The world's biggest farmers' cooperative, Indian Farmers Fertiliser Cooperative (Iffco), says it will set up a set up a huge dairy farming venture with New Zealand firm Fonterra to produce milk for premium customers.
It is looking at importing thousands of high-yield cows in partnership with Fonterra, according to India's Economic Times newspaper, which said the Indian government was considering a relaxation of a three-decade-old regulation on import of milking cows for commercial herds to help the venture get underway.
Fonterra's director of global trade, Kelvin Wickham, confirmed that Fonterra had an interest in the Indian dairy market, which is the world's largest and is growing rapidly.
"We are in exploratory talks with Iffco, a large Indian farmer co-operative, about potentially establishing a dairy farming operation in India," he said on Monday.
"It is early days and we do not yet have any formal agreement."
The starting point for any dairy business in India would be securing a high-quality, traceable milk supply.
When Fonterra was asked by NZPA in July whether it was considering participating in the venture, a spokeswoman said it was not involved in the Iffco project.
On Monday, one company representative said the information was probably commercially-sensitive at that stage, while another said that in July the company was not discussing a farm park in southern India.
"We've literally just agreed to start negotiations - we haven't signed anything," a spokesman said on Monday.
The Economic Times said the 10 billion rupee ($A232.28 million) project will sell the country's most quality-sensitive, expensive milk under the Kisan brand name.
"The project involves import of 3,000 jerseys and holstein heifers from Australia and New Zealand and procurement of 10,000 local cows annually for the next three years," it said.
Iffco managing director US Awasthi told the newspaper: "We've agreed to collaborate and will be applying formally for clearances soon."
Iffco would have 45 per cent stake, Fonterra would hold 35 per cent and an Indian company, Global Dairy Health, would hold the balance of 20 per cent, the newspaper said.
The Nellore dairy plant in Andhra Pradesh will help develop India as a hub for milk exports to
South-East and West Asia, and a second plant will be set up in Sholapur, in Maharashtra state.
Average daily production of one million litres of milk will be upgraded progressively to 10 million litres.
The chief executive of the Nellore project, M Rajashekariah, said that previously-fragmented supply chain models, had made quality a challenge, but the new venture will have "end-to-end quality control".
India produces 108 million tonnes of milk a year - most of it consumed in the domestic market - and the demand for milk is projected to rise to 180 million tonnes by 2021.
The country's National Dairy Development Board (NDDB) has chalked out a 15-year national dairy plan requiring investment of 17 billion rupees to lift bovine productivity and milk production.
© 2010 NZPA