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HindustanTimes Thu,28 Aug 2014

Low on supply, your favourite dairy will cost you more this summer

Zia Haq and Gaurav Choudhury, Hindustan Times  New Delhi, May 11, 2014
First Published: 00:47 IST(11/5/2014) | Last Updated: 08:52 IST(11/5/2014)

Dairy products, including your favourite ice cream and lassi, could cost more this summer. Supplies are drying up again, which will need good rains to replenish, and consumer-end charges have started heading north. At least two branded milk-sellers have told HT that stocks of skimmed milk powder are running low. The season’s first round of countrywide “price correction” began with Amul, the nation’s largest seller of packaged milk, raising rates by Rs. 2 effective Saturday, citing higher procuring costs.

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“We decided to hike milk prices by Rs. 2 per litre across all variants in the Delhi-NCR region, since there has been a substantial increase in the cost of raw materials, like cattle feed as well as labour, and this has led to a rise in the cost of milk production,” RS Sodhi, managing director of Gujarat Cooperative Milk Marketing Federation Ltd, which owns Amul, said.

Mother Dairy, the largest seller of branded milk in the Capital, is also likely to increase prices.

Strong global demand, particularly in China, along with a dip in milk output in some countries, led to increased exports from India last year. India’s milk output has substantially risen, on an average by 5 million tonnes a year in the last six years, making the country the largest producer globally.

With improving supplies, India allowed free exports on June 8, 2012, along with an incentive of 5% under the “Vishesh Krishi & Gram Udyog Yojana”.

While milk-sellers particularly profited from a stronger dollar, which make exports more gainful, the government continued the stimulus because each dollar earned helped plug the precarious current account deficit, a measure of a country’s trade in which the value of goods it imports exceeds the value of goods it exports.

“Although international dairy prices have since fallen due to better supply from New Zealand, the prospect of a drier summer has kept domestic prices from dropping,” an official of a leading branded milk-seller told HT, requesting anonymity. The Indian Meteorological Department has predicted below-average monsoon rainfall for 2014.

The bigger worry lies in output failing to keep pace with demand. “Milk consumption has been growing at a very healthy rate of 5%,” said Shiva Mudgil, a dairy analyst with Rabobank International.

Domestic demand for milk is growing at about six million tonnes a year whereas annual incremental production over the last ten years has been about 3.5 million tonnes, according to a government report.

“Considering that requirement of milk in 2021-22 is expected to be 180 million tonnes, according to India’s economic survey, milk production must increase at 5.5% per annum for the next 12 years,” a government projection shows.


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