Union Budget 2026: Transforming India's Dairy and Cooperative Landscape

India's dairy sector, which contributes approximately 5% to the national GDP and supports over 8 crore farmers, has received a significant boost in the Union Budget 2026-27. Finance Minister Nirmala Sitharaman announced a series of visionary measures aimed at modernizing infrastructure, simplifying taxation for cooperatives, and fostering entrepreneurship in the rural economy. With India already being the world's largest milk producer, these reforms are designed to transition the sector toward White Revolution 2.0, focusing on quality, efficiency, and global competitiveness.

Record Allocations for Animal Husbandry and Dairying

The Ministry of Fisheries, Animal Husbandry and Dairying has been allocated a total of 8,915.26 crore for the 2026-27 fiscal year. A substantial portion of this, approximately 6,153.46 crore, is dedicated to the Department of Animal Husbandry and Dairying (DAHD). This represents a 27% increase from the previous year's allocation of 4,840.40 crore. This record funding signals the government's intent to treat the livestock sector as a primary growth engine for the agricultural economy, which has seen livestock GVA grow at over 7% annually.

Tax Incentives: Strengthening the Cooperative Backbone

A major highlight of the budget is the focus on the cooperative sector, which manages a vast network of 8 lakh societies across the country. The Finance Minister proposed to extend tax deductions for primary cooperative societies engaged in supplying cattle feed and cotton seed produced by their members. Previously, this deduction was limited to milk, fruits, and vegetables. This change is expected to lower operational costs for dairy farmers and encourage the local production of high-quality feed.

Relief on Inter-Cooperative Dividends

To improve financial liquidity within the cooperative ecosystem, the budget introduces relief on inter-cooperative dividends. Dividend income earned by one cooperative from another will now be allowed as a deduction under the New Tax Regime, provided it is further distributed to members. This move eliminates double taxation and ensures that more surplus funds reach the hands of individual farmers. Additionally, a three-year tax exemption has been proposed for dividend income received by notified National Cooperative Federations on specific investments.

Strategic Funding for National Dairy Schemes

The budget continues to support flagship programs under the White Revolution initiatives. The National Programme for Dairy Development (NPDD) has been allocated 1,055 crore to enhance processing infrastructure and milk chilling facilities. The Rashtriya Gokul Mission (RGM), which focuses on indigenous breed improvement and genetic enhancement, received 800 crore. These investments aim to address the fundamental challenge of low per-animal productivity in the Indian dairy sector.

The Rise of Dairy Entrepreneurship

A new initiative, the Integrated Scheme for Entrepreneurship Development, has been introduced with an outlay of 500 crore. This scheme will provide credit-linked subsidies to livestock Farmer Producer Organisations (FPOs), startups, and individual entrepreneurs. By encouraging private investment in value-added products like cheese, paneer, and organic dairy, the government aims to help farmers capture a larger share of the consumer rupee.

NextGenGST: Making Dairy More Affordable

Complementing the budget proposals, the government announced sweeping GST reforms under the #NextGenGST initiative. Milk and paneer, whether branded or unbranded, remain exempted from GST. However, significant cuts were made to value-added products. GST on butter and ghee has been reduced from 12% to 5%. Furthermore, the tax on essential farming inputs like fertilizers and bio-pesticides has been corrected to 5%, significantly lowering the cost of production for rural households.

Global Ambitions: National Cooperative Exports Limited

To increase India's footprint in the global dairy trade, which currently stands at less than 0.5%, the budget allocated 450 crore as grant-in-aid to the National Cooperative Exports Limited (NCEL). This body will act as a facilitator for cooperatives to access international markets, providing logistics support and trade intelligence. The goal is to scale dairy exports by 15-20% annually over the next five years, positioning India as a global hub for climate-friendly dairy manufacturing.

Infrastructure and Logistics Support

The budget also highlighted the development of a new dedicated freight corridor from Surat to Dankuni. This infrastructure project is expected to streamline the movement of dairy products from the surplus regions of Western India to the high-demand markets in the East. Improved logistics, combined with the reduction in GST on commercial trucks from 28% to 18%, will likely reduce freight costs and minimize post-harvest losses in the dairy supply chain.

Market Impact and Industry Response

Industry leaders, including Amul MD Jayen Mehta, have hailed the budget as futuristic and visionary. The removal of double taxation on dividends and the inclusion of cattle feed under tax deductions are seen as game-changers for the 32 crore members of Indian cooperatives. Market analysts expect these measures to stimulate rural demand and increase the purchasing power of the farming community. The focus on value addition and automation is also expected to attract more youth and women entrepreneurs into the dairy ecosystem.

Conclusion

The Union Budget 2026-27 represents a holistic approach to rural prosperity. By combining record financial allocations with structural tax reforms and infrastructure development, the government has laid a strong foundation for the next phase of the White Revolution. These measures not only ensure nutritional security for the nation but also empower the smallholder farmers who are the backbone of the Indian economy. As the sector moves toward modernization, the focus on cooperatives and entrepreneurship will be key to achieving the vision of a Viksit Bharat by 2047.