NOĒSIS

There are different “states” through which a milk collection activity in a cluster move. Each state depends on factors like location of the cluster, volume of milk produced and competition amongst milk buyers.

At the very outset, we will make it clear that according to DNE, quality based payments for milk wherein each farmer gets paid exactly according to the quality of milk poured by him is the best situation that we can have and that is something that DNE hopes to achieve through its interventions.

Before we go further we would also like to clarify that by quality we mean the nature of chemical composition and extent of microbial content in milk. For a dairy processing unit which converts raw milk into various dairy products, what matters is the solids content in the milk. If we go deeper, the solids in milk consists of fat, proteins, lactose,minerals. Depending on the product manufactured in the dairy plant, the milk may be valued at a higher price if it has a higher content of one of these components. However,the most common method of quality based payment is on the basis of the total solids content in milk. This is the easiest to find out and it requires a simple lactometer dip.( Lactometers measure the specific gravity of milk and hence the solids content.)In slightly better cases, milk is paid on the basis of fat.

The different forms of payment that the farmers get are:

Volume Based:

This method is normally followed in case where the farmer sells milk to a milk vendor/agent or sells it to households directly. S/he may bargain for a better price just on the basis of the perceived “thickness” of the milk.
More volume you pour more money you get.
Why is this good: No hassles of measurement. No investment required to collect milk or keep track of the payments to be made.
Why is this bad:The farmer has no incentive to produce good quality milk. S/he adds water.Entire dairy supply chain suffers.

Entry of an “organised” player into an area for milk collection does NOT guarantee “right” price for milk. There are multiple systems under which the organised players collect milk.

They may let a milk agent collect milk for them.

Quality Based:

Normally followed by the organised sector or to some extent by milk agents in case of competition.

Why is this good: Farmers have incentive to pour better quality of milk, the rest of the supply chain gets benefitted immensely.

Why this is bad: Requires different level of complexity and investments to implement.

Different “versions” of quality based payments

• The milk buyer may collect milk from farmers and NOT measure the quality of individual sample separately and pay all the farmers in a cluster according to the quality of the bulk sample of all the milk poured in that cluster. The farmer gets paid as per the volume of milk poured and as per the quality of milk poured by the entire village.

• The milk may be collected from farmers and the TS content measured for each farmer separately. The farmers are then paid according to the TS content for each farmer. The equipment required at the village level is a simple lactometer and a measuring cylinder.Cost Rs.200 (approx).

• Milk may be collected from farmers and individual samples taken for milk poured by each farmer. The samples may then be taken to the nearest chilling unit/dairy plant to measure the fat and Solids Not Fat content of milk. The equipment required at the village level is a sample bottle tray, a lactometer and measuring cylinder. Cost Rs.1500 (approx)

• Each milk sample is not tested daily. It is randomly tested and each farmer gets payment based on the quality of the milk that gets tested once in a week/fortnight/month.

• Milk is collected and tested at the village level for fat and TS. the testing of milk may be done using a manual system where all samples will not be tested everyday. The equipment cost would be about Rs.5000-6000.The farmer gets paid according to the quality with the fat being tested once in a two days/week.

• The testing of milk may be done using an electronic equipment. The total setup would cost about Rs.30000-60000. This would enable payment as per fat and SNF for each sample of milk poured.Farmer gets paid for every sample of milk that s/he pours differently based on quality.

• There is an automated milk testing setup available which would enable creation of records of payment automatically through a computerised system. The setup costs Rs.80,000-1,20,000.

In other countries, the microbial load of milk is also judged for payment. In some cases (cheese plants), the protein content of the milk is considered for payments.