White revolution in danger now

Developed countries' heavy subsidies stymie India's dairy growth.

The distortion of global dairy prices due to heavy subsidies by the European Union and the US, besides other developed countries, has rendered Indian dairy products non-competitive in the international market.

The European Union (EU) provides a daily subsidy worth $2.7 per cow which is much higher than the daily average earning of less than $2 of over half of India's 1,000-million population. This could be taken to mean that the worth of such an individual in India is less than that of a cow in Europe.

This has been stated in the report of a study on the impact of the World Trade Organisation (WTO) on the Indian dairy sector, conducted by Pune-based Gokhale Institute of Politics and Economics faculty member Deepak Shah.

The report has been published by Oxfam, a global ginger group working for protecting the interests of developing countries through its "make trade fair" campaign.

The Indian dairy sector is the largest single contributor to the country's gross domestic product (GDP).

The gross value of output from the livestock sector at current prices has grown more than ten-fold from Rs 10,599 crores in 1980-81 to Rs 1,39,981 crores in 2000-01 and further to Rs 1,64,509 crores in 2003-04, the study points out.

There has been a consistent rise in India's share in world milk production "" from 9.9 per cent in 1990 to 12.3 per cent in 1996 and further to 14.5 per cent in 2003. India is now the world's largest milk producer.

However, the opening up of the Indian market to foreign goods has raised much concern about the status of the Indian dairy industry in the post-WTO era.

"The subsidies provided to dairy farmers by developed countries have helped them lower the prices of their dairy products, affecting in turn, the farming community in the developing world. Traders are now free to import cheaper milk products and thereby earn high profits at the expense of farmers belonging to developing countries like India", the report states.

The subsidies in developed countries have adversely affected the dairy industry not only in India, but also in countries like Brazil and Jamaica. India received subsidised skimmed milk powder involving a subsidy of Euro 5 million in 1999-2000.

Similarly, the subsidy on butter exports paid by the EU caused butter oil imports in India to grow at an average rate of 7.7 per cent annually. This led to depressed ghee prices in the domestic market. However, the hike in import duties subsequently, checked this trend to some extent.

Besides, there has been a slowing down of the rate of growth in milk production, especially between 1991-92 and 2003-04 compared to that between 1980-81 and 1990-91, the study points out. A majority of states have displayed either stagnation or deceleration in milk output growth.

Although Uttar Pradesh ranks first in terms of total milk production in the country, its share in the total output has stagnated at around 18 per cent over the past two decades. A similar pattern is seen in the case of Gujarat, Karnataka, Kerala, Punjab, Tamil Nadu and West Bengal.

States like Madhya Pradesh and Rajasthan in general, and Bihar in particular, have shown a fall in milk production between 1980-81 and 2003-04.

Only Maharashtra and Andhra Pradesh have shown a growing trend in milk output, especially after 1990-91.

"Poor growth in breedable bovine population, coupled with lower productivity of bovines, has greatly affected the milk output growth of several states in the country" the report maintains.

Referring to the possible future scenario when dairy subsidies in the US and the EU are removed, the study indicates that Indian dairy products could then become more price competitive.

"If India fails to make headway in the world market when subsides are abolished, other competitors like Australia and New Zealand would use this opportunity to enter the market in a big way and aggressively sell their dairy products. For India, it would mean loss of competitiveness and a great opportunity in the new trade regime," the study cautions.