PROJECT INFORMATION DOCUMENT (PID)
APPRAISAL STAGE
Report No.: AB6495
Project Name
Region
Country
Sector
Lending Instrument
Project ID
Borrower(s)
Implementing Agency
Environmental Screening
Category
Date PID Prepared
Estimated Date of Appraisal
Completion
Estimated Date of Board
Approval
Decision
I.
National Dairy Support Project
South Asia
India
Animal production (60%); Agricultural extension and
research (20%); Agricultural marketing and trade (20%)
Specific Investment Loan (SIL)
P107648
Republic of India
National Dairy Development Board (NDDB)
{ }A {X}B { }C { }FI
07/21/2011
08/02/2011
09/15/2011
Project authorized for appraisal
Country Context
1.
India is one of the fastest growing economies in the world, but the country is faced with a
number of challenges, including achieving inclusive growth and improving service delivery, in
both urban and rural areas. The Government of India’s Eleventh Five Year Plan (2007-12) aims
at more inclusive growth as a primary objective, and this emphasis is likely to continue in the
Twelfth Plan. The agricultural sector, from which more than half the country’s population
derives the bulk of their income, has been identified as one of the areas of focus for making
growth more inclusive.
2.
Within agriculture, dairying is an important economic activity, accounting for about 18
percent of agriculture GDP. Milk is the single largest agricultural commodity in the country in
terms of value of output, and India is the world’s largest producer of milk with annual production
of about 112 million tons, most of which is consumed domestically by India’s 1.2 billion largely
vegetarian population for whom milk and milk products are an important part of food and
nutritional security. However, a substantial increase in milk prices over the last two years –
average of about 20 percent per annum during 2009 and 2010, compared to an average overall
price increase of about 9 percent per annum during the same period – is an emerging cause for
concern.1 As the economy grows, and incomes increase, demand for milk and milk products’ is
expected to rise even further and per capita consumption is projected to rise to more than 350
grams per day by 2020.2
1
Data refers to year-on-year wholesale price increases in 2009 and 2010.
Between 1983 and 2006, the share of milk and milk products in households’ expenditures increased from 11.5
percent to 15.1 percent in rural areas and from 15.7 percent to 17.5 percent in urban areas. Per capita milk
2
1
3.
Dairying is a major source of livelihoods for a large proportion of the rural population,
especially small holder farmers. More than 70 million of the reported 147 million rural
households depend on dairy, in varying degrees, for their livelihoods. About 80 percent of
farmers are small and marginal, typically owning one to three milk producing animals, and
contribute about 70 percent to the total milk production. Dairy animal ownership is much more
equitable than land ownership – small and marginal farmers own more than 75 percent of milk
producing animals in the country, but only about 40 percent of farm land. Further, a large
proportion of the labor in dairying activities at the household level is provided by women. The
dairy sector is therefore an important vehicle for inclusive development in the country as it is a
major source of livelihoods for a large proportion of the rural population, especially small holder
farmers.
II.
Sectoral and Institutional Context
4.
The dairy sector has witnessed significant growth over the past decades. India’s ‘white
revolution’ is a phenomenon as celebrated as the ‘green revolution’ in development literature.
National milk production quadrupled between 1974 and 2006 and per capita milk availability
more than doubled over the same period. An important contributor to past growth was a series of
Operation Flood programs spearheaded by the National Dairy Development Board (NDDB),
mainly through promotion of dairy cooperatives across the country. The Bank was a significant
partner in this process and supported Operation Flood through a series of five operations between
1974 and 1995.3 Following policy changes initiated in the 1990s -- the de-licensing of the dairy
industry in 1991 and elimination of milksheds in 2002 -- private sector presence in milk
processing has also grown at a rapid rate. Registered milk processing capacity in the private
sector now exceeds that in the cooperative sector.
5.
Notwithstanding past success, the Indian dairy sector is facing renewed challenges and
issues. These include:
6.
Emerging demand-supply imbalances. The growth rate of milk production has slowed in
recent years, from an average of 4.3 percent per annum in the 1990s to 3.7 percent per annum in
the 2000s, while domestic demand continues to grow spurred by rising per capita incomes and
shifting food preferences. According to Government of India (GoI) estimates, milk demand is
projected to grow to at least 180 million tons by 2021/22. Meeting this demand from domestic
supply would require production to grow at 5.5 percent per annum over the next decade. If India
fails to achieve substantial production growth, the country would need to resort to significant
imports from the world market, which has the potential to cause international prices to spurt
because India is a large consumer. Hence, increasing milk production and improving
productivity of dairy farmers to meet the projected demand is a key development challenge
facing the Indian dairy sector.
consumption increased from 147 grams/day to 246 grams/day. This trend is expected to continue in the future with
per capita consumption projected to rise to more than 350 grams per day by 2020.
3
These were Karnataka Dairy Development Project (Cr. 482-IN), Rajasthan Dairy Development Project (Cr. 521IN), Madhya Pradesh Dairy Project (Cr. 522-IN), National Dairy Project (Cr. 824-IN), and National Dairy II Project
(Cr. 1859-IN/Ln. 2893-IN).
2
7.
Rising milk prices. Domestic milk prices have increased substantially in the last two
years, by 21.9 percent in 2009 and 18.2 percent in 2010, compared to an average increase of 4.3
percent per annum between 2000-2008. As milk is a significant item in the food basket of
India’s population, rising milk prices have also contributed substantially to the recent food price
inflation in the country. Milk and milk products account for about 23 percent of the national
wholesale food price index, and the increase in milk prices in the past two years poses a
significant concern for food and nutritional security.
8.
Low productivity levels. Average milk yield of Indian cows is only about 3.1 kg/day
against a world average of 6.4 kg/day. Unlike other countries, buffalos are a significant source
of milk in India accounting for over half the national milk production. Average milk yield per
buffalo is about 4.4 kg/day. Less than 20 percent of Indian cattle are cross-bred with relatively
high milk yields, while a vast proportion are indigenous non-descript cattle with very low milk
yields. The main causes of low productivity are poor nutrition, health, low genetic potential for
milk production, and near absence of well run genetic improvement programs. Animal nutrition
is undermined not only by feed and fodder scarcity, but also lack of farmers’ knowledge on how
to better use existing feed resources. With regard to breeding, the emphasis has been on crossbreeding, with limited attention to improvement of indigenous breeds. Although some 20
percent of the animals are bred using artificial insemination (AI), only about 10 percent of the
bulls in the country’s semen stations having come through a genetic improvement program.
Therefore, increasing the number of genetically improved bulls to produce high quality semen
has to go hand-in-hand with expanding AI services. These investments are necessary to build a
foundation for increased milk production.
9.
Weak service delivery. Public extension services have played a major role in technology
transfer in the Indian crop sector, but in the livestock sector, public service delivery has remained
weak. Extension activities by State Animal Husbandry departments suffer from inadequate
resources and expertise to conceive and operate technology transfer packages. The services are
mainly run by veterinarians who operate from veterinary dispensaries to treat animals. There is
little extension advice to educate farmers about improved animal feeding practices in particular.
Furthermore, AI services often do not adhere to common protocols and operating procedures,
although in recent years some NGOs have started providing AI services at farmers’ doorstep,
with comparatively better performance in terms of services delivered. The limited availability of
quality AI services means that about 80 percent of breeding in the country is through natural
service which predominantly involves non-descript or inferior bulls.
10.
Limited farmer access to organized milk processing sector. About half of the milk
produced is marketed, with only about 30 percent of the marketed milk handled by the organized
sector (private and cooperatives). Small producers are particularly affected as profit margins are
less for milk sold through informal markets. Furthermore, during the flush production season,
informal traders often offer less than market prices or even decline to procure output.
11.
Environmental Sustainability. The dairy sector is facing numerous environmental
challenges. First is the problem of methane emissions from a large bovine population, which
accounts for an estimated 11 percent of the gross green house gas (GHG) emissions of the
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country. Second, overgrazing is causing degradation of fodder resources, especially in semi-arid
areas. The third environmental challenge relates to animal waste management where, for
example, using animal waste as cooking fuel contributes to pollution and health hazards. To
meet the increasing demand for dairy products, ‘business as usual’ is no longer a viable option,
and approaches to reduce adverse impacts and ensure sustainable dairying need to be adopted.
Among others, these could include: (a) improving feed diets and feed conversion ratios to reduce
enteric fermentation and hence methane emission; (b) manure management to reduce pollution;
(c) increase fodder crops productivity to reduce the gap between demand and supply of green
fodder; and (d) improving local breeds adapted to local environmental conditions to ensure their
long-term conservation.
12.
Government strategy and programs. The GoI Eleventh Five Year Plan targets a growth
of 5 percent per annum in the dairy sector. A number of government schemes have been
developed to meet the growth target, including programs to provide animal health and veterinary
services for effective disease control; a national program for cattle and buffalo breeding; clean
milk production; and a national mission for fodder which is still under discussion. Although
several of these programs are complementary to the proposed project, not all are performing
equally well and there remains a lack of adequate funding and quality support services.4
13.
National Dairy Plan. To meet the growing demand for milk and accelerate dairy
development in the country, NDDB has prepared a National Dairy Plan (NDP, 2008) with a
proposed outlay of about US$ 3.5 billion over a fifteen year horizon. The NDP is a concept
document that envisages a focused multi-state initiative to enhance productivity and
strengthen/expand infrastructure for milk procurement and marketing, backed with appropriate
policy and regulatory measures. The proposed project supports and operationalizes the first
phase of NDP through investments to enhance milk productivity and improve farmer access to
organized milk marketing channels. Depending on achievements and lessons learned through
the project, longer term support may be considered for further development of the dairy sector.
The project will employ common protocols and operating procedures which are expected to
serve as a demonstration/reference in implementing other government schemes in the animal
husbandry and dairy sector and influence the overall transformation of the sector.
14.
Rationale for Bank Involvement. The proposed project is an important opportunity for
the Bank to re-engage at a national scale in dairy development. Following the 2008 food crisis
there is renewed emphasis, globally as well as in India, on improving agricultural productivity to
combat increasing food prices and improve food security. Since 2009, domestic milk prices have
increased substantially as a result of emerging supply-demand gaps. The project aims to increase
domestic milk supply through investments designed to improve productivity of milk animals.
The Indian dairy sector is dominated by small holders with 80 percent of dairy farmers owning
1-3 milk producing animals and more than 90 percent owning 5 or less milk producing animals.
Improving productivity in the Indian dairy sector can potentially contribute to improved food
4
Overall public spending on animal husbandry and dairy is relatively modest. In 2009/10, the Central Government
incurred expenditures of Rs. 5.9 billion (about US$ 130 million) on animal husbandry and dairy programs. All state
governments together spent Rs. 64.7 billion (about US$ 1.5 billion), with over 95 percent of these being recurrent
expenditures to meet salaries and other operating expenses. Overall public spending is equivalent to less than 3
percent of livestock GDP and about 0.2 percent of total public expenditures
4
security and stability of national (and global) milk prices, in addition to improving the incomes
of millions of small holder milk producers.
15.
The project is well aligned with the country and sector strategies of achieving inclusive
growth, promoting sustainable development, and improving effectiveness of service delivery.
The project provides opportunities to catalyze GoI and NDDB’s own efforts for a more enabling
policy and regulatory environment. The project design, which pays particular attention to the
quality of animal husbandry inputs and services delivered to farmers, is expected to influence the
design and implementation of future GoI programs and thereby act as a transformative influence
towards improved public service delivery in the sector. From the environmental perspective, the
project offers an opportunity to increase milk production through improved animal productivity
rather than increasing the numbers of animals. It also presents opportunities to support programs
for balanced animal nutrition, thereby contributing to reduced methane emissions, which is a
potentially significant environmental externality with implications for climate change mitigation.
III.
Project Development Objectives
16.
The Project Development Objectives are to increase the productivity of milk animals and
improve market access of milk producers in project areas.
17.
These objectives would be pursued through: (a) adoption of scientific and systematic
processes in provision of technical inputs and services to milk producers at their doorsteps; and
(b) facilitating access of milk producers to the organized milk processing sector. The project
enhances the opportunity for small dairy holders to access productivity enhancement services
delivered at their doorsteps and also participate in collective milk marketing. The project also
contributes to mitigating climate change through interventions designed to reduce methane
emissions from dairy animals.
IV.
Project Description
18.
The key principles underlying project design are:




A dairy farmer-centric approach.
Improving quality of inputs and services delivered to farmers – through adoption of
common protocols and Standard Operating Procedures (SOP) in provision of technical
inputs and other services at the farmer’s doorstep.
Enhancing market access for sale of surplus milk by milk producers -- through village
level institutional structures operating in a fair and transparent manner.
An enabling policy environment to support implementation of project investments.
19.
The project will seek to increase milk production by genetic improvement of the dairy
herd (cows and buffalos) and optimal use of feed and fodder. This would be achieved through
investments in animal breeding, extensive training of dairy farmers and doorstep delivery of
ration balancing advisory services and AI services, integrated with veterinary support, together
with development of related information network and databases. The project will raise farmers’
awareness about the importance of good quality milk and build their capacity for hygienic milk
5
production, collection and sale. Collective sale will strengthen farmers’ negotiating power and
reduce transactions costs for a highly perishable commodity.
20.
There is a strong case for public intervention in technology transfer activities to improve
the quality of the dairy herd and increase productivity. Investments in animal breed
improvement are typically long term in nature with benefits accruing after several years. Since
farmers are free to sell their milk to anyone, there is little private sector appetite for investing in
herd improvement and village level collection and bulking centers, except for a few large private
dairies pursuing long term commitments.
21.
The project intends to support the following three components (see Annex 2 for a detailed
description):
22.
Component A: Productivity Enhancement (Estimated Cost US$258.3 million). This
component will aim to increase bovine productivity through improved animal breeding and
nutrition services. To achieve this aim the project intends to support the following activities:
Sub-Component – 1 Animal Breed Improvement: This sub-component will support:
a) Production of high genetic merit bulls (HGM) through: (i) Progeny Testing (PT) program
in selected breeds; (ii) Indigenous Breed Development (IBD) program in selected breeds;
and (iii) Import of exotic bulls/embryos/frozen semen.
b) Semen Production: Strengthening of existing semen production stations and
establishment of new semen stations.
c) Delivery of Artificial Insemination (AI) Services through trained mobile AI technicians
(MAIT) at farmers’ doorstep.
Sub-Component – 2 Animal Nutrition: This sub-component will support:
a) Ration Balancing Program (RBP): A comprehensive RBP whereby extension advice
would be provided to dairy farmers through trained local resource persons (LRP) for
advising on animal feed and nutrition. Research shows that feeding balanced rations has
the potential to increase milk yield, reduce production costs, and contribute to reduced
methane emissions.
b) Fodder Development: Extension initiatives/interventions for fodder development,
including support for improved fodder seed production, fodder contracting,
demonstrations for silage making, and reducing wastage of dry fodder through processing
and enrichment.
23.
The main expected results from interventions proposed under Component A are increased
productivity per milk animal, increase in in-milk animals, improved conception rates, reduction
in feeding costs per animal, and reduction in methane emissions per unit of milk produced.
24.
Component B: Milk Collection and Bulking (Estimated Cost US$166.3 million).
This component would improve access to markets by developing village level milk collection
and bulking facilities. This will include:
a) community mobilization and institution building through: (i) expansion of selected
existing dairy cooperative societies (DCS) registered under the Cooperative Societies
6
Act, and (ii) promotion of new milk producer institutions which would be registered as
producer companies under the Companies Act;
b) training and capacity building of milk producers and functionaries; and
c) village level infrastructure for milk collection and bulking such as milk cans, bulk milk
coolers for a cluster of villages, associated weighing and testing equipment, and related
IT equipment.
25.
The main expected results from interventions proposed under Component B are increase
in number of milk producers organized into dairy cooperative societies/producer companies,
increase in coverage of villages for milk collection and bulking, increase in share of milk sold to
the organized milk processing sector, and improved milk quality.
26.
Component C: Project Management and Learning (Estimated Cost US$29.3
million). This component would ensure smooth implementation and coordination of project
activities, regular and timely monitoring of implementation progress and outputs/outcomes
achieved, and learning through feedback to management. Activities to be financed include: (i)
support for Project Management Unit (PMU) at NDDB; (ii) operation and management of
computerized information systems for collection of data and dissemination of information related
to animal breeding, nutrition, health services and milk collection and bulking; (iii) services of
external agencies for carrying out baseline, mid-term and project completion surveys and other
special surveys/studies as may be needed during project implementation; (iv) third party quality
assurance of civil works under the project; and (v) technical assistance and support during
implementation.
27.
Project Coverage and Enabling Policy Environment. The project aims to cover 14 major
dairying states over a six-year implementation period. These states account for 93 percent of the
country’s milk production and about 87 percent of the breedable cattle and buffalo population.
There are two caveats to the proposed project coverage. First, project locations for bull
production and semen production (Sub-Components 1(a) and 1(b) of Component A) will be
selected based on geographical and technical comparative advantage considerations, and
state/district level institutions with capacity to successfully implement these sub-components
may in some cases lie outside of the 14 states.5 Second, all other proposed project investments
(AI delivery, RBP, fodder development, milk collection and bulking) would be supported in the
14 states only after they commit to time-bound implementation of certain proposed state level
policy/regulatory changes that would create a more enabling environment for sustainable
development of the Indian dairy sector. These include measures to competitively deliver AI
services through private AI technicians, adoption of minimum standards and protocols while
undertaking animal breeding activities, and adoption of state rules to prevent and control
infectious and contagious diseases in animals. Following a series of discussions led by the
Department of Animal Husbandry, Dairying and Fisheries (DADF), GoI with the 14 major
5
Production of high genetic merit bulls and good quality semen in adequate quantities is critical to the future growth
and success of Indian dairy development efforts. Thus production of bulls would be in the native geographical tracts
of identified breeds, while semen production stations to be strengthened under the project will be those that are rated
either ‘A’ or ‘B’ by the Central Monitoring Unit of the DADF, GoI.
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dairying states, eight states have been identified as the first batch of states that would participate
in the project.6 Other states would be included over time under the project.
V.
Financing
Source:
Borrower
Beneficiaries
IBRD
IDA
Total
VI.
(US$m.)
39.1
62.8
352.0
453.9
Implementation
28.
The Government of India has identified the National Dairy Development Board (NDDB)
as the implementing agency for the proposed project. The NDDB was created in 1965 to
transform dairying into an instrument for the development of India's rural sector. It was initially
registered as a society under the Societies Act and in 1987 was established as an institution of
national importance by an Act of India’s Parliament – the National Dairy Development Board
Act, 1987. NDDB was the implementing agency for the "Operation Flood", a program
extending over two decades which also used World Bank funds to develop the cooperative dairy
sector in India.
29.
The NDDB is the implementing entity for the project. A Project Management Unit
(PMU) in NDDB, headed by a Mission Director, will manage and monitor day-to-day project
activities. The unit would include a small multi-disciplinary team and will be responsible for
preparation of annual plans; review and appraisal of sub-project proposals; project financial
management; quality assurance and control; monitoring of project results; and providing support
to end-implementing agencies as needed. The unit will draw on the considerable technical staff
and other resources at NDDB and other institutions as needed during project implementation.
NDDB has a long and successful track record of management and coordination of large
programs (including the widely acclaimed Operation Flood program). It also has considerable
experience in working with dairy cooperatives (who will be important end-implementing
agencies) across all major states of India.
30.
Specific end-implementing agencies (EIA) will be selected for implementation of various
activities under the project in participating states. The EIAs will need to meet the technical,
financial, and management capacity requirements for implementing the activity for which they
are considered. The EIAs are likely to include state cooperative dairy federations, district
cooperative milk unions, producer companies, central, state and ICAR institutions engaged in
animal breeding and fodder development activities, NGOs/Trusts, and other entities that meet the
eligibility criteria for each activity. To be eligible for funding under the project, each EIA will
prepare a detailed sub-project proposal for implementing specific activities under the project.
The sub-project proposals will be reviewed and appraised by the PMU as per eligibility criteria
6
The eight states identified as the first batch of states are Andhra Pradesh, Bihar, Gujarat, Karnataka, Maharashtra,
Punjab, Rajasthan and Uttar Pradesh.
8
and appraisal guidelines laid out in the Project Implementation Plan. Once approved, PMU will
execute written agreements with the concerned EIA for implementing agreed activities. Funds to
implement the agreed investments will flow as a grant from NDDB to the EIAs.
31.
NDDB Dairy Services, a not-for-profit subsidiary of NDDB, will play an important role
as the delivery arm of NDDB for facilitating formation of producer companies and strengthening
existing cooperative structures.
32.
Higher level guidance will be provided by a National Steering Committee (NSC) chaired
by the Secretary DADF and comprising Chairman NDDB, Mission Director, other
representatives from DADF, and representatives from two state governments (on a rotation
basis). The NSC would provide strategic support to the project, periodically review and guide
project implementation progress, approve annual action plans, and address larger policy issues
that may affect project implementation.
33.
A Project Steering Committee (PSC) chaired by the Mission Director and including
representatives of DADF and NDDB will approve sub-project proposals after they have been
reviewed and appraised by the PMU.
VII.
Safeguard Policies (including public consultation)
Safeguard Policies Triggered
Environmental Assessment (OP/BP 4.01)
Natural Habitats (OP/BP 4.04)
Forests (OP/BP 4.36)
Pest Management (OP 4.09)
Physical Cultural Resources (OP/BP 4.11)
Indigenous Peoples (OP/BP 4.10)
Involuntary Resettlement (OP/BP 4.12)
Safety of Dams (OP/BP 4.37)
Projects on International Waterways (OP/BP 7.50)
Projects in Disputed Areas (OP/BP 7.60)
Yes
X
No
X
X
X
X
X
X
X
X
X
34.
The key environmental challenges that the project addresses are: (i) reducing GHG
emissions from livestock through a Ration Balancing Program; (ii) bridging the fodder gap
through promotion of quality fodder seeds that would increase per unit tonnage of fodder; and
(iii) on farm waste management by promoting a package of practice approach that accounts for
better utilization of wastes generated.
35.
On social aspects, the project ensures that: (i) dairy farmers (through cooperatives and
producer companies) have an important and active role in project interventions; (ii) small dairy
farmers will have greater opportunities to participate in project activities; and (iii) any adverse
impact resulting from the project interventions will be mitigated appropriately.
9
36.
The Strategic Environmental and Social Assessment (SESA) has been completed and
disclosed publically, which identifies the type and extent of environmental and social impacts
including related to Pest Management (OP 4.09), waste management, GHG emissions, Tribal
(OP 4.10), women and other vulnerable groups. The SESA also gives a screening matrix for
categorizing sub projects on the basis on potential negative impacts. It includes a detailed
Environmental and Social Management Framework (ESMF) prepared on the basis of impacts
identified by SESA and includes a Pest Management Plan and a strategy for Tribal Development.
ESMF provides a detailed mitigation strategy for limiting adverse environmental impacts, but
also guidance to increase environmental sustainability of dairying as well for transparent
consultations and disclosure at the sub project level.
VIII.
Contact point at World Bank and Borrower
World Bank
Contact: Mr. Deepak Ahluwalia
Title: Senior Economist
Tel: +91 11 4147 9149
Email: dahluwalia@worldbank.org
Borrower/Client/Recipient
Contact: Mr. Venu Rajamony
Title: Joint Secretary, Department of Economic Affairs, Ministry of Finance, Republic of India
Tel: +91 11 2309 5190
Email: venu.rajamony@nic.in
Implementing Agencies
Contact: Mr. Ravi Shankar
Title: Executive Director, National Dairy Development Board (NDDB)
Tel: +91 2692 260708
Email: rs@nddb.coop
IX. For more information contact:
The InfoShop
The World Bank
1818 H Street, NW
Washington, D.C. 20433
Telephone: (202) 458-4500
Fax: (202) 522-1500
Web: http://www.worldbank.org/infoshop
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