members by the Society in 1999-2000 was

17.4 lakh litres. It has increased to 21.4 lakh litres in 2007-08 and decreased to 16.94

lakh litres in 2009-10. By the method of least square, a straight line trend can be fitted

to the given time series data in order to estimate the future procurement of milk from

the members of the Society. It gives us the result Yc = 19.57 + 0.21x. From this, it is

evident that the milk procured from the members has increased by 0.21 lakh of litres

per year from 1999-2000 to 2009-10. The trend in the procurement of milk and the

actual procurement of milk from the members by the Society is given in the form of a

graph in figure no.3.4.

FIG.3.4

TREND VALUE FOR PROCUREMENT OF MILK FROM MEMBERS

(In Lakh Litres)

Assuming the same trend to continue, the scholar has computed the

procurement capacity of the Society for the years 2010-11, 2015-16 and 2020-21.

Thus, it is estimated that this Society will have the capacity to procure 20.81 lakh

0

5

10

15

20

25

Actual milk procurement

Trend value

137

litres in 2010, 21.84 lakh litres in 2015 and 22.87 lakh litres in 2020, if the same trend

prevails.

3.2.5 Seasonal Variation in Milk Procurement

The average milk procurement by the Society per day is 5000 litres from

members and 4000 litres from the Tirunelveli District Co-operative. Milk Producers

union Pocket milk purchase. The total milk of 9000 litres thus procured is sold to the

customers.

Usually, the societies do not procure the same quantity of milk throughout the

year. The quantity of milk purchased by the societies from their members is not the

same for all the time. The quantity of milk procurement varies from month to month.

This is because of the variation in the availability of milk in different seasons.

Generally, there are two seasons namely flush season and lean season which

each and every society experiences. The TMPCS Ltd. experiences flush season in the

period from October to April and lean season in the period from May to September.

These seasonal differences in milk production create difficulties in the handling of

milk and its marketing. It is due to the effect of monsoon on breeding activity of

animals and production of fodder.

The monthly total procurement of milk for the period from 1999-2000 to

2009-10 is given in Table No.3.8. Also, the seasonal variation in milk procurement

and distribution is analysed with the help of seasonal indices.

Under this method, total monthly procurement of milk is calculated for every

month in the study period of eleven years and it is divided by eleven to arrive at the

eleven yearly average. Then, the seasonal index is calculated by dividing the monthly

average by total average. This figure is multiplied by 100 to make it as a percentage.

138

TABLE NO.3.8

MONTHLY PROCUREMENT OF MILK

Mo

nth

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

Mo

nth

ly t

ota

l

for

11 y

ears

11

yea

rly

Aver

age

Sea

son

al

Ind

ex

Jan 1.45 1.55 1.5 1.36 1.51 1.79 1.92 1.68 1.58 1.39 1.33 17.06 1.55 95.68

Feb 1.48 1.47 1.48 1.28 1.51 1.76 1.78 1.55 1.41 1.24 1.13 16.09 1.46 90.12

Mar 1.52 1.58 1.63 1.39 1.63 2 1.89 1.66 1.73 1.36 1.16 17.55 1.6 98.77

Apr 1.55 1.61 1.74 1.48 1.74 2.12 2.01 1.87 1.87 1.4 1.18 18.57 1.69 104.32

May 1.6 1.59 1.7 1.59 2.03 2.19 2.23 2.1 2.01 1.58 1.33 19.95 1.81 111.73

June 1.49 1.53 1.6 1.53 1.88 2.07 2.08 1.99 1.96 1.51 1.28 18.92 1.72 106.17

July 1.42 1.49 1.59 1.55 1.87 2.04 2.06 1.95 1.92 1.56 1.24 18.69 1.7 1.04.94

Aug 1.37 1.47 1.53 1.54 1.87 2.04 1.99 1.73 1.69 1.55 1.19 17.97 1.63 100.62

Sep 1.4 1.49 1.43 1.42 1.82 2.03 1.96 1.66 1.66 1.46 1.1 17.43 1.58 97.31

Oct 1.48 1.57 1.56 1.56 2.01 2.09 1.95 1.72 1.58 1.48 1.19 18.19 1.65 101.85

Nov 1.41 1.47 1.51 1.61 1.77 2.04 1.76 1.58 1.4 1.38 1.19 17.12 1.56 96.30

Dec 1.46 1.49 1.45 1.51 1.78 1.96 1.67 1.53 1.34 1.4 1.2 16.79 1.53 94.44

Total 19.48

Seasonal Index 10011

×=

averageTotal

averagesmonthlyyearly Average 1.62

The seasonal indices of milk procurement shown in Table No.3.8 show that

the flush season had prevailed for seven months from April to October as the seasonal

index is high for these seven months and lean season had prevailed for five months

from November to March as the seasonal index is low for these five months. The

amount of milk production is the highest in the months of May and June.

To overcome the difficulties created by the seasonal variation, generally, the

milk co-operative societies follow a suitable policy for procurement of milk. The

139

societies take only the amount of milk demanded by the consumers and return the

surplus milk to the members. But, with regard to TMPCS Ltd., the excess milk is used

for the preparation of curd, butter, ghee and milk sweets.

3.2.6 Marketing of Milk

The profit from the sale of any product depends on the way through which can

be marketed. The successful functioning of the milk co-operative societies depends on

the efficiency in the marketing system followed. The procurement function carried on

by the societies will be meaningful only when the procured milk is distributed.

The TMPCS Ltd. directly markets the major portion of milk procured from the

members. The Society sells the milk to different consumers through different channels

of distribution. They sell the milk directly to the local consumers by issuing coupons.

The milk is filled in cans and distributed among the consumers through the employees

of the societies. Cycles are the only mode of conveyance used for the distribution of

milk. A daily average of 1500 litres milk is sent by the Society to the union. The

marketing system followed by the Society for sale of milk is presented in Table

no.3.9.

140

TABLE NO.3.9

MARKETING OF MILK BY TMPCS LTD. (IN LAKH LITRES)

Sl.

No

Yea

r

Raw Milk Pocket

Milk

Sa

les

to H

ote

l

Cre

dit

Sa

les

Un

ion

,

Sta

ll, P

alp

eda

etc.

Du

e b

y

Du

e to

Ex

cess

Mil

k

Tota

l S

ale

s

Cash

Sales

Card

Sales

Card

Sales

1 1999-2000 11.43 1.29 16.55 8.67 0.16 1.47 0.28 0.01 0.34 40.26

2 2000-01 12.74 1.12 14.97 8.42 0.17 1.43 0.19 0.02 0.35 39.25

3 2001-02 13.47 0.97 12.74 7.73 0.17 2.16 0.17 0.03 0.36 37.86

4 2002-03 7.11 0.91 17.19 7.78 0.16 1.80 0.15 0.05 0.59 36.07

5 2003-04 10.82 0.99 9.38 9.56 0.18 3.10 0.11 0.01 0.36 34.51

6 2004-05 9.66 0.90 9.27 11.64 0.18 4.98 0.08 0.11 0.44 37.26

7 2005-06 14.93 0.84 8.73 7.96 0.18 5.61 0.06 0.08 0.48 38.87

8 2006-07 12.43 0.96 8.34 10.85 0.17 3.53 0.06 - 0.45 36.79

9 2007-08 10.59 1.04 8.93 10.64 0.18 3.97 0.04 - 0.43 35.82

10 2008-09 13.20 1.07 10.49 _ 1.72 6.28 _ _ _ 35.59

11 2009-10 12.42 1.06 10.77 _ 1.50 4.78 _ _ _ 33.51

Source: Records of the TMPCS Ltd.

From Table No.3.9, it is evident that the Society’s milk reaches the public

through cash card sales, pocket milk sales, sales to hotel, credit sales and also through

special order sales. Among the various levels of marketing, the Society was able to

sell a large quantity of milk only through pocket milk card sales, but, the value of

141

pocket milk sales shows a decreasing trend from the year 2003-04. However, after

2007-08, pocket milk sales increases as there is no sale of milk to hotels.

The total sale of milk is 40.26 lakh litres in the year 1999-2000. But, it seems

to be decreasing year by year. The total amount of sales is only 33.51 lakh of litres in

the year 2009-10, which would affect the profit earning capacity of the milk society.

In order to meet the special demand for milk, the Society may be approached

by the common man. In some cases, a special order may be placed in advance. In

some other cases on the spot order may be given to get milk from the Society.

However the price of milk supplied for special order is somewhat higher than the

price for other sales.

3.2.7 Pricing of Milk.

The pricing of milk may be analysed under two heads, namely, purchase price

and selling price. Both the prices are determined by the Society according to the price

schedule prepared and supplied by the Tirunelveli District Cooperative Milk

Producers Union on the basis of the quality that is the fat and solid non-fat content of

the milk. The union follows a pricing system which is remunerative and incentive ori-

ented in nature.

A) Purchase Price

It refers to the price fixed by the Society for the purchase of milk from the

members, union and other societies. The purchase price of both cow milk and buffalo

milk is given separately in Table No.3.10

142

TABLE NO.3.10

PURCHASE PRICE (PER LITRE) (IN RS.)

Sl.No Year Cow milk Buffalo milk

1 1999-2000 9.00 9.70

2 2000-01 9.00 9.70

3 2001-02 9.00 9.70

4 2002-03 9.50 10.20

5 2003-04 9.50 10.50

6 2004-05 9.50 10.50

7 2005-06 9.50 10.50

8 2006-07 11.00 11.70

9 2007-08 13.00 15.70

10 2008-09 15.00 16.00

11 2009-10 15.00 21.00

Source: Records of the TMPCS Ltd.

As seen from Table No.3.10, it may be noted that the purchase price of buffalo

milk is quite higher than the cow milk. This is because of the fact that buffalo milk is

thicker than cow milk. The purchase price of cow milk has slowly increased from

Rs 9.00 per litre to Rs.15.00 per litre during .1999-2000 to 2009-10. Similarly, the

purchase price of buffalo milk also has increased from Rs.9.70 per litre in 1999-2000

to Rs.21.00 per litre in 2009-10.

The trend in the purchase price of milk may better be understood from the bar

diagram (Fig 3.5).

143

FIG 3.5

CHART SHOWING PURCHASE PRICE OF MILK

(Value in Rs.)

From the chart, it can be understood that the purchase price of both cow and

buffalo milk has increased rapidly during the period and the rise in buffalo milk is

comparatively more than that of cow milk.

B) Selling Price

It refers to the price fixed for the selling of milk through different channels of

distribution. The factors that determine the sale price of milk are the intensity of

demand, elasticity of demand and the cost of production of milk. The selling price of

milk for different channels is given in table no.3.11 given in the adjoining page.

0

5

10

15

20

25

Purchase price

Cow milk

Buffalo milk

144

TABLE NO.3.11

SELLING PRICE (PER LITRE) (IN RS.)

Sl.No Year Raw Milk Card Sales Hotel Sales Credit Sales

Special

order

Sales

1 1999-2000 11.00 11.00 11.00 12.00 14.00

2 2000-01 11.00 11.00 11.00 12.60 14.00

3 2001-02 11.50 11.00 11.50 12.80 14.00

4 2002-03 12.50 12.00 12.50 13.20 14.00

5 2003-04 12.50 12.00 12.50 13.20 14.00

6 2004-05 12.50 12.00 12.50 13.20 14.00

7 2005-06 12.50 12.00 12.50 13.20 14.00

8 2006-07 12.50 12.50 12.50 12.50 14.00

9 2007-08 14.00 14.00 14.00 14.00 15.00

10 2008-09 18.00 18.00 18.00 18.00 _

11 2009-10 20.00 20.00 20.00 20.00 _

Source: Records of the TMPCS Ltd.5

Table No.3.11 clearly indicates that the Society follows the concept of price

discrimination, that is, different price for different consumers. The selling price in

case of special order milk is very high when compared to other types of sales. The

Society offers low price to the consumers only in case of card sales. On the whole, the

selling price of milk is slowly increasing. There is a step-by-step increase in the

selling price of milk for the first four years such as from 1999-2000 to 2002-03 and

there is steep rise in theselling price of milk in the last two years and there is no

special order sales. There is also uniformity in the selling price of milk. The trends in

the selling of milk may better be understood from the bar diagram given in the

adjoining page.

145

FIG.3.6

CHART SHOWING SELLING PRICE OF MILK

(Value in Rs.)

The increase in the purchase price of milk will automatically leads to an

increase in the selling price of milk. It ultimately leads to increase in the profit of the

Society. Thus, there is a direct relationship between the purchase price and the selling

price. The relationship between these two variables is found out by the method of

correlation. In order to find the nature of the relation, the scholar has used the Karl

Pearson’s co-efficient of correlation and it is denoted by the letter ‘r’. The variables

taken are the purchase price of cow milk and the selling price of raw milk. The

calculated r is 0.94. From this, it can be proved that there is a high degree of positive

correlation between the two variables, that is, if purchase price increases, the selling

price also would increase and hence both are positively correlated.

0

2

4

6

8

10

12

14

16

18

20

Raw Milk

Card sales

Hotel Sales

Credit Sales

Special order Sales

146

3.2.8 Sale of other Milk Products

As told earlier, besides supplying milk, the Society also supplies curd, butter,

ghee and milk sweets (palpeda) from the very beginning, according to the surplus

unsold milk and the nature of demand. Thus, the Society gets considerable amount of

income by selling the by-products of milk. It also purchases and sells cattle feed.

Frozen semen is also sold by the Society. Separate trading accounts are prepared for

the sale of cattle feed and palpeda. This amount is included in the total sales. Table

No.3.12 classifies the amount of sale of other products included in the total sales.

TABLE NO.3.12

SALE OF OTHER MILK PRODUCTS AND RELATED PRODUCTS

(in Thousand Rs.)

Sl.No Year Sale of Butter, ghee

etc.

Sale of

Palpeda

Cattle

feed

Sale of

Frozen

semen

Total

1 1999-2000 15.445 261.060 2401.703 2.460 2680.668

2 2000-01 62.000 255.888 2629.710 2.052 2949.650

3 2001-02 31.000 335.692 2462.562 1.566 2830.820

4 2002-03 33.000 276.661 2437.540 1.890 2749.091

5 2003-04 42.760 323.540 3013.285 1.860 3381.445

6 2004-05 7.000 362.736 3779.280 1.035 4150.051

7 2005-06 5.075 348.128 2156.765 0.285 2510.253

8 2006-07 _ 278.784 1767.684 _ 2046.468

9 2007-08 97.671 218.965 2710.075 _ 3026.711

10 2008-09 _ 246.840 4177.720 _ 4424.560

11 2009-10 _ 133.680 4376.805 _ 4510.485

Source: Records of the TMPCS Ltd.

The table denotes that the sale of other products also form a major part of

income to the Society. This amount is very high during 2004-05, 2008-09 and 2009-

147

10 due to the increase in the sale of cattle feed. It can easily be noted from the table

that the sale of cattle feed forms the major part of income in all the years. Sale of

frozen semen gives a meager amount and from 2006-07 onwards, there is no such

sale. During 2006-07, 2008-09 and 2009-10, products made from milk such as butter,

ghee etc. also were not sold by the Society.

The share of each product such as palpeda, butter, ghee, frozen semen and

cattle feed in the total sale of other products is clearly shown in the following bar

diagram.

FIG.3.7

CHART SHOWING SALE OF OTHER PRODUCTS

(in Thousand Rs.)

3.2.9 Cattle feed

Cattle feed refers to the cottonseed, oilcake, wheat bran, dry fodder, etc.,

which is to be given as feed to the milch cattle. The Society buys these types of cattle

feeds on wholesale and sells it to its members at a subsidised rate. The ultimate aim

behind these transactions is to help the members in maintaining the cattle. The

purchase and sale of cattle feed by the Society is given in Table No.3.13 for the study

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Sale of other products

Sale of Palpeda

Sale of Butter,ghee etc.

Sale of Frozensemen

Cattlefeed

Sales of other Milk Products and Related Products

148

period from 1999-2000 to 2009-10. The term purchases referred to here includes trade

charges incurred in the purchase of cattle feed.

TABLE NO.3.13

PURCHASES AND SALES OF CATTLE FEED

(Rs.in Lakhs)

Sl.No Year Purchases Sales Difference

(Sales- Purchases) Profit %

1 1999-2000 23.2 24.0 0.8 3.45

2 2000-01 25.1 26.2 1.1 4.38

3 2001-02 23.5 24.6 1.1 4.68

4 2002-03 23.3 24.8 1.5 6.44

5 2003-04 28.5 30.1 1.6 5.61

6 2004-05 35.9 37.8 1.9 5.29

7 2005-06 18.9 21.6 2.7 12.5

8 2006-07 16.9 17.7 0.8 4.52

9 2007-08 26.6 27.1 0.5 1.89

10 2008-09 39.8 41.8 2.0 5.03

11 2009-10 39.5 43.8 4.3 10.89

Source: Records of the TMPCS Ltd.

From the table, it is clear that purchase and sale of cattle feed is not showing a

steady increasing trend. However, the total amount of purchases has increased from

23.2 lakh in 1999-2000 to 39.5 lakh in 2009-10. Likewise, the total amount of sales

has increased from 24 lakh in the year 1999-2000 to 43.8 lakh in 2009-10. Also, the

percentage of profit incurred in the sale of cattle feed is very low (nearly 5%) except

during the year 2005-06, where there is 12.5% of profit .In the last year also, the profit

percentage is 10.89.

Thus, it is to be noted that this sale of cattle feed enables the Society to earn a

reasonable amount to increase its income. It forms the major part of the income from

the sale of other products.

149

SUMMARY

The analysis made in this chapter reveals that the number of members of the

Society has increased from 7326 in 1999-2000 to 7449 in 2009-10.But, the total

number of members supplying milk to the Society is decreasing day by day. It has

come down from 920 in the year 1999-2000 to 568 in 2009-10. Trend value is

calculated for this purpose and it is estimated that the number of members supplying

milk would be 372 in 2020-21 if the same trend continues.

The total number of milch cattle owned by the members also has decreased

from 1220 in 1999-2000 to 777 in 2009-10. The number of workers has come down

from 173 to 103 in the study period.

There is a tremendous fall in the number of workers employed in the Society

from 173 in 1999-2000 to 103 in 2009-10.

The amount of milk procured by the Society shows a decreasing trend from

39.9 lakh litres to 33.5 lakh litres in the study period of eleven years. The seasonal

indices of milk procurement show that the flush season had prevailed for seven

months from April to October as the seasonal index is high for these seven months

and lean season had prevailed for five months from November to March as the

seasonal index is low for these five months.

The purchase price and the selling price of both the cow and buffalo milk

shows an increasing trend. The sale of other milk products such as palpeda, butter,

ghee etc. and cattle feed have also increased during the study period.

Thus, in this chapter, the physical performance of the TMPCS Ltd. has been

evaluated and it has been found out that there is no steady growth in the membership

of the Society. Also, the procurement and distribution trend found in the Milk Society

is not appreciable.