To check volatility in milk prices, the government is considering a proposal to create a buffer stock of skimmed milk powder (SMP) in the country.
Officials said the buffer stock, expected to be created with milk processing units, will be provided adequate subsidy by the government.
“The proposal to create such a buffer stock was discussed recently at a meeting of the Inter-Ministerial Group on inflation,” a senior official said.
The meeting attended by senior officials from the department of food, consumer affairs, agriculture, finance and others also decided to create adequate domestic demand for SMP within the country by encouraging its usage in government’s social welfare programmes.
According to industry officials, the country has stocks of around 111,000 tonnes of skimmed milk powder lying with different cooperative and private dairies, while the annual domestic demand is around 88,000 tonnes.
“Unless, government creates a fresh outlet for SMP, milk procurement could fall drastically, because the flush season for milk (when supplies increase) would start from October onwards,” R G Chandramoghan, managing director of Hatsun Agro Products Ltd told Business Standard. He said the excess stocks have been created after the government imported around 50,000 tonnes of SMP two years back to tide over domestic shortage. “Exports are also not much viable as global prices have dropped,” another leading milk supplier in the private sector said.
The players in this sector do not believe that buffer stocks of SMP or increasing domestic consumption will solve the problem of price volatility.
Kuldeep Saluja, managing director of Sterling Agro Industries Ltd, makers of the Nova brand of milk and milk products, said currently India is saddled with more than 1,00,000 tonnes of SMP which has been accrued because of duty-free imports in the last few years.
"Now, when milk prices have stabilised, there is no outlet to sell the stocks. Government should immediately give one-time susbidy of around Rs 30 per kilogram to enable private and cooperative milk companies to export SMP and get some liquidity," he said.
He said that unless the excess stocks of SMP are weaned off, the milk processors would find it extremely difficult to purchase milk in the coming flush season that starts from October. In the flush season, milk supplies usually increase. It lasts till March.
India’s annual milk production is estimated to be around 130 million tonnes, while demand is slightly more than that.
The Economic Survey of 2011-12 estimated domestic demand for milk to be growing at around six million tonnes per year, while incremental yearly production in the past 10 years was around 3.5 mt
