Powdered milk makers operating at 40% capacity

Seven months after the government imposed a ban on skimmed milk powder (SMP) exports, a price crash caused by a glut has induced manufacturers to operate their units at 40 per cent capacity.

"Though prices have crashed from Rs 125 per kg at the time of the ban to Rs 105, there are no buyers. Milk availability has also increased by 30 per cent owing to the monsoons, boosting SMP production," said Kuldeep Saluja, managing director of Sterling Agro Industries, the country's largest SMP exporter.

The ban, which is in place till the end of this month, was announced in February to prevent the summer shortage, traditionally a lean season for milk production. The price of SMP increased from Rs 90 to Rs 125 a kg by February.

The government banned exports as part of its efforts to control inflation. SMP accounts for roughly 6 per cent of India's milk production of 100 million tonnes, of which about 1 per cent is exported.

"Following the export ban, prices have dropped but there is no demand. Therefore, units are running below capacity and we are unable to pay the price we were paying to milk producers when SMP was selling at Rs 125-130 per kg," said Sandeep Aggrawal, director, SMC Foods.As a result, milk producers' profit per litre has dropped from Rs 19 to Rs 15.50.

SMP producers think the government should review the export ban or introduce monthly or quarterly quotas. "While the current domestic realisation is Rs 105 per kg, we could have contracted exports at Rs 160 per kg. Moreover, there is no market in India to absorb the surplus SMP production," said R G Chandramogan, managing director of Hatsun Agro Product.