The study has addressed the issues associated with the alternative milk market chains and their implications on dairy farmers and traders. It has been conducted in Bihar, where modern milk market chains especially the milk co-operatives have grown significantly. The study has shown that in spite of growing presence of modern milk supply chains, the traditional milk supply chain is still dominant. The empirical evidence does not appear to support the perceptions of exploitative nature of the traditional milk market agents. Traditional milk processing seems to offer good opportunities for the small and resource-poor milk producers and traders to enhance their income. The traditional milk sector should be addressed in a constructive manner and the policies should be evolved which would allow informal players improve their performance including quality control and their integration with the emerging modern milk supply chains.