The dairy industry in Andhra Pradesh is facing a serious challenge this year — the problem of plenty. Dairy firms are running at full storage levels, unable to take any more load. Milk procurement prices have dipped by Rs 5-6 the last two months, making prices unremunerative for the dairy farmers. The State produces 8 per cent of the country’s total milk production of 127 million tonnes.

Though procurement prices crashed from Rs 32 to Rs 26 a litre, there is no change in purchase price for the consumers.

The crisis is so severe that the Government had announced a ‘milk holiday’, proposing to stop procurement for a few days in a month. However, fearing a backlash, it withdrew the decision.

The industry feels the present problem is temporary. But the larger challenge is to be tackled at the national level. “It is a cascading chain reaction after the country banned export of milk powder two years ago. Though we lifted the ban, it was not of much help because milk prices have crashed globally,” Bhasker Reddy, President, AP Chapter, Indian Dairy Association (IDA), told Business Line .

The prices of skimmed milk powder (SMP) have plummeted to Rs 140 a kg, while the cost of production is Rs 200. The country is now saddled with stocks of 1.5 lakh tonnes of SMP.

“Consumer price has not come down because of the poor SMP price. We need to build extra capacity to handle situations like these. We should also do away with erratic (export ban) policy in order to sustain trust in the international market,” he said. In Andhra Pradesh, the Government should reduce VAT from 14 per cent to 4 per cent, as in other States, Mr Reddy, who is also Managing Director of Creamline Dairy Products, said.

kurmanath.kanchi@thehindu.co.in

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