“FINANCIAL TREND ANALYSIS OF LUCKNOW PRODUCER”S CO OPERATIVE MILK

UNION LTD.”(PARAG DAIRY)

A PROJECT REPORT

Submitted in the fulfillment of the Requirement of the Award of the Degree of

Master of Business Administration

(YEAR 2011-2013)

Supervised by: Submitted by:

Dr. Vivekanand Pandey RATNA YADAV

(1106170114)

Sherwood College of Management

LUCKNOW (UTTER PRADESH)

1

Sherwood College of Management , Luck now

Certificate

This is to certify that Ms. Ratna Yadav, a regular student of MBA 2011 Batch has undergone

Summer Training in PARAG DAIRY, 22 Jopling Road, Luck now on the topic of Financial

Trend Analysis of Lucknow Producer’s Co-operative Milk Union Ltd for a period of 6

weeks commencing from 15-6-2012 to 30-7-2012.

This Summer Training Project Report embodies the facts and figure collected and interpreted by

her during the course of Training.

This Certificate is issued by the undersigned on the basis of the Summer Training Certificate of

the organization in which the student completed the Summer Training during above period.

Date:

Head Place:

PREFACE

2

I want to express my gratitude for the experience and practical knowledge that I gained during

the summer internship project at PARAG DAIRY .

For accomplishment of the project report I think about the conditions and views and then I used

to compose the whole thing on computer. In making the project report theoretical knowledge was

needed more than the practical which was given to us by my professors in my institutes. In the

office the experience relating to the practical knowledge was very good which realized me about

the real conditions of the FINANCE department.

The project flows logically consisting of data collection method . It hoped that the findings and

the suggestions will help the company, confidently to formulate its strategy in comparison to its

competitors. I have enjoyed my summer internship at PARAG DAIRY and have learnt lots of

new things, which will be helpful to me during my work in any organization. I thank PARAG

DAIRY for giving this opportunity at their office and being good to me all the time.

I am please to work in this esteemed organization. I have tried my best to make this report a

reader friendly & also did my level best to fulfill the objective of the summer training.

ACKNOWLEDGEMENT

3

I am thankful to Faculty of Sherwood College of Management,Lucknow for granting the

permission, cooperation and valuable information for completion of this project. Words are not

enough to thank Mr.Vivekanand Pandey(Guide) & Mr.Pankaj Malhotra (Finance Manager)

LUCKNOW PRODUCER’S CO-OPERATIVE MILK UNION LTD who not only inspired me

to work on this project but also accepted to guide me in spite of heavy responsibilities and busy

schedules, they always managed time to provide proper guidance. Last but not the least, I would

like to thank my parents and friends for giving me their constant support and encouragement in

completion of my project.

Completion of this report was made possible due to enduring help of many people. I avail this

opportunity to express my deep gratitude to them.

(RATNA YADAV)

MBA (3rd semester)

Roll No. (1106170114)

4

Declaration

I Ratna Yadav hereby declare that the project work entitled FINANCIAL

TRENDANALYSISOFLUCKNOW PRODUCER”S CO OPERATIVE MILK UNION LTD.” is an

authenticated work carried by me at Parag Dairy under the guidance of

Mr.Pankaj Malhotra, Finance Manager for the award of the degree of Master of Business

Administration .

Ratna Yadav

MBA III SEM

5

TABLE OF CONTENTS

6

S.NO CONTENT PAGE

NO.

1 COMPANY PROFILE 9 TO 37

2 INTRODUCTION TO THE PROJECT 38TO 77

8 EXPLANATION & FINDING 78 TO 91

10 SUGGESTION&RECOMMENDATION 92TO 93

11 CONCLUSION & ANNEXURE 94 TO 98

EXECUTIVE SUMMARY

In today’s competitive world while entering in the market it is very necessary to have

good knowledge of the potential of a particular market. The growth of a company is

invariably determined not just by its strategy, but on how it responds to the challenges it

encounters. Over the decades PARAG has successfully countered several challenges that

have come its way with innovative responses and continuous improvement, which have

enabled it to remain stable and even convert some of these challenges into opportunities.

It is the culture of endurance that has accorded PARAGthe insight and focus to deal with

the current economic environment. Drawing from its inner strength and beliefs, PARAG

responded by launching several initiatives across all its operations in various geographies

that are helping the group achieve growth even

in current times. It is also this very strategic culture that will propel PARAG to continue

on its growth trajectory in years to come.

The report provides a comprehensive insight into the company and also about the

company’s SWOT analysis. This report mainly studies in detail the various product mix

strategies of the company and also focuses on the segmentation of both company based

and industry based and helps in analysing the company’s competitive advantage and the

reason behind its success.

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CHAPTER- 1

COMPANY PROFILE

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AN INTODUCTION OF FMCG INDUSTRY

The FMCG sector is a cornerstone of the Indian economy. This sector can drive growth, enhance

quality of life, create jobs, and support penetration of technology. A vibrant FMCG sector can

boost agricultural product and export. It contributed to the exchequer significantly, disperse

technology across the value chain and usher in the product innovation. This innovation can

improve Indian Health standards.

Fast Moving Consumer Good (FMCG) industry has a long history. However, the Indian FMCG

began to take shape only during the last fifty-odd years Today, the Indian

FMCG industry continues to suffer from a definitional dilemma. In fact, the industry is yet to

crystallize in terms of definition and market, size, among others.

The definitional confusion that has marked the Indian FMCG industry is getting confounded.

Some others call it the CPG industry and some even call it the PMCG industry. The Indian

FMCG industry has suffered because of the confusion.

It is an industry which touches every aspect of human life from looks to hygiene to palate.

Perhaps defining as industry whose scope is so vast is not so easy.

The government is at crossroads not knowing how and where to slot the Indian FMCG industry

and unsurprisingly, the manner in which it has treated an industry which holds tremendous

promise as producer of goods that pervade everyday life has been only callous. The facts that the

FMCG industry is a noteworthy employer and a major tax payer are being ignored.

The only thing that is cheering the industry are the reforms of the nineties. Post reforms, the

industries is excited about a burgeoning rural population whose income are rising and which is a

willing to spend on goods designed to improve lifestyle.

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What is needed now is a change in the mindset of the mandarins, FMCG industry -friendly

legislation are the needs of the hour. It does not matter whether changes are being brought about

by dawning market realities or the ongoing economic reforms. One thing is certain here: The

Indian FMCG industry has a promising future to look forward to.

In terms of growth potential, the Indian market is a great horse to bet on. With a little help and

understanding from the government, the Indian FMCG can realize its true potential.

So far, it has been a checked graph for the MNC’s operating in the Indian FMCG industry.

Domestic companies are only beginning to make their presence felt in the industry. It has taken

tremendous consumer insight and market savings for the FMCG players to reach where they are

today. But, the journey has only begun.

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ABOUT LUCKNOW PRODUCER’S CO OPERATIVE MILK

UNION LTD.

Sections-1.1:

INTRODUCTION

11

12

PROFILE OF THE COMPANY

Name of the organisation LUCKNOW PROODUCER’S CO-OPERATIVE MILK

UNION LTD

Address of the organisation 22, Jopling Road, Lucknow

Established 1938

Registration 23rd March 1938

First Dairy Inspector N.K. Bhargava

Place of Establishment Initialy at Charbagh, Shifted to Ganesh ji, Presently at 22,

Jopling Road, Lucknow

Founder Raj bahadur Gopal Lal Pandya

Board Of Directors Mr. Gopal Pandya

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Mr. N.C. Chaturvedi

Mr. Tej Shanker

Mr. Pushkar Nath Bhatt

Per Day Production Of Milk initially 4000Ltr

Location Initially Charbagh

Now Present In 22, Jopling road, Lucknow

Area of Distribution Initially- Bakshi ka talab, Tewari Ganj

At Present- entire District

Lucknow is the capital city of Uttar Pradesh . Total area of district is 2528 square km 91588

hactare is cultivated land . Lucknow producer’s cooperative milk union ltd.(Parag dairy

lucknow) was established in 1938. Lucknow milk is the first cooperative dairy established in

India . Very few people know the fact the process developed by Lucknow Milk Union was

later used in spirit in Gujrat co operative milk movement and is now famous as “anand

pattern” .

Lucknow milk union was then chosen as one of the model dairy to Implement operation

flood programme started by national dairy development board (NDDB)in 1970.

14

The aim of Lucknow milk union is to provide reasonable price to farmer thereby

defending them from exploitation of milk vendors and earn supplementary income part from

agriculture . On the other hand the milk union supplies high quality pure milk and milk

products at reasonable prices to urban consumer under the brand name “parag”. The milk

union has been running “clean milk mand breed conservation programmes” UPDASP where

milk producer have been educated in producing and supplying milk under clean and hygienic

condition and provided the producer with semen of pure Indian breed for the improvement

of the present breed of animal. Lucknow milk union is established Auto milk collection unit

(AMCU) in societies for giving transparent payment system for milk given by farmer. By the

established of these machine farmer are getting full price and actual detail of fat and snf of

their milk . presently AMCU are running successfully in 259 societies 27 bulk milk coolers

are established in various rural area of lucknow for keeping high quality of milk procured in

those area by milk societies

Lucknow milk union has set up of teams for quality check and health awareness

programme for the urban consumer of milk.

The team visit different localities in city, test their milk and provide on the spot results to the

consumer .

The milk union also organize school children’s visit to its dairy plant to create awareness on

milk procrssing and other related system amongst them. The milk union has obtained ISO

and HACCP certification in year 2007.

For coming months lucknow milk union has commited itself to provide a minimum of

160000 liters of high qualities “parag” milk per day to the urban consumers. Apart from

selling milk in pouches, the milk union is also gearing itself to provide fresh loose milk to

the city consumers. Towards this end, the milk supply vehicles insulated with Japanese eco-

friendly standards have already been introduced in various area of the city. 87 all time milk

booth(ATM) are established for supply of high quality milk to the consumers round the

clock.

15

Lucknow milk union is able to maintain high quality standards in its milk and milk products

through close monitoring of processes in all its stages of production, processing and

packaging.

The constant increase in the sales figure of the milk union are a reflection of their

sincere efforts and the growing confidence of the consumers in parag milk products. The

organization has a chain of around 2000 agent providing employment to the unemployed

youths door to door milk delivery system through mini insulated tanker thru commission

agent with attractive commission rates has been started in the city .

The requirement for this system is to have a mini insulated tanker for which one has to

arrange finance upto rs 50000/- himself and rest amount comes through bank finance.

The new milk products launched by the milk union such as chhena kheer, besan

laddoo, and chhachh, gulabjamun etc have begin tickling the taste buds of the consumers

giving them great pleasure and value for money.

The common brand name of the company is “PARAG” the meaning of PARAG is the pollen

of flower the slogan in the logo is: -

PURE NATURAL & GOOD HEALTH

Parag milk shed is situated in the Lucknow, the capital of Uttar Pradesh since independence

it has formed part of the traditional supply line of agriculture products from the village to the

big cities rich in its milk potential the milk shed has, in the source of last few decades been

thoroughly exploited by small traders and powerful contractors and well organized private

dairies. Thus, while such intermediaries were retaining large profits the rural milk producers

found their position deteriorating day by day

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In 1950-a co-operative milk supply union was organized in Lucknow , which started

collecting milk from village and supplied to Lucknow and local markets.

This milk union continued function for about a decade, in the mean time Lucknow milk

scheme was established by government of India in 1959-60 to ensure cheaper milk to the

local pollution of Lucknow. The scheme started operating through 12 chilling centers in

Eastern Uttar Pradesh. These chilling centers were mainly coated in thither district of

Lucknow , Barabanki, Raebareli , Kanpur, Unnao, Sitapur etc . The milk was mainly

collected through contractors. 10 milk unions were also found almost at the same time,

around each chilling center. These continued functioning in a rather lop-sided manner till

1977.

Gradually all the milk union almost become defunctioning and was supplying very little

quantity of milk during the years 1970-77. Obviously contractors had monopoly and

collected major share of milk which was either supplied to Lucknow or to the local

population of the city.

This programmer was launched in Uttar Pradesh in 1972 and the implementing agency in the

was pradeshik cooperative dairy federation limited which was framed in the year. The basic

idea was to replicate anand pattern societies in Uttar Pradesh. In august September 1972

organization of societies in Lucknow district was taken up bar out, Mohanlalganj,Amausi

blocks. A spear head team from national dairy development board was posted in Lucknow ,

which started functioning from April 1978 with a team of 27 employees drawn from

Lucknow milk 198 milk procurement cooperative societies by the year 1981, when the

operation fllod-14 programme ended.

Feeded balancing dairy, Lucknow Producer’s Co-operative Milk Union Ltd was set up

under operation flood-1 programmer with the specific purpose of supplying milk of local

markets and other districts.

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Dairies and conversion surplus milk into various dairy products. This dairy is situated in the

middle of Lucknow . The dairy was commissioned in April 1978 and processed the liquid

milk procured from the then milk shed comprising Lucknow, Raebareli, Barabanki and

Unnao.

The purpose of establishing feeder balancing dairy, Lucknow co was to provide remunerative

market for milk produced in the milk shed comprising district of Lucknow , Barabanki,

Raebareli, Kanpur and Sitapur as envisaged under operation flood-1 scheme. Thus feeder

balancing dairy was oblized to receive entire surplus milk from the rural areas, through a

network of milk coop. In 1978-79 the average handing of milk per day at fbd-Lucknow

Producer’s Co-operative Milk Union Ltd was 49,300kg. With peak handing of 1, 04,950kg

in the feb.

In April 1981 Lucknow Producer’s Co-operative Milk Union Ltd launched pasteurized

whole milk packed in polythene sachet for local consumers. The supply of milk was

gradually extended to other local markets .

As the basic idea of establishing FBD-Lucknow Producer’s Co-operative Milk Union Ltd

was to convert surplus milk into various dairy-products, this activity started in sept. 1978

With manufacture of skimmed milk powder and ghee. The manufacturing of table butter was

started from April 1981.

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In view of milk production procurement and marketing potential of Lucknow Producer’s

Co-operative Milk Union Ltd , and expansion programme has been undertaken by N.D.D.B.

on turn basis. The target set is as under:

Increasing processing capacity from 1 lack to 3.5 liters per day.

Increasing powder plant capacity from 10 tones to 40 tones per day.

Increasing the capacity of ghee plant from 1.m.t. to 4.m.t. per day.

Increasing the capacity of butter manufacturing up to 16.m.t. per day

The work of expansion has been complete in 1989.

The work of expanded dairy started functioning on full capacity in 1991-1993 year. The

liquid milk and products are selling in the market in the brand name of PARAG.

The milk product has been marketed by P.C.D.F. luck now. The sale of liquid milk has been

carried out Lucknow Producer’s Co-operative Milk Union Ltd, Lucknow.

In the year 1983 P.C.D.F. Ltd. started working under Operation Flood – II (White revolution)

scheme. Mostly unit milk Sahakari Board where connected under Operation Flood – II,

having the name Dugdh Utpadak Sahakari Sangh (D.U.S.S.) Ltd. P.C.D.F. Ltd. takes royalty

of common brand name PARAG and all the important policy taken by Pradeshik Co-

operative Dairy Federation Ltd. Who monitors to all the D.U.S.S. Ltd. i.e. Lucknow ,

Kanpur, Varanasi.

PARAG provides hygienic, nutritious milk and milk product. In the year 1983 Operation

Flood – II scheme was launched, the main objectives of the Operation Flood were following

–

To collect the milk directly from the producers (Villagers through society).

To insure the supply of quality milk collected from the villagers which being sold in

the market area of city.

To save the producers, villagers and the customers from the middle man.

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The milk is collected firstly to the society level then it comes to D.U.S.S. level finely

it comes under the state level i.e. federation.

ANALYSIS OF MILK INDUSTRY

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Traditionally, in India dairying has been a rural cottage industry. Semi-commercial dairying

started with the establishment of military dairy farms and co-operative milk unions

throughout the country towards the end of nineteenth century.

In earlier years, many households own their own ‘family cow’ or secured milk from a

neighbor who had one. With the increase in urban population fewer households could afford

to keep a cow for private use and moreover there were other problems also like the high cost

of milk production, problems of sanitation etc. restricted the practice; and gradually the

family cow in the city was eliminated and city cattle were all sent back to the rural areas.

Gradually farmers living near the cities took advantage of their proximity to the cities and

began supplying milk to the urban population; this gave rise to the fluid milk-sheds we see

today in every city of our country.

Prior to the 1815 most milk was necessarily produced within a short distance of the place of

consumption because of lack of suitable means of transportation and refrigeration.

The Indian Dairy Industry has made rapid progress since independence. A large number of

modern milk plans and product factories have since being established. These organized

dairies have been successfully engaged in the routine commercial production of pasteurized

bottled milk and various western and dairy products. With modern knowledge of the

protection of milk during transportation, it became possible to locate dairies where land was

less expensive and crops could be grown more economically.

In India, the market milk technology may be considered to have commenced in 1950, with

the functioning of the Central Dairy of Aarey Milk Colony, and milk product technology in

1956 with the establishment of Amul dairy, Anand.

21

Indian dairy sector is still mainly and unorganized sector as barely 10% of our total milk

production undergoes organized handeling.

22

23

DAIRY DEVELOPMENT IN UTTAR PRADESH

(AT A GLANCE)

U.P. is the highest milk producing State in India having a share of 18% of the total

production of the country. The per capita availability of milk has gone up to 224 grams.

Dairy development programme is being implemented in State through the following sectors:-

Cooperative Sector

Private Sector

Cooperative Sector:-

In the year 1917 saw the advent of the First Co-operative Milk Society at Katra,

LUCKNOW. It was unfortunate that no special efforts were made in this direction for the

next two decades. It was then in the year 1938 LUCKNOW PRODUCER’S CO-

OPERATIVE MILK UNION was established. In the coming years Lucknow, Varanasi,

Kanpur, Haldwani, Nainital and Lucknow Milk Unions saw the light of the day.

To accelerate the pace of Dairy Development in the State a State Level apex autonomous

unit PRADESHIK CO-OPERATIVE DAIRY FEDERATION LIMITED was established

in the year 1962. Initially the federation played the role of a Technical Advisor. As years

went by PCDF Ltd. became proficient and was given the World Bank assisted Operation

Flood Programme in the State.

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Objectives of the O.F. Programme

(1) Capturing a dominant share of the urban milk market, hitherto served by a

multitude of small milk vendors.

(2) Creating a procurement network to link numerous cooperative producer societies

in different milk shed areas to the organized urban dairy industry.

(3) Upgrading the milk production capacity of Indian bovine stock through a

programme of crossbreeding, veterinary services and auxiliary activities.

The Operation Flood Programme in the State was being implemented by a three tier

cooperative structure :-

(1) Dairy cooperative societies at the village level handling procurement of milk.

(2) Co-operative Milk Unions at the district level engaged in processing and product

manufacturing.

(3) Pradeshik Co-operative Dairy Federation (PCDF) at the State level charged with

the coordination of marketing.

Operation Flood-I was initiated in 1971 and covered 8 districts of the Lucknow and

Varanasi milk sheds. Besides Cattle Feed Factory of one handed Metric Tone capacity

each at Lucknow and Varanasi were established.

Operation Flood-II started in 1982, wherein coverage was extended to 28 districts.

Operation Flood-III launched in 1987 and included two more districts, so that of the

total 83 districts, was implemented in 30 districts/as of date the coverage has been

extended to 41 districts. The Operation Flood Programme completed its third phase in

the year 1994-95.

The federation is equipped with sophisticated plants and machinery to manufacture

Ghee, Table Butter, Milk Powder, Infant Milk Food and other dairy products on a big

scale. Our manufacturing capacity covers approximately 37 MT Ghee, 30 MT Butter

and 55 MT of Milk Powder Daily.

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The Net Capacity available with the affiliated Milk Unions including the newly

acquired Parag Dairy – Stand at (Dairy: 1530 TLPD/Chilling (Hired: 180

TLPD/Owned : 660 TLPD).

The progress achieved till the year 1999-2000 indicates the total functional VDC’s at

10865 with a membership of 5.51 lacs. Procurement and Sales figure for the year

reflect 7.28 lacs K.G.s and 4.27 Lacs liter respectively.

In addition the federation is also marketing milk in the N.M.G., the figures for the

year 1999-2000 stand at 3-20 lacs K.G.s As a technical support to its base activity the

federation is also supplying Fodder Seeds and Cattle Feed to its producer members.

The federation is Lucknow and Varanasi and has marketed 37144 MT cattle feed.

Similarly the federation operates a Seed Processing and Marketing Unit at Aligarh.

The total fodder seeds distribution by this unit stand at 3017 Quintal. It is to state that

we are also marketing fodder seeds to neighbouring state including Tamilnadu and

West Bengal.

GENERAL IMPACT – O.F. PROGRAMME

Real ground work in dairying has been done be the co-operatives.Due awareness has been

created in the minds of producers and urban consumers of the state.Co-operative have

succeeded in the social and economic upliftment of women and down trodden in the rural

society.Loss of genetic material by the middleman has been chedked to considerable extent.

Rural migration to the cities curtailed because of continuous and sustainable employment

generation at village level.In its efforts to replicate the programme and accelerate that

development in the remaining districts of the state a parallel body in the form of Rajya

Dugdh Parishad played the role of mainly a licensing authority. Later on in the year 1990 the

26

Parishad was given the charge to work parallely in Non-Operation Flood Districts. At present

42 districts are covered through 33 district level milk unions.

The net capacities available with the affiliated milk unions including the newly acquired

Parag dairy -Stand at (Dairy : 155 TLDP/Chilling : 100 TLPD/Owned 161 TLPD).

The progress achieved till the year 1999-2000 indicate the total functional VDC’s at 5381

with a membership of 2.75 lacs. Procurement and Sales figure for the year reflect 1.57 lacs

K.G.S. and 1.09 lacs liter respectively.

Private sector:

Presently 25 registered private dairy are functioning in different districts of the State, with a

total handling capacity of 46.64 lacs liter per day.The Dairy Development Department is also

running some supportive programmes for dairy development in state of Uttar Pradesh as :

IMDP, WDP, RFWP, UPDASP, SCP, Shwet Kranti Yojna.

IMDP – Intensive Mini Dairy Project:

The largest employment generation programme named a IMDP under Deen Dayal Rojgar

Yojna was initiated in the year 1991. The programme was launched in 17 districts of the

State in the first phase. In due course of time the scheme at the Government level was

renamed as Vishes Rojgar Yojna. For the year 1999-2000 the total number of mini dairy

stands at 18, 5000 in 73 districts of the state.

WDP – Women Dairy Project:

In its efforts to remove gender basis the state Government has initiated WDP through

Government of India, wherein part of the programme is being funded under the STEP

programme of the State Government. The progress as on date reflects 2096 women societies

with a membership of 80345.

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RFWP – Rural Family Welfare Programme :

Under the aegis of SIFPSA a family welfare project is running at present. It is an ideal

programme for family welfare through dairy cooperative society. It is currently operating in

13 districts. Further 3 new districts will be added U.P.

UPDASP – Uttar Pradesh Diversified Agriculture Support Project:

A World Bank assisted Project it is operative through the following components:- PHAP -

Public Health Awareness Programme.The programme is operational in 15 districts of the

State for a period of MRCB – Milk Recording & Conservation of Breed. The programme is

operational in 07 districts of the state for a period of Special Achievements/Initiatives

The highest ever Milk Procurement in a single day that touched the magical 13.58 Kgs

Mark.Efforts are on to bring in our Major Dairies under the ISO 9002 fold, wherein Lucknow

Dairy & Parag Dairy have already been awarded the ISO 9002 Certification.

To fulfill the vision and the dream of strengthening the Federation of that it is able to meet

the ever increasing competition on all fronts an Satat Sudhar Yojna has been initiated.Total

NMG supplies 3.20 lac liters/day.

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OBJECTIVE OF THE STUDY

The purpose of this project is to diagnose the information contained in financial statement as

to judge the profitability and current financial affairs.

To estimate the working capital requirement of the firm , Just like a doctor examines his

patient by recording his body temperature ,blood pressure ,etc. before making any conclusion

regarding the illness and before making his conclusion regarding the illness and before

giving the treatment, a financial analyst analysis the financial statement with various tools

and techniques of analysis before commenting upon the Financial affairs (positive and

negative) & working capital condition of an enterprise. The analysis and interpretation of

financial statement is essential to bring out the mystery behind figures in financial

statements. The main objectives of the study as related to the topics are as under:-

To find out the concept of working capital and cash flow analysis.

To find and analysis the group wise composition of working capital in parag dairy.

To study the different mechanism to maintain proper working capital in parag dairy.

Estimation of working capital.

Evaluate working capital requirement in the manufacturing ferm.

To find various alternatives of working capital.

To analysis the financial position of parag dairy.

29

SCOPE AND LIMITATIONS OF THE STUDY

Working Capital is considered as central nervous system of the firm. The importance of

working capital is reflected in fact that financial managers spend most of their time in

managing current assets and current liabilities. Adequate working capital needs to be

maintained in order to discharge day to day liabilities. Adequate working capital needs

to be maintained in order to discharge day to day liabilities and protect the business

from adverse effects in times of calamities and emergenxies. It aims at protection the

purchasing power of assets and maximizing a firm’s profits.

Scope

Determining the total funds required to meet the current operations of the firm

(i.e. determination the level of current assets).

To decide the structure of current assets (i.e. the proportion of long term and

short term capital to financial current assets).

To evolve suitable policies, procedures and reporting systems for controlling the

individual components of current assets ( mainly cash, receivables, inventory).

To determine the various sources of working capital.

To ensure optimum investment in current assets.

To strike a balance between the twin objective of liquidity and profitability in

the use of funds.

To ensure adequate flow of funds for current operations.

To speed up the flow of funds or to minimize the stagnation of funds.

30

Limitation of study

Unnecessary accumulation of inventories, which leads to mishandling of

inventories, waste theft and losses in increase.

Excessive of working capital in indication of defective credit policy and slack in

collection period. These leads to higher bad debts losses that reduce profits.

It makes management complacent which degenerates in to managerial

inefficiency.

Inadequate working capital stagnates growth.

It becomes difficult to implement operating plans and achieve the firm’s target

profits.

It leads to inefficient utilization of fixed assets.

MANANGEMENT OF WORKING CAPITAL

I. INVENTORY

It is time to review our inventory level and ensure reduction as number of days of turn

over. Sincere effort should be made for liquidation of non / slow moving inventory.

The inventory against AMA’s need to be reviewed & reduced.

II. Book Debts

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Units and business sector should continued with their vigorous efforts to achieve

minimum level of 180 days to turn over at the company level.

The areas to be focused a part from the collectable out standing from the current bills

are, dues against different debts, bills under verifications, turn over recognized but not

billed due to various reasons etc.

The dispatches, which only add to turn over, without immediate billing and

corresponding billing and corresponding cash collections are to be reviewed thoroughly

and the billing schedule with the customer may be reviewed thoroughly and the billing

schedule with the customer may be reviewed for changes.

The practices of dispatching material which could not be billed immediately is not be

encouraged head of the unit shall personally reviewed goods dispatched but pending for

more then three month on regular basis.

A focused presentation on this has to be made to the budget team units must strive hard to

control the increase in differed debts and also old and held outstanding.

III. CONTRACT CLOSING ISSUES

Miner supply from units to settle outstanding commercial disputes in respect of

project completed in the part of contract were of are yet to closed, should also be

fully included in the budget to insure expenditious closure of old contract and

realization of large overdue outstanding an amount of Rs.3.6 cr is outstanding

against final payment which could be realized by the solving to the contract closing

issues. This will also enable to withdraw huge amount of provision created for

contractual obligation. Units shall make focused presentation on their action plan to

the budget team.

PURPOSE

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PCDF’S aims to build a system to ensure that individual farmer got a fair price for the milk he

sold.

MISSION

PCDF’S mission is to become the strongest marketing organization by 2005.PCDF’S came into

existence in 23rd march 1938,with the simple intension of ensuring a fair return to the producers.

Which was implemented in UP is the year 1983-1984 provided the much needed impetus to co-

operation. The mission was to develop a product mix that would not only promote sustained

growth but also help member union to develop adequate.

Production and processing facilities. It also aimed to offer quality products at fair price, and to do

so by achieving economies of scale and costs. And this mission gave birth to brands like parag

and Amul.

33

RESEARCH METHODOLOGY

Methodology for a study like this is the most important part .The method of study

operate by me is totally is to increase $ to gather the more information regarding this

project.

The major emphasis in such studies is on the discovery of the ideas fruitful

relevant information. As such the research design appropriate for such studies must be

flexible enough to provide opportunity for considering different aspect of a problem

under study.

I collected the information regarding this project through –

I. PRIMARY DATA

II. SECONDARY DATA

Primary data is collected by the customers and Parag retailers.

Secondary data is collected by retailer

Since our research is descriptive type, so research design is also descriptive.

Sample design:

Sampling is a process of obtaining information about an entire population by

examining only a part of it.

As depicted below, I have taken 14 retailers and 30 customers as my sample size

Sample size:

RETAILER : 35

34

CUSTOMER: 110

SWOT ANALYSIS OF PARAG DAIRY

STRENGTH :

The major strength of the traditional dairy product sector is the mass appeal enjoyed by the wide

variety of products .The market for these products far exceeds that for western dairy products

like milk powder , table butter and cheese. Their operating margins are also much higher than the

western dairy products. The incresing demand for these products presents a great opportunity for

the organized dairies in the country to modernize and scale up production.

WEAKNESS :

The major weakness of this sector is the practice of inadequate hygine in the preparation and

handling of these products and relatively short shelf life. The preparation and marketing of these

products is generally done by Halwais and that limits development in these sector.

OPPORTUNITY :

35

The expanding business prospects provided by these products and their accompanying value –

addition , call for a thorough study of this sector. It would facilitate an increase in the production

and marketing of hyginenically prepared and properly packed products to meet the demand of

growing population, as has been demonstrated at the NDDB’s Sugam Dairy.

MARKET SHARE OF PRODUCERS IN LUCKNOW

During the project work , a survey is been conducted to know the market share of the PARAG in

Lucknow city. This survey is been done among 50 people . This is shown with the help of

following table and Pie chart.

Table No. 1.1

Duration Number of consumers Percentage

Parag 26 52%

Amul 15 30%

Deva 6 12%

Local suppliers 3 6%

Total 50 100%

36

Buying Behaviour

morning 46%evening 24%both time 30%

It is clear from the graph that :

1. 52% of market share is captured by PARAG.

2. 24% of the market share is captured by AMUL

3. 12% of market share is captured by DEVA.

4. 6% of market share is captured by Local Suppliers.

37

CHAPTER – 2

INTRODUCTION TO THE PROJECT

38

INTRODUCTION TO THE INDIAN

DAIRY INDUSTRY

The world's biggest dairy producing country is growing fast and looking to become

an export powerhouse despite major quality problems...

A Note to our Readers: the following information on India's dairy sector is reproduced from

India Infoline.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.

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 2008. 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 milky 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

39

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.

40

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 2008. Production of milk

powder including infant milk-food has risen to 2.25 lakh MT in 2008, 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.

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.

13

Packaging Technology

Milk was initially sold door-to-door by the local milkman. When the dairy cooperatives

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,

41

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

2008-00 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 2008. 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

up to 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 tones of milk solids per year. Plants producing over 75,000 litres per day or more

than 3,750 tones 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 up to 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

42

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 milkbased 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

43

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

large metros.

Export Potential

India has the potential to become one of the leading players in milk and milk product exports.

Location 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.

The major export products: - The products of Amul is being exported in the 40 countries of the

world . Many of the products are now available in the U.S.A , Gulf countries and Singapore.

Amul products are being exported to the Singapore since last three decades . undoubtedly , Amul

is the preferred taste of Indians in the Gulf countries.

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,

rasagulas and other ethnic sweets to the large number of Indians

scattered all over the world.

44

PRODUCT PROFILE

MILK PRODUCTS

(1) Butter

It contains less than 80% milk fat and more than 15% moisture and high acidity. It is

prepared exclusively from milk cream of curd of cow or buffalo milk without the addition of salt,

color or any preservative and is intended for cooking or for preparation of Ghee.

(2) Ghee

About 43% of total quantity of milk produced in India is manufactured first into butter

and then converted into Ghee. Bulk of Ghee is derived from buffalo milk because it is richer in

fat that cow milk. In Parag surplus butter is mutted in steam jacket kettles. Which are equipped

with mechanical stirrers and heated with steam till the moisture is removed.

(3) Paneer

In Parag, Paneer is produced by the traditional method in which citric acid is added to the

boiled milk and the milk immediately gets adulterated and water is separated and paneer is

obtained. It contains less than 50% frat of more than 60% moisture.

45

(4) Others

Skimmed milk powder, cake and khoya are other products produced by Parag.

Future Products

Some new products like coffee powder, ready to make ice-cream powder, baby food and

other milk drinks are in the testing stages.

PARAG’S MILK PRODUCTS:-

Butter available in 20 gm., 100 gm., and 500 gm. packs.

Pure Ghee available ½ Kg.

Paneer - vailable in 100 gm.

Skimmed milk powder - in 500 gm. cartons & 200 & 500 gm. plastic bottles.

46

47

48

49

50

51

52

53

54

RATE OF MILK AND MILK PRODUCT

Name of Milk & Milk Product Agent Rate Consumer Rate

1. F.C.M.

2. TONED MILK

3. JANTA MILK

4. LOOSE MILK (IN CANTS)

5. GHEE/1LITER PACK

6. BUTTER 100 GRAM

7. BUTTER 500 GRAM

8. PANEER

9. MATTHA (200 ML)

10. DAHI

25.50P/L

20.00P/L

17.00 P/L

19.00 P/L

215.00 P/L

15 RS

72.50 RS

147.00 P/KG

4.50 P.P.

9.00 P. CUP

27.00

22.00

18.00

20.00

250.00

20 RS

90 RS

170.00

5.00

10.00

QUALITY CONTROL

Quality control is an essential and most important department for any manufacturer. Today every

organization has efficient quality control system.

Quality control is depend upon only practical (Survey Analysis and Right Procedure).

In D.U.S.S. Ltd. LUCKNOW at reception point of milk from different societies (Producers

Villagers) Milk is collected and basic test are carried out quickly after cleaning it is send for

55

further processing. Finally after pasteurization three type of milk obtain that is Full cream milk.

Toned Milk, Janta Milk.

Milk procedure out through some stages----------------------

1. ORGANO LEPTIC TEST –

It passes through three stages this is the first type of testing milk.

Seeing

Smell

Testing

2. CLOT ON BOILING TEST –

After testing checking is done between good and pour milk.

Formalin test

Soda test

Urea test

Sugar test

Caustic test

These tests are based on c lot on boiling test

3. S.P.C. (Standard plate count) TEST –

In this type of testing not more than 25000 Bacteria’s should be present in one ml of

milk.

56

4. CLR (Correct Lacto Meter Reading) Test –

In this type of testing is done to find out quantity of water in milk.

11%, 135% should be is LATIC ACID in the milk.

5. M.B.R.T. (Methyl Blue Reduction Test) –

M.B.R.T. test is done for milk pasteurization. Heating temperature should be 72 – 80

Degree centigrade. Chilled temperature should be 5 degree below

6. S.N.F. Test (Solid not fat) –

S.N.F. test is based on lactometer test.

S.N.F.=CLR/R x .2 X fat %+.29 (this formula is used for Big lactometer)

S.N.F.=CLR/4 x .2 x 5%+.50 (this formula is used for small lactometer)

AFTER STERILIZATION NUMBER OF VITAL TEST ARE EXECUTED –

1. TOTAL SOLID TEST

2. ACIDITY TEST

3. SUCROSE TEST

4. TEXTURE TEST

5. MILK FAT TEST – Milk fat teat is used in GURBUR MACHINE and ACID.

57

FAT = 5 ML (Sulfuric Acid) + 10 ML Milk + 1 ML (Ethyl Alcohol)

This mixture is rotated in GURBUR MACHINE and quantity of fat in milk is seen. The most

important test i.e. phosphorous test and Methyl test Blue reduction test.

1. Phosphorous test is user for confirm the pasteurization of milk.

2. M.B.R.T. (Methyl Blue Reduction) test is used for maintaining appropriate quality of milk in

every half an hour. It is done with full responsibility and care so that the offered product to

the consumer could be reached with appropriate CALORIFIC VALUE.

THE MAJOR PRIVATE COMPANIES ENTERING THE DAIRY SECTOR ARE

1) Milk specialties in Punjab.

2) Amrutha Foods & Beverages in Bhubaneshwar, Orissa.

3) Cephem Milk in Chittor, Andhra Pradesh.

4) J.K. Dairy & Foods of J.K. Industries in Muradabad in U.P.

5) Khaitan Agro in Buland-Sahar in U.P.

6) Modern dairy in Karnal, Haryana.

7) Thapar Agro in Alvar, Rajasthan.

8) Gyan Dairy in Lucknow U.P.

9) Gokul Dairy in Lucknow U.P.

10) Heritage foods in Chittor , Andhra Pradesh.

The Dairy sector now processes in compelling competition from private quarters; in order to

survive the co-operative sector now has to undergo a phase of corporate restructuring & up

gradation of product to live up to ultimate health & hygienic conditions. In the words, of

Prof. V. J. Kurian, Chairman of N.D.D.B. the co-operative sector has to bring about the

complete metamorphosis if its want to remain in the rac

58

INNOVATIONS TO BE MADE

Potential for Process Innovations

The modernization of the manufacturing process of traditional dairy products is long

overdue. But, there is no need to reinvent the wheel because some of the food processing

methods available in the west can be usefully adapted to mass-produce traditional

products. Some process modifications may, however, become necessary.

Pioneers in the field

In recent years, process innovations have been initiated at the National Dairy

Development Board (NDDB) and the National Dairy Research Institute (NDRI) for

the assembly-line production of burfi, dahi, kheer, shrikhand, gulabjamun,

rasagollas, mishti doi and the like, by adapting the Western tools and technology.

The use of western products like concentrated and dried milk powder for making

chhana and khoa needs to be adopted in modern dairy plants, as also at the halwai

level.

An outstanding example of Western technology adaptation is the manufacture of

shrikhand on a large scale, using basket centrifuges, quarg separators and planetory

mixers, used by bakeries. Today, the volume of shrikhand manufactured by the

organized sector exceeds that of processed cheese sold in India.

The most modern plant associated with the manufacture of traditional dairy

products is the Baroda District Cooperative Milk Producers Union Ltd. (Sugam

Dairy) at Vadodara in Gujarat. It markets its products through a large network of

150 retail outlets in the city. The Sugam Dairy uses the traditional grocery/general

stores that have a refrigerator to market its products. The product range includes

59

shrikhand, gulabjamuns, pedas and lassi, apart from flavored milks. The dairy has

the highest turnover of a single unit, marketing traditional dairy products.

The Mother Dairy in Calcutta markets mishti doi and dahi in a similar fashion.

Dairies in Punjab and Haryana market paneer and kalakand (also, lately, milk

cake).

Cooperative dairies in Tamil Nadu, Andhra Pradesh and Karnataka also sell

makkhan(butter), khoa, peda(a form of sweetmeat) and kulfi.

Warana and Mahanand dairies in Maharashtra are also marketing shrikhand

through their sales outlets.

Potential for more

The manufacture of khoa, using roller dryers and other scraped surface heat

exchangers, is instance of the use of the Western technology.

UF/RO technologies can also be used for the making of chhana and concentration of

milk for many indigenous dairy products.

The use of meat ball forming machines and potato fryers for manufacturing

gulabjamuns on large scale is a good example of integrating modern technology with

the traditional process.

The packaging of these products can also follow a similar approach.

In Italy, Mozzarella cheese balls are being packed in whey in consumer packs. This

can be tried to market rasagollas and gulabjamuns.

Chocolate and candy packaging lines can be used to pack burfi and peda.

Tetrapaks can be used to pack lassi, basundi, kheer and sevian.

An example of this technique is the process by which the Japanese manufacture Tofu,

which resembles paneer.

The modernization of this sector will also result in energy savings.

60

While manufacturing sweets in the traditional manner, a lot of heat energy goes waste

which can possibly be recovered in a modern plant. Evaporation of milk in a karahi

consumes five times more energy than in a vacuum evaporator. Whey is being

drained, today, from the small scale manufacture of paneer and chhana . This causes

pollution and degradation of the environment. Most of the whey in a modern plant can

be recovered for the manufacture of lactose/lactates. Then, India need not import

some 5,000 tonnes of lactose annually. Rather, it may be in a position to export it.

The preparation of these products by traditional methods needs to be studied and well

documented on a scientific basis. The technological parameters, biochemical changes

and the perishability of these products should be further researched to develop unit

processes required for the large scale manufacture.

Foreseeable Advantages of Process Innovation

Many ingredients used in the preparation of traditional dairy products are adulterated.

In fact, many food colors used in these products may actually be carcinogenic.

Branding of these products will lead to the use of pure ingredients as the

manufacturers would make serious efforts to protect their brand names. The Bureau of

Indian Standards (BIS) has now worked out standard specifications for the quality of

khoa, shrikhand, burfi, rasagollas and gulabjamuns. This is encouraging, and the

quality standards should be specified for all other important traditional products.

Large scale manufacture of these products will also open possibilities for trying out

newer ingredients. The processed food industry in the United States has emerged as

the largest user of corn syrup solids and high fructose corn syrup. These sweeteners

add to the moisture retention properties of many foods apart from adjusting the

sweetness to a desired level. These are exciting possibilities that can be explored to

the advantage of the processors and consumers.

61

The production of traditional products through modern technology can ensure

utilizing larger quantities of milk during the flush season, thus helping in stabilizing

farmer prices. The technology of recombining milk constituents can also help in

making these products available in the lean season,.and in far-off places. Shrikhand is

being manufactured in the winter for consumption in the summer months, reducing

the pressure on limited milk supplies during the lean period. Khoa has also been

stored at low temperatures for use in the summer.

The consumer will ultimately decide how far these modifications will be accepted.

The advent of convenience foods and their increased acceptability will further support

the modernization in this sector. While some attempts have been made to strengthen

the R&D base for indigenous dairy products, very little use of modern technologies is

being seen in the market place. A focused attempt is needed in this direction

INDIAN DAIRY INDUSTRY

World’s largest food factory, in celebration India Dairy.com invites you to world’s

highest milk producers. And all set to find out more about their achievements. Here you

can find about answer to every question about dairy. Be it investors, researchers,

entrepreneurs or the merely curious Indian dairy. It has something for everyone.

Today India is ‘The Oyster’ of the Global dairy industry. It offers opportunities galore to

entrepreneurs Worldwide, who wish to capitalize on one of the world’s largest and fastest

growing market for milk and milk products. A bagful of “pearls” awaits the international

dairy processor in India .The Indian dairy industry is rapidly growing , trying to keep

pace with the galloping progress around the world .As he expands his overseas operations

to India , many profitable options awaits him. He may transfer technology, sign joint

ventures or use India as a sourcing center for regional exports. The liberalization of

62

Indian economy beckons to MNC’s and foreign investors alike .India has one of the

largest livestock population in the world. Fifty percent of the buffaloes and twenty

percent of the cattle in the world are found in India, most of which are milk cows and

buffaloes. Dairy development in India has been acknowledged the world over as one of

modern India’s most successful developmental programme. Today, India is the largest

milk producing country in the world. Milk and milk products is rated as one of the most

promising sectors which deserves appreciation in a big way.

When the world milk production registered a negative growth of 2 percent, India

performed much better with 4 percent growth. The total milk production is over 72

million tones and the demand for milk is estimated at around 80 million tonnes. By 2005,

the value of Indian dairy produce is expected to be Rs. 1,000,000 million. In the last six

years foreign investment in this sector stood at Rs. 3600 million which is about oneforth

of the total investment made in this sector. Manufacture of casein and lactose, largely

being imported presently, has good scope. Exports of milk products have been

decanalised. 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.

Technology Export Potential of Milk and Dairy Sector The production of milk products

i.e. milk products including infant milk food, malted food, condensed milk & cheese

stood at 3.07 lakh tonnes in 1999-2000. Production of milk-powder including infant milk-

food had risen to 2.25 lakh tons in 1999-2000, whereas that of malted food is at 65000

tons. The trends in production of milk products in India is given in Annexure 1.Cheese

and condensed milk production stands at 5000 and 11000 tonnes respectively. Some

plants are coming-up for producing lactose, casein and improved cheese varieties.

Livestock Population

63

India is rich in its livestock wealth. It accounts for nearly 15.8% of the world cattle

population, more than half of the world buffalo population.

As per FAO production year book 1998, the population of cattle, buffaloes, sheep and

goats in the world and in India is given in Annexure 2. As per the 1992 livestock census

of Ministry of Agriculture,

highest cattle population was reported in Madhya Pradesh(28.68 million nos.) followed

by Uttar Pradesh (25.63 million nos.) Bihar (22.15 million nos.) Maharashtra (17.44

million nos.) and West Bengal (17.45 million nos.). According to livestock census the

highest population of buffaloes is reported in U.P. (20.08 million nos.) followed by A.P.

(9.15 million nos.), M.P. (7.97 million nos.) and Rajasthan

(7.74 million nos).

Production of Milk and Milk Products

The milk production was almost stagnant between 1947 to 1970 with an annual growth

rate of merely one percent Livestock accounts for nearly 15.8% of the world cattle

population, more than half of the world buffalo population.Technology Export

Potential of Milk and Dairy Sector which has since registered a vigorous growth of over

4.5% per annum after the year 1970. The production of milk in India has been increasing

steadily as shown in Annexure 3. The major milk producing states are UP, Punjab,

Rajasthan, M.P, Maharashtra and Gujarat. Number of milk products manufacturing Plants

have come up in these states for Processing of milk.

Present Status

The Five Year Plan, achieving an annual output of over 60 million tonnes of milk. This

not only places our industry second in the world after the United States, but represents

64

sustained growth in real availability of milk and milk products for our burgeoning

population. Most important, dairying has become an important secondary source of

income for millions of rural families. Improved genetic material achieved primarily

through cross breeding of cattle and upgrading of the national buffalo herd has played a

significant role in increasing the productivity. Gradual extension of improved husbandry

practices; increase in consumption of balanced concentrates made possible, in part,

through innovations in the field of nutrition; expanded area under fodder; greater access

to veterinary care; and advances in the fight against endemic and epidemic cattle diseases

have also contributed to increased production and productivity. About three quarters of

the milk produced is consumed at the household level. Of the milk supplied to the

market, about 9-11 percent is processed in over 275 dairy plants and Dairying has

become an important secondary source of millions of rural families.6 Technology Export

Potential of Milk and Dairy Sector 83 milk product factories operated by cooperative,

private dairy processors, and government milk schemes in the oroganized sector. Milk

channeled through Operation Flood cooperatives is generally processed in dairy plants

located in the rural areas and then transported into cities and towns.

Operation Flood Milk productions account for about 1 0% of total milk production or

40% of the marketed output. The balance (about 90% of total production) is handled by

the private traders and processors. About 45% of milk production is consumed as fluid

milk. About 35% is processed into butter or ghee; about 7% is processed into Paneer

(cottage cheese) and other cheeses, about 4% is converted into milk powder; and the

balance is used for other products such as Dahi (yoghurt) and sweet meats. In recent

years, there has been an increasing ice cream production as foreign companies have

invested in India.Industry Segments:

65

1. Cheese

The organised cheese market including its variants like processed cheese, cheese spreads,

mozzarella, flavoured and spiced cheese, is placed at around Rs 3 bn. Processed cheese at

50% of the overall market is Rs. 1.5 bn strong. The next most popular variant is cheese

spread claiming a share of around 30% of the total cheese market. The market is

primarily an urban phenomenon and is know to be growing at around 15%. The market

for cheese cubes slices and tins is growing. The flavoured cheese segment has been

declining. About 45% of milk production is consumed as fluid milk. About 35% is

processed into butter o r or ghee is processed into paneer(cottage cheese) and other

cheeses, about 4% is converted into milk powder; and the balance is used for other

products such as Dahi (yoghurt) and sweet meats.

Technology Export Potential of Milk and Dairy Sector 7 operator in the branded cheese

market in India with about 60% market share in the branded market.

It pioneered the market for processed, branded cheese. What GCMMF did was to

develop the technology to make cheese from buffalo milk. World over it is made from

cow milk. Annexure 4 gives the market size of cheese in India. Other cheese

manufacturers are : Britannia Industries, Dynamix Dairy Industries (DDI), Hiranandani,

ETA and Metro.

2. Ice Cream

The ice cream market in India is estimated to have reached the level of Rs. 10 bn per

annum, of which the organized sector is about Rs. 6 bn. The unorganised market has been

shrinking. The per capita ice cream consumption in the country is extremely low at 250

ml per year compared with that of the US, which is about 22 litre. The organised market

for ice creams of about 60 mn litres,has been growing at around 15% per annum. The ice

cream industry has, in a short span of time, undergone a structural transformation.

66

Annexure 5 (a) and 5 (b) shows the growth of market size of Ice Cream in India and the

market structure of this segment respectively.

3. Chocolates

The Chocolates market is estimated at 35,000 tonnes valued at approximately Rs. 8.0 bn.

The chocolate counter market is worth nearly Rs. 2.5 to 3.5 bn and the rest is made up of

chocolate bars. Chocolates in fact make up less than a fourth of the sweet-tooth products

including sugar boiled confectionery mints and chewing gums.

Sugar confectionery is by far the largest segment with a share market growth rates

indicate that the cheese market in India is growing steadily. The organised market for ice

creams of about 60 mn litres has been growing at around 15% per annum. Technology

Export Potential of Milk and Dairy Sector exceeding 60%. Annexure 6 (a) and 6 (b)

gives the market size are structure of chocolate market in India.

4. Dairy Whiteners

The organised dairy industry processes an estimated 15% of the total milk output in

India. The industry has maintained a high growth profile, especially in the wake of the

Operation Flood, colloquially also termed as White Revolution, initiated in early 1980s.

Today India produces over 80 mn tonnes of milk annually. In terms of value, the total

milk economy is estimated at Rs. 1200 bn. The market for dairy whiteners (commercially

know as beverage milk powders and condensed milk) and creamers is around Rs. 2,750

mn.

The growth of market size of dairy whiteners in the last 10 years is given in Annexure 7

(a) and 7 (b). Apart from MNCs like Nestle and companies like Britannia, the Indian

enterprises have also made perceptible progress. Names like Amul, Sapan, Vijaya,

Mohan, Parag and several others have been seen in the marketplace with their whiteners.

67

Aseptically packed creamer in miniportions is widely used in the west, but has yet to

enter the Indian market. Aseptically packed creamer involves techniques to impart a

longer shelf life to the product. It is packed in small cups ready to be poured into a cup of

tea or coffee.

Creamer is fresh milk with increased fat content (upto 12%) and is aseptically packed

after undergoing Ultra Heat Treatment (UHT) at 140oC. Its introduction will affect the

existing whitener market as a natural milk product with a longer shelf life. The

organised dairy industry processes an estimated 15 % of the total milk output in

India. The industry has maintained a high growth profile, especially in the wake of

the Operation Flood, col loquial ly also termed as White Revolution , initiated nearly

1980s.Technology Export Potential of Milk and Dairy Sector The potential for exports;

especially to neighbouring countries and the countries in the Middle east, the Gulf and

Africa, also exist and could be exploited.

5. Baby Foods

Conventionally, foods (solids, semi-solids and liquids)badministered to babies of upto

two years of age are classified as baby foods. In some cases, however, baby foods are

continued to be given to children older than of two years depending on socio-economic,

health-related and geosocietal conventions. The concept of packaged baby foods is

relatively recent in India. The traditional homemade foods have dominated this sector

until the induction of packaged foods mostly from multinational companies. Baby foods

have assumed special significance in the recent years because of greater awareness of

hygiene and health and constraints on time of busy mothers. A reliable, healthy,

convenient and readyto-use baby food is the requirement of the day. India is catching up

with the rest of the developed world in this area rater fast. A comparison of growth rates

over the last 10 years shows that these has been a steady rise of market size.

68

Annexure 8 (a) and 8 (b) gives the market size and the market structure of baby foods in

India. The packaged food products for babies are broadly classified into a) cereal-based

such as Nestum; b) cereal-based with milk such as Farex, Cerelax, c) milk-based such as

Lactogen, d) ready-to-feed liquids, and e) rusks and biscuits. Infant milk foods constitute

the most significant segment. The potential for exports;especially to neighbouring

countries and the countries in the Middle east, the Gulf and Africa, exist and could be

exploited. Technology Export Potential of Milk and Dairy Sector.

6. Biscuits and Bakery Products

The Indian bakery industry is dominated by the small-scale sector with an estimated

50,000 small and medium-size producers, besides the 15 units in the organised sector.

Apart from the nature of the industry which gravitates to the markets and caters to the

local tastes, the industry is widely dispersed. The two major bakery products, biscuits and

bread, account for 82% of all bakery production. The unorganised sector accounts for

about two-thirds of the total biscuits production estimated at 1.3 mn tonnes. It also

accounts for 80% of the total bread production which is estimated at 1.5 mn tonnes and

around 90% of the other bakery products estimated at 0.6 mn tonnes. The last includes

pastries, cakes, buns, rusks and others. Annexure 9 (a) and 9 (b) gives the growth of

market size of biscuits over the last ten years. Biscuit is estimated to enjoy around 37%

share by volume and 75% by value of the bakery industry. The organized sector caters to

the medium and premium segments, which are relatively less price-sensitive.

The organised sector is unable to compete at the lower price range due to the excise

advantage enjoyed by the informal sector. The organised segment in biscuits has

witnessed a steady growth of about 6%, conforming broadly to the growth rate of GDP.

The production crossed the one-million tone mark in 1995-96 which has now grown by

69

estimated 30%. The size of the bread market is estimated at Rs. 13 bn. There are a

number of producers in both sectors, organised and unorganised.

From a low priced commodity, bread has The two major bakery products , biscuits

and bread, account for 82% of all bakery production. Biscuit is estimated to enjoy

around 37% share by volume and 75% by value of the bakery industry. Technology

Export Potential of Milk and Dairy Sector graduated into a branded product with

discriminating prices.

7. Confectionery

The Indian confectionery market includes sugar boiled confectionery, hard-boiled

candies, toffees and other sugarbased candies. In 2000, sugar boiled confectionery had

penetrated an estimated 15% of the households only, suggesting a large potential for

growth. There are about 5,000 units catering to the local markets. The total volume of the

sugar boiled confectionery market in the organised sector (comprising plain / hard-boiled

candies, toffees, eclairs and gums) is around 125,000 tonnes. Add to this the unorganized

sector and the market for all types of confectionery is of the order of 250,000 tpa. That

translates into 66% market share of the unorganized sector by volume.

In value terms it is less than 50%.

The sector’s expansion at a rate of 25% in 1998 had dropped to 17% in 1999 and

registered a negative growth of 2% in 2000. In the long run it is slated to grow at 8 to

10% annually. The growth in the size of the confectionery market is gives as Annexure

10 (a). The total volume of the sugar boiled confectionery market in the organised sector

is around 125,000 tonnes. Add to this the norganized sector and the market for all

types of confectionery is of the order of 250,000 tpa.

70

Exports:

Export of certain milk products like milk powder, ghee and butter was canalised uptil

1993. With the objective of promoting exports of milk products, the Govt. have

dechannelised the export of these milk products with effect from mid 1993. According to

the EXIM Policy for 1997- 2002, the policy for export of these milk products is as under:

Powder milk (skimmed or full Cream) whole and infant milk food, pure milk Ghee and

Butter, except when exported as branded products in consumer packs, not exceeding 5

kgs in weight, will be exempted from the following

Conditions :

1) Quantitative i ceiling as may be notified by the DGFT from time to time.

2) registration-cum-allocation certificate issued by agricultural and processed Food

Products Export Development Authority (APEDA).

The Director General of Foreign Trade, Ministry of Commerce vide Public Notice No.

48/RE-98/1997-2002 dated 13th October, 1998 have removed the quantitative ceiling for

export of powder milk and ghee and their export is now freely allowed. However, butter,

if exported in packaging exceeding 5 kg. in weight, continues to be under the quantitative

ceilings.

Products for exports - Skimmed Milk Powder, Whole Milk Powder, Ghee, Butter,

Cheese, Condensed Milk, Casein etc. are some of the milk products being exported from

India. With the objective of promoting exports of milk products, the Govt. have

71

dechannelised the export of these milk products with effect from mid 1993.The export

figures of dairy products during the last five years are given in Annexure 11.

Major Destinations- UAE (43%), Nepal (19%), Bangladesh(12%) Future Markets South

East Asia, Russia and Africa will be the emerging market for Indian dairy products. In

the immediate future, there is prospect of an additional demand of over 3 million tonnes

of milk products in the ASEAN region alone. The EU dairy exports will become limited

by GATT agreements, while Australia-New Zealand do not have adequate production

capacity.

Equally significant is the rise of Russia as the world’s biggest dairy importer. Although

by far the biggest milk producer in Europe, the Russian output has declined by more than

25 percent in the past five years. The shortfall in milk production is estimated to be 13

million tonnes a year. These major deficits in milk availability offer an opportunity for

India to fill this vacuum and to become leading dairy exporting nations.

Potential for value added products Ethnic Indian dairy products like Sweets Shreekhand,

Rusgulla, Khoya and Ready-to-Eat-Kheer, Haluwa, etc. have good demand in the

countries where ethnic Indian population is settled. For promotion of these products, we

require export worthy consumer packing, which also improves the shelf-life of the

product. South East Asia, Russia and Africa will be the emerging market for Indian

dairy products. Technology Export Potential of Milk and Dairy Sector APEDA has

initiated following steps to increase export of dairy products:

Standards have been laid down for export of dairy products APEDA is offering subsidies

for implementation of HACCP and ISO 9000, installation and upgradation of laboratories

and market promotion through sending of samples, printing of catalogue brochures and

brand publicity through advertisement etc. under it’s plan scheme. Export market

development will depend on ensuring the quality. This will require that exporters ensure

72

quality from the milk animals to the port and beyond. To build the quality, mechanized

dairy fanning requires encouragement with export oriented processing facilities.

Manufacturing units linked by contract with large scale producers, can ensure of quality

raw material necessary to enter and maintain the position in the international market.

It is the cow milk which is recognized in the international market. Since India is

producing more of buffaloe milk, there is a need for generic promotion of buffaloe milk.

Many countries in the world do not import milk products from India since India is

reporting many livestock diseases particularly FMD. Efforts are, therefore, needed to

control and eradicate FMD at least in major milk producing States. Creation of chilling

facilities at block level village level and transportation of liquid milk to processing units

in reefer units .

NATIONAL DAIRY DEVELOPMENT BOARD (NDDB)

The National Dairy Development Board was created to promote, finance and support to

the following:

1- Producer owned and controlled organizations. NDDB’s programmes and

activities.

2- Seek to strengthen farmer to support national policies that are favorable.

3- To the growth of such institutions. Fundamental to NDDB’s efforts are co-

operative principles and the Anand Pattern Co-operatives of Cooperation.

73

The National Dairy Development Board (NDDB) was founded to replace

exploitation with empowerment, tradition with modernity, stagnation with growth,

transforming dairying into an instrument for the development of India’s rural

people.

Policies in Milk & Milk Products

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.

Mi lk and Milk Products Order (MMPO) regulates mi lk and mi lk products production in

the country.

1 8 Technology Export Potential of Milk and Dairy Sector.All the milk products except

malted foods are covered in the category of industries for which foreign equity

participation upto 51% is automatically allowed. Icecream, which was earlier reserved for

manufacturing in the small scale sector, has now been dereserved. As such, no license is

required for setting up of large scale production facilities for manufacture of ice cream.

Subsequent to dechannelisation 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

74

products, which are to be adhered to by the industry. Regulatory Environment in the

Dairy Processing Sector in India

The Indian processed dairy industry has grown and diversified enormously in the last few

years. To ensure the proper development and growth of this industrial sector, the

Government of India has instituted various laws and regulations.

The various regulations that govern the dairy processing industry can broadly be

classified into:

Compulsory Legislation

Prevention of Food Adulteration Act, 1954

This Act is the basic statute that is intended to protect the common consumer against the

supply of adulterated food. This specifies different standards for various food articles.

The standards are in terms of minimum quality levelsTechnology Export Potential of

Milk and Dairy Sector 1 9 intended for ensuring safety in the consumption of these food

items and for safeguarding against harmful impurities

and adulteration. The Central Committee for Food Standards, under the Directorate

General of Health Services, Ministry of Health and Family Welfare, is responsible for the

operation of this Act. The provisions of the Act are mandatory and contravention of the

rules can lead to both fines and imprisonment.

Milk and Milk Product Order (MMPO) 1992

The Milk and Milk Product Order (MMPO), 1992, issued on June 9, 1992 seeks to ensure

the supply of liquid milk, an essential commodity, to consumers by regulating its

processing and distribution. Within eight years of its operation, the Central/State

Registering Authorities have till December 2000 registered 666 units with a total

processing capacity of 65.8 million litres per day (mlpd).

75

Salient Features of the MMPO Order include the following:

– Registrations for units handling up to 75,000 litres of milk per day are granted by the

State Governments and units with more than 75,000 litres per day capacity

are registered by the Central Registering Authority.

– The Certificate also specifies the milkshed area, which, under the order is defined as a

geographical area demarcated by the Registering Authority for the collection of milk by

the registered unit.

– Maintenance of specified hygienic conditions in the premises where milk and milk

products are handled, processed, manufactured or stored.2 0

Technology Export Potential of Milk and Dairy Sector

The collection, transportation and processing of milk normally centres around the

operations of a processing plant.

The region from which the marketable surplus of milk production finds its way to a

processing plant is called a ‘milkshed’. The concept of milkshed areas is pivotal to the

MMPO. For an orderly development of the dairy industry, a proper assignment/allocation

of milkshed is critical.

Standards on Weights and Measures (Packaged Commodities) Rules, 1977

76

These Rules lay down certain obligatory conditions for all commodities that are packed

form, with respect to declarations on quantities contained. These Rules are

operated by the Directorate of Weights and Measures, under the Ministry of Food and

Civil Supplies.

a) Voluntary Standards

There are two organizations that deal with voluntary standardization and certification

systems in the food sector. The Bureau of Indian Standards looks after

standardization of processed foods and standardization of raw agricultural produce is

under the purview of the Directorate of Marketing and Inspection.

b) Bureau of Indian Standards (BIS)

The activities of BIS are two fold, the formulation of Indian standards in the processed

foods sector and the implementation of standards through promotion

and through voluntary and third party certification systems. BIS has on record, standards

for most of processed foods. In general, these standards cover rawTechnology Export

Potential of Milk and Dairy Sector

2 1 materials permitted and their quality parameters, hygienic conditions under which

products are manufactured and packaging and labelling requirements. Manufacturers

complying with standards laid down by the BIS can obtain and “ISI” mark that can be

exhibited on product packages. BIS has identified certain items like food

colours/additives, vanaspati, containers for packing, milk powder and condensed milk,

for compulsory certification.

77

c) Directorate of Marketing and Inspection (DMI)

The DMI enforces the Agricultural Products (Grading and Marketing) Act, 1937. Under

this Act, Grade Standards are prescribed for agricultural and allied

commodities. These are known as “Agmark” Standards. Grading under the provisions of

this Act is voluntary. Manufacturers who comply with standard

the laid down by DMI are allowed to use “Agmark” labels on their products.

Other Government Regulations :

1) Industrial Licence:

No licence is required for setting up a Dairy Project in India. Only a Memorandum has to

be submitted to the Secretariat for Industrial Approvals (SIA) and an

acknowledgment is to be obtained. However Certificate of Registration is required under

the Milk and Milk Products Control Order (MMPO) 1992.

2) Foreign Investment:

Foreign Investment in dairying requires prior approval from the Secretariat of Industrial

Approvals, Ministry of Industry, as dairying has not been included2 2

Technology Export Potential of Milk and Dairy Sector in the list of High Priority Industries.

Automatic approval will be given upto 51% Foreign Investment in High Priority Industries. In

case of other Industries, proposals will be cleared on case to case basis. Government may allow

78

51% without enforcing the old limit of 40% applicable under Foreign Exchange Regulations Act

at its discre

79

CHAPTER – 3

EXPLANATION & FINDINGS

80

COMPANY PROFILE

Lucknow Pradeshik Co-operative Dairy Federation came into being on 23rd March 1938

via registration number 257 , the capital invested was only Rs. 100/- and liters of liquid

milk. Today 2 lakh liters of milk are handled in the co-operative production unit and

turnover has touched Rs. 50 crore marks. Parag Dairy is one of the India's reputed

manufactures and exporters of Milk and Milk Products like skimmed milk powder, full

cream milk powder, ghee, butter, paneer & curd etc. All our products are processed under

hygienic conditions, so that it is safe for our clients to consume.

In Brief:

Established : 1938

Registered : 23rd March 1938

First dairy Inspector : Mr. N.K. Phargava

Board of Directors : Mr. Gopal Lal Pandya

: Mr. Nirmal Chandra Chaturvedi

: Mr. Pushkar nath Bhatt

Initial Capital Investment : Rs. 100/-

Present Capital : State Government – 90%

: Co-operative – 10%

81

Location : Initial Charbagh

Area of Distribution : Initially Bakshi Ka Talab ,

: Tivariganj ,Gosaiganj.

Presently : The entire District

In spite of the several setback and hurdle, the Lucknow Pradeshik Co-operative Dairy has

steadily progressed and retains its position firmly in the present market and given

strength to the operation flood II.

Human population : 953 million (70 million dairy farmer)

Milk production :74.3 tones (203.5 million lpd)

Average Annual Growth rate (1995-2000): 5.6%

Per capita milk availability : 224 g/days or 78kg/year

Milk animals : 57 million cows ; 39 million buffalos

Milk yield per breed able bovine in-milk :1250 kg

Cattle feed production (organized sector) : 1.5 million tones

Turnover of of veterinary pharmaceuticals : Rs. 550 crores

Dairy plants throughout : 20 mlpd

Throughout as percentage of total milk output : 10

Value of output of milk group (2007-2008)* : Rs. 50,051 crores

Value output of dairy industry** : Rs. 105,500 crores

*based on producer’s price **Based on retail price

82

BRIEF HISTORY OF PARAG

The history of co-operative dairy industry in U.P. dates back to 1917, when the “Katra

Co-operative Milk Society”, Allahabad was established. LPMU was established in 1938

as the first step towards organized dairy development programme all over India.

At the time of independence four milk supply schemes were operating in Lucknow,

Allahabad, Varanasi, and Kanpur cities. The Agra co-operative dairy came into existence

in second five year plans while dairies at Bareilly, Gorakhpur and Mathura were adopted

later on.

The Apex institute of dairy co-operative was registered under the name ‘PCDF’

(Pradeshik Co-operative Dairy Federation) in the year 1962 during the fourth five-year

plan. Aligarh and Merrut were also proposed to be included in the scheme. The

Government of U.P. also entrusted PCDF with the responsibility of implementing the

operation flood. It was to establish co-operative structure in some of the best milk sheds

located in ten states in U.P. being one of them.

ORGANIZATION STRUCTURE

LPCUL has ten divisions. Every division has a manager who is responsible to General

Manager. G.M. of every division is responsible to managing director.

The division heads of each division is responsible for the performance and of their

respective division shall be responsible for the performance and of their respective

83

division not only at head office but also in the units/unions in the field. These officers

shall not merely insure achievement of the targets fixed and implementation of systems

for their functional areas but promptly attend to the problems of the units/unions.

The divisional heads discharge their duties within policy frames laid down by the

Managing Director and subject of his control & supervision only important performance

and control reports, matters, questions involving exceptions to approved policy, systems

development and other important matters need to be put up before Managing Director.

Bill before approval and implementation; be routed through the Management Service

Division (MSD), which will check the plan to see whether they are in conformity with

other plans and system contradiction occurs.

The divisional heads see the terms made by them and their officers and purposively

designate link officers for each officer in their division. All letters to the NDDB shall

before dispatch, be send to the MSD, which will take speedy clearance at the appropriate

level. A copy of all such letters shall be the CPM section the MSD.

 PARAG MILK:

After having won the hearts of thousands people and becoming youth No.1 milk in U.P.,

Parag is now getting closer to becoming a well known brand in the National Capital

Region. With the aim of becoming a bestseller here as well. With an affordable price,

incomparable purity and hygiene. So that your family have more milk and thereby,

become more healthy.In view of specific individual needs, preferences and

requirements ,various types of milk with different special qualities have been developed

so as to meet the requirements of all sections of the consumers

84

PRODUCT LINE OF PARAG

Dairy products are manufactured under the name PARAG

They had a considerable market share in U.P. and other regions in north and east.

There has been an increase in the market completion due to the coming up of

many private dairies that has introduced their own brand of milk product.

AMUL products still have to face a stiff competition in Lucknow with PARAG

products due to the efficient distribution network of the marketing division of

LMU is liquid milk. Other milk products are:

1. MILK

2. BUTTER

3. GHEE

4. PANEER

5. FLAVORED MILK

6. SKIMMED MILK POWDER

7. MILK CAKE

8. ICE-CREAM

9. MATTHA

10. CURD

85

COLLECTION AND DISTRIBUTION OF MILK

This report present detailed information about the Lucknow Milk Union (PARAG), its

evolution and organization structure.

Dairy work happens through various procedures. Basic of the dairy work is like this

structure –

Milk Collection Mechanism

Milk Distribution Mechanism

Parag is the brand name of products of Lucknow Producers Co-operative milk

union. It is a big co-operative unit based on values of understanding and co-

operation profit for milk producers and providing quality products to consumers at

86

Collection of Milk

Dairy (Reprocessing of Milk)

Distribution of

Milk

a cheaper price .“PARAG” does maximum utilization of milk to increase milk

efficiency in reasonable costs of production and hence overall costs.

Work of ‘PARAG’ may be divided into 3 subunits:

a) Marketing

b) Administration and production

c) Industry Unit

Administration co-ordinates various functions, looks after salaries and wages and various

human resources problems of production. The industry unit is engaged in the function of

producing various industrial products like milk, butter etc.

Whereas the marketing is engaged in distribution and proper sale of these products like

milk, butter etc.

Whereas the marketing is engaged in distribution and proper sale of these products.

“PUBLIC RELATION means the effort made by industries, unions, corporation,

occupation, government, or other organizations to establish productive relationship report

and partnership”

It is popularly defined as on the other basis of acceptance of well organized efforts by

society for welfare and development of entire community.

IV. CASH FLOWS

Units should ensure positive net flows through the year. Allocation of funds

to units with negative balance at any point of time will be done with my

approval. The units should also generates free cash flow from their

87

operations. The free cash flow for R.E-2006-07 B.E-2007-08 should be

presented to directors.

V. CAPITAL EMPLOYED

In 2007-08, the capital employed has increased to Rs. 451,51 cr. from Rs.

447,49cr. in 2006-07. Increases in capital employed due to the recent

investment in modernization scheme should also give the return commitment

in the project report.

Better working capital management will help us to reduce the capital

employed.

VI. DIVERSTMENT OF UN PROFITABLE PRODUCT LINE

As part of budget exercise the unit shall have a detailed review of the market

share in constitution with business sectors and develop strategies.

FINANCIAL ASPECTS IN RUNNING MILK PLANT

To meet the growing demand of milk in pouches , it was envisaged to setup in house

polypack capacity of 6 lakh litres at dairy in the adjoining plot of dairy.

However initially on experimental basis in the existing premises polypack operation of

50,000 LPD was made operational using existing available services with minimum

investment.

The packing capacity was further Expanded TO 1 lakh litres . However, by further adding

2 no packing machines the total packing facility from existing premises has been

increased to 1.5 lac litres per day.

88

Looking into space constraint further expansion in the existing premise is not

possible.Meanwhile sale of milk in pouches is increasing day by day and average growth

per year is more than 15% . There is no surplus packing capacity available with existing

co-packers.

In view of the above to take care of the next five years requirement of additional milk in

pouches , vendor development group has recommended setting up of 6 lakh litres per day

of milk packeging facility in the adjoining plot and also increasing existing milk

processing facility from 4 LLPD to 10 LLPD at Dairy.It is also necessary to have some

percentage of own packing facility from strategic point of view.

OBJECTIVE :

1. The facility can be setup at dairy in minimum time due to availability of good quality

of reqired land.

2. The main input for setting up many dairy is availability of good quality fresh

water.The water quality and quantity of underground tube wells at dairy is very good to

the nearby river Hindon.

3. It is necessary to create a production facility to meet the market demand to keep edge

over the competitors in the field.

4. To setup and run the facility at dairy will be very cost effective due to availbility of

infrastructure at dairy, which can be in actually shared , based on need.

5. The proposed packing plant will be a role model for other Co-packers to adopt in their

plants from layout of plant to deliver final milk quality in pouches and dispatch.

89

CAPITAL BUDGETING TECHNIQUES

1. PAY BACK PERIOD

YEAR CASH FLOW

2007 -13900000

2008 127909

2009 358333.5

2010 558301

2012 549301

2013 549301

2014 549301

2015 549301

2016 549301

PBP= Year before full recovery=uncovered cost at start of year/cash flow

during year

=3+2128445/5583010

=3.381 Yr.

NOTE:

a. Pay back period is the period of time required for the expected cash flow

from investment project to equal the initial cash flow.

b. If the payback period calculated is less than sum maximum expectable

payback period,the proposal is expected,if not,it is rejected.

c. The required payback period were 3 year,the project would be accepted.

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2. DISCOUNTED PAYBACK PERIOD:

K=Interest rate 12.75% according to SBI

(1+K)n=1.12 n=10

Discounted net cash flow=FV(PVIFi,n)-ICO

Years(n)

1. 1279090*. 881131994.65

2. 35333350*. 72805751.30

3. 5583010*. 693869025.93

4. 5583010* . 613422385.13

5. 5583010*. 543031574.43

6. 5493010*. 482636644.80

7. 5493010*. 422334529.25

8. 5493010*. 372065371.76

9. 5484005*. 331826173.66

10. 5484005*. 291617781.47

3+2270842.99/3031574.13=3.7496

NOTE:

The discounted payback period , which is similar to regular payback

period , except that expected cash flows are discounted by the project cost

of capital.

3. NET PRESENT VALUE

CF1/(1+K)1+CF2/(1+K)2+…+CFn/(1+K)n-ICO=K=12.75

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YEARS(n)

1. 1279090*. 881131994.65

2. 35333350*. 72805751.30

3. 5583010*. 613422385.93

4. 5583010*. 3422385.13

5. 5583010*. 543031574.43

6. 5493010*. 482636644.80

7. 5493010*. 422334529.25

8. 5493010*. 372065371.76

9. 5484005*. 331826173.66

10. 5484005*. 291617781.47

Total 24741232.38

Less(ICO) -13900000.00

Net Total 10840232.38

3+2270842.99/3031574.13=3.7496

NOTE:

a. The present value is the present value of an investment projects net cash

flow less the project initial cash outflow.

b. If an investment project’s NPV is zero or more , the project is

accepted ,if not, it is rejected.

4.

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5. PROFITABILITY IN PV OF FUTURE CASH FLOW/INITIAL COST

=Ent+1CFT/(1+K)1/CFo

=22216056.38/13900000

=1.598

NOTE:

a. Profitability index is the ratio of present value of the projects, future net

cash flow to the project’s initial cash out flow.

b. As long as PI is 1 or greator , the investment proposal is expectable

because our profitability index is greator than one implies that our

project PV is greator than its initial cash outflow which , in turn, implies

that NPV is greator than zero.

6. INTERNAL RATE OF RETURN

PV(inflow)=PV(investment cost)

NPV= Ent +1 CFT/(1+RR)1 =0

IRR = 20%

YEARS:

1. 1279090.83=1065482

2. 35333350.6=24868345

3. 5583010.57=3232562.8

4. 5583010.48=2691010.8

5. 5583010.40=2244370

6. 5493010.33=1840158.4

7. 5493010.27=1532549.8

8. 5493010.23=1279871.3

9. 5484005.19=113296.97

10. 5484005.16=94608.81

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TOTAL = 38962256

LESS (ICO) = 13900000

= 25062256

NOTE:

1. Internal Rate of Return is the discount rate that equates the present

value of the future cash flows from an investment project with the

project’s initial cash outflow.

2. Solving for IRR by computer yields 20.02417% which in this case is

very close to our approximate answer.

ANALYSIS AND INTERPRETATION OF DATA

Out of 50 consumers , 44% consumer are using PARAG products daily , 50%

consumers are using weekly , and 12% are using monthly.

64% consumers are satisfied with taste and quality of PARAG products and 36%

consumers are dissatisfied.

60% consumers are satisfied with the price of PARAG products , whereas 40%

customers are dissatisfied.

92% consumers are satisfied with the quality of PARAG products , whereas 80%

of consumers are dissatisfied.

88% consumers want more number of PARAG booths to be setup in their locality

& 12% have no effect.

32% consumers have positive response to switch over , if other brands are

available at same quality & 68% consumers have no response.

I contacted 50 consumers , among which 26 are using PARAG milk , 15

consumers are using AMUL , 6 consumers are using DEVA and 3 consumers are

using Fresh Milk

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CHAPTER – 4

SUGGESTION & RECOMMENDATION

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FINDINGS

1. "The company caters to the Indian palate, which is its primary driver of success". In light of

this statement, critically examine the marketing strategies adopted by Parag Dairy to capture a

sizeable market share of the organized Dairy based food Product in India.

2. In the modern competitive scenario, promotion is a key element in the marketing mix of a

company. Critically analyze the promotion strategies adopted by What other efforts must the

company take to effectively promote it products?

3. Dairy based Products contribute a major share of the revenues of Parag. Given the competitive

scenario in the Dairy Products in India, where competitors such as Amul are introducing several

innovative products.

RECOMMENDATIONS

1. Company should have feed back from market and consumer about the Dairy based Products.

2. The more Flavors of Parag Dairy Products should become in the Market.

3. The company provided some small schemes for retailer also.

4. The company gives some gifts for customer also.

5. The company should associate itself with some games or tournaments like football, cricket and

so on.

6. Company should provide sponsored seminar market intelligence- Company should maintain

the healthy relationship with market distribution channel i.e. whole seller, distributor, retailers

which will boost the brand image.

7. Company should check the market real position help the trainees and other survey

organizations.

8. Company should launch its website and use new advertising channels ; i.e.

♦ Trailer in cinema halls

♦ Hoardings

♦ Spencer any education scholarship or games.

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CHAPTER – 5

CONCLUSION

97

CONCLUSION

I have studied and analyzed the Dairy based food Product Market of Parag Dairy Products on

different aspects of the markets, outlets, distribution & consumers. The survey was conducted in

various areas of Agra city with great enthusiasm. This project report Concludes that Parag Dairy

are easily available in various parts of Lucknow .

The retailers & consumers both promotes Parag Dairy of it’s brands for could be with regard to

order processing, warehousing, inventory management &transportation; besides that shop

covering, exit from the market by the salesmen glow shine board, schemes, incentives, prizes,

gifts, discount, returning of defective goods, proper supply should be improved.

My job was to make marketing managers aware of all the problems so that a proper course of

action is required to be undertaken.

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Bibliography

www.parag.com

www.paragdairy.com

http://www.indairyasso.org/world%20dairy%20report.htm

http://www.mdcdatum.org.uk/MilkSupply/WorldMilkProduction.html

http://www.indiadairy.com

NEWS PAPER

1) The Hindu

2) Times of India

3) Dainik Jagaran

4) Business Standard

WEBSITE

www.indiandairy.com

www.amulindia.com

www.indiainfoline.com

www.webindia123.com

.

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