Rice-wheat system in the farming economy of Punjab has not only attained its potential but also led to depletion of soil and water reserves of the state. The technology has shown the signs of fatigue, the income growth has slowed down and employment has shrunk. Livestock is being considered as one of the viable options for diversifying the agricultural economy of the state. Livestock economy especially dairying is one of the prominent contributors to agricultural growth. Gross Domestic Product from livestock sector at current prices was Rs 16675.82 crore during 2008-09 with 31.05% share in agriculture and allied sector. Punjab has emerged as the 4th largest producer of milk in country (After U.P., A.P. and Rajasthan), despite the small size of its area and population. Adequate knowledge of the cost structure of milk production is essential for working out a pricing policy and providing incentives to milk producers. At present, the procurement price of milk is determined arbitrarily without considering the cost structure of milk production. Such an approach is not conducive for the growth of dairy sector. The realistic cost estimates of milk production are required to be made on the basis of study of comprehensive milk production system through survey of dairy farmers as in case of rice and wheat, where minimum support price is fixed on the basis of comprehensive analysis of cost of cultivation. Therefore, project entitled “Economics of milk production and its regular monitoring in Punjab€ was undertaken in this direction to study the investment pattern, cost of milk production and net returns from milk production across different categories in three zones of Punjab state viz. Sub-mountainous zone, central zone and south-western zone. The cost of milk production of buffaloes and cows on per litre basis was highest in central zone. The dairy enterprise profit from buffaloes per day per milch animal on per litre basis was found to be the highest in zone central zone i.e. Rs 6.24/litre and that of cows in zone south-western zone i.e. Rs 3.52/litre. Category wise, dairy enterprise profit per day per milch animal on per litre basis increased with increase in herd size both in case of buffaloes and cows

Keyword: Rice-wheat system; Livest