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"Mother Dairy will find it more viable to import whole milk powder, which contains 26 per cent fat and yet is quoting just $50 per tonne higher at around $1,800 per tonne."

New Delhi , Aug. 28

THE Agriculture Minister, Mr Rajnath Singh, on Thursday confirmed that the National Dairy Development Board (NDDB) would be importing up to 6,000 tonnes of milk powder in order to tide over the milk shortage in the national capital.

The imports would be made by NDDB's wholly owned subsidiary, Mother Dairy Foods Ltd. "Mother Dairy has obtained the licence from the Directorate-General of Foreign Trade (DGFT) to import up to 6,000 tonnes, which includes both skimmed as well as whole milk powder. It is for NDDB/Mother Dairy now to decide the timing of the imports," said Ms Binoo Sen, Secretary, Department of Animal Husbandry and Dairying.

The DGFT's licence is mandatory since milk powder imports are covered by the Tariff Rate Quota (TRQ) regime, under which imports of up to 10,000 tonnes are permitted at 15 per cent duty, with quantities beyond these attracting 60 per cent rate. Currently, skimmed milk powder (SMP), containing 1.25 per cent fat, of European and Oceania origin are quoting at around $1,750 per tonne f.o.b. or Rs 80 per kg. Inclusive of the 15 per cent duty, freight and handling costs, the final price would come to over Rs 95 per kg.

Industry sources, however, feel that Mother Dairy would, instead of SMP, find it more viable to import whole milk powder (WMP), which contains 26 per cent fat and yet is quoting just $50 per tonne higher at around $1,800 per tonne. WMP imports would enable Mother Dairy to meet its supply requirements for not only fluid milk, but also products such as butter and ice cream. The only problem is that whole powder has a low shelf life and the high fat content induces rancidity in the absence of cold storage.

But the sources wonder where the imports would come from? Europe is now going through a period of unusually high temperatures, which has badly impacted milk production, while Australia is still recovering from one of its worst droughts. That leaves New Zealand, which, at the start of its calving season now, has stocks just about enough to fulfil existing export contracts.

"Spot availability of powder is extremely limited and it will be very difficult to place orders for 5,000-6,000 tonnes without pushing world prices further. Already, over the last year, prices have soared from $1,250 to $1,750 per tonne," the sources said. The second issue is the timing, which is important since that the flush season for milk production here is just two months away.

Ms Sen, however, said Mother Dairy would be able to import "within 10-15 days time". The last time India imported significant quantities was in 1999-2000 and 2000-01, when a total 18,000 tonnes of powder and 11,500 tonnes of butter oil was cumulatively imported.

One view is that Mother Dairy is using the 6,000 tonne import licence simply to `test the market' and also as a bargaining tool with the Gujarat Cooperative Milk Marketing Federation (GCMMF or Amul). Mother Dairy had, on Wednesday, bought 1,000 tonnes of SMP from Amul at a reported contract rate of Rs 94 per kg or about Rs 97.50, after adding freight and taxes. This is almost equal to the landed price for imported powder at today's rates. Mother Dairy is expected to purchase another 9,000 tonnes from Amul in the coming days.

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