Ex-ante Evaluation Paper (for Japanese ODA Loan)
South Asia Division 1, South Asia Department, JICA
1 Basic Information
Country: India
Project: Project for the Dairy Development
Loan Agreement: December 21, 2018
2. Background and Necessity of the Project(1) Current State and Issues of the Agricultural Sector (Dairy) in India and thePositioning of the Project
Annual production of cow’s milk in India, the world's largest cow milk producer,
totaled 155 million tons, accounting for 19% of the worldwide production volume(FAO STAT by the Food and Agriculture Organization). Agriculture is an
important sector in India and accounts for 17% of its total GDP. Livestock sector
accounts for approximately 25% of the agricultural sector’s contribution to theGDP, while dairy production makes up approximately 70% of the livestock
sector’s contribution (National Accounts Statistics 2017). However, there are still
many tasks to be addressed for the development of dairy sector. First, as for theproduction aspect, little progress has been made to intensify production andsales in the dairy sector and only 8% of farming households possess four milk
cows/buffalos or more. Moreover, 70% of the milk in India is produced by smalland marginal farmers with operational holding areas of 2 ha or less (JICA DataCollection and Confirmation Study on Dairy Sector Report). Dairy operations,which run during the 10-month milking period per year on average, can provide astable income source for farming households all year round. In addition, whileassets creating economic value in rural areas are traditionally land and animals,
liquidity of land is low and thus small-scale farmers have limited opportunities toacquire new ownership of land. Hence, the importance of dairy operations isgreater for such small-scale farmers with limited assets, since milk cows/buffalos
can serve as not only a cash resource, but also as assets.
In terms of supply side, raw milk is highly perishable, so for distribution toremote areas for consumption, cold chains capable of prompt refrigeration of
fresh milk, subsequent sterilization and pasteurization, as well as installation of
dairy processing machinery (a modern distribution network) are indispensable.
In India, dairy cooperatives and private companies handle the modern

distribution networks of milk and dairy products. However, since installation ofsuch cold chains and machinery are not fully-established yet, the raw milk being
marketed with proper treatment through these distribution networks accounts forroughly 20% of the total milk production, and the rest are likely consumed athomes or traded under unsanitary conditions at lower price in local markets.
Farmers without access to modern distribution networks also lack experience ofgood sanitation. Their access to markets is also limited and naturally, theirincome from dairy products remains low. Under these circumstances, creating
value chains through the installation of cold chains for milk and dairy products
along with securing the relevant processing capacity for raw milk are criticaltasks in terms of improvements in the livelihood of small-scale farmers and foodsafety in India.
The Government of India highlighted the importance of installing cold chains ofdairy products and raw milk processing facilities in “Vision 2024: National Action
Plan on Dairy Development.” The Government of India also clearly specified
their intention to focus on the dairy sector in “India Three Year Action Agenda
2017-18 to 2019-20” aiming to double the farmers’ incomes by 2022. The Project
for the Dairy Development, through dairy cooperatives, intends to improve small
farmers’ access to modern distribution networks, leading to augmentation of milk
sales and farmers’ income, by installation of dairy equipment as well as cold
chains, and capacity strengthening of business management as well as foodsafety and quality control. Thus, the Project is positioned as an important project
for the Government of India. In addition, the Project has the effect of poverty
reduction, food security and nutrition improvement, making a contribution to theSustainable Development Goals (SDGs) Goal 1: End poverty in All Its Forms
Everywhere and Goal 2: Zero Hunger.
(2) Assistance Policies of Japan and JICA for Agricultural Sector in India and thePositioning of the ProjectJapan’s Country Assistance Policy for India (March 2016) set "supporting
sustainable and inclusive growth" as one of the priority areas and clearlyspecified the aim to support poverty reduction and the social development sector,
including agriculture. Furthermore, JICA’s “Country Analysis Paper for India”(March 2018) concluded that, perceiving inclusive growth of rural areas as acritical issue that should be addressed, it is crucial to increase the incomes offarmers by facilitating access to markets and improving the efficiency ofproduction activities. Thus, the Project meets the policies and analysis results

mentioned above.
(3) Other Donors' Activity
The World Bank has supported a dairy development project (“Operation Flood”)
from 1970 to 1996, placing the National Dairy Development Board in India as theexecuting agency to promote expansion of dairy production in India. Since 2012,
the World Bank has been assisting the “National Dairy Plan” conducted by theNational Dairy Development Board aimed at enhancing productivity andimproving milk collection. Since the Project, which will install equipment toprocess and distribute dairy products, and the National Dairy Plan arecomplementary to each other, the Department of Animal Husbandry, Dairying
and Fisheries in the Ministry of Agriculture & Farmers Welfare in India will
provide coordination for effective collaboration between these projects. In
particular, the National Dairy Plan supported by the World Bank provides training
on raw milk processing for individual farmers as part of its capacity building
assistance to enhance productivity. Such training is important in terms of foodsafety, and the teaching materials used in the training will be also utilized in theProject.
3. Project Description(1) Project Objective
The Project aims to increase sales of milk and dairy products by increasing
farmers' access to organised market, upgrading dairy processing facilities andmarketing infrastructure and enhancing the capacity of producers owned
institutions, thereby contributing to increase in returns to milk producers in theproject area. .
At the onset of the Project, under the agreement among the Ministry ofAgriculture & Farmers Welfare, the National Dairy Development Board, andJICA, two states will be selected as target areas of the Project. These states will
have a relatively higher milk production and lower socioeconomic indicator, asset by the National Institution for Transforming India Committee (NITI Aayog),
based on the factors such as borrowing capacity of dairy cooperatives in theStates and intentions of state governments.
(2) Project Site/Target Area: States agreed on by the Ministry of Agriculture &Farmers Welfare, the National Dairy Development Board, and JICA
(3) Project Components
Financed through the National Dairy Development Board, activity-(i) listedbelow will be carried out by district level dairy cooperatives involved insecondary collection, processing, and sales of milk. As for financial assistancefrom the National Dairy Development Board, funds for the equipment of dairy
plants will be loaned, while funds for other equipment will be provided as grant.
Activities (ii) to (iv) will be conducted by the National Dairy Development Board.
(i) Upgrade and install dairy product-related equipment (refrigerators for milkcollection, milk quality testing equipment, equipment of dairy plants,
refrigeration equipment for transportation and sales, equipment for feedproduction, etc.).
(ii) Capacity development for business management (training on marketing, 5S(Sort, Set in Order, Shine, Standardize, Sustain), improvement activities
referred to as “Kaizen” in Japanese, etc.)(iii) Capacity Development for food safety and quality control (training on
formulating food sanitation policies, risk analysis, quality inspection, etc.)(iv) Project monitoring and studies (market research, baseline study, end-line
evaluation, etc.)(v) Consulting services (project management, improvement of financial support,etc.)(4) Estimated Project Cost
22,989 million yen (of which, the ODA Loan amount is 14,978 million yen)(5) Schedule
Scheduled from December 2018 to November 2023 (60 months total). Projectcompletion is defined as the completion of financing (November 2023).
(6) Project Implementation Structure1) Borrower: President of India
2) Executing agency: National Dairy Development Board
3) Operation and Maintenance Agency: District level dairy cooperatives will be
responsible for the operation and maintenance of all equipment and facilities
provided by the Project, except for milk collection equipment stationed in eachvillage. Village level cooperatives will be responsible for the operation andmaintenance of milk collection equipment placed in the village.
(7) Coordination with Other Schemes and Donors
1) Related aid activities by Japan: None
2) Aid activities by other aid organizations: The Ministry of Agriculture &Farmers Welfare will coordinate funding services from other governmental
entities and the World Bank. Of note, the Project will use the same teachingmaterials used in the training on raw milk processing provided for individual
farmers implemented in the National Dairy Plan financed by the World Bank.

(8) Environmental and Social Considerations/Poverty Reduction and SocialDevelopment
1) Environmental and Social Considerations① Category: C② Categorization Rationale: According to the “JICA Guidelines forEnvironmental and Social Considerations” (promulgated in April 2010),
the negative impact on the environment from the Project is judged to beminimum.
2) Cross-cutting Items
The Project will implement measures that focus on socioeconomicallyunder-developed areas and provide financing to district level dairy
cooperatives to increase the incomes of their impoverished members.
3) Gender Classification: [Gender Project] GI (S) (Gender Integrated Project)<Activities/Classification Rationale> Since management of milk cows/buffalos
has been carried out by women in many regions of India, training conducted as
capacity development activities for food safety and quality control, amongcapacity development, will be implemented for women. Therefore, the Projectis classified as a Gender Integrated Project.
(9) Other Important Issues: None in particular
4. Target Outcomes(1) Quantitative Effects
Outcomes (Operational and Effect Indicators)
Indicator

Baseline(Actual value in 2019)

Target value(2025) [2 Years afterCompletion]

Quantity of milk processed in upgraded/newplants (thousand litter/day)*1

3,500 *2

Quantity of liquid milk marketed byParticipating Institutions (thousand litter/day)*1*1

Additional producer members of Dairy
Cooperative Society－150,000 *2

Revenue of Participating Institutions frommilk and dairy products (million Rupee)*1*1*1 Figures are determined at the time of sanctioning of each sub-project .
*2 Figures are based on current predictions and will be determined at thebeginning of each sub-project.
(2) Qualitative Effects: stabilization of farmers’ incomes, improvement ofconsumers' confidence in safety of dairy products.
(3) Internal Rate of Return
Internal Rate of Return will not be calculated since sub-projects have notbeen identified.
5. External Factors and Risk Control(1) Preconditions: None in particular(2) External Factors: Assumption that the political and economic situation inIndia and areas surrounding the Project do not deteriorate, and no large-scale
natural disaster occurs.
6. Lessons Learned from Past Projects
From the ex-post evaluation of the “Dairy Facilities Improvement Project (2)” forthe Republic of Korea, the following lessons were learned. Since demandforecasting examines situations containing uncertain factors, project estimates
can potentially be incorrect, exerting tremendous impact over the projects. Thus,
it is essential to have demand forecasting sufficiently reflect the characteristics ofgoods by analyzing consumption patterns in developed countries through carefuland comprehensive examination of various factors. Moreover, from the ex-post
evaluation of the “New and Renewable Energy Development Project” for India
implemented through a two-step loan, the following lessons were learned. Whenthe monitoring system of implementation of executing agencies is inadequate,
establishing an adequate system early with technical assistance can enhancethe effectiveness and sustainability of the project.
Based on these lessons, the Project should pay special attention to developing
the appropriate products and installing the necessary equipment for processing
such products based on the market demand through development of business
management skills, such as marketing. In addition, the Project will provide
consulting services to strengthen the project monitoring system implemented by
the executing agency.
7. Evaluation Results
In alignment with the Government of India’s policies on development andsolving issues, as well as Japan's and JICA’s policy on assistance and analysis

results, the Project intends to contribute poverty reduction, food security, andnutritional improvement, through installing dairy equipment and cold chains aswell as strengthening capacity of dairy cooperatives in India. Therefore,
supporting the implementation of the Project is considered highly necessary
based on the judgment that it will contribute to SDGs Goal 1: End poverty in All
Its Forms Everywhere and Goal 2: Zero Hunger.
8. Plan for Future Evaluation(1) Indicators to be Used
As indicated in sections 4.(1) to (3)(2) Timing of the Next Evaluation
Ex-post evaluation: 2 years after project completion