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• DOODH KA DOODH AUR PAANI KA PAANI
• REAL THREAT TO GLOBAL COMPETITIVENESS OF INDIAN
  DAIRY INDUSTRY
• PRESENTATION
• By
• Mission Director
• INTERNATIONAL IMPROVEMENT MISSION
• Regd. Office 53-A, Sector 18-A, Chandigarh-160018

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REAL THREAT TO GLOBAL COMPETITIVENESS OF INDIAN
DAIRY INDUSTRY

• DO YOU KNOW WHY YOUR PROFITS ARE LOW?
• ANALYZE AND IMPROVE YOUR A.D.M. FACTOR
• ADULTERANTS AND PRESERVATIVES IN RAW MILK
• DILUTION OF RAW MILK WITH WATER
• MANIPULATIONS IN COMPOSITION OF RAW MILK

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OPTIMISING PROFITABILITY OF DAIRY BUSINESS

• ADULTERANTS AND PRESERVATIVES IN RAW MILK
• QUANTIFY AND CALCULATE FINANCIAL IMPACT OF
  ADULTERATION
• We all know that adulterants and preservatives in
  milk affect quality of dairy products and
  profitability of dairy business.
• Based on scientific analysis and clinical tests
  prepare a chart that besides quantifying level
  of adulteration convert that consequential loss
  in to financial terms.
• Purchase raw milk only after accurate evaluation
  of financial implications and assessing actual
  worth of milk being purchased.
• Locate and develop appropriate sources from where
  you can procure PURE unadulterated milk.

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OPTIMISING PROFITABILITY OF DAIRY BUSINESS

• DILUTION OF RAW MILK WITH WATER
• Normally we feel that added water in milk does
  not benefit the seller or harm the buyer so long
  we pay the price of milk after testing FAT and
  SNF in milk as per 6040 C.L.R. based two axis
  formulae but actually it is not so.
• ADDITION OF WATER IN MILK
• Reduces its contribution to profitability.
• Increases handling /processing cost.
• Adversely effects Fat/S.N.F. test results.
• Helps the seller to manipulate SNFFAT ratio to
  his advantage
• Helps unethical/unorganized traders to dominate
  the organized sector.
• Badly effects microbiological quality of raw
  milk/ dairy products .

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OPTIMISING PROFITABILITY OF DAIRY BUSINESS

• IMPACT OF ADULTERATION WITH WATER
• Quantity Fat SNF SNFFat Fat SNF
• KGs Ratio Rs./Kg Rs./Kg
• 100 6.50000 8.84 1.36 120 58.82
• 110 5.90909 8.03636 1.36 120 58.82
• 120 5.41666 7.36666 1.36 120 58.82
• 130 5.00000 6.80 1.36 120 58.82
• 140 4.64286 6.31428 1.36 120 58.82
• 150 4.33333 5.89333 1.36 120 58.82
• Assumed RateRs.13.00/KG or Rs. 200/Kg Fat
• Standard Milk 6.50 Fat , 8.84 SNF 29.00
  C.L.R.
• Fat rate/Kg(13.00x 0.6)/6.5x100Rs.120 SNF
  rate(13.00x0.4)/8.8x10058.82
• Diluted Milk(100Kg Milk30 Kg. Water) 5.00 Fat
  6.80 SNF
• Fat rate(13.00x.6)/5.00x100 Rs.120/Kg.
• SNF rate(13.00x.4)/6.80Rs. 58.82/Kg.
  

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OPTIMISING PROFITABILITY OF DAIRY BUSINESS

• IMPACT OF DILUTION MANIPULATION
• Quantity C.L.R. Fat SNF SNFFat RATE Fat SNF
• KGs Ratio Rs./Kg Rs./Kg Rs./Kg
• 100 29 6.50 8.84 1.36
  13.00 120 58.82
• 110 26.36 5.91 8.04 1.36 11.82 120
  58.82
• 120 24.16 5.42 7.37 1.36 10.83 120 58.82
• 130 22.31 5.00 6.80 1.36 10.00 120 58.82
• 112.22 25.84 5.79 7.88 1.36 11.58 120 58.82
• 100 29.50 5.00 8.67
  1.734 11.10 133.20 51.21
• 113.92 34.17 3.99 9.68
  2.428 10.48 157.71 43.29
• 130 39.00 4.55 11.05
  2.428 11.96 157 71 43.29
• 120 36.00 4.20 10.20
  2.428 11.04 157.71 43.29
• 110 33.00 3.85 9.35
  2.428 10.12 157.71 43.29
• 100 30 3.50 8.50 2.428
  9.20 157.71 43.29
• RateRs.13.00/KG or Rs. 200/Kg Fat Standard Milk
  6.50 Fat 8.84 SNF
• Fat rate/Kg(13.00x.6)/6.50x100Rs.120.00 SNF
  rate/Kg.(13.00x.4)/8.84x10058.82 B.M.
• Fat rate/Kg(13.00x.6)/5.00x100Rs.133.20 SNF
  rate/Kg.(13.00x.4)/8.67x10051.21 M.M.
• Fat rate/Kg(13.00x.6)/3.50x100Rs.157.71 SNF
  rate/Kg.(13.00x.4)/8.50x10043.29 C.M.
• Value per C.L.RRs.0.30666666 (C.M)
  Value per C.L.RRs.0.448430493
  (B.M)

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OPTIMISING PROFITABILITY OF DAIRY BUSINESS

• TECHNO-ECONOMICS OF COW MILK V/S BUFFALO MILK
• Assumed RateRs.13.00/KG or Rs120/Kg fat
  58.82/Kg SNF (Buffalo Milk)
• Rs. 157.71/Kg. Fat Rs. 43.29/Kg. SNF (Cow Milk)
  (6040 Two axis Formulae)
• Let us presume that we purchase 100Kgs. B.M.
  100Kgs. C.M.
• SNFFat ratio of standard buffalo milk
  (8.84/6.50) 1.36
• SNFFat ratio of standard cow milk (8.50/3.50)
  2.4285714
• Cost of 100 Kg. B.M.(6.50 8.84)6.50x1208.84x
  58.82Rs.1300
• Cost of 100Kg. C.M.(3.50 8.50)3.50x157.718.5
  0x43.29Rs.920
• Total cost of 200Kgs. (B.M.C.M.)Rs.2220
• Total mixed milk(B.M.C.M.)10Kgs Fat 17.34Kgs.
  S.N.F.
• Cost of mixed milk10x12017.30x58.8235294Rs.2217
  .65
• Difference between A B Rs.2220-2217.65Rs.2.352
  942 or Rs.0.011764712/Kg
• Cow milk as such is not expensive as compared
  to buffalo milk but It is manipulation
• of transferring part of cow fat to buffalo milk
  fat and buffalo milk SNF to cow milk..

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OPTIMISING PROFITABILITY OF DAIRY BUSINESS

• DILUTION OF RAW MILK WITH WATER
• 30ADDITION OF WATER IN MILK
• Reduces its contribution by Rs. 0.371539 per KG.
• AssumptionsRateRs.13.00/KG(FatRs.120/KG
  SNF58.82/KG)
• RealisationFatRs.193.8/KG
  SNFRs.95/KG)
• Cost of milk (5x1206.80x58.82)Rs.10.00/KG.
• Revenue(5x193.86.80x95)16.15/KG.
• Contribution(Revenue-Cost)16.15-10.00Rs.
  6.15/KG.
• Cost of Standard buffalo milk6.50x1208.84x58.82
  Rs. 13.00/KG.
• Revenue (6.5x193.88.84x95)Rs. 21./KG.
• Contribution(Revenue-Cost) 21-13Rs.8.00/KG.
• Loss of ContributionRs.8.00-6.15Rs.1.85/KG.

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OPTIMISING PROFITABILITY OF DAIRY BUSINESS

• DILUTION OF RAW MILK WITH WATER
• 10ADDITION OF WATER IN MILK
• Increases direct/indirect handling /processing
  cost by Rs.0.40/KG
• AssumptionsRateRs.13.00/KG (Fat-Rs.120/KG
  SNFRs.58.82/KG
• Loss due to use of milk powder for compensating
  dilution in S.N.F.
• 0.80x58.82/100Rs.0.47/Kg.
• Extra milk procurement commission
• Extra milk chilling cost
• Extra transportation cost
• Extra power cost
• Extra steam cost
• Total0.87/Kg.

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OPTIMISING PROFITABILITY OF DAIRY BUSINESS

• DILUTION OF RAW MILK MANIPULATION
• ADDITION OF WATER IN MILK
• Helps the seller to manipulate SNFFAT ratio to
  his advantage.
• AssumptionsRate Rs.13.00/KG(FatRs.120/Kg
  SNFRs.58.82/Kg
• Rs.13.00/Kg (6.50 Fat 8.84 SNF) V/s (5.00Fat
  6.80 SNF) Milk
• 6.5/5.001.30( 100 KG milk30KG water)
• (6.50-5.00)x120(8.84-6.80)x58.82Rs.2..99/Kg say
  Rs.3.00/Kg.
• Price for (5.006.80)Rs.(13.00-3.00)Rs.10.00/
  Kg
• Actual payment claimed as mixed milkRs
  (5x222/100)/Kg.Rs.11.10/Kg.
• Hidden loss to purchaserRs. (11.10-10)Rs.1.10/Kg
  .
• Actual payment claimed as Cow milkRs
  (5x262,28/100)/Kg.Rs.13.11/Kg.
• Hidden loss to purchaserRs. (13.11-10)Rs.3.11/Kg
  .
• Possible loss in milk purchase transactions due
  to dilution manipulation
• Rs.1.10 to 3.11/Kg. ( Converting diluted milk as
  M.M or C.M)
• These losses could be controlled by purchasing
  B.M. C.M separately strictly as per C.L.R. and
  releasing only due payment as per formulae)

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OPTIMISING PROFITABILITY OF DAIRY BUSINESS

• DILUTION OF RAW MILK WITH WATER
• ADDITION OF WATER IN MILK
• Helps unethical/unorganized traders to dominate
  organized sector
• Unethical/unorganized sector exploits milk
  producers by purchasing milk at low price (using
  money power), diluting it with ice
  water,modifying SNFFAT ratio to their advantage,
  using undesirable adulterants/preservatives and
  supplying that milk to dairy plants at
  unreasonably high cost. Unfortunately buyers look
  at only the as such cost of diluted milk which
  appears low and reasonable. Under these
  conditions ethical private sector will find it
  extremely difficult to compete with unorganized
  sector.

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OPTIMISING PROFITABILITY OF DAIRY BUSINESS

• DILUTION OF RAW MILK WITH WATER
• ADDITION OF WATER IN MILK
• Badly affects microbiological quality of raw
  milk/ dairy products .
• Disposal of industrial waste water without proper
  treatment has badly affected the quality of water
  available in villages from shallow hand pumps/
  tube wells. Contaminated water of this kind plays
  havoc with microbiological quality of milk
  rendering it unfit for manufacturing dairy
  products meeting National/ International quality
  standards.

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OPTIMISING PROFITABILITY OF DAIRY BUSINESS

• MANIPULATIONS IN COMPOSITION OF RAW MILK
• CALCULATE IMPACT OF MODIFYING SNFFAT RATIO ON
  PRICE OF MILK
• Declared price of milk is subject to specified
  of FAT and SNF
• Change of FAT or SNF disturbing specified ratio
  can decrease real worth of milk that does not
  reflect on milk billing calculations
• Cost of milk being paid appears logical and
  reasonable as per arithmetical calculations but
  causes heavy loss to buyer.
• Purchasing diluted/adulterated/manipulated milk
  from unethical traders is major reason for heavy
  losses to many private sector milk plants and low
  profitability of multinational companies and
  dairy plants in co-operative sector.

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OPTIMISING PROFITABILITY OF DAIRY BUSINESS

• RATIONALIZING MILK PRICING PATTERN
• Conventional milk pricing system being followed
  by dairy industry in India was designed many
  decades ago when prices of ghee and skimmed milk
  powder used to follow a set seasonal pattern and
  ratio of realization from FAT and SNF did not
  vary much to effect the profitability of dairy
  business adversely.
• A new modified/rationalized system of milk
  pricing based on contribution (realization from
  1KG standard milk containing specified amount of
  FAT and SNF but fair to milk producers and
  industry) needs to be designed/implemented.

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OPTIMISING PROFITABILITY OF DAIRY BUSINESS

• ANNEXURE-A
• Dairy plant selling pasteurized liquid milk must
  earn gtRs.3.00/Kg.
• Assuming annual average basic price of raw milk
  as Rs.13.00/Kg. (6.50/8.84) or Rs. 200/Kg. Fat
  (Rs. 120 /Kg Fat Rs. 58.82/ Kg. SNF) total
  solids15.34 , C.L.R. 29
• Milk collection/processing/packing /marketing
  cost for efficiently managed dairy plant will not
  normally exceed Rs.4.00/Litre. (including
  processing losses and over heads)
• Pasteurized whole milk containing 6.00 Fat and
  9.00 SNF
• (Total solids15) would cost Rs.13/Litre (
  Approximately).
• Retail consumer price for pasteurized whole milk
  in most of the towns Rs.21.00/Liter
• As such there is clear profit margin of more than
  Rs.4.00/Litre.
• 21-(134.00)4.00/ Litre
• Dairy company handling one lac litres milk per
  day would thus make annual net profit of more
  than Rs. 14.60 Crores. (20 of turn over)
  provided there are no hidden losses.
  100000x4.00x365Rs.14,60.000,00
• Normally difference between consumer price for
  whole milk and farm gate price paid to milk
  producers remains Rs.8.00/Kg. Rs. (21- 13)Rs.
  8.00/Kg.

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OPTIMISING PROFITABILITY OF DAIRY BUSINESS

• RATIONALIZED MILK PRICING PATTERN
• Conventional milk pricing pattern being followed
  by dairy industry in India was designed many
  decades ago when prices of ghee and skimmed milk
  powder used to follow a set seasonable pattern
  and ratio of realization from FAT and SNF did not
  vary much to effect the profitability of dairy
  business adversely.
• A new modified/rationalized system of milk
  pricing and billing based on net contribution
  (realization from 1KG standard milk containing
  specified amount of FAT and SNF but fair to milk
  producers and industry) needs to be
  designed/implemented.
• Our Mission associate in Canada has developed
  such a milk pricing cum billing system based on
  digital analytical technique (D.A.T.) that is
  suitable for purchasing B.M., C.M., and M.M.
  determining its actual net worth accurate up to
  decimal points.

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INTERNATIONAL IMPROVEMENT MISSION

• LET US WORK TOGETHER
• TO
• ELIMINATE HIDDEN LOSSES
• DUE TO
• ADULTERATION
• DILUTION
• AND
• MANIPULATION