Project Report / Pre-feasibility report for 20 Cattle which contains SWOT analysis, Key challenges along with solutions and Economic feasibility of the dairy farm

1. Model Bankable Project Report
for a
Dairy Farm Starting with 20 Cattle
By
Dr. Vishnu Vardhan Reddy Pulimi
M.V.Sc (Animal Nutrition)
Dr. Srikala Devarapalli
M.V.Sc (Animal Nutrition)
Veterinary Assistant Surgeons,
Animal Husbandry Department
Andhra Pradesh
Contact No: +91 9177568030
Email: dr.vickylolo17@gmail.com

2. ACKNOWLEDGEMENT
We have immense pleasure in presenting this Project on Dairy Farming
starting with 20 cattle. The Subject is an interesting one. It gave us an opportunity
to have a detailed study on the subject and showed how things work in the practical
world. We came to understand and analyze the importance and the role of Indian
Dairy Industry and Dairy farm Management.
We had a great time working on the project and we have provided information to the
fullest of our knowledge and findings.
We wish all the best to Entrepreneurs who want to explore and do the dairy business.
Regards,
Dr. Vishnu Vardhan Reddy Pulimi
M.V.Sc (Animal Nutrition)
Dr. Srikala Devarapalli
M.V.Sc (Animal Nutrition)

3. PURPOSE OF THE DOCUMENT
The objective of this pre-feasibility study is primarily to facilitate potential
entrepreneurs to provide an overview about Dairy Farming. The document may form
the basis of an important investment decision and in order to serve this objective, the
document covers various aspects of dairy startup, production, finance and business
management.
The purpose and scope of this information memorandum is to introduce the
subject matter and provide a general idea and information on the said area. All the
material included in this document is based on data/information collected from
various sources and is based on certain assumptions.
Although, due care and diligence has been taken to compile this document,
the contained information may vary due to any change in any of the concerned
factors, and the actual results may differ substantially from the presented
information. The prospective user of this memorandum is encouraged to carry out
additional diligence and gather any information he/she feels necessary for making
an informed decision.

4. DISCLAIMER
This project report has been prepared by “Dr. Vishnu Vardhan Reddy Pulimi and Dr.
Srikala Devarapalli” and is for information purposes only. This report does not constitute an offer,
invitation or inducement to invest in any sector or industry. Neither the information contained in
this project report nor any further information made available with the subject matter contained
herein will form the basis of any contract. Any recommendations contained in this document must
not be relied upon as investment advice based on the recipient's personal circumstances. In the
event that further clarification is required on the words or phrases used in this material, the
recipient is strongly recommended to seek independent legal or financial advice.
The material in this project report is general information intended for recipients who
understand the risks and opportunities associated with making investment in India specifically in
Dairy sector.
It does not take account of whether an investment, course of action, or associated risks are
suitable for the recipient. This report does not purport to be comprehensive or to contain all the
information on which a prospective investor can make an investment decision. The information
contained herein is based on publicly available information and sources, which we believe to be
reliable, but we do not represent it as accurate or complete. The recipient of this report must make
his own investigation and assessment of the information presented herein.
No representation, warranty or undertaking, express or implied, is or will be made or given
and no responsibility or liability is or will be accepted by us, in relation to the accuracy or
completeness of this project report or any other written or oral information made available in
connection with the information presented herein. Any responsibility or liability for any such
information is expressly disclaimed.

5. Dairy Farming
1. Introduction:
India’s dairy market presents lucrative and impactful opportunities. A growing market that
is poised for success, this report details the underlying factors that are fueling such growth.
Moreover, this report is meant to give the reader a deeper understanding of the Indian dairy
market by providing a holistic overview of market drivers, challenges, opportunities,
investment metrics, and insights from leading companies and investors in the space.
2. Scope for Dairy Farming and its National Importance:
India is endowed with the largest livestock population in the world. It accounts for about
57 per cent of the world’s buffalo population and 15 per cent of the cattle population. The value
of output of milk is Rs. 6,14,387 crore in 2016-17. India’s milk production increased from
165.40 MMT in 2016-17 to 176.35 MMT in 2017-18 and planning to produce 240 MMT by
2023-24 with growth rate of around 6% per annum. The per capita availability of milk in India
during 2017-18 was 375 gm/day and by 2023-24, it is estimated to increase to 592 gm/day with
around 10% increase per annum. To achieve this demand annual growth rate in milk production
has to be increased around 4% additionally per annum. Thus, there is a tremendous
scope/potential for increasing the milk production through profitable dairy farming.
Central and State Governments are giving considerable financial assistance for creating
infrastructure facilities for milk production.
3. Beliefs in Dairy Business:
Dairy Farming (as a business); keeping large number of animals & following Scientific
methods has just started a few years ago but is picking up very fast due to Its several advantages
viz.
a) Steady business with steady income unaffected by Recession.
b) Milk can be sold directly from the farm (No Marketing setup needed)
c) No brokers; price is already declared by the Government.
d) Selling rate of milk has been consistently increasing over a period of time.
e) Consumption accepted by all religions, caste & creed.
Further to my interactions with scores of people thinking of entering Dairy business all
across (especially India) the country it was quite evident that the general beliefs are:-
1. Dairy Farming is an easy business.

6. 2. Animal gives milk throughout the year.
3. Dairy Business breaks even in the first year.
4. Compare to all other business, dairy business break even in the first year itself.
4. The Main Costs in Dairy Farming are:
Capital cost: For purchase of animals, construction of Shed & purchase of machinery, cans
etc. This cost occurs only once & is depreciable over a Period of time totally.
Administrative Costs: includes appointment of a Farm manager, Supervisor, Skilled &
unskilled labours depending upon the requirements as well as the size of the farm. This is a
fixed cost for a certain period.
Recurring Cost: includes the Feeding & Management along with Vaccination, Insurance,
treatment & other miscellaneous costs. This is required daily & is liable to fluctuate at all times.
It will be essential to control these costs which will have a direct bearing on the production of
milk as well as Reproduction (birth of next calf). At the same time balancing of feed will also
determine the reduction of the Inter calving period which has a bearing on total profitability.
Dairy business can be done by being dependent on labors.
Dairy Business can be learned from the Net & by getting hold of Project report.
5. Financial Assistance Available from Banks for Dairy Farming:
For dairy schemes with large outlays, detailed project reports will have to be prepared. The
items of finance would include capital asset items such as purchase of milch animals,
construction of sheds, purchase of equipment etc. The feeding cost during the initial period of
one/two months is capitalized and given as term loan. Cost towards land development, fencing,
digging of well, commissioning of diesel engine/pump set, electricity connections, essential
servants' quarters, godown, transport vehicle, milk processing facilities etc. can be considered
for loan.
6. Project Formulation for Bank loan:
This project was prepared by a beneficiary after consulting technical persons of State
animal husbandry department. The beneficiary also visited other progressive dairy farmers and
government and veterinary university dairy farm in the vicinity and discussed the profitability
of dairy farming and obtained good practical training and experience in dairy farming. The
dairy co-operative societies established in the villages as a result of efforts by the Dairy
Development Department of State Government and National Dairy Development Board would

7. provide all supporting facilities particularly marketing of fluid milk. Veterinary hospital,
artificial insemination centre are near to the dairy farm.
The project report includes the information on land, livestock markets, availability of
water, feeds, fodders, veterinary aid, and breeding facilities. The scheme should also include
the information on the number of and types of animals to be purchased, production
performance, cost and other relevant input and output costs with their description. Based on
this, the total cost of the project, margin money to be provided by the beneficiary, requirement
of bank loan, estimated annual expenditure, income, profit and loss statement, repayment
period, etc. are worked out and shown in this Project report.
7. SWOT Analysis:
A SWOT analysis can help in analyzing these factors, which can play important role in
making the decision. This particular pre-feasibility is regarding to “Dairy Farm Management”
which comes under “Livestock and Agriculture” sector. Before making the decision, one
should carefully analyze the associated risk factors & must consider following critical aspects,
which form the basis of any investment decision.
7.1 Strengths:
• Relatively cheap farmland.
• High domestic consumption
• Good milk quality.
• Ample human resource employment sector.
• Low cost living standard.
• Full family involvement, Devoted & Hardworking Sector.
7.2 Weaknesses:
• High production costs.
• Low levels of bulk feed production.
• Poor management level in quite a few cases.
• Lack of education and initiative in farmer.
• Unorganized sector, unaware of basic farm management practices.
• No or low application of research work and pedigree record keeping.
7.3 Opportunities:
• Dairy products needs are much higher than supply.
• Commercially viable sector with great credit potential and absorption capacity.

8. • Vast range of area of operation, more needs and scope of development.
• Value added dairy products are in demand.
• Cooperatives can play a big role for development in dairy sector.
7.4 Threats:
• High risks of diseases in livestock.
• Imbalance between prices of inputs & outputs.
• Rising trend of cost of production with higher rate of interest as compared to profit ratio.
• Increasing level of poverty.
8. Risk Analysis
Some of the important challenges faced by Indian dairy industry may be identified as follows:
• Highly competitive market
• Competition between public and private sector
• Quality consciousness and standardization of product
• Security/ guarantee
• Fast changing Technology
• Technological collaboration
• Liberalization in policy and action
• Health/ Hygiene
• Emphasis on self- sustenance of supporting/ promotional organization leading to better
services from them.
Some important issues of the dairy industry are as under:
Breeding of animals and getting expected milk yield is a biological phenomenon, which
depends upon various factors. Dairy farming besides good planning requires hardworking,
reliable and alert manager. In India, usually persons from the family take the responsibility.
Inadequate management of feeding heard health and lack of quality control in various stage of
production can cause major loss affecting the profitability of the entire venture.
Issues and challenges at the small holder level:
The entire dairy Industry in India has its base in the small holders and marginal farmers.
These prime stakeholders of the entire value chain of milk are deprived of minimum resources
of land, labour, capital etc. The other constraints at the grass root levels are:

9. Key Challenges:
1. There is an increasing pressure on the land resources for cultivation of food crops and
fodder crops are not preferred.
2. Lack of good quality animal feed
3. Lack of animal health care facilities.
4. Lack of breeding and good quality artificial insemination facilities.
5. Low genetic potential of the animals
6. Lack of chilling capacities
7. High production costs
8. Lack of financial support.
Solutions & Guideline:
1.Every year there should be a progressive aim for breeding (including number of animals
to be maintained) and production.
2.Visiting dairy farms that run on commercial basis and have a discussion with experienced
farm owners. We need not have to rely much on others experience, analyze every event
logically and if needed consult with local Veterinarians for more information.
3. Plant to manage the farm on our own, look for opportunities to work for an existing farm
for a minimum period of six months.
4. Develop interest and study feed and fodder's market in your region, its difficulties in
relation to seasons.
5. Manage a good team of laborers. You need to choose hardworking reliable persons
preferably with some experience. You can also train them for specific jobs.
6. Visit the cattle market occasionally. Observe animals on sale and talk with persons
engaged with purchasing of animals.
7. Read magazines on Dairy Industry and keep yourself informed.
9. Project Profile
The proposed pre-feasibility is for establishment of dairy cattle farm with increase per cow
milk production through state of the art farm management facilities, efficient and effective
utilization of dairy production and deployment of technologically advance infrastructure. The
project requires a unique mix of technology and herd composition that will make it possible for
investor to achieve economies of scales and attain high rate of return on investment.

10. Brief summary of project is as follows.
1. For the establishment of Dairy Farm in Andhra Pradesh, this feasibility has been
conducted.
2. The initial cost of the project is Rs. 19,78,000/-,and the working capital for 1st
year Rs.
13,91,400/-
3. Farm will be started with 20 Nos. of Cows and approx. 90,000 Ltr. Milk (20 Cows X15
Ltr. X 300 Days) to be produced in a year.
4. Sales price assumed @ Rs.30/- per ltr. or may very time to time as per govt. policy.
5. Projected Revenues for the project for year 1, year 2, year 3, year 4 and year 5 is Rs.
20.98, 27.73, 27.73, 38.82, and 49.91 lacs respectively.
4. Gross profit for year 1, year 2, year 3, year 4 and year 5 is Rs. -3.30, 5.31, 4.45, 9.59
and 14.51 lacs respectively.
5. Payback period of the project is approximately 5 years.
6. Net Present Value after 5 years will be Rs. 15,07,989/-.
7. The IRR of the project is 21%.
10. Economic Viability
Non-Recurrent Costs No of Units Cost/Unit Total Cost
Number of animals 20 70,000 14,00,000
Floor space requirement (Sq.ft) 40 Sq.ft/Animal 20 800 Sq.ft
Cost of construction of animal shed (Rs.) 800 Sq.ft 200/Sq.ft 1,60,000
Floor space requirement of store room (Sq.ft) 10 Sq.ft/Animal 20 200 Sq.ft
Cost of construction of store room (Rs.) 200 Sq.ft 200/Sq.ft 40,000
Cost of equipment (Rs.) 1000 20 20,000
Cost of electrification (5% of shed) 8,000
Water bore and tank (6000 liter capacity) 2,00,000
Cost of milking machine & chaff cutter (Rs.) 1 1,50,000 1,50,000
Total Non-Recurrent Cost 19,78,000
Recurrent Costs
Insurance premium/animal (@ 4.5%) 3150 20 63,000
Depreciation on buildings (@ 10%) 16,000
Depreciation on machinery and equipment (@ 20%) 34,000
Veterinary aid/animal/year (Rs.) 1000 20 20,000
Labor cost per month (@ 1 person/10 animals, Rs.) 2 10,000 2,40,000
Electricity charges (Rs.) 2000/month 24,000
Miscellaneous cost (Rs.) 1000/Animal 20,000
Total Recurrent Cost (Excluding cost of feeding) 4,17,000

11. Production and Economical Assumptions:
Average weight of the Animal: 400 Kg
Average milk Production: 15 liters /Animal/Day
Average manure production: 10 kg/Animal/Day
Selling price of milk: 30/liter
Selling price of Manure: 1000/ton
Bank Loan (70% of Recurrent Expenditure): 13,84,600
Interest on Bank loan: 12%
Feeding Cost
Feed/Fodder
Cost/kg
(Rs.)
Lactation Period Dry Period
Quantity/Day
(kg)
Cost (Rs)
Quantity/Day
(kg)
Cost (Rs)
Concentrate Feed 20 6 120 3 60
Green Fodder 1 30 30 15 15
Dry Fodder 7 4 28 2 14
Total 178/Day 89/Day
Requirements are calculated as per ICAR, 2013
Days in Milk
Particulars 1 Year 2 Year 3 Year 4 Year 5 Year
1 st Batch 2700 3000 3000 3000 3000
2 nd Batch 1800 3000 3000 3000 3000
Born 0 0 0 2400 4800
Total lactation days 4500 6000 6000 8400 10800
Cost of Feeding 8,01,000 10,68,000 10,68,000 14,95,200 19,22,400
Days in Dry
Particulars 1 Year 2 Year 3 Year 4 Year 5 Year
1 st Batch 600 600 600 600 600
2 nd Batch 0 600 600 600 600
Born 0 0 0 240 720
Total Days in Dry 600 1200 1200 1440 1920
Cost of Feeding 53,400 1,06,800 1,06,800 1,28,160 1,70,880
Total cost of Feeding
Particulars 1 Year 2 Year 3 Year 4 Year 5 Year
Cost of lactation days 8,01,000 10,68,000 10,68,000 14,95,200 19,22,400
Cost of Dry days 53,400 1,06,800 1,06,800 1,28,160 1,70,880
Calf to Calving @
15,000/Year/animal
8 X 15,000
= 1,20,000
16 X 15,000
= 2,40,000
24 X 15,000
= 3,60,000
28 X 15,000
= 4,20,000
32 X 15,000
= 4,80,000
Total Cost of Feeding 9,74,400 14,14,800 15,34,800 20,43,360 25,73,280

12. Income Generation
Particulars 1 Year 2 Year 3 Year 4 Year 5 Year
Total Milk Produced
(@15 lts/animal/day, lts)
67,500 90,000 90,000 1,26,000 1,62,000
Total manure Produced
(@10 kg/animal/day, kg)
20 Animals
73,000
20 Animals
73,000
20 Animals
73,000
28 Animals
1,02,200
36 Animals
1,31,400
Income through milk
(@ 30/lt, Rs.)
20,25,000 27,00,000 27,00,000 37,80,000 48,60,000
Income through manure
(@1000/ton, Rs.)
73,000 73,000 73,000 1,02,200 1,31,400
Total Income (Rs.) 20,98,000 27,73,000 27,73,000 38,82,200 49,91,400
Project Profitability
Particulars 1 Year 2 Year 3 Year 4 Year 5 Year
Recurring expenditure 4,17,000 4,17,000 4,17,000 5,37,000 6,57,000
Feeding expenditure 9,74,400 14,14,800 15,34,800 20,43,360 25,73,280
Total Expenditure 13,91,400 18,31,800 19,51,800 25,80,360 32,30,280
Income through milk 20,25,000 27,00,000 27,00,000 37,80,000 48,60,000
Income through manure 73,000 73,000 73,000 1,02,200 1,31,400
Total Income 20,98,000 27,73,000 27,73,000 38,82,200 49,91,400
Financial Analysis
Parameter 1 Year 2 Year 3 Year 4 Year 5 Year
Capital cost 19,78,000
Bank Loan 13,84,600
Margin money 5,93,400
Repayment of Bank Loan 2,76,920 2,76,920 2,76,920 2,76,920 2,76,920
Interest on Loan 1,66,152 1,32,922 99,691 66,461 33,230
Total Bank Loan repayment
with interest
4,43,072 4,09,842 3,76,611 3,43,381 3,10,150
Recurring cost
(Including feed)
13,91,400 18,31,800 19,51,800 25,80,360 32,30,280
Total cost 24,27,872 22,41,642 23,28,411 29,23,741 35,40,430
Total Income 20,98,000 27,73,000 27,73,000 38,82,200 49,91,400
Net Income -3,29,872 5,31,358 4,44,589 9,58,459 14,50,970
BCR 1.50
NPV 15,07,989
IRR 21%