Heritage Foods to set up 4 plants

New plants to increase capacity by another one lakh litres of milk per day

Heritage Foods India Limited (HFIL), the city-based milk and milk products company, is setting up four new plants during the current financial year.

These new plants will add another one lakh litres of milk per day to the existing capacity of 9,87,500 litres of milk per day. The company is expected to invest around Rs 6 crore in the new plants.

V Nagaraja Naidu, the whole-time director of HFIL, told Business Standard that two procurement and processing plants "� each with 25,000 litres per day (LPD) capacity "� are coming up at Bapatla in Guntur district and Kothanandur in East Godavari district.

The company is also setting up two procurement, processing and packing plants (PPPs) at Ramachandra Puram in East Godavari district and Gauribidanur in Kolar district, Karnataka. Each PPP will have an installed capacity of 25,000 LPD which is expandable to 50,000 LPD, he said.

During the financial year 2003-04, the total annual installed capacity of milk production was raised by 527 lakh litres to 3,375 lakh litres from 2,848 lakh litres in 2002-03.

During the year, the company commissioned two new procurement and processing plants at Nandyal and Namakkal and acquired one at Kondapi. These plants have a capacity of 25,000 LPD each.

The company spent Rs 2.23 crore on the new plants. The acquisition of Kondapi plant cost the company around Rs 50 lakh (inclusive of Rs 8 lakh investments written-off).

During the first quarter of the current financial year, the company commissioned a procurement and processing plant at Kallur at a cost of Rs 92.39 lakh. The plant with a capacity of 25,000 LPD went on stream in May.

At present, the company has 15 procurement and processing plants and seven procurement, processing and packing plants. The main dairy plant is located at Chandragiri in Chittoor district and produces value-added products like cream, ghee, curd, butter and others.

Of the total turnover of Rs 234.49 crore achieved in 2003-04, milk-based products contributed around 14.75 per cent with milk sales accounting for the remaining 85.25 per cent.

The company operates in Andhra Pradesh, Karnataka and Tamil Nadu and the state-wise contribution in the turnover was 34.3 per cent, 32.84 per cent and 32.86 per cent respectively.

Nagaraja Naidu said that the company was planning to enter the Kerala market by setting up a PPP at Pulliyangudi in Tirunelveli district in Tamil Nadu.

On the dairy sector scenario, the Heritage director said that the continuous drought for the last three years was impacting the availability of milk. Intense competition among the players was causing the procurement prices to go up, he said.

The procurement price for buffalo milk which was Rs 165 per kg fat is around Rs 195 at present. Likewise, the price for cow milk is Rs 74 as compared to Rs 65 one year ago, he said.

Add to the bleak scenario was the Tamil Nadu government's intervention which hiked the procurement prices by eight per cent without effecting corresponding hike in sale prices, he said. He expected the situation to continue till the end of September and only good monsoons could bail the industry out.

On export prospects, Naidu observed that though the cost of production is cheaper in India, the country did not have an edge in the international market.

Heavy subsidies were being accorded to the dairy sector players in developed countries, which ensured that their products were cheaper than those from India, he added.