Dairy Processing Plant Project Report, Setup Cost, Profit

Introduction to Dairy Processing Plant Project:

The following information is about Dairy Processing Plant Project Set up Cost and Profit.

Dairy processing around the world is growing rapidly to meet milk and dairy products for an ever-growing population. Dairy processing is an industry that involves harvesting or processing milk from milk-producing animals for human consumption. The structure of the dairy processing industry varies from country to country. Milk is sold directly to the public in developing countries, while in developing and major milk producing countries, most of the milk is sold on a wholesale basis.  Milk is an easily digestible and highly nutritive human food that is consumed on a daily basis either directly or in any other dairy product forms. Dairy products contain different kinds of vitamins, proteins, minerals, fat, and sugar contents in liberal quantity. India stands third after America and Russia in the world milk production. Being one of the top milk producers, the distributions of milk across the population spread out in the nation are inadequate as there are limited milk Processing Plants. The distribution and supplying of processed milk are inadequate to reach children, expectant and nursing mothers across the nation. This can only be achieved by stepping up milk production and setting up dairy Processing Plants. To market milk and various dairy products; a scientific planning and layout must be set up for milk collection and processing at dairy Processing Plants. The general tendencies in the marketing of dairy products such as yogurt, soft cheeses, and creams that have short lifespan are located in urban regions and dairy products such as butter, cheese, and milk powders that have a longer shelf life are located in rural regions.

Dairy Processing Plant Project – Milk Procurement:

15% of total milk production across the nation is distributed under cooperatives and private dairy Processing Plants. These statistics exhibit a wide scope for young entrepreneurs to invest in the processing of milk and manufacture of dairy products for both domestic and export. Milk drawn from the cattle remains almost sterile with the milk temperature of about 37° C equal to the body temperature of the milch animal. The fresh milk will have a shelf life of about 2 to 3 hours and starts to sour. Milk is a perishable commodity gets easily contaminated from air, utensils, and other reasons; the milk should be sent to the dairy Processing Plant or milk collection centers at the earliest.

In almost all countries, most of the milk is produced in rural regions which are transported to the milk processing plant. In India, milk is collected both in the morning and evening and has to be transported twice in a day. Procurement of milk is carried out in various ways depending on the location and availability of collection centers or dairy Processing Plants. Milk is collected at the dairy Processing Plant by the following methods:

  1. Individuals: Those that are located near to the milk collection centers; the milk is brought by individual producers directly. The individuals carry the milk on their own transport and vessels to the Dairy plant.
  2. Contractor: Some contractors collect milk from individual milk producers. The contractor supplies milk to the dairy plant. In this process, the contractor has to collect and transport the milk, thereby the contractor buys milk at a cheaper rate from the individual milk produced and keeps his share of profit.
  3. Cooperative Organizations: To avoid the middlemen and contractors; some individual milk producers formed as a cooperative organization. Milk is collected at the cooperative organization brought by individual milk producers, the cooperative societies or organization is responsible to supply milk to the dairy plant. This method is beneficial to individual producers as they don’t need to share profits with contractors or middlemen.
  4. Milk Collection cum Chilling Centers: This method is currently more prevalent in Indian dairy operations in organized sections. The milk that arrives at the collection centers brought by individuals from the nearby rural regions is weighed and tested for fat content. The milk is stored in 40l cans and sent to the milk chilling center or dairy Processing Plant.

Dairy Processing Plant Project – Milk Processing:

Milk is a nutritious food having a short shelf-life as it is a highly perishable commodity and an excellent medium for bacterial pathogens and micro-organisms growth. The shelf-life of milk can be extended for several days or weeks through milk processing that helps in reducing the number of pathogenic microorganisms. Following are the milk processing steps:

  1. Skimming: The raw milk during pasteurization undergoes milk skimming through common centrifugal separator application; the milk is passed through a clarifier or a separator which spins the milk through a series of conically shaped disks. The purpose of this process is to separate the debris, skim milk, and cream. Clarifier removes debris and any sediment present in the raw milk. The separator separates the heavier milk fat from the lighter milk at a temperature between 45° to 55° C to produce cream and skim milk.
  2. Fortifying: The skimmed milk may be added with Vitamins A and D at this stage. A peristaltic pump helps in dispensing the required amount of vitamin concentrate into the milk.
  3. Pasteurizing: This is an important process stage in milk processing. Heating every particle of the milk for a specified time duration at a specific temperature is termed as pasteurization. Usually it can be carried in two ways; first, the temperature can be 72°C for 15 to 17 sec time period or 63°C for 30 minutes. Pasteurization process helps in destroying bacteria and other microorganisms that may affect the milk shelf-life and also may affect consumer’s health.
  4. Homogenizing: In this process, the size of the remaining milk fat particles is reduced evenly. Homogenizing helps to prevent the milk fat from separating and floating to the surface. After going through pasteurization, the hot milk is pressurized to 2,500 to 3,000 psi by a multiple-cylinder piston pump and then compelled to pass through tiny sections in an adjustable valve. When the fat particles break down evenly into the proper size, to avoid harming its taste, the milk is quickly cooled to 4°C.
  5. Packaging: The final stage in the dairy Processing Plant is packing. The milk is packed in 500ml and 1000ml sealed packets. The packets are stamped with the date of packing. The milk packets are placed in transport containers and refrigerated. Transporting of milk packets to various retail outlets and distribution centers is carried out in refrigerated vehicles and are kept in refrigerated display cases.
Milk Processing Plant (Pic source Indiamart).
Milk Processing Plant (Pic source Indiamart).

Dairy Processing Plant Project – Manufacturing of Dairy Products:

Butter Production: Raw milk after undergoing the process of filtration/clarification, skimming, and pasteurization are now ready to start the butter production process. Milk that is homogenized is not good for butter production, avoid the homogenization process. After skimming, the heavier milk fat that is separated is from raw milk is heat treated and cooled. This helps good whipping and churning. At the time of churning, culture inoculation can be processed for the ripening of the milk. This helps increase the content of diacetyl, which is the compound responsible for the flavor of butter. Butter made without culture is called sweet cream butter, butter that is flavor enhanced using culture is termed cultured butter or lactic.  Both sweet cream and cultured butter have less storage life. To add flavor and storage life, salt is added at the recommended dosage. Butter which is ready can be stored in bulk quantities to be repacked into regular market quantity or according to market demand.

Cheese Production: Milk is heated while being stirred in the large cheese tank until it reaches the desired temperature. Add lactic acid bacteria along with rennet an enzyme to the milk. Stop stirring at this point, allowing the milk to settle down in a large vat. 30 to 45 minutes of resting leads to curdle of milk. The jellylike curdled milk is stirred in breaking it into smaller pieces. This allows separation of curd and water content. The smaller the pieces the harder the cheese will be. The curd is stirred while being heated up to 57° C.  The cheese is collected in cheesecloth and pressed hard to remove whey or water content. The soft cheese collected is put into a saline bath for 30 minutes to 2 days depending on the cheese size. This processes any leftover moisture content and allows absorption of salt to make the cheese stable. The last process is ripening and fermentation, this makes the cheese dough formation of holes and the aroma.

Milk Powder Production: Milk that is not pasteurized is used for making milk powder. It can be of skim milk powder, fat filled milk powder or whole milk powder. Depending on the characteristics desired for the final powder product and the stability of the protein content in the milk, the milk is preheated in tubular heat chambers at a preheating or desired temperature. The heated milk, then passes through the evaporation chamber that increases the concentration of milk solids up to 50 percent. The concentrated milk is then fed into the drying chamber, spraying the concentrated milk over the hot air stream will allow the remaining water content to evaporate instantly, leaving tiny particles of powdered milk solids to fall at the bottom of the chamber. The milk powder is collected and packed at desirable quantity for market distribution.

Dairy Processing Plant Project – Dairy Plant Design and Planning:

Dairy Plant design and planning, young entrepreneurs should focus on this important section when starting their dairy Processing Plant project. As this include, the estimation of milk capacity, process scheduling, and appropriate plant layout in order to accomplish the target of taking care of raw milk and its byproducts at low cost and its well being. In any case, the dairy business and the plant design need to have proper planning to meet certain unique requirements and should be focused on them such as:

  • Milk by nature is a perishable agriculture commodity with a few hours of shelf life. Raw milk has to chill and processed at the earliest before manufacturing the dairy products. Thus, TIME is the most essential factor and aspect to be considered for dairy plant design and planning.
  • Milk provides nutritious and easily digestible, thus becoming an important commodity in every household of the general public. It is consumed by children, youngsters, elderly, pregnant and lactating women making the dairy industry an important part in the society.
  • The dairy processing business needs to manage raw milk fluctuations in procurement. In the Flush season that is at the time of calving and abundant green fodder availability, milk is generated to the maximum. In dry seasons such as summer and end of calving season, milk generation will be at the lowest. Fluctuation of raw milk procurement depending on the season has to be considered at the time of dairy Processing Plant design and planning.
  • Dairy processing plant hygiene and staff safety measures have to be considered.
  • Water used in the dairy processing industry contains COD and BOD high values, proper effluent disposal of the dairy Processing Plant is essential.
  • The dairy Processing Plant has to meet the Industrial Act, Pollution Control Act, Boiler Act, Labor Act, and additionally, has to meet HACCP and FSSAI guidelines.

Dairy Processing Plant Project – Dairy Processing Plant Layout:

Dairy processing plant efficiency and production depend on the dairy processing layout. Dairy plant layout is the most important part to start a dairy processing business. Proper planning with a proper layout not only increases efficiency and production, but also the quality of the products. Negligence in terms of improper dairy processing layout would put many lives at risk. A good dairy processing layout is of great importance to the quality production process. The layout emphasizes placing machinery at sufficient distance for staff easy movement while operating, cleaning, and monitoring the dairy Processing Plant.  The common sections of a dairy Processing Plant layout include:

Reception: The first stage in the dairy processing layout is collecting milk from milk tankers and trucks. The milk is offloaded at the specially designed milk offloading section. The milk is pumped into the milk silos with flow meters checking the milk quantity.

Processing Rooms: Manufacturing of milk and dairy products such as cheese, butter and others is carried out in separate rooms. Manufacturing, packaging and storage rooms are included in the dairy processing layout. Cold rooms help to store the perishable products before dispatching to the market.

Laboratory: Labs help in quality assurance with timely analysis. They are placed with easy access to raw materials and product sampling for timely analysis.  Labs placement should be located near to the manager’s office for easy supervision.

Administration Office: Placing of concerned departmental office rooms at the plant entrance aids the quick administration process. It will be accessible to vendors, visitors, and staff to facilitate the plant administration activities.

Utility Room: A good layout design will provide boiler, refrigeration system, compressed air and vacuum systems, power generators, and other are housed properly with sufficient space. For safety issues, the utilities are housed in different buildings.

Waste Handling Facility: The dairy processing layout will help in the proper handling of toxic waste and other bio waste produced in the dairy processing plant. Proper handling mechanisms will help protect contamination and environmental degradation.

Dairy Processing Plant Project – Bank Loans and Subsidies:

Entrepreneurs can approach any financing PSU or Private bank for finance. New entrepreneurs should go through guidelines to claim incentives promoted by various State Governments for the promotion of Dairy product industry. There are various incentives depending upon the location of the dairy unit.  Depending on states Agro Industry Policy, newcomers can take maximum advantage of these subsidies. To avail various subsidy schemes of government, it is recommended to take a bank loan. Along these lines, the entrepreneurs who are envious of benefiting subsidy should hold fast to the methods of finance, i.e. the quantum of bank loan and marginprescribed under the subsidy plan. The government of India has implemented the National Mission on Food Processing (NMFP) to be implemented through State / UT Governments during the 12th Five Year Plan (2012-17). Food Processing Industries can avail subsidy under this scheme. To implement this scheme in different states, GOI appointed State Nodal Agencies. For more information on schemes and state nodal offices, one can go through, Ministry of Food Processing Industries website.

Dairy Processing Plant Project  – Bank Security:

The Loan issuing bank will take adequate security as per RBI guidelines. Entrepreneurs should plan projects accordingly to the fixed assets as security against bank loan. Banks will look into three aspects before issuing of loans, and they are primary security, collateral security, and hypothecation.

The primary security includes the land and building that are mortgaged to financing banks. Fixed assets such as the plant, machinery equipment, and other miscellaneous fixed assets shall have to be hypothecated to the bank.

The company or entrepreneur property or assets will be mortgaged when the value of the primary security will not be enough to cover the bank loan. The value of the primary assets along with the promoter’s immovable assets will be taken as collateral security by banks for extending loans.

Financing banks will take all stocks, inventories, and debtors as security against the loan and will hypothecate these assets.

Dairy Processing Plant Project – Cost and Profits in Dairy Processing Plant  / Economics of Dairy Processing Plant

Based on the type of milk procured and products proposed; different plant and machinery are required for dairy processing. All the plant and machinery are according to BIS specifications. A dairy Processing Plant for 10,000 liters capacity and section-wise machinery required with specifications are given below:

Reception Section of Dairy Processing Plant Project Report:

S.No Particulars Qty
1. Can Roller Conveyor (3 mtrs) 1 No.
2. Can Tip Bar 1 No.
3. S.S Weigh Bowl (500 lits) Electronic 1 No.
4. S.S Dump Tank (1000 lits) 1 No.
5. S.S Milk Pump (1.5 HP) 1 No.
6. Disc Filter 1 No.
7. S.S Can Scrubber 40 ltrs 1 No.
8. Can Drip Saver (6 cans) 1 No.
9. Laboratory Equipment:

Milkoscan, Density meter, Milkotester, Cryoscope, HPLC, Emulsion quality analyzer, glassware, etc.

1 set

Process Section of Dairy Processing Plant Project:

S.No Particulars Qty
1. S.S Milk pump (2 HP) 1 No.
2. S.S Milk Chiller, Cap (3 klph) 1 No.
3. S.S Balance Tank with Float (100 lts) 1 No.
4. S.S Flow Control Valve 1 No.
5. S.S Simplex Filter 1 No.
6. S.S Remote Control 1 No.
7. Milk Pasteurizer (2.5 klph) 1 No.
8. S.S Holding Coil (16 secs) 1 No.
9. S.S Pipeline & Valves (interconnecting) 1 Set
10. Flow Diversion Valve 1 No.
11. Cream Separator (500 l/hr) 1 No.
12. Cream Tank (1 kl) 1 No.
13. Ghee Boiler (250 ltrs) 1 No.
14. Ghee Settling Tank (250 ltrs) 1 No.
15. Ghee Balance Tank & Pump 1 Set
16. CIP Unit 1 Set

Storage and Packaging of Dairy Processing Plant Project:

S.No Particulars Qty
1. HMST- MS Outer (5 kl – single comp) 1 No.
2. HMST- MS Outer (10 kl – single comp) 1 No.
3. S.S Milk Pump (1hp) 1 No.
4. S.S Overhead Tank (200 ltrs) 1 No.
5. Packing Machine (5000 pph) 2 No.
6. SS Pipes & Valves (interconnecting) 1 Set
7. Pouch Packing Machine (stabilizer) 1 No.
8. Spare S.S Pump (tanker filling) 1 No.
9. G.I Pipeline (Driers for air & controls) 1 Set

Utilities of Dairy Processing Plant Project:

S.No Particulars Qty
1. Hot Water Generator 1 No.
2. Water Softener 1 No.
3. G.I Pipeline (water pump & valves) 1 No.
4. Chimney (3 mtrs) 1 No.
5. Makeup Water Tank (200 ltr) 1 No.

 Refrigeration Section of Dairy Processing Plant Project:

S.No Particulars Qty
1. Refrigeration (storage equipment) 1 Set

Electricals of Dairy Processing Plant Project:

S.No Particulars Qty
1. Generator (63 kva) 1 No.
2. Cables & Others 1 Set
3. MCCB Control Panel Board 1 No.

Staff for Dairy Processing Plant Project:

S.No Particulars No’s Salary / month Total Salary
1. Plant Manager 1 No. 35,000/- 35,000/-
2. Plant Operator 1 No. 27,500/- 27,500/-
3. Marketing 2 No. 15,000/- 30,000/-
4. Plant Supervisor 1 No. 16,000/- 16,000/-
5. Mechanics 2 No. 15,000/- 30,000/-
6. Driver (Delivery) 1 No. 7,500/- 7,500/-
7. Lab Technicians 2 No. 14,500/- 29,000/-
8. Labor 8 No. 6,000/- 48,000/-
9. Accounts Staff 2 No. 7,500/- 15,000/-
10. Watchman 2 No. 6,000/- 12,000/-
Total 22 1,50,000/- 2,50,000/-

Capital Cost of Dairy Processing Plant Project:

S.No Particulars Cost           (Rs. lakh)
1. Site Development 16.25
2. Civil Works 46.50
3. Plant and Machinery equipment 150.00
4. Vehicles 6.40
5. Misc. Fixed Assets 25.00
Total 255.15/-

Process Section of Dairy Processing Plant Project:

S.No Particulars Cost (Rs)
1. Procured Milk Price (Avg) 30.00 / ltr
2. Sale Price(Avg) Toned Milk (3% fat) 34.00 / ltr
3. Sale Price(Avg) Cream (40% fat) 120 / kg
4. Ghee 290 / kg
5. Comm. And Transportation Charges 1.5 / ltr
6. Electricity and Fuel 0.60 / ltr
7. Pouches and Packing 0.80 / ltr
8. Chemicals & Detergents 0.25 / ltr
9. Maintenance & Repairs(% on Machinery Cost) 5%
10. Insurance (% of Machinery Cost & Civil Structure) 1.6%
11. Milk Distribution Cost 1.25 / ltr
12. Advertising 0.20 / ltr

Income on Dairy Processing Plant Project:

S.No Particulars Cost (Rs)
Milk Procured(8,000/- ltr / day)
Milk Processed(7,995 ltr / day)
1. Toned Milk (3% fat – 7,350 ltrs / day @ Rs.34 / ltr) 2,49,900/-
2. Ghee (170 kg / day @ Rs.290 / kg) 49,300/-
3. Cream (40% fat & 25% cream; 160 ltrs / day @ Rs.120 / kg) 19,200/-
Total Income per Day 3,18,400/-

The above cost figures in this project report are not actuals but are indicative to give an understanding to young entrepreneurs on investment and returns in the dairy processing business project. Dairy entrepreneurs should get quotations & estimations from vendors for specific designs of plant machinery equipment and their installations. It is recommended for entrepreneurs to enter into contract for maintenance and service after purchase.

Dairy Processing Plant Project Report – Marketing of Milk and Dairy Products

The dairy unit should have a marketing department that will promote milk and dairy products by placing hoardings or billboards at strategic locations in the cities and retail centers. A detailed market survey of cities and retail outlets will help with distribution and advertising plans. The major competitors and their present offers are to be found out. Building or promoting dairy brand milk parlors and distribution retail outlets in major densely populated regions in the cities with door delivery of milk to consumers will be able to achieve higher growth in sales.

Dairy Processing Plant Project Report  – Statutory / Government Approvals

The dairy Processing Plant must possess the following requirements licenses and permits from statutory agencies:

  • License from the State Food and Drug Department.
  • MMPO registration from the concerned state government.
  • Plan approval from Gram Panchayat or Municipality.
  • Registration – PF, ESI, and Labor laws.
  • NOC from Fire and Safety Department.
  • Clearance Certificate from Pollution Control Board
  • Registration with Small Industries or District Industries Department.
  • License from Factory Inspector for Boiler Installation.
  • Local authority clearance for shops and establishment.

Read: Dairy Farming FAQ.

Read: Small Scale Dairy Farming.


  1. Very useful information for a start up. It provides most of the basic information that can be modified to suit any jurisdictional requirement.

  2. Dear sir
    i am willing to start a Milk processing plant and automated milk collection system in uttar pradesh ( Ghazipur) Destrict please help me for providing a DPR on 10000/ltr/day plant

  3. Very nice piece of information. Really a important guide for the new entrepreneurs to chalk out their business plan for successful implementation.

  4. Thank you for detailed reports on multiple agro based industries.
    A good initiative, very helpful for new investors and project planners.

    I would like to get in touch with you regarding a diary plant project in South, with an installed capacity of upto 1,00,000 liters per day processing. Please reach me at your convenience.

  5. I got Excellent information to read this is helpful for my dairy business planning. I need the information for Machinery and Equipment suppliers & contacts


  7. Sir,
    We have milk cooperative at Ghaghra, Gumla, Jharkhand.
    We would like to start milk chilling and processing unit.
    It is government sponsored.
    We need DPR, machines and entire set up.
    Let us know, if there are possibilities

  8. Excellent information
    .I want to start 100000 litres milk processing plant per day with its byproducts..I need DPR and to know profitability details…

  9. Very insightful business plan. We want a plan for 2000lts/ day milk collection center which we can develop into a processing plant. The infrastructure is already there so it the machinery and equipment. We would also appreciate if we can incorporate biscuit making machines with packing as an added enterprise.


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