The Three-Tier Structure of Dairy Co-operatives in India

India is the world’s largest producer of milk, and behind this achievement lies not just the hard work of millions of small farmers – but a carefully designed institutional system that connects a rural dairy farmer in a remote village all the way to a consumer buying packaged milk in a city. That system is the three-tier structure of dairy cooperatives, a model that has transformed Indian dairying from a fragmented, exploited trade into one of the most successful cooperative movements in the world. Understanding how this structure works explains why India’s dairy sector continues to grow at around 5.29% annually – well above population growth – while keeping small and marginal farmers at the centre of it all.

Origins of the three-tier model: the Anand pattern 🔗

The three-tier cooperative structure did not emerge from a government blueprint. It grew out of a farmer struggle. In the 1940s, milk producers in Kaira district, Gujarat, were at the mercy of private contractors and middlemen who dictated prices with no accountability. On the advice of Sardar Vallabhbhai Patel, the farmers organised themselves and established the Kaira District Cooperative Milk Producers’ Union – the cooperative that later became Amul.

The structure that emerged from this movement – village-level societies, district-level unions, and state-level federations – came to be known as the Anand Pattern. Its core principle, as described by the National Dairy Development Board (NDDB), is farmer control at all three stages of milk procurement, processing, and marketing. Starting in 1970, NDDB replicated this model across India through Operation Flood, the landmark programme that laid the foundation for India’s modern dairy industry.

Today, as per NDDB data, the cooperative network includes over 2,28,374 village-level dairy cooperative societies, 228 district milk unions, and 27 state-level federations, collectively serving around 18 million farmer-producer members.

Tier one: village dairy cooperative societies (DCS) 🔗

The foundation of the entire system is the village-level dairy cooperative society (DCS). This is where a farmer’s participation in the cooperative begins. Any milk producer in a village can become a member by purchasing a minimum share and paying a nominal entrance fee as specified in the society’s bye-laws. Once enrolled, every member has an equal vote – there is no advantage to holding more capital.

Each DCS has a milk collection centre where members bring their milk every day. The milk is tested for quality, and payment is made based on fat and SNF (solids-not-fat) content. This transparent, quality-based payment system was a direct departure from the earlier system where contractors arbitrarily set prices.

Functions beyond milk collection 🔗

The DCS does much more than collect milk. According to the Dairy Knowledge Portal, societies organise micro-level inputs for their members, including veterinary first-aid, artificial insemination, supply of balanced cattle feed, and sale of fodder seeds. Many societies also facilitate cattle insurance and health insurance for members. These services directly improve the productivity of the farmer’s animals and, consequently, the volume and quality of milk produced.

The society is governed by an elected Managing Committee (MC), with members choosing their own chairman. All positions on the MC are honorary – the committee hires paid professional staff to manage day-to-day operations. This combination of democratic governance and professional management is a defining feature of the Anand Pattern.

NDDB’s National Dairy Plan continues to expand this tier by establishing new DCS in uncovered villages and upgrading existing ones with modern infrastructure such as Automatic Milk Collection Units (AMCU), bulk milk coolers, and digital testing equipment – ensuring fair and transparent transactions at the very first point of milk procurement.

Tier two: district cooperative milk producers’ unions 🔗

All the dairy cooperative societies within a district are federated into a District Cooperative Milk Producers’ Union (also called Dugdh Sangh in Hindi). The village societies become members of this union by subscribing to its share capital. Each village-level society gets one vote in the district union’s elections, maintaining democratic representation at this level too.

The district union is the processing and logistics hub of the three-tier structure. It aggregates the milk collected by all member societies, processes it into various products, and arranges for its marketing and distribution.

What district unions do 🔗

The NDDB’s cooperative dairying framework outlines the union’s key responsibilities clearly. The union procures milk from member societies, processes it into liquid milk and dairy products, and arranges for marketing. Importantly, it also provides macro-level production inputs to member societies – including cattle feed supply, animal health services, and breeding support – which individual village societies cannot arrange on their own.

District unions also take on the responsibility of training – for managing committee members and staff of village societies as well as for their own board members, managers, and staff. This capacity-building function is essential for keeping the system professionally managed at every level.

On the technology front, many district unions operate refrigerated milk transport vans and insulated tankers, bulk milk coolers, and increasingly, IT-enabled systems for tracking milk procurement and quality data in near real time. The Jaipur Dairy’s cooperative model in Rajasthan, for instance, has long implemented computerised milk collection stations and electronic fat-testing equipment at the DCS level, with data flowing up to the union for processing and payment.

Tier three: state cooperative milk marketing federations 🔗

At the apex of the structure sits the State Cooperative Milk Marketing Federation. All district milk unions within a state become members of this federation by subscribing share capital as per the federation’s bye-laws. The federation’s Board of Directors consists of the elected chairmen of all member unions, along with the federation’s Managing Director and other expert members.

Well-known state federations include the Gujarat Cooperative Milk Marketing Federation (GCMMF), which markets products under the Amul brand, and others like Karnataka Milk Federation (Nandini), Kerala Co-operative Milk Marketing Federation (Milma), and Haryana Dairy Development Co-operative Federation (Vita). Each of these has built strong regional brands that consumers trust.

Role of the state federation 🔗

The federation’s primary responsibility is marketing – evolving and implementing policies for cooperative marketing of liquid milk and milk products of all member unions, deciding the product-price mix, and coordinating joint services like artificial insemination, cattle feed supply, and technical inputs across the state.

Federations also play a key role in policy advocacy – coordinating with state and central government agencies, working with bodies like NDDB, and representing the interests of dairy farmers at the highest levels of governance. As described in the FAO’s review of dairy cooperative development, the federation has the authority to act on pricing policy, extension services, subsidies, and credit – powers that directly affect farmer income and livelihoods.

At the national level, the National Cooperative Dairy Federation of India (NCDFI), based in Anand, serves as the apex body coordinating the marketing efforts of all state-level cooperative federations. Amul, Mother Dairy (Delhi), and various state federations are members of the NCDFI.

How the three tiers work together 🔗

The three tiers are not independent layers – they are vertically integrated and interdependent. Milk flows upward: from the farmer to the village DCS, then to the district union’s processing plant, and finally to consumers through the state federation’s marketing and distribution network. Services and inputs flow downward: from the federation and union to the village society and, ultimately, to the individual farmer.

This vertical integration means that farmers are not just sellers of raw milk – they are co-owners of the processing plant, the brand, and the market. As the World Bank’s analysis of India’s milk revolution notes, the core feature of this model is farmer control across all three stages – procurement, processing, and marketing – which eliminates middlemen and ensures that the economic returns flow back to the producers.

Benefits to farmers and the dairy sector 🔗

The benefits of this structure are both direct and systemic. Farmers receive year-round market access for their milk – a crucial advantage for small and marginal producers who would otherwise be at the mercy of seasonal demand or local traders. Payment is based on objective quality parameters (fat and SNF), making transactions transparent and fair. Profits are shared among members in proportion to their contribution.

Beyond individual returns, the structure has enabled India to scale milk production dramatically. India’s milk output grew from 21.2 million metric tonnes in 1968 to over 221 million metric tonnes by 2021-22, making the country the world’s largest milk producer contributing around 23% of global production. Per capita milk availability rose from 112 grams per day in 1968-69 to 445 grams per day in 2021-22.

The structure has also been transformative for women. Dairying is widely recognised as a women-centric activity in rural India. The NDDB’s White Revolution 2.0 initiative specifically targets expanded cooperative coverage, employment generation, and women’s empowerment, with a goal of increasing milk procurement by 50% over five years by opening new markets for farmers in uncovered areas.

Challenges and the road ahead 🔗

Despite its successes, the network still has gaps. Cooperative coverage is uneven across states – strong in Gujarat, Karnataka, Kerala, and parts of southern India, but relatively thin in eastern and northeastern states. NDDB data indicates that the organised dairy sector handles only about 20% of total milk production, while a significant share still moves through unorganised channels.

To address this, NDDB has planned the establishment of around 75,000 new multipurpose dairy cooperative societies between 2024-25 and 2028-29, along with upgrading around 46,000 existing societies with better milk testing and procurement infrastructure. The integration of blockchain, near-real-time data devices, and digital payment systems is gradually being introduced at the village society level, making the cooperative machinery more efficient and accountable than ever before.

What do you think? With only about 35% of India’s villages currently covered by the dairy cooperative network, what do you think are the biggest barriers preventing wider adoption – and how could the three-tier structure be strengthened to bring more small farmers into the organised fold? Also, as private dairy companies expand rapidly in India, do you think the cooperative model needs to evolve its marketing and technology strategies to stay competitive?

References

1. https://www.srpublication.com/role-and-contribution-of-dairy-cooperatives-in-development-of-india/
2. https://en.wikipedia.org/wiki/Amul
3. https://www.nddb.coop/farmer/dairying/movement
4. https://www.nddb.coop/about/genesis/pattern
5. https://www.dairyknowledge.in/dkp/article/dairy-cooperative-society-milk-union-milk-federation-relations-and-functions
6. https://www.nddb.coop/services/cooperative/villagendp
7. https://www.jaipurdairy.com/dairy-cooperatives
8. https://www.fao.org/4/t3080t/t3080t0a.htm
9. https://documents1.worldbank.org/curated/en/748851468771700148/pdf/308270IN0Milk01ion01see0also0307591.pdf
10. https://www.nddb.coop/services/cooperative/strengthening-of-milk-procurement-infrastructure
11. https://beta.nddb.coop/what-we-do/cooperative-services/