VI. Efforts of the Dairy Households Surveyed to Capture Environmental Externalities

6.1 Capture of Environmental Externalities in Dairy Farms

6.1.1 Current Pathways of Nutrient Use (from Manure and Dead Animals) in the Households Surveyed

Figure 6.1 illustrates the current pathway of nutrient use from dairy farms showing the destinations and use of manure. Dairy manure in India may be used in multiple ways. It may be used for biogas, plastering of floors, dried as cakes for fuel, or as organic fertilizers. Some of it may also be used at home and/ or sold to others. Table 6.1 summarizes the method of disposal by size of farmers across the northern and western regions of India. For the dairy farmers sampled throughout the zones, manure was used as an organic fertilizer or as fuel. As the size of operations increased, the percent use as a fertilizer increased and the percent use as a fuel decreased. Seventy percent of the small farmers used manure as fuel while only 16 percent of the commercial farmers use it as fuel. This is not surprising as it may be one of the main sources of fuel for small farmers, and large farmers may rely on another source for fuel. As the size of farms increased, so did the percentage of households storing manure in a pit. This is perhaps an indication of manure surplus and/or a desire to use it as fertilizer when needed by the plants.

6.1.2 Environmental Cost Born by Dairy Farms

There are differences between large and small growers for environmental mitigations and regional difference (see Table 6.2). On average dairy producers in the northern part of the country spend .39 rupees per cow compared to .46 rupees per cow in the western zone. On average, small-scale dairy producers spend more rupees. per cow than larger producers with the exception of the producers in the commercial and peri-urban area. Commercial peri-urban farms paid consistently higher environmental costs per output. This is not surprising, as there is a higher likelihood that people in this area will complain about air and water pollution, and there is less land to easily dispose manure.

Figure 6.1 Specification of manure flow in dairy farms

Table 6.1 Distribution of farmers by method of disposal of dairy manure, India, 2002

Region/Farm size	Manure use (%)		Sold (t)	Price (Rs/t)	Disposal place (%)
	Organic manure	Fuel			Open farm field	Manure pit
North Zone
Small Farms	30	70	1.2	131	90	10
Medium Farms	55	45	4.1	117	87	13
Large Farms	68	32	13.7	112	84	16
Commercial	84	16	57.9	103	78	22
All farms	72	38	10.7	120	86	14
West Zone
Small Farms	82	18	2.5	162	85	15
Medium Farms	85	15	4.6	160	80	20
Large Farms	87	13	11.1	179	78	22
Commercial	95	5	25.7	147	76	24
All farms	86	14	12.0	173	81	19

Source: IIM/IFPRI India Dairy Field Survey, 2002-2003.

Table 6.2 Environmental cost per output of milk

Average environmental cost by region	Farm Size
	Small	Medium	Large	Commercial/ Peri-Urban	Total
North Zone
Mean	0.46	0.42	0.34	0.24	0.40
Standard deviation	0.19	0.13	0.12	0.14	0.17
No. of observations	100	68	58	34	260
West Zone
Mean	0.53	0.47	0.40	0.34	0.46
Standard deviation	0.29	0.21	0.14	0.11	0.23
No. of observations	100	80	50	30	260

Source: IIM/IFPRI India Dairy Field Survey, 2002-2003.

6.1.4 Mass Balance Calculations for Dairy Farms

The utilization and disposal of animal manure has become a concern recently as dairy production has increased. Traditionally, the manure is applied to agriculture land to promote plant growth, thereby recycling the nutrients. With fewer but larger operations, the manure has become more concentrated in local areas. When application rates exceed the carrying capacity of the land to assimilate nutrients, repeated applications can lead to a buildup of nutrients in the soil. This in turn increases the potential for nutrients to move from the field through leaching and runoff, and to pollute ground water (Kellogg, et al 2000).

Thus, differences in the amount of money spent on trying to capture the environmental externality and the method used may be dictated by whether a farmer has the ability to utilize all manure on their own farm or if they need to remove it. Figures 6.2 and 6.3 illustrate the percentage of farmers, by size category, within a given range of nutrient balance. These ranges are indicative of a farmer's potential capacity to assimilate the nutrients on to their existing land. The mass balance calculations performed here are used as rough estimates of actual nutrient balances. They serve to indicate households with potential problems for certain size households. They also serve to indicate why some households have active involvement with manure markets.

For nitrogen, the mass balance for most farms falls between -2 and 1 metric tons per year. Of all large-sized producers, 96 percent had a net excess of manure, while 91 percent of medium-sized and 73 percent of small-sized farms had a net excess of manure. The deficit in assimilative capacity is small relative to other commodities and countries, and a small percentage of all producers had the potential to absorb all of their manure produced from their farm animals on their own farms.

If the manure was being applied based on its phosphorus content, only 7 percent of the large-scale farms surveyed would have more than enough land to dispose of their manure. Seventy percent of the small-scale producers had an excess of up to 1 metric ton of manure in terms of nitrogen and 50 percent had an excess in terms of phosphorous content to be worried about moving off farm.

Figure 6.2 Nitrogen mass balance calculations for dairy farms in India, 2002

Note: A negative nutrient balance suggests that there is not enough land to absorb the nutrient indicated from manure.

Source: IIM/IFPRI India Dairy Field Survey, 2002-2003.

Figure 6.3 Phosphorous mass balance calculations for dairy farms in India, 2002

Note: A negative nutrient balance suggests that there is not enough land to absorb the nutrient indicated from manure.

Source: IIM/IFPRI India Dairy Field Survey, 2002-2003.