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Milk Cooling Units

Milk Cooling Units

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Published by: api-3728521 on Oct 15, 2008
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Animal Husbandry
Milk Cooling Units
1. Introduction:

1.1 The Indian dairy industry is contributing significantly to the country's economy, besides improving the health
standard by increasing the nutritional value of the food. India occupies first position in the world having a total bovine
population of 288 million compared to the world's total bovine population of 1420 million. As per 1992 livestock
census, the country has about 62.90 million breedable cows and 42.46 million breedable buffaloes. There has been a
major improvement in milk production which increased from 17 million tones in 1951 to 74.7 million tonnes during
1998-99 and the growth was maximum between 1980 and 1990. Uttar Pradesh, Punjab, Madhya Pradesh,
Rajasthan, Maharashtra, Gujarat, Andhra Pradesh, Haryana, Tamil Nadu and Bihar contributed to the extent of 85
percent of the total milk production in the country. Today, India is number one producer of milk in the world. The
present per capita availability of milk is 212 gms as against the ICMR recommendation of 250 gms.

1.2 Recognizing the importance of the sector, the notable programmes taken up by GOI are key village schemes,
intensive cattle development projects, crossbreeding projects through bilateral assistance, operation flood
programme and technology mission. In 1970 under the aegis of National Dairy Development Board, "Operation
Flood" programme was launched to modernize the dairy sector and flood the 4 metro cities with milk from dairy
cooperatives. By the end of September, 1999, 82000 village milk producers cooperatives were organised through 102
lakh farmers and with an average rural milk procurement of 13.13 million liters per day. Another step was taken in
1988, to augment rural income by launching Technology Mission on Dairy Development (TMDD), which aims at
applying modern technology to improve productivity, reduce costs of operation and thus ensure greater availability of
milk and milk products.

1.3 With the liberalization of the Indian economy in 1991, the dairy sector too was delicenced. However, on June 9,
1992 GOI notified Milk and Milk Products Order (MMPO), according to which, a dairy handling more than 10000 liters
of milk per day or 500 MT milk solids per annum need to be registered. The registering authority shall be an officer of
the State Government or Union Territory in respect of units handling upto 75000 liters/day, or 3750 MT of milk solids
per annum, where the entire milkshed of the unit lies within a State / Union Territory. In case of those units, which are
handling more than 75000 liters of milk per day or 3750 MT of milk solids per annum, the registering authority is
Department of Animal Husbandry and Dairying ,Ministry of Agriculture, Govt. of India, New Delhi.

1.4 Dairy products form one of the fastest growing segments in the livestock product export. The major products
exported are malted milk foods, ghee and cheese (to some extent) to the countries like Bangladesh, UAE, Nepal, Sri
Lanka, Bahrain and Oman. The export performance during the years 1980-81 to 1995-96 was quite satisfactory.
Subsequently, there is a fall in exports of milk products. As per the APEDA estimates, the export of milk and milk
products to currently existing markets would increase to Rs.285 million and to new markets to Rs. 155 million. Thus
the exports is likely to touch Rs.440 million by the turn of the century. The GATT agreement further gave a boost to
the dairy industry, as India has a comparative cost advantage in regard to milk production. NABARD has been
actively involved in credit disbursement for various investments under dairy sector. It also encourages development
of new products through its research and development funds besides guiding various entrepreneurs in new areas of
business and technology.

1.5 Having made a significant stride in production and processing, our country is topping the Globe as the highest milk producer. Now it the time to upgrade the quality of milk in similar quantum to provide hygienically safe milk and milk products to the consumers. The sole criterion for determining quality should no longer be FAT/SNF but should also be bacteriological quality of the milk, which is possible only by the proper handling of milk from the udder of the animal to the super market shelf. Since the ambient temperature in our country is as high as 45o C, improvement of Raw milk quality is possible only by the careful milking conditions and its prompt cooling to 4oC or below.

1.6 The best alternative to the present collection system of milk is cooling of milk immediately after milking by Bulk
Cooling Tanks. The usage of such tanks have become popular in the recent past because it not only helps in
increasing the shelf-life of milk but also provides systematic and simple way of the procurement of milk . Also ensures
procurement of more Milk by covering untapped farther areas for Milk Collection.

1.7 As per the latest Draft Codex International Code of Hygienic Practice for Milk and Milk Products from Codex
Secretariat, if the milk is not processed within two hours of milking, it is required to be cooled to a temperature below
7oC. Therefore, the Dairies who have to market their milk and milk products in International Market will have to

comply with the Codex International Code of Hygienic Practice and cold chain will become a must for them. The initial
capital investment will pay back in the long run, as the system will eliminate the use of milk cans, milk Sourage,
reduction in transportation cost, better return etc.

2. Objectives:
The financial assistance is extended for purchase of bulk milk coolers with the following objectives.
1. To enhance the keeping quality of milk and also to avoid economic losses to farmers due to spillage/sourage

of milk.
2. To produce improved quality products for export as well as to meet the domestic requirements.
3. To reduce the transportation cost by regulating transportation of the milk on alternative days and also

through reduction in expenditure on purchase and maintenance of cans.
3. Potential areas:

Bulk Milk Cooling Units were introduced by the Milk Cooperative Unions of Kaira, Baroda and Mehsana districts in Cooperative Sector and in private sector by Dynamix Dairy in Maharashtra and Nestle in Punjab. The scheme has potential to finance in almost all the operation flood programme(OFP) districts and also to some extent in non- OFP districts.

4. Beneficiaries:
Village Milk Cooperative Societies of Cooperative Milk Union or Milk Collection Centres of private Dairies.
5. Project Details:
1.Components: The components of Bulk Milk Cooling Unit comprises of bulk coolers, DG set, accessories
such as water heater, water storage tanks etc.

2.Capacity :The capacity of Bulk Milk Cooling Units is ranging from 300 to 5000 litres.
3.Specifications: The specifications of different models manufactured by two firms are given in table 1.
4.Equipment suppliers: The machinery should be as per BIS standards and are presently manufactured in

the country by Alfa Laval, IDMC, PRAJ, etc. The addresses of few manufacturers are given in Table II for
guidance of entrepreneurs/bankers.
5.Processing: The operations involve collection and chilling of milk to a temperature of 4 o C

1. Elimination of souring/curdling of milk because of cooling at the collection centre itself.
2. Adulteration of milk and spillage from cans can be eliminated during transport.
3. Transportation cost of milk can be brought down by regulating transportation to the main dairy

either on alternative days or once in a day.
4. Saving of initial investment on purchase of cans and subsequent maintenance cost (Repairs,
cleaning etc.)of those cans.
5. Improved quality of milk can be supplied to the main dairy to manufacture quality products for

domestic as well as export markets.
6. Flexibility in milk collection time results in increase in volume of milk collected at the centres.
7. Farmers will get better returns for the quality of milk.
8. Chilling at the Main dairy can be avoided.

6. Technical Collaboration: Since the process is simple no technical collaboration is envisaged for the project,
however the Milk Unions/Private Dairy Plants would be providing guidance to the societies/collection centres in
purchase and installation of Bulk Milk Coolers, and also training of manpower in operations and maintenance.
7. Capital Cost: The capital cost varies with the capacity and the specifications of the Bulk Milk Coolers. However,

two models have been considered i.e. 2000 and 5000 litres capacity, whose unit costs are Rs. 6.35 lakhs and 14.45
lakhs respectively. The detailed unit cost is given in the Annexure I. It is assumed that the space available in the
existing collection centre/cooperative society will be sufficient to install the equipment and accordingly no cost on civil

structures is considered. In case if the civil structures are required to be considered, the same may be considered
under project cost.
8. Economics of the project:

Based on the various techno economic parameters furnished in Annexure II, the economics of the project has been
worked out and presented in Annexure III A and B for two different models. The items of income include reduction in
souring/curdling of milk, spillage and pilferage of milk, saving of expenditure on transportation, purchase and
maintaince of cans and chilling cost received from the union while the expenditure includes the operational cost of
cooler (fuel/power), repairs, maintenance and additional manpower. In case if the unit is financed along with
Automatic Milk Collection Station, the existing staff of the society will be sufficient to manage the unit. No additional
expenditure on manpower is required.

9. Financial Analysis:

The cash flow statement covering the Benefit Cost Ratio (BCR) Net Present Worth (NPW) and Internal Rate of
Return (IRR) has been worked out for the project and presented in Annexure IV. For the models of 2000 litres and
5000 litres, the BCR is 1.237:1 and 1.341:1, NPW is Rs. 2.141 lakhs and Rs. 6.013 lakhs and IRR is 27.97 % and
32.08 % respectively. The entire bank loan can be repayable in nine / eight years without any grace period and
accordingly the repayment has been fixed at nine / eight years for the model project.(Annexure V)

10. Financial assistance:

Bulk Milk Cooling units of various sizes would be considered for refinance support by National Bank. Therefore all
participating banks may consider financing this activity subject to their technical feasibility, financial viability and

11. Lending Terms and other requirements:
11.1 Margin Money: The society or Milk collection centre should normally meet 25% of the project cost either out of
their own resources or through subsidy.
11.2 Interest rate: Interest rate will be as determined by the financing bank.
In the present case we have considered interest rate of 15%

11.3 Security: As stipuilitated by the RBI
11.4 Insurance: The financing bank may ensure that the society takes adequate insurance cover for the asset
11.5 Repayment period: Depends upon the gross surplus generated, it may be upto 8 -9 years without any grace

12 Special terms and conditions:
The special terms and conditions of the project are given in Annexure VI.
Annexure - I
Unit cost, Bank loan and margin money - Bulk Milk Cooling unit
(Rs. in lakhs)

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