Crisis in dairy sector as it faces a problem of plenty
The current crisis of plenty that the dairy sector is facing is relatively new and in fact is related to the success of the ‘White Revolution’ launched by the government.business Updated: Jul 16, 2018 12:51 IST
Travellers on a busy stretch of Bannerghata Road - a key arterial street - in Bengaluru were bemused last month, when they were offered fresh milk - for free - by protesting dairy farmers, in front of the offices of Karnataka Milk Federation (KMF). The dairy farmers who were present along with their cows in front of KMF’s headquarters were carrying out this unique protest to oppose the reduction in the procurement price of milk from Rs 23 to Rs 21 per litre.
While a Rs 2 per litre reduction might not look big, it is important to note that there are 24 lakh dairy farmers in Karnataka alone and this would have led to a 10% drop in their income. Also this was the third successive downward revision of prices from a peak of Rs 27 per litre in January of this year. KMF is the third largest dairy player in the country after Gujarat Cooperative Milk Marketing Federation and Mother Dairy.
The reason why the 14 affiliated Karnataka wide district dairy units of KMF had reduced procurement prices for raw milk was simple. KMF everyday procures a little over 75 lakh litres of milk but is able to sell only 36 lakh litres. The rest of the milk it converts into milk powder for which it incurs an additional cost of Rs 5 to 7 per litre. Unable to sell even the milk powder or other value added products like ghee, sweets and other dairy products, it is sitting on a mountain of dairy produce. KMF is not alone or unique in facing this challenge.
India is drowning in a problem of plenty with regard to milk, as witnessed by the anguish of dairy farmers in Haryana. Dairy farmers in the state used to get about Rs 25 per litre for cow milk and Rs 45 for buffalo milk during summer season in 2014, whereas this season they have been getting about Rs 25 and Rs 38, respectively though the feed cost has risen more than 20% in the last four years.
The chief general manager of the Harayan’s Milk Federation S S Kohli says they have had to lower the price in the wake of overall countrywide scenario of surplus milk. “Like other federation majors, we too have a surplus stock of skimmed milk powder (SMP) — 3,200 metric tonne - and white butter — 3,800 metric tonne - and yet we are collecting liquid milk to our capacity now,’’ he says. Since the overall milk surplus scenario has led to a major fall in the prices of milk products such as SMP and butter, we cannot even stock more of it for now.”
Gujarat, which is the largest dairy player in the country, is no different. The Gujarat government was forced in the last week of June to announce a Rs 300-crore subsidy on exports of around 60,000 tonnes skimmed milk powder through Gujarat Cooperative Milk Marketing Federation (GCMMF), as unsold milk powder stocks were piling up across the country. GCMMF markets Amul brand of milk and products. This even as a dairy farmer in Gujarat, who used to get Rs 43.34 per litre of milk in 2014-15, today gets Rs 38.5 per litre for raw milk.
Similarly, the situation in Punjab is of excess supply hurting the state’s dairy industry. Because of increase in milk production, prices have fallen and the burden has fallen on the state’s milk co- operative federation — Milkfed — that sells Verka brand of milk and milk products. Despite a lean season currently, Milkfed is getting at least 20 lakh litres of milk every day for processing. “We have no option but to process the ex- cess milk into white butter and skimmed milk powder (SMP), which involves processing and storage cost,” says Milkfed managing director Manjit Singh Brar.
He says that nationally there are stocks of at least two lakh tonne of SMP and at least one lakh tonne of white butter. “If this is dumped into the market, it will further disturb the business dynamics. Moreover, the Gujarat government’s decision to help its milk cooperative Amul with Rs 300 crore subsidy will further impact the dairy industry in a negative sense,” says Brar.
Gujarat’s deputy chief minister Nitin Patel defended the move. “The subsidy (to be given over the next six months) will directly help the state’s 35 lakh dairy farmers as milk cooperatives will be prevented from reducing milk procurement price.”
In Punjab, which has highest per capita milk availability of 1,070 millilitres, (against national average of 360 millilitres), as per figures procured form Milkfed, milk production in five years (from 2013-14 to 2017-18) has grown by 17% and processing during the same time period has increased by 35%. Currently, milk production in Punjab has touched 350 lakh litres per day, which is expected to rise in the flush season beginning from August, and it is apprehended that it will only worsen the situation. Due to increase in supply, Milkfed and other milk cooperatives have already reduced rates of milk procured by Rs 2 a litre.
Situation is no different in the Eastern part of the country considered once to be milk-deficit. Till last year, Bihar for example had to procure conserved comm- odities of milk, like skimmed and whole milk powder as well as butter, from outside the state. The scenario has, however, changed this year. The state has now bec- ome milk surplus. Bihar registe- red a 10%-15% growth in milk procurement, up from 16.27 lakh kg per day in 2017-18 to 18.20 lakh kg per day (till May 2018), according to Shikha Srivastava, managing director of Bihar State Milk Co-operative Federation Ltd (COMFED).
The current crisis of plenty that the dairy sector is facing is relatively new and in fact owes its success to the ‘White Revolution’ launched by the government. From a mere 55.6 million tonnes of milk in 1991-92, India in 2016-17 produced 165.4 million tonnes of milk, according to Department of Animal Husbandry, Dairying and Fisheries, Ministry of Agriculture. Per capita availability of milk has doubled from a mere 178 ml to 360 ml in the same period. India is today the world’s largest producer of milk ahead of USA and China, the number two and three respectively.
Suresh Babu, managing director of Mandya Milk Union, says a concatenation of circumstances has caused the present set of challenges. “In a way the success of the industry has been its undoing. Productivity has gone up. Because it is lucrative, more people have taken to dairy farming. However, while consumption has increased, it has failed to keep pace with production, leading to depression in prices. Also, the softness in the international market prices also has hurt the Indian dairy industry.” Mandya Milk Union, which is one of the 14 affiliated unions to KMF, alone is sitting on 3,200 metric tonne of SMP and 1,500 tonnes of butter.
He points out that the milk powder’s shelf life is a maximum of 12-15 months and butter that of not more than 1-3 months. “There is additional cost in processing and storing these large amounts of milk produce, which is why procurement prices have been slashed. Earlier we were able to sell SMP at Rs 180 per kg even, but now even the international price is just around Rs 110-117,” says Babu.
B G Anjanappa, president of BAMUL, the Bangalore affiliate of KMF, says that even after the cut in procurement price of milk, it continues to remain lucrative. “Apart from what we pay the government of Karnataka gives a subsidy of Rs 5 per litre to the dairy farmer. While it is true that there are large amounts of stock of milk powder, I don’t see it as a crisis as one drought year when feed availability goes down could cut supply down and reduce the stockpile.”
Governments also have been trying their own innovative ways of ensuring that they continue to subsidise the sector. “With milk becoming surplus and to address the nutritional requirement of impoverished children, beginning July, the state government on a pilot basis began supplying milk once a week and free of cost to children in 3-6 years age group, across 25 anganwadi centres in Gaya, Vaishali, Saran, Gopalganj and Siwan districts of Bihar,” says Shikha Srivastava, managing director of Bihar’s COMFED.
In June, COMFED supplied 12 tonnes of milk to the social welfare department for integrated child development services (ICDS), a Central government programme, which provides free food, preschool education, and primary healthcare to children under 6 years of age and their mothers. Bihar chief minister Nitish Kumar now wants to extend the scheme across over 1 lakh anganwadi centres across all 38 districts of the state.
Karnataka launched a ‘Ksheera Bhagya’ scheme under whi- ch government school kids across the state are being given 150 ml of milk per day for 5 days a week, free of cost. This scheme cost the government an estimated ~850 crore per year and is a kind of hidden subsidy to the dairy sector in the state. GCMMF managing director R S Sodhi, commenting on the subsidy for exports, said, “This will lift the overall sentiment in Indian market and farmers across the country will be ben- efited.” Sodhi, who declined to give figures of SMP stock available with Amul, maintained that its inventory is still not huge eno- ugh to press the panic button. “We have not reduced procurement prices and procurement quantity is more than previous years,” he said.
First Published: Jul 11, 2018 08:53 IST