After successfully blocking milk product imports from New Zealand and Australia under the Regional Comprehensive Economic Partnership (RCEP) agreement, the Indian dairy industry is mounting similar pressure vis-à-vis a free trade deal with the European Union (EU).

“They want to include dairy in the India-EU free trade agreement (FTA), which we are strongly resisting. When import of cheese, ice-cream, yogurt and whey is already allowed at 30% duty, butter/milk fat at 40% and milk powder at 60%, why should we further open up our market? Even in milk powder, the basic duty is 15% on imports of up to 10,000 tonnes a year, with only quantities beyond that attracting 60%,” a top domestic dairy industry source told The Indian Express. 

The Commerce Ministry has been holding stakeholders’ consultations regarding the India-EU FTA that is in the final stages of negotiation. Dairy and automobiles are the two industries where the EU is apparently seeking greater market access. Car imports currently attract a general duty of 60%, while it is 100% for vehicles with petrol/diesel engine capacity exceeding 2,500-3,000 cc. An FTA — which the domestic auto industry is also lobbying against — may entail substantial duty cuts for a specified number of cars imported from the region.

“In dairy, the proposal is for duty concessions on so-called high-end products like cheese. But why extend these to elite consumers at the expense of our farmers? Cheese imports are anyway permitted sans any restrictions at 30% duty,” the earlier-quoted industry source said.

India’s organised cheese market is estimated at 60,000-70,000 tonnes and worth Rs 1,800-2,100 crore at an average processor realisation of Rs 300/kg. Roughly three-fourths of this is marketed in consumer packs and the rest sold to industrial consumers like Domino’s Pizza, KFC/Pizza Hut and McDonald’s.

“Our domestic production capacity is now roughly one lakh tonnes (lt) per year. With mozzarella cheese being identified for support under the Narendra Modi government’s production-linked incentive scheme to boost exports, the capacity will go up by another 50%. Allowing more imports goes against the government’s own policy objective,” the source claimed.

India imports around 3,000 tonnes of mostly gourmet cheese annually. But the fear is of large-scale imports once the market is fully opened up: EU is the world’s biggest producer (103.5 lt out of a total 212.22 lt in 2020) as well as exporter (9.31 lt out of 21.62 lt) of cheese.

India, in November 2019, opted out of joining RCEP, citing concerns over the adverse impact of unfettered imports from China, New Zealand, Australia, the ASEAN countries, South Korea and Japan that signed up to the 15-country FTA. The dairy industry, in particular, raised the alarm about New Zealand and Australia flooding the Indian market with cheap milk powder and butter.

With the EU, the perceived threat is more from cheese, where the domestic market has grown in the last few years mainly on the back of rising pizza consumption.

“The EU, unlike New Zealand and Australia, heavily subsidises farmers, enabling their dairy products to be dumped at low rates once market access is granted. At the same time, they erect non-tariff barriers making it impossible to export our products to their markets. We should keep these facts in mind while negotiating any FTA relating to agricultural products,” the industry source added.

Source : The Indian Express : March 25th 2021 by Harish Damodaran

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