Dairy farming is an important occupation, which is supporting a large number of resource-poor families in India. Pondicherry, which is credited with a large percentage of cross-bred cattle population is no exception to this. Although a number of dairy development programmes are being implemented in Pondicherry, the annual milk production is almost stagnant at 38,000 tonnes. The number of landless families who depend upon dairy farming is increasing whereas, the overall bovine population shows a declining trend. Considering the ever increasing demand for milk and milk products due to a raise in per capita incomes, there is an enormous scope to increase milk production. In this paper, the situation of dairying and the challenges faced by the dairy farmers are discussed based on different studies conducted in Pondicherry. Acute shortage of feed and fodder coupled with high cost has been a serious constraint in dairy development to reckon with. Some policy interventions are suggested for strengthening this important occupation to safeguard the interests of the dairy farmers with special reference to landless and less land category and ultimately to escalate the milk production.