Two dairy wars are happening in two southern states—Kerala and Karnataka—involving three dominant milk cooperatives. Nandini, a brand owned by the Karnataka Milk Federation (KMF), is facing a threat from Amul, owned by the Gujarat Cooperative Milk Marketing Federation, in its home state. The Karnataka-based cooperative is accused of encroaching into the market territory of neighbouring Kerala and violating the principles of federalism by the Kerala Cooperative Milk Marketing Federation (KCMMF), which owns the brand Milma. KCMMF criticised KMF for opening its outlets in Kerala, claiming it violated the dairy sector’s cooperative spirit.

The warring state-run milk cooperatives do not disclose that milk is in short supply in the country and is becoming increasingly expensive for the average citizen. Prices have surged over 15% in the past year, prompting India, the world’s largest milk producer, to look at importing some dairy products as milk output has remained more or less stagnant. The total production stood at 221 million tonnes in 2021–22 and fell to 208 million tonnes last year. While the ongoing dairy wars should be seen in the context of falling production, let’s analyse who stands to gain and lose.

The milk trade has two main players: consumers and milk farmers/producers. The entry of additional aggregators and processors will benefit farmers, and competition among processors will enhance the value proposition for consumers by making available quality products at reasonable price levels. Regionalism to ward off competition is not new in the market, but it is better served when supply is abundant. If Nandini had surplus milk in its home state and dumped it at a lower rate in Kerala, it would hurt the latter’s milk sector. However, Kerala is already a milk-importing state. Moreover, since transporting milk over long distances is not economically feasible, Nandini and Amul will likely focus on selling value-added and premium milk products in other states to improve margins, rather than plain vanilla milk, an essential commodity and very price-sensitive. The entry of Amul, Nandini and even Aavin (from Tamil Nadu) will force Milma to stay competitive and improve its quality and efficiency. Let the market decide who survives and who doesn’t. Why should consumers bear the cost of protectionism?

Source : New Indian Express April 20th 2023