National Programme For Dairy Development 2014:Assessing Dairy Infrastructure, Productivity And Rural Livelihoods (2021-2026)

Policy Update
Ayan Bardoi

Background

The dairy industry is the mainstay of the Indian rural economy, providing employment to more than 80 million farmers of whom the majority are small and marginal farmers. The Department of Animal Husbandry and Dairying (DAHD) has started the National Programme for Dairy Development (NPDD) in the country since 2014 to build the capacity of grassroots milk procurement, processing and marketing infrastructure. This policy update evaluates the design, implementation status and contribution of NPDD towards rural dairy livelihood during the 15th Finance Commission cycle (2021-22 to 2025-26) and was further revised during 2025 with an enhanced outlay.

Since February 2014, DAHD has been running NPDD at a national level. The scheme was re-structured & realigned in July 2021 for implementation during 15th Finance Commission cycle from 2021-22 to 2025-26. In March 2025, the Union Cabinet approved a revised version of NPDD, which will increase the scheme’s budget by Rs 1,000 crore to Rs 2,790 crore over the 2021-22 to 2025-26 period. The new programme explicitly targets an upgrade of dairy infrastructure, development of a quality control framework and better access to organised markets, to boost rural incomes.

Functioning

There are two arms to NPDD, both with a specific focus on different elements of the dairy value chain.

The Component A – Dairy Infrastructure Development is aimed at establishing and upgrading infrastructure for quality milk testing equipment and Primary Chilling Units for State Cooperative Dairy Federations and District Cooperative Milk Producers’ Unions, SHGs, Milk Producer Companies and Farmer Producer Organisations. It is being rolled out all across the country during the 21-22 to 25-26 academic years and will run till 27-28, with funding split between the Centre and States.

The cost sharing pattern varies among activities and geographical regions as follows: 75:25 in respect of establishment and development of Milk Producer Company, cost of R&D and training, cost of chilling and processing infra facilities in North Eastern, Hilly States and UTs while other activities are at 50:50. 70:30 in respect of establishment and development of Milk Producer Company, cost of R&D, cost of testing, cost of certification and accreditation of infra facilities in North Eastern and Hilly States and UTs while other activities are at 50:50. 35:65 in respect of establishment & development of Milk Producer Company, cost of R&D, cost of testing, cost of certification and accreditation of infra facilities in North Eastern and Hilly States and UTs and fully Central funded in all other activities.

The component B – Dairying Through Cooperatives was an externally aided component supported by Japan International Cooperation Agency (JICA) and was started on a pilot basis in Uttar Pradesh and Bihar to create dairy infrastructure and capacity of the cooperative institutions from the village level to State level. The component has been expanded to cover 9 States, namely, Andhra Pradesh, Bihar, Madhya Pradesh, Punjab, Rajasthan, Telangana, Uttar Pradesh, Uttarakhand and West Bengal with financial assistance being provided as a total outlay of Rs 1,568.28 crore, of which 60% is to be financed by JICA (Rs 924.56 crore), 31% by the Government of India (Rs 475.54 crore) and the balance 9% with participation from institutions (Rs 168.18 crore).

Figure 1: NPDD Funding by Component (2021-22 to 2025-26)

Source: PIB Delhi, Rajya Sabha reply (19 March 2025); DAHD NPDD scheme page.

Performance

However, official government figures, produced in Parliament and published via official government press releases, show significant groundwork has been achieved under the new NPDD:

Benefits to farmer outreach and employment: 30,000 direct and indirect farmer jobs created and more than 18.74 lakh farmers benefited.
Procurement capacity: There was an additional increment of 100.95 lakh litres per day (LLPD) in milk procurement capacity during 2021-22 to 2023-24. The capacity of dairy plants increased to 1.82 lakh litres per day (LLPD) for the same period.
Strengthening of milk testing laboratories at the village level: More than 51,777 village-level milk testing laboratories were strengthened, 5,123 bulk milk coolers of 123.33 lakh litres were installed and 169 laboratories were upgraded with the FTIR milk analyser; 232 dairy plants were provided with advanced adulteration detection systems.
Projects and cooperative expansion: In Tamil Nadu, 110 projects with an outlay of Rs 2,247.46 crore were approved under Component A, which covers projects and cooperative expansion, across the country. The updated NPDD also aims for the creation of 10,000 additional Dairy Cooperative Societies with a particular thrust to process in the North Eastern Region and establishment of two Milk Producer Companies.
Concessional financing under Component B: JICA finances loans to eligible institutions at a subsidised interest rate of 1.50% for creation of dairy infrastructure.
Dairy Processing and Infrastructure Development Fund (DIDF): In addition to NPDD, the Dairy Processing and Infrastructure Development Fund (DIDF) has also helped in the capacity building of the sector with 37 projects sanctioned with project cost of Rs 6,777 crore, and milk processing capacity of 73.95 lakh litres per day.

The infrastructure push by NPDD needs to be viewed in the background of the performance of the Indian dairy industry. Milk production increased by CAGR of 5.62% from 146.31 million tonnes in 2014-15 to 239.30 million tonnes in 2023-24, and was estimated to be around 247.9 million tonnes in 2024-25.

Figure 2: India’s Milk Production Growth, 2014-15 to 2024-25

Source: DAHD Basic Animal Husbandry Statistics; PIB Year End Review 2024; PIB World Milk Day release.

In 2024-25, India’s milk availability per capita was 485 grams/day, surpassing the global average of 328 grams/day. Livestock’s share of total agriculture and allied GVA increased from 24.38% in 2014-15 to 30.23% in 2022-23, highlighting the increasing role of dairying in the rural economy. However, this production expansion is taking place in the face of structural weaknesses. Almost two-thirds of the milk in India is traded through unorganised channels and the milk producers do not get quality linked price, chilling facilities and value addition opportunities, which is the very gap NPDD’s Component A addresses with its testing labs, chilling infrastructure and certification systems.

Impact

Dairying is considered one of the most equitable rural livelihood activities as it is relevant for landless and marginal households and has played a very significant role in economic participation by women in rural households as daily activities of the cattle are commonly managed by women. Because the price discovery and quality-based payment leg of the dairy value chain is most important for smallholder incomes, Component A is designed to scale up investment in village-level milk testing and chilling infrastructure, rather than just large processing plants. The regional-equity design is also evident in the 75:25 and 70:30 funding ratios for North Eastern and Hilly States, respectively, which are explicit in their name.

Emerging Issues

Despite the reported physical improvement, there are still some issues in implementation that warrant further consideration in policy:

Continuing informality: There’s about two thirds of milk that’s still not organised, and the size of the NPDD-supported infrastructure needs to grow significantly to move more milk into quality assured, organised milk channels.
Regional concentration: Is the targeted regional funding ratios being matched in terms of actual ground-based capacity in NER and hilly States for milk production and cooperative infrastructure, and whether the regional concentration is reducing competition and allowing the few States that have higher capacity to enjoy a greater share of the market?
Absorption and utilisation: Like many of these schemes where the State cooperatives federations are the central bodies, the time for the utilisation of fund and completion of the projects may lag behind the sanctioned outlays, especially infrastructure intensive components that require land, civil works and equipment procurement.
The limited footprint of component B: Concessional component B was confined to a limited number of States, and initially was only piloted in two States, providing potential for replication if outcomes are favorable.

Way Forward

Improve last-mile quality infrastructure: The expansion of the village-level testing labs and bulk milk coolers must be given priority, particularly in districts having high unorganised milk share, in order to directly impact on the farm-gate price of milk.
Ensure transparency in monitoring: Continue with regular public reporting of State-wise physical and financial progress (already being done by DAHD) and granular disaggregation of State-wise outcomes of NER and hilly States in particular.
Scale-up Component B judiciously: If pilot results in Uttar Pradesh and Bihar show efficiency improvements, the pilot model could be replicated in other States, spreading NPDD’s funding sources.
Track more indicators of impacts downstream of infrastructure creation: Impact assessments moving forward should follow the creation of the infrastructure and document the uptake of measures such as procurement price realisation, value addition and the participation of women in cooperative governance, to validate the rural livelihood goals of the scheme.

The National Programme for Dairy Development is a long-term Central government initiative over the next 10 years to establish the physical and institutional pillars of the Indian dairy economy from creation of testing and chilling facilities in villages to establishment of cooperative capacities and concessional international financing. The reported improvements in procurement ability, farmers covered and employment created indicate that the scheme has started to show tangible results. Ultimately, however, whether the investment in infrastructure will lead to lasting improvements in farm-gate incomes and market organisation, especially in the North East region and the hilly States where milk is not sold through organised markets will restrain the overall success of the programme.

References

1. Press Information Bureau. (2025, March 19). Cabinet approves Revised National Programme for Dairy Development (NPDD). Ministry of Fisheries, Animal Husbandry and Dairying, Government of India. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2112791

2. Department of Animal Husbandry and Dairying. (n.d.). National Programme for Dairy Development (NPDD). Ministry of Fisheries, Animal Husbandry and Dairying, Government of India. https://www.dahd.gov.in/en/schemes/programmes/npdd

3. Press Information Bureau. (2024, December 24). Year end review 2024: Department of Animal Husbandry and Dairying. Government of India. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2086052

4. Press Information Bureau. (2025, March 19). National Programme for Dairy Development [Rajya Sabha reply]. Ministry of Fisheries, Animal Husbandry and Dairying, Government of India. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2112693

5. Press Information Bureau. (2024, June 1). World milk day. Government of India. https://www.pib.gov.in/PressNoteDetails.aspx?NoteId=151889

6. Prime Minister’s Office. (2025, March 19). Cabinet approves Revised National Program for Dairy Development (NPDD). Government of India. https://www.pmindia.gov.in/en/news_updates/cabinet-approves-revised-national-program-for-dairy-development-npdd/

About the Contributor

Ayan Bordoloi is an intern with IMPRI, currently pursuing his master’s in political science at the University of Delhi. His research interests lie in federalism, tribal governance, and Northeast India’s political landscape.

Acknowledgements

The author extends sincere gratitude to the IMPRI team for their guidance and support, along with the reviewers Anamika PK and Divya Natarajan for their valuable feedback and insights and Prisha Sachdeva for publishing

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organization