Mother Dairy’s move to hike milk prices surprises many

Mother Dairy’s move to hike milk prices by four per cent has caught everyone by surprise.

The hike comes at a time when skimmed milk powder (SMP) prices have crashed and the monsoon deficit has shrunk.

More importantly, it is just ahead of the ‘flush’ season when production shoots up.

“It looks they are saddled with huge stocks of skimmed milk powder (SMP), which they are unable to dispose of.

“They seem to have increased liquid milk prices just to cover these losses,” an industry source told Business Line .

Mother Dairy, which sells more than 30 lakh litres of milk in the National Capital Region accounts for more than half of the packaged milk sales.

SMP stocks

Sources said that Mother Dairy currently holds SMP stocks of some 40,000 tonnes, valued at about Rs 600 crore at Rs 150 a kg.

However, S. Nagarajan, Managing Director, Mother Dairy, disputed this figure and estimated the company’s SMP stocks at 22,000-24,000 tonnes.

Nagarajan attributed the hike in prices to the rise in logistics, packaging, power and procurement costs.

Milk procurement

Mother Dairy procures milk from as far as Andhra Pradesh and Gujarat, besides Uttar Pradesh and Punjab.

Stating that the company has held on to the prices over the past one year, Nagarajan said: “Mother Dairy has caught up with Amul, after almost six months in terms of increasing prices.” Amul had made a price hike in April this year.

“There is no basis for hiking the prices, as prices of both powder and milk have come down compared with a year ago.

“The hike is inflationary and anti-consumer,” said Kuldeep Saluja, Managing Director of Sterling Agro Ltd, a skimmed milk powder supplier to Mother Dairy.

SMP itself is today available at Rs 140-150 a kg against Rs 185-190 a year ago.

Milk price

Dairies in North paid up to Rs 31 a litre to farmers during the peak season, which has now fallen to Rs 26 in case of full cream milk containing six per cent fat.

Mother Dairy retails full cream milk now at Rs 39 a litre.

Production shoots up

“We are going to enter the flush season, when the animals will start yielding more milk, which would push prices still lower,” sources said.

They said Mother Dairy miscalculated the extent of rebound in milk production in 2011-12, following a squeeze in supplies the previous year forcing dairies to effect huge increases in procurement prices.

import spree

National Dairy Development Board, through which SMPs are channelised, went on a huge import spree last year, contracting up to 50,000 tonnes at an average landed cost of Rs 185 a kg.

But as domestic milk production staged a spectacular recovery, dairies got saddled with huge unsold inventories, forcing the Government to lift the ban on exports of both casein and SMP recently.

Last week, the Government told Parliament that demand for milk powder in 2012-13 is estimated at 88,000 tonnes against current availability of 1.12 lakh tonnes.

In a written reply, the Minister of State for Agriculture, Charan Das Mahant, told the Lok Sabha that the current stock of milk powder with federations, Mother Dairy (Delhi) and NDDB is around 1.11 lakh tonnes.

Rise in procurement

Ahead of the flush season, which typically starts in October, dairies mainly in areas hit by dry spell in Gujarat, Maharashtra and Karnataka have witnessed a 10-25 per cent rise in procurement.

This is mainly because farmers prefer to sell more milk in a drought-like situation since it becomes their only source of income.

> vishwanath.kulkarni@thehindu.co.in

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