Skimmed milk powder rates up Rs 20/kg since July

Harish Damodaran

Cause for worry

SMP prices

ruling at a record Rs 120-122 a kg.

Ghee selling

at Rs 2,320-2,330 per 15 kg tin.

Mother Dairy's

procurement 8-9 LLPD against sales of 20-21 LLPD.

New Delhi, Aug 29

After wheat, pulses and edible oils, it is milk that is causing worries in the run-up to the festival season.

Wholesale prices of skimmed milk powder (SMP) in Delhi are currently ruling at a record Rs 120-122 a kg, with bulk ghee selling at Rs 2,320-2,330 per 15 kg tin or Rs 154-155 a kg.

Since July, SMP rates have gone up by around Rs 20 per kg, while ghee prices rising by Rs 15 a kg.

`Never before'

"Never before have SMP prices crossed Rs 120 and wholesale ghee prices Rs 150 a kg," said Mr Kuldeep Saluja, Managing Director of Sterling Agro Industries Ltd, which makes the Nova brand of ghee and other dairy products. At Rs 120 a kg of powder and Rs 155 a kg of ghee, the equivalent milk price (for six per cent fat and nine per cent solids-not-fat) would be Rs 21.15 a kg or Rs 21.78 a litre without deducting for processing costs and various overheads.

Current realisations

Even if these costs are accounted for, the current realisations on SMP and ghee make it viable for dairies to pay Rs 19-20 for a litre of full-cream milk at the dock and still make a killing.

Small wonder that farmers are selling most of their milk to private dairies, which are paying a rupee or so more than the co-operatives. And that, in turn, has hit liquid milk supplies.

According to industry sources, the National Dairy Development Board-owned Mother Dairy's milk procurement is now just 8-9 lakh litres per day (LLPD) against sales of 20-21 LLPD in the National Capital Region.

Normally, at this time, it would have been procuring 14-15 LLPD and meeting the rest through stocks of powder built up during the `flush' months. But now, not only has Mother Dairy's procurement fallen by 6-7 LLPD, it has also run out of stocks.

Lack of stocks

"The trade knows that it has no stocks. And that is what is driving up prices," the sources said.

The current situation is expected to continue at least till Diwali (third week of October 22). "After that, we might see some easing because supplies would also improve with the start of the flush season," said Mr R.S. Sodhi, General Manager, Gujarat Co-operative Milk Marketing Federation.

Liquid milk shortage

There are others who blame the current liquid milk shortage on Mother Dairy.

"Our co-operative dairies in Rajasthan were supplying Mother Dairy 3.5 LLPD, but we stopped when we were being given just Rs 13.50 a litre. Instead, we are selling 1.5 LLPD milk in Delhi under our own Saras brand and marketing the rest within our State," said Mr Ram Chandra Choudhary, Chairman of the Ajmer district milk union.

Contracting imports

With Rajasthan stopping supplies, Mother Dairy is now having to source powder from even private dairies such as Sterling, VRS Foods (Paras brand) and Bhole Baba Milk Food Industries (Krishna).

There is even talk of it contracting imports, though at current international prices of $2,200 a tonne and 15 per cent duty, it may be a costly option.

(This article was published in the Business Line print edition dated August 30, 2006)
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