COMFED: the new challenges

of diversification

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Mrs Harjot Kaur was the Managing Director of Bihar State Co-operative Milk Federation .
(COMFED). COMFED was a rural organisation involving 6 lakh farmers. Starting with just
1,030 cooperatives in 1983, the number of cooperatives had risen to 11,400 in 2012. The

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milk production was 11 lakh litres per day, and the annual turnover in 2011-2012 was Rs
1,503.00 crore, 11 per cent more than that of previous year. Mrs Kaur was committed to
serve COMFED customers and realise the dream of having at least one dish of Bihar in the
plate of every Indian.
Mrs Kaur envisaged COMFED producing 44 lakh litres milk per day from the existing 11

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lakh litres per day, covering around 60 per cent villages of the state against the existing 33
per cent in 2013. COMFED was also trying to capture new markets. At present, COMFED
sent bulk milk to Delhi, Manesar and Kolkata, where it was sold by various dairy
cooperatives such as Amul and Mother Dairy under their own brand names. Mrs Kaur
aspired to market COMFED milk under the “Sudha” brand all over India (Exhibit 1).
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Moreover, Mrs Kaur was also looking to export to other countries such as Bangladesh and
Bhutan. The external environment, scope and positioning of COMFED were the main issues
that Mrs Kaur was pondering.
As Mrs Kaur was crafting the future path for COMFED, she also realised that above all the
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external challenges that exist, an internal vice – complacency – was the biggest hurdle her
company had to face.

Dairy industry overview: India

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In India, the dairy sector played an important role in the country’s socio-economic
development, and constituted an important segment of rural economy, by providing
employment to 18 million people, 70 per cent of which were women in 2004. As the
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world’s largest milk producer with a total milk production of 127.9 million tonnes in year
2011-2012, India was well positioned to be the global market leader for dairy products
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(Exhibit 2). According to National Dairy Development Board (NDDB), demand for milk
was growing at approximately twice the growth rate of production. Indian consumption
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of milk in the year 2014 was forecasted at 425,000 metric tonnes whereas in 2013,
consumption estimates were at 420,000 metric tonnes. The estimated demand for milk
in year 2021-2022 was about 120 million tonnes. This meant that milk production would
continue to grow at 4 per cent per annum, that is, with an incremental addition of about
5 million tonnes per year. The total amount of milk produced had more than tripled from
23 million tonnes back in 1973 to 74.70 million tonnes 26 years later in 1998.
The tremendous rise in milk production was primarily the fallout of the dairy farming
policy reflected in “Operation Flood”. The per capita availability of 291 Gms/day had
 increased to 176 Gms/day in 2012-2013. The total milk marketing comprised 22,944
thousand litres per day in year 2011-2012. In terms of trade, the value of output from
livestock was about Rs 1,733 bn in 2004-2005, of which milk accounted for 68 per cent.
During 2011-2012, the cooperative milk unions together procured 28.7 million kg of milk
per day compared to 26.2 million kg per day in the previous year, registering an annual
growth of around 9.5 per cent. The contribution of the dairy industry to the GDP of India
in 2011-2012 was 6 per cent.
The Department of Animal husbandry-Dairy farming of Government of India (GOI) was
providing financial assistance to dairy farming through the National Bank of Rural and
Agricultural Development (NABARD). It gave both short-term and long-term loans to the
farmers. The government initiated several plans such as “National Dairy Plan-1” with a
motive to provide rural milk producers with greater access to the organised milk processing

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sector and implemented four schemes in FY 2012-2012 namely:

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a. Intensive Dairy Development Programme: This was implemented in state federation/
district milk unions to develop milk cattle, increase milk productivity by providing
technical input services and procurement, processing and marketing of milk in cost
effective manner.

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b. Strengthening infrastructure for quality and clean milk production: This programme
was implemented through state government by district co-operative milk unions/state
level milk federation so as to ensure building of infrastructure and milk quality from
producer to consumer.
c.
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Assistance to Co-operatives: The GOI aimed to revitalise underperforming dairy
cooperative unions at the district level and cooperative federations at the state level.
The programme was being implemented by the concerned district cooperative milk
unions/state dairy federations.
d. Dairy entrepreneurship development scheme: This programme was being
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implemented through the NABARD, for the creation of modern dairy farms for the
production of clean milk and to create structural changes in an unorganised sector to
promote initial milk processing at village level.
The Indian milk economy was estimated at ₹ 1,300 billion in 2013. The dairy sector in India
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was divided into two groups: organised sector and unorganised sector.
The organised sector referred to dairy units registered under Milk and Milk Products Orders
1992. The dairies having a capacity of handling 10,000 litres of milk per day and above are
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registered as Co-operatives, private or others (such as government dairies). The country’s

organised sector was about US$10bn in 2012-2013. About 15 per cent of the total milk
output in India was estimated to be processed in the organised dairy. Milk was processed
and marketed by 170 Milk Producers’ Cooperative Unions, which included federates in 15
State Cooperative Milk Marketing Federations. Over the years, several brands had been
created by cooperatives such as Amul (GCMMF), Vijaya (Andhra Pradesh), Verka (Punjab),
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Saras (Rajasthan). Nandini (Karnataka), Milma (Kerala) and Gokul (Kolhapur) Suddha
(Bihar).
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The unorganised sector comprised small and/or seasonal milk producer/traders that were
not registered under Milk and Milk Producer Orders. They handled less than 10,000 litres
of milk per day. This sector still dominated the Indian milk market. The Indian dairy industry
was pegged at US$70bn, both the organised and unorganised sector, which was expected
to be doubled by 2020. On the back of this rise was the increase in disposable income and
strong demand for dairy products in India. While the dairy sector was growing at a
compounded annual growth rate (CAGR) of 15-17 per cent, the value added products were
growing at CAGR 24 per cent in 2012-2013.
Dairy industry overview: Bihar
The National Sample Survey Office (NSSO) household consumer expenditure survey,
1999-2000, revealed that Bihar had 44 per cent rural people living below the poverty line
against the national average of 26 per cent. Hence, they were dependent on livestock
enterprise for their livelihood. The dairy sector in Bihar was characterised by very large
number of animals with low productivity. In 2012, the government of Bihar allocated a Rs
100 crore dairy with a capacity of four lakh litres milk and 30 tonnes milk powder and tetra
pack plants set up at Hajipur in Bihar’s Vaishali district. The government also distributed Rs
6.44 crore among 124 milk cooperatives and farmers for better performance to the industry
players. Average animal productivity of cross-bred cattle, indigenous cattle and buffaloes
had been recorded as 4.9, 1.6 and 3.4 kg per day, respectively during 1998-1999
according to World Bank, 2007. As per 1997 livestock census, the state possesses over
12.36 per cent and 6.54 per cent of India’s total cattle and buffalo population, respectively.

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The per capita milk availability remained almost static over the past decade in Bihar, that

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is, 102g/day in 1992, 100 g/day in 2003-2004 and 184 gms/day in 2010-2011. In Bihar, the
estimated milk production in 2001-2002 was 4.068 lakh tonnes whereas it was 3.25 lakh
tonnes in 1994-1995 which had increased to 66.43 lakh tonnes in 2011-2012. The total milk

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procurement in 2011-2012 in Bihar was 1,061 thousand kilolitres per day which was 1,091
thousand kilolitres per day in 2010-2011. The total milk marketing in 2010-2011 was 454
thousand litres/day, which increased to 521 thousand litres/day in 2011-2012.

Dairy industry overview: National Capital Region

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The National Capital Region (NCR) – the country’s biggest milk market was growing at a
rapid speed. Estimated milk production was 50 lakh litres per day (LLPD); the organised
milk market in NCR was growing at 6-8 per cent. In 2012, Mother Dairy, NDDB’s brand,
dominated the market. The rising income levels and the shift in preference of consumers to
packaged milk were driving sales.
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Mother Dairy, which commands half of the total market, was the largest seller of liquid milk
sold through machines in Delhi and closely follows Amul, the market leader in pouched
milk sales. Mother Dairy and Amul accounted for over 95 per cent of Delhi’s organised milk
market, whereas others, Delhi Milk Scheme and smaller private players, such as Paras,
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Gopaljee and Kwality, accounted for the rest.

COMFED: overview
COMFED was established on 18th April’ 1983 as the implementing agency of Operation
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Flood programme of dairy development on “Anand Pattern[1]” in Bihar. Bihar government

signed “Operation Flood” with NDDB in 1984. The products offered by COMFED could
broadly be divided into three categories, viz. milk, milk products and ice-creams. Looking
at the present health conscious consumers, the milk segment had been diversified by
introducing different sub-brands like: cow milk, Sudha Shakti, Sudha Gold and Sudha
Healthy. This sub-branding was done on the basis of fat and solid not fat (SNF) content of
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milk. Milk products include yogurt, Indian sweets (peda, gulabjamun and rossogulla),
flavoured milk etc. Ice-cream was offered in various flavours to diversify its product portfolio
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(Exhibit 2). Sudha offered the product in different weights, so that it was easily affordable
to one and all. In 2011-2012, the total number of co-operatives in Bihar was 11,131 with
producer members of 614,000.

Products and markets

Since, its establishment on 18th April 1983, the repair and modernisation of its old
machinery were continued till 1984. In the initial phases of its establishment, the growth was
slow, and in 1985-1986, there were a total of 1,030 co-operatives which were collecting
 23.62 thousand kilolitres of milk per day. In 1987-1988, the four milk unions were
established and they were Vaishal Patliputra Milk Union operating in the districts of Patna,
Vaishali, Saran, Nalanda and Sheikhpura (Exhibit 3). Apart from milk unions and milk
projects, COMFED had expanded its operations through milk units (Exhibit 4). In 2012, nine
out of ten dairy plants were ISO:9001:2000 and HACCP:IS:15000:1998 certified. The
number of dairy co-operative societies in year 2006-2007 was 5,819, which has increased
to 13,681 in 2012-2013 and the number of members has risen to 7.85 lakh from 2.84 lakh
during the same period. There were a total of 9,500 retail outlets of Sudha in Bihar in
2012-2013. These were the main point from where Sudha was marketing its products.
Whereas, in Ranchi (Now in Jharkhand State) there were 700 Sudha Diary outlets.
Sudha was eying a quick number three slot in the NCR with initial volumes of around 2 LLPD
in about six months or even earlier, while targeting 5 LLPD in about a year’s time. For this,
they had hired the private milk plant at Ghaziabad so as to ensure proper milk supply in

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NCR region. Sudha was targeting the captive residents of Bihar in the NCR, which

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exceeded 40 lakh. In NCR regions, Sudha offered three varieties of milk plus sweets at its
outlets. There would be about 350 Sudha outlets in NCR region. But, it’s not the first time
Sudha was selling milk to NCR region; it had been supplying 2 lakh litres of milk per day to
Amul and Mother Dairy for the last few years. Sudha had targeted NCR region because it

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was a pollution-free environment, green fodder in the Gangetic belt, availability of pure
water for milch animals and immediate chilling centres and processing of milk units.
COMFED had not only met the domestic needs of Bihar state; instead, Sudha had supplied
1.16 lakh litres on an average to the states of Delhi, West Bengal, Odisha, Assam etc. Safe,
retail-ready packages also played a role in dairy food safety across India. High-speed

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packers were positively impacting the industry through the use of food-grade robotics
made specifically for dairy environments and by promoting rapid-changeover during plant
operations. In addition to machinery and technological advancements, dairy manufacturers
were looking to their supply partners and the industry itself for guidance on food safety
standards. Maintaining strong, open relationships with suppliers from the advent of a
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project would help increase efficiency, while simultaneously meeting the industry’s strict
regulatory measures.

Technology
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Raw field milk was the basic raw material for the dairy processing industry. India’s dairy
processing industry had developed rapidly since after 1950. This growth and development
was expected to continue as rapidly as the supply of milk increased. Milk was often made
to undergo one or more processes which were applied to it before it was sold. In rural
areas, milk was processed fresh or sour. The choice depended on available equipment,
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product demand and on the quantities of milk available for processing.

As far as the technology of COMFED was concerned, it totally followed the pattern of a
traditional milk processing plant. All of its plants were manual except one of Bihar Sharif,
which was automated. But the company was moving towards automation. Under its
expansion policy, 14 new plants were coming up by 2018, and all of them were to be
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automated and funded by National Cooperative Development Corporation (NCDC).

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Manual plant
The manual plant basically included the technologies related to reception, process,
packaging (toned and standard milk), product, clean-in-place (CIP) and allied works with
utilities including process/services piping systems, power/control cable network, earthing
network, safety devices, instruments etc., as per requirement for the dairy plant for smooth
operation and maintenance of the system.
Milk received in tankers was weighed on the electronic weighbridge, the operators
manually entered relevant tanker details in the weighbridge PC and the weights were taken
automatically. Milk samples were taken manually from the tanker and the details of the
sample were fed to a testing system for measurement of necessary parameters of fat, SNF,
pH and temperature. Based on the acceptable parameters and actual results, the
consignments were accepted or rejected. The reception rate through tankers were
assumed to be 20,000 LPH average and 30,000 LPH maximum. To enable SNF addition for
manufacturing of different varieties of milk (viz. standard/toned/double toned), a
reconstitution system comprising of funnel & venture unit, tanks (un-insulated).
Pump, duplex filter, chillers etc. were provided. This high SNF pasteuriser. Skim milk
powder bags were manually cut opened and dumped in the hopper of funnel and venture.
The boilers in use in these plants were LDO type which was cost efficient.

Automated plant

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Microprocessor based distributed control systems (DCS) were used for centralised
operation of the plant. The integrated control system proposed for the new dairy plant was

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fully automatic, which had better features of both PLC and DCS systems. All the operations
from weighing, milk reception, milk processing and storage, cream processing and cream
storage, cream transfer to butter section, rinse milk recovery system and CIP operations
were automated and were controlled from a control system. The automatic control included

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starting operation, operation during process, shut down and CIP. All the data referring to
raw materials, products and utilities were made available for transfer to the main MIS
server. The automation system was also capable of interfacing with powder plant, milk
packaging only the utility sections such as refrigeration, boiler etc.

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Comprehensive self-diagnostic features were provided to facilitate easy fault location and
detection of failure without individually checking each module. On-line testing facility of
control system while the unit was in operation, were provided with suitable indication for
easy identification of faulty module.
The process/final control element interface section comprises various signal interface
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cards suitable for digital communication with intelligent/smart field devices, distributed I/O
stations, local control panel, intelligent actuator/sensor, frequency drives and standard
motor control system. Failure of sensor/transmitter did not lead to malfunction of the
corresponding control system. These plants were much efficient and wastage was very
less in comparison to manual plants.
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Operations
The operation part of COMFED was one of the areas of concern, because of wastage of
energy, steam and required chemicals. The increasing cost of material and increasing
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wastage was adding to the total cost of milk and milk products (Exhibit 5). The operation
started with the procurement of milk from a co-operative and ended with distribution to the
retailers. In between, the milk was processed using different technologies to give a wide
range of products to the customer. The operation consisted of (Exhibit 6):
■ Procurement – collection of raw milk from dairy co-operatives at village level;
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■ Processing – applying different dairy technologies to the raw milk, so as to pasteurise

it and make different milk products;
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■ Packaging – packing milk and milk products using polyfilms and paper cartoons; and
■ Selling and Distribution – distributing the packed milk and milk products to the retailers
at the specified time.

Financial overview
The financial policy of COMFED involved payment to the co-operatives after ten days of
milk procurement and received advances from the retailers. This helped COMFED to lower
 down its working capital requirement. The total business of COMFED in year 2011-2012
was Rs.1564 crore which had increased by 31 per cent to Rs.2058 crore in 2012-2013. The
P/L A/c showed an increasing trend of net profit from 12.80 crore in 2010-2011 to 16.04
crore in 2011-2012 and 24.60 crore in 2012-2013 (Exhibit 7 and Exhibit 8).

Co-operative Milk Federation Ltd. in 2012

In 2012, Mrs Kaur’s challenges for COMFED were manifold. The primary challenges were
the lack of sense of urgency among the employees because Sudha was enjoying a
monopoly in the Bihar market. COMFED’s decision to enter into the NCR region came too
late because Mother Dairy and Amul had acquired a major part of the market share and
customers were not ready to taste a new brand. The organisational structure of COMFED
was a highly centralised one, which created a lot of problems in proper functioning at the

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milk union level because they had to wait for the orders from the head office. COMFED had

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a large operating cycle, which locked the capital in cycle for a longer period. There was
lack of cash management, huge current asset in the balance sheet, high raw material
holding period and no expenses in research and development. The huge losses of steam,
fuel, ammonia gas, electricity and chemicals were continuously adding to the

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manufacturing cost of COMFED.
A secondary set of challenges which Mrs Kaur was facing included improper maintenance
of machines. Absence of proper routing of procurement vehicles led to unutilised capacity
of vehicles, again leading to wastage of resources. This problem added to another major

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problem that was unutilised capacity of plant, in which huge amounts of capital was
invested. There was also the system of large buffer inventories, which sometimes led to
wastage of the product. There was no inventory strategy such as economic order quantity
(EOQ), fixed order system and material requirement planning. There was a lack of written
trade-credit policy documents because of which there was a problem of book-keeping. The
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milk unions and units had large portion of accounts receivable as there was no certain
policy about the funding of these unions and units. COMFED was not providing proper
training to its employees so that their productivity can be increased. Motivational factors
such as recognition, reward, incentives, hikes, promotion were absent.
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COMFED was a growing organisation and had huge potential, resources and capacity in
dairy industry (Exhibit 9 and Exhibit 10). Mrs Kaur realised that the overall business of the
company was growing and the finances were showing an increasing trend regarding its net
profit; however, the company was following a traditional pattern which needed to be
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changed. Adapting to new technologies was a really good decision but the biggest
challenge for Mrs Kaur was to expand COMFED beyond the boundaries of Bihar and NCR.

Note
1. Anand pattern: Bihar State Milk Co-operative Federation is based on Anand pattern. This pattern
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was first adopted by Amul (GCMMF). This Anand pattern of co-operative structure was built on
vertically integrated co-operatives linking rural producers with urban consumers. It is a three-tier
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structure. Primary Dairy Co-operative Society at the village level is the first tier that consists of
members who own milch animals within the village jurisdiction and supply milk to co-operative
society on regular basis. District Co-operative Milk Producer’s Union at the district level is the
second tier in which all the primary societies are members. It is managed by board of directors the
majority of which are elected by the presidents of primary dairy cooperative societies. The District
Union is responsible for procurement, processing and marketing of milk and also to provide
technical inputs. Co-operative federation is at state level is the third tier to which all district unions
in a state are federated. The federation board consists of elected chairman of the district unions
and representative of state government. Its primary purpose is to maximise returns to milk
producer members through centralised marketing, purchase and quality.
Exhibit 1. Product offered by COMFED

Table EI Milk products

Ghee Matha
Table Butter Misthi Dahi
Paneer Mango Dahi
Lassi Plain Dahi
Mango Lassi Flavoured Milk
Peda Khoa Mithai
Rasogulla Gulab Jamun
Balusahi Milk Cake
Kalakand Sugar Free Kalakand
Soanpapdi Sugar Free Peda
Source: COMFED Website

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Table EII Milk
Serial no. Milk Milk type Fat (%) SNF (%)

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1 Sudha Gold Full Cream Milk 6.0 9.0
2 Sudha Gold Sudha Shakti 4.5 8.5
3 Sudha Gold Cow Milk 3.5 8.5
4 Sudha Healthy Tonned Milk 3.0 8.5
5 Sudha Smart Double Toned Milk 1.5 9.0
Source: COMFED Website

Exhibit 2. National milk production

Table EIII Production in India

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Year Production (million tonnes) Per capita availability (gms/day)

1991-1992 55.7 178

1992-1993 58.0 182
1993-1994 60.6 187
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1994-1995 63.8 194

1995-1996 66.2 197
1996-1997 69.1 202
1997-1998 72.1 207
1998-1999 75.4 213
1999-2000 78.3 217
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2000-2001 80.6 220

2001-2002 84.4 225
2002-2003 86.2 230
2003-2004 88.1 231
2004-2005* 90.7 229
2005-2006 94.6 220
2006-2007 100.9 246
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2007-2008 107.9 260

2008-2009 112.2 266
2009-2010 116.4 273
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2010-2011 121.8 281

2011-2012 127.9
Sources: State/UT animal husbandry departments, 2004; *production estimate of Milk, Egg, Meat
and Wool of the year 2004-2005
 Exhibit 3. Capacity utilization of milk unions and units under COMFED

Table EIV
Particulars Daily capacity Utilised capacity % utilised

Milk unions
Vaishal Patliputra Milk Union 150,000 204,540.7 136.3604667
Mithila Milk Union 300,000 257,275.2 85.7584
Tirhut Milk Union 250,000 121,539.6 48.61584
Shahabad Milk Union 250,000 160,323.8 64.12952
Baruni Milk Union 300,000 44,034.9 73.3915
Vikramshila Milk Union 60,000 312,876.2 104.2920667
Units of COMED
Magadh dairy project 60,000 11,993.8 19.98966667

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Kosi dairy project 20,000 14,150.5 70.7525

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Jamshedpur dairy 200,000 122,890 61.445
Ranchi dairy 200,000 57,694 28.847
Bokaro dairy 150,000 63,360 42.24
Source: COMFED annual reports

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Exhibit 4. Geographical area of operation of COMFED

Table EV
Milk unions/Projects/Units

Patna
Tirhut Milk Union (TIMUL),
Muzaffarpur
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Vaishal Patliputra Milk Union (VPMU),
Districts

Patna, Vaishali, Nalanda, Saran and Sheikhpura

Muzaffarpur, Sitamarhi, Sheohar, East Champaran,

Mithila Milk Union (MMU), Samastipur
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Shahabad Milk Union (SMU), Ara
Vikramshila Milk Union (VMU),
Bhagalpur
Magadh Dairy Project (MDP), Gaya
Kosi Dairy Project (KDP), Purnia
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West Champaran, Siwan and Gopalganj
Samastipur, Darbhanga and Madhubani
Bhojpur, Buxar, Kaimur and Rohtas
Bhagalpur, Munger, Banka, Jamui and parts of
Khagaria District
Gaya, Aurangabad, Jehanabad, Arwal and Nawada
Purnia, Katihar, Araria, Kishanganj, Saharsa, Supaul

and Madhepura
Jamshedpur Dairy Saraikela Kharsawan, East Singhbum and West
Singhbum
Ranchi Dairy Ranchi, Ramgrah, Hazaribagh, Simdega, Gumla,
Khunti, Chatra, Palamu, Koderma, ll Lohardaga,
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Latehar and part of Gridih

Bokaro Dairy Bokaro, Dhanbad
Source: COMFED annual reports
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Exhibit 5. Cost sheet of COMFED

Table EVI
2011-2012 2012-2013
Particulars Amount Cost/Unit O.P. Ratio Amount Cost/Unit O.P. Ratio

Qty Sold 1552.75 2089.09

Sale Value/op income 46015.25 29.63 100.00 73719.04 35.29 100.00
(1) Total Material Cost 38069.55 24.52 82.73246 64334.96 30.80 87.27
(2) Total Procurement cost 1586.68 1.02 3.448161 1712.07 0.82 2.32
(3) Total Processing cost 889.63 0.57 1.933337 1372.49 0.66 1.86
(4) Total Packing Cost 844.76 0.54 1.835826 1006.84 0.48 1.37
(5) Wages 211.14 0.14 0.458848 315.76 0.15 0.43
(6) Product mat Cons 47.19 0.03 0.102553 73.27 0.04 0.10
(7) Selling & Distt Exps 247.06 0.16 0.536909 480.35 0.23 0.65

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Total Variable Cost 41896.01 26.98 91.0481 69295.74 33.17 94.00

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Contribution 4119.24 2.65 8.951902 4423.30 2.12 6.00
(8) Administrative Cost 3269.30 2.11 7.104819 3028.54 1.45 4.11
Operating profit 849.94 0.55 1.847083 1394.76 0.67 1.89
Non-operating Income 1884.23 1.21 4.094795 1027.83 0.49 1.39
Depreciation 155.17 0.10 0.337214 79.80 0.04 0.11

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Interest 441.77 0.28 0.960051 111.49 0.05 0.15
Total Fixed Cost 3866.24 2.49 8.402084 3219.83 1.54 4.37
Total cost 45762.25 29.47 99.45018 72515.57 34.71 98.37
Profit loss 2137.23 1.38 4.644612 2231.30 1.07 3.03
Source: COMFED managing team and compiled by authors

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 Exhibit 6. COMFED – operations

Table EVII
Operation Particulars Cost

Procurement The total milk procured during year 2012-2013 was 17.88 lakh The procurement cost has shown an
kilolitres a day and shown an increase of 15.8%. The increment of Rs.0.07 to 0.08 due to
procurement is done through vehicles like Trucks, pickups increase in the petroleum prices
vans and milk tankers. These vans and vehicles carry the milk
in steel cans from co-operatives to the milk unions and units,
where it is processed to pasteurised milk and different milk
products
Processing a. Receiving the milk-irrespective of product, the plant has a The processing cost of milk unions
section where milk is delivered and stored and units of COMFED has increased

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b. Sampling of milk-Milk samples are drawn for organoleptic by Rs.0.47 in comparison of last
and other platform test for determination of fat, solid-not-fat as year. This increment is due to hike in

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well as its keeping quality the prices of electricity, coal and
c. Unloading of milk diesel
The milk is unloaded from the cans/tankers and taken into the
dump tanks

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d. Milk processing
Raw milk duly chilled will be passed through the milk plate
pasteuriser, which is a self-contained unit for heating and
cooling of milk. The milk is heated from 4 degree Celsius to 45
degree Celsius and is diverted to a cream separator, which
separates out the cream from the milk whereas the skimmed

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milk returns back to the pasteuriser where it is further heated
to 80 degree Celsius so as to make it safer for human
consumption and then chilled to 4 degree Celsius to further
enhance its keeping quality on storage
e. Separation of milk fat
Milk from milk pasteurizer is taken to the cream separator
where the fat is separated from the milk in form of cream
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containing 40 to 50% fat and the skimmed milk from the cream
separator is diverted back to the pasteurizer
f. Pasteurisation of cream
Cream from cream separator is pumped through the cream
pasteuriser, which is identical in construction to milk
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pasteuriser where cream is heated to 80 degree Celsius by

means of hot water and is cooled to 8 degree Celsius by
means of chilled water to enhance its keeping quality. The
pasteurized cream is stored in double jacked cream storage
tank for further conservation into butter and ghee
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g. Manufacture of butter
Cream from cream storage is tank is pumped into the
continuous butter making machines / butter churn. The cream
is churned into the machine in order to get butter granules
(this is known as churning of cream)
h. Ghee-Butter from melting vat is pumped to ghee boiler
where it is heated to about 107 degree Celsius gently so as to
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evaporate water from the molten butter

i. Skimmed milk powder
Skimmed milk/ whole milk from the milk silos is pumped
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through multi effect falling film evaporator where it is

pasteurised and condensed under vacuums to desired
concentration continuously
(continued)
Table EVII
Operation Particulars Cost

Packaging The material used in packaging are polyfilms, paper cartoons, The taotal cost of packaging has
tin cans, plastic containers etc., and recently they are moving decreased from 0.54 to 0.48/litre
to tetra packs. There are certain specifications regarding
packaging material which are set by National Dairy
Development Board and are necessary to be followed by all
milk co-operative federation. The width of polyflim should be
50-55 micron. It is important to note at this point that cost of
polyfilm is paid on the basis of its thickness. The total number
of packets of half litre from one kilogram of polyflim should be
around 410 and that of one litre packets should be around
250. Note that anything less than this is considered to be
wastage of resources

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Selling and These activities are handed over to agencies which are The administrative cost of milk

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distribution selected on the basis “BID”. The agency with the lowest bid unions of COMFED has shown an
price is selected by COMFED for its promotional and increment of Rs.0.35 per litre. The
distribution activities administrative cost of units of
COMFED has decreased from
Rs.2.11 per litre to Rs.1.24 per litre

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Source: COMFED Managing Director Interview and Compiled by Authors

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 Exhibit 7. Bihar state Milk Co-Operative Federation Ltd., Patna, Profit and Loss
Account for the year ended 31st March, 2012

Table EVIII
Particulars 2010-2011 2011-2012 Particulars 2010-2011 2011-2012

To opening stock 123,228,649.86 71,621,532.98 By sales 3,375,126,124.83 4,327,487,151.49

To material cost 2,954,989,420.74 4,023,436,946.64 By stock Transfer (outward) 231,343,375.95 274,043,569.38
To procurement cost 122,486,355.55 158,669,751.05 By closing stock 71,621,532.98 283,382,432.57
To processing cost 67,301,119.80 88,963,823.98
To wages 16,596,924.80 21,114,226.41
To packing cost 75,901,282.91 84,478,333.31
To selling cost 25,912,187.12 24,708,246.05
To gross profit 291,675,092.98 411,920,293.02

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Total 3,678,091,033.76 4,884,913,153.44 Total 3,678,091,033.76 4884913153.44

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To salaries and wages 149,234,800.17 174,712,424.27 By gross profit b/d 291,675,092.98 411,920,293.02
To other admin expenses 72,313,849.64 136,982,713.29 By training fee/income 8,776,131.00 8,459,974.00
To running repairs and 5,289,372.95 5,051,835.85 By misc receipt 155,719,598.07 179,964,681.33
maint exp
To training expenses 7,874,671.25 9523599.45

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To audit fees 546,667.00 657,206.00
To interest 41,894,317.86 44,175,904.96
To depreciation 11,991,517.00 15,517,494.40
To profit before tax 167,025,626.18 213,723,770.13
total 456,170,822.05 600,344,948.35 Total 456,170,822.05 600,344,948.35
To provision for tax 38,968,290.00 53,242,773.00 By net profit before tax b/d 167,025,626.18 213,723,770.13
To net profit after tax c/d 128,057,336.18 160,480,997.13
sub-total
Appropriation of profit

To reserve fund

To dairy co-operative fund

167,025,626.18

42,696,878.00

1,707,875.00 1,280,573.00
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213,723,770.13 Sub-total
By net profit after tax
(prev.yr)
32,014,334.00 By net profit after tax
(current yr)
167,025,626.18
170,787,511.59

128,057,336.18
213,723,770.13
128,057,336.18

160,480,997.13
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To reserve for unseen losses 17,078,751.00 12,805,734.00
To general fund 96,479,727.59 69,132,415.18
To provision for dividend 12,824,280.00 12,824,280.00
170,787,511.59 128,057,336.18
To net profit 128,057,336.18 160,480,997.13
Total 298,844,847.77 288,538,333.31 Total 298,844,847.77 288,538,333.31
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Source: COMFED Annual Reports

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Exhibit 8. Balance sheet of COMFED

Table EIX
2010-2011 2011-2012

Capital and Liability

Share capital
Authorised capital 150,000shares@Rs.1,000 each 150,000,000.00 150,000,000.00
Paid up capital114,750(prev.year-106,869) shares 106,869,000.00 114,750,000.00
of Rs.1,000 each allotted
Share deposit pending for allotment 5,135,754.40 3,997,430.40
Reserve and surplus
Grants from NDDB 28461585.34 28461585.34

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Grants from Govt. of Bihar 78,801,403.86 78,797,334.90
Grants from PAD/FFHC 303,682.62 303,682.62

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Technology mission 4,954,262.00 4,954,262.00
Micronutrient 40,908.54 40,908.54
Reserve fund 141,802,119.16 173,816,453.16
Capital reserve 2826.17 2826.17
Depreciation reserve 224,626,432.70 239,954,841.10

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Statutory Reserve 32,881.00 32,881.00
Co-operative Education fund 11,312,691.91 12,593,264.91
Equity Redemption fund 6,431,560.00 6,431,560.00
Reserve for Unforeseen losses 48,811,314.07 61,617,048.07
Bad and Doubtful debt fund 4,553,309.02 4,553,309.02
profit and Loss account 1,280,57,336.18 160,480,997.13
General fund
Secured loan
Banks (against hypothecation of stock
or fixed deposit)
Unsecured loan
Advances
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248,737,088.41

95,165,061.23

17,701,715
1,779,261,070.93
317,869,503.59

216,927,980.67

18,321,715
1,757,904,786.09
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Current liability and provisions 627,098,529.74 859,032,934.71
Total 3,558,160,532.76 4,060,845,304.90
Assets and properties
Fixed assets 310,905,100.74 334,683,972.72
Work in progress 273,855.00 3,836,596.00
Investment 1,528,597,160.49 1,493,062,679.83
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Current assets and loans and advances

A. Current assets
Stock 71,621,532.98 283,382,432.57
Sundry stores 50,238,611.55 84,530,335.04
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Loose tools and spare parts 607,986.59 414,312.09

Books 84,459.71 84,459.71
Sundry debtors 20,265,337.97 21,415,656.54
Balance with unions 130,377,464.68 169,813,871.68
Interest receivable 58,503,574.73 69,947,313.41
Cash and bank balance 395,022,729.92 182,914,412.35
B. Loans and advances
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Advances 972,789,679.29 1,391,423,820.93

others 18,873,039.11 25,335,332.03
Total 3,558,160,532.76 4,060,845,194.90
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Source: COMFED annual reports

 Exhibit 9. COMFED – units performance

Table EX
Turnover Operating profit
2012-2013 2011-2012 2012-2013 2011-2012
Serial no. Name of the units Amount Amount % Change Amount Amount % Change

1 Jamshedpur Dairy 14,168.34 12,624.03 12.23 583.12 438.55 32.97

2 Ranchi Dairy 11,922.38 9,643.16 23.64 588.78 268.40 119.37
3 Bokaro Dairy 7,470.16 6,270.55 19.13 274.38 96.99 182.90
4 Gaya Dairy 4,174.77 3,204.89 30.26 62.56 63.51 1.50
5 Koshi Dairy 3,642.13 2,625.70 38.71 36.46 73.22 50.20
6 Nalanda Dairy 14,217.54 1,458.17 875.03 220.67 50.39 537.92
7 CFP, Ranchi 3,324.66 3,257.25 2.07 14.91 576.97 102.58
8 Head Office 14,799.07 6,931.50 113.50 356.29 617.31 42.28

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Total 73,719.05 46,015.25 60.21 1,394.77 849.94 64.10

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Source: COMFED annual reports

Exhibit 10. COMFED-Unions performance

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Table EXI
Turnover Operating profit
2012-2013 2011-2012 2012-2013 2011-2012
Serial no. Name of the unions Amount Amount % Change Amount Amount % Change

1
2
3
4
5
VPMU, Patna
DRMU, Barauni
MMU, Samastipur
SMU, Ara
VIMUL, Bhagalpur
24417.81
25,313.99
24,656.51
14,835.15
4,135.42
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15625.05
18,346.65
17,990.61
7,666.23
2,435.79
56.27
37.98
37.05
93.51
69.78
46.37
622.85
352.47
216.90
75.20
312.20
222.78
120.80
15.29
7.23
85.15
179.59
191.79
1,518.21
1,140.03
6 TIMUL, Muzaffarpur 13,135.24 7,722.26 70.10 353.85 145.14 143.79
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Total 106,494.12 69,786.58 52.60 1,083.43 823.44 31.57

Source: COMFED annual reports

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Q1. Analyse the dynamics of the Indian dairy sector. What was the role of the general environment of India in
shaping these dynamics? Are they favourable or problematic for COMFED?

Q2. Analyse the scope and advantages of COMFED? Was it sustainable?

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Q3. What were the potential sources of competitive advantage for COMFED in the dairy sector? How did
COMFED compare to its competitors?

Q4. What were the competitive pressures COMFED was experiencing in 2012? What should Mrs Kaur do
next?
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