Dairy decline

Milk farmers need support to deal with demand slump

Milk farmers of Maharashtra and other states, who have been agitating for higher prices for their produce, are turning restive as their woes continue to worsen for want of remedial action. The kind of help that the crop cultivators are receiving from the government to sail through the Covid-19 crisis has not been forthcoming for dairy farmers. What is being disregarded is the fact that milk is the country’s largest food product in terms of both output and value, far ahead of rice or wheat. Besides, it supports the livelihood of 80 million landless, small and marginal farmers who rely critically on supplementary income from milk.

Though the production of milk has remained, by and large, unaffected by the pandemic, its consumption has nosedived because of erosion in demand from the bulk consumers like hotels, restaurants, canteens, sweetmeat shops, and social functions. No doubt, the lockdown restrictions are now being gradually eased, but normalcy is still elusive for these activities. Many dairies, which have been converting surplus milk into value-added and shelf life-enhanced products like skim milk powder (SMP), butter and ghee, have piled up huge inventories of these items. They are, therefore, wary of procuring surplus milk just to bail out the farmers. Consequently, the prices of raw milk have plunged sharply by 15-30 per cent in different areas since March. They are currently ruling below the production cost at many places, causing widespread distress among dairy farmers. Though some state governments had promised to pay bonus on milk acquisition prices, no headway has yet been made on this front. The Maharashtra government had offered to give an additional Rs 5 per litre directly to the milk producers. But that commitment remains unfulfilled. Unsurprisingly, the milk producers are now threatening to intensify their stir by blocking supplies of fresh milk to urban areas.

On the other side, dairy cooperatives, even though equally peeved at the prevailing situation, have come out with some well-considered suggestions, which, they feel, could benefit all stakeholders in the milk sector. The proposed steps are aimed broadly at boosting both local milk consumption and exports of SMP and other milk products. The domestic utilisation of milk is sought to be increased by distributing it through anganwadis (child care centres) to improve the nutrition of children and hospitals to feed the Covid-19 patients. Besides, milk can be included in mid-day meals when schools reopen after the pandemic. 

The key to dismantling the accumulated inventories of milk products also lies in the proposed two-pronged strategy of promoting domestic consumption and exports. Local sales can possibly be stimulated by suspending the goods and services tax on milk products, which range from 5 to 12 per cent, till the Covid crisis ends. SMP exports can be stepped up by offering direct or tacit subsidies that are permitted under various special clauses of the global Agreement on Trade Related Intellectual Property Rights. Moreover, the structure of duties on the external trade of processed milk products may also need to be revisited to discourage imports and incentivise exports of these items. Whatever the remedial action, it needs to be taken expeditiously as the situation might otherwise exacerbate during the monsoon-triggered flush season for milk, which is round the corner.