PROCUREMENT AND MARKETING OF MILK

Transcription

1 PROCUREMENT AND MARKETING OF MILK The performance with respect to procurement and marketing of milk by the Tirunelveli Milk Producers Cooperative Society is presented in this chapter in order to evaluate the performance and functioning of the Society. The farmers, as members of the Milk Producers Cooperative Society, should focus only on supplying quality milk and become financially self-sufficient, said former minister Alangur Shrinivas. 68 Indian dairy industry is one of the fastest growing sectors in India. It has registered incredible growth in the last several years. We are proud to say that our country holds number one position in the world in milk production with million tonnes of milk produced during Despite the impressive growth in milk production in the last three decades, productivity of dairy animals remains very low and milk-marketing systems primitive. Marketing of the majority of the milk through unorganized sectors is likely to dissuade small dairy farmers from expending production, which is absolutely necessary to keep up with the strong demand growth. In a recent study, Datta and Ganguly (2002) 69 estimated Indian milk demand for 2020 under various GDP growth rates. The study reported that if the current growth continues for the next twenty years (the nation has been growing at a rate between 5 and 7 percent over past five years), milk consumption is likely to more than double by Deccan Herald, Sunday, 19, September, Datta, T. N. and B. K. Ganguly.. Analysis of Consumer Expenditure Pattern in States with Special Reference to Milk and Milk Products. National Information Network, NDDB (National Dairy Development Board),

2 3.1 GROWTH AND IMPORTANCE OF DAIRY CO-OPERATIVES IN MILK PROCUREMENT Dairying is a centuries-old tradition for millions of Indian rural households; domesticated animals have been an integral part of the farming systems from time immemorial. Milk contributes more to the national economy than any other farm commodity-more than 10.5 billion dollars in In the context of poverty and malnutrition, milk has a special role to play for its many nutritional advantages as well as providing supplementary income to some 70 million farmers in over 500,000 remote villages More importantly, the farmers earn an average 27.3 percent of their income from dairying, with as high as 53 percent for landless and as low as 19 percent for the large farmers. 70 In India, the efforts for organising dairy industry and trade on co-operative lines were made immediately after the enactment of Co-operative Societies Act, Dairy co-operatives are acclaimed as effective instruments for economic uplift of the rural poor, as they provide opportunities for gainful employment and income. The opportunities provided by dairy co-operatives for easy sale of milk, periodic payment and incentive bonus, act as stimuli for the farmers to take up dairying on a more permanent and regular basis. These factors led to the growth and development of dairy co-operatives. Before 1947, the administrators did not see any need to spend money on improvement of dairying. During the Second World War, the situation in milk supply was still worse. The civil supplies department introduced the subsidised milk scheme in 1944 under which milk was distributed for children, invalids and expectant mothers at subsidised rates. 70 Dairy India Yearbook 1997, Priyadarshini Vihar, Delhi, India. 116

3 Since independence, dairy development has been getting increased attention and the outlay has been increasing plan after plan, and the growth of outlay has been faster since the Third Plan. From a mere 7.81 crores in first five year plan, the plan outlay in the fourth five year plan had shot up to 139 crores 71. Most of the outlay on dairying and milk supply has gone into setting up milk processing plants, and chilling and marketing facilities for milk. Rapid urbanization, improvements in transport and communication and progress of technology have all speeded up the expansion of dairy industry in selected milk sheds. Attempts were made in different parts of the country to organise dairy co-operatives. At the early stage, three different types of dairy co-operatives were established by the consumers, distributors and producers, though ultimately the producers co-operatives found patronage and encouragement Producers Cooperatives and Milk Union This type is the most widely prevalent one in the country. They are called either milk supply societies or milk producers societies. It is the genuine organisation of milk producers. It promotes the interest of the producers without at the same time affecting the consumers interests. It has greater growth potential. Milk producers are the members of the Society who produce both cow milk and buffalo milk. The two tier structure of dairy cooperatives evolved by the Kaira District Co-operative Milk Producers Union Limited, popularly known as Amul met with great success. During the evolutionary stages, the milk co-operatives were established under a two tier system whereas now they are established under a three tier system. Efforts to increase milk production by dairy farmers are strongly influenced by the degree to which demand signals are transmitted through the marketing system. Co-operatives have played an important role in transmitting the message of urban 71, V. Kulanthaiswamy, Co-operative Dairying in India, Rainbow Publications, p

4 market demand to them. Since the demand in the urban scenario is rapidly increasing so is the supply generated by the farmers. A number of field studies conducted by independent researchers emphatically confirm the role played by milk co-operatives in the progress of the dairy industry. Millions of small farmers isolated in various parts of the country have gained the strength to sustain their livelihood. The co-operatives have provided gainful employment and brought them close to the market. The Primary Milk Society is the foundation of the Cooperative structure. The efficiency of the movement solely lies in the strength of these Societies. Primary Milk Societies are organised at the rate of one society per village. The purpose of such a society is to promote the economic interests of its members by improving quality, and increasing quantity of milk production per buffalo or cow and to provide necessary guidance and assistance to its members and supply milk to the Milk Unions. These societies also supply cattle feed etc. to their members with a view to enhancing milk production. The Managing Committee of the Society comprises members elected by those members who are eligible to participate and vote in the General Body Meeting. The Primary Milk Societies (PMS) functioning at the village level join to form a Milk Union for carrying out such activities which are conducive and essential for the socio-economic development of milk producers, by procuring and processing of milk and marketing of milk products. The Board of Directors comprising nine members elected out of the Chairmen of affiliated Primary Milk Societies run the day-to-day administration through the Chief Executive Officer. These Unions either process milk at their own level or pass the same to the milk plants of other milk unions for processing. They also organize new Primary Milk Societies at the village level. 118

5 3.1.2 Growth in procurement of milk Today, with about 100 lakh farmer producers, Indian dairy farmers have been shown the way to prosperity and health. The ideal conditions for long term growth in procurement have been created. Modern technologies in animal breeding and feeding have been adopted by a significant number of farmers. Modern consumer processing and marketing facilities have been created all over the country. Technical input services including animal insemination, balanced cattle feed / bypass proteins feed, better fodder varieties and emergency veterinary health services - have not only helped in raising and sustaining milk production but have also ensured a better quality of life in the villages. Recognising the importance of the sector, the notable programmes taken up by GOI are key village schemes, intensive cattle development projects, crossbreeding projects through bilateral assistance, operation flood programme and technology mission on Dairy Development. In 1970 under the aegis of National Dairy Development Board, "Operation Flood" programme was launched to modernise the dairy sector and flood the four metro cities with milk from dairy cooperatives. By the end of September, 1999, village milk producers cooperatives were organised through 102 lakh farmers and with an average rural milk procurement of million liters per day. Having made significant strides in production and processing, our country is topping the world as the highest milk producer. Now it is time to upgrade the quality of milk by increasing the efficiency of procurement as well as the testing of milk for quality. In India, the milk pricing is based on the fat percentage and to some extent 119

6 Solid Not Fat (SNF) in milk. The determination of fat is based on the butyrometer method which is one of the oldest technologies adopted by the Milk Collection Centres / Milk Cooperative Societies. From 1980's many of the societies have been using Milko testers for testing the fat percentage in milk as this is a rapid method compared to former one. Of late, Milk Collection Centres/Cooperative Societies are installing automatic milk collection stations (PC based milk collection stations, smart automatic milk collection stations and automatic milk collection stations) which measure the weight of milk, fat contents and give a print out of payment slip to farmers in each shift. The system also facilitates storing ten days/monthly/yearly data and printing of cumulative summary of shift as and when needed. The state of art equipment is able to perform 120 to 150 operations in an hour Milk-Marketing System Figure 3.1. A schematic diagram of milk marketing channels in India is presented in 120

7 FIG. 3.1 MILK MARKETING SYSTEM IN INDIA Producer Milk Vendor Government Village Private Wholesaler Co-ops. Retailer District level Milk Producers Coop. Union Village level Milk Producers Coop. society Consumer Source: Journal of Food Distribution Research 35(2), July India has the largest cattle and buffalo population in the world. More than 67 percent of dairy animals are owned by marginal and small farmers, which constitute the core milk-production sector in the country. Many of these farmers own dairy animals primarily to supply milk for their own consumption. Slightly more than 30 percent of the milk produced in the country is retained in producer households. Eighty percent of milk is marketed through the highly fragmented unorganized sector, which includes local milk vendors, wholesalers, retailers, and producers themselves. On the other hand, the organized dairy industry, which accounts for about 20 percent of total milk production, comprises two sectors: government and cooperatives. Even though cooperatives provide a remunerative price to the producer, the unorganized sector plays a major role in milk marketing because of three factors. 121

8 The first factor is the pricing policy of the cooperatives: their purchase price is based on the fat content of the milk, whereas the private sector pays a flat rate per liter of milk. The second factor, which motivates the milk producers to sell milk to private vendors, involves the type of milk animals reared by the producer. Crossbred cows yield more milk with a lower fat than do buffalos. The crossbred cow population has increased over years because of artificial insemination and improvements in management practices. The third factor is payment policy. The private sector can pay their producers every day, whereas the co-operatives pay weekly or fortnightly. Producers sometimes have to fight with the co-operatives to get their payments. Within the organized sector, the co-operative sector is by far the largest in terms of volumes of milk handled, installed processing capacities, and marketing infrastructure. The eighty-two thousand Dairy Co-operative Societies (DCSs) across the countries have a strong membership of nearly 10 million landless, marginal, and smallholder milk-producer families. Although the organized sector handles less than 20 percent of the production, it has an installed capacity to process about 33 percent of India s total milk production. The cooperative and private sectors have more or less equal processing capacities Role of Cooperatives in Milk Marketing Operation Flood, launched in 1970, introduced cooperatives into the dairy sector with the objectives of increasing milk production, augmenting rural income, and providing fair prices for consumers. The three phases of Operation Flood succeeded in fulfilling a major part of their objectives. During its first phase, Operation Flood linked eighteen of India s premier milk sheds with consumers in India s four major metropolitan cities: Delhi, Mumbai, Calcutta, and Chennai. Operation Flood s Phase II ( ) increased the milk sheds (collection centers) 122

9 from 18 to 136 and 290 urban markets expanded the outlets for milk. Phase III ( ) enabled dairy co-operatives to expand and strengthen the infrastructure required to procure and market increasing volumes of milk. Phase III consolidated India s dairy cooperative movement, adding 30,000 new dairy co-operatives to the 42,000 existing societies organized during Phase II. Milk sheds peaked to 173 in with the numbers of women members and Women s Dairy Cooperative Societies increasing significantly. Today there are 22 state federations in India, with 170 district-level unions, more than 76,000 village-level cooperative societies, and 11 million milk-producer members in different states. These cooperatives collect an average of 15 million liters of milk each day. Fresh liquid milk, packed and branded, is marketed in over 1000 cities and towns in India by these cooperatives; annual sales turnover exceeds 80 billion Indian rupees Milk Procurement by Dairy Cooperatives Most of the rural people, especially women, make their livelihood by rearing milch animals and by supplying milk to the Cooperatives. Keeping this in view and to improve the rural economy and to enhance the personal income of the stake holders in rural area, Government of Tamil Nadu directed the Tamil Nadu Cooperative Milk Producers Federation and District Cooperative Milk Producers Union (DCMPU) to raise the procurement price of cow's milk from Rs to Rs per litre and that of the buffalo s milk from Rs to Rs with effect from and the milk cost as per the revised procurement price is being disbursed to the Milk producers. In Tamil Nadu State, milk is procured by the Tamil Nadu Cooperative Milk Producers Federation through 17 District Cooperative Milk Producers Unions 123

10 (DCMPUs) covering 30 districts. The quantity of milk procured by the District Co-operative Milk Producers Unions as on is furnished in the adjoining page in Table No.3.1. According to Table No.3.1, 17 District Cooperative Milk Producers Unions have procured lakh litres of milk per day (LLPD) during , with the maximum amount of 437 thousand litres per day being collected by the Salem union. TABLE NO.3.1 MILK PROCUREMENT BY DCMPUs (As on ) (In thousand litres per day) Sl.No. Name of the Union Kancheepuram-Tiruvallur Villupuram Vellore Dharmapuri Salem Erode Coimbatore Nilgiris Madurai Dindigul Trichy Thanjavur Pudukottai Sivagangai Virudhunagar Tirunelveli Kanyakumari 6 Total 2237 Source: Dairy Development Policy Note for the year

11 3.1.6 Average milk procurement by DCMPUs: The average milk procured by the District Cooperative Milk Producers Unions in Tamil Nadu per day for the years from to is shown in the following table. TABLE 3.2 AVERAGE MILK PROCUREMENT IN DCMPUS PER DAY (In Lakh Litres) Year Year Year Year Year Year Year Year Year (up to June) Source: Report published by TamilNadu Co-operative Milk Producers' Federation Ltd. Table No. 3.2 clearly shows that the average milk procurement per day in the State of Tamil Nadu has increased from lakh litres in the year to lakh litres in From the information available in Table No.3.2, the line chart in the adjoining page is prepared to explain the increasing trend in average milk procurement per day. 125

12 FIG.3.2 AVERAGE MILK PROCUREMENT PER DAY 25 Average Milk Procurement per Day Average Milk Procurement per day 0 Figure No.3.2 shows the trend in the average milk procurement per day. There is gradual change in the years from to But in the year , the increase in the procurement is remarkable. After that, a stagnant position is shown in the average procurement of milk per day Milk Sales in District Unions and Chennai Metro Standardised milk, Buffalo milk and double toned milk are being sold by the Federation through 218 Automatic Vending Machines (AVM) to the city consumers. Milk products are also sold in certain AVM Units. Sachet milk sales are also carried out in AVM units. The quantity of local milk sales by District Co-operative Milk Producers' Unions during the year is given in Table No

13 TABLE NO. 3.3 MILK SALES IN DISTRICT UNIONS AND CHENNAI METRO (In thousand litres per day) Sl.No Name of the Union Kancheepuram-Tiruvallur 1 2. Villupuram Vellore Dharmapuri Salem Erode Coimbatore Nilgiris Madurai Dindigul Trichy Thanjavur Pudukottai 7 14 Sivagangai Virudhunagar 5 16 Tirunelveli Kanyakumari 18 Total Chennai Metro sales 1032 Grand Total 2015 Source: Dairy Development Policy Note for the year Table No.3.3 shows that the total sales for the period is 2015 thousand litres per day. Of the total sales, Chennai Metro sales alone contributes 1032 thousand litres and the remaining 983 thousand litres being sold by the 17 DCMPUs. 127

14 3.2 PROCUREMENT AND DISTRIBUTION OF MILK BY THE TMPCS LTD. In this part of the study, the researcher deals with the two major functions of the Society namely procurement and distribution of milk. The researcher has made an attempt to draw a short biographical sketch about the physical performance of TMPCS Ltd. The necessary data to design this chapter has been collected by the researcher from various records, documents and annual reports of the selected Society. Some informal but useful interviews were also conducted with the officials of the Society Number of members A member is one who owns share in the Society. Thus, anyone can become the member of the Society by purchasing the share of the Society. A person can buy more than one share, but now, the Society follows a rule that if a person wants to become a member, then, he should have at least one milch cattle of his own. The Table No.3.3 explains the membership of the Society from the year to From the table, it is evident that there is a slight increase in the total membership of the Society. The total number of members supplying milk to the Society has also increased in the beginning years of research. This is due to the fact that the Society pays for the milk promptly and dividend is also paid regularly to the members. The preference of the members for selling the milk to the Society arises mainly due to the ready price paid by the Society for milk. The second reason being the amount of bonus given by the Society. Only very few members prefer the Society for safety purpose. 128

15 TABLE NO.3.4 MEMBERS OF THE SOCIETY Sl.No Year Total Members supplying milk Trend Members to the Society value Source: Records of the TMPCS Ltd. There is increase in case of members supplying milk to the Society for the study period only up to The number of members supplying milk is at a maximum of 994 during that period. After that, it decreases and reaches 839 in the year and 568 in the year The total members supplying milk to the Society was 920 in It has decreased to 568 members in the year The least square method is applied and the straight line equation Yc = a+bx is fitted for the given time series data on the members supplying milk to the Society. It gives us the result Yc= x. From this, it is evident that the members supplying milk to the Society has decreased 129

16 by per year during the study period. The trend in the decrease of membership of the Society and the actual membership of the Society is presented in the form of a graph given below. FIG.3.3 TREND VALUE FOR MEMBERS SUPPLYING MILK Members supplying milk Trend Value Assuming the same trend to continue, the researcher has computed the total members who may be supplying milk to the Society in , and Thus, it is estimated that the membership might have increased from the present number of 568 in to 681 in Then, it would decrease to 527 in and 372 in if the same trend prevails Number of milch cattle The term milch cattle refers to the cow or buffalo. The total of milch cattle owned by the members is given in Table No

17 TABLE NO.3.5 MILCH CATTLE Year Number of milch cattle Source: Records of the TMPCS Ltd. The members must have milch cattle of their own to supply milk to the Society. It can be seen from the Table No.3.5 that the number of milch cattle owned by the members those who are supplying milk to the Society is increasing during the first four years of the study period and decreasing during from to This may lead to an overall decrease in the total milk supplied by the Society which in turn will lead to a decrease in the profit of the Society. Table No.3.4 shows that there is also a decrease in the number of milk supplying members during these years. Thus there is a direct relationship between the number of members supplying milk to the Society and the number of milch cattle owned by them. This can be proved by the Karl Persons co-efficient of correlation applied for these two variables. It is denoted by r. The calculated r is from this, it is proved that there is a high degree of positive correlation between the two 131

18 variables which indicates that if the number of members supplying milk to the Society decreases, the number of milch cattle owned by them also decreases and vice versa Number of workers employed The number of workers employed in the Society from the year to is given in Table No. 3.6 TABLE NO.3.6 WORKERS EMPLOYED Year Workers employed Source: Records of the TMPCS Ltd. For the efficient functioning any organization, sincere and efficient workers are needed. Like this, the Society also gives employment opportunities to the people in its area of operation. The table no. 3.6 shows that the number of workers employed in the Society has decreased from 173 in to 103 in The main reason for this heavy fall in the number of workers is that the Society is functioning with its own funds and hence if the Society employs many workers then it has to keep a large amount for the payment of salary to the workers. This will definitely affect the 132

19 financial position of the Society. That may be the reason for the reduction in the number of workers employed Procurement of milk Milk is the raw material for this special type of industry and it is obtained only through procurement from the members, union and other institutions. The TMPCS Ltd., procures milk from the members who live in the nearby villages. For milking their cows, the members have to bring them to the milking sheds built by the Society for this purpose. There the milking is done and the Society collects the necessary milk from the members. Here it is to be noted that the Society purchases the milk by strictly checking the members from adding water to the milk. In general, Lactometer should be used for this purpose. But, due to lack of time, no such device is used by the Society. A chemical called potassium permanganate is mixed with water and this solution, which acts as a germicide, is used for cleaning the udder, particularly the teats of the cows and buffaloes, before milking. Then, the collected milk is brought to a central place, where testing is made for its content of fat and sweet non fat (SNF). For procuring the milk from the members, the TMPCS Ltd. was using its own van purchased for this purpose. But, the maintenance expenses were very high as a result of which the operating expenses reached the maximum amount in the year Therefore, the Society had no other way except to sell the van. And now, the Society uses a hired van for procuring milk from the members. To increase milk production, TMPCS Ltd. helps the milking members in the form of loans and subsidies through nationalised banks for the purchase of milking animals. It is recovered from the payment for milk and settled to the banks monthly once. 133

20 Payment for milk is made once in ten days. A thrift fund 20 paise per litre is retained and returned with interest during Pongal time. To encourage members and make them to supply more milk, additional purchase price is given during Deepavali time from the profit earned by the Society. Cattle feeds are supplied at subsidized rates. A cash Prize is given during Co-operative vara vizha to one male and one female member whose cattle produce the maximum milk during the year. Bonus to milking members and one Rupee per litre are given every year. TMPCs Ltd. procures milk from its members, union and other institutions which include District Livestock Farm, Sankarankoil Milk Producers Society and Melanatham Milk Producers Society. Thus, the total milk procured by the Society is reached by adding the milk supplied by all the three. The total milk procured by the Society from the members, union and other institutions is presented in Table No

21 TABLE NO.3.7 MILK PROCUREMENT (IN LAKH LITRES) Trend Sl.No Year From Members From Union From Other Institutions Total milk procurement Actual increase/ Decrease Percentage Increase/ Decrease Value for milk from members Source: Records of the TMPCS Ltd. It is observed from Table no.3.7 that the milk procured from the members shows an increasing trend while the milk procured from other two sources shows a declining trend from onwards. Generally, when the number of members who are supplying milk to the Society increases, then the quantity of milk supplied by them also increases But here, though the number of members supplying milk to the Society is in a fluctuating trend, the amount of milk produced by them has been steadily on the increase from to Thus, the Society procures more milk from its members themselves and hence there is a decline in the procurement 135

22 from other sources. However, the procurement of milk from members decreases afterwards. The total milk procured from the members by the Society in was 17.4 lakh litres. It has increased to 21.4 lakh litres in and decreased to lakh litres in By the method of least square, a straight line trend can be fitted to the given time series data in order to estimate the future procurement of milk from the members of the Society. It gives us the result Yc = x. From this, it is evident that the milk procured from the members has increased by 0.21 lakh of litres per year from to The trend in the procurement of milk and the actual procurement of milk from the members by the Society is given in the form of a graph in figure no.3.4. FIG.3.4 TREND VALUE FOR PROCUREMENT OF MILK FROM MEMBERS (In Lakh Litres) Actual milk procurement Trend value 0 Assuming the same trend to continue, the scholar has computed the procurement capacity of the Society for the years , and Thus, it is estimated that this Society will have the capacity to procure lakh 136

23 litres in 2010, lakh litres in 2015 and lakh litres in 2020, if the same trend prevails Seasonal Variation in Milk Procurement The average milk procurement by the Society per day is 5000 litres from members and 4000 litres from the Tirunelveli District Co-operative. Milk Producers union Pocket milk purchase. The total milk of 9000 litres thus procured is sold to the customers. Usually, the societies do not procure the same quantity of milk throughout the year. The quantity of milk purchased by the societies from their members is not the same for all the time. The quantity of milk procurement varies from month to month. This is because of the variation in the availability of milk in different seasons. Generally, there are two seasons namely flush season and lean season which each and every society experiences. The TMPCS Ltd. experiences flush season in the period from October to April and lean season in the period from May to September. These seasonal differences in milk production create difficulties in the handling of milk and its marketing. It is due to the effect of monsoon on breeding activity of animals and production of fodder. The monthly total procurement of milk for the period from to is given in Table No.3.8. Also, the seasonal variation in milk procurement and distribution is analysed with the help of seasonal indices. Under this method, total monthly procurement of milk is calculated for every month in the study period of eleven years and it is divided by eleven to arrive at the eleven yearly average. Then, the seasonal index is calculated by dividing the monthly average by total average. This figure is multiplied by 100 to make it as a percentage. 137

24 TABLE NO.3.8 MONTHLY PROCUREMENT OF MILK Month Monthly total for 11 years 11 yearly Average Seasonal Index Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Total yearly monthly averages Seasonal Index = 100 Total average Average 1.62 The seasonal indices of milk procurement shown in Table No.3.8 show that the flush season had prevailed for seven months from April to October as the seasonal index is high for these seven months and lean season had prevailed for five months from November to March as the seasonal index is low for these five months. The amount of milk production is the highest in the months of May and June. To overcome the difficulties created by the seasonal variation, generally, the milk co-operative societies follow a suitable policy for procurement of milk. The 138

25 societies take only the amount of milk demanded by the consumers and return the surplus milk to the members. But, with regard to TMPCS Ltd., the excess milk is used for the preparation of curd, butter, ghee and milk sweets Marketing of Milk The profit from the sale of any product depends on the way through which can be marketed. The successful functioning of the milk co-operative societies depends on the efficiency in the marketing system followed. The procurement function carried on by the societies will be meaningful only when the procured milk is distributed. The TMPCS Ltd. directly markets the major portion of milk procured from the members. The Society sells the milk to different consumers through different channels of distribution. They sell the milk directly to the local consumers by issuing coupons. The milk is filled in cans and distributed among the consumers through the employees of the societies. Cycles are the only mode of conveyance used for the distribution of milk. A daily average of 1500 litres milk is sent by the Society to the union. The marketing system followed by the Society for sale of milk is presented in Table no

26 TABLE NO.3.9 MARKETING OF MILK BY TMPCS LTD. (IN LAKH LITRES) Sl.No Year Raw Milk Cash Card Sales Sales Pocket Milk Card Sales Sales to Hotel Credit Sales Union, Stall, Palpeda etc. Due by Due to Excess Milk Total Sales _ _ _ _ Source: Records of the TMPCS Ltd. From Table No.3.9, it is evident that the Society s milk reaches the public through cash card sales, pocket milk sales, sales to hotel, credit sales and also through special order sales. Among the various levels of marketing, the Society was able to sell a large quantity of milk only through pocket milk card sales, but, the value of 140

27 pocket milk sales shows a decreasing trend from the year However, after , pocket milk sales increases as there is no sale of milk to hotels. The total sale of milk is lakh litres in the year But, it seems to be decreasing year by year. The total amount of sales is only lakh of litres in the year , which would affect the profit earning capacity of the milk society. In order to meet the special demand for milk, the Society may be approached by the common man. In some cases, a special order may be placed in advance. In some other cases on the spot order may be given to get milk from the Society. However the price of milk supplied for special order is somewhat higher than the price for other sales Pricing of Milk. The pricing of milk may be analysed under two heads, namely, purchase price and selling price. Both the prices are determined by the Society according to the price schedule prepared and supplied by the Tirunelveli District Cooperative Milk Producers Union on the basis of the quality that is the fat and solid non-fat content of the milk. The union follows a pricing system which is remunerative and incentive oriented in nature. A) Purchase Price It refers to the price fixed by the Society for the purchase of milk from the members, union and other societies. The purchase price of both cow milk and buffalo milk is given separately in Table No

28 TABLE NO.3.10 PURCHASE PRICE (PER LITRE) (IN RS.) Sl.No Year Cow milk Buffalo milk Source: Records of the TMPCS Ltd. As seen from Table No.3.10, it may be noted that the purchase price of buffalo milk is quite higher than the cow milk. This is because of the fact that buffalo milk is thicker than cow milk. The purchase price of cow milk has slowly increased from Rs 9.00 per litre to Rs per litre during to Similarly, the purchase price of buffalo milk also has increased from Rs.9.70 per litre in to Rs per litre in The trend in the purchase price of milk may better be understood from the bar diagram (Fig 3.5). 142

29 FIG 3.5 CHART SHOWING PURCHASE PRICE OF MILK (Value in Rs.) 25 Purchase price Cow milk Buffalo milk 5 0 From the chart, it can be understood that the purchase price of both cow and buffalo milk has increased rapidly during the period and the rise in buffalo milk is comparatively more than that of cow milk. B) Selling Price It refers to the price fixed for the selling of milk through different channels of distribution. The factors that determine the sale price of milk are the intensity of demand, elasticity of demand and the cost of production of milk. The selling price of milk for different channels is given in table no.3.11 given in the adjoining page. 143

30 TABLE NO.3.11 SELLING PRICE (PER LITRE) (IN RS.) Sl.No Year Raw Milk Card Sales Hotel Sales Credit Sales Special order Sales _ _ Source: Records of the TMPCS Ltd.5 Table No.3.11 clearly indicates that the Society follows the concept of price discrimination, that is, different price for different consumers. The selling price in case of special order milk is very high when compared to other types of sales. The Society offers low price to the consumers only in case of card sales. On the whole, the selling price of milk is slowly increasing. There is a step-by-step increase in the selling price of milk for the first four years such as from to and there is steep rise in theselling price of milk in the last two years and there is no special order sales. There is also uniformity in the selling price of milk. The trends in the selling of milk may better be understood from the bar diagram given in the adjoining page. 144

31 FIG.3.6 CHART SHOWING SELLING PRICE OF MILK (Value in Rs.) Raw Milk Card sales Hotel Sales Credit Sales Special order Sales 2 0 The increase in the purchase price of milk will automatically leads to an increase in the selling price of milk. It ultimately leads to increase in the profit of the Society. Thus, there is a direct relationship between the purchase price and the selling price. The relationship between these two variables is found out by the method of correlation. In order to find the nature of the relation, the scholar has used the Karl Pearson s co-efficient of correlation and it is denoted by the letter r. The variables taken are the purchase price of cow milk and the selling price of raw milk. The calculated r is From this, it can be proved that there is a high degree of positive correlation between the two variables, that is, if purchase price increases, the selling price also would increase and hence both are positively correlated. 145

32 3.2.8 Sale of other Milk Products As told earlier, besides supplying milk, the Society also supplies curd, butter, ghee and milk sweets (palpeda) from the very beginning, according to the surplus unsold milk and the nature of demand. Thus, the Society gets considerable amount of income by selling the by-products of milk. It also purchases and sells cattle feed. Frozen semen is also sold by the Society. Separate trading accounts are prepared for the sale of cattle feed and palpeda. This amount is included in the total sales. Table No.3.12 classifies the amount of sale of other products included in the total sales. Sl.No TABLE NO.3.12 SALE OF OTHER MILK PRODUCTS AND RELATED PRODUCTS (in Thousand Rs.) Sale of Sale of Butter, ghee Sale of Cattle Year Frozen Total etc. Palpeda feed semen _ _ _ _ _ _ _ Source: Records of the TMPCS Ltd. The table denotes that the sale of other products also form a major part of income to the Society. This amount is very high during , and

33 10 due to the increase in the sale of cattle feed. It can easily be noted from the table that the sale of cattle feed forms the major part of income in all the years. Sale of frozen semen gives a meager amount and from onwards, there is no such sale. During , and , products made from milk such as butter, ghee etc. also were not sold by the Society. The share of each product such as palpeda, butter, ghee, frozen semen and cattle feed in the total sale of other products is clearly shown in the following bar diagram. FIG.3.7 CHART SHOWING SALE OF OTHER PRODUCTS (in Thousand Rs.) Sales of other Milk Products and Related Products Sale of other products Sale of Palpeda Sale of Butter,ghee etc. Sale of Frozensemen Cattlefeed Cattle feed Cattle feed refers to the cottonseed, oilcake, wheat bran, dry fodder, etc., which is to be given as feed to the milch cattle. The Society buys these types of cattle feeds on wholesale and sells it to its members at a subsidised rate. The ultimate aim behind these transactions is to help the members in maintaining the cattle. The purchase and sale of cattle feed by the Society is given in Table No.3.13 for the study 147

34 period from to The term purchases referred to here includes trade charges incurred in the purchase of cattle feed. TABLE NO.3.13 PURCHASES AND SALES OF CATTLE FEED (Rs.in Lakhs) Sl.No Year Purchases Sales Difference (Sales- Purchases) Profit % Source: Records of the TMPCS Ltd. From the table, it is clear that purchase and sale of cattle feed is not showing a steady increasing trend. However, the total amount of purchases has increased from 23.2 lakh in to 39.5 lakh in Likewise, the total amount of sales has increased from 24 lakh in the year to 43.8 lakh in Also, the percentage of profit incurred in the sale of cattle feed is very low (nearly 5%) except during the year , where there is 12.5% of profit.in the last year also, the profit percentage is Thus, it is to be noted that this sale of cattle feed enables the Society to earn a reasonable amount to increase its income. It forms the major part of the income from the sale of other products. 148

35 SUMMARY The analysis made in this chapter reveals that the number of members of the Society has increased from 7326 in to 7449 in But, the total number of members supplying milk to the Society is decreasing day by day. It has come down from 920 in the year to 568 in Trend value is calculated for this purpose and it is estimated that the number of members supplying milk would be 372 in if the same trend continues. The total number of milch cattle owned by the members also has decreased from 1220 in to 777 in The number of workers has come down from 173 to 103 in the study period. There is a tremendous fall in the number of workers employed in the Society from 173 in to 103 in The amount of milk procured by the Society shows a decreasing trend from 39.9 lakh litres to 33.5 lakh litres in the study period of eleven years. The seasonal indices of milk procurement show that the flush season had prevailed for seven months from April to October as the seasonal index is high for these seven months and lean season had prevailed for five months from November to March as the seasonal index is low for these five months. The purchase price and the selling price of both the cow and buffalo milk shows an increasing trend. The sale of other milk products such as palpeda, butter, ghee etc. and cattle feed have also increased during the study period. Thus, in this chapter, the physical performance of the TMPCS Ltd. has been evaluated and it has been found out that there is no steady growth in the membership of the Society. Also, the procurement and distribution trend found in the Milk Society is not appreciable. 149