Prices slumping, include milk in Rs 35-bn stabilisation fund: Farm Ministry

Move will enable states and milk unions increase procurement from farmers

To stem the sharp fall in milk prices, the agriculture ministry has sought inclusion of the commodity under the Price Stabilisation Fund (PSF) scheme of the department of consumer affairs.

This, officials said, would enable state governments and milk unions to purchase bulk quantities of fresh milk from farmers and convert them into skimmed milk powder (SMP) and ghee for future use.

How much of this actually translates into actual purchases this year remains of seen, as almost 99 per cent of the Rs 35 billion allocated as Central share under the fund has been exhausted till December, and much of this has gone into buying pulses from farmers.

Officials said once milk is included under PSF, states would be able to distribute the commodity through welfare programmes such as the public distribution system (PDS).

The Centre contributes half of the total fund under PSF, while states put in the rest.

The agriculture ministry in mid-December had issued an advisory to states and other Central ministries and departments to include milk under mid-day meal, PDS and other welfare programmes including distribution through Aanganvadis.

Recent measures to create additional domestic demand for milk have come against the backdrop of a sharp fall in procurement prices mainly due to weak global markets and excess supplies during the flush season.

The flush season for milk runs from November to March, when supplies are usually on the higher side.

Though prices tend to move downwards during this period, this year, they've been particularly bad as procurement rates have dropped to their lowest levels.

A weak global commodity market for milk since 2015 has exacerbated the fall.

SMP, which quoted at around $5,000 per tonne around 2015 in the global markets, is now selling at below $2,000 per tonne.

Officials said fresh milk procurement rates in Maharashtra have dropped to Rs 18 per litre from Rs 26-27 last year, while buffalo milk rates in Punjab and Haryana are down to about Rs 26 per litre from Rs 38-40 last year.

Though cooperatives have upped their procurement by 25-30 per cent this year, there is a limit to which they can support. The private sector has been poor in buying milk this year as exports are unviable.

Overall milk production in 2017-18 is estimated at over 6-7 per cent more than last year’s production of 165 million tonnes.

The government estimates that as of now country has a stock of SMP of 116,000 tonnes due to higher conversion which is expected to increase to 200,000 tonnes by end-March 2018.