i

Submitted to:

National Dairy Development Board (NDDB)

Hariharbhawan, Lalitpur, Nepal

SUBMITTED BY:

Nepal Environment Protection Center

(NEPC) P.O.Box 2444, Mid Baneshwor, Kathmandu

Tel: +977-01-4465942, Fax: +977-01-4465942

Email: nepckathmandu@gmail.com, info@nepcnepal.org

Website:www.nepcnepal.org

Date: 7th January 2018

Dairy Value Chain Study in Nepal

FINAL REPORT RFP No: NDDB/C/RFP/2074/75/03

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Table of Contents

Contents Page Table of Contents .............................................................................................................................................................. ii

List of Tables ....................................................................................................................................................................... v

List of Chart ....................................................................................................................................................................... vii

List of Figure ..................................................................................................................................................................... vii

Abbreviations ................................................................................................................................................................. viii

Sample Districts under Dairy Value Chain Study in Nepal ............................................................................. ix

Executive Summary ..........................................................................................................................................................x

Chapter 1 .............................................................................................................................................................................. 1

Introduction ........................................................................................................................................................................ 1

1.1 Background ............................................................................................................................................................. 1 1.2 Objectives of the Study ....................................................................................................................................... 2 1.3 Scope of the Study ............................................................................................................................................... 2

Chapter II ............................................................................................................................................................................. 3

Methodology ....................................................................................................................................................................... 3

2.1 Desk study ............................................................................................................................................................... 3 2.2 Consultation with concern authorities ........................................................................................................ 3 2.3 The study areas ..................................................................................................................................................... 3 2.4 Coverage of the study ......................................................................................................................................... 3 2.5 Sampling and the sample Size ......................................................................................................................... 4 2.6 Data collection tools ............................................................................................................................................ 5 2.7 Training of the survey team ............................................................................................................................. 5 2.8 Methods of data collection from the field ................................................................................................... 6 2.8.1 Sample selection .............................................................................................................................................. 6 2.8.2 Field study .......................................................................................................................................................... 6

2.9 Data Management and analysis ...................................................................................................................... 7 2.10 Progress update ................................................................................................................................................. 8 2.11 Report preparation ........................................................................................................................................... 8 2.12 Data quality assurance ................................................................................................................................... 8 2.12.1 General measures ......................................................................................................................................... 8 2.11.2 Instruction to the survey team ................................................................................................................ 9

Chapter III ......................................................................................................................................................................... 10

The Value Chain Actors ............................................................................................................................................... 10

3.1 Key Direct Actors ............................................................................................................................................... 10 3.1.1 Dairy farmers .................................................................................................................................................. 10 3.1.2 Milk producers' cooperative societies ................................................................................................. 10 3.1.3 Milk chilling centers .................................................................................................................................... 10 3.1.4 Milk processing industries ....................................................................................................................... 11 3.1.5 Sellers and distributors ............................................................................................................................. 12 3.1.6 General consumers ...................................................................................................................................... 12

3.2 Key Enablers/Supporting Actors ................................................................................................................ 12 3.2.1 Department of Livestock Services (DLS) ............................................................................................ 12

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3.2.2 Department of Food Technology and Quality Control (DFTQC) ............................................... 13 3.2.3 Department of Cooperative ...................................................................................................................... 13 3.2.4 Nepal Agriculture Research Council (NARC) .................................................................................... 13 3.2.5 National Dairy Development Board (NDDB) .................................................................................... 13 3.2.6 National Cooperative Development Board (NCDB) ....................................................................... 14 3.2.7 I/NGOs and Development Projects ....................................................................................................... 14 3.2.8 Others ................................................................................................................................................................ 14

Chapter IV ......................................................................................................................................................................... 18

Milk Producers' Analysis ............................................................................................................................................ 18

4.2 Gender of the milk producers ...................................................................................................................... 18 4.3 Education of the milk producers ................................................................................................................. 19 4.4 Family size of the milk producers .............................................................................................................. 19 4.5 Dairy animal management ............................................................................................................................ 19 4.5.1 Number of dairy animals ........................................................................................................................... 20

4.5.2 Animal breeds ................................................................................................................................................. 21 4.5.3 Sources of dairy animals ............................................................................................................................. 21 4.5.4 Animal shed...................................................................................................................................................... 21 4.5.5 Animal breeding ............................................................................................................................................. 22 4.5.6 Sources of breeding bull ............................................................................................................................. 23 4.5.7 Sources of animal feed ................................................................................................................................. 24 4.5.8 Sources of concentrates/grains ............................................................................................................... 24 4.5.9 Sources of utensils and cleaning materials ......................................................................................... 25 4.5.10 Sources of veterinary care services ..................................................................................................... 25 4.5.11 Sources of veterinary medicines .......................................................................................................... 26 4.5.12 Milk market ................................................................................................................................................... 26 4.6 Observed changes in diary production system ..................................................................................... 27 4.7 Availability of credit ......................................................................................................................................... 28 4.8 Improvement in the level of income .......................................................................................................... 28 4.9 Changes observed in dairy processing ..................................................................................................... 29 4.10 Farmers' Experience about dairying ...................................................................................................... 29

Chapter V ........................................................................................................................................................................... 32

Consumers' Analysis .................................................................................................................................................... 32

5.1 Sample size by district ..................................................................................................................................... 32 5.2 Gender of the consumers ............................................................................................................................... 32 5.3 Education of the consumers ......................................................................................................................... 33 5.4 Family size of the consumers ....................................................................................................................... 33 5.5 Main sources of income .................................................................................................................................. 33 5.6 Annual income .................................................................................................................................................... 34 5.7 Expenditure ......................................................................................................................................................... 34 5.8 Purchase of milk and milk products .......................................................................................................... 35 5.9 Quantity of milk and milk products purchased .................................................................................... 35 5.10 Availability of milk and milk products as and when required ..................................................... 36 5.11 Changes on the availability of milk and milk products compared to 5 years back ............. 36 5.12 Changes on the quality of milk and milk products compared to 5 years back ...................... 37 5.13 Access to milk and milk products compared to 5 years back ...................................................... 37 5.14 Changes observed in dairy processing .................................................................................................. 38 5.15 Milk and major milk products available in the market areas of consumers .......................... 38 5.16 Changes in marketing strategy followed by the dairy processors ............................................ 39

Chapter VI ......................................................................................................................................................................... 41

Qualitative SWOT and Sustainability Analysis .................................................................................................. 41

6.1 SWOT Analysis of value chain actors ........................................................................................................ 41

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6.1.1 Farmers ............................................................................................................................................................ 44 6.1.2 Milk producer Cooperatives .................................................................................................................... 44 6.1.3 Milk Chilling Centers ................................................................................................................................... 45 6.1.4 Milk Processors ............................................................................................................................................. 45 6.1.5 Milk and milk products sellers................................................................................................................ 46 6.1.6 Feed manufacturer and suppliers ......................................................................................................... 42 6.1.7 Financial institutions .................................................................................................................................. 43 6.1.8 Suppliers of dairy equipment/materials ............................................................................................ 42 6.1.9 AI and veterinary service providers ..................................................................................................... 41 6.1.10 Agro-vets ....................................................................................................................................................... 41 6.1.11 Department of Livestock Development ............................................................................................ 43 6.1.12 Division Cooperative Office ................................................................................................................... 48

6.2 Sustainability analysis ..................................................................................................................................... 48 Chapter VII ....................................................................................................................................................................... 50

Economics of Value Addition .................................................................................................................................... 50

7.1 Economics/Cost of Raw Milk production ................................................................................................ 50 7.2 Share of the benefit per liter of milk ......................................................................................................... 51 7.3 Product Costing .................................................................................................................................................. 51 7.4 Products of DDC ................................................................................................................................................. 52 7.5 Production of DDC Costs and Income of DDC ........................................................................................ 52 7.6 Cost Components and Income...................................................................................................................... 52 7.7 Product costs and margin .............................................................................................................................. 53

Chapter VIII ...................................................................................................................................................................... 57

Conclusion and Recommendations ........................................................................................................................ 57

8.1 Conclusion ............................................................................................................................................................ 57 8.2 Recommendations ............................................................................................................................................ 57 8.2.1 Farmers ............................................................................................................................................................ 57 8.2.2 Milk Producers Cooperatives .................................................................................................................. 58 8.2.3 Milk Chilling Centers ................................................................................................................................... 58 8.2.4 Milk processors ............................................................................................................................................. 58 8.2.5 Milk and milk products sellers................................................................................................................ 59 8.2.6 Consumers....................................................................................................................................................... 59 8.2.7 Feed manufacturer and suppliers ......................................................................................................... 59 8.2.8 Financial institutions .................................................................................................................................. 59 8.2.9 Suppliers of dairy equipment/materials ............................................................................................ 59 8.2.11 AI and veterinary service providers .................................................................................................. 59 8.2.12 Agro-vets ....................................................................................................................................................... 59 8.2.12Department of Livestock Development ............................................................................................. 60 8.2.13 Division Cooperative Office ................................................................................................................... 60

Annexes ............................................................................................................................................................................. 61

Annex: 1 Survey Tools ................................................................................................................................................. 61

Annex: 2 Survey Tables ............................................................................................................................................... 79

Annex: 3 Key Informants Interviewed .................................................................................................................. 83

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List of Tables Page

Table 2.1: Geographical distribution of sample districts………………………………………………………...13

Table 2.2: Sample size for other value chain actors………………………………………………………………..14

Table 2.3: Field survey team composition……………………………………………………………………………..16

Table 2.4: Field survey methodology…………………………………………………………………………………….17

Table 3.1: Estimated daily milk collection in the formal sector……………………………………………….21

Table 3.2: Milk used for value addition in different milk products………………………………………….22

Table 3.3: summary of dairy value chain actors, their functions and inters relationships………...25

Table 4.1: Sample by district………………………………………………………………………………………………...28

Table: 4.2 Male family size of the milk producers…………………………………………………………………………….29

Table 4.3: Female size of the milk producer…………………………………………………………………………………….29

Table 4.4: Number of households having dairy animals…………………………………………………………………..30

Table 4.5: Number of households having milking dairy animals……………………………………………..30

Table 4.6: Animal breeds……………………………………………………………………………………………………...31

Table 4.7: Sources of dairy animals……………………………………………………………………………………….31

Table 4.8: Sources of shed construction materials…………………………………………………………………32

Table 4.9: Sources of breeding bull……………………………………………………………………………………….33

Table 4.10: Sources of semen……………………………………………………………………………………………….33

Table 4.11: Purchased roughages………………………………………………………………………………………………………..34

Table 4.12: Place of purchase………………………………………………………………………………………………………………34

Table4.13: Roughages suppliers………………………………………………………………………………………………………….34

Table 4.14: Items purchased……………………………………………………………………………………………………………….35

Table 4.15: Place of purchase………………………………………………………………………………………………………………35

Table 4.16: Suppliers of concentrates/grain………………………………………………………………………………………...35

Table 4.17: Sources of utensils and cleaning materials…………………………………………………………..35

Table 4.18: Sources of veterinary care services……………………………………………………………………..35

Table 4.19: Sources of veterinary medicines………………………………………………………………………….36

Table 4.20: Milk market………………………………………………………………………………………………………..36

Table 4.21: Changes in dairy production system (Multiple answer)………………………………………..37

Table 4.22: Availability of credit…………………………………………………………………………………………...38

Table 4.23: Comparative income…………………………………………………………………………………………..38

Table 4.24: Changes in dairy processing………………………………………………………………………………..39

Table 4.25: Farmers' experience on dairy sector development prospectus and challenges………39

Table 5.1: Sample size by district………………………………………………………………………………………….42

Table 5.2: Male family size of the consumer………………………………………………………………………….43

Table 5.3: Female family size of the consumer……………………………………………………………………….43

Table 5.4: Average annual expenditure of the consumers (Rs.)………………………………………………44

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Table 5.5: Quantity of milk and milk products purchased………………………………………………………45

Table 5.6: Milk and major milk products………………………………………………………………………………48

Table 5.7: Strategies undertaken by the processors……………………………………………………………….49

Table 5.8: Consumers' perceptions on the problems of milk and milk products………………………50

Table 6.1 Alignment with Sustainability Principles………………………………………………………………..58

Table: 7.1 Economics/cost of Milk Production and Profit Margin of Raw Milk………………………...60

Table: 7.2 Share of benefit out of one-liter milk……………………………………………………………………..61

Table 7.3: DDC's Milk collection, production and sales and Costs……………………………………………62

Table 7.4: Income of DDC from Milk and Milk Products, 2073/74…………………………………………..63

Table 7.5: Cost, Income and Margin of Standard Milk…………………………………………………………….63

Table 7.6: Cost, Income and Margin of Whole Milk…………………………………………………………………64

Table 7.7: Cost, Income and Margin of Cow Milk……………………………………………………………………64

Table 7.8: Cost, Income and Margin of Tea Milk……………………………………………………………………..64

Table 7.9: Cost, Income and Margin of Ghee…………………………………………………………………………..64

Table 7.10: Cost, Income and Margin of Dahi…………………………………………………………………………65

Table 7.11: Cost, Income and Margin of Ice-cream…………………………………………………………………65

Table 7.12: Cost, Income and Margin of Paneer……………………………………………………………………..65

Table 7.13: Cost, Income and Margin of Yak Cheese……………………………………………………………….65

Table 7.14: Cost, Income and Margin of Mozzarella Cheese……………………………………………………65 Table 7.15: Cost, Income and Margin of Kanchan Cheese………………………………………………………………..66 Table 7.16: Cost, Income and Margin of Mozzarella Cheese…………………………………………………………....66

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List of Chart Page

Chart 4.1 Gender of the milk producer (%)……………………………………………………………………………28

Chart 4.2: Education of the milk producer (%)………………………………………………………………………29

Chart 4.3: Type of animal shed (%)…………………………………………………………………………………………………..32

Chart 4.4: Breeding system (%)………………………………………………………………………………………………………..33

Chart 4.5: Source of roughages (%)………………………………………………………………………………………………….34

Chart 4.6: Source of concentrates/grains (%)………………………………………………………………………………….34

Chart 4.7: Improvement in level of income (%)……………………………………………………………………………….38

Chart 5.1: Gender of consumer respondents (%)…………………………………………………………………………….42

Chart 5.2: Education of the consumer respondents (%)………………………………………………………………… 43

Chart 5.3: Main source of income of the consumer (%)………………………………………………………………….44

Chart 5.4: Annual income of the consumer (%)………………………………………………………………………………44

Chart 5.5: Purchase of milk and milk products by the consumers (%)………………………………………………45

Chart 5.6: Availability of milk and milk products (%)………………………………………………………………………..46

Chart 5.7: Changes in availability of milk and milk products (%)………………………………………………………46

Chart 5.8: Changes in the quality of milk and milk products (%)………………………………………………………47

Chart 5.9: Access to milk and milk products (%)………………………………………………………………………………47

Chart 5.10: Changes observed in the dairy processing (%)……………………………………………………………….48

Chart 5.11: Changes in the marketing strategies (%)……………………………………………………………………….49

List of Figure

Fig: 1 Major actors of dairy value chain…………………………………………………………………………………25

Fig: 2 GMP in milk production…………………………………………………………………………………………………………30

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Abbreviations

AI Artificial Insemination

CBO Community based Organization

CDCAN Central Dairy Cooperative Association of Nepal

CoP Code of Practice

CoC Code of Conduct

DLSO District Livestock Development Office

DIA Dairy Industry Association

DOC Department of Cooperative

DLS Department of Livestock Services

DDC Dairy Development Corporation

DADOs District Agriculture Development Office

DCC District Coordination Committee

DMPCU District Milk Producer's Cooperative Union

FGD Focus Group Discussion

FNCCI Federation of Nepalese Chamber of Commerce Industries

GHP Good Husbandry Practice

GMP Good Manufacturing Practice

HH Household

GoN Government of Nepal

I/NGOs International/National Non-Governmental Organizations

KII Key Informant's Interview

MOLD Ministry of Livestock Development

MOAD Ministry of Agriculture Development

MPC Milk Producers Cooperative

MCC Milk Chilling Center

MPCs/Us, Milk Producers Cooperative/Union

MOAC Ministry of Agriculture and Cooperative

MT Metric Ton

NARC Nepal Agriculture Research Council

NCDB National Cooperative Development Board

NDDB National Dairy Development Board

NDA Nepal Dairy Association

NARDF National Agriculture Research and Development Fund

NEPC Nepal Environment Protection Center

R/UMPs Rural Urban Municipality

ToR Terms of Reference

VAHW Village Animal Health Worker

VC Value chain

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Sample Districts under Dairy Value Chain Study in Nepal

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Executive Summary

Introduction As policy inputs, NDDB has been engaged in carrying out studies on various aspects of dairy development in Nepal. Accordingly, NDDB called for carrying out a study on the dairy value chain in Nepal with the following objectives:

• To identify the value chain actors in the dairy sector,

• To find out key factors influencing on value chain analysis for dairy sector,

• To discover the opportunities and challenges of value chain actors, and

• To suggest the value chain actors to strengthening the dairy sector in accordance with benefits of socio-economic standpoint.

The study was carried out in 24 districts and included different value chain actors. These include:

• Government agencies

• Milk producers

• Milk producer's cooperatives

• Chilling centers

• Dairy processors

• Feed manufacturers/industry

• Veterinary service providers

• Marketing channel

• Consumers

• Supporting line agencies like bank, insurance, and finance companies

• Dairy equipment/input suppliers. The study used both the quantitative and qualitative approach. The quantitative approach involved structured questionnaire-based sample survey of 382 milk producer farmers and 375 consumers; and the qualitative approach including focus group discussions as well as key informant survey with the related value chain actors. The research team during the course of data collection from the field also observed the field from the eye of dairy and dairy marketing perspective. For analysis of quantitative data, a database was designed using spss and MS-Excel. Cleaned and labeled data set in SPSS as well as Excel format were prepared for analysis and interpretation. The data were further converted to MS Word format for analysis and interpretation. Qualitative data collected through FGDs and KIIs were organized by key issues and themes and the answers to questions within the themes were grouped and summarized in data analysis frameworks. Deductive approach was implied where similarities and dissimilarities among the responses was examined. Method of content analysis was also employed for classification, summarization and analysis both at the descriptive and interpretative levels. Major Findings of the Milk Producers

• Majority of the milk producer farmers have 1-5 dairy animals signifying that the small farm size is dominant in the dairy animal keeping practice. The lower number of milk producer farmers having more cattle/buffalo signifies that the dairy animal keeping has not yet become a commercial practice.

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• About 85 per cent of the milk producers have milking animals.

• The milk producer farmers keep different breeds of cattle and buffaloes. Largest portion (40.05 per cent) of the milk producers keeping cattle have cross breed cattle followed by local cattle (27.49) per cent). Among the buffalo keeping farmers, half of them have local breed followed by cross breed buffaloes (33.51 per cent).

• Milk producer farmers receive dairy animals from different sources. Among them, most of the farmers receive dairy animals from their own shed, own village, animal suppliers and neighboring villages.

• The milk producer farmers have both the local and improved animal shed to keep their dairy animals and most of the milk producer farmers construct animal shed by using the materials available in their local market, own house and village markets.

• Milk producer farmers used both the artificial insemination and natural breeding to inseminate their dairy animals. Compared to natural breeding, a little bit more farmers were found using artificial insemination

• Majority of the milk producer farmers used neighbor's breeding bull for breeding purpose. Besides, some of them used own bull or bull from the next villages.

• A vast majority of the milk producer farmers using artificial insemination received semen from the extension workers.

• The milk producer farmers used straw, green forage, concentrates and grains for animal feeding. More than three-fourth of the farmers (78.01 per cent) used straw and green forage grown on their own land and the remaining about 22 per cent of them purchased these items. Among the farmers purchasing these items, 75 per cent of them purchased straw. Majority of the farmers (57.14 per cent) purchased these animal feeds from their own village and the remaining farmers who purchased these items from outside their village got these roughages either from traders or from other farmers.

• The milk producer farmers also used concentrates, grains and grain byproducts to feed their dairy animals. A little more than two-third of the farmers (67.80 per cent) purchased concentrates and grains/byproducts while the remaining 32.20 per cent of them got these from their own land.

• Among the milk producer farmers who purchased concentrates, grains and grains' by-product like bran, a large majority of them (83.78 per cent) purchased grains whereas only 16.22 per cent of them purchased concentrate. The milk producer farmers purchased these animal feeds both from their own village (by 57.92 per cent) and from outside the village (by 42.08 per cent). A large majority of the farmers purchasing these items from outside the village (80.73 per cent) got these items from traders and some of them (19.27 per cent) got it from the farmers.

• Most of the milk producer farmers used government and/or private technicians for veterinary care services (to treatment of their dairy animals). In total, about 80 per cent of the milk producer farmers used the services provided by these technicians.

• For the supply of veterinary medicines, about half of the total milk producers (48.69 per cent) were solely dependent on the local agro-vets. Besides, among the farmers who used different other sources of veterinary medicines also used local agro-vets.

• Local market or MPCS or both were the places to market their milk production for most of the milk producer farmers. The information shows that about a little more than one-third (37.17 per cent) of them sold their milk in the local market whereas about a quarter of them (25.39 per cent) sold milk to the MPCS and about one-fifth of them (17.28 per cent) sold milk both in the local market and to the MPCS. Altogether about 80 per cent of the milk producer farmers sold their milk in the local market and to the MPCS.

• The milk producer famers have observed various changes in the dairy production system. Among these the prominent are increased household income, increased number of dairy

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animals and increased ratio of dairy animals and milk producing animals. This signifies that the dairy production system has brought positive changes.

• About a little than one-third of the milk producer farmers (31.15 per cent) articulated that required credit is available. Nevertheless, the remaining more than two-third of the milk producer farmers stated differently and opined that availability of required credit is difficult, the process of getting credit is lengthy and even there is malpractices in credit sanction

• According to overwhelming milk producer farmers (94.50 per cent), their level of income has improved.

• Regarding the changes observed by the milk producer farmers in dairy processing activities, most of them have expressed that the number of dairy processors has increased; processors have diversified the products along with quality improvement. However, some of the milk producers were also of the view that the processors think only about their own benefit.

• Major experiences about milk production and supply as illustrated by the milk producers include positive aspects, difficulties they face, future prospects and challenges.

Major Findings of the Consumers

• The average annual household consumption of consumers is found to be Rs. 3,48,602.41 which is spent for various items of goods and services. Of the total, the major items of expenditure are food (24 per cent), housing (19.53 per cent) and education (19.22 per cent). Besides, expenditure is also incurred for festivals, clothing, health care, entertainment etc.

• Almost all of the consumers (96.27%) have expressed that they purchase milk and milk products for consumption. Only a few of them (3.73 per cent) did not purchase milk and milk products signify that milk and milk products are the essential part in the daily food habit of the consumers.

• The consumers purchased milk and different other milk products. Almost all of them purchased fluid milk. Dahi is purchased by more than 2/3 of them and ghee by more than ½ of them. The other products purchased by the consumers include paneer, ice-cream, mohi etc. Available information shows that average monthly consumption of fluid milk is about 47 liters or about 1.5 liters per day or 290 ml per capita.

• A vast majority of the consumers (89.60 per cent) expressed that milk and milk products are available as and when required. Milk and milk products were not available as and when required for only about 10 per cent of the consumers. This signifies that the consumers have easy and accessible market of the milk and milk products.

• As per about three-fourth of the consumers (74.4 per cent), presently market of the milk and milk products has improved compared to 5 years back. However, about a quarter of the consumers (22.4 per cent) did not accept that the market has improved. A small number of the consumers opined that the market has even deteriorated. On the whole, this indicates that market of the milk and milk products has improved as compared to past but there is need for further improvement.

• As claimed by about two-third (64.27 per cent) of the consumers, quality of the milk and milk products has improved. Nevertheless, about one-third (34.13 per cent) of the consumers expressed that there is no improvement in the quality of milk and milk products. Only for a negligible portion of the consumers (1.60 per cent), quality of milk and milk products has even deteriorated. This signifies that despite the quality of milk and milk products has comparatively improved, quality improvements need additional attention.

• As expressed by an overwhelming majority (85.60 per cent) of the consumers, access to milk and milk products has increased compared to 5 years back. But 12 per cent of the consumers articulated that access to milk and milk products has not comparatively increased. Only a tiny portion (1.60 per cent) of the consumers opined that access to milk and milk products has even decreased.

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• The consumers have observed various changes in dairy processing. Most among them (40.32 per cent) observed that number of the processors has increased while about a quarter of them (25.40 per cent) observed that the processors have diversified the milk products. Similarly, about one-fifth (19.84 per cent) of the consumers observed that the processors have improved the quality of dairy products. Nonetheless, some of the consumers (14.44 per cent) observed that the processors think only about their own benefit. To sum up, the consumers have observed that the number of dairy processors has increased and dairy products have been diversified with quality improvement.

• Fluid milk and different other dairy products are available in the market areas of the consumers. The most common among them are fluid milk, dahi, ghee and paneer followed by, ice-cream, mohi, and sweets. Cheese and chhurpi are also available in the market areas of some of the consumers. This indicates that fluid milk, dahi, ghee and paneer are the dominant dairy products in the market areas of the consumers.

• As asserted by a little less than three-fourth of the consumers (72 per cent), the dairy processors have been following different marketing strategies to market their products. Nevertheless, a bit more than a quarter of the consumers did not find any changes in the strategies of the dairy processors to market their products. Of those who asserted that the dairy processors have been following different marketing strategies, claimed that the strategies followed by the dairy processors include improve in quality; improve in packaging and advertisement.

• Regarding the problems faced by the consumers about the milk and milk products in the market, their important perceptions included: no scientific milk price fixing technique, no uniformity in the price, highly expensive, poor quality milk, poor monitoring and quality check system, poor road and electricity supply etc.

SWOT Analysis The SWOT analysis is qualitative findings of the study. Role and SWOT of the major value chain actors are as follows: Farmer's role is to operate dairy farm with high productive dairy animals and produce hygienic and clean milk. Their major strength is good knowledge and experience in dairy animal farming but their major weakness is lack of knowledge on new technology for more production. Their major opportunities are tremendous demand for milk (increased consumers) and expansion of dairy processing industries and product diversification. Their big threats include determination of milk price determined by others and natural calamities. Major roles of the milk producers' cooperatives are collection of milk from the member and non-member farmers and raise the voices of farmers for their benefit. Their important strengths are well established milk collection and testing facility and they are well organized. Their major weaknesses are poor quality milk from the farmers and poor management skill. Their main opportunities are high demand for raw milk, emergence of new dairy industries and prioritized sector of the government. The threats they face are unfair competition due to so many MPCs/collection centre within the same vicinity. The milk chilling centers' role is to receive milk from the MPCS, test and immediately chill it. They also facilitate MPCs for quality milk production and supply. Their major strengths are they have well established chilling, quality testing and CIP facility in some instances. Their major weaknesses are lack of knowledge on maintenance of equipment and machinery and difficult to manage spare parts. Their major opportunities are expansion of commercial dairy farming and dairy processing industries and

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demand for chilled milk from the milk processors. Their main threat is poor electricity supply and road network. The milk processors' role is collection and processing of hygienic and clean milk, packaging and marketing of dairy products. Their major strengths are they have well established milk processing facility to produce quality milk and dairy products, and good network for milk collection and transportation. Their major weaknesses are non-development of adequate cold chain facility, lack of technically robust manpower, and lack of knowledge and skill in market development and marketing. Their main opportunities include increased demand for processed dairy products, tremendous import of dairy products, and diversification in the dairy business. Their main threats are irregularity in the electricity supply, poor road network and unfriendly government tax system. Main role of milk and milk products sellers is to provide quality milk and milk products to the consumers. Their major strengths are they have established own consumers, change in food habit among the consumers and increased demand for dairy products. Their main weaknesses are difficult to maintain cold chain, lack of transportation facility, and unfair competition. Their main opportunities are market expansion and health conscious consumers, competition in milk production and processing, and increased demand for milk and milk products. Their major threats are low supply of milk in lean season, irregularity in electricity and poor road network Major roles of the feed manufacturer and suppliers are to provide quality feed in comparatively low price, collection of raw materials and feed formulation/preparation and support in commercialization of dairy farming. Their major strengths are high demand of quality feed, and awareness among the farmers to provide quality feed for high production. Their main weaknesses are high transportation cost, no cash payment upon the delivery, expensive raw materials and raw materials not available in the country, and lack of competent technical and marketing manpower. Their main opportunities include expansion of commercial dairy farms, increase market network, and improvement in the income of the dairy farmers. Their main threats are geographical remoteness, and poor road network. The main role of the financial institutions is to provide livestock credit/insurance services. Their main strengths are expansion of commercial dairy farming and dairy processing, and increased awareness on the dairy animal insurance among the farmers. Their major weaknesses are tedious process to receive livestock credit and dairy animal insurance, non-availability of experience, veterinarian/livestock experts and weak monitoring. Their major opportunities are government priority in dairy sector development, large farming community with ample dairy animals, grooming milk processing industries, commercialization of dairy sector and government policy to subsidies in the insurance premium and loan. Their main threats are outbreak of communicable diseases, reluctance to pay the installment and wrong information on collateral. The major roles of suppliers of dairy equipment/materials are management and supply of dairy related utensils and equipments, and to provide support in storage and transportation/ cold chain maintenance. Their major strengths are increased milk production and collection, increased use of modern machinery and equipment, increased awareness on the quality of milk and milk products. Their main weaknesses are non-availability of the required quality and quantity of the utensils/ equipment, unreliable electricity, and lack of technically sound manpower. Their main opportunities are availability of support and subsidy in dairy equipment/utensils/machine, and increased farm mechanization/factory upgrading practice. The main threats are non-complying government policy and practices, and geographical remoteness and poor road access. The major role of the AI and veterinary service providers are to provide onsite veterinary care and AI services and counseling services on dairy farming. Their main strengths are experience in working at

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local level, knowledge on the number and type of dairy animals in the farmers premises, and experience and goodwill in AI and veterinary services. Their main weaknesses are difficulty to motivate the farmers from traditional to commercial, lack of time due to excessive demand, lack of new technology (no training), lack of semen and veterinary medicine, and youth's preference to foreign employment. Their major opportunities are increased income of the dairy farmers, increased consciousness among the farmers on animal health, and lack of liquid nitrogen. Their main threats are inconsistent power supply, poor rood network, and non-recognition by the government. Agro-vets' main roles are supply of the veterinary medicine, vaccine and compound feed, provide AI services, import and dissemination of proven advanced technology, supply of seed and sapling of forage/ fodder, and counseling services to the dairy farmers. Their major strengths are capacity on veterinary and AI services at the local level, management of the compound feed, TMR and feed raw materials, increased number of improved animal breeds, increased purchasing power of the dairy farmers, and gradual commercialization of dairy farming. Their main weaknesses are unavailability of required quality and quantity of medicine, vaccine, semen and other inputs, lack of veterinary and livestock technicians, poor road network/no all-weather roads, lack of awareness among the farmers on their need of inputs (medicine, semen, seeds etc), lack of green forage/fodder seeds and saplings, and prevalence of traditional dairy farming system. Their major opportunities include overwhelming interest among the youth in dairy sector, government priority to dairy farming, expansion of milk collection and processing, livestock insurance, and increasing awareness on the animal health care. Their major threats are geographical remoteness and difficult to manage the required inputs in time, occurrence of contagious diseases, and irregularity in electricity supply. Economics of Value Addition Of the total costs, major cost of dairy animal farming is feeding cost with 46.6 percent in case of buffalo and 48.18 percent in case of cow. Second highest cost is wage (care and management) which was 25.02 percent in case of cow and 25.24 percent in case of buffalo; interest on loan was 12.21 percent in case of cow and 13.45 percent in case of buffalo. Thus, cost of milk production was bit higher in buffalo than cow. Cost of milk production is less when more animal is kept and vice versa. The farm size was categorized from small (having herd size 5 or less), medium (having herd size 6-20) and large (having herd size more than 20). It was found that the smaller the farm, the more the cost and vice versa. There was difference in the cost of dairy animal keeping between cow and buffalo, the cost for keeping buffalo was found less compared to cow. Cost per animal when keeping 5 or less cow was Rs. 96,241, while buffalo with same number was NRs. 93,326, similarly per animal cost when keeping 6-20 cow costs NRs. 92,757 while keeping same number of buffalo costs NRs. 91,235 and per animal cost when keeping more than 20 cow costs 82,739 and same number of buffalo keeping costs NRs. 75,487. The cost of milk product in case of cow was found Rs. 32.82/liter and that of buffalo was NRs. 43.51/ liter It was found that the cow milk price was NRs. 45 and that of buffalo was NRs. 50 while cost of production was NRs. 37.32 in case of cow and NRs. 46.40 in case of buffalo. Profit margin of cow milk seems 20.81 percent while that of buffalo was 7.83 percent. Milk production in the study districts was predominated by the buffalo but productivity of buffalo is less compared to cow. Increasing number of commercial cow farms or cow could be instrumental to decrease cost of milk production and increase profit margin to the farmers. Total share of the production chain was NRs. 43.86 and marketing chain was NRs. 16.14 per liter constituting 73.1 and 26.9 percent respectively. Consumer price of a liter of milk was found NRs. 60. In totality, 42.21 percent share have been for farmers, 18.61 percent for agro-vets (medicines, feed,

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seeds, fertilizer etc), 11.56 percent to financial institutions, 9.96 percent to dairy equipment suppliers, 5.42 percent to dairies and 5.4 percent to the staffs. Dairy industry in Nepal is comprised of different types and scales of dairies operating both in the public, private and cooperative sectors. Except for the DDC, information about the cost and income of these dairies is not available as the private or cooperative sector dairies are reluctant to disclose this information. As such, the cost of value addition of different milk products is attempted to assess based on the DDC cost and income data of 2073/74. DDC produces different dairy products but separate costs of each product are not maintained. It maintains joint cost records for multiple products. As such, method of allocating cost based on sales value or relative sales value method is employed to determine the cost of each individual product. Summary of the cost, income and margin of various dairy products was found as follows:

• Per unit cost of standard milk was NRS. 60.44/liter, income was NRs. 61.73/liter and margin per unit was NRs. 1.29 per liter.

• Per unit cost of whole milk was NRS. 75.55/liter, income was NRs. 77.16/liter and margin per unit was NRs. 1.61 per liter.

• Per unit cost of cow milk was NRS. 68.49/liter, income was NRs. 69.95/liter and margin per unit was NRs. 1.46 per liter.

• Per unit cost of teae milk was NRS. 54.18/liter, income was NRs. 56.52/liter and margin per unit was NRs. 2,34 per liter.

• Per unit cost of butter was NRS. 624.72/kg, income was NRs. 638.08/kg and margin per unit was NRs. 13.36/kg.

• Per unit cost of ghee was NRS. 636.04/kg, income was NRs. 649.63/kg and margin per unit was NRs. 13.59/kg.

• Per unit cost of dahi was NRS. 90.01/liter, income was NRs. 91.94/liter and margin per unit was NRs. 1.93/liter.

• Per unit cost of ice-cream was NRS. 314.98/liter, income was NRs. 219.59/liter and margin per unit was NRs. 4.61/liter.

• Per unit cost of paneer was NRS. 455.00/kg, income was NRs. 464.73/kg and margin per unit was NRs. 9.73/kg.

• Per unit cost of yak cheese was NRS. 997.06/kg, income was NRs. 1,018.38/kg and margin per unit was NRs. 21.32/kg.

• Per unit cost of kanchn cheese was NRS. 674.92/kg, income was NRs. 689.36/kg and margin per unit was NRs. 14.44/kg.

• Per unit cost of yak Mozzarella was NRS. 521.71/kg, income was NRs. 532.86/kg and margin per unit was NRs. 11.15/kg.

It shows that the dairy processing generates some margin per unit of the products. This indicates that value addition in dairy processing is commercially cost-effective. Although this may not exactly represent the cost of value addition of the dairy industry as a whole, it gives a fair idea about an approximate value addition cost involvement in the dairy processing. Recommendations During the discussions with the value chain actors, they have expressed their concerns and also have made various recommendations to improve the dairy value chain. Their main recommendations are as follows: Farmers:

• Priority should be given for soft loan rather than the subsidy/grant with extensive integrating research. Increase access and availability of subsidized loan and insurance

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• Training on full package of practice on dairy farming including breeding, feeding, care-management, disease prevention and control, GMP, CoP, SoP, marketing and marketing management with extensive follow-up and consultancy services to the dairy farmers.

• Develop dairy animal resource center, extend the AI services with quality sexed semen, forage and fodder resource center and assure steady milk production throughout the year.

• Motivate youths in dairy farming with honor providing training on business plan, farm record including full package of practice for dairy farming and expansion of shed improvement and housing

• Establish milk collection and chilling centers at strategic location along the road corridor and create an environment with increased access and availability of inputs and services and uninterrupted market. Allocate milk shed areas/ pockets for specific dairy processors and regulate them with strong code of conduct where the concern processing industry will provide training and extension activities with market guarantee of the milk

• Provision of forage seed, sapling, TMR, feed raw materials in subsidized rate. • Establish mechanism of assessing number, type, stage of lactation, total milk production,

cost of milk production and profit margin to the farmers. Link the system with computer software between every local governments and federal government with uninterrupted server to collect information in central data bank. Fixed the milk price in close consultation with farmers and pricing formula should be developed for fixing the milk price based on the compositional /chemical and bacterial quality allocating points for fat, SNF, protein, lactose, TPC and coliform). Expansion of production based premium price per unit of milk produced.

• Provision of good road network, electricity facility, cold chain, digital system to measure the quality of milk (chemical and bacterial).

• Management of proving recently pass out dairy graduates to serve in diary pocket areas • Transform dairy farmer to dairy entrepreneur and dairy farming as enterprise organizing

observation tour and exchanged visit, workshop, training etc and commercialize dairy farming.

Milk Producers Cooperatives

• Regular supply of electricity and all-weather roads with support/ subsidy/ loan to the dairy cooperatives

• Strengthen the institutional capacity of the MPCs augmenting cooperative member education, cooperative execution, business plan preparation, financial management and milk product diversification

• Scientific milk pricing system to be introduced with extensive training and advocacy on GMP, CoC, GHP and CoP

• Establish chilling facility at strategic location- road corridor, provide chilling facility and milk transport in subsidized loan.

• Equip the MPCs with up to date laboratory and computer software to calculate the milk price.

Milk Chilling Centers

• Increase services to the farmers to reduce the fluctuation of milk production between the season

• Provide uninterrupted supply of electricity and improve road network • Increase chilling facility at strategic location (along the road corridor) • Provide fresh and refresher training on operation and maintenance of chilling centre

Milk processors

• Improvement in electricity supply and road network • Training to the technical and managerial staff on good manufacturing practices,

marketing management

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• Effective monitoring of the industries for quality assurance (government role should be facilitating not only controlling)

• Increase investment in quality improvement • Establish computer software/ link it with dairy industries and their products and central

quality control authority and establish immediate feedback system to the processing industries.

Milk and milk products sellers

• Regular supply of electricity and all-weather roads • Training on marketing management • Facility development for cold chain maintenance

Consumers

• Reduce the consumer price of milk and milk products. • Improve the milk quality, discourage toned milk production, strictly prohibit the supply of

poor quality milk and products in the market. • Promotional activities on the GHP, GMP, CoP, SoP, Codex, HACCAP provision for mass

awareness. • Good road and transportation network should be developed with appropriate cold chain

facility • Increased number of milk outlets viz: sales booth/centers, marts, departmental stores,

franchised shops and increased availability of milk and products all the time Feed manufacturer and suppliers

• Increase production of feed raw materials in the country • Training on the marketing management • Provide subsidy in feed manufacturing • Regular supply of electricity and water • Increase feed storage capacity

Financial institutions

• Awareness on the insurance and soft loan among the farmers • Simplify the rebating of insurance claim policy • Increase productivity of animals through better management and service delivery • Strong monitoring and evaluation system to be developed • Premium should be fixed for better compensation

Suppliers of dairy equipment/materials

• Meaningful implementation of custom duty exemption policy • Provide training on operation and maintenance of the dairy machinery and equipment • Investment protection policy to be formulated • Increase subsidy and support • Scientific milk price fixing policy to be introduced

AI and veterinary service providers

• Massive functional and technical training on AI and veterinary service delivery • Recognition from the government on the AI service providers and AI services • Increased access and availability of good quality sexed semen • Meaningful implementation of insurance and subsidized loan • Government role not only controlling but also facilitating

Agro-vets

• Technology friendly training at local level • Meaningful implementation of subsidized loan and insurance and on the spot loan sanction

procedure should be established • Management of subsidized veterinary medicine, semen, seeds in time

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• Reliable electricity supply and road network • Increase in number of high productive dairy animals with developing resource centers • Technology transfer for high performance of dairy animals (breeding, feeding, sanitation,

veterinary service etc) Department of Livestock Development

• Marketing management, increase number of livestock service, uniformity in milk price, expansion of forage mission and AI mission

• Functional coordination and linkage with different and relevant agencies and additional support and subsidy

• Provision of soft loan, emphasis on hygiene and sanitation in dairy farming, increased required number of human resources

• Training and exposure visit to the field level extension workers • One ward one technician campaign and action accordingly • Link the agriculture and forest university with the dairy farming and manage to recruit

recently pass out graduates to serve farmers dairy pocket areas • One dairy industry one dairy pocket area should be implemented • Provide adequate quantity of high productive sexed semen to the dairy farmer in

subsidized rate • Establish database of dairy farms, farm record managing separate server and link with

local government dairy management system • System of concentrating farmers only in production rather to marketing should be

developed Division Cooperative Office

• Provide effective and functional training to the cooperative general members, executive body and staff

• Provide business development training to the cooperative executive committee and staff members

• Training on milk product diversification, marketing, market development and consumer care

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Chapter 1

Introduction

1.1 Background

A value chain is a high-level model developed by Michael Porter used to describe the process by which businesses receive raw materials, add value to the raw materials through various processes to create a finished product, and then sell that end product to customers. Companies conduct value-chain analysis by looking at every production step required to create a product and identifying ways to increase the efficiency of the chain. The overall goal is to deliver maximum value for the least possible total cost and create a competitive advantage. Value chain can be used to examine the various activities of a firm and how they interact in order to provide a source of competitive advantage by, performing these activities better or at a lower cost than the competitors. In competitive terms, value is the amount buyers are willing to pay for what a firm provides them. Creating value for buyers that exceeds the cost of doing so is the goal of any generic strategy. Value instead of cost, must be used in analyzing competitive position’. Sustaining competitive advantage depends on understanding NOT only a firm’s value chain but how the firm fits in the overall value system. In terms of diary value chain, there are stakeholders, who are not direct actors/players, but contribute to its development. The stakeholders in question take different forms such as government; development organizations or promoters and input suppliers; that are necessary and play very important roles in the development of the dairy subsector in Nepal. The key players in the dairy value chain are the input suppliers, farmers of various sizes, milk collection/chilling centers, processors and retail outlets. Each of the players in the value chain carry out various value adding services, the input suppliers for instance provide various veterinary drugs, milking equipment, AI services, feed among other services. The primary producer in the dairy value chain – the farmer carries various animal husbandry measures such as disease control measures, provision of feed to in-calf and lactating cows requirements and traded through the formal marketing channels. The farmers adopt different feeding regimes; provide water to enhance milk production by dairy cows. It has been established that the larger the scope of operation of the farmer, the lower the cost production, hence economies of scale. The Milk Producers Cooperatives (MPCs) play intermediary roles for small holder farmers to enable them enter the commercial selling of milk through the processors to the market. MPCs bulk the milk, test the milk for quality and either chill the milk by themselves or dispatch the milk to the nearest milk chilling centers (MCCs) or directly to the milk processing plants. Some MPCs provide capacity building services to farmers in order for the farmer to run dairy farming as a business. The processor is an important player in the dairy value chain. The processors play the role of promoting the growth of the dairy subsector and offer the market to the MPCs and the farmers to buy their milk. The processors buy raw milk and produce various milk and milk products, including pasteurized fresh milk, ghee, butter, ice cream, paneer etc. among others. The processor enters into supply agreements with various retail outlets such as milk selling booths, franchise shops etc. among others. The promotion of value chains in agribusiness aims to improve the competitiveness of agriculture in national and international markets and to generate greater value added within the country or region. The key criterion in this context is broad impact, i.e. growth that benefits the rural poor to the greatest possible extent or, at least, does not worsen their position relative to other demographic groups. The need to connect producers to markets has led to an understanding that it is necessary to verify and analyze markets before engaging in upgrading activities with value chain operators. Thus, the value

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chain approach starts from an understanding of the consumer demand and works its way back through distribution channels to the different stages of production, processing and marketing. 1.2 Objectives of the Study National Dairy Development Board (NDDB) is the apex level policy making body formed by the government of Nepal in 1992 for holistic dairy sector development of the country. Functions and duties of NDDB includes formulation and recommendations on policies on import and export of good necessary for production and promotion of milk and milk products, acceleration of the implementation of approved policies; formulation and recommendation on pricing policy of milk to Government of Nepal; encouragement to development of dairies through the medium of co-operatives; monitoring, evaluation and review of dairy development and registration of dairy industries. As policy inputs, NDDB has been engaged in carrying out studies on various aspects of dairy development in Nepal. Accordingly, NDDB called for carrying out a study on the dairy value chain in Nepal with the following objectives:

• To identify the value chain actors in the dairy sector, • To find out key factors influencing on value chain analysis for dairy sector, • To discover the opportunities and challenges of value chain actors, and • To suggest the value chain actors to strengthening the dairy sector in accordance with benefits

of socio-economic standpoint.

1.3 Scope of the Study

The study covers the following areas of value chain of the dairy sector:

• Identification of the key as well as supporting actors in the dairy value chain. • Analysis of the functions of each identified key and supporting actors in the dairy value chain. • Analysis of the prime factors influencing the key as well as supporting actors in dairy value

chain. • Assessment of the opportunities of the key as well as supporting dairy value chain actors. • Analysis of the challenges faced by the key and supporting dairy value chain actors. • Analysis of change in income of the key dairy value chain actors. • Analysis of the consumers' perceptions/attitudes towards the activities of the dairy value

chain actors. • Analysis of the changes in the dairy business in terms of: • household income contribution, livestock composition and gender role • dairy extension services • dairy production technologies • dairy input supply and credit services • dairy performance and income • dairy processing and marketing • Analysis of total volume of milk flowing through formal channel (value added) and informal

channel (partial or n o value added) in the districts under sampling frame. • Find out weakness and strength of value chain actors.

3

Chapter II Methodology

2.1 Desk study The literatures/documents related to dairy sector specially the dairy value chain study reports, and related problems, issues, experiences and other relevant documents will be collected and reviewed. Especially the government's policy, programs, guideline, operating manuals (if any) about the dairy development focused on dairy value chain will be collected and reviewed. Similarly, the survey tools prepared and used by NDDB and other agencies (if any) will also be visited to gather the information.

2.2 Consultation with concern authorities

Concern authorities in National Dairy Development Board (NDDB) were met and discussed on various aspects of dairy value chain. Need of dairy value chain study its gravity, objectives and experiences during its implementation in the field level were discussed. This process provided clear insight on the objectives and indicators of the assessment.

2.3 The study areas

The study was carried out in the following major dairy pocket of the provinces/districts. Table 2.1: Geographical distribution of sample districts

Province Districts No. of Districts 1 Ilam Terathum and Morang 3 2 Saptari, Dhanusha and Sarlahi 3 3 Bhaktapur, Lalitpur, Makwanpur, Kavreplanchok,

Sindhupalchok and Chitwan; and Rasuwa and Dolakha for Cheese production

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4 Kaski, Bagling and Rupandehi 3 5 Dang, Banke and Bardiya 3 6 Surkhet and Dailekh 2 7 Kailali and Dadeldhura 2

Total 24

2.4 Coverage of the study

The study included different value chain actors. These include:

• Government agencies (department of livestock services, district level livestock service offices, department of cooperatives, NDDB, NARC etc).

• Milk producers (big, medium and small farms) • Milk producers cooperatives (primary, district and central level) • Chilling centers (cooperative, public and private) • Dairy processors (cooperative, public and private and associations of private dairies) • Feed manufacturers/industry • Veterinary service providers (agro-vet, para-vet etc.) • Marketing channel (wholesaler/retailer) • Consumer's (perception on quality and price of milk and milk products) • Supporting line agencies like bank, insurance, and finance companies • Dairy equipment/input (color, flavor, chemicals, packaging materials etc.) suppliers.

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2.5 Sampling and the sample Size

The study used stratified random sampling method to select the required sample size. Among others, the sample size of farmers and consumers has been designed by using the following formula1 where it is assumed that the number of farmers and consumers to be greater than 100,000 and confidence level to be 95 per with 5 per cent margin of error: χ2*N*P*(1-p) n = (ME2*(N-1)) + (χ2*P*(1-p)) where, n is required sample size χ2 is chi square for the specified confidence level at 1 degree of freedom (Value* 3.841 for 5% confidence level with 1 degree of freedom) N is population size P is population proportion (0.5) ME is desired Marginal error (expressed as a proportion) By using the above formula, the sample size is arrived at 384. However, due to the need to discard some samples, the actual sample size of farmers has been 382 and that of the consumers has been 375. As mentioned above, three strata viz. big, medium and small was made to select the farmers. Similarly, estimated sample size for other value chain actors is proposed to be as presented in Table 2.2. Table 2.2: Sample size for other value chain actors

Category No. of

sample/ district

Total Remarks

Milk Producers cooperatives

Operating under public, cooperative and private dairies

Small (< 250 lpd) 2 48 Medium (250-<500 lpd) 2 48 Big (>500 lpd) 1 24

Sub total 5 120 Chilling centers

Operating under public, cooperative and private dairies

Small (< 500 lpd) 1 24 Medium (500 -<2000 lpd) 1 24 Big (>2000 lpd) 1 24

Sub total 3 72 Milk processors

Operating under public, cooperative and private dairies

Cottage (<1000/lpd) 2 48 Small (>1000-5000 lpd) 2 48 Medium(>5000-50000 lpd) 2 24 Large (>50000 lpd) 2 5

Sub total 8 125 Feed manufacturers/ dealer 1 24 Public and private Veterinary service providers 3 72 Public and private

1 Krejcie & Morgan: “Determining Sample Size for Research Activities” (Educational and Psychological Measurement, #30, pp. 607-610), 1970

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Category No. of

sample/ district

Total Remarks

Marketing channel 3 72

Comprised of dairy's own shops, booth men, dealer, franchise shops etc. operating under public, cooperative and private dairies

Supporting line agencies 3 72 Public and private Dairy equipment/input suppliers 3 72 Private

Total

629 Lpd- liler per day

2.6 Data collection tools

Based on the literature review and consultative meeting with concerned authorities of NDDB structured and semi-structured questionnaires/checklists were prepared to address the objectives and scope of work as defined in the ToR. Semi structured tools such as checklists/interview guides were designed to conduct Key Informant's Interview (KII), Focus Group Discussion (FGD), and secondary information collection. Following will be the data collection tools: Tool: 1 Structured questionnaire for HH survey with dairy farmers and consumers Tool: 2 Semi structured check-list for Key Informant’s Interview (KII) with chilling centers, Milk Producers Cooperative (MPC), feed manufacturers, veterinary service providers, supporting line agencies, dairy-equipment/ input suppliers, milk processors, marketing channel/ marketers. Tool: 3 Focus Group Discussion (FGD) Guideline for FGD with social workers, active/ leader farmers, school teachers, gender activists, CBO members Tool: 4 Semi structured check-list for direct observation of the value chain actor premises Note: under tool 2, the questions were different for different key informants of specific value chain actors. Tools are attached in annex: 1. The data collection tools were submitted along with the inception report. The data collection tools were refined and finalized after incorporating the feedback/suggestions received from NDDB. The final tools were submitted to NDDB and used after NDDB's approval.

2.7 Training of the survey team

A survey team of field supervisors and enumerators experienced in carrying out similar surveys was selected. Two days training was organized to orient the field survey team on the study goal, objectives, methodology of the research, sampling design, sampling process, sample size, quality control of the data collection processes. The orientation training provided enough knowledge about survey methodology, process, contents of each category of data collection method and tools to be used. Besides this, participants will be provided opportunity to have experiential learning about using the designed data collection tools in real life situation. After the training session, participants conducted simulation exercise where one participant served as respondent and other acted as interviewer. Based on the experience gained through simulation exercise, the core team members of the study team collected the feedback from the participants and the survey tools/questionnaires were revised accordingly. For data collection a team of 21 persons with one supervisor and 2-3 enumerators were formed for each team as presented in Table 6. The supervisor managed the field, conducted meetings and Key Informant's Interviews (KIIs) with related value chain actors and conduct Focus Group Discussion (FGD). The enumerators conducted the quantitative survey and assisted the supervisors to conduct KIIS and FGDs.

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Table 2.3: Field survey team composition

Province Districts No. of Districts

Team Supervisor Enumerators

1 2

Ilam, Terathum and Morang Saptari, Dhanusha and Sarlahi

6 1 1 5

3 Bhaktapur, Lalitpur, Makwanpur, Kavreplanchok, Sindhupalchok and Chitwan

6 1 1 4

3 Rasuwa and Dolakha (for Cheese production) 2 1 1 2

4 Kaski, Baglung and Rupandehi 3 1 1 2 5 6

Dang, Banke, Bardiya, Surkhet and Dailekh

5 1 1 3

7 Kailali and Doti 2 1 1 2 Total 24 6 6 18

2.8 Methods of data collection from the field

2.8.1 Sample selection

In each district, meetings with the related agencies and individuals were held so as to be informed about the existing dairy value chain actors. Based on this meeting, list of all dairy value chain actors was be prepared; and the potential samples were drawn from the list. For the farmers, members of those MPCs having all type of farms i.e. small, medium and large were selected for farmers' survey. Similarly, list of institutional consumers (tea shops, hotels, restaurant, schools, hostels, hospitals, Army, police barrack etc) with quantity of milk consumed was prepared and selected based on the discussions with the key informants covering varying quantity of milk consumed. Farmers, consumers and other value chain actors were randomly selected. Simple random sampling technique was employed to select farmers and consumers. Likewise, other value chain actors within the districts were also selected from the potential list by using the same technique.

2.8.2 Field study

Field study was comprised of both the structured questionnaire based quantitative and semi-structured tools including checklist/interview guide based qualitative survey approach. (i) Household Survey Household survey of both the farmers and consumers was conducted through face to face interview with them by using the approved structured questionnaire. The survey was separately arranged for each category. (ii) Key Informant's Interview Key Informants drawn from among the concerned stakeholders who are involved directly or indirectly in the project implementation process at various levels and considered knowledgeable about the project activities. Among others, key persons representing NDDB, MPCS, MPCU, CDCAN, dairy processors, MOAD, DLS, and FNCCI at the center, Regional Directors, DLSO, DADOs, DCCIs, feed manufacturers, dairy equipment/machinery/inputs suppliers, marketers/ market channels, I/NGOs and other stakeholders in the district were interviewed using a separate checklist developed for this purpose.

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(iii) Focus Group Discussion/SWOT FGDs/SWOT with 7-10 participants comprised of the representatives of farmers and local persons including teachers, village livestock workers and social workers were conducted with the help of an FGD guide. The FGD participants were selected maintaining gender balance and inclusiveness. Discussion will be organized at the convenient location for all participants. One FGD in each district was conducted. One member of the field team facilitated the discussion while other recorded literally the words and phrases without distorting the opinion of the participants. The focus group discussion provided the information to have verification and validity generation on the information collected through the HH surveys and report on indicators that can’t be done through household surveys. (iv) Direct Observation The research team during the course of data collection from the field also observed the field from the eye of dairy and dairy marketing perspective. Method of qualitative survey was applied to conduct survey with other dairy value chain actors. Table 2.4 depicts the field study methodology with different dairy value chain actors. Table 2.4: Field survey methodology

Value Chain Actors Sample Survey method Survey tool

Dairy farmers 382 Quantitative survey Structured questionnaire Consumers 375 Quantitative survey Structured questionnaire

Sub-total 757 Farmers' cooperatives 120 Qualitative survey Semi-structured tools Chilling centers 72 Qualitative survey Semi-structured tools Milk processors 125 Qualitative survey Semi-structured tools Feed manufacturers 24 Qualitative survey Semi-structured tools Veterinary service providers 72 Qualitative survey Semi-structured tools Marketing channel 72 Qualitative survey Semi-structured tools Supporting line agencies (DLSO, DADOs, DCO, DCCs)

72 Qualitative survey Semi-structured tools

Dairy equipment/input suppliers 72 Qualitative survey Semi-structured tools Sub-total 629

Total 1,386 Apart from this, the officials of related government and non-government agencies were interviewed by using the KIS tool. Besides, the field research team during the course of data collection from the field also directly observed the operations of the value chain actors and note down the important features of the operations.

2.9 Data Management and analysis

Quantitative data: All completed questionnaires were stored separately in a confidential place at NEPC office. Questions with open-ended responses were coded manually. A database was designed using spss and MS-Excel. All data were entered by trained personnel. Ten per cent of each day’s entered data were checked by the data manager to control errors. Data were checked for out-of-range values and inconsistencies between variables. The data were then be transferred to the IBM SPSS

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Statistics version 13 software (SPSS). Cleaned and labeled data set in SPSS as well as Excel format were prepared for analysis and interpretation. The data were further converted to MS Word format for analysis and interpretation. The data were analyzed and presented both in the tabular and graphical forms. Qualitative data: Qualitative data collected through FGDs and KIIs with respondents were organized by key issues and themes and the answers to questions within the themes were grouped and summarized in data analysis frameworks. Verbatim quotes that illustrated the views of the majority of participants or contradicted the majority view were extracted from the interviews and were included in the study report within the relevant sections. Thus, deductive approach was implied where similarities and dissimilarities among the responses was examined. Method of content analysis was also employed for classification, summarization and analysis both at the descriptive and interpretative levels. The data entry persons were supervised by the data manager during data entry. After entering all quantitative data received from the field, they were cleaned to ensure a robust quality of analyzed data. The development of coding frame and categories used in the qualitative data analysis was done by a team of two researchers working independently and then their coding frames were compared.

2.10 Progress update

The progress report of the study was prepared and submitted to the NDDB regularly during the whole study period. The status of the activities, problems and solution measures undertaken were shared with NDDB to get work completed in time.

2.11 Report preparation

Draft report was prepared based on the valid information collected from the primary and secondary sources. The data collected from different methods and tools were triangulated for its validity before analysis. The report was prepared based on quantitative and qualitative data collected from primary and secondary sources. Besides analyzed tables, the report also includes pictures, graphs, diagrams, narrative analysis, and other inferential statements that sufficiently extrapolate the prevailing dairy value chain system. The draft report was submitted to NDDB for its comments and suggestions. Draft report was also presented to the stakeholders in stakeholder workshop to collect their feedback, comments and suggestions. After incorporating the relevant comments, suggestion and feedback from NDDB and other stakeholders' final, report was prepared and submitted.

2.12 Data quality assurance

2.12.1 General measures

The following measures were taken for the quality control of data collection:

• Provision of a thorough training for the field researchers, • Development of research tools that are clearly understood by both the researchers and the

respondents, • Mandatory checking of completed questionnaires by the research assistants themselves and

then by the field supervisors for the completeness and accuracy of collected information before the researchers leave for data collection,

• Application of conflict sensitivity and Do-No-Harm approaches both during the questionnaire design and survey,

• Maintenance of research ethics during the entire process of the study, • Minimization of gender and linguistic barriers during the collection of data,

9

• Monitoring of field research to ensure that the desired number of interviews are conducted on timely basis,

• Establishment of a mechanism to ensure that challenges faced in the districts are duly reported and feedbacks are promptly provided,

• Establishment of range and skips in the data entry program, and • Generation of frequency distribution tables to examine whether or not some possible outliers

in data are due to errors in data entry. In addition, the field teams were also instructed to review the responses after completing their daily work and visit the respondents again the next day if any information was found missing and/or any inaccurate or inconsistent information was found. The enumerators were particularly directed to present the filled questionnaires to the supervisors for checking; and supervisors to meticulously check the filled questionnaires for accuracy and completeness. The field teams were strictly made aware to leave the district only after confirming that the collected information is complete, accurate and consistent with those asked in the questionnaires. They were warned to be liable if any mistakes are found in filling the questionnaires. The central team members (Team Leader, dairy specialists and marketing expert) also visited the survey site during data collection. During the visit they checked if the field teams are working as scheduled, randomly checked the filled questionnaires and offered advice in case they are facing any difficulties in data collection. Moreover, each field researcher was provided the hotline telephone number in Kathmandu office of NEPC where the field researcher could deliver their problem. The NEPC management shared the problem and promptly responded to the field team with solutions.

2.11.2 Instruction to the survey team

To make the survey as best as possible, the survey teams were instructed to comply with the following procedures during the field survey:

• To select the settlement/ward of the U/R municipalities which is comprised of heterogeneous population of mixed caste; and to encompass the neighboring settlement/ward if there are no single village having such characteristics;

• To prepare the HH list in consultation and presence of knowledgeable persons of the village; • To cover all caste/ethnicity in the settlement/ward(s) while selecting the HHs for interview

from the HH list; • To conduct the interview by visiting the selected HHs but not by forming the group; • To firstly greet the respondent and acquaint her/him about the purpose of survey; • To politely request but not command the respondent to find a secluded place for interview so

as to avoid intervention during interview by either other HH members or any outsiders; • To minimize gender and linguistic barriers during the survey; • To ensure that the desired number of interviews are conducted on timely basis; • To duly report any challenges faced in the districts; • To cut by a single line if any deletion is to make during the questionnaire filling; • To check the questionnaire if all questions are responded; • To thank the respondent after completion of the interview; • To respect the village's dignity and customs while conducting the survey; and • To depart from the village only after clearing all the payments related to lodging, food and

other items.

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Chapter III

The Value Chain Actors

3.1 Key Direct Actors 3.1.1 Dairy farmers The dairy farmers are scattered throughout the country. Their main function is to keep and manage dairy animals, produce milk and supply it to the milk collectors (MPC/milk processing plants/private vendors, consumers). Mostly, they belong to small scale with 1-5 dairy animals and subsistent in nature. Some of them belong to semi-commercialized medium scale and are concentrated in the road corridors and trying to connect to formal sector collection network. They have strong network in the form of primary MPCS, district level DMPCU and the central level CDCAN. They are characterized by high cost of milk production, high calf rearing cost, disease/parasites having economic and zoonotic importance, infertility in dairy animals, and poor access to technology/inputs, quality feeding resource and cost, poor adoption of available technologies. Almost all of them have no knowledge and skill on the hygienic milk handling, COP, CoC and GMP.

3.1.2 Milk producers' cooperative societies

MPCSs are mostly established in the rural areas. Farmers from the surrounding villages carry their milk production to the nearest MPCS where their milk is received, measured, recorded and samples are taken for quality check [mostly fat and solid-not-fat (SNF) test]. After receiving milk from all farmers, the MPCS transport milk by available means to the nearest MCC or milk processing plants. Some of the MPCSs have their own chilling system where they chill the milk, deliver it to the DDC and/or private MCCs or sell in the local market. A few MPCSs located near to the milk processing plant directly deliver milk there. They receive payment for milk and distribute it to the milk producers who supply milk to them. Some of the MPCS also offer inputs and services to the dairy farmers. They establish linkage between dairy farmers and the milk processors. The dairy cooperatives in Nepal have adopted a three - tier system of which the MPCSs are the first-tier primary level cooperatives. In the second tier, MPCSs in different districts have formed district level District Milk Producers’ Cooperative Unions (DMPCUs), which are registered under Cooperative Act as district level bodies. Their main objectives are to deliver programs designed to support the increased production and processing of milk and milk products and to contribute to the financial and social upliftment of the rural milk producers. In the third tier, the MPCSs and DMPCUs have formed Central Dairy Cooperative Association Limited Nepal (CDCAN). CDCAN is registered as their central-level cooperative organization. Established in 1993, CDCAN is a national level tertiary organization of all the milk producers' cooperatives at primary and secondary levels. CDCAN aims to bring increased economic benefits to milk producers and to contribute to make the country self-reliant in clean and high-quality milk and related products. It also implements policy advocacy activities at the central level to represent the interest of member organizations.

3.1.3 Milk chilling centers

Next are the MCCs established by the milk processing plants or cow cheese production centers where milk received from the MPCSs is measured, recorded, and platform quality control tests are performed that generally include organoleptic test, fat and SNF test, clot-on-boiling (COB) test etc. Occasionally, adulteration test is also performed. Milk in the MCC is cooled by either instant chilling system or in the bulk milk cooling vat. The chilled milk is stored in milk storage tank in case of MCCs having instant chilling facility and in the cooling tank itself in the MCCs where milk is cooled in the bulk-cooling vat. In the cheese production centers, milk received from the MPCSs is directly processed to produce cheese, butter and other dairy products such as paneer, and sweets. Milk from the MCCs is transported to the milk processing plants in insulated bulk milk tankers.

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3.1.4 Milk processing industries

The milk processing industry comprises both the government owned Dairy Development Corporation (DDC) and the dairies operating under the private sector. DDC is the pioneer public sector dairy entity. It was created in July 1969 under the Corporation Act of 1964. Its major objectives are to: provide a guaranteed market for milk to the rural farmers with fair price; supply pasteurized milk and milk products to urban consumers; develop organized milk collection system to meet increasing demand for pasteurized milk and milk products and develop an organized marketing system for milk and milk products in urban areas. Dairy Development Corporation is the major institution in the public sector involved in processing of milk and milk products including cheese. This organization was created during 1969 under the Corporation Act of 1964. The major objectives are to: provide a guaranteed market for milk to the rural farmers with fair price; supply pasteurized milk and milk products to urban consumers; develop organized milk collection system to meet increasing demand for pasteurized milk and milk products and develop an organized marketing system for milk and milk products in urban areas. The private sector started its involvement in the dairy-processing sector from late 1970s with very small-scale operations in Kathmandu. Today, there are many private dairies (including cooperatives) of varied scale including cottage, small, medium and large both within and outside the Kathmandu valley. While almost all of the cottage and small-scale dairies are manually operated with traditional technology, the medium and large-scale dairies operate using modern technology and mechanized dairy plants. These dairies produce pasteurized milk and other dairy products such as yoghurt, ice-cream, butter, ghee and different milk products. Similarly, the private entrepreneurs have also involved in producing cheese in the mid and high mountain regions from cow and nak milk. The private milk processing industries have organized themselves under two associations namely Nepal Dairy Association (NDA) and Dairy Industry Association (DIA) involving small, medium, and large-scale dairy industries scattered throughout the country. These associations are involved in lobbying the concerns and problems of dairy sector to the policy makers and other concerned institutions and authorities. An attempt is made to estimate the quantity of milk collected by these milk processing plants and to analyze the total volume of milk used for value addition by these plants in the districts under sampling frame. The results are presented in Table 3.1 and 3.2. Table 3.1: Estimated daily milk collection in the formal sector

Type of dairies

Daily Collectio

n

Annual collection/dai

ry # of

dairies

Total annual collection

(Lits)

% in the formal sector

Cottage Dairy 553 201,845 254 51,268,630 11.45

Small Dairy 2,746 1,002,290 89 89,203,810 19.93

Medium Dairy 15,838 5,780,870 32 184,987,840 41.33

Large Dairy 90,361 32,981,765 3 98,945,295 22.11 SMP 31,733 11,582,545 2 23,165,090 5.18

Formal sector collection (MT) 447,570,665 25.22

Total estimated milk production 1,774,844,000 Source: Field Survey 2018 and Consultant's estimation, 2018

Note: Total milk production is estimated by an estimated annual growth rate of milk production from 2072/73

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Table 3.2: Milk used for value addition in different milk products

Dairy Products Milk used

(MT) Production (MT) %

Dahi/yoghurt 7,347 7,734 1.64

Paneer 12,849 1,927 2.87

Butter 15,538 1,088 3.47 Ghee 49,307 1,972 11.02

Cheese 1,597 208 0.36

Chhurpi 234 30 0.05

SMP 19,635 1,964 4.39

Sweets 866 130 0.19 Ice-cream 44 80 0.01 Other products 2,443 366 0.55

Total milk for value addition 109,860 24.55

Source: Field Survey 2018 and Consultant's estimation, 2018

3.1.5 Sellers and distributors

Milk haulers/ vendors are also exhibiting their existence in the milk market. They collect milk from the farmers and reached to the consumers. They are city centered and have limited capacity. Have no knowledge and skill on the hygienic milk handling, COP, CoC and GMP. They pay somewhat higher price where competition exists, prompt payment can be taken, collects milk from farmers doorstep and provide market outlet in region not well serviced by formal procurement system. While on the other hand the last actors are the milk selling booths/dairy shops and institutional buyers. The milk booths sell only milk to the consumers/tea shops, and dairy shops mostly sell milk products to the consumers. The milk selling booths operate for only 2-3 hours in the morning but the dairy shops are open from morning to evening. There are some such shops also which buy milk from the booths in the morning and put it in the refrigerator and sell it later with extra charge. The institutional buyers include hotels, supermarkets/departmental stores and fresh houses. Among these, hotels use milk and milk products for their own purposes whereas supermarkets/ departmental stores and fresh houses sell milk products to the consumers.

3.1.6 General consumers

The ultimate but the most important in the dairy value chain are the consumers who buy the milk and milk products produced by the dairy industries. As such, consumers play a vital role in the whole dairy operation. Without consumer demand, producers would lack one of the key motivations to produce: to sell to consumers.

3.2 Key Enablers/Supporting Actors

3.2.1 Department of Livestock Services (DLS)

Department of Livestock Services aims to contribute to poverty reduction and improving the living standard of the people in the country through sustainable livestock development. DLS strives to develop livestock sector by commercialization of the enterprise and to develop it as an income generating sustainable enterprise. The department has implemented various programs/projects on dairy development with the objective of poverty reduction amongst rural poor. The national network of district livestock service offices, service centres and sub-service centres has provided the department of livestock services an environment and opportunity to contribute for dairy sector development in an organized, institutional and across the whole country according to the potentials and possibilities of a particular location. DLS has also maintained the breeding and production farm

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for buffaloes and National Livestock Breeding Centre at Pokhara for production and processing of semen for artificial insemination.

3.2.2 Department of Food Technology and Quality Control (DFTQC)

DFTQC has played a pioneer role to lay down foundation stone for food control system, research and development of food processing and nutrition support programs. As mandated by GoN, DFTQC is the sole governmental agency for implementing Food Act and Regulation as well as Feed Act and Regulation for the enhancement of quality and safety of food and feed in the country. DFTQC strives to maintain safety and quality of food and feed products in the country by implementing updated food and feed act and regulations, promote entrepreneurship by developing and disseminating appropriate technologies, and improve the nutritional status of people through food-based approaches.

3.2.3 Department of Cooperative

DoC is a regulatory body to regulate all the cooperatives from primary to federation level operating in the country. The DoC has three main functions: registration of cooperatives, making recommendations for improvement of cooperatives, and dissolve the cooperatives which fail to operate for two consecutive years or acts against its objectives. Additionally, the DoC is also responsible to monitor the cooperatives to assess their performance. Accordingly, the DoC is also responsible to register and monitor the MPCS, DMPCUs and central level dairy cooperative association.

3.2.4 Nepal Agriculture Research Council (NARC)

Nepal agriculture Research Council (NARC), the apex organization for conducting agriculture (including dairy) research in the country, has been involved in dairy sector research through development of suitable technologies for improving dairy animal productivity and improving the efficiency of the sector for better competitiveness in the market. The major areas of research have been the dairy breeding, dairy health, dairy nutrition, forage production and dairy management. NARC has specific divisions like Animal health, Animal breeding, Animal nutrition, Forage and Pasture to contribute to the sector but also The Bovine Research program, all of which are involved in dairy sector research synergistically. The flow of developed technologies to the clients is through the channels of government line agencies, non-government organizations (NGOs), and development projects.

3.2.5 National Dairy Development Board (NDDB)

National Dairy Development Board (NDDB) was established in 1992, with the objectives to: assist GoN in formulating national level dairy development policies and plans; promote dairy industries in the country; find the solutions to the problems in dairy development and dairy health; maintain coordination between the public and private dairy industries; carry out high level studies and research on dairy development and make arrangements for fodder and pasture resources. The functions of NDDB include: policy formulation and recommendation on import of goods necessary for production and promotion of milk and milk products as well as animal feeds, implementation of the approved policies; formulation and recommendation of milk pricing policy to the government; recommend the government for promotion of dairy processors and consumers; promotion of cooperative sector dairies; registration of dairy industries; management and mobilization of national and foreign grant and loan for dairy industries; technical assistance for setting-up, improving, promoting and safeguarding dairy industries; review, monitoring and evaluation of dairy development programs, and carry out other necessary activities for dairy industries.

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3.2.6 National Cooperative Development Board (NCDB)

NCDB was formed under the NCDB Act, 1992 to promote and develop cooperatives in the country. Its Executive Committee is composed of members representing government, private sector and professionals. The Secretariat of the Board is headed by an Executive Director appointed by GoN. The NCDB is also responsible for mobilizing funds, entering into joint venture agreements, extending technical support and coordinating the functions of non-government organization involved in cooperative activities.

3.2.7 I/NGOs and Development Projects

Various NGO/INGOs and development projects have been involved with dairy sector development in various regions particularly in the more accessible parts of the country. These organizations have been involved in organization and capacity development of the farming communities, introduction of technologies and inputs in the system and development and support of marketing structure and system.

3.2.8 Others

The other supporting actors in the dairy the value chain are the agro-vets, animal feed manufacturers and suppliers, and the financial and insurance institutions. The agro-vets are the main procurer and suppliers of the veterinary care services including the veterinary medicines and animal feeds. They are located at different market center close to the dairy pocket areas. The animal feed manufacturers are the producers and suppliers of different types of animal feeds. They produce animal feeds with agricultural products as the the main ingredients. They sell animal feeds to small independent farmers and institutions mainly milk cooperatives both directly and via appointed authorized reseller across the country. The financial institutions include various commercial/development banks involved in providing credit to the milk producers. Similarly, the insurance companies include those which are providing animal insurance services to the milk producers. Figure 1 and Table 3.3 illustrates the summary of dairy value chain actors, their functions and inter-relationships.

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Production chain

Marketing Chain

Table 3.3: summary of dairy value chain actors, their functions and inters relationships

SN Actors Function Relationship A Production

chain

1 Agro-vets Supply veterinary medicine, fodder/forage seed/ saplings Provide technical services to some extents Provide counseling services to the farmers Supply feeds and dairy utensils

Service and input provision and make available to the dairy farmers

2 Nurseries Produce fodder saplings Provide fodder saplings 3 Universities and

technical institutes and universities

Produce different level manpower to be worked in the dairy subsector Provide skill training Undertake research on different actors in

Produce high level, middle and low level human resource Provide tailored made courses on dairy production and

Milk

Vendors

Milk Producing

Farmer

• Input suppliers (Agro-Vets)

• Feed Suppliers

• Bank/insurance institution

• Farmer Groups

• VAHWs

• Nurseries

Milk

Village/Town

Shop/Restaurant

Cooperatives/ Milk Collection

Centre/ Dairy Farms

Milk

Transporter

DDC Chilling

Centre

Milk Processing

Industries

Retailers/ Milk

booth/Franchise Shop Micro dairies/

Milk Processor

Consumer (Institutional

and Household)

Fig: 1 Major actors of dairy value chain

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SN Actors Function Relationship value chain management and processing

4 Resource center Produce required number of quality dairy animals Maintain the gene pool for breeding purpose Assure breed type and genetic purity

Provision of the high producing quality dairy animal breed

5 Banks and financial institutions

Provide loan to the dairy entrepreneurs (farms and other value chain actors) based on their business plan Follow the rules as administered by the central bank and Government of Nepal

Review on the business and offer loan

6 Insurance companies

Ensure the dairy farms/ farm animals lying within the policy administered by the government and the Beema Samiti. Train the people on insurance agent and extension services to the livestock production areas Coordinate with bank, dairy extension service providers and evaluate the insurance claim and provide claim without any delay

Loss mapping and provide insurance claim as soon as possible

7 Feed factories Produce cattle feed Supply feed to the retailers/ dealers

Offer dealership to the local feed suppliers and supply the feed as per demand

8 Dairy equipment suppliers

Supply dairy equipment and machineries Supply utensils and apparatus Supply dairy chemicals

Supply the dairy equipment, utensils and chemicals to the dairy farmers, MPCs, milk collectors

9 Farmers groups Organize the farmers Saving and credit Resource pooling from different sectors Service delivery to the members

Organizing the farmers, resource pooling and service delivery to the members

10 Dairy farmers Dairy farm operation/ manage dairy animals Produce milk and supply to the milk collectors (MPC/ private vendors, consumers)

Produce milk using the inputs (forage seed/saplings, forage/fodder, medicine, live animal, technical support and others)

B Marketing chain

11 Milk Producers Cooperatives (MPC)/ Cooperatives

Unite the dairy farmers Quality checking of the milk (CoB and fat, Sand Solid Not Fat (SNF) Act as milk collection center and collect, chill storage and handover to the milk transporter Sale milk to the milk processing industries and their chilling facilities Chill the milk and provide to the milk processors Sale milk to the local market Provide dairy inputs (feed, forage seed/ saplings medicine, dairy utensils etc) to

Collect and provide the milk to the milk processing industries/ chilling centers, milk vendors. Offer inputs and services to the dairy farmers. Establish linkage between dairy farmers and the milk processors.

17

SN Actors Function Relationship the members

12 Milk transport Main cold chain for milk quality stability. Transport the milk from collection center to the chilling centers

Establish linkage between the milk collectors and the processing industries, preserve the milk quality.

13 Milk chilling Centers

Received the milk from the milk transports Quality checking of the milk (CoB, Fat, SNF, TS). Chill the milk and upload to the milk tanker to be forwarded to processing industries

Assure and maintain the milk quality, maintain cold chain

14 Milk processing industries

Received the milk from the milk tanker/ transport Quality check for chemical quality (Fat, SNF, TS, protein), bacterial quality (Total Plate Count-TPC, coliforms, antibiotics and others). Standardize the milk, homogenized and pack Produce value added products (product diversification) Quality check of the milk ready for dispatch to the consumer market Supply to the milk distributors/ dealers

Establish linkage between the chilling center- transport, dealers and maintain cold chain. Produce milk and milk products as per choices of the consumers

15 Dealers Take milk and milk products from the dairy industries in bulk Maintain cold chain Supply the milk and milk products to the retailors

Maintain cold chain and link the processing industries and retailers

16 Retailers Store the milk safely Sale milk and milk products to the consumers (institutional and households)

Maintain cold chain and link between the consumers, dealers and processing industries

17 Consumers Purchase the milk and milk products Provide feedback through the retails to the dairy processing industries Alert on the consumer right and raise voices for quality assurance

Pay against quality

Source: Field Survey 2018

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Chapter IV

Milk Producers' Analysis

4.1 Sample size by district The total sample size of the milk producer farmers was 382 from 24 districts. Information of the sample size by district is presented in Table 4.1. Table 4.1: Sample by district S. No. District Sample %

1 Baglung 16 4.19 2 Banke 16 4.19 3 Bardiya 15 3.93 4 Bhaktapur 17 4.45 5 Chitawan 17 4.45 6 Dailekh 16 4.19 7 Dang 16 4.19 8 Dhanusha 17 4.45 9 Dolakha 17 4.45

10 Doti 16 4.19 11 Ilam 12 3.14 12 Kavre 16 4.19 13 Kalilali 16 4.19 14 Kaski 16 4.19 15 Lalitpur 15 3.93 16 Makawanpur 17 4.45 17 Morang 16 4.19 18 Rasuwa 18 4.71 19 Rupandehi 16 4.19 20 Saptari 16 4.19 21 Sarlahi 13 3.40 22 Sindhupalchowk 15 3.93 23 Surkhet 17 4.45 24 Terhthum 16 4.19

Total 382 100.00

Source: Field Survey 2018

4.2 Gender of the milk producers

Of the total dairy farmers interviewed, about three-fourth (74.87 per cent) were male whereas about a quarter (25.13 per cent) were female (Chart 4.1 and Annex 2).

Chart 4.1 Gender of the milk producer (%)

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4.3 Education of the milk producers

The milk producers were comprised of illiterate and having different educational level. Among them, the higher portion has secondary level of education (Chart 4.2 and Annex 2).

Chart 4.2: Education of the milk producer (%)

4.4 Family size of the milk producers

Family of the milk producers was comprised of different sizes which ranged from 1 to11 in case of male and 1 to 14 in case of female. The most common size was a family comprising 2-3 males and 2-3 females (Table 4.2 and 4.3). Table 4.2: Male size Table 4.3: Female size

Female size No. of HH % 1 40 10.47 2 148 38.74 3 96 25.13 4 57 14.92 5 28 7.33 6 8 2.09 7 3 0.79 9 1 0.26

14 1 0.26 Total 382 100

Source: Field Survey 2018 The average family size of the milk producers was 5.90 per family with 51.95 per cent male and the remaining 48.05 per cent female.

4.5 Dairy animal management

Department of Livestock Services (DLS) tended to commercialize the dairy farms and registered in

concern government line agencies to make easy in tracking the farms and service provision. The farms

have been categorized in to three categories i) small- farms having 5 or less, ii) medium- farms having

6-20 and iii) large -farms having more than 20 animals. There are only 60 commercial dairy farms out

of which 55 falls under the medium and only 10 large farms they are not following Good

Manufacturing Practice (GMP). Ideal GMP process is elaborated in Fig: 3.

Male size No of HH % 1 18 4.71 2 110 28.80 3 159 41.62 4 54 14.14 5 21 5.50 6 14 3.67 7 2 0.52 9 3 0.79

11 1 0.26 Total 382 100

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Fig: 2 GMP in milk production

During the field visit in the study districts, dairy animal management was found as follows:

4.5.1 Number of dairy animals

Majority of the milk producer farmers have 1-5 dairy animals with about 80 per cent for cattle and about 92 per cent for buffaloes (Table 4.4). This means that the small farm size is dominant in the dairy animal keeping practice. The lower number of milk producer farmers having more cattle/buffalo signifies that the dairy animal keeping has not yet become a commercial practice. Table 4.4: Number of households having dairy animals

Source: Field Survey 2018 Among the milk producer's farmers' households, about 85 per cent have milking animals with the largest number being the households having 1-5 dairy animals (Table 4.5). Table 4.5: Number of households having milking dairy animals

S. No.

Number of Animals

Animal type/No. of Milk producer farmers Cattle % Buffalo %

1 0 61 15.97 57 14.93 2 1-5 261 68.32 298 77.94 3 6-10 44 11.52 21 5.57 4 11-20 12 3.14 5 1.34 5 20 and more 4 1.05 1 0.22

Total 382 100.00 382 100.00

Source: Field Survey 2018

S. No.

Number of Animals

Animal type/No. of Milk producer farmers Cattle % Buffalo %

1 1-5 307 80.37 350 91.62 2 6-10 55 14.40 25 6.54 3 11-20 15 3.93 6 1.57 4 20 and more 5 1.31 1 0.26

Total 382 100.00 382 100.00

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4.5.2 Animal breeds

The milk producer farmers keep different breeds of cattle and buffaloes. Largest portion (40.05 per cent) of the milk producers keeping cattle have cross breed followed by local cattle (27.49) per cent). Among the buffalo keeping farmers, half of them have local breed followed by cross breed buffaloes (33.51 per cent). Table 4.6 presents the breeds of animal in the milk producers' households. Table 4.6: Animal breeds

S. No. Animal breeds

Animal type/No. of Milk producer farmers

Cattle % Buffalo %

1 Local 105 27.49 191 50.00

2 Cross breed 223 58.38 169 44.24

4 Local, cross breed 54 14.13 22 5.76

Total 382 100 382 100 Source: Field Survey 2018

4.5.3 Sources of dairy animals

Milk producer farmers receive dairy animals from different sources. Among them, most of the farmers receive dairy animals from their own shed, own village, animal suppliers and neighboring villages (Table 4.7). Table 4.7: Sources of dairy animals S. No. Source of animal Total %

1 Own shed 100 26.18 2 Own shed, own village 62 16.23 3 Animal supplier 58 15.18 4 Own village 58 15.18 5 Neighboring village 35 9.16 6 Own shed, own village, neighboring village 15 3.93 7 Own shed, animal supplier 13 3.40 8 Own shed, neighboring village 13 3.40 9 Own village, neighboring village 11 2.88

10 Neighboring village, animal supplier 6 1.57 11 Own village, animal supplier 5 1.31 12 Own shed, own village, animal supplier 3 0.79 13 Own shed, neighboring village, animal supplier 2 0.52 14 Own shed, own village, neighboring village, animal supplier 1 0.26

Total 382 100.00

Source: Field Survey 2018

4.5.4 Animal shed

The milk producer farmers have both the local and improved animal shed to keep their dairy animals (Chart 4.3). According the available information, comparatively more milk producers have local animal shed (Annex 3). However, improved animal shed with about 40 per cent of the milk producer farmers indicates that the milk producer farmers are gradually inclined to using improved animal shed.

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Chart 4.3: Type of animal shed (%)

Most of the milk producer farmers construct the animal shed by using the materials available in their local market, own house and village markets (Table 4.8). Table 4.8: Sources of shed construction materials

S. No. Type Total % 1 Local market 124 32.46 2 Own house 75 19.63 3 Village/local market 48 12.57 4 Own house, local market 39 10.21 5 Own house, village/local market 38 9.95 6 Own house, village 35 9.16 7 Village 10 2.62 8 Regional market 5 1.31 9 Own house, village/local/regional market 4 1.05

10 Village//local/regional market 2 0.52 11 Local/regional market 2 0.52

Total 382 100.00

Source: Field Survey 2018

4.5.5 Animal breeding

Milk producer farmers used both the artificial insemination and natural breeding to inseminate their dairy animals (Chart 4.4). Compared to natural breeding, a little bit more farmers were found using artificial insemination (Annex 4).

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Chart 4.4: Breeding system (%)

4.5.6 Sources of breeding bull

Majority of the milk producer farmers used neighbor's breeding bull for breeding purpose. Besides, some of them used own bull or bull from the next villages (Table 4.9). Table 4.9: Sources of breeding bull S. No. Type Total %

1 Neighbor 104 56.83 2 Own, neighbor 25 13.66 3 Own 17 9.29 4 Neighbor, next village 14 7.65 5 Next village 11 6.01 6 Own, neighbor, next village 6 3.28 7 Breeding center 2 1.09 8 Neighbor, breeding center 2 1.09 9 Neighbor, next village, breeding center 1 0.55

10 Own, next village 1 0.55

Total 183 100.00

Source: Field Survey 2018 A vast majority of the milk producer farmers using artificial insemination received semen from agro-vets or from the extension workers (Table 4.10) Table 4.10: Sources of semen S. No. Type Total %

1 Extension workers 174 87.44 2 Agro-vets 15 7.54 3 Extension workers, agro-vets 10 5.03

Total 199 100.00

Source: Field Survey 2018

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4.5.7 Sources of animal feed

The milk producer farmers used straw, green forage, concentrates and grains for animal feeding. More than three-fourth of the farmers (78.01 per cent) used straw and green forage grown on their own land and the remaining about 22 per cent of them purchased these items (Chart 4.5 and Annex 5). Among the farmers purchasing these items, 75 per cent of them purchased straw (Table 4.11). Majority of the farmers (57.14 per cent) purchased these animal foods from their own village (Table 4.12) and the remaining farmers who purchased these items from outside their village got these roughages either from traders or from other farmers (Table 4.13). Table 4.11: Purchased roughages Table 4.12: Place of purchase Table4.13: Roughages suppliers

S. No.

Roughages Total %

S. No.

Place Total %

S. No.

Suppliers Total %

1 Straw 63 75 1 Own village

48 57.14 1 Traders 20 55.56

2 Green forage

21 25 2 Outside the village

36 42.86 2 Farmers 16 44.44

Total 84 100 Total 84 100 Total 36 100

Source: Field Survey 2018 Source: Field Survey 2018 Source: Field Survey 2018

Chart 4.5: Source of roughages (%)

4.5.8 Sources of concentrates/grains

The milk producer farmers also used concentrates and grains to feed their dairy animals. A little more than two-third of the farmers (67.80 per cent) purchased concentrates and grains while the remaining 32.20 per cent of them got these from their own land (Chart 4.6 and Annex 6).

Chart 4.6: Source of concentrates/grains (%)

Among the milk producer farmers who purchased concentrates, grains and grains' by-product like bran, a large majority of them (83.78 per cent) purchased grains whereas only 16.22 per cent of them purchased concentrate (Table 4.14). As shown in Table 4.15, the milk producer farmers purchased these animal feeds both from their own village (by 57.92 per cent) and from outside the village (by

25

42.08 per cent). A large majority of the farmers purchasing these items from outside the village (80.73 per cent) got these items from traders and some of them (19.27 per cent) got it from the farmers (Table 4.16). Table 4.14: Items purchased Table 4.15: Place of purchase Table 4.16: Suppliers of concentrates/grain

S. No.

Type Total %

S. No.

Type Total %

S. No.

Suppliers Total %

1 Concentrates 42 16.22 1 Own village 150 57.92 1 Traders 88 80.73

2 Grains and by-products

217 83.78 2 Outside the village

109 42.08 2 Farmers 21 19.27

Total 259 100 Total 259 100 Grand total 109 100

Source: Field Survey 2018 Source: Field Survey 2018 Source: Field Survey 2018

4.5.9 Sources of utensils and cleaning materials

The milk producer farmers use different utensils and cleaning materials during milk production and marketing of milk. Most of the farmers used these items either from their own house or purchased in the local market (Table 4.17). Table 4.17: Sources of utensils and cleaning materials S. No. Type Total %

1 House made, local market 124 32.46 2 House made 107 28.01 3 Local market 91 23.82 4 House made, local market, district headquarter 24 6.28 5 Local market, district headquarter 12 3.14 6 District headquarter 10 2.62 7 House made, district headquarter 5 1.31 8 Local market, district headquarter, regional market 3 0.79 9 Regional market 3 0.79

10 House made, local market, district headquarter, regional market 1 0.26 11 House made, local market, regional market 1 0.26 12 District headquarter, regional market 1 0.26

Total 382 100

Source: Field Survey 2018

4.5.10 Sources of veterinary care services

Most of the milk producer farmers used government and/or private technicians for veterinary care services (to treatment of their dairy animals). In total, about 80 per cent of the milk producer farmers used the services provided by these technicians (Table 4.18). Table 4.18: Sources of veterinary care services S. No. Sources Total %

1 Government technician 107 28.01 2 Government technician, private technician 102 26.70 3 Private technician 97 25.39 4 Self 15 3.93 5 Self, Government technician 15 3.93 6 Self, Private technician 12 3.14 7 Self, government technician, private technician 12 3.14 8 Private technician, INGO technician 11 2.88

26

S. No. Sources Total % 9 Self, Government technician, private technician, INGO technician 4 1.05

10 Government technician, INGO technician 4 1.05 11 Others 1 0.52 12 Self, private technician, INGO technician 2 0.26

Total 382 100.00

Source: Field Survey 2018

For the supply of veterinary medicines, about half of the total milk producers (48.69 per cent) were solely dependent on the local agro-vets. Besides, among the farmers who used different other sources of veterinary medicines also used local agro-vets (Table 4.19)

4.5.11 Sources of veterinary medicines

Table 4.19: Sources of veterinary medicines S. No. Type Total %

1 Local agro-vets 186 48.69 2 House made, local agro-vets 62 16.23 3 Local agro-vets, district headquarter 49 12.83 4 District headquarter 36 9.42 5 House made, local agro-vets, district headquarter 18 4.71 6 House made 16 4.19 7 Local agro-vets, district headquarter, regional market 5 1.31 8 House made, local market agro-vets, district headquarter, regional market 3 0.79 9 House made, district headquarter 2 0.52

10 District headquarter, regional market 2 0.52 11 Local agro-vets, regional market 1 0.26 12 Regional market 1 0.26 13 Local agro-vets, district headquarter, regional market, national market 1 0.26

Total 382 100.00

Source: Field Survey 2018

4.5.12 Milk market

Local market or MPCS or both were the places to market their milk production for most of the milk producer farmers. The information shows that about a little more than one-third (37.17 per cent) of them sold their milk in the local market whereas about a quarter of them (25.39 per cent) sold milk to the MPCS and about one-fifth of them (17.28 per cent) sold milk both in the local market and to the MPCS. Altogether about 80 per cent of the milk producer farmers sold their milk in the local market and to the MPCS (Table 4.20). Table 4.20: Milk market S. No. Type Total %

1 Local market 142 37.17 2 MPCS 97 25.39 3 MPCS, local market 66 17.28 4 MPCS, local market, milk processors 23 6.02 5 Milk processors 20 5.24 6 Local market, milk processors 10 2.62 7 MPCS, local market, milk processors, doorstep 7 1.83 8 Local market, doorstep 6 1.57 9 MPCS, local market, doorstep 5 1.31

10 Local market, milk processors, doorstep 2 0.52

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S. No. Type Total % 11 MPCS, milk processors, doorstep 1 0.26 12 MPCS, milk processors 1 0.26 13 Doorstep 1 0.26 14 Milk processors, doorstep 1 0.26

Total 382 100.00

Source: Field Survey 2018

4.6 Observed changes in diary production system The milk producer famers have observed various changes in the dairy production system. Among these the prominent are increased household income, increased number of dairy animals and increased ratio of dairy animals and milk producing animals (Table 4.21). This signifies that the dairy production system has on areas. Table 4.21: Changes in dairy production system (Multiple answer)

S. No.

Type Total %

1 Increased household income, 119 31.15 2 Increased household income, increased number of dairy animals 46 12.04 3 Increased household income, increased ratio of dairy animals and milk

producing animals 40 10.47 4 Increased ratio of dairy animals and milk producing animals 33 8.64 5 Increased household income, increased number of dairy animals,

increased ratio of dairy animals and milk producing animals, changed role of men and women in dairy production 30 7.85

6 Increased household income, Increased number of dairy animals, Increased ratio of dairy animals and milk producing animals 25 6.55

7 Increased household income, changed role of man and women in dairy production 20 5.24

8 Increased number of dairy animals 20 5.24 9 Increased household income, Increased number of dairy animals,

changed role of men and women in dairy production 15 3.93 10 Changed role of men and women in dairy production 10 2.62 11 Increased number of dairy animals, increased ratio of dairy animals and

producing animals 10 2.62 12 Increased number of dairy animals, changed role of men and women in

dairy production 6 1.57 13 Increased ratio of dairy animals and milk producing animals,

changed role of men and women in dairy production 4 1.05 14 Increased number of dairy animals, increased ratio of dairy animals and

milk producing animals, changed role of men and women in dairy production 2 0.52

15 Increased household income, increased ratio of dairy animals and milk producing animals, changed role of men and women in dairy production 2 0.52

Total 382 100.00

Source: Field Survey 2018

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4.7 Availability of credit

On the inquiry about the availability of credit facility from the financial institutions, about a little than one-third of the milk producer farmers (31.15 per cent) articulated that required credit is available. Nevertheless, the remaining more than two-third of the milk producer farmers stated differently and opined that availability of required credit is difficult, the process of getting credit is lengthy and even there is malpractices in credit sanction (Table 4.22). Table 4.22: Availability of credit S. No. Type Total %

1 Required credit is available 119 31.15 2 Difficult to get credit 89 23.30 3 Not available, lengthy process 86 22.51 4 Lengthy process 75 19.63 5 Malpractices in credit sanction 9 2.36 6 Lengthy process, malpractices in credit sanction 4 1.05

Total 382 100.00

Source: Field Survey 2018

4.8 Improvement in the level of income

According to overwhelming milk producer farmers (94.50 per cent), their level of income has improved (Chart 4.7 and Annex 7).

Chart 4.7: Improvement in level of income (%)

In terms of increase in income compared to five years back, income of 47 milk producer farmers within the slab ranging from Rs. 100,000 to Rs. 500,000 has increased. Similarly, income of 14 farmers within the slab ranging from Rs. 500,000 to Rs. 1,000,000 has increased. Nevertheless, income of 56 farmers within the slab ranging from Rs. 50,000 to Rs. 100,000 has decreased (Table 4.23). Table 4.23: Comparative income

Income slab (Rs.) Milk producer farmers

Five years back % Current % 0-50,000 128 35.46 130 36.01 50,001-100,000 78 21.61 22 6.09 100,001-500,000 138 38.23 171 47.37 500,001-1,000,000 14 3.88 31 8.59 > 1,000,000 3 0.83 7 1.94

Total 361 100 361 100.00 Source: Field Survey 2018

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4.9 Changes observed in dairy processing

Regarding the changes observed by the milk producer farmers in dairy processing activities, most of them have expressed that the number of dairy processors has increased; processors have diversified the products along with quality improvement. However, some of the milk producers were also of the view that the processors think only about their own benefit (Table 4.24). Table 4.24: Changes in dairy processing

S. No. Changes Total % 5 Increased number of processors 114 29.84 2 Increased number of processors, processors diversify the products 57 14.92 6 Processors improve the quality of dairy products 53 13.87 1 Processors diversify the products 39 10.21 3 Increased number of processors, processors improve the quality of

dairy products 30 7.85 7 Increased number of processors, processors diversify the products,

processors improve the quality of dairy products, 23 6.02 10 Increased number of processors, processors diversify the products,

processors improve the quality of dairy products, processors think only about their own benefit 20 5.24

4 Processors diversify the products, processors improve the quality of dairy products 14 3.67

14 Processors think only about their own benefit 10 2.62 13 Increased number of processors, processors think only about their

own benefit 9 2.36 8 Increased number of processors, processors diversify the products,

processors think only about their own benefit 4 1.05 15 Processors improve the quality of dairy products, processors think

only about their own benefit 4 1.05 9 Processors diversify the products, processors think only about their

own benefit 2 0.52 12 Increased number of processors, processors improve the quality of

dairy products, processors think only about their own benefit 2 0.52 11 Processors diversify the products, processors improve the quality of

dairy products, processors think only about their own benefit 1 0.26

Total 382 100.00

Source: Field Survey 2018

4.10 Farmers' Experience about dairying

On the inquiry about the farmers' experience about milk production and supply, their responses are presented in Table 4.25 Table 4.25: Farmers' experience

Farmers' response No. % Positive aspects Improved life style/livelihood 178 46.60 Increased income helping for household expenditure 157 41.10 Increased production year after year 89 23.30 Improve in quality of milk 88 23.04 Can consume quality milk 76 19.90 Increased milk price 68 17.80 Able to provide quality education for child 67 17.54 Increased number of dairy animals 65 17.02

30

Farmers' response No. % Increase dairy animal feeding materials 63 16.49 Availability of fresh milk 56 14.66 No need to go foreign for employment 56 14.66 Milk market expanded 53 13.87 Access to veterinary services 52 13.61 Use of money for good job 51 13.35 Self-employment and no need to find job 45 11.78 Production of FYM 45 11.78 Access to insurance services 43 11.26 Ensure daily cash income 38 9.95 Processor diversify the products 32 8.38 Easy income source 25 6.54 Proper use of time 24 6.28 No need to go market for milk purchase 23 6.02 Milk is available 21 5.50 Female also start to involve in this sector 19 4.97 Ensure better health 18 4.71 Everything for farming is available 16 4.19 Able to meet the milk requirement of the consumers 16 4.19 Pure ghee available/produced 15 3.93 Loan facilities 11 2.88 Difficulties No proper recording system 123 32.20 No easy access to subsidized loan and insurance 118 30.89 Poor availability of feed and forage 107 28.01 Traditional sheds for housing 101 26.44 No availability of quality semen 99 25.92 Poor dairy animal management 98 25.65 No availability of high producing dairy animals 95 24.87 No technical knowledge and skill 95 24.87 Poor technology transfer (training etc) 93 24.35 Low milk price 89 23.30 High service charge of veterinary services and medicine 87 22.77 Poor AI services (no sexed semen) 79 20.68 No effective breed improvement 78 20.42 Do not have veterinary skill 77 20.16 Lack of workers 67 17.54 Not well-organized market 63 16.49 Government support is inadequate 56 14.66 Youths are not motivating in the farming 52 13.61 No availability of medicine and vitamins as and when need basis 47 12.30 Not able to get support/subsidy 32 8.38 Dairy farming still not transforming to enterprise 31 8.12 Unfair competition 28 7.33 Non-availability of improved breed bull 17 4.45 Prospects Increased milk market- high demand of milk 207 54.19 Increased hh income 129 33.77 Enough land for farming 106 27.75 Employment generated at local level specially for women 98 25.65 MPCs and collection centers are forming 79 20.68

31

Farmers' response No. % Increased number of dairy processors 67 17.54 Trend of rearing calves is increasing 57 14.92 Trend of milk product diversification is increasing 56 14.66 Increased availability of compound feed/ TMR 54 14.14 Increased number of MPCs and milk collection centers 48 12.57 Dairy farming is taken as prestigious occupation 46 12.04 Availability of support and subsidy 41 10.73 Government policy for subsidized loan and insurance 36 9.42 Availability of new technology and knowledge transfer 32 8.38 Different NGOs are also supporting 31 8.12 Road network expanding 21 5.50 Challenges Milk price is not under farmers control 99 25.92 Milk holiday 91 23.82 Non-availability of forage from the community forest 86 22.51 Zoonotic and communicable diseases outbreak 78 20.42 Poor road network and electricity supply 54 14.14 Reluctance of financial institution to provide subsidized loan 38 9.95 Natural calamity- earthquake, land slide 29 7.59 Climate change- lack of water 23 6.02

Source: Field Survey 2018

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Chapter V Consumers' Analysis

5.1 Sample size by district The total sample size of the consumers including both the individual and institutional consumers was 375 from 24 districts. Information of the sample size by district is presented in Table 5.1. Table 5.1: Sample size by district

S. No.

District Sample size %

1 Baglung 17 4.53 2 Banke 16 4.27 3 Bardiya 16 4.27 4 Bhaktapur 13 3.47 5 Chitawan 14 3.73 6 Dailekh 16 4.27 7 Dang 16 4.27 8 Dhanusha 16 4.27 9 Dolkha 17 4.53

10 Doti 18 4.80 11 Ilam 14 3.73 12 Kavre 15 4.00 13 Kalilali 16 4.27 14 Kaski 16 4.27 15 Lalitpur 17 4.53 16 Makwanpur 16 4.27 17 Morang 15 4.00 18 Rasuwa 16 4.27 19 Rupandehi 15 4.00 20 Saptari 16 4.27 21 Sarlahi 14 3.73 22 Sindhupalchowk 16 4.27 23 Surkhet 16 4.27 24 Terhthum 14 3.73

Total 375 100.00 Source: Field Survey 2018

5.2 Gender of the consumers

Of the total consumers, 64 per cent were male whereas 36 per cent were female (Chart 5.1 and Annex 8).

Chart 5.1: Gender of consumer respondents (%)

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5.3 Education of the consumers

The consumers were comprised of illiterate and having different educational level. Among them, the higher portion has secondary level of education (Chart 5.2 and Annex 9).

Chart 5.2: Education of the consumer respondents (%)

5.4 Family size of the consumers

Family of the consumers was comprised of different sizes which ranged from 0 to 8 in case of male and 0 to 10 in case of female. The most common size was a family comprising 2-3 males and 2-3 females (Table 5.2 and 5.3). Table 5.2: Male size Table 5.3: Female size

Female size

No. of

HH %

0 3 0.80 1 49 13.07 2 151 40.27 3 102 27.20 4 52 13.87 5 13 3.47 6 4 1.07

10 1 0.27 Total 375 100.00

Source: Field Survey 2018 Source: Field Survey 2018 The average family size of the consumers was 5.30 per family with 51.43 per cent male and the remaining 48.57 per cent female.

5.5 Main sources of income

Business was the main source of income of the majority of consumers followed subsequently by agriculture, service; foreign employment and wages (Chart 5.3 and Annex 10 and 10.1).

Male size

No of HH

%

0 1 0.27 1 39 10.40 2 130 34.67 3 144 38.40 4 31 8.27 5 17 4.53 6 9 2.40 7 3 0.80 8 1 0.27

Total 375 100.00

34

Chart 5.3: Main source of income of the consumer(%)

5.6 Annual income

Annual income of the consumers ranged from up to Rs. 100,000 to more than Rs. 1,000,000 with around 29 per cent having an income between Rs. 100, 000 – Rs. 300,000. Only a few (7.47 per cent) of the consumers have an income of more than Rs. 1,000,000 (Chart 5.4 and Annex 11).

Chart 5.4: Annual income of the consumer (%)

5.7 Expenditure

The average annual household consumption of consumers is found to be Rs. 3, 48,602.41 which is spend for various items of goods and services. Of the total, the major items of expenditure are food (24 per cent), housing (19.53 per cent) and education (19.22 per cent). Besides, expenditure is also incurred for festivals, clothing, health care, entertainment etc. (Table 5.4). Table 5.4: Average annual expenditure of the consumers (Rs.)

Expenditure type Total

Expenditure Average

Expenditure %

Food 31,372,000 83,658.67 24.00 Housing 25,531,000 68,082.67 19.53 Education 25,128,000 67,008.00 19.22 Festivals 11,492,000 30,645.33 8.79 Clothing 10,781,203 28,749.87 8.25 Health care 8,391,800 22,378.13 6.42 Entertainment 3,560,500 9,494.67 2.72 Land purchase 3,293,000 8,781.33 2.52 Interest pay 2,895,000 7,720.00 2.21 Electronics 1,602,900 4,274.40 1.23

35

Expenditure type Total

Expenditure Average

Expenditure %

Rituals 1,367,500 3,646.67 1.05 Social contribution 919,500 2,452.00 0.70 Utensils purchase 186,500 497.33 0.14 Others 4,205,000 11,213.33 3.22

Total 130,725,903 348,602.41 100.00 Source: Field Survey 2018

5.8 Purchase of milk and milk products

Almost all of the consumers (96.27%) have expressed that they purchase milk and milk products for consumption. Only a few of them (3.73 per cent) did not purchase milk and milk products (Chart 5.5 and Annex 12). It signifies that milk and milk products are the essential part in the daily food habit of the consumers.

Chart 5.5: Purchase of milk and milk products by the consumers (%)

5.9 Quantity of milk and milk products purchased

The consumers purchased milk and different other milk products. Almost all of them purchased fluid milk. Dahi is purchased by more than 2/3 of them and ghee by more than ½ of them. The other products purchased by the consumers include paneer, ice-cream, mohi etc (Table 5.5). Available information shows that average monthly consumption of fluid milk is about 47 liters or about 1.5 liters per day or 290 ml per capita. Table 5.5: Quantity of milk and milk products purchased

S. No.

Milk and products

Unit No. of

consumer Consumer

% Average monthly quantity

1 Fluid milk liter 357 95.2 46.8 2 Dahi liter 265 70.67 11.73 3 Mohi liter 62 16.53 9.77 4 Ghee kg 214 57.07 2.44 5 Paneer kg 130 34.67 2.45 6 Ice cream liter 79 21.07 3.08 7 Canned milk liter 10 2.67 40.9 8 Others

4 1.07 14.25

Source: Field Survey 2018

36

5.10 Availability of milk and milk products as and when required

A vast majority of the consumers (89.60 per cent) expressed that milk and milk products are available as and when required. Milk and milk products were not available as and when required for only about 10 per cent of the consumers (Chart 5.6 and Annex 13). This signifies that the consumers have easy and accessible market of the milk and milk products.

Chart 5.6: Availability of milk and milk products (%)

5.11 Changes on the availability of milk and milk products compared to 5 years back

As per about three-fourth of the consumers (74.4 per cent), presently market of the milk and milk products has improved compared to 5 years back. However, about a quarter of the consumers (22.4 per cent) did not accept that the market has improved. A small number of the consumers opined that the market has even deteriorated (Chart 5.7 and Annex 14). On the whole, this indicates that market of the milk and milk products has improved as compared to past but there is need for further improvement.

Chart 5.7: Changes in availability of milk and milk products (%)

37

5.12 Changes on the quality of milk and milk products compared to 5 years back

As claimed by about two-third (64.27 per cent) of the consumers, quality of the milk and milk products has improved. Nevertheless, about one-third (34.13 per cent) of the consumers expressed that there is no improvement in the quality of milk and milk products. Only for a negligible portion of the consumers (1.60 per cent), quality of milk and milk products has even deteriorated (Chart 5.8 and Annex 15). This signifies that even though the quality of milk and milk products has comparatively improved, quality improvements need additional attention.

Chart 5.8: Changes in the quality of milk and milk products (%)

5.13 Access to milk and milk products compared to 5 years back

As expressed by an overwhelming majority (85.60 per cent) of the consumers, access to milk and milk products has increased compared to 5 years back. But 12 per cent of the consumers articulated that access to milk and milk products has not comparatively increased. Only a tiny portion (1.60 per cent) of the consumers opined that access to milk and milk products has even decreased (Chart 5.9 and Annex 16). This indicates that consumers have easy access to milk and milk products.

Chart 5.9: Access to milk and milk products (%)

38

5.14 Changes observed in dairy processing

The consumers have observed various changes in dairy processing (Chart 5.10 and Annex 17). Most among them (40.32 per cent) observed that number of the processors has increased while about a quarter of them (25.40 per cent) observed that the processors have diversified the milk products. Similarly, about one-fifth (19.84 per cent) of the consumers observed that the processors have improved the quality of dairy products. Nonetheless, some of the consumers (14.44 per cent) observed that the processors think only about their own benefit. To sum up, the consumers have observed that the number of dairy processors has increased and dairy products have been diversified with quality improvement.

Chart 5.10: Changes observed in the dairy processing (%)

5.15 Milk and major milk products available in the market areas of consumers

Fluid milk and different other dairy products are available in the market areas of the consumers. The most common among them are fluid milk, dahi, ghee and paneer followed by, ice-cream, mohi, and sweets. Cheese and chhurpi are also available in the market areas of some of the consumers (Table 5.6). This indicates that fluid milk, dahi, ghee and paneer are the dominant dairy products in the market areas of the consumers. Table 5.6: Milk and major milk products

S. No. Milk and milk products Consumers % 1 Fluid milk 319 85.07 2 Dahi 343 91.47 3 Ghee 310 82.67 4 Paneer 230 61.33 5 Ice-cream 106 28.27 6 Mohi 104 27.73 7 Sweets 98 26.13 8 Cheese 66 17.60 9 Churpi 52 13.87

10 Others 146 38.93 Source: Field Survey 2018

39

5.16 Changes in marketing strategy followed by the dairy processors

As asserted by a little less than three-fourth of the consumers (72 per cent), the dairy processors have been following different marketing strategies to market their products. Nevertheless, a bit more than a quarter of the consumers did not find any changes in the strategies of the dairy processors to market their products (Chart 5.11 and Annex 19).

Chart 5.11: Changes in the marketing strategies (%)

Of those who asserted that the dairy processors have been following different marketing strategies, claimed that the strategies followed by the dairy processors include improve in quality; improve in packaging and advertisement (Table 5.7). Table 5.7: Strategies undertaken by the processors

S. No.

Strategies Consumers % of total

1 Improve in quality 63 23.33 2 Improve in packaging and advertisement 53 19.63 3 Improve in packaging 52 19.26 4 Improve in packaging and improve in quality 46 17.04 5 Advertisement 28 10.37 6 Improve in packaging, improve in quality and

advertisement 14 5.19 7 Improve in quality and advertisement 4 1.48 8 Offer reasonable prices 3 1.11 9 Improve in packaging, improve in quality, offer

reasonable prices 3 1.11 10 Improve in quality and offer reasonable prices 2 0.74 11 Improve in packaging and improve in quality,

Advertisement and offer reasonable prices 2 0.74

Total 270 100.00

Source: Field Survey 2018

5.17 Problems cited by the consumers The consumers were also inquired about the problems they faced about the milk and milk products in the market. Their perceptions are presented in Table 5.9.

40

Table 5.8: Consumers' perceptions on the problems of milk and milk products Problems No. %

No scientific milk price fixing technique 238 63.47 No uniformity in the price 212 56.53 Highly expensive 205 54.67 Water adulterated milk 180 48.00 Less sensitive consumer 176 46.93 No option for the consumer 170 45.33 Poor quality milk 154 41.07 No availability of milk as and when needed basis 135 36.00 Fouling /rancid milk 108 28.80 Poor monitoring and quality check system 108 28.80 Use of skim milk powder 102 27.20 Poor road and electricity supply 89 23.73 Old milk supplied by the dairies 86 22.93 Poor market network 86 22.93 No problem 85 22.67 No feed and feeding materials 75 20.00 No organized market 74 19.73 Chemical mixed milk 69 18.40 Poor supply network 59 15.73 Milk clotting 54 14.40 No habit of taking milk (meat is more habitual) 47 12.53 No market promotion activities 42 11.20 Contaminated with dung/grass 39 10.40

Source: Field Survey 2018

41

Chapter VI

Qualitative SWOT and Sustainability Analysis

6.1 SWOT Analysis of value chain actors

An attempt was also made to collate the opinions of the value chain actors about their strength, weakness, opportunities and threats through qualitative approach by using focus group discussion and key informant interviews. The opinions of the value chain actors are presented below.

6.1.1 AI and veterinary service providers

Role in value chain

• Provide onsite veterinary and AI services -the infertility, repeat breeding and other zoonotic diseases

• Consultancy services on dairy farming Strength Weakness

• Have experience in working at local level • Have knowledge on the number and type of

dairy animals in the farmers premises • Have experience and goodwill in AI and

veterinary services • Good coordination with different value chain

actors

• Difficult to motivate the farmers from traditional to commercial

• Excessive demand and cannot manage the time

• Lack of new technology (no training) • Lack of semen and veterinary medicine • Price hike unnaturally • Youth's preference to foreign employment

Opportunities Threats

• Increased income of the dairy farmers and farmers are transferring to entrepreneur

• Increased consciousness among the farmers on animal health

• Commercial orientation of the dairy farmers • Increased awareness on "nothing is free"

among the farmers • Lack of liquid nitrogen

• Inconsistent power supply and poor rood network

• Non-recognition by the government • and poor access

Relationship with other actors

• Dependent to each other, coordination, cooperation, exchange of experience, idea and service complement

6.1.2 Agro-vets

Role in value chain

• Supply of the veterinary medicine, vaccine and compound feed • Provide AI services and contribute for cross breeding • Import and dissemination of proven advanced technology • Supply of seed and sapling of forage/ fodder • Consultancy and counseling services to the dairy farmers

Strength Weakness

• Strong capacity on veterinary and AI services at local level

• Management of the compound feed, TMR and feed raw materials at local level

• Increase number of improved sheds • Dairy farmers becoming wealthy and

increased purchasing power • Commercialization of dairy farming

• Unavailability of required quality and quantity of medicine, vaccine, semen and other inputs

• Lack of veterinary and livestock technicians • Poor road network/ no all-weather roads • No awareness among the farmers on their

need of inputs (medicine, semen, seeds etc) • Lack of green forage/fodder • Prevalence of traditional dairy farming system

42

Opportunities Threats

• Overwhelming interest among the youth in dairy sector

• Government priority • Expansion of milk collection and processing • Livestock insurance • Increasing awareness on the animal health

care

• Geographical remoteness and difficult to manage the required inputs in time

• Occurrence of contagious diseases • Irregularity in electricity supply

Relationship with other actors

• Creative and health completion between the value chain actors • Reporting of the business to concern government authority

6.1.3 Feed manufacturer and suppliers

Role in value chain

• Provide quality feed in comparatively low price • Collection of raw materials and feed formulation/preparation • Support in commercialization of dairy farming

Strength Weakness

• Increased productivity of dairy animals and high demand of quality feed

• Support and subsidy in feeding dairy animals • Awareness among the farmers to provide

quality feed for high production • Government priority in dairy sector

development • Popularity of compound and TMR among the

farmers

• Transportation cost is very high • No cash payment upon the delivery • Expensive raw materials and raw materials

not available in the country • Increased noise and air pollution • No availability of feed in required quality

and quantity • Unfair competition • Lack of competent technical and marketing

manpower Opportunities Threats

• Expansion of commercial dairy farms • Increase market network • Diversification of the production and

marketing sector • Improvement in the income of the dairy

farmers • Increased services and supply of inputs to

the dairy farmers

• Geographically remoteness, poor road network

• Irregularity in the electricity supply

Relationship with other actors

• Interdependence to each other, coordination, cooperation. supply of feed

6.1.4 Suppliers of dairy equipment/materials

Role in value chain

• Management and supply of dairy related utensils, equipment • Increased productivity of dairy entrepreneurs and income • Support in milk collection and discourage plastic utensils • Support in storage and transportation/ cold chain maintenance

Strength Weakness

• Increased milk production and collection • Increased awareness on the demerits of

plastic utensils

• No availability of the required quality and quantity of the utensils/ equipment

• No reliable electricity and roads network

43

• Maximum use of modern machinery and equipment

• Increased awareness on the quality check of the milk produced

• Increased awareness on the cold chain maintenance among the suppliers and consumers

• Increased awareness on the consumption of hygienic and clean milk among the processors and consumers

• Lack of technically smart manpower • Difficult in getting maintenance services and it

is expensive • Harassment in the custom office during

import • Increased price of the

equipment/material/utensils

Opportunities Threats

• Availability of support and subsidy in dairy equipment/utensils/machine

• Increased farm mechanization/factory upgrading practice

• Government high priority in dairy sector development

• Government policy and practice not compliance each other (difficult to get tariff exemption)

• Geographical remoteness and poor access Relationship with other actors

• Coordination, cooperation, complementary and competitive

6.1.5 Financial institutions

Role in value chain

• Provide livestock insurance service • Assessment of the loss and rebate • Increase milk production • Provide loan assessing the business plan • Loan management, monitoring of the business and installment management • Property assessment for collateral

Strength Weakness

• Expansion of commercial dairy farming and dairy processing

• Establish network of the financial institutions • Maximum use of technology • Increase awareness on the dairy animal

insurance among the farmers

• Tedious process of dairy animal insurance, no uniformity in the price

• Lack of services (difficult to convince in insurance)

• No timely repayment of the installments • Lack of staff and monitoring is expensive • Non-availability of experienced

veterinarian/ livestock experts Opportunities Threats

• Government priority in dairy sector development

• Farmer community is large and so many dairy animal

• Processing industries are grooming • Commercialization of dairy sector • Government policy to subsidies in the

insurance premium and loan

• Communicable disease outbreak • Reluctance to pay the installment • Wrong information on collateral

Relationship with other actors

• Legal relationship, coordination cooperation, facilitation, resource management

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6.1.6 Farmers

Role in value chain

• Operate dairy farm with high productive dairy animals • Produce hygienic and clean milk Strength Weakness

• Have good knowledge and experience in dairy animal farming

• Have land and physical structure (sheds and other)

• Have coordination and linkage with DLSO and other government agencies for technical support

• Have good working relationship with local governments

• Availability of land barren and cultivated land to cultivate forage/fodder

• Lack of new technology for more production • Weaker section (cannot organized) • Low investment and risk bearing capacity • Weak access and availability to financing and

insurance • High difference in milk production between

the seasons (lean and flush) • Innocence on rearing calves • No business plan and farm record • Poor time management (no care when to feed,

milking etc) • Difficult to get worker

Opportunities Threats

• Tremendous demand of milk (increased consumers)

• Dairy sector is government priority and provision of support and subsidy

• Expansion of dairy processing industries and product diversification

• Availability of technical support and inputs at local level

• Provision of subsidy in insurance premium

• Milk price determined by other • Natural calamities

Relationship with other actors

• Cordial relationship with processors and the input suppliers. Milk provide to the Cooperative/processors

6.1.7 Milk producer Cooperatives

Role in value chain

• Collection of milk from the member and non-member farmers • Facilitate production of hygienic and clean milk • Service provide to the member farmers in dairy farming and management • Raise the voices of farmers for the benefit of farmers • Influence the local government to prepare policy in for of dairy farmers/ cooperative members

Strength Weakness

• Well established milk collection and testing facility

• Provision of milk testing, manpower/ manager

• Providing services to the member farmers (some provide AI service, feed, vet. services, feed etc)

• Well organized sector and large member universe

• Increased financial status

• Poor quality milk from the farmers • Poor bargaining capacity due to perishable

nature of commodity • High milk production cost • No technically experienced human resource

and cannot pay more • Poor service delivery to the member farmers • Poor management skill • Severe difference in milk production

between flush and lean season (60:40 ratio).

45

• Milk clotting Opportunities Threats

• High demand of raw milk • Many processing industries emerging • Consumer awareness on need of milk

consumption • Increase support and subsidy • Government priority sector (cooperative) • High demand of inputs (business

diversification)

• Unfair competition in bulking of the raw materials

• So many MPCs/ collection center • Irregular supply of electricity, poor road

network

Relationship with other actors

• Coordination cooperation, complementary role.

6.1.8 Milk Chilling Centers

Role in value chain

• Raw milk reception, testing and chilling immediately • Facilitate MPCs for quality milk production and supply • Identify new milk production pockets, establish collection center/MPCs

Strength Weakness

• Have well established chilling center • Equip with quality testing facility and CIP in

some instances • Have well trained manpower • Processing industries demand chilled milk

• Very less collection during lean season (almost 60:40 ratio) between flush and lean season.

• No knowledge on maintenance of equipment and machinery

• Difficult to manage sphere parts • Compulsion to receive poor quality milk • No insurance • Highly perishable commodity handling

Opportunities Threats

• Expansion of commercial dairy farming and dairy processing industries

• Availability of support and subsidy in milk production and protection/chilling

• Government priority to maintain cold chain in milk

• Processing is eager to get chilled milk

• Poor electricity supply and road network

Relationship with other actors

• Coordination, cooperation. Receive the raw milk, chill and supply to the processing industries

6.1.9 Milk Processors

Role in value chain

• Collection and processing of hygienic and clean milk • Processing, packaging and marketing of dairy products • Increase employment opportunity • Import substitution and export promotion

Strength Weakness

• Have well established milk processing facility • Good network for milk collection and

transportation • Highly motivated technical and managerial

human resource

• Non-development adequate cold chain facility

• Lack of technically robust manpower (in medium to cottage industries)

• Unfair competition in purchase of milk and

46

• Willingness to produce quality milk and dairy products

• Commercialization of dairy farming • Government priority

Poor quality raw milk in the market • Massive adulteration in raw milk • Lack of knowledge and skill in market

development and marketing • Poor financing • High transportation cost • Price is totally controlled by DDC • Difficult to get worker

Opportunities Threats

• Support and subsidy in milk production and processing

• Increased demand of processed dairy products

• Tremendous import of dairy products • Expansion of the commercial dairy farms • Diversification in the dairy business sector

and interdependence

• Irregularity in the electricity supply and poor road network

• Government tax system is not domestic production friendly

Relationship with other actors

• Co-existence principle, coordination, cooperation, timely payment to the farmers

6.1.10 Milk and milk products sellers

Role in value chain

• Provide quality milk to the consumers • Increase demand of milk and milk products • Awareness on the quality and hygienic milk production to the farmers

Strength Weakness

• Have established own consumers • Change in food habit among the consumers

and increased demand of dairy products • Cash business

• Lack of milk supply during lean season and milk quality deteriorate

• Difficult to maintain cold chain • Lack of transportation facility • Highly perishable commodity • Unfair competition

Opportunities Threats

• Market expansion and health conscious consumers

• Competition in milk production and processing

• High demand of milk and milk products

• Severe low supply of milk in lean season • Irregularity in electricity • Poor road network

Relationship with other actors

• Interdependence, coordination, cooperation and information sharing

6.1.11 Department of Livestock Development

Role in value chain

• Implement livestock development activities • Use of modern technology in veterinary services • Implement women and targeted group livestock development program • Training and counselling/ consultancy services • Awareness on shed improvement and support for it • Support in milk marketing and product diversification • Hygienic and clean milk production support • Distribute milk can and other dairy related utensils and equipment

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• Provide good quality dairy animal breed and breed improvement program • Livestock feed, feeding, fodder/forage development program/ forage mission • Increase productivity and increase income of the farmers • Coordination and linkage with other agencies for livestock/ dairy development • Providing services Support and subsidy • AI and veterinary services • Distribution of forage seed, fodder sapling, nursery development • Training and extension services in over all dairy development/livestock development • Implement the government policy at field level • Act as bridge between the government and dairy farmers

Strength Weakness

• Commercialization trend in livestock and dairy sector

• Dairy farmers are toward self-reliance • Increased consumption of quality milk and

milk products • Expansion of technical services in AI and

veterinary services • Farmers are prepared on livestock insurance

and doing • Government priority and develop policy on

support and subsidy • Increased productivity and adoption of new

advanced and appropriate technology • Develop entrepreneurship and employment

generation at local level • Different level training curriculum in place

and implementing training

• Geographical remoteness and difficult to provide required services

• Milk holiday and need to spent more time for milk sale

• Non-availability of green forage during dry season

• No record on what the result of support and subsidy is and poor monitoring

• Frequent transfer of staff members and lack of livestock/veterinary services

• Low productivity due to large number of low productivity local dairy animals

• Difficult to reach support and subsidy to needy and real farmers/entrepreneurs (even to get loan)

• Increased pollution due to use of machinery and equipment

• Lack of experienced and skilful manpower, reluctance to provide services and cannot provide medicine free of cost

• Cannot address entire problems faced by the dairy farmers

• Different milk price at different location, low attraction on livestock insurance

• Lack of education and poor management in MPCs

Opportunities Threats

• Change in gender role and expansion of women employment in livestock sector/ dairying

• Increased in number of high production dairy animals and good climate for dairy farming

• Large market in India and China • Market expansion, farmers becoming

commercial with high yielding improved breed

• Increased investment in livestock/dairy sector

• Difficult to change the attitude due to traditional and spiritual belief on un productive dairy animals

• Farmers cannot fix the milk price

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• Skilful and trained farmers and technicians and well prepared for livestock occupation

Relationship with other actors

• Facilitating role to the other value chain actors (farmers, agro-vets, feed suppliers, MPCs, dairy industries etc)

• Support for increase production of milk and milk products • Increase employment opportunity • Pool between the policy making bodies and farmers

6.1.12 Division Cooperative Office

Role in value chain

• Registration, regulation, monitoring supervision and evaluation of cooperative activities • Capacity building of the general cooperative members (cooperative education) and executive

committee and staffs • Consultancy services, auditor selection and mobilization

Strength Weakness

• Legally recognized and recognized as third pillar of economic development

• Have trained and capable human resource • Government priority of cooperative

development • Diversity in the nature of cooperative (single,

subject-wise, multipurpose, saving credit etc) • Safeguard by the government and tax

exemption in import of goods and equipment • Many cooperative unions and

federation/associations

• Weak monitoring and evaluation system • Mushrooming cooperatives and many are

inactive • Difficulties to regulate and administer • Lack of adequate human resources • Youths are not being attracted

Opportunities Threats

• Many farmers and organized and making strong networks throughout the country

• Government top priority • Donors are also extending eyes • Cooperative based industries and production

sectors are growing

• Private sector misunderstanding that cooperative is their competitor

Relationship with other actors

• Coordination, linkage and facilitation of the cooperative

6.2 Sustainability analysis

A sustainability assessment was undertaken during the field survey. Major principles and dimensions of sustainability were discussed. The findings of this assessment are summarized in Table 6.1. Table 6.1 Alignment with Sustainability Principles

Principle Comments on the alignment

Improving efficiency in

the use of resources is

crucial to sustainable

There are different required economic infrastructures in the survey

districts. Climate is suitable for dairy animal production and there are

many production pocket areas already identified. Local and regional

market centers are linked with road network, however, there is need of

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agriculture upgrading the road. Available dairy animals have tremendous

opportunity to upgrade through cross breeding, improving pasture land,

production of organic manure will replace the chemical fertilizer and

improve the soil structure and texture, increase moisture holding

capacity and improve soil moisture management. Produced urine could

be used for organic pesticide. Use of the available human resources and

upgrading the skill could be done augmenting the functional training.

Farmers are inclined toward the commercialization and youths are more

positive in dairying and financing institutions have network even in rural

areas including saving and credit and banks.

Sustainability requires

direct action to

conserve, protect and

enhance natural

resources

Dairying is much potential and at this stage there is synergy effect of dairy

farming as it required more fodder and forage that will increase

greenery/ vegetation. This process will protect and preserve the

biodiversity and increase the carrying capacity covering the soil that

could minimize the soil erosion. Covering the top soil will absolve the rai

water and recharge that will protect and preserve the natural springs.

However, there should be long term plan to manage the green house gas

e.g. methane, nitrate and other nitrogenous substances.

Agriculture that fails to

protect and improve

rural livelihoods and

social well-being is

unsustainable

Dairy farming is one of the best enterprise and well accepted by the youth

as it can formulate capital in rural areas and promote self employment. It

could bring urban capital to rural areas twice daily and help in balancing

trade between rural and urban centers. Increased milk production will

improve the nutritional status of the people ensuring health and

productive human resource. Thus, this will improve the livelihood and

well-being of the rural people.

Enhanced resilience of

people, communities

and ecosystems is key

to sustainable

agriculture

Commercial horizon in dairy farming will required more investment that

will automatically make the farmers more conscious and alert assessing

the possible risk and establish good communication mechanism between

the value chain actors and enablers. Farmers will become more careful to

adopt and adapt the resilience mechanism against the climate change and

find out the way for mitigation. Also the commercial farms will well

acknowledge the market volatility and market functions. This will make

farmers more commercial and entrepreneur filling that automatically

stabilize the dairy farming.

Sustainable food and

agriculture requires

responsible and

effective governance

mechanisms

Once the economic benefits will ensure the interrelationship between the

value chain actors will increased, this situation Increase effective

participation and efficient value chain governance. The farmers will be

more conscious on their rights and role and tried to engage and tended to

be a member of association that will increase strength to raise voices act

as pressure group for policy influence. This situation will create good

platform to discuss inter and intra value chain actor meeting and

establish relationship with stakeholders and increase frequency of

meeting and interaction. This will enhance transparency in the business

and make the farms more accountable strengthening ddecentralized

capacity.

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Chapter VII Economics of Value Addition

7.1 Economics/Cost of Raw Milk production Table 7.1 tries to find out the cost of raw milk production based on the information collected from the key informants and the workshop participants. There were different cost items to produce the milk. Many value chain actors were involved and played roles to produce milk. Cost items were for breeding, feeding, care management, disease prevention and control, sale, financing, insurance and others.

Table: 7.1 Economics/cost of Milk Production and Profit Margin of Raw Milk SN Cost Item Cow Buffalo Cow Buffalo NRs NRs Percent Percent 1 Semen/bull including technician service charge 1,000 1,600 1.07 1.73

2 Green forage/fodder including inputs and cultivation cost 14,892 15,476 15.95 16.72

3 Straw 8,030 8,322 8.60 8.99 4 Concentrates (commercial/conventional) 19,345 19,345 20.72 20.90 5 Vitamin and mineral 2,720 - 2.91 - 6 Vaccination 50 50 0.05 0.05

7 Medical service (technical service including reproductive obstacles) 1,200 800 1.29 0.86

8 Medicine cost 970 730 1.04 0.79 9 Water, electricity 450 450 0.48 0.49

10 Detergents (soap, acids, alkali etc) 440 440 0.47 0.48

11 Wage (care of animals and shed, feed and fodder collection and milk sale) 23,360 23,360 25.02 25.24

12 Depreciation of tools for sanitation (shovel, rope, spade, bucket, can, etc) annual 20% 1,320 1,320 1.41 1.43

13 Depreciation of sheds (Annual 10%) 7,000 7,000 7.50 7.56 14 Interest on cost of purchasing animal (15%) 11,400 12,450 12.21 13.45 15 Premium of insurance 1,200 1,200 1.29 1.30

Total 93,377 92,543 100.00 100.00

Milk Production 2,502 1,995 - -

Cost of production/lits 37.32 46.40 2.68 2.16

Milk Price 45 50 0.04 0.05

Total 112,590 99,733 0.05 0.05

Profit 19,213 7,190 120.58 107.77

Profit margin 7.68 3.61 20.81 7.83

Source: HVAP-SIP-Dairy Sector report, Dec 2017

It was found that the major cost lies in feeding (46.6 percent) in case of buffalo in contrast to 48.18 percent in case of cow. Second highest cost was incurred in wage (care and management) which was 25.02 percent in case of cow and 25.24 percent in case of buffalo; interest on loan was 12.21 percent in case of cow and 13.45 percent in case of buffalo. Thus, cost of milk production was bit higher in buffalo than cow. NDDB, Milk Marketing Strategy Study, 2074 entails that the cost of milk production is less when more animal kept and vice versa. The farm size was categorized from small (having herd size 5 or less), medium (having herd size 6-20) and large (having herd size more than 20). By size of the farm, it was found that the smaller the farm sizes the more the cost and vice versa. There was difference in the

51

cost of dairy animal keeping between cow and buffalo, the cost for keeping buffalo was found less compared to cow. Cost per animal when keeping 5 or less cow was Rs. 96,241, while buffalo with same number was NRs. 93,326, similarly per animal cost when keeping 6-20 cow costs NRs. 92,757 while keeping same number of buffalo costs NRs. 91,235 and per animal cost when keeping more than 20 cow costs 82,739 and same number of buffalo keeping costs NRs. 75,487. The cost of milk product in case of cow was found 32.82/ liter and that of buffalo was NRs. 43.51/ liter It was found that the cow milk price was NRs. 45 and that of buffalo was NRs. 50 while cost of production was NRs. 37.32 in case of cow and NRs. 46.40 in case of buffalo. Profit margin of cow milk seems 20.81 percent while that of buffalo was 7.83 percent. Milk production in the study districts was predominated by the buffalo but productivity of buffalo is less compared to cow. Increasing number commercial cow farms or cow could be instrumental to decrease cost of milk production and increase profit margin to the farmers.

7.2 Share of the benefit per liter of milk

Total share of the production chain was NRs. 43.86 and marketing chain was NRs. 16.14 per liter constituting 73.1 and 26.9 percent respectively. Consumer price of a liter of milk was found NRs. 60. In totality, 42.21 percent share have been for farmers, 18.61 percent for agro-vets (medicines, feed, seeds, fertilizer etc), 11.56 percent to financial institutions, 9.96 percent to dairy equipment suppliers, 5.42 percent to dairies and 5.4 percent to the staffs. Table: 7.2 Share of benefit out of one-liter milk

Value chain Total value chain Production Chain Cost (NRs) Percent Agro-vets 11.16 18.61 Farmers 25.33 42.21 Financial institutions 5.37 8.95 Collection in MPC/cooperative 2.00 3.33 Total 43.86 73.10 Marketing chain 0.00 0.00 Dairy equipment supplier 5.98 9.96 Fuel 0.55 0.91 Transport 0.55 0.91 Staff 3.24 5.40 Farmers 0.00 0.00 Management 0.90 1.50 Financial institution 1.57 2.61 Government tax 0.12 0.20 Dairies 3.25 5.42 Total 16.14 26.90 Consumer price 60.00 100.00

Source: HVAP-SIP-Dairy Sector report, Dec. 2017

7.3 Product Costing

Dairy industry in Nepal is comprised of different types and scales of dairies operating both in the public, private and cooperative sectors. Except for the DDC, information about the cost and income of these dairies is not available as the private or cooperative sector dairies are reluctant to disclose this information. As such, the cost of value addition of different milk products is attempted to assess based on the DDC cost and income data of the fiscal year 2073/74. Although this may not exactly represent the cost of value addition of the dairy industry as a whole, it gives a fair idea about an approximate value addition cost involvement in the dairy processing.

52

Another point to note here is that the DDC produces different dairy products but separate costs of each product is not maintained. It maintains joint cost records for multiple products. As such, method of allocating cost based on sales value or relative sales value method is employed to determine the cost of each individual product. The formula used for this purpose is:

Cost Allocated to a Joint Product = Sale Value of the Product

× Total Joint Costs2 Sales Value of Total Production

7.4 Products of DDC DDC produces different milk products. These include various types' liquid processed milk including standard milk, whole milk, cow milk, tea milk and fresh milk. It also produces butter, ghee, dahi, ice cream and paneer. In addition, different types of cheese including Yak cheese, Kanchan cheese, and Mozzarella cheese are also produced. Besides these main products, DDC also produces nominal quantity of cream, processed and spread cheese, and traditional sweets including peda, rasbari, lalmohan, lassi, mohi and khuwa which have very less contribution in the total income of DDC. 7.5 Production of DDC Costs and Income of DDC Available information from DDC shows that it collected 53,186,000 liters of raw milk from the farmers, produced 49,275,000 liters of pasteurized milk and sold 428,725,000 liters of pasteurized milk in 2073/74. Similarly, during the same period it produced 526,589 kg butter, 295,594 kg ghee, 3,618,524 liters dahi, 70,507 liters ice cream, 218,082 kg paneer, 49,734 kg Yak cheese, 133,141 kg Kanchan cheese and 46,681 kg Mozzarella cheese. Besides, it also produced smaller quantity of other dairy products like spread and processed cheese, and sweets including rasbari, lalmohan, peda, and jeera mohi, lassi etc.

7.6 Cost Components and Income DDC categorizes its costs in different components such as cost of raw milk, collection cost, processing cost, sales cost and administrative overheads. Cost of raw milk is the price paid to the farmers for buying milk. Collection cost is comprised of several cost items of which the major are salary and allowances of the employees working in milk collection, fuel for milk transport vehicles and maintenance of these vehicles. The major items included in the processing cost are salary and allowances of the employees working in milk processing at the processing plants, packing materials, water and electricity charges, fuel for boiler and generator, machine maintenance, chemical and detergents, and other raw materials. The major sales cost items are salary and allowances of the employees working in sales, milk and milk product transportation, and rent. The major items of the administrative overheads are salary and allowances of the administrative employees, insurance, gratuity, depreciation, hospitality and several other small expenses. Table 7.3 portrays the cost of DDC in 2073/74.

Table 7.3: DDC's Milk collection, production and sales and Costs Cost particulars Cost (Rs. '000) Cost/liter Cost %

Raw milk purchase 2,474,549 46.53 61.93 Milk collection cost 266,024 5.00 6.66 Milk production cost 687,585 13.95 17.21 Sales cost 133,873 2.75 3.35 Administrative overheads 433,629 8.80 10.85

Total 3,995,660 100.00 Source: DDC Progress Report and Final Audit Report, 2073/74 2 https://accountingexplained.com/managerial/cost-allocation/joint-cost-allocation-methods

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DDC generated income by selling different types of milk and milk products. Table 7.4 depicts its income. Table 7.4: Income of DDC from Milk and Milk Products, 2073/74

Milk and Milk Products

Unit Quantity

Sold Income

Income Per/Unit (liter/kg)

Income %

Milk Std. Milk '000 liter 33,767 2,084,393 61.73 51.07 Whole milk '000 liter 9,020 695,995 77.16 17.05 Cow milk '000 liter 3,645 254,982 69.95 6.25 Fresh milk

7,325

0.18

Tea milk '000 liter 2,097 118,520 56.52 2.90 Sub-total 48,792 3,161,215

77.46

Milk Products Butter MT 151 96,350 638.08 2.36 Ghee MT 296 192,293 649.64 4.71 Dahi '000 liter 3,620 332,814 91.94 8.16 Ice cream '000 liter 74 16,249 219.58 0.40 Paneer MT 217 100,847 464.73 2.47 Yak Cheese MT 45 45,827 1,018.38 1.12 Kanchan cheese MT 117 80,654 689.35 1.98 Mozzarella cheese

MT 44 23,446 532.86 0.57

Others

31,403

Sub -total

919,883

22.54

Total

4,081,098

Source: DDC Final Audit Report, 2073/74

7.7 Product costs and margin Of the total DDC income, 77.46 per cent of the total income was generated from liquid milk such as standard milk, whole milk, cow milk and tea milk; and 22.54 per cent from milk products including butter, ghee, dahi, icecream, paneer, and yak, kanchan and mozzarella cheeses; other cheeses and sweets. Per unit product cost and income of these products, and margin is presented in Tables 7.5 through 7.16. The initial margin is arrived at after deduction of cost of raw milk from income and margin thereafter is derived by deducting subsequent cost from the subsequent margin. The final margin is the surplus per unit from the respective product after deduction of all costs. Table 7.5: Cost, Income and Margin of Standard Milk

Source: Estimation based on DDC Final Audit Report, 2073/74

SN Cost Particulars Cost/liter (NRs) Margin (NRs) 1 Cost of raw milk 37.43 24.30 2 Collection cost 4.02 20.28 3 Processing cost 10.40 9.88 4 Sales cost 2.02 7.85 5 Administrative overheads 6.56 1.29

Total costs 60.44

Income/liter 61.73

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Table 7.6: Cost, Income and Margin of Whole Milk

S. No Cost Particulars Cost/liter (NRs.) Margin (NRs.)

1 Cost of raw milk 46.79 30.38 2 Collection cost 5.03 25.35 3 Processing cost 13.00 12.35 4 Sales cost 2.53 9.81 5 Administrative overheads 8.20 1.62

Total costs 75.55

Income/liter 77.16

Source: Estimation based on DDC Final Audit Report, 2073/74

Table 7.7: Cost, Income and Margin of Cow Milk

S. No Cost Particulars Cost/liter (NRs.) Margin (NRs.)

1 Cost of raw milk 42.42 27.54 2 Collection cost 4.56 22.98 3 Processing cost 11.79 11.19 4 Sales cost 2.29 8.90 5 Administrative overheads 7.43 1.46

Total costs 68.49

Income/liter 69.95 Source: Estimation based on DDC Final Audit Report, 2073/74

Table 7.8: Cost, Income and Margin of Tea Milk

S. No Cost Particulars Cost/liter (NRs.) Margin (NRs.)

1 Cost of raw milk 33.55 22.97 2 Collection cost 3.61 19.36 3 Processing cost 9.32 10.04 4 Sales cost 1.82 8.22 5 Administrative overheads 5.88 2.34

Total costs 54.18

Income/liter 56.52 Source: Estimation based on DDC Final Audit Report, 2073/74

Table 7.9: Cost, Income and Margin of Butter

S. No Cost Particulars Cost/kg (NRs.) Margin (NRs.)

1 Cost of raw milk 386.90 251.18 2 Collection cost 41.59 209.59 3 Processing cost 107.50 102.09 4 Sales cost 20.93 81.16 5 Administrative overheads 67.80 13.36

Total costs 624.72

Income/kg 638.08 Source: Estimation based on DDC Final Audit Report, 2073/74

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Table 7.10: Cost, Income and Margin of Ghee

S. No Cost Particulars Cost/kg (NRs.) Margin (NRs.) 1 Cost of raw milk 393.90 255.73 2 Collection cost 42.35 213.39 3 Processing cost 109.45 103.94 4 Sales cost 21.31 82.63 5 Administrative overheads 69.03 13.60

Total costs 636.04

Income/kg 649.63 Source: Estimation based on DDC Final Audit Report, 2073/74

Table 7.11: Cost, Income and Margin of Dahi

S. No Cost Particulars Cost/kg (NRs.) Margin (NRs.) 1 Cost of raw milk 55.75 36.19 2 Collection cost 5.99 30.20 3 Processing cost 15.49 14.71 4 Sales cost 3.02 11.69 5 Administrative overheads 9.77 1.92

Total costs 90.01

Income per liter 91.94 Source: Estimation based on DDC Final Audit Report, 2073/74

Table 7.12: Cost, Income and Margin of Ice-cream

S. No Cost Particulars Cost/liter (NRs.) Margin (NRs.)

1 Cost of raw milk 133.14 86.44 2 Collection cost 14.31 72.13 3 Processing cost 37.00 35.13 4 Sales cost 7.20 27.93 5 Administrative overheads 23.33 4.60 Total costs 214.98

Income per liter 219.59 Source: Estimation based on DDC Final Audit Report, 2073/74

Table 7.13: Cost, Income and Margin of Paneer

S. No Cost Particulars Cost/kg (NRs.) Margin (NRs.) 1 Cost of raw milk 281.79 182.94 2 Collection cost 30.29 152.65 3 Processing cost 78.30 74.35 4 Sales cost 15.24 59.11 5 Administrative overheads 49.38 9.73

Total costs 455.00

Income/kg 464.73

Source: Estimation based on DDC Final Audit Report, 2073/74

Table 7.14: Cost, Income and Margin of Yak Cheese

S. No Cost Particulars Cost/kg (NRs.) Margin (NRs.)

1 Cost of raw milk 617.49 400.89 2 Collection cost 66.38 334.51 3 Processing cost 171.58 162.93 4 Sales cost 33.41 129.53 5 Administrative overheads 108.21 21.32

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S. No Cost Particulars Cost/kg (NRs.) Margin (NRs.)

Total costs 997.06

Income/kg 1,018.38 Source: Estimation based on DDC Final Audit Report, 2073/74

Table 7.15: Cost, Income and Margin of Kanchan Cheese

S. No. Cost Particulars Cost/kg (NRs.) Margin (NRs.) 1 Cost of raw milk 417.98 271.37 2 Collection cost 44.93 226.43 3 Processing cost 116.14 110.29 4 Sales cost 22.61 87.68 5 Administrative overheads 73.25 14.43

Total costs 674.92

Income/kg 689.36 Source: Estimation based on DDC Final Audit Report, 2073/74

Table 7.16: Cost, Income and Margin of Mozzarella Cheese

S. No. Cost Particulars Cost/kg (NRs.) Margin (NRs.)

1 Cost of raw milk 323.10 209.77 2 Collection cost 34.73 175.03 3 Processing cost 89.78 85.25 4 Sales cost 17.48 67.77 5 Administrative overheads 56.62 11.16

Total costs 521.71

Income/kg 532.86

Source: Estimation based on DDC Final Audit Report, 2073/74

The above analysis illustrates that around 62 per cent of the cost in dairy processing is incurred for raw milk and the remaining 38 per cent for other costs. It also shows that the dairy processing generates some margin per unit of the products. This indicates that value addition in dairy processing is commercially cost-effective.

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Chapter VIII

Conclusion and Recommendations

8.1 Conclusion

In Nepal, majority of the population resides in the rural areas with about two-third of them still dependent on agriculture for their livelihood. However, the current status of the crop productivity of large sectors of the rural population is exceedingly poor. Agriculture being subsistent in nature, crop yield is low and family labor is not fully employed. No major improvement in crop productivity has been achieved though it has been in priority in all-national budget due to constraints in infrastructural support and capacities to make appropriate investment. In addition, the distribution of land is such that the number of small and/or marginal farmers and landless dominate the scene and the resources of this class of people are very meager and much of the household is heavily indebted. At this backdrop, the dairy sector has been playing a major role in order to ensure social justice amongst the rural poor by providing off farm opportunities for increased employment and income generation. Dairy sector is directly contributing food security to the large number of population as part of their milk production is consumed within the farm households in the form of milk and milk products which encompass both elements of availability and access to food. The dairy sector is also contributing to the stability of food security of rural households because dairy animals form an integral part of crop-livestock integrated form of agriculture systems, in which they provide a steady stream of food and revenues for households, they can be used as collateral for credit, sold for emergency cash needs arising due to an injury or illness of productive family members, they also provide draught power, fertilizer and pest control, contributing to total farm productivity and hence to food security. The final element of utilization is materialized through production and consumption of milk-based foods which is a common practice in the Nepalese farm households. Apart from the above direct contribution to food security, the dairy sector has been the major source of income generation contributing indirectly to food security in the rural areas. Accordingly, the dairy development activities have been one of the major means to regularly channeling a large amount of urban money to the rural areas significantly contributing to total farm productivity and hence to food security and improve the living standards of the rural poor. Similarly, the The dairy is the most important subsector of livestock in the country contributing almost two-third of livestock GDP and providing employment and income generating opportunities for hundreds of thousands of households. The sector is well known for flow of money from urban to rural sector in the country. On the other side, increasing human population, rapid urbanization, change in demographic structure, increasing income level and changing food habits are some of the driving force for increasing demand for milk and milk products. As such, the value chain actors involved in the dairy sector have major role to play to serve both the dairy farmers and urban consumers. The sector's operations should be planned and result oriented so as it to be a self-reliant and commercially successful enterprise.

8.2 Recommendations

During the discussions with the value chain actors, they have expressed their concerns and also have made various recommendations to improve the dairy value chain. These recommendations are summarized below. Farmers

• Priority should be given for soft loan rather than the subsidy/grant with extensive extension service integrating research. Increase access and availability of subsidized loan and insurance

58

• Training on full package of practice on dairy farming including breeding, feeding, care-management, disease prevention and control, GMP, CoP, SoP, marketing and marketing management with extensive follow-up and consultancy services to the dairy farmers.

• Develop dairy animal resource center, extend the AI services with quality sexed semen, forage and fodder resource center and assure steady milk production throughout the year.

• Motivate youths in dairy farming with honor providing training on business plan, farm record including full package of practice for dairy farming and expansion of shed improvement and housing program

• Establish milk collection and chilling centers at strategic location along the road corridor and create an environment with increased access and availability of inputs and services and uninterrupted market. Allocate milk shed areas/ pockets for specific dairy processors and regulate them with strong code of conduct where the concern processing industry will provide training and extension activities with market guarantee of the milk

• Provision of forage seed, sapling, TMR, feed raw materials in subsidized rate. • Establish mechanism of assessing number, type, stage of lactation, total milk production, cost

of milk production and profit margin to the farmers. Link the system with computer software between every local governments and federal government with uninterrupted server to collect information in central data bank. Fixed the milk price in close consultation with farmers and pricing formula should be developed for fixing the milk price based on the compositional/chemical and bacterial quality allocating points for fat, SNF, protein, lactose, TPC and coliform). Expansion of production based premium price per unit of milk produced.

• Provision of good road network, electricity facility, cold chain, digital system to measure the quality of milk (chemical and bacterial).

• Management of proving recently pass out dairy graduates to serve in diary pocket areas • Transform dairy farmer to dairy entrepreneur and dairy farming as enterprise organizing

observation tour and exchanged visit, workshop, training etc and commercialize dairy farming.

Milk Producers Cooperatives

• Regular supply of electricity and all-weather roads with support/ subsidy/ loan to the dairy cooperatives

• Strengthen the institutional capacity of the MPCs augmenting cooperative member education, cooperative execution, business plan preparation, financial management and milk product diversification

• Scientific milk pricing system to be introduced with extensive training and advocacy on GMP, CoC, GHP and CoP

• Establish chilling facility at strategic location- road corridor, provide chilling facility and milk transport in subsidized loan.

• Equip the MPCs with up to date laboratory and computer software to calculate the milk price.

Milk Chilling Centers

• Increase services to the farmers to reduce the fluctuation of milk production between the season

• Provide uninterrupted supply of electricity and improve road network • Increase chilling facility at strategic location (along the road corridor) • Provide fresh and refresher training on operation and maintenance of chilling centre

Milk processors

• Improvement in electricity supply and road network • Training to the technical and managerial staff on good manufacturing practices, marketing

management • Effective monitoring of the industries for quality assurance (government role should be

facilitating not only controlling)

59

• Increase investment in quality improvement • Establish computer software/ link it with dairy industries and their products and central

quality control authority and establish immediate feedback system to the processing industries.

Milk and milk products sellers

• Regular supply of electricity and all-weather roads • Training on marketing management • Facility development for cold chain maintenance

Consumers

• Reduce the consumer price of milk and milk products. • Improve the milk quality, discourage toned milk production, strictly prohibit the supply of

poor quality milk and products in the market. • Promotional activities on the GHP, GMP, CoP, SoP, Codex, HACCAP provision for mass

awareness. • Good road and transportation network should be developed with appropriate cold chain

facility • Increased number of milk outlets viz: sales booth/centers, marts, departmental stores,

franchised shops and increased availability of milk and products all the time

Feed manufacturer and suppliers

• Increase production of feed raw materials in the country • Training on the marketing management • Provide subsidy in feed manufacturing • Regular supply of electricity and water • Increase feed storage capacity

Financial institutions

• Awareness on the insurance and soft loan among the farmers • Simplify the rebating of insurance claim policy • Increase productivity of animals through better management and service delivery • Strong monitoring and evaluation system to be developed • Premium should be fixed for better compensation

Suppliers of dairy equipment/materials

• Meaningful implementation of custom duty exemption policy • Provide training on operation and maintenance of the dairy machinery and equipment • Investment protection policy to be formulated • Increase subsidy and support • Scientific milk price fixing policy to be introduced

AI and veterinary service providers

• Massive functional and technical training on AI and veterinary service delivery • Recognition from the government on the AI service providers and AI services • Increased access and availability of good quality sexed semen • Meaningful implementation of insurance and subsidized loan • Government role not only controlling but also facilitating

Agro-vets

• Technology friendly training at local level

60

• Meaningful implementation of subsidized loan and insurance and on the spot loan sanction procedure should be established

• Management of subsidized veterinary medicine, semen, seeds in time • Reliable electricity supply and road network • Increase in number of high productive dairy animals with developing resource centers • Technology transfer for high performance of dairy animals (breeding, feeding, sanitation,

veterinary service etc)

Department of Livestock Development

• Marketing management, increase number of livestock service, uniformity in milk price, expansion of forage mission and AI mission

• Functional coordination and linkage with different and relevant agencies and additional support and subsidy

• Provision of soft loan, emphasis on hygiene and sanitation in dairy farming, increased required number of human resources

• Training and exposure visit to the field level extension workers • One ward one technician campaign and action accordingly • Link the agriculture and forest university with the dairy farming and manage to recruit

recently pass out graduates to serve farmers dairy pocket areas • One dairy industry one dairy pocket area should be implemented • Provide adequate quantity of high productive sexed semen to the dairy farmer in subsidized

rate • Establish database of dairy farms, farm record managing separate server and link with local

government dairy management system • System of concentrating farmers only in production rather to marketing should be developed

Division Cooperative Office

• Provide effective and functional training to the cooperative general members, executive body and staff

• Provide business development training to the cooperative executive committee and staff members

• Training on milk product diversification, marketing, market development and consumer care

61

Annexes

Annex: 1 Survey Tools

g]kfnsf] 8]/L d'No >[vnf cWwog Dairy Value Chain Study in Nepal

/fli6|o b'Uw ljsf; jf]8{ tyf g]kfn jftfj/0f ;+/If0f s]Gb|

b'w pTkfbsx?sf] nflu 3/w'/L ;e]{If0f 3/d'nLsf] gfdM=============================pQ/bftfsf] gfdM===============================lhNNff=============k|b]z=========

lnËM============================================ pd]/ -jif{_====================== k]zfM======================

pQ/bftfsf] lzIffM s_ lg/If/ v_ ;fIf/ u_ k|fydLs 3_ dfWoflds ª_ pRr dfWoflds

r_ :gfts jf jbL

kl/jf/ ;+Vof================= dlxnf======================== k'?if=============

!= tkfO{sf] uf]7df sltj6f ufO{÷e};L 5g\ < s_ ufO{====================== v_ e};L================== @= tkfO{sf] uf]7df sltj6f b'w lbg] ufO{÷e};L 5g\ < s_ ufO{====================== v_ e};L================== #= ePsf ufO{ e};Lsf] k|sf/M

ufO{ s_ :yfgLo v_ qm; u_ ljsf;]

e};L s_ :yfgLo v_ qm; u_ ljsf;]

$= ufO{ e};Lsf] ;|f]t

s_ cfkm\g} uf]7sf] v_ cfkm\g} ufpFjf6 u_ l5d]sL ufpFjf6 3_ ufO{÷e};L Jofkf/Ljf6

%= uf]7sf] k|sf/

s_ :yfgLo v_ ;'wfl/Psf]

^= uf]7 lgdf{0f ;fdu|Lsf] ;|f]t -uf]7 lgdf{0f ;fdu|L s;/L h'6fpg'x'G5<_

s_ cfkm\g} gLlh v_ ufpFjf6 u_ :yfgLo jhf/jf6 3_ If]qLo jhf/ ª_ /fli6|o jhf/

&= k|hgg ljlw

s_ ufO{M k|fs[lts======================= P=cfO{ ufO{

v_ e};L k|fs[lts======================== P= cfO{= e};L

*= k|fs[lts eP /fFuf]÷;fF9] sxfF jf6 k|fKt ug'{ eof] <

S_ cfkm\g} v_ l5d]s u_ l5d]sL ufpF 3_ k|hgg s]Gb|

(_ P=cfO{= eP l;d]g sxfFjf6 Nofpg' eof] <

S_ Pu|f]e]6 v_ k|;f/ sfo{stf{ -;/sf/L h]=6L=P_ u_ gLlh h]=l6=P 3_ cGo v'nfpg]

!)_ 3fF; k/fnsf] ;|f]t

S_ cfkm\g} v_ vl/b ug]{

!!_ vl/b eP s] vl/b ug'{ eof] < s_ k/fn v_ xl/of] 3fF;

62

!@_ sxFfjf6 vl/b ug'{eof] < s_ cfkm\g} ufpF v_ ufpF eGbf jflx/

!#_ ufpF jflx/jf6 eP s;n] pknAw u/fof] < s_ ls;fgn] v_ Jofkfl/n]

!$_ bfgf rf]s/sf] ;|f]t s_ cfkm\g} v_ lsg]sf]

!%_ lsg]sf] eP s] lsGg'eof] < s_ cGg v_ bfgf u_ rf]s/ 3_ cGo====

!^_ sxfFjf6 lsGg'eof] < v_ :yfgLo jhf/ u_ lhNnf ;b/d'sfd 3_ If]qLo jhf/

ª_ cGo jhf/=====================

!&_ ufpF jflx/jf6 eP s;n] pknAw u/fof] < s_ ls;fgn] v_ Jofkfl/n]

!*_ pks/0f tyf ;kmfug]{ ;fdu|Lsf] ;|f]t s_ 3/s}] v_ :yfgLo jhf/ u_ lhNnf

;b/d'sfd 3_ If]qLo jhf/ ª_ cGo jhf/=====================

!(_ kz' k|fljlws ;]jfsf] ;|f]t s_ cfkm} v_ ;/sf/L h]=l6÷P u_ gLlh h]=l6÷P

3_ u};; h]=l6÷P ª_ cGo -n]Vg'xf];_

@)= kz' cf}iflw÷vf]ksf] ;|f]tM s_ 3/d} jgfPsf] v_ :yfgLo jhf/÷Pu|f]e]6

u_ lhNnf ;b/d'sfd 3_ If]qLo jhf/ ª_ /fli6|o jhf/ r_ k|fljlwsn] NofPsf] r_ cGo jhf/=========

@!= b'wsf] jhf/ s_ b'Uw pTkfbs ;xsf/L v_ :yfgLo jhf/ u_ pBf]uL 3_

3/3/df n}hfg] ª_ cGo -n]Vg'xf];_====================

@@= % jif{ otf b'w pTkfbg If]qdf tkfO{n] s] s:tf] kl/jt{g b]Vg'ePsf] 5<

S_ 3/fo;L cfDbfgL j9]sf] v_ ufO{÷e};Lsf] ;+Vof j9]sf] u_ ufO{÷e};Lsf] ;+Vof / b'w lbg]

ufO{÷e};Lsf] cg'kft j9]sf] 3_ ufO{÷e};L kfngdf dlxnf tyf k'?ifsf] e'dLsf kl/jt{g ePsf] .

@#_ % jif{ otf ufO{÷e};L kfngsf] nflu k|;f/ ;]jfdf s] s:tf] kl/jt{g kfpg' ePsf] 5<

S_ k|;f/;]jf j9]sf] 5 v_ k|;f/ ;]jf 36]sf] 5 u_ p:t} 5 3_ ;]jf pknAw g} 5}g

@$= % jif{ otf ufO{÷e};L kfng -b'w pTkfbg_ k|ljlwdf s] s:tf] kl/jt{g kfpg' ePsf] 5<

s_ b9L pTkfbgsf] nflu gofF k|ljlw v_ k|ljlwdf s'g} kl/jt{g gcfPsf] u_ s]lx ;'wf/ cfPsf]

@%= % jif{ otf ufO{÷e};L kfng -b'w pTkfbg_ C0f k|flKtdf s] s:tf] kl/jt{g kfpg' ePsf] 5<

s_ rfx] hlt C0f kfO{G5 v_ C0f kfpg ufXf] 5 u_ C0f g} kfO{b}g 3_ k|s[of nfdf]

ª_ C0f :jLs[tdf clgoldttf

@^= % jif{ otf tkfO{sf] b'w pTkfbgjf6 x'g] cfDbfgL j[l4 ePsf] 5 < s_ 5 v_ 5}g

@& olb 5 eg] zfnfvfnf lglZrt jflif{s slt cfDbfgL slt 5< s_ % jif{ klxn] -?_============

v_ clxn] -?_=============================

63

@*= % jif{ otf b'w k|;f]wgsf] If]qdf s] s:tf kl/jt{g b]Vg' ePsf] 5<

s_ k|;f]wgstf{ j9]sf 5g\ . v_ ljleGg vfn] b'Uw kbfy{ jgfpg] yfn] u_b'Uw kbfy{sf] u'0f:t/df ;'wf/ 5

3_ cfkm\gf] nfe dfq x]g{ yfn] .

@(_ % jif{ otf b'w / b'Uw kbfy{sf] jhf/Ls/0fdf s:tf] kl/jt{g b]Vg'ePsf] 5<

S_ b'wsf] ljZj;gLo jhf/ 5. v_ b'wsf] jhf/ clglZrt 5 u_ b'w ljbf x6]sf] 5

3_ /fd|f] d'No kfO{Psf] 5 . ª_ s'g} kl/jt{g 5}g .

#)= ufO{÷e};L kfng jf b'w pTkfbgsf ;jn÷/fd|f kIfx? s] s] 5g\ <

#!= ufO{÷e};L kfng jf b'w pTkfbgdf ;'wf/ ug'{kg]{ kIffx? s] s] 5g\ <

#@= ufO{÷e};L kfng jf b'w pTkfbgsf ;Defjgfx? s] s] 5g\ <

##= /fd|f] tl/sfn] ufO{÷e};L kfng jf b'w pTkfbgsf r'gf}ltx? s] s] 5g\ <

#$= ufO{÷e};L kfng jf b'w pTkfbgdf ;'wf/ ug{sf] nflu tkfO{sf ;'emfjx? s] s] 5g\ <

wGojfb

cGtjftf{ lng]sf] gfd==================================================== x:tfIf/ ldltM @)&%÷!÷

64

g]kfnsf] 8]/L d'No >vnf cWwog Dairy Value Chain Study in Nepal

/fli6|o b'Uw ljsf; jf]8{ tyf g]kfn jftfj/0f ;+/If0f s]Gb|

b'w pkef]Qmfx?sf] nflu 3/w'/L ;e]{If0f 3/d'nLsf] gfdM=============================pQ/bftfsf] gfdM===============================lhNNff=============k|b]z=========

lnËM==================================================== pd]/ -jif{_================== k]zfM========================

pQ/bftfsf] lzIffM s_ lg/If/ v_ ;fIf/ u_ k|fydLs 3_ dfWoflds ª_ pRr dfWoflds

r_ :gfts jf jbL

kl/jf/ ;+Vof================= dlxnf============== k'?if=============

!= tkfO{sf] kl/jf/sf] cfDbfgLsf] d'Vo ;|f]t s] xf] <

S_ s[lif v_ Jofkf/ u_ gf]s/L 3_ j}b]lzs /f]huf/L ª_ Hofnf r_ cGo -v'nfpg]_

@= ;j} tkm{jf6 cfpg] cfDbfgL hf]8\bf tkfO{sf] 3/sf] ut jif{sf] s'n cfDbfgL slt ?k}kf eof]< ?=================

#= ut jif{ tkfO{sf] kl/jf/sf] vr{ s] s] df slt slt ?k}of eof] <

S_ vfgf=============== v_ nQf sk8f============= u_ lzIff=============== 3_ :jf:Yo==================

ª_ dgf]/~hg=========== r_ 3/ lgdf{0f============== 5_ rf8kj{============ h_ wd{÷;+:s[lt============

em_ ;fdu|L vl/b========= `_ rGbf================= 6_ Jofh ltg{=========== 7_ cGo -v'nfpg]_==

$= tkfO{sf] 3/df b'w jf b'Uw kbfy{ lsGg] rng 5< s_ 5 v_ 5}g

%= b'w jf b'Uw kbfy{ lsGg] rng eP dfl;s slt lsGg' x'G5 <

s_ emf]n b'w -ln_====== v_ blx -ln_======== u_ df]lx -ln_=========== 3_ 3Lp -s]=hL_==========

ª_ kgL/ -s]=hL_======= r_ cfO{:s|Ld -ln_===== 5_ b'w kfp8/ ÷NofS6f]h]g -s]=hL_=======

h_ Sofg b'w -ln_==== em_ cGo -v'nfpg'xf];\_==============================

^_ b'w tyf b'whGo kbfy{x? rfx]sf] j]nfdf kfO{G5 < s_ kfO{G5 v_ kfO{b}g

&_ % jif{ klxn] / clxn]sf] t'ngf ubf{ b'w tyf b'whGo kbfy{x?sf] pknAwtfdf s] km/s kfpg'ePsf] 5<

s_ b'w k|fKt ug{ ;'wf/ cfPsf] 5 v_ ;'wf/ cfPsf] 5}g u_ emg lju|LPsf] 5 .

*_ % jif{ klxn] / clxn]sf] b'w tyf b'whGo kbfy{x?sf] u'0f:t/df ;'wf/ cfPsf] 5 <

s_ ;'wf/ ePsf] 5 v_ ;'wf/ cfPsf] 5}g u_ emg lju|LPsf] 5 .

(_ tkfO{sf] xsdf % jif{ klxn] / clxn]sf] b'w tyf b'whGo kbfy{x?sf] kx'Fr s:tf] 5 <

s_ kx'Fr j9]sf] 5 -vl/b ug]{ ;+Vof j9]sf]]_ v_ j9]sf] 5}g u_ 36]sf] 5 -dxËf] ePsf]_

!)_ ljut % jif{ otf b'w k|;f]wgsf] If]qdf s] s:tf kl/jt{g b]Vg' ePsf] 5<

65

s_ k|;f]wgstf{ j9]sf 5g\ . v_ ljleGgvfn] b'Uw kbfy{ jgfpg] yfn] u_b'Uw kbfy{sf] u'0f:t/df ;'wf/ 5

3_ cfkm\gf] nfe dfq x]g{ yfn] .

!!+_ tkfO{sf] If]q j/k/sf jhf/df s] s] b'w tyf b'whGo kbfy{x? vkt x'G5 < ;'rL tof/ ug'{xf];\ .

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=========================================================================================================================

!@_ b'w tyf b'whGo kbfy{ k|;f]wgstf{x?n] cfkm\gf] ljlqm /0fgLltdf kl/jt{g NofPsf 5g\ < 5g\ eg] s] s:tf

/0fgLlt NofPsf5g\ <

s_ Kofs]hdf ;'wf/ v_ u'0f:t/df ;'wf/ u_ lj1fkg 3_ ;x'lnot d'No

!#= b'w tyf b'whGo kbfy{x?sf] vktdf b]vfk/]sf ;dZofx? S] s] x'g\ < jtfpg'xf];\ .

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!$_ ;du| b'Uw If]qsf] ljsf;sf] nflu tkfO{ s] s] ;'emfj 5g\ < jtfpg'xf];\ .

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=========================================================================================================================

wGojfb

cGtjftf{ lng]sf] gfd==================================================== x:tfIf/ ldltM @)&%÷!÷

66

g]kfnsf] 8]/L d'No >vnf cWwog Dairy Value Chain Study in Nepal

/fli6|o b'Uw ljsf; jf]8{ tyf g]kfn jftfj/0f ;+/If0f s]Gb| d'Vo ;'rgfbftfsf] cGtjftf{sf] nflu r]slni6 -b'Uw ljsf; jf]8{, lhNnf tyf s]GB|Lo b'Uw pTkfbs ;xsf/L ;+3,

lhNnf kz';]jf sfof{no, Pkm=Pgl;l;cfO{ sf k|ltlglwx?jf6 lng] _

;'rgfbftsf] gfdM================================= ;+:yf====================================== kbM===============================

7]ufgfM lhNnf=========================== gu/÷ufpFkflnsf================================= j8f g++++++++++++++++++++++++++++++++++++++=====++++++++++++++++=++++=========================

! tkfO{sf] lhNnf÷ gu/÷ufpFkflnsf If]qdf b'w pTkfbg If]qx? sxfF sxfF 5g\ < b'w pTkfbg ks]6sf] gfd

jtfpg'xf];\M

=======================================================================================================================================================

=======================================================================================================================================================

=========================================================================================================================

@= tkfO{sf] lhNnf÷ gu/÷ufpFkflnsf If]qdf b'w / b'Uw kbfy{sf] d'Vo d'Vo jhf/ If]qx? sxfF sxfF 5g\ < jhf/

ks]6sf] gfd jtfpg'xf];\M

=======================================================================================================================================================

=======================================================================================================================================================

=========================================================================================================================

#= tkfO{sf] lhNnf÷ gu/÷ufpFkflnsf If]qdf b'w ;+u ;DjlGwt ;+3 ;+:yf jf JolQmx? s] s] 5g\ < gfd

jtfpg'xf];\M

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=======================================================================================================================================================

=========================================================================================================================

$= tL ;+:yf jf JolQmx?n] 8]/L If]qsf] ljsf;sf] nflu s] s:tf sfo{x? ub}{ cfPsf5g\ <

=======================================================================================================================================================

=======================================================================================================================================================

=========================================================================================================================

%= tLlgx?n] b'Uw If]q ljsf;df s;/L k|efj kfg{ ;Sbg\ <- gLlt ;'wf/, ;dGjo÷5nfËLo ;'wf/, nufgL, ;]jf

k|jfx, ;fdu|L pknAwwtf==== cfbL_.

=======================================================================================================================================================

=======================================================================================================================================================

=========================================================================================================================

^= tkfO{sf] lhNnf÷ gu/÷ufpFkflnsf If]qdf b'Uw If]q ljsf;df ;xof]uL ;+:yf÷JolQmx? s] s] 5g\ <

=======================================================================================================================================================

=======================================================================================================================================================

=========================================================================================================================

&= ;xof]uL ;+:yf÷JolQmx?n] 8]/L If]qsf] ljsf;sf] nflu s] s:tf sfo{x? ub}{ cfPsf5g\ <

=======================================================================================================================================================

=======================================================================================================================================================

=========================================================================================================================

67

*= tkfO{sf] lhNnf÷ gu/÷ufpFkflnsf If]qdf b'Uw If]q ljsf;df k|efj kfg]{ d'Vo d'Vo tTjx? s] s] 5g\ <

=======================================================================================================================================================

=======================================================================================================================================================

=========================================================================================================================

(= tLlgx?n] b'Uw If]q ljsf;df s;/L k|efj kfg{ ;Sbg\ <- gLlt ;'wf/, ;dGjo÷5nfËLo ;'wf/, nufgL, ;]jf

k|jfx, ;fdu|L pknAwwtf==== cfbL_

=======================================================================================================================================================

=======================================================================================================================================================

=========================================================================================================================

!)= tkfO{sf] lhNnf÷ gu/÷ufpFkflnsf If]qdf b'Uw If]qsf ;DjlGwt ;+:yf tyf JolQmx? ÷d'No >[vnfsf

v]nf8Lx? -ls;fg, ufO{, e};L ljlqm ug]{x?, uf]7 jgfpg] ;fdu|Lx?, bfgf / bfgf jgfpg] kbfy{ ljlqmug]{x?, 3fF;

pTkfbgsf ;fdu|L ljlwm ug]{x?, e]6]/Lg/L cf}iflw ljqm]tfx?, b'w k|;f]wsx? cfbL_ sf] nflu cfkm\gf] Joj;fo

j9fpg s] s:tf cj;/x? 5g\ <

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!!= tkfO{sf] lhNnf÷ gu/÷ufpFkflnsf If]qdf b'Uw If]qsf ;DjlGwt ;+:yf tyf JolQmx? ÷d'No >[vnfsf

v]nf8Lx? -ls;fg, ufO{, e};L ljlqm ug]{x?, uf]7 jgfpg] ;fdu|Lx?, P=cfO{, ;f9]÷/fFuf], bfgf / bfgf jgfpg] kbfy{

ljlqmug]{x?, 3fF; pTkfbgsf ;fdu|L ljlwm ug]{x?, e]6]/Lg/L cf}iflw ljqm]tfx?, b'w k|;f]wsx? cfbL_ sf] nflu

cfkm\gf] Joj;fo j9fpg s] s:tf ;d:of / r'gf}ltx? 5g\ <

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79

Annex: 2 Survey Tables Table 1: Milk producers by gender

S. No. Gender No. of farmers % 1 Female 96 25.13 2 Male 286 74.87

Total 382 100

Table: 2: Education of the milk producers

S. No. Education level No. of Milk producers

%

1 Illiterate 62 16.23 2 Literate 74 19.37 3 Primary 71 18.59 4 Secondary 109 28.53 5 Higher Secondary 44 11.52 6 Bachelors and more 22 5.76

Total 382 100.00 Table: 3: Type of animal shed

S. No. Type Total % 1 Local 232 60.73 2 Improved 150 39.27

Total 382 100

Table: 4: Breeding system

S. No. System Total % 1 Artificial insemination 199 52.09 2 Natural breeding 183 47.91

Total 382 100.00

Table: 5: Sources of roughages S. No. Sources Total %

1 Purchase 84 21.99 2 Own land 298 78.01

Total 382 100.00

Table 6: Sources of concentrates/grains S. No. Sources Total %

1 Purchase 259 67.80 2 Own land 123 32.20

Total 382 100.00

Table 7: Improvement in income

S. No. Response Total % 1 Yes 361 94.50 2 No 21 5.50

Total 382 100.00

80

Table 8: Consumers by gender

S. No. Gender No. of

consumers %

1 Male 240 64.00

2 Female 135 36.00

Total 375 100.00

Table 9: Education of the consumers

S. No. Education level No. of

consumers %

1 Illiterate 25 6.67 2 Literate 49 13.07 3 Primary 66 17.60 4 Secondary 110 29.33 5 Higher Secondary 62 16.53 6 Bachelors and above 63 16.80

Total 375 100.00 Table 10: Main sources of income

S. No. Sources of income No. of consumers %

1 Agriculture, business 34 9.07

2 Agriculture and foreign employment 17 4.53

3 Agriculture 56 14.93

4 Agriculture, business and foreign employment 2 0.53

5 Business 151 40.27

6 Agriculture and service 15 4.00

7 Business and service 17 4.53

8 Service 66 17.60

9 Foreign employment 6 1.60

10 Agriculture and wage 1 0.27

11 Wage 3 0.80

12 Business and foreign employment 1 0.27

13 Agriculture, business and service 1 0.27

14 Agriculture, service, and foreign employment 4 1.07

15 Agriculture, business, service and foreign employment 1 0.27

Total 375 100.00

Table 10.1: Aggregated main sources of income S. No. Sources of income No. of consumers %

1 Agriculture 131 27.46 2 Business 207 43.40 3 Foreign employment 31 6.50 4 Service 104 21.80 5 Wage 4 0.84

Total 477 100.00

Note: Total is > sample size due to multiple responses Table 11: Annual income of the consumers (Rs.)

S. No. Annual income No. of consumers % 1 0-100,000 35 9.33 2 100,001-300,000 109 29.07 3 300,001-500,000 103 27.47 4 500,001-1,000,000 100 26.67 5 1,000,000 and more 28 7.47

Total 375 100.00

81

Table 12: Purchase milk and milk products

S. No. Response No. of consumers % 1 Yes 361 96.26 2 No 14 3.73

Total 375 100.00 Table 13: Availability of milk and milk products as and when required

S. No. Response No. of consumers % 1 Yes 336 89.6 2 No 39 10.4

Total 375 100

Table 14: Availability of milk and milk products compared to 5 years back

S. No. Response No. of Consumers % 1 Improved 279 74.4

2 Not improved 84 22.4

3 Deteriorated 12 3.2

Total 375 100

Table 15: Quality of milk and milk products compared to 5 years back

S. No. Response Total % 1 Improved 241 64.267 2 Not improved 128 34.133 3 Deteriorated 6 1.6

Total 375 100i

Table 16: Access to milk and milk products compared to 5 years back

S. No. Response Total % 1 Increased access 321 85.6 2 Not increased 45 12 3 Decreased 9 2.4

Total 375 100

Table 17: Changes observed in dairy processing

S. No. Observed changes Consumers % 1 Increased number of processors and processors diversify the products 76 20.27 2 Increased number of processors and processors improve the quality of

dairy products 34 9.07 3 Processors diversify the products 32 8.53 4 Processors think only about their own benefit 36 9.60 5 Increased number of processors 88 23.47 6 Increased number of processors, processors diversify the products and

processors improve the quality of dairy products 19 5.07 7 Processors improve the quality of dairy products 30 8.00 8 Processors improve the quality of dairy products and processors think only

about their own benefit 9 2.40 9 Processors diversify the products and processors think only about their

own benefit 3 0.80 10 Increased number of processors and processors think only about their own

benefit 11 2.93 11 Processors diversify the products, processors improve the quality of dairy

products and processors think only about their own benefit 6 1.60 12 Increased number of processors, processors diversify the products,

processors improve the quality of dairy products and processors think only about their own benefit 15 4.00

13 Increased number of processors, processors diversify the products and 4 1.07

82

S. No. Observed changes Consumers % processors think only about their own benefit

14 Processors diversify the products and processors improve the quality of dairy products 5 1.33

15 Increased number of processors, processors improve the quality of dairy products and processors think only about their own benefit 7 1.87

Total 375 100 Table 17.1: Aggregated observed changes

S. No. Observed changes Consumers % 1 Increased number of processors 254 40.32 2 Processors diversify the products 160 25.40 3 processors improve the quality of dairy products 125 19.84 4 processors think only about their own benefit 91 14.44

Total 630 100

Note: The consumers are > the sample due to multiple responses. Table 18: Marketing strategy followed by the dairy processors

S. No. Response Consumers % 1 Yes 270 72.00 2 No 105 28.00

Total 375 100.00

83

Annex: 3 Key Informants Interviewed Project: Dairy Value Chain Study in Nepal

Annex: List of Key Informants Interviewed

SN District Name Office Position

1 Terththum Bidhya Dhungana DLSO JT

2 Terththum Padma Lal Timilsina District Cooperative Union Member

3 Terththum Prem Bhattarai MPC Chairperson

4 Kaski Purusottam Tripathi DLSO Office Incharge

5 Kaski Shiva Hari Acharya Nepal Dairy Association Province member

6 Kaski Chudamani Adhikary Nagdhunga MPC Chairperson

7 Chitwan Che Narayan Kharel DLSO Office Incharge

8 Chitwan Kopila Rimal DMPCU Manager

9 Chitwan Santosh Ghimire DLSO Livestock Dev. Officer

10 Makwanpur Basudev Adhikary DMPCU Chairperson

11 Makwanpur Kumar Mani Dahal DMPCU Manager

12 Makwanpur Ram Prakash Pradhan DLSO Office Incharge

13 Kailali Naresh Rawal Shanti Nepal Small Farmers Cooperative Chairperson

14 Kailali Bhuban Pathak Kailali Dugdha Bikash Sanstha Secretary

15 Kailali Bhupendra Bdr. Singh DLSO Planning Officer

16 Bardiya Jit Kumar Yogi

Deegopan Samajik Uddhami Mahila Sahakari Sanstha Chairperson

17 Bardiya Khem Naraya Lamichhane Aadishakti MPC Secretary

18 Bardiya Bharat Lamsal DLSO Planning Officer

19 Dadeldhura Dhan Bdr. Budha Shivashakti Krishi Tatha MPC Chairperson

20 Dadeldhura Bishnu Raj Bhatta Ugratara Devi Pashupalan Sanstha Secretary

21 Dadeldhura Khadka Bdr Saha DLSO Officer

22 Bhaktapur Hari Prasad Nepal DMPCU Chairperson

23 Bhaktapur Manoj Lamichhane DMPCU Manager

24 Bhaktapur Umesh Lal Pradhan DLSO Officer

25 Lalitpur Balak Choudhary NDDB Sr. Manager

26 Lalitpur Rajesh KC NDDB Research Officer

27 Lalitpur Gogal Pd Saha DLSO Officer

28 Lalitpur Ghasana Maiya Shrestha NDDB Sr.

84

SN District Name Office Position

Manager

29 Rasuwa Shiva Ram Poudel Gosaikunda RMP Na. Su

30 Kabre Raghu Nath Gautam Deurali Cooperative Manager

31 Kabre Kedar Neupane Derali Cooperative Manager

32 Kabre Deepak Dodhari Setidevi MPC Asst. Manager

33 Sindhupalchowk Kalyan Kumar Shrestha DLSO Office Incharge

34 Sindhupalchowk Sanjaya Lama DLSO Ns. Su

35 Sindhupalchowk Upendra Pandit LSC- Melamchi JT

36 Dolkha Pradeep Sibakoti Milk Production and Processing Center Manager

37 Dolkha Nava Raj Dahal DLSO JT

38 Dolkha Dhan Bdr. Tamang Samarpan Dairy Chairperson

39 Banke Amar Poudel DLSO Officer

40 Banke Shyam Sahi DLSO Kharidar

41 Banke Kamal Pun Janta MPC Vice Chairperson

42 Ilam Hari Narayan Yadhav DLSO Planning Officer

43 Ilam Krishna Basnet DMPCU Chairperson

44 Ilam Bed Nidhi Dulal DLSO JJ

45 Dhanusha Bishnu Dev Yadhav DLSO JT

46 Dhanusha Tara Devi Saha Dugdha Utpadak Sahaki Sanstha

Vice Chairperson

47 Dhanusha Shambhu Sahal DLSO Veterinary Doctor

48 Dhanusha Ram Rosan Yadhav Dugdha Utpadak Sahaki Sanstha Secretary

49 Sarlahi Suno Kumar Mahato DLSO Livestock Dev. Officer

50 Sarlahi Karna Yadhav Ram Janak Sahakari Sanstha Chairperson

51 Saptari Parmeshwor Yadhav DLSO JT

52 Saptari Dipendra Acharya Aadarsha MPC Chairperson

53 Saptari Bhuwan Pd Acharya DMPCU Chairperson

54 Dailekh Deepak Kumar Bhandari DLSO Veterinary Doctor

55 Dailekh Bhim Bahadur Thapa Belpata MPC Member

56 Surkhet Prachanda Khadka DLSO Planning Officer

57 Surkhet Deepa Poudel Gautam Karekhola MPC Manager

58 Surkhet Mahendra Sahi Regional Livestock Directorate JT

59 Dang Nim Bahadur Pun DLSO Livestock Dev. Officer

60 Dang Ganesh Lamichhane Dibyajyoti MPC Manager

85

SN District Name Office Position

61 Dang Tirshan Adhikary Uddhamseel Agriculture Multipurpose Cooperative Manager

62 Dang Fapta Bdr Khadka Janta MPC Manager

63 Rupandehi Bishnu Pd Gyawali Jannautthan MPC Chairperson

64 Rupandehi Prakash Aryal Devdaha MPC Manager

65 Baglung Dharanidhar Sharma Baglung MPC Manager

66 Baglung Keshab Poudel DLSO JT

67 Baglung Chukta Kandel Baglung MPC Chairperson

68 Morang Yadhav Dhakal Baliraja MPC Manager

69 Morang Kamal Bhatta DLSO JT