Regulating India’s Dairy Sector: Legal, Policy and Compliance Perspectives

Posted On - 10 November, 2025 • By - Aurelia Menezes

Introduction

India’s dairy industry stands as one of the largest contributors to the global milk supply, accounting for nearly 25% of total production. Beyond its nutritional significance, the sector forms the backbone of rural livelihoods, food security, and agribusiness development. However, with scale and diversity come complex legal challenges from food safety regulation and cooperative governance to environmental compliance and foreign investment laws.

As India transitions into a new era of agricultural modernization and sustainability, understanding the regulatory and legal framework governing the dairy sector has become essential for investors, cooperatives, startups, and multinational food companies operating in this space.

The dairy sector is governed by a multi-layered framework of central and state laws, administrative regulations, and policy measures. Key legislations include:

  • The Food Safety and Standards Act, 2006 (FSSA): Administered by the Food Safety and Standards Authority of India (FSSAI), this Act consolidates all previous food laws and sets uniform standards for milk and milk products. It governs licensing, quality testing, labeling, packaging, and traceability obligations for dairy operators.
  • The Essential Commodities Act, 1955: Historically used to regulate prices and supply of milk and dairy products. While its use has been rationalized, it still provides emergency control powers to ensure food availability.
  • The Cooperative Societies Act, 1912 and Multi-State Cooperative Societies Act, 2002: These laws form the backbone of India’s cooperative dairy network including entities like Amul, Nandini, and Mother Dairy by defining membership rights, profit-sharing norms, and governance structures.
  • Environmental (Protection) Act, 1986 and Water (Prevention and Control of Pollution) Act, 1974: Dairy units must comply with effluent discharge standards, waste management norms, and pollution control clearances from State Pollution Control Boards (SPCBs).
  • Animal Welfare and Prevention of Cruelty to Animals Act, 1960: Establishes minimum standards for animal husbandry and humane dairy practices, an area increasingly relevant under ESG frameworks.

Regulatory Compliance and FSSAI Licensing

Every entity engaged in processing, storing, distributing, or selling milk and milk products must obtain an FSSAI license or registration, depending on production scale.

FSSAI imposes specific standards for pasteurization, fortification, and adulteration prevention under the Food Products Standards and Food Additives Regulations, 2011. Non-compliance may attract penalties under Section 63 and 65 of the FSSA, including imprisonment and financial penalties.

In 2024, FSSAI also introduced Digital Traceability Systems under its Milk Safety and Quality Assurance Initiative, enabling QR-based verification from farm to consumer. Law firms play an important advisory role in helping clients navigate these evolving compliance frameworks.[1]

Cooperative Governance and Contractual Frameworks

India’s dairy sector is unique for its three-tier cooperative model, encompassing:

  • Primary Dairy Cooperative Societies at the village level,
  • District Milk Unions, and
  • State Federations.

Legal issues frequently arise in cooperative elections, member rights, auditing, and inter-union disputes. Recent amendments to the Multi-State Cooperative Societies Act, 2023 have sought to enhance transparency, introduce independent directors, and enable digitized auditing, all of which require legal restructuring and compliance guidance.

Private players entering supply agreements with cooperatives must also ensure legally enforceable procurement contracts, compliant with state cooperative and agricultural produce laws.

Investment, Trade, and FDI in the Dairy Sector

Under India’s FDI policy, 100% foreign direct investment is permitted under the automatic route in food processing and 100% FDI in marketing of food products produced in India.

Legal scrutiny arises in:

  • Structuring cross-border investments and joint ventures with cooperatives or private dairy firms,
  • Obtaining approvals from the Department for Promotion of Industry and Internal Trade (DPIIT), and
  • Complying with Competition Commission of India (CCI) regulations during mergers and acquisitions in the food sector.

Further, dairy exports are regulated by the Export Inspection Council and must comply with Sanitary and Phytosanitary (SPS) measures under WTO agreements where legal due diligence and trade compliance become crucial.

Intellectual Property and Brand Protection

With the rise of premium and regional dairy brands, intellectual property (IP) protection has become a strategic necessity.

  • Geographical Indications (GI), such as “Gir Cow Ghee” or “Mathura Peda,” offer regional producers competitive advantage.
  • Trademarks and packaging design registration under the Trademarks Act, 1999 protect brand identity against imitation.
  • Labeling compliance under FSSAI’s Labelling and Display Regulations, 2020 ensures consumer trust and prevents misleading advertisements.

Law firms increasingly advise clients on IP portfolio management, licensing, and cross-border enforcement in the fast-growing dairy and FMCG sectors.

ESG, Sustainability, and Animal Welfare Compliance

Sustainability is becoming central to India’s White Revolution 2.0 vision. The government encourages eco-friendly practices such as biogas generation, organic fertilizer production, and circular economy models using dairy waste.

Dairy businesses must also align with:

  • Environmental, Social, and Governance (ESG) reporting frameworks,
  • Plastic Waste Management Rules, 2016, and
  • Animal welfare mandates under the National Livestock Policy, 2013.

Firms engaged in environmental and corporate compliance advisory can assist clients in obtaining clearances, structuring sustainability-linked financing, and managing ESG disclosures under SEBI’s Business Responsibility and Sustainability Reporting (BRSR) framework.

The government’s White Revolution 2.0, initiated in 2024, aims to create 75,000 new dairy cooperatives and strengthen 46,000 existing ones by 2029. It promotes digitization, women’s participation, and sustainable growth through a legal and institutional reform agenda.

Legal opportunities will emerge in:

  • Public-Private Partnerships (PPP) in rural dairy infrastructure,
  • Regulatory harmonization between state and central dairy laws,
  • Contract standardization for smallholder milk suppliers, and
  • Dispute resolution through mediation and arbitration frameworks for cooperative and trade conflicts.

[1] https://www.pib.gov.in/PressNoteDetails.aspx?id=155298&NoteId=155298&ModuleId=3