Incentives for Dairy Farmers, Youth, and Entrepreneurs

India is the world’s largest milk producer, yet millions of small dairy farmers still struggle with limited capital, inadequate infrastructure, and the constant financial risk of losing an animal. To bridge these gaps, the government has put in place a set of targeted incentive schemes – including the Dairy/Poultry Venture Capital Fund (now evolved into the Dairy Entrepreneurship Development Scheme) and the Livestock Insurance Scheme – specifically designed to support farmers, rural youth, and entrepreneurs in building sustainable dairy businesses. Here is a clear breakdown of what these schemes offer and how they work.

The dairy/poultry venture capital fund: where it all started 🔗

The Department of Animal Husbandry, Dairying and Fisheries introduced the Venture Capital Scheme for Dairy and Poultry in 2004 with a focused objective: boost self-employment and promote the development of small dairy farms across India. The scheme recognised that one of the biggest barriers to dairy entrepreneurship was not willingness or skill – it was capital. Setting up even a basic dairy unit requires upfront investment in animals, sheds, equipment, and feed systems that most small farmers and first-time entrepreneurs simply cannot afford on their own.

The fund provided financial assistance for a range of activities – purchasing high-yielding dairy animals, constructing cattle sheds, setting up milk cooling systems, and installing milking equipment. It operated as a credit-linked subsidy, meaning that the assistance was channeled through banks rather than given as direct cash handouts. This approach ensured that beneficiaries had a structured financial plan and remained accountable for the investment.

Evolution into the Dairy Entrepreneurship Development Scheme (DEDS) 🔗

After gathering feedback from farmers, state governments, and banks over several years, the government revamped the Venture Capital Scheme in 2010 and relaunched it as the Dairy Entrepreneurship Development Scheme (DEDS). The National Bank for Agriculture and Rural Development (NABARD) was designated as the nodal agency for implementation.

The core shift was significant: DEDS wasn’t just about giving money to buy cows. Its mandate expanded to cover the entire milk value chain – from procurement and milk production to transportation, preservation, processing, and marketing. This made it a far more comprehensive scheme that could support entrepreneurs at multiple stages of the dairy business, not just at the farm level.

What DEDS covers 🔗

DEDS provides financial assistance to invest in advanced technologies, infrastructure, and equipment for improving milk productivity, animal health, and overall farm management. Eligible activities include setting up small to medium dairy units with milch animals, constructing modern cattle sheds, purchasing milking machines and chaff cutters, establishing milk chilling units, and setting up dairy product processing units for items like paneer, butter, and cheese.

The subsidy structure is straightforward. Under DEDS, the applicant must arrange a minimum 10% of the total project cost. The government provides a back-ended capital subsidy of 25% of the project cost – or 33.33% for SC/ST beneficiaries – while the remaining amount is provided as a loan by commercial banks, cooperative banks, regional rural banks, or urban banks. The term “back-ended” means the subsidy is not given upfront; it is released by NABARD to the bank after successful repayment of the initial loan instalments, which reduces the outstanding loan burden over time.

Loan repayment tenures under DEDS typically range from 3 to 7 years, with a grace period of 3 to 6 months for dairy farms. For those setting up calf-rearing units, the grace period can extend up to 3 years, acknowledging the longer gestation period before the unit becomes productive.

Who is eligible? 🔗

Eligible beneficiaries include individual farmers, individual entrepreneurs, and groups from both the organised and unorganised sectors – including self-help groups (SHGs), dairy cooperative societies, milk unions, and milk federations. The scheme is intentionally broad to ensure that no segment of the dairy ecosystem is left out.

One important condition: an entity can apply for assistance only once for each component of the scheme. However, more than one family member can receive assistance if they set up separate units with separate infrastructure, located at least 500 metres apart.

Impact on small farmers and the unorganised sector 🔗

One of the most important goals of DEDS was to bring structural changes to the unorganised dairy sector – that large segment of rural India where milk is produced in small quantities and sold through informal channels with little to no quality control or price security. By providing financial support and encouraging linkage with cooperatives and milk unions, the scheme pushed for more organised milk collection and processing at the village level itself.

DEDS has empowered around 1.86 lakh entrepreneurs to establish mini dairy units, with each unit generating employment for approximately two people. For rural areas with few formal employment opportunities, this is a meaningful contribution to local income and economic activity.

Special focus on youth and women entrepreneurs 🔗

DEDS specifically aims to encourage rural youth to take up dairy farming as a livelihood option, recognising that young people with education and energy often lack the initial capital needed to start a venture. The scheme’s easy access to credit through NABARD-approved banks lowers this entry barrier considerably. Several state governments have gone further by establishing dedicated help desks and mentorship programmes where experienced dairy farmers guide newcomers through the first critical years of operation.

Women-led dairy enterprises receive equal access to DEDS benefits, and in many states, priority in processing loan applications. Self-help groups (SHGs) of women have used DEDS to establish community-level dairy units – pooling resources and sharing management responsibilities – which has proven particularly effective in states like Maharashtra, Karnataka, and Andhra Pradesh. The scheme also supports the production of milk-based products such as paneer, butter, and ghee, allowing women’s groups to move up the value chain and capture higher margins than raw milk sales alone.

The Livestock Insurance Scheme: protecting the investment 🔗

Financial support for buying or upgrading dairy animals is only useful if those animals are protected against unexpected loss. This is where the Livestock Insurance Scheme – a centrally sponsored scheme implemented by the Department of Animal Husbandry, Dairying and Fisheries – plays a critical role.

The Livestock Insurance Scheme was first piloted during 2005-06 and 2006-07 and was implemented as a regular scheme from 2008-09 across selected districts of the country. Its core purpose is to provide farmers and cattle rearers with financial protection against the untimely death of their animals – an event that can push a small farming household into serious debt overnight.

How the scheme works 🔗

Under the scheme, crossbred and high-yielding cattle and buffaloes are insured at their current market value. The insurance premium is subsidised by 50%, with the Central Government bearing the entire cost of the subsidy. The subsidy benefit is available for a maximum of two animals per beneficiary, for a policy period of up to three years.

Before a policy is issued, a certified veterinary surgeon examines the animal to confirm it is healthy and free from disease. The animal is then tagged – often using a 12-digit UID tag or RFID chip – to enable proper identification throughout the policy period. In the event of the animal’s death, the farmer must immediately inform the insurer, obtain a death certificate from a qualified veterinary practitioner, and submit the required documents for claim settlement.

State-level variations also exist. For instance, Kerala’s Gosamrudhi NLM scheme offers an 85% subsidy on premiums for all categories of farmers, with cows and buffaloes between two to ten years of age eligible for coverage of up to ₹65,000 per animal. Personal accident coverage for the farmer is also bundled alongside in some states.

Why insurance matters for dairy sustainability 🔗

For a small farmer who has taken a loan under DEDS or a similar scheme to purchase two or three high-yielding cows, the death of even one animal is not just an emotional loss – it is a financial crisis that can derail the entire business. Without insurance, many farmers slip into debt cycles and abandon dairy farming altogether. Research on the National Livestock Mission’s insurance component has shown that livestock death and disease are among the main factors contributing to poverty in rural India, and that insurance coverage can meaningfully reduce this vulnerability.

By pairing financial assistance schemes like DEDS with insurance coverage under the Livestock Insurance Scheme, the government has created a two-pronged safety net – one that funds entry into dairy farming, and one that protects that investment from risk.

Additional infrastructure support: DIDF and AHIDF 🔗

Beyond individual-level schemes, the government has also invested in sector-wide infrastructure to support the entire dairy ecosystem. A ₹10,881 crore Dairy Processing and Infrastructure Development Fund (DIDF) has been set up under NABARD to provide low-interest loans to dairy cooperatives, support modernisation of existing dairy plants, and strengthen milk procurement, processing, and marketing networks.

Additionally, the Animal Husbandry Infrastructure Development Fund (AHIDF), worth ₹15,000 crore, was announced to incentivize investments by individual entrepreneurs, private companies, and Farmer Producer Organisations (FPOs) in dairy and allied processing infrastructure. These larger funds complement the on-farm support provided by schemes like DEDS by ensuring that once milk is produced, there is adequate infrastructure to process, store, and market it efficiently.

Challenges and the road ahead 🔗

Despite their reach, these schemes face implementation challenges. Awareness among small and marginal farmers remains low in many regions. The claim process under livestock insurance can be cumbersome, and research has noted that non-availability of veterinarians and high premium amounts relative to farmer incomes remain key constraints in expanding livestock insurance uptake. The same study recommended prompt claim settlements within 60-90 days and simpler, doorstep-level service delivery to bring more farmers under coverage.

On the entrepreneurship side, while DEDS was formally discontinued in 2020-21, its components and objectives have been absorbed into the broader National Livestock Mission and related programmes, which continue to channel support for dairy sector development with updated frameworks. Farmers and entrepreneurs looking to access such support today should contact their nearest NABARD regional office or DAHD-affiliated state implementing agency to find the most current scheme details and application procedures.

What do you think? Given that schemes like DEDS and the Livestock Insurance Scheme together address both the financial entry barrier and the risk of animal loss, what other gaps do you think still need to be addressed to make dairy entrepreneurship truly accessible for first-generation farmers and rural youth? And how might insurance schemes need to adapt as new disease risks and climate-related stresses affect livestock health?

References

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4. https://flexiloans.com/dairy-entrepreneurship-development-scheme
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