Model scheme on Automatic Milk Collection Units

MODEL SCHEME

Automatic Milk Collection Units

NATIONAL BANK FOR AGRICULTURE AND

RURAL DEVELOPMENT

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 Model scheme on Automatic Milk Collection Units

A. Introduction:
India is endowed with the largest livestock population in the world. It accounts for
about 57.7 per cent of the world’s buffalo population and 16.5 per cent of the cattle
population. Indian dairy industry is the major contributor to the country's economy
surpassing rice in amount. The value of output of milk sector is Rs. 492273 crore in
2014-15. Estimated per capita availability of milk in 2015-16 was 337 grams per day,
an increase of 4.7 per cent over the previous year. The total milk production in the
country is 155.49 million tonnes per annum in 2015-16 and the demand is expected to
be 210 million tonnes by 2020. During the last five years ending 2015-16, the average
annual incremental production of food grain is 2.05 million tonnes. During the same
period, the average annual incremental milk production was over six million tonnes.
The variation between the growth rate in food grain production and milk production
can be partially explained by the volatility factor in agricultural production and
robustness in milk production. In 1970 under the aegis of NDDB, "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 2015-16, 1,70,992 village milk
producers cooperatives were organised with 157,35,000 milk producer members with
an average rural milk procurement of 42.55 million tonnes per day and liquid milk
marketing of 32.02 million litres per day. Another step was taken in 1989, 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 dairy products.
The Government of India had promulgated the Milk and Milk Product Order (MMPO)
1992 under the provisions of Essential Commodities Act, 1955 consequent to de-
licensing of Dairy Sector in 1991. As per the provisions of this order, any person/dairy
plant handling more than 10,000 liters per day of milk or 500 MT of milk solids per
annum needs to be registered with the Registering Authority appointed by Central
Government. The objective of the order is to maintain and increase the supply of liquid
milk of desired quality in the interest of the general public and also for regulating the
production, processing and distribution of milk and milk products.

Recognizing the necessity suitable amendments in Milk and Milk Product Order-1992
for faster pace of growth in dairy sector, Government of India has amended milk and
milk product order-92 from time to time in order to make it more liberal and oriented
to facilitate the dairy entrepreneurs. The Government of India has notified the last
amendment proposals in the official Gazette on 26/3/02. Now there is no restriction
on setting up of new milk processing, while noting that the requirement of registration
is for enforcing the prescribed Sanitary, Hygienic Conditions and Quality and Food
Safety Measures as specified in the 5th Schedule of MMPO-1992. With the introduction
of Food Safety and Standards (licensing and Registration of Food Business)
Regulations, 2011 with effect from 05 August 2011, all the food processing units
including the Dairy processing units comes under the purview of the act.

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 Model scheme on Automatic Milk Collection Units

Even though India is the highest milk producing country, productivity per animal is
very poor. The organized dairy sector (both cooperatives and private) is presently
handling only 24-28 percent of total milk production in the country. Thus leaving a
wide scope for enhancing the procurement, processing of milk and manufacture of
milk products for domestic consumption as well as exports. The quality of milk
collected is also poor which is acting as the main deterring factor in
preparation/marketing of
different value added
products. Even today many
parts of the country are not
covered with organized milk
procurement and at times the
milk is procured only once a
day. Having made significant
strides in production and
processing, it is the time to
upgrade the quality of milk
by increasing the efficiency of
procurement as well as the
AMCU being used in a MPCS testing of milk for quality. In
India the milk pricing is based on the fat percentage
and to some extent Solid Not Fat (SNF) in milk. The determination of fat is based on
the butyrometer method which is one of the oldest technology adopted by the Milk
Collection Centres/Milk Cooperative Societies. Since 1980's many of the societies have
been using Milk o testers for testing the fat percentage in milk as this is a rapid method
compared to former one. Of late Milk Collection Centres/Cooperative Societies are
installing Automatic Milk Collection Stations (AMCUs) (PC based milk collection
stations, smart automatic milk collection stations and automatic milk collection
stations) which measure the weight of milk, fat contents and gives a print out of
payment slip to farmers in each shift. The systems also facilitates storing 10
days/monthly/yearly data and printing of cumulative summary of shift as and when
needed. The state of art equipment is able to perform 120 to 150 operations in an hour.
The milk analyser replaced the milk o testers.
B. Objectives:
Financial assistance is extended for purchase of various equipment in the Automatic
Milk Collection Stations with the following objectives.
1. To increase the efficiency and accuracy of fat testing in milk. To test for other
constituents of milk like SNF%, Water % etc,.
2. To reduce the staff of the society/collection centre through automation and
economise the operations by avoiding manual registers.
3. To gain confidence of milk producers through transparent systems and thereby
increasing the milk procurement.

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 Model scheme on Automatic Milk Collection Units

C. Potential areas:
Many of the milk processing plants in cooperative as well as private sector introduced
the Automatic Milk Collection Stations in their procurement network. These stations
can be financed in most of the societies/milk collection centres where daily milk
procurement is more than 350 litres.
D. Beneficiaries:
These units can be established by the Milk Cooperative Societies of the Cooperative
Milk Union or Milk Collection Centre of private dairies. Alternatively individuals also
can be encouraged to set up these stations in tie up with organized dairies.
E. Project Details:
1. Components: Automatic Milk Collection Station is a specially designed integrated
unit which is a combination of several units i.e. automatic Milk Weighing System,
Electronic Milk Testing,
Personal Computer with
printer and battery for data
processing and providing
the output. The
procurement centres
handling higher quantities
of milk can go for modern
systems wherein automatic
Components of AMCU
milk analyser can be used in
place of milk testing
equipment, (provides Fat%, SNF%, water % etc). These higher procuring agencies can
also go for web based data management where in the farmer wise data from the AMCU
will be sent to server and the payment details will be sent to the bank directly by the
milk processing plant. The AMCUs can be made to use dairy to bank concept where
farmer’s bill amount is directly deposited in its bank account and even without going
in bank, he/ she can withdraw money as per requirement directly from Milk collection
center. Some of the model AMCUs are shown in the figure below.
2. Capacity:
The capacity of Automatic Milk Collection Stations is to analyse 120 to 150 samples
per hour. Based on the equipments used, parameters will be varying.
3. Specifications:
The machinery used should be as per BIS specifications and the broad parameters
measured are as under:

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 Model scheme on Automatic Milk Collection Units

a) Fat measurements: 0 - 13%

b) Measuring capacity: 120 to 150
operations per hour.
c) Power supply: AC 220 to 240
watts 5O HZ.
In case of milk analysers, in addition
to fat content, SNF content from 3 to
15 % and water content as well as
other parameters also will be
measured. .
4. Equipment suppliers:
Results on display
The equipment are being supplied by various agencies which are
as follows: IDMC, Ananad, Gujarat; DSK Milkotronics, Pune, Maharashtra;
Kamadhenu, Ahmedabad, Gujarat; DODIA Himmatnagar, Gujarat; PROMPT Baroda,
Gujarat; OPTEL Anand, Gujarat; CAPITAL Electronics Anand, Gujarat; REIL Jaipur,
Rajashtan. The list is only indicative and suitable systems can be purchased from any
of the reputed agencies.
5. Functioning:
Each milk pouring farmer will be given with a unique number
/card by the Collection Centre in consultation with Milk
Processing unit. When the farmer comes for pouring milk his
number or card will be used for identity. After feeding the
number, the sample will be collected for analysis.
Simultaneously his milk will be poured into the container
where it is weighed automatically and based on the fat content
and quantum of milk poured the rate will be calculated and
payment slip is printed. If a milk analyser is used other
parameters of milk also will be analysed and based on these
parameters and quantity of milk the rate will be calculated and
displayed. Some manufacturers had come up with mobile Milk
Collection Units which can be fitted on the vehicle and milk
can be procured from different locations.

6. Mobile AMCU Milk Collection Units

Now a days Mobile AMCUs are also available in the market.

Rate print given to the member MMCU comprises of following components.
1. Data Processor with In-built Printer & Splitter
2. Milk Analyzer
3. Electronic Hanging Weighing Scale
4. Digital Display

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 Model scheme on Automatic Milk Collection Units

In Mobile Milk Collection Unit, the system is implemented on a bicycle or on any two-
wheeler. The system consists of all hardware i.e. Milk Analyser, 60 kg hanging
weighing scale, splitter and digital display. The Operator goes to the farmers’ doorstep
and does the milk collection. In this
system, the data is collected of various
farmers. As the system is mobile,
using a single system, the operator
can collect milk from various farmers,
giving transparency with respect to
milk quality and milk quantity. The
battery backup is also provided in-
built with the system in order to
complete a smooth and trouble free
milk collection on the move. The
system is in automation mode while
Mobile milk collection unit doing the milk collection process. A
single operator can handle the
system. The operator can provide milk rate receipt to farmer and can maintain other
reports also like shift-end report, deduction report, farmer periodic bill, and monthly
report etc.

6.1. Working of MMCU:

The unique code is given to the each farmer. The operator selects the date & morning
shift or evening shift. Then operator enters farmer code. The operator takes milk
sample from the farmers milk can & holds it to an inlet tube of milk analyzer. To
measure the quantity, the operator keeps the milk can on the hook of a hanging
weighing scale. As the system is in automatic mode, all the parameter i.e. FAT, SNF,
Weight are displayed on the digital display for the farmer and the operator receives
same data on MMCU. The operator gives milk rate receipt to the farmer. As the MMCU
has an in-built thermal printer, the preparation of milk receipt & timely payments to
farmer can happen on shift basis.

The operator can collect the data in the pen drive. So that data can be available at any
center or dairy head-office. To do deduction, operator can maintain deduction details
like Cattle feed, Artificial insemination etc. in MMCU. The operator can also maintain
the reports like daily morning, daily evening, Monthly, Member bill & Deduction
report etc.

Milk rates are predefined for each quality of cattle milk. The quality parameters like
FAT, SNF are also maintained for each society. Milk bill is prepared by the Union for
a predefined period. At various farmer villages, the rate chart is different, so operator
can feed rate chart in the MMCU in a very short span of time. The operator can use dot
matrix printer to take the print out of all reports.

F. Advantages of AMCUs:
1. Saving in quantity of sample milk, chemicals and detergents, expenditure on
glassware, stationery and time, expenditure on staff.
2. Gaining confidence of milk producers through transparent system and increased
milk procurement.

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 Model scheme on Automatic Milk Collection Units

3. Reduced human errors

4. Wastage is reduced
5. Transparency in activities
6. Spot payments can be enabled or the data can be directly transferred to the bank
account of the owner or to the milk union, so that direct benefit transfer can be
effected.
7. Operational integration

G. Technical Collaboration:
Since the unit is an integrated unit, 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 Automatic Milk
Collection Stations and also training of manpower in operations and maintenance. In
case of individual AMCUs necessary arrangements should be made with the suppliers
for after sales service.
H. Capital Cost:
The capital cost varies with the specifications and also the manufacturers. However,
based on the information furnished by the manufacturers and also as observed in the
field , an average unit cost of Rs.1.20 lakh including the cost of battery has been
considered.
I. Economics of the project : AMCU
It is assumed that AMCU will come up in the existing building of the collection centre
and hence civil costs were not considered for the AMCUs. Based on the various techno
economic parameters furnished in Annexure I, the economics of the project has been
worked out and presented in Annexure II.
The items of income include saving in expenditure on staff, stationery, chemicals and
detergents and glassware and also income from saving of sample milk, while the items
of expenditure are consumables, repairs and maintenance of the Automatic Milk
Collection Stations.

J. Financial Analysis:
The cash flow analysis 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 III. For the model under consideration, the BCR is 1.39:1
NPW is Rs. 1,04,650/- and IRR is 82%. The entire bank loan can be repayable in five
years without any grace period. Hence repayment has been fixed at 5 years for the
model project. (Annexure IV)

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K. Financial assistance:
Automatic Milk Collection Stations 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 bankability.
L. Lending Terms:
1.Margin Money: The Milk Cooperative society or Milk collection centre should
normally meet 25% of the project cost out of their own resources.
2.Interest rate: Interest rate will be as determined by the financing bank. However
for working out the economics interest rate is considered at 13.5% pa.
3. Security: As stipulated by the RBI.
4. Insurance: The financing bank may ensure that the milk society/Collection centre
takes adequate insurance cover for the asset.
5. Repayment period: Depends upon the gross surplus generated, it may be up to
7 years without any grace period.
M. Special terms and conditions:
The special terms and conditions of the project are given in Annexure V.

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 Model scheme on Automatic Milk Collection Units

Annexure I

Unit Cost and Techno economic parameters - Automatic Milk Collection Stations

Sr. No Particulars Unit Assumptions

A Unit Cost, Bank loan,
Margin money
1 Cost of AMCU Rs 120000
2 Margin Money Rs 30000
3 Bank loan Rs 90000

B Income parameters
1 Volume of milk procured Lts/day 500
2 No. of milk samples Samples per 25
day
3 Quantity of sample milk Ml per 80
saved sample
4 Sale of sample milk @ 10 60
ml/sample
(lt/month)
5 Sale price of sample milk Rs./litre 25
6 Saving in expenditure on Rs./month 6000
staff
7 Saving in stationery Rs./month 800
8 Saving on chemicals & Rs. 0.2
detergents /day/sample
9 No. of days considered in days 30
month

C Expenditure parameters
1 Repairs and maintance Rs./month 5000

D Others
1 Depreciation on AMCU % 15
(%)
2 Interest rate % 12
3 Repayment period Years 7

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Annexure II

Income and Expenditure – Automatic Milk Collection Station

(Rs. Lakh)
Sr. Particulars I II III IV V
No Year Year Year Year Year
1 Volume of Lt/day 500 500 500 500 500
milk
procurement
2 No. of milk Samples/day 25 25 25 25 25
sample per
day
3 Quantity of Lt/day 2 2 2 2 2
sample milk
saved

A Income
1 Sale of sample 0.1825 0.1825 0.1825 0.1825 0.1825
2 Saving in expenditure on 0.72 0.72 0.72 0.72 0.72
staff
3 Saving in stationery 0.10 0.10 0.10 0.10 0.10
4 Saving on chemicals and
detergents
Total income
B Expenditure
1 Repairs and maintenance 0.60 0.60 0.60 0.60 0.60
Total Expenditure 0.60 0.60 0.60 0.60 0.60

C Gross surplus (A-B) 0.5445 0.5445 0.5445 0.5445 0.5445

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Annexure- III

Financial Analysis ( NPW, BCR & IRR ) – Automatic Milk Collection

Stations

Sr. No Particulars I Year II Year III Year IV Year V Year

1 Capital Cost 1.20 0 0 0 0
( Fixed
cost)
2 Recurring 0.60 0.60 0.60 0.60 0.60
Cost
3 Total Cost 1.80 0.60 0.60 0.60 0.60
4 Benefits 1.1445 1.1445 1.1445 1.1445 1.1445
5 Depreciated 0 0 0 0 0.5324
value of
AMCUs
6 Total 1.1445 1.1445 1.1445 1.1445 1.6769
Benefits
7 Net benefits -0.6555 0.5445 0.5445 0.5445 1.0769
8 Discount 0.884956 0.783146 0.693050 0.613318 0.542759
factor
@15%
9 Net Present 1.0465
Value
(NPV)
10 Benefit 1.39
Cost Ratio
(BCR)
11 Internal 82 %
Rate of
Return
(IRR)

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 Model scheme on Automatic Milk Collection Units

Annexure IV

Repayment Schedule- Automatic Milk Collection Stations.

Year Balance Interest Gross Principal Total Net DSCR

outstanding Income amount repayment surplus
at the
beginning
of the year
I 0.90 0.1080 0.5445 0.18 0.2880 0.2565 1.8906
II 0.72 0.0864 0.5445 0.18 0.2664 0.2781 2.0439
III 0.54 0.0648 0.5445 0.18 0.2448 0.2997 2.2243
IV 0.36 0.0432 0.5445 0.18 0.2232 0.3213 2.4395
V 0.18 0.0126 0.5445 0.18 0.2016 0.3429 2.7009

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ANNEXURE- V

Special terms and conditions.

The bank should ensure that:-
1. The Milk Union/Dairy will identify the milk societies/collection centres whose milk
collection is above 400 litres per day for financing Automatic Milk Collection Stations.
2. The Union/Dairy will guide the society/collection centre for the purchase and
installation of Automatic Milk Collection unit.
3. The Milk Union/Dairy will train the secretary/worker of the Milk Cooperative
Society/Collection Centre in the operation and maintenance of the Automatic Milk
Collection Unit
4. The Union/Dairy will arrange to supply the required stationery and diluents to the
milk cooperative society/collection centre.
5. The Milk Society/Collection Centre will enter into an annual service contract with
the supplying firm from second year onwards.
6. The milk society/collection centre will insure the Automatic Milk Collection Station
with the insurance companies, provided the insurance coverage is available.
7. The Union/Dairy will provide tie up arrangement for the repayment of bank loan.

DISCLAIMER: The views expressed in this model

project are advisory in nature. NABARD assume no
financial liability for anyone using this project report
for any purpose. The actual costs and returns will have
to be taken on a case by case basis considering the
specific requirements of projects.

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