The increase in milk prices over the last few months has been the topic of hot discussion in India. The prices of milk have seen a sharp rise of 14 to 15 per cent, which is more than the inflation. Milk inflation has been the second largest factor (after cereals) in driving up retail inflation in January and February. Milk prices surged by 9.3 per cent on-year, shows the March CPI (consumer price index) data. And while cereal prices will hopefully ease; milk prices are seen getting higher.
In an interview with Outlook Business, RS Sodhi, current President of the Indian Dairy Association and former MD of Gujarat Cooperative Milk Marketing Federation (its flagship brand is Amul) said that he does not foresee any reduction in milk prices until Diwali, which is typically celebrated in October or November. He explained that it is only around this time that we may see price stability in the market.
What Is The Biggest Challenge For India’s Dairy Sector Currently?
India’s dairy sector is facing a lot of challenges and if we look at the growth rate, it is the best as per agriculture produce. The statistics suggest that in every 25 years our milk production multiplies three times. The biggest challenge is to maintain a constant growth rate for the next 25 years. In 2047, when India will be celebrating ‘Amrit Varsha’, we will be needing 628 million metric tonnes of milk and to achieve that growth we need to ideate now.
How Can We Maintain A Steady Growth In Dairy Industry?
There are two important stake holders in the dairy industry, one is farmers, and the other is the consumer. All we need to do is keep a balance of production, supply and demand. The farmers continue to produce more milk, while the consumers continue to receive healthy milk product at an affordable price. Currently the consumer is spending a lot in branded and organised food, the sector is growing, and at this scale if both the parties are happy only then can we have a 3X growth in the next 25 years. If farmers don’t receive stable price for their produced milk, they won’t be happy to invest in dairy farming and can divert their resource to something else. Taking about the consumption of milk, we are leading in the world. Earlier, the scale of use was 220 gram per person, now its 440 gram per person. In every 25 years, the production is growing 3X, while the consumption is growing 2X, despite the growth in population.
Do You Want The Central Government To Allocate Subsidies For Dairy Industry?
No, no we don’t need it. Dairy plays a very important role in Indian household and so animal husbandry-dairy play equivalent role in rural India. What we need to see is how central government is handling this sector. How much resource is getting allocated for this industry?
Currently, more resource is allocated to the agriculture wing; be it subsidiary in fertilisers or resources in cultivation. But there are no subsidies or special allocations for dairy industry. All we require is a better infrastructure for the dairy farmers, this can provide livelihood to the farmers, and it will turn out to be very economical for the government as well. If we focus on local production, invest more in infrastructure for dairy farmers, we don’t require any subsidy, this will be enough for the farmers to increase productivity and growth in this industry.
Are You In Favour Of The Idea Of Importing Milk?
As a part and plan of ‘Aatmanirbharta’, we need to increase local production of milk and milk products rather than focusing on cheap imports. Let’s not follow the mistake of cheap oil imports. If we plan to import milk, no farmers will be interested in producing milk in India.
The central government has also clarified that they have taken no action in import of dairy product, they have just given caution that if there is drastic drop in production of milk, then for a short span, small quantity of milk and its commodities will be considered for import, and it will be sold at the in-house produce price.
What Is Causing The Price Inflation In Milk?
To understand the milk inflation, we need to focus on Covid duration in dairy industry. The milk production was not hampered in early days of lockdown, the consumption was also stable, but the HoReCa (hotel / restaurant / catering) segment consumption reduced drastically, which led to rise in production of milk commodities. Rise in milk commodities resulted in price decline for both commodities as well as the price paid for milk to the farmers. Lockdown also restricted the movement of fodder, artificial insemination in dairy animals, movement of dairy animals also got restricted, then lumpy skin disease came in, all of this resulted in less investment by farmers in dairy, leading to less production.
When HoReCa segment opened-up, the demand increased suddenly, resulting in a demand-supply pull, leading to dairy inflation. There may be better procurement in March and April, but it will not reduce the price as in summer season milk and milk products consumption increases, in form of ice cream, butter milk, dahi, chaach etc. The milk prices will not decrease even if there is an increase in production after Diwali and Dussehra. This is because the input costs have continued to rise. In India the inflation rate for milk has been around 8-9 per cent, while international milk inflation has ranged from 20-40 per cent, this indicates that the milk inflation in India is significantly lower than the global average.
How Much Investment You Suggest Is Needed For The Growth Of The Dairy Industry?
Dairy and animal husbandry is contributing to 30 per cent of the GDP. Though the present budget has increased allocation for dairy industry by 50 per cent, it cannot be considered enough for the industry. We need to include dairy in agriculture definition, like in income tax and concessions like loan. Then, we need to gradually increase the allocation in animal husbandry and dairy industry.
Do You Think That Opposition To RCEP (Regional Comprehensive Economic Partnership) By Indian Farm Bodies Was Justified?
It was 100 per cent justified. More and more countries are becoming self-sufficient, and the import statistic will justify it. Sri Lanka situation is the best example for this. We must become self-sufficient, even on the point of food security, self-reliant in food, so RCEP was the timeliest decision by Indian government, and we are realising the benefit of it.
Source : The Outlook April 26th 2023