Economics and Financing Dairy Enterprises | Animal Husbandry & Veterinary Science Optional for UPSC PDF Download

Role of Financing Agencies and Dairy Enterprises

• Government Support: The government provides significant encouragement to small farmers, marginal farmers, and landless agricultural laborers to supplement their income from agriculture through activities like cow keeping.
• Financial Assistance: Agricultural banking plays a crucial role in providing financing for the purchase of dairy cows or buffaloes, essential for rural households to generate additional income. 
• Beneficiary Categories: 
  • Weaker sections: Suitable for rural women who cannot access regular employment and individuals needing supplementary income. 
  • Educated unemployed: Suitable for those living near areas with high demand for milk in towns. 
• Loan Availability: Bank loans are accessible for both categories of beneficiaries.

General Considerations: 

• Capital Requirement: Capital is essential for acquiring animals, constructing shelters, and procuring land for fodder production. 
• Return on Capital: The primary aim of any enterprise is to achieve a high overall return on capital invested.

Financial Assistance and Subsidies

• Subsidy Programs: Various levels of subsidies are available to beneficiaries under weaker sections, reducing the burden of loans. 
• Integrated Rural Development Programme (IRDP): Special programs for those below the poverty line with concessional interest rates. Subsidies for economic activities: small farmers (25%), marginal farmers (33.3%), and tribal families (50%).

Security, Interest, and Repayment

• Security Requirements: No security needed for loans up to Rs.10,000; for higher amounts, collateral security or third-party guarantees are necessary.
• Interest Rates and Repayment: Interest rates are 10% under IRDP and 12.5% for others, with a repayment period of 5 years.
• Repayment Strategy: Interest calculated annually; paying the principal monthly reduces the interest burden significantly.

Costs and Profit Margins

• Fixed Costs: Include overhead costs, insurance, and depreciation.
• Variable Costs: Cover feed, minerals, veterinary expenses, and working capital.
• Profit Calculation: The profit is the difference between gross margin and fixed costs.

Forage and Feed Management

• Forage Production: Proper land management can yield significant amounts of green fodder, crucial for maintaining dairy animals.
• Ration Examples: Various high-quality roughage rations are essential for maintaining milk production in cows and buffaloes. These points highlight the importance of financial support, subsidy programs, security requirements, and cost management in dairy enterprises, emphasizing the need for efficient financing and operational strategies for sustainable dairy farming.

Overview of Dairy Farming Economics

Factors Affecting Profitability:

• Net margin calculation based on gross margin and fixed costs.
• Factors influencing gross margin: yield per cow and calving index.
• Impact of breed, hereditary traits, environment, feeding, and management on milk yield.

Significance of Proper Feeding:

• Importance of green fodder for cost-effective milk production and cow health.
• Feeding strategies during pregnancy and dry periods to optimize subsequent lactation.
• Balance between additional feed costs and profitability.

Cost Considerations:

• Impact of veterinary charges on overall profitability and cow maintenance.
• Factors affecting profitability like vaccination, inspection costs, and breeding efficiency.
• Importance of maintaining detailed records to evaluate dairy enterprise success.

Economics of a Two-Milch Animal Dairy Unit

Initial Capital Requirements:

• Cost breakdown including milch animal cost, temporary shed, and equipment expenses.

Feed and Fodder Management:

• Daily requirements for green fodder, dry fodder, and concentrate mix over five years.
• Steaming up provision and maintenance strategies for optimal milk production.

Financial Aspects:

• Sale of calves to offset rearing costs.
• Insurance and veterinary aid considerations for cost management.
• Depreciation and insurance premium factors in financial planning.

Economics of Ten Milch Animal Dairy Units

• Management and Labor: The unit is to be run by a self-employed farmer with one part-time laborer at Rs. 20 per day.
• Location: The unit is ideally situated near a town to facilitate easy marketing of milk.
• Acquisition Costs: The average cost of a graded Surti/Murrah buffalo with a female calf is estimated at Rs. 8,000, while a crossbred cow is also valued at Rs. 8,000. The male-to-female calf ratio is maintained at 50:50.
• Milk Yield and Lactation Period: The average daily milk yield is estimated at 7 liters for buffaloes and 8 liters for crossbred cows. The lactation period is set at 240 days for buffaloes and 270 days for cows, with corresponding dry periods of 120 and 90 days, respectively.
• Sale Price: The average sale price of milk is projected at Rs. 12.50 for buffalo milk and Rs. 0.50 for cow milk.
• Feeding Practices: While high-quality leguminous green fodder can sustain a cow yielding 8-10 liters of milk per day, a mix of green legumes, grasses, dry fodder, and concentrates is deemed practical for small farmers. Costs for green fodder, dry fodder, and concentrates are set at Re. 0.75, Rs. 1.10, and Rs. 6.00 per kilogram, respectively.
• Animal Welfare and Replacement: The scheme includes provisions for the rearing of female calves, culling of animals with below-average production, and the maintenance of male stock through the sale of male calves.
• Animal Acquisition Strategy: The plan involves purchasing milch animals in two installments of five animals each, spaced six months apart, with 15-day-old calves. All calves are reared for the first three months, and one or two heifers are retained as replacements.
• Loan Repayment and Asset Ownership: The loan is to be repaid in full over five years, after which the animals purchased earlier and those raised on the farm will become the farmer's assets.

Buffaloes

• Capital Requirements: Capital needed includes the cost of 10 animals, temporary sheds, calf sheds, a water tank with a hand pump, a calving pen, an office room, a record room, a rodent-proof store room, equipment like pails and cans, and miscellaneous expenses.
• Daily Feed/Fodder Requirement: Daily requirements for green fodder, dry fodder, and concentrates are detailed, with corresponding costs per kilogram.
• Milking Days and Dry Days: The number of milking days and dry days in different years are specified, alongside replacement costs.

Capital and Feed Requirements:

• Capital Needed: Understand the total cost required for starting the dairy farm. Calculate expenses for infrastructure, equipment, and initial livestock purchase. 
• Daily Feed/Fodder Requirement: Break down the necessary feed components like green fodder, dry fodder, and concentrates. Calculate the daily amount needed for each component based on the number of animals.

Expenditure and Income Analysis:

• Expenditure Breakdown: Analyze the various expenses involved in running the dairy farm. Include costs like feed, labor charges, depreciation, insurance, veterinary aid, and others.
• Income Generation: Evaluate the sources of income, primarily from milk sales. Calculate the total income generated over a specified period.
• - Profit Calculation: Determine the profit by subtracting total expenditure from total income. Calculate profit per animal and overall profitability of the dairy farm.

Repayment Schedule and Surplus Analysis:

• Loan Repayment Schedule: Understand the repayment plan for the loan amount, including principal and interest payments. Calculate the total amount to be repaid over the specified period.
• Surplus Analysis: Analyze the surplus generated after deducting expenses from income. Understand the financial health of the dairy farm based on surplus calculations.

Interest Rates and Total Costs:

• Interest Rate Analysis: Evaluate the interest rates applied to the loan amount. Calculate the total interest payments over the repayment period.
• Total Costs Calculation: Summarize the total costs incurred, including both fixed and variable expenses. Calculate the total investment required to maintain the dairy farm operations.By understanding these financial aspects and calculations, you can effectively manage the financial health of the dairy farm and make informed decisions to ensure its sustainability and profitability.

Overview of Livestock Management

• Discuss the importance of managing livestock efficiently for sustainable agricultural practices.
• Explain the significance of maintaining a balance between expenditure and income in livestock farming.
• Highlight the key factors influencing profitability in livestock enterprises.

Factors Affecting Profitability in Livestock Farming

• Explain how factors such as feed costs, veterinary expenses, and labor charges impact the overall profitability of a livestock enterprise.
• Discuss the role of depreciation, insurance, and other miscellaneous costs in determining the financial success of a livestock business.

Income and Expenditure Analysis

• Break down the income sources such as milk sales and the various expenditure components like feed costs, veterinary aid, and labor charges.
• Illustrate how the profit is calculated based on the income generated and the total expenditure incurred in livestock farming.

Repayment Schedule and Loan Management

• Explain the repayment schedule for loans in livestock farming and how it impacts the overall financial health of the enterprise.
• Discuss the importance of managing loans effectively to ensure sustainable profitability in livestock businesses.

Replacement Strategies for Livestock

• Elaborate on the need for replacing old and uneconomic animals in a livestock herd to maintain productivity levels.
• Discuss different strategies for replacing livestock, including buying replacements, contract rearing, and subsidized rearing programs.
• Explain the financial implications and benefits of each replacement strategy in livestock management.

The Crossbred Heifer Rearing Scheme is a program where farmers receive loans from financial institutions to support the rearing of healthy crossbred heifers from about 4 months of age. The loan specifically covers the cost of concentrate feed, while the farmers are responsible for all other ongoing expenses except insurance. Once the heifer calves, the loan for the concentrate feed is repaid gradually over a period of 2-3 years using the proceeds from milk sales. If the animal is sold before the loan is fully repaid, the outstanding amount is collected in a lump sum. To ensure the success of this scheme, several factors are crucial, including the availability of green fodder, veterinary support, breeding services, appropriate financing, farmer training, as well as follow-up and supervision.

Crossbred Heifer Rearing Scheme:

• Farmers receive loans for concentrate feed for healthy crossbred heifers. 
• Repayment through milk sale proceeds over 2-3 years. 
• Farmers bear recurring expenses except insurance. 
• Factors for success: green fodder availability, veterinary aid, breeding support, proper financing, farmer training, follow-up, and supervision.

The Salvage of Dry Animals initiative aims to prevent productive cows from being sent to slaughterhouses when they are not producing milk. To support this, commercial banks and financing agencies offer financial assistance to weaker sections to purchase these dry animals. These animals can be raised for approximately 15 months and then sold once they are ready to calve, with the loan amount repaid in a single installment. This scheme is particularly beneficial in areas with limited milk marketing facilities or insufficient green fodder. Additional concentrates may be required during advanced pregnancy for better fetal growth. Proper veterinary care and insurance coverage are also provided, making this initiative suitable for Differential Rate of Interest (DRI) advantages, especially for rural women.

Salvage of Dry Animals: 

• Financial aid for weaker sections to buy dry animals. 
• Animals raised for 15 months and sold before calving. 
• Loan repayment in one installment. 
• Beneficial in areas with limited marketing facilities or green fodder. When providing credit facilities to rural farmers for cattle purchase, an inspection checklist is recommended. This checklist includes assessing the availability of fodder, marketing opportunities, breeding facilities, veterinary support, health coverage, calf rearing programs, heifer rearing programs, and the adaptability of cows to local conditions. By analyzing production data for the first 30 days of lactation, the potential yield of a cow can be reasonably estimated. This estimation helps in determining the profitability of maintaining that particular cow.

Inspection Checklist: 

• Evaluation criteria: fodder availability, marketing opportunities, breeding facilities, veterinary support, health coverage, calf and heifer rearing programs, adaptability to local conditions. 
• Yield estimation based on production data from the first 30 days of lactation. Biogas plants, in conjunction with cow-keeping units, utilize cattle dung to produce clean and cost-effective biogas, which contains 55-70% methane and is flammable. This biogas serves as both fuel and manure without compromising the value of the manure. By using biogas, the inconveniences associated with collecting firewood and storing it during rainy weather are eliminated, while also reducing environmental pollution. The promotion of biogas is overseen by the Department of Non-Conventional Energy Sources in the Ministry of Energy. Various designs of biogas plants are available, with capacities ranging from 1 to 10 cubic meters per day, catering to different household sizes. Loans for installing biogas plants are provided by commercial and cooperative banks, with refinancing facilities offered by institutions like NABARD. The Central Government extends various support measures, including training courses for masons and promotional incentives for village functionaries.

Biogas Plant and Cow-Keeping Unit: 

• Utilization of cattle dung for clean biogas production. 
• Benefits: fuel source, manure production, environmental impact. 
• Design variations and capacities of biogas plants. 
• Financial assistance from banks, refinancing options, and government support.