The Hindu Business Line : Casein exporters make hay despite SMP ban

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New Delhi Feb. 24 The Centre's decision to completely ban milk powder exports while still allowing shipments of casein has created an anomalous situation within the dairy industry.

The reason is that both casein and powder are derived from the same raw material, i.e., milk. In skimmed milk powder (SMP) as well as casein manufacture, the first stage is the same — of taking the milk and separating the cream out. The difference is only at the next stage of processing the skimmed milk.

For SMP, the skimmed milk is basically dried out to remove moisture, so as to leave behind only the powder part. (Buffalo milk typically contains 85 per cent water, 6 per cent fat separated out as cream and the balance 9 per cent solids-not-fat or SNF recovered as SMP.)

Casein, on the other hand, represents 80 per cent of the proteins in the milk. The 9 per cent SNF portion of milk contains around 3.5 per cent proteins (of which 80 per cent is casein and 20 per cent whey) and 4.5 per cent lactose (milk sugar), with assorted vitamins, minerals and enzymes making up the rest.

The process

To produce casein, the normal process is to extract it through controlled acid precipitation from skimmed milk. Along with casein, dairies also obtain whey protein concentrates and lactose as by-products.

The Directorate-General of Foreign Trade's notification, dated February 9, banning export of powder covers not just SMP, but also whole milk powder (WMP), baby milk powder and all other products under the tariff code `0402'. But there is no such prohibition with regard to casein, which falls under the code `3501'.

"If powder exports have been banned because of their causing so-called shortage and diversion of milk, why has the same logic not been used for casein?"sources pointed out.

During 2005-06, 10,800 tonnes of casein worth Rs 280 crore were exported, with these being 50,500 tonnes and Rs 500 crore for SMP and WMP. Currently, casein manufacturers process an estimated 35-lakh litres per day of milk for exports.

The anomaly does not end there. While the ban on powder exports has been extended even to shipments against past letters of credit (opened before February 9), casein exporters continue to enjoy an 8 per cent duty drawback benefit on the free-on-board value of their consignments.

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