After barring imports for 3 decades, Lanka looks at Delhi for milk

Ahmedabad, April 8 Tables have turned for Sri Lanka. Once averse to allowing access to Indian dairy players, the island nation is now desperately giving feelers to dairy players and the policy makers in New Delhi to bail it out from the current milk crisis.

Multiple trade sources confirmed to BusinessLine that the trade partners from the island country are looking to strike a deal with India to ease its dairy products shortage. Indian cooperative dairies, on the other hand, have expressed their willingness to supply the required quantities to the beleaguered neighbour, but not so easily.

Faced with severe economic crisis, Sri Lanka is running short on all essential items, most of which are imported, including milk powder. The prices have sky-rocketed to Sri Lankan rupee 1,500-2,000 a kg in retail markets, practically going out of the reach of common man.

Notably, insiders informed that Sri Lanka had imposed barriers on Indian dairy products imports to protect its local market and cartels. The estimated size of the Sri Lankan dairy market is $400 million, of which the majority is catered to by New Zealand and Australia's dairies. This has left only thin, product-specific space for Indian suppliers.

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‘Temporary opportunity’

India's largest dairy player Amul sees a possibility to reach out to the Sri Lankan market, but with strings attached. "As far as commodities (WMP or skimmed milk powder) are concerned, we have no issue (to supply). But we need to think long term as they have Free Trade Agreements with other supplier countries. We can't go there (Sri Lanka) as a temporary measure," said RS Sodhi, Managing Director, Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF), Amul marketer.

Notably, in late 1990s Sri Lanka had pushed away National Dairy Development Board (NDDB), which had extended a helping hand to the country in building their dairy cooperative structure.

Advocate and policy expert Vijay Sardana stated that while India has extended a $1 billion credit line to Sri Lanka for daily necessities like medicines etc, “they can approach the Commerce Ministryand NDDB to allow the purchase of dairy products through this line of credit.

“Sri Lanka must know that the trade will not be the same anymore, they will have to change their policies from what they did in past,” he said, adding that it would require India to make a bargain for the sustenance of Indian dairy players in the Sri Lankan market in future after things turn normal.

Cautious players

NDDB Chairman Meenesh Shah believes that a country like Sri Lanka can't depend for long on imported dairy products. "NDDB was given the task of developing a dairy cooperative model in Sri Lanka. Initially, it went well, but the programme had to be suspended due to various factors including strong local resistance," said Shah, who was part of the NDDB team overseeing the Sri Lankan Joint Venture of NDDB and Kiriya Milk Industries of Lanka Ltd.

"Now, only a government-to-government channel can decide about the fate of dairy products supplies and the future of Sri Lanka's dairy sector. Indian dairies can access that market but only if there is a level-playing field," said Shah.

However, neither NDDB nor Amul or other dairies have received any communication as yet from the Indian authorities regarding possible dairy products demand from Sri Lanka.

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