Faced with ample stocks of skimmed milk powder (SMP) amid demand disruption in the bulk consuming sector, largest dairy player Amul has approached the Gujarat government seeking a ₹160-crore financial incentive to export the surplus stocks.

The Gujarat Cooperative Milk Marketing Federation (GCMMF), which markets the Amul brand of milk products, has approached the Gujarat government for an export incentive on a similar lines of what was granted in later part of 2018.

RS Sodhi, MD, GCMMF, recently met Gujarat Deputy Chief Minister Nitin Patel to appraise him about the SMP stock situation and the price impact on the milk producers and sought State support.

“The demand scenario is bleak as there is not much off-take from the bulk segment such as hotels, restaurants, cafes as gatherings, marriages, parties are not happening. However, consumer product demand is growing well, but the bulk segment is not growing. And we have collected record milk during the lockdown period and converted it into SMP and white butter. Now, there is about 1.25 lakh tonnes of stocks of SMP available in the country,” said Sodhi told BusinessLine .

During the lockdown period, Amul had procured additional 40-50 lakh litres of milk from producers, but due to insufficient bulk demand, it is now sitting on SMP stocks of about 80,000 tonnes.

Price crash

SMP prices have seen a sharp decline from a peak of ₹330 per kg before the lockdown in December 2019-January 2020 to about ₹130 a kg in June.

According to Sodhi, a glut situation in SMP results in a price crash in the SMP, which will eventually hurt milk procurement prices as the dairies would cut down on procurement prices to avoid losses. “This may hurt the farmers as there may be a dip in milk prices for producers,” said Sodhi.

In order to keep farmers’ income intact and allow surplus SMP shipped outside India, the dairy major has sought export incentive from the State.

Notably, global SMP prices as quoted by Global Dairy Trade (GDT) have recovered from lows of $2,373 per tonne on May 5, 2020 to $2,609 on June 16, 2020.

In July 2018, the Gujarat government had incentivised SMP exports by announcing financial assistance of ₹50 per kg for a period of six months with a ceiling of ₹300 crore. The decision was aimed at pushing out 60,000 tonnes of SMP during the given period. India was saddled with over 200,000 tonnes of SMP inventory at that time with prices at ₹135 per kg.

India’s annual SMP consumption is estimated at 5,00,000 tonnes against the production of 6,00,000 tonnes — of which a majority is spread between cooperatives of Amul and Karnataka Milk Federation’s Nandini dairy while some portion comes from private players based in Delhi and Maharashtra.

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