EXECUTIVE SUMMARY

India has quadrupled its milk output in forty years, becoming the world’s largest milk-producing nation, with a gross output of 84.6 million tons in 2001. It has achieved this on the strength of a producer-owned and professionally-managed cooperative system, despite the fact that a majority of dairy farmers are illiterate or semi-literate and run small, marginal operations; for many dairy farmers, selling milk is their sole source of income. More than ten million dairy farmers belong to 96,000 local dairy cooperatives, which sell their product to one of 170 milk producers’ cooperative unions which, in turn, are supported by fifteen state cooperative milk marketing federations.

Despite this achievement, India’s dairy industry is relatively inefficient and unproductive, with yields per cow less than one-fifth those of foreign producers who will soon have access to India’s domestic market under WTO rules. Moreover, much of India’s milk products are of relatively poor quality, a consequence of poor animal health, a polluted and unclean environment, and manual handling delays. The resulting poor quality prohibits Indian milk from being exported.

Pertinent to addressing this challenge is a small, entrepreneurial business, Shree Kamdhenu Electronics Private Ltd. (SKEPL), founded in 1996 with less than US$11,000 to develop IT-based tools that could increase the efficiency and productivity of the Indian dairy industry at a grassroots level. SKEPL provides integrated solutions, marketed under the brand name of AKASHGANGA, that automate the milk collection process at local dairy cooperatives. The AKASHGANGA system not only minimizes handling and increases efficiency, but also increases transparency, and creates a basis for improving the quality of the milk produced.

BUSINESS MODEL
SKEPL’s business model is centered on providing technology-based products and services to help milk cooperatives become more efficient and productive. The company provides complete IT-enabled solutions that automate the milk collection process at local milk cooperatives. Its high-end system, selling for about US$3,300 (Rs 151,800) , incorporates an electronic weighing system, a milk analyzer to test milk quality, a personal computer, and accounting and management software. Compared to earlier manual procedures, the AKASHGANGA system is faster, more accurate, and more transparent. That means milk can be sent on to the cooperative union for processing more quickly, reducing spoilage; farmers can see for themselves the weight and quality of their milk via a display and printed receipt, increasing their trust in the cooperative process. In addition, farmers are paid immediately, rather than sometimes days later as under manual procedures; and local cooperatives need fewer employees and have better records and reports for planning purposes. SKEPL places an emphasis on delivering quality products and services as well as responsive and efficient after-sales service.

In just a few short years of operation, the AKASHGANGA brand has become quite popular in the Indian dairy industry, especially in the states of Gujarat and Maharashtra, where the bulk of the company’s 600 installed systems are located. The company and its founders have received wide recognition for their efforts. Moreover, the company has been consistently profitable, and has recently raised additional investment to enable it to expand more rapidly. With only a small proportion of India’s 96,000 local milk cooperatives using automated collection systems today, SKEPL’s vast potential market is scarcely tapped. The company has also recently formed a strategic alliance with ICICI Infotech Ltd, a large software consulting firm linked to ICICI Bank Limited, the second largest bank in India in terms of asset size. ICICI Infotech is in the process of developing an integrated supply chain management software system that will seamlessly connect milk societies, milk unions, and milk federations on a single technological platform, and has chosen SKEPL as its development partner. ICICI Infotech will integrate its system with AKASHGANGA’s solution at the local society level.

With the success of its basic model, SKEPL plans to incorporate Internet-based information and communication technology (ICT) into its products to facilitate online information exchange between local cooperatives and milk unions. In addition to featuring access to AKASHGANGA’s dairy portal, the upgraded system will also enable farmers to exchange e-mail and obtain information in local languages about market prices of milk and dairy inputs, as well as general access to information about hospitals, government offices, educational institutions, and market prices.


DEVELOPMENT BENEFIT
Automating milk collection has brought demonstrable benefits to farmers and local dairy cooperatives, increasing efficiency, transparency and fairness, and speed of payment. Moreover, it enables faster processing of perishable milk, preventing spoilage, and provides the mechanism for capturing the historical information base that farmers and local cooperatives need in order to plan more effectively and make improvements in quality and yield. These in turn will be critical to the competitiveness of the Indian dairy industry and possibly the survival of its cooperative structure as it faces a growing threat from more efficient foreign producers. Transformation of IT-enabled automatic milk collection systems into networks that provide Internet-based information and communication services may, in the future, also help farmers improve their productivity and gain better access to government and commercial services.


KEY LESSONS
AKASHGANGA’s success demonstrates the potential of information technology to impact livelihoods in poor, rural communities. AKASHGANGA’s experience indicates that even illiterate or semi-literate people can adopt IT-based systems when they see tangible benefits and when the systems are deployed in purposeful, easy-to-use ways. SKEPL’s experience also indicates that providing direct benefits and expanded opportunities to poor communities in developing countries can be profitable. AKASHGANGA, in tying its future to improving the productivity of its customers, will succeed to the extent that it can help transform the fortunes of rural dairy farmers, demonstrating the synergies between business and development goals.


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