Centre to look at more export markets to tackle dairy glut

With a milk glut hitting the domestic dairy sector, the Commerce Ministry has decided to carry out an analysis of new export markets that dairy companies could tap to offload their rising skimmed milk powder (SMP) stock.

The dairy companies have also sought higher compensation under the duty reimbursement schemes for exports, the Merchandise Export from India Scheme (MEIS), to make their products viable in the global market where prices are ruling low, a government official has said.

“Exports of SMP have dried since 2013-14 because of falling global prices. India’s traditional markets such as UAE, Pakistan, Bangladesh, Nepal, Bhutan and also, to some extent Africa, are buying more from competing countries such as Australia and New Zealand,” the official said.

The primary reason for the crisis in the dairy sector is the stock of over 1.5 lakh tonnes of milk powder that the industry is struggling with. With the dip in procurement price of milk throughout the country, there are farmer protests in many States, including Maharashtra and Gujarat.

Setting eyes on China

A delegation from the dairy industry recently met Commerce Ministry officials seeking help to explore alternative markets, including China.

“China doesn’t import dairy products from India as its quality department has not made any effort to examine and approve dairy plants in the country from where exports could take place. The Indian industry is keen to supply to China. The Commerce Ministry is in talks with the Chinese government on the matter,” the official said.

Export sops

There are other markets too such as Russia where exports could take place, the official said. “We will do an analysis of the countries which purchase SMP and where it would be feasible for Indian exporters to supply. While low global prices is the primary issue of concern, we hope that with the recently-announced support for exporters in the form of duty reimbursement under the MEIS, the prospects would be better,” the official said. Exporters are also seeking higher compensation under the MEIS scheme, currently fixed at 10 per cent of export value, as they say that it is not enough to make a difference.

According to industry figures, the global prices of SMP — similar to the one produced in India — is about ₹120 per kg compared to domestic price of ₹150 a kg. The domestic cost of production is even higher at ₹200/ kg.This means that already the industry is selling at a loss in the domestic market. The global prices are even lower, making it very difficult for Indian industry to penetrate it.

“Dairy companies are demanding higher compensation under MEIS. The delegation that visited Commerce Ministry made a case for it. However, this is a call that the Finance Ministry will have to take,” the official said.

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