Operation Flood & Beyond: India Emerges As A World Dairy Powerhouse

A Note to our Readers: the following information on India's dairy sector is reproduced from  IndiaInfoline.com. India is the world's largest milk producing country and is growing fast, with an eye toward becoming a major dairy exporter. This article is helpful reading for anyone interested better understanding India as an emerging competitor for U.S. milk producers at home and abroad.

Mon, 24-Dec-2001 11:59:09 IST (GMT+5:30)

India with 134mn cows and 125mn buffaloes, has the largest population of cattle in the world. Total cattle population in the country as on October'00 stood at 313mn. More than fifty percent of the buffaloes and twenty percent of the cattle in the world are found in India and most of these are milch cows and milch buffaloes.

Indian dairy sector contributes the large share in agricultural gross domestic products. Presently there are around 70,000 village dairy cooperatives across the country. The co-operative societies are federated into 170 district milk producers unions, which is turn has 22-state cooperative dairy federation. Milk production gives employment to more than 72mn dairy farmers. In terms of total production, India is the leading producer of milk in the world followed by USA. The milk production in 1999-00 is estimated at 78mn MT as compared to 74.5mn MT in the previous year. This production is expected to increase to 81mn MT by 2000-01. Of this total produce of 78mn cows' milk constitute 36mn MT while rest is from other cattle.

While world milk production declined by 2 per cent in the last three years, according to FAO estimates, Indian production has increased by 4 per cent. The milk production in India accounts for more than 13% of the total world output and 57% of total Asia's production. The top five milk producing nations in the world are India ,USA, Russia, Germany and France.

Although milk production has grown at a fast pace during the last three decades (courtesy: Operation Flood), milk yield per animal is very low. The main reasons for the low yield are

_ Lack of use of scientific practices in milching.

_ Inadequate availability of fodder in all seasons.

_ Unavailability of veterinary health services.

Milk Yield comparison:


Milk Yield (Kgs per year)







New Zealand






World (Average)


Source: Export prospects for agro-based industries, World Trade Centre, Mumbai.

Production of milk in India


Production in million MT



























E= estimatedT= target / expectedSource: DFPI, Annual Report-1999-2000

World's major milk producers

(Million MTs)



1998-99 ( Approx.)































New Zealand












(Source: Dairy Industry Newsletter)

Operation Flood

The transition of the Indian milk industry from a situation of net import to that of surplus has been led by the efforts of National Dairy Development Board's Operation Flood. programme under the aegis of the former Chairman of the board Dr. Kurien.

Launched in 1970, Operation Flood has led to the modernization of India's dairy sector and created a strong network for procurement processing and distribution of milk by the co-operative sector. Per capita availability of milk has increased from 132 gm per day in 1950 to over 220 gm per day in 1998. The main thrust of Operation Flood was to organize dairy cooperatives in the milkshed areas of the village, and to link them to the four Metro cities, which are the main markets for milk. The efforts undertaken by NDDB have not only led to enhanced production, improvement in methods of processing and development of a strong marketing network, but have also led to the emergence of dairying as an important source of employment and income generation in the rural areas. It has also led to an improvement in yields, longer lactation periods, shorter calving intervals, etc through the use of modern breeding techniques. Establishment of milk collection centers, and chilling centers has enhanced life of raw milk and enabled minimization of wastage due to spoilage of milk. Operation Flood has been one of the world's largest dairy development programme and looking at the success achieved in India by adopting the co-operative route, a few other countries have also replicated the model of India's White Revolution.

Per Capita availability of milk



























E= EstimatedP= Provisional* Operation flood was launched in 1970

Fresh Milk

Over 50% of the milk produced in India is buffalo milk, and 45% is cow milk. The buffalo milk contribution to total milk produce is expected to be 54% in 2000. Buffalo milk has 3.6% protein, 7.4% fat, 5.5% milk sugar, 0.8% ash and 82.7% water whereas cow milk has 3.5% protein, 3.7% fat, 4.9% milk sugar, 0.7% ash and 87% water. While presently (for the year 2000) the price of Buffalo milk is ruling at $261-313 per MT that of cow is ruling at $170-267 per MT. Fresh pasteurized milk is available in packaged form. However, a large part of milk consumed in India is not pasteurized, and is sold in loose form by vendors. Sterilized milk is scarcely available in India.

Packaged milk can be divided according to fat content as follows,

Whole (full cream) milk - 6% fatStandardized (toned) milk - 4.5% fatDoubled toned (low fat) milk - 3% fatAnother category of milk, which has a small market is flavoured milk.

Consumer Habits And Practices

Milk has been an integral part of Indian food for centuries. The per capita availability of milk in India has grown from 172 gm per person per day in 1972 to 182gm in 1992 and 203 gm in 1998-99.This is expected to increase to 212gms for 1999-00. However a large part of the population cannot afford milk. At this per capita consumption it is below the world average of 285 gm and even less than 220 gm recommended by the Nutritional Advisory Committee of the Indian Council of Medical Research.

There are regional disparities in production and consumption also. The per capita availability in the north is 278 gm, west 174 gm, south 148 gm and in the east only 93 gm per person per day. This disparity is due to concentration of milk production in some pockets and high cost of transportation. Also the output of milk in cereal growing areas is much higher than elsewhere which can be attributed to abundant availability of fodder, crop residues, etc which have a high food value for milch animals.

In India about 46 per cent of the total milk produced is consumed in liquid form and 47 per cent is converted into traditional products like cottage butter, ghee, paneer, khoya, curd, malai, etc. Only 7 per cent of the milk goes into the production of western products like milk powders, processed butter and processed cheese. The remaining 54% is utilized for conversion to milk products. Among the milk products manufactured by the organized sector some of the prominent ones are ghee, butter, cheese, ice creams, milk powders, malted milk food, condensed milk infants foods etc. Of these ghee alone accounts for 85%.

It is estimated that around 20% of the total milk produced in the country is consumed at producer-household level and remaining is marketed through various cooperatives, private dairies and vendors. Also of the total produce more than 50% is procured by cooperatives and other private dairies.

While for cooperatives of the total milk procured 60% is consumed in fluid form and rest is used for manufacturing processed value added dairy products; for private dairies only 45% is marketed in fluid form and rest is processed into value added dairy products like ghee, makhan etc.

Still, several consumers in urban areas prefer to buy loose milk from vendors due to the strong perception that loose milk is fresh. Also, the current level of processing and packaging capacity limits the availability of packaged milk.

The preferred dairy animal in India is buffalo unlike the majority of the world market, which is dominated by cow milk. As high as 98% of milk is produced in rural India, which caters to 72% of the total population, whereas the urban sector with 28% population consumes 56% of total milk produced. Even in urban India, as high as 83% of the consumed milk comes from the unorganized traditional sector.

Presently only 12% of the milk market is represented by packaged and branded pasteurized milk, valued at about Rs. 8,000 crores. Quality of milk sold by unorganized sector however is inconsistent and so is the price across the season in local areas. Also these vendors add water and caustic soda, which makes the milk unhygienic.

Market Size And Growth

Market size for milk (sold in loose/ packaged form) is estimated to be 36mn MT valued at Rs470bn. The market is currently growing at round 4% pa in volume terms. The milk surplus states in India are Uttar Pradesh, Punjab, Haryana, Rajasthan, Gujarat, Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu. The manufacturing of milk products is concentrated in these milk surplus States. The top 6 states viz. Uttar Pradesh, Punjab, Madhya Pradesh, Rajasthan, Tamil Nadu and Gujarat together account for 58% of national production.

Milk production grew by a mere 1% pa between 1947 and 1970. Since the early 70's, under Operation Flood, production growth increased significantly averaging over 5% pa.

About 75% of milk is consumed at the household level which is not a part of commercial dairy industry. Loose milk has a larger market in India as it is perceived to be fresh by most consumers. In reality however, it poses a higher risk of adulteration and contamination.

The production of milk products, i.e. milk products including infant milk food, malted food, condensed milk & cheese stood at 3.07 lakh MT in 1999. Production of milk powder including infant milk-food has risen to 2.25 lakh MT in 1999, whereas that of malted food is at 65000 MT. Cheese and condensed milk production stands at 5000 and 11000 MT respectively in the same year.

(Source: Annual Report 1999-2000, DFPI)

Major Players

The packaged milk segment is dominated by the dairy cooperatives. Gujarat Co-operative Milk Marketing Federation (GCMMF) is the largest player. All other local dairy cooperatives have their local brands (For e.g. Gokul, Warana in Maharashtra, Saras in Rajasthan, Verka in Punjab, Vijaya in Andhra Pradesh, Aavin in Tamil Nadu, etc). Other private players include J K Dairy, Heritage Foods, Indiana Dairy, Dairy Specialties, etc. Amrut Industries, once a leading player in the sector has turned bankrupt and is facing liquidation.

Packaging Technology

Milk was initially sold door-to-door by the local milkman. When the dairy co-operatives initially started marketing branded milk, it was sold in glass bottles sealed with foil. Over the years, several developments in packaging media have taken place. In the early 80's, plastic pouches replaced the bottles. Plastic pouches made transportation and storage very convenient, besides reducing costs. Milk packed in plastic pouches/bottles have a shelf life of just 1-2 days , that too only if refrigerated. In 1996, Tetra Packs were introduced in India. Tetra Packs are aseptic laminate packs made of aluminum, paper, board and plastic. Milk stored in tetra packs and treated under Ultra High Temperature (UHT) technique can be stored for four months without refrigeration. Most of the dairy co-operatives in Andhra Pradesh, Tamil Nadu, Punjab and Rajasthan sell milk in tetra packs. However tetra packed milk is costlier by Rs5-7 compared to plastic pouches. In 1999-00 Nestle launched its UHT milk. Amul too relaunched its Amul Taaza brand of UHT milk. The UHT milk market is expected to grow at a rate of more than 10-12% in coming years.

Regulatory Framework

The dairy industry was de-licensed in 1991 with a view to encourage private investment and flow of capital and new technology in the segment. Although de-licensing attracted a large number of players, concerns on issues like excess capacity, sale of contaminated/ substandard quality of milk etc induced the Government to promulgate the MMPO (Milk and Milk Products Order) in 1992. Milk and Milk Products Order (MMPO) regulates milk and milk products production in the country. The order requires no permission for units handling less than 10,000 litres of liquid milk per day or milk solids upto 500 tpa. MMPO prescribes State registration to plants producing between 10,000 to 75,000 litres of milk per day or manufacturing milk products containing between 500 to 3,750 tonnes of milk solids per year. Plants producing over 75,000 litres per day or more than 3,750 tonnes per year of milk solids have to be registered with the Central Government. The stringent regulations, government controls and licensing requirements for new capacities have restricted large Indian and MNC players from making significant investments in this product category. Most of the private sector players have restricted themselves to manufacture of value added milk products like baby food, dairy whiteners, condensed milk etc.

All the milk products except malted foods are covered in the category of industries for which foreign equity participation upto 51% is automatically allowed. Ice cream, which was earlier reserved for manufacturing in the small-scale sector, has now been de-reserved. As such, no license is required for setting up of large-scale production facilities for manufacture of ice cream.

Subsequent to de-canalization, exports of some milk based products are freely allowed provided these units comply with the compulsory inspection requirements of concerned agencies like: National Dairy Development Board, Export Inspection Council etc. Bureau of Indian standards has prescribed the necessary standards for almost all milk-based products, which are to be adhered to by the industry.

Proposal to Amend the MMPO

A proposal to raise the exemption limit for compulsory registration of dairy plants, from the present 10,000 litres a day to 20,000 litres, is being considered by the Animal Husbandry Department. The 75,000-litre limit is likely to be raised either to 100,000 litres or 125,000 litres in the amended order. The new order would also do away with the provision for re-registration.

Penetration of milk products

Western table spreads such as butter, margarine and jams are not very popular in India. All India penetration of butter/ margarine is only 4%. This is also largely represented by urban areas, where penetration is higher at 9%. In rural areas, butter/ margarine have penetrated in 2.1% of households only. The use of these products in the large metros is higher, with penetration at 15%.

Penetration of cheese is almost nil in rural areas and negligible in the urban areas. Per capita consumption even among the cheese-consuming households is a poor 2.4kg pa as compared to over 20kg in USA. The lower penetration is due to peculiar food habits, relatively expensive products and also non-availability in many parts of the country. Butter, margarine and cheese products are mainly manufactured by organized sector.

Similarly, penetration of ghee is highest in medium sized towns at 37.2% compared to 31.7% in all urban areas and 21.3% in all rural areas. The all India penetration of ghee is 24.1%. In relative terms, penetration of ghee is significantly higher in North and West, which are milk surplus regions. North accounts for 57% of ghee consumption and West for 23%, South & East together account for the balance 20%. A large part of ghee is made at home and by small/ cottage industry from milk. The relative share of branded products in this category is very low at around 1-2%.

Milk powder and condensed milk have not been able to garner any significant consumer acceptance in India as indicated by a very low 4.7% penetration. The penetration is higher at 8.1% in urban areas and lower at 3.5% in rural areas. Within urban areas, it is relatively higher in medium sized towns at 8.5% compared to 7.7% in a large metros.

Export Potential

India has the potential to become one of the leading players in milk and milk product exports. Locational advantage : India is located amidst major milk deficit countries in Asia and Africa. Major importers of milk and milk products are Bangladesh, China, Hong Kong, Singapore, Thailand, Malaysia, Philippines, Japan, UAE, Oman and other gulf countries, all located close to India.

Low Cost Of Production : Milk production is scale insensitive and labour intensive. Due to low labour cost, cost of production of milk is significantly lower in India.

Concerns in export competitiveness are Quality : Significant investment has to be made in milk procurement, equipments, chilling and refrigeration facilities. Also, training has to be imparted to improve the quality to bring it up to international standards.

Productivity : To have an exportable surplus in the long-term and also to maintain cost competitiveness, it is imperative to improve productivity of Indian cattle.

There is a vast market for the export of traditional milk products such as ghee, paneer, shrikhand, rasgolas and other ethnic sweets to the large number of Indians scattered all over the world

India's exports of milk products

Description(Quantity, M T.: Value, Rs. million)










Skimmed milk powder







Milk and Milk Food for babies







Milk cream







Sweetened condensed milk














Ghee/Butter/Butter oil








(a) Fresh







(b) Processed







(c) Other














(Source: DGCIS)

Indian (traditional) Milk Products

There are a large variety of traditional Indian milk products such as

Makkhan - unsalted butter.Ghee - butter oil prepared by heat clarification, for longer shelf life.Kheer - a sweet mix of boiled milk, sugar and rice.Basundi - milk and sugar boiled down till it thickens.Rabri - sweetened cream.Dahi - a type of curd.Lassi - curd mixed with water and sugar/ salt.Channa/Paneer - milk mixed with lactic acid to coagulate.Khoa - evaporated milk, used as a base to produce sweet meats.The market for indigenous based milk food products is difficult to estimate as most of these products are manufactured at home or in small cottage industries catering to local areas.

Consumers while purchasing dairy products look for freshness, quality, taste and texture, variety and convenience. Products like Dahi and sweets like Kheer, Basundi, Rabri are perishable products with a shelf life of less than a day. These products are therefore manufactured and sold by local milk and sweet shops. There are several such small shops within the vicinity of residential areas. Consumer loyalty is built by consistent quality, taste and freshness. There are several sweetmeat shops, which have built a strong brand franchise, and have several branches located in various parts of a city.

Branding Of Traditional Milk Products

Among the traditional milk products, ghee is the only product, which is currently marketed, in branded form. main ghee brands are Sagar, MilkMan (Britannia), Amul (GCMMF), Aarey (Mafco Ltd), Vijaya (AP Dairy Development Cooperative Federation), Verka ( Punjab Dairy Cooperative), Everyday (Nestle) and Farm Fresh (Wockhardt).

With increasing urbanization and changing consumer preferences, there is possibility of large scale manufacture of indigenous milk products also. The equipments in milk manufacturing have versatility and can be adapted for several products. For instance, equipments used to manufacture yogurt also can be adapted for large scale production of Indian curd products (dahi and lassi). Significant research work has been done on dairy equipments under the aegis of NDDB.

Mafco Limited sells Lassi under the Aarey brand and flavoured milk under the Energee franchise (in the Western region, mainly in Mumbai). Britannia has launched flavored milk in various flavors in tetra packs.

GCMMF has also made a beginning in branding of other traditional milk products with the launch of packaged Paneer under the Amul brand. It has also created a new umbrella brand "Amul Mithaee", for a range of ethnic Indian sweets that are proposed to be launched The first new product Amul Mithaee Gulabjamun has already been launched in major Indian markets.

Western Milk Products

Western milk products such as butter, cheese, yogurt have gained popularity in the Indian market only during the last few years. However consumption has been expanding with increasing urbanization.


Most Indians prefer to use home made white butter (makkhan) for reasons of taste and affordability. Most of the branded butter is sold in the towns and cities. The major brands are Amul, Vijaya, Sagar, Nandini and Aarey. Amul is the leading national brand while the other players have greater shares in their local markets. The latest entrant in the butter market has been Britannia. Britannia has the advantages of a wide distribution reach and a strong brand recall. Priced at par with the Amul brand, it is expected to give stiff competition to the existing players. In 1999-00 the butter production is estimated at 4 lakh MT of this only 45K MT is in the white form used for table purposes rest all is in the yellow form.


The present market for cheese in India is estimated at about 9,000 tonnes and is growing at the rate of about 15% per annum. Cheese is mainly consumed in the urban areas. The four metro cities alone account for more than 50% of consumption . Mumbai is the largest market (accounting for 30% of cheese sold in the country), followed by Delhi (20%). Calcutta (7%) and Chennai (6%). Mumbai has a larger number of domestic consumers, compared to Delhi where the bulk institutional segment (mainly hotels) is larger.

Demand for various types of cheese in the Indian market

Type of cheese

% of total consumption



Cheese spread








The major players are Amul, Britannia, and Dabon International dominating the market. Other major brands were Vijaya, Verka and Nandini (all brands of various regional dairy cooperatives) and Vadilal. The heavy advertising and promotions being undertaken by these new entrants is expected to lead to strong 20% growth in the segment. Amul has also become more aggressive with launch of new variants such as Mozzarella cheese (used in Pizza), cheese powder, etc.

The entry of new players and increased marketing activity is expected to expand the market. All the major players are expanding their capacities

Capacity expansion in Cheese





Dynamix Group

Manufactures for Britannia


35 tons per day




20 tons per day



Andhra Pradesh

10 tons per day


Milk Powder

Milk powder are mainly of 2 types

_ Whole milk powder

_ Skimmed milk powder

Whole milk powder contains fat, as distinguished from skimmed milk powder, which is produced by removing fat from milk solids. Skimmed milk powder is preferred by diet conscious consumers. Dairy whiteners contain more fat than skimmed milk powder but less compared to whole milk powder. Dairy whiteners are popular milk substitute for making tea, coffee etc. The penetration of these products in milk abundant regions is driven by convenience and non perishable nature (longer shelf life) of the product.

Dairy sector of advanced nations export milk products with a subsidy of $ 1000 per tonne with a level of subsidy more than 60 % of the price of milk powder produced in India, this has led to large scale imports of milk powder both in whole and skimmed form. To protect the domestic sector from these subsidized imports the central government has recently increased the basic import duty on all imports of milk powder more than 10000 MT to 60% from 15%. For imports less than 10000 MT the basic customs duty has been left unchanged at 15%.

In 1999-00 India is estimated to have imported about 18,000 tonnes of milk powder against a total estimated production of 2.40 Lakh MTs. In 2000-01 India is expected to export 10000 MT of skimmed milk powder due to rise in international prices to $2300 per MT from last year's levels of $1400 per MT. These expectations are based on the strong demand from Russia, East Asia and Latin America, and also on tightening of supply in EU, which accounts for 75% of the annual global Skimmed Milk Powder exports.

Major Players

Milk Powder/Dairy Whiteners : Major skimmed milk brands are Sagar (GCMMF) and Nandini (Karnataka Milk Federation), Amul Full Cream milk powder is a whole milk powder brand.

Leading brands in the dairy whitener segment are Nestle's Everyday, GCMMF's Amulya, Dalmia Industry's Sapan, Kwality Dairy India's KreamKountry, Wockhardt's Farm Fresh and Britannia's MilkMan Dairy Whitener.

Condensed Milk

The condensed milk market has grown from 9000 MT in 1998 to 11000 MT in 1999. Condensed milk is a popular ingredient used in home-made sweets and cakes. Nestle's Milkmaid is the leading brand with more than 55% market share. The only other competitor is GCMMF's Amul.

Infant Foods

Nestle is the market leader in the segment. This is a category where brand loyalties are very strong as mothers want the best for their babies. Heinz is the only other significant competitor to Nestle in this segment. Nestle's Cerelac and Nestum together have around 80% market share and Heinz's Farex has close to 18% share. Wockhardt is a relatively new entrant with its First Food brand. Wockhardt also proposes to launch a new baby food Easum containing moong (moong is one of the easily digestible pulses). The Easum brand will directly compete with Nestle's Nestum (made from rice).

In infant formula also Nestle's Lactogen formula and Lactogen standard formula are the leading brands with around 75% market share. Other brands are Heinz's Lactodex Farex, Wockhardt's Raptakos, and Amul's Amulspray

Major dairy products manufacturers

Some of the major dairy products manufacturers in the country:



Major Products

Nestle India Limited

Milkmaid,Cerelac, Lactogen, Milo, Everyday

Sweetened condensed milk, malted foods, milk powder and Dairy whitener

Milkfood Limited


Ghee, ice cream, and other milk products

SmithKline Beecham Limited

Horlicks, Maltova, Viva

Malted Milkfood, ghee, butter, powdered milk, milk fluid and other milk based baby foods.

Indodan Industries Limited


Condensed milk, skimmed milk powder, whole milk powder, dairy milk whitener, chilled and processed milk

Gujarat Co-operative milk Marketing Federation Limited


Butter, cheese and other milk products

H.J. Heinz Limited

Farex, Complan, Glactose, Bonniemix, Vitamilk

Infant Milkfood, malted Milkfood



Flavoured milk, cheese, Milk Powder, Ghee



Malted food

Manufacturing Process

Milk is pasteurized by treating it to high temperature for a short time. The main aim in treating milk with high temperature is to destroy the disease causing pathogens and to improve keeping quality.

Separation machine is typically a high powered centrifuge. The centrifugal force makes milk fat globules and emerges as cream from the separator bowl. Separation of cream produces skim milk from which several dairy products are made.

Baby food : Fresh milk, which is received from farmers/ traders, is chilled and stored. Then MSK skimmed/ wet skimmed milk and sugar are added in turbo mixture to achieve the desired specifications of ingredients in the milk. This is followed by addition of vitamins and minerals. This milk which contains ingredients to specifications is filtered, cooled, analyzed and then purified. Then it passes through specific pasteurization and is taken to evaporator for pre-condensing. Pre-condensate is homogenized, cooled and stored. Cooled pre-condensate is heated and dried in spray drier (Egron). Then sugar is added. The powder is then passed through chemical analysis to check quality and is filled in tins through filling machines. These tins are gassed during gas mix and then sealed, packed and dispatched in cardboard cartons.

Butter : Whole milk is first separated into skim milk and cream by centrifugal force in a separator. The cream is then pasteurized either through batch process or a continuous process. In batch process, cream is heated to a minimum of 740 C and held at the temperature for 30 minutes, while in continuous process it is heated at 850 C and is held for only 15 seconds. The heat treatment destroys bacteria, inactivates enzymes and gives the cream a cooked flavour. After pasteurization, a tempering process is applied in which cream is held at 100 C to allow rearrangement of the fat crystals. The cream is then churned to produce butter. Continuous churning converts cream into butter in a few minutes while batch churning takes a longer time. Composition and colour adjustment is also done at the churning stage and a salt solution is added to give the finished butter a salty taste. About 13 litres of milk with 6% fat is required to produce 1 kg of butter.

Cheese :There are thousands of varieties of cheese in the world. The type of manufacturing process used in the production of cheese determines its flavour, which ranges from extremely mild to very sharp, and its texture, which can be semi-solid to almost stone hard. Cheese making requires four main ingredients - good quality milk, rennet or coagulating acids, culture and salt. Cheese is generally made from cow's milk. About 10 litres of milk with 3% fat is required for making 1 kg of cheese. Natural Cheese is made by coagulating or curdling milk, stirring & heating the curd, draining off the whey and collecting or pressing the curd. The desired flavour and texture is obtained by varying the temperature, humidity and time period of the curing process.

Sweetened condensed milk is usually made from fresh milk by adding sugar to the milk pre-warming and concentrating the mixture in the high vacuum. The syrupy milk is then cooled so that the lactose crystallizes as very fine crystals and then the product is coagulated.

Future Prospects

India= = s dairy sector is expected to triple its production in the next 10 years in view of expanding potential for export to Europe and the West. Moreover with WTO regulations expected to come into force in coming years all the developed countries which are among big exporters today would have to withdraw the support and subsidy to their domestic milk products sector. Also India today is the lowest cost producer of per litre of milk in the world, at 27 cents, compared with the U.S' 63 cents, and Japan= = s $2.8 dollars. Also to take advantage of this lowest cost of milk production and increasing production in the country multinational companies are planning to expand their activities here. Some of these milk producers have already obtained quality standard certificates from the authorities. This will help them in marketing their products in foreign countries in processed form.

The urban market for milk products is expected to grow at an accelerated pace of around 33% per annum to around Rs.43,500 crores by year 2005. This growth is going to come from the greater emphasis on the processed foods sector and also by increase in the conversion of milk into milk products. By 2005, the value of Indian dairy produce is expected to be Rs 10,00,000 million. Presently the market is valued at around Rs7,00,000mn.