Business Proposal

Fore School of Management A Business Proposal on Empowering Dairy Farmers

Submitted to: Prof. Sriparna Basu

Submitted by: Akshay Garg (251072) Manish Kumar (251096)

Table of Contents Page No.

Executive summary …………………………..

2

Introduction …………………………………..

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3

Background .…………………………………..

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Purpose ……………………………………......

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Benefits ………………………………………..  To the farmers  To the company

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Feasibility ……………………………………..

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Budget and time frame

….…………………..

10

Conclusion

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References

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Problem

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EXECUTIVE SUMMARY A proof of concept application using Information Technology (IT) in the dairy sector was developed by the Centre for Electronics Governance at the Indian Institute of Management, Ahmedabad. This proposal is to establish automated and technology driven milk trading system and evolve the dairy sector of Bihar to effectively compete with the large organised dairies in the developed countries. It includes delivery of education via internet kiosks, which will be setup in rural areas, use of information systems and involvement of Non-Government Organizations to successfully execute the initiative. The proposal also aims at helping the dairy farmers in the state of Bihar with timely messages and educating them on the care for their milch cattle and enhance the production of quality milk. It also aims at assisting the dairy unions in effectively scheduling and organizing the veterinary, artificial insemination, cattle feed and other related services. The process uses Personal Computers at the milk collection Centres of the Dairy Cooperative Societies (DCS) having connectivity to an Internet Service Provider (ISP). The application includes two components – Dairy Portal (DP) Dairy Information Services Kiosk(DISK)

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INTRODUCTION India is the world's largest producer of milk, and is the leading exporter of skimmed milk powder, yet has little to no other milk product exports. Dairy farms produced about 730 million tonnes of milk in 2011, from 260 million dairy cows. The ever increasing rise in domestic demand for dairy products and a large demand-supply gap could lead to India being a net importer of dairy products in the future. Indian dairy sector contributes the large share in agricultural gross domestic products. Presently there are around 70,000 village dairy cooperatives across the country. The cooperative societies are federated into 170 district milk producer’s unions, which is turn has 22-state cooperative dairy federation. Milk production gives employment to more than 72mn dairy farmers. In terms of total production, India is the leading producer of milk in the world followed by USA. The milk production in 1999-00 is estimated at 78mn MT as compared to 74.5mn MT in the previous year. This production is expected to increase to 81mn MT by 2000-01. Of this total produce of 78mn cows' milk constitute 36mn MT while rest is from other cattle. Keeping in view the large CSR budget possessed by the company, it is proposed that a similar kind of co-operative movement in the milk industry be implemented in various districts in the fast developing state of Bihar, taking inspiration from the immensely successful movement in Gujarat. On these lines, the application developed by JK Infotech Ltd. aims at helping the dairy farmers with timely messages and educating them on the care for their milch cattle and enhance the production of quality milk. It also aims at assisting the dairy unions ineffectively scheduling and organizing the veterinary, artificial insemination, cattle feed and other related services. The application uses Personal Computers at the milk collection Centres of the Dairy Cooperative Societies (DCS) having connectivity to an Internet Service Provider (ISP). The application includes two components - a Dairy Portal (DP) and a Dairy Information Services Kiosk(DISK). This proposal presents JK Infotech Ltd. efforts to design and implement the DISK and Dairy Portal. The details of the implementation of the plan and the financial are henceforth discussed.

PROBLEM Over the last decades, market liberalization, globalization, rapid urbanization, rising incomes and changing diets, etc. have been all changing agriculture at an unprecedented speed and in diverse ways. They are creating new markets, stimulating demand for high-value products, Page | 3

and making it possible for farmers to produce food and other products for the market. These developments offer opportunities for farmers, but they also produce challenges and risks. India may be the world's largest raw milk producer but the dairy sector is marked by poor on-farm efficiency and low productivity. The country's dominant co-operatives have struggled to improve the model employed by their farmer members. India's dairy sector is dominated by large co-operatives, which struggle to boost efficiency amidst India’s entrenched informal village-based supply system and Bihar is no exception. The Confederation of Indian Industry (CII) said that India's dairy system suffers from low input, low output and low productivity per animal. Bihar too have potential to be at the forefront of milk production but its inefficient business process from milk collection to processing it seems a farfetched idea.

BACKGROUND The co-operative movement began at Amul Dairy in Gujarat and is now replicated in 70,000 villages in about 200 districts of India. The village milk co-operative is a society of primary producers formed under the guidance of a supervisor or milk supply officer of the Cooperative Dairy Union (district level co-operative owning the processing plant). A milk producer becomes a member by buying a share from the co-operative society and agreeing to sell milk only to the society. Co-op members elect a managing committee and a chairperson responsible for the recruitment of staff to manage the day-to-day operations of the society. Each society has a milk collection centre where farmers take their milk in the mornings and evenings. The number of farmers organised into village milk producers' co-operative societies is now over one million, and the daily procurement of milk by the co-operatives is 13 million litres per day. Following the repeal of quantitative restrictions on food imports by the Government of India under a WTO agreement, the Indian dairy sector faces a strong challenge from the large organised dairies in the developed world. To meet this challenge, the co-operative dairy sector has to further improve the production, collection, processing and marketing of milk and milk products.

PURPOSE The purpose of this proposal is to improve the production, processing and marketing of the milk and milk products. It will help in increasing the profits of the farmers.

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The rural area has sufficient production of milk but due to poor communication and lack of knowledge among the farmers the production process is not that effective and efficient as it should be. The two components can greatly influence the daily sector of Bihar making it more profitable both for the farmers as well as the consumers.

Dairy Information Services Kiosk (DISK) With the initiatives of National Dairy Development Board (NDDB), out of 70,000 dairy cooperative societies in the country, around 2500 are using the PC connected electronic milko-tester machines and exposing 5,00,000 people daily to the benefits of IT. These systems introduced very satisfactory milk collection methods and facilitated immediate payments to farmers based on the quality and quantity of milk delivered. The success of these systems coupled with inexpensive connectivity opportunity offered by Internet, motivated IIMA to enhance the PC at the Automatic Milk Collection Systems into a Dairy Information Services Kiosk (DISK) and offer an extensive knowledge and service delivery mechanism through a Dairy Portal. Current developments in IT enable creation of cost effective solutions that strengthen the exchange of useful information between farmers and the union, in addition to opening a window to the world of opportunities. Personal Computers have become extremely powerful in terms of their capacity to handle complex data, software and connectivity with the external world. Through regional language and graphic user interfaces, these systems have become user friendly and can even use by less educated users. The Personal Computers have been in the Automatic Milk Collection Systems at the milk collection Centres to process the data collected by the electronic milko-testers. They have worked flawlessly at several rural societies for more than five years. Local agencies have gained experience and expertise to handle such systems in rural societies. The DISK project was conceived with two components: 1) an application running at the society level that could be provided Internet connectivity 2) a Dairy Portal at the district level serving transactional and information needs of all members and staff in the district co-operative structure. The software used at the society level was developed to provide: • Data analysis and decision support to help a rural milk collection society in improving its performance i.e. increasing milk collection. • Data analysis to improve productivity and yield of milch cattle.

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• Farmers with facilities to place orders for goods and services offered by different agencies in the co-operative sector and seek information on subjects of interest.

Dairy Portal The Dairy Portal is designed to provide an interactive dairy information and education channel to the members of the DCS (farmers) and others in the dairy sector. The services to be offered at these centres would include: 1) Delivery of information related to dairying, including best practices in breeding and rearing milch cattle, scheduling of government and other private sector agency services, and collecting feedback on the quality of service provided to the catchment area; 2) Access to a multimedia database on innovations captured by SRISHTI (an NGO working with IIMA) from hundreds of villages, covering agricultural practices, medicinal plants, home remedies, tools and implements, etc., and a multimedia format that has captured the description of the innovations provided by innovators and a visual presentation of the innovations; 3) use as a communication centre offering services like email, fax and Internet telephony (if Internet telephony is permitted); 4) Internet Banking Services and Automated Teller Machines (ATMs), which will enable the milk societies to credit payments directly to sellers' bank accounts. (The sellers already have plastic card identifiers. The card identifier may have to be upgraded to smart cards carrying biometric identification. The cards can be used to withdraw cash from ATMs); 5) a way for farmers to download Government Forms, receive documents (from a Government site) and order supplies and agricultural inputs from manufacturers; and 6) a means of communicating with farmers via the automatic printing process of daily payment slips.

BENEFITS The DISK application has been tested for two societies on the IIMA EGovernance centre platform. A portal with illustrative content in Gujarati and English has been developed and is accessible as a beta site. Currently the application is being pilot tested in two co-operative village societies of Amul dairy in Kheda district. Nearly 600 such systems are in operation in the Kheda district in Gujarat. There are 70,000 village societies in India, of which 2,500 have been computerised.

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To the Farmers: The benefits to milk farmers include payments that are now based on a reliable and transparent measurement of fat content and weight. Under the previous system the fat content was calculated a few hours after the milk was received because the measurement process was cumbersome. Malfeasance and under-payment to farmers were commonly alleged, but difficult to substantiate. In addition, milk for testing was stored in plastic bottles, which led to unhygienic conditions. Farmers may now receive immediate payment for their milk, rather than waiting ten days as under the previous system. Moreover, queues at the milk collection centres are short, saving farmers considerable time. Among the benefits to the co-operative societies is a reduction in the number of employees. The computer system also is able to keep accurate and up-to-date records, reducing the likelihood of fraud or corrupt practices (e.g. temporary use of the funds by individuals). With Internet connections these frequently visited co-operative centres could be used as a communication point offering services like email and fax. Farmers also could download government forms, receive documents (from a government site) and order supplies and agricultural inputs from manufacturers.

To the company 1

Improving name recognition – Individuals will start to attach our brand or name with the cause. If they also support that cause, they’ll be more likely to buy your product, even if it costs a bit more.

2

Boosting brand reputation among consumers – Social media is huge right now, and as consumers talk about the brands they prefer, those that value socially responsible businesses with socially responsible services will discuss your brand and recommend it to others.

3

Increasing sales and positive consumer sentiment – A satisfied customer is one who is likely to return again to your storefront for purchases.

4

Assisting in efforts to recruit and retain talented employees for your company

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Employees will be better motivated and staff productivity will increase.

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Improving the quality of life in communities where you do business – The stronger you can help your community become, the more revenue your business will see. Page | 7

FEASIBILITY

Porter’s Five forces model

Potential Entrants

(Low) Supplier Power

(Moderate)

Industry Rivalry

Buyer Power

(Low) Threat of Substitutes Porter’s Five Forces Model. Porter’s five forces industry analysis can be used to get a general over view of the threats to the profitability of the dairy business. Through the model does not help in analyzing firm specific demand; it gives some information of its business environment. Buyer Power Page | 8

 Buyer power is determined by various factors such as switching costs, the relative volume of purchases, the standardization of the product, elasticity of demand, brand identity, quality of the products.  On one end are the large instrumental buyer’s i.e. big hotels and restaurants which ask for discounts, extended credit periods and the other end are small retail outlets like general stores which have no power to negotiate with the firms.  The power of buyers is relatively high when buyers are large, consisting of individual customers, grocery stores, convenience stores, and restaurants nationwide. Since retailers purchase ice cream products in large quantities, this gives buyers substantial leverage over price.  Customers are able to substitute one brand to any point in time. There are many brands to choose from, so the buyer’s cost of switching to competing brand is already low. Supplier Power  The suppliers to dairy industry include dairy farmers, paper container manufactures, and suppliers of various products. The principal inputs are commodities available in competitive markets.  Factors affecting the bargaining power of suppliers include the threat of forward integration and the concentration of suppliers. There exist numerous potential suppliers of ingredients. The ingredients provided by each supplier are not unique or greatly differentiated. Furthermore, ice cream manufactures are able to switch between suppliers quickly and cheaply.  Also, many supplier’s viability is tied to the well-being of large, established companies. Therefore, the bargaining power of suppliers of ingredients is rather low.  However, being a milk co-operative, it has to empower the milk producers and farmers so that they get a remunerative return. Therefore, a certain power is vested in the hands of the farmer societies.

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Threat of Substitutes There is no perfect substitute to Milk because of its very nature. However, many other products are available like Milk powder etc. Since substitute products are readily available and attractively priced, the competitive pressures posed by substitute products can be considered low. Potential Entrants  The barriers to entry in the industry are moderate due to the brand preference and customer loyalty towards the larger and more established companies.  Other obstacles to new entrants include the requirement for large sources of capital, specialized mixing facilities and manufacturing plants.  In addition, the accessibility of distribution channels can be difficult for an unknown firm with little or no brand recognition. Industry Rivalry Implementing a project approved by NDDB is a part of CSR plan. The project sustainability is the prime thing for the company. As it is a step by the company, for the society, there is no competition involved.

BUDGET AND TIME FRAME Part of this investment for the project can come from the users, provided they are shown the value of the information and services that rural kiosks can deliver. Building useful content in local languages is necessary. In the dairy sector the district unions are willing to spend because they stand to gain as the system described above increases the efficiency and effectiveness of the services delivered by them to rural farmers. In other arenas, organisations like Grameen Bank (which already has invested) and other NGOs can find it advantageous to invest in rural kiosks. The budget for the CSR Framework needs to be decided on the basis of the costs associated with implementing IT, providing mobile and telecom services, hiring NGOs and partnering with external organizations. The total cost estimate of the projects which is required for setup is INR. 80,00,000. There will be cost of running it on monthly basis which is INR 1,00,000. This will take around 6 months. Help from local people would be taken. Page | 10

Details of which are as follows: PROJECT Field Work Kiosks construction Computer Systems Software Contract with Telecomm Hi-Tech machinery RFID Technology

Set-Up Cost Units Rate (INR / unit) 4,000 hrs. 50 15 40,000 16 25,000 20 5,000 1 5,00,000 20 3,00,000 20 10,000

Amount (INR) 2,00,000 6,00,000 4,00,000 1,00,000 5,00,000 60,00,000 2,00,000

Subtotal

80,00,000 Ongoing Cost on Monthly Basis

Volunteers’ Salary Inspector’s Salary

12 2

5,000 20,000

Total Monthly Cost

60,000 40,000 1,00,000

CONCLUSION 1. The council for e-governance of IIMA has invested significant resources in conceptualizing, developing and implementing DISK and Dairy Portal. The Amul Dairy has offered support to pilot test these proof–of-concept products and the results are very encouraging. There is still an unlimited potential to be tapped from the opportunity provided by the ICT application 2. If the Internet could be accessed from rural areas, the pilots demonstrate that useful content and services from the government and other institutions can be delivered to poor rural populations through information kiosks. Several state governments are indeed planning to establish such kiosks in rural areas. In building these applications in rural areas the role of small private sector is extremely important. 3. In extending the network of rural kiosks it is important to build upon the work done by other agencies than to start afresh. The fact that 2500 rural locations were already using IT offered a great opportunity to extend the application and its utility.

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4. The project can also fulfil all the purposes of the company as the company will be able to utilize the CSR fund, this will improve the image of the company and on other hand the milk sector of the state can be converted in profitable sector within the state of Bihar. Though there are certain hurdles that we might face such as the farmers need to be educated properly about the technology and make aware of the benefits the project will bring. But the benefits will outweigh the costs of undertaking this project.

REFERENCES     

‘National diary development board’ http://www.nddb.coop/ The official site of Bihar state Milk Co-operative Federation Ltd.:http://www.sudha.coop/. ‘Empowering Dairy Farmers: A portal and dairy information and services kiosk case study’ – International conference on achieving connectivity for the rural poor in India (2001, May 31 – June 3) ‘Bihar’s Milk production on rise’ - http://www.indiancooperative.com/dairy/biharsmilk-production-on-rise ‘District wise Milk production in Bihar’ http://www.sudha.coop/DataFiles/CMS/file/Districtwise%20Milk%20Production %20-%20Bihar.pdf

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