Domestic dairies are seeking creation of a Government-funded buffer stock of skimmed milk powder (SMP) and fat (butter oil/ghee). This follows a surge in milk arrivals during the ongoing flush season, resulting from a production rebound after two years.

“This is the right time to do it, as animals produce more milk now. This surplus can be converted into solids that can be used for reconstitution during the lean summer months,” said Mr R.G. Chandramogan, CMD of Hatsun Agro Product Ltd, the country's largest private sector dairy company.

HIGHER PROCUREMENT

Most dairies are currently experiencing 15-20 per cent jump in procurement. Hatsun alone is today procuring 17 lakh litres per day (LLPD), against 14.25 LLPD at this time last year. The same goes for Gujarat Cooperative Milk Marketing Federation, which owns the ‘Amul' brand.

“We are now collecting 140 LLPD, with 122-123 LLPD coming from Gujarat and the rest from other States. Last year, at this time, we were doing roughly 120 LLPD, including 112-113 LLPD from Gujarat,” noted Mr R.S. Sodhi, Managing Director of India's No. 1 dairy concern.

Concurring with Mr Chandramogan's view, Mr Sodhi noted that the current surplus arrivals of milk had led to dairies in the North bringing down their purchase price by up to Rs 6 a litre since Diwali. “On our part, we have not reduced farmer prices,” claimed Mr Sodhi.

According to a Delhi-based private dairy company promoter, the current reduction in procurement prices may not be good, as it would discourage farmers from keeping animals, which would hurt milk production in subsequent years. “It happened in 2007, when we had a huge surplus and prices fell, leading ultimately to farmers investing less in their animals and India turning into an importer,” he recalled.

MSP FOR MILK

Creating a buffer, Mr Chandramogan said, will help provide some kind of a minimum support price for milk. “You can have a buffer for 45,000 tonnes, including 30,000 tonnes of SMP and 15,000 tonnes of butter oil. It doesn't require huge storage space, unlike wheat or rice. The stocks can be maintained at the dairies themselves, with the Government only meeting the working capital requirement of Rs 900 crore or so (at Rs 175/kg for SMP and Rs 240/kg) “, he added.

The buffer stock created from domestic milk will, in turn, obviate the need for imports during the lean season. “We are not in favour of imports at all, more so when there is so much milk within the country. There should be especially no imports at zero duty (as is currently allowed for 50,000 tonnes of milk powder and 15,000 tonnes of butter oil under the tariff rate quota),” said Mr Sodhi.

Currently, the landed price of imported butter oil is less than Rs 210 a kg, against corresponding domestic realisations of Rs 240 for ghee.

EXPORT BAN

Apart from permitting duty-free imports under TRQ, the Government has also banned exports of milk products, including casein. “There is no need to open up the export window right now. It would make better sense to, instead, create a buffer and then consider any decision to allow exports”, Mr Chandramogan felt.

The country's milk production suffered a huge setback from the severe drought of 2009. The effects of that year's monsoon failure were, however, felt only in 2010, with the earlier fodder deprivation leading to delayed calving of pregnant animals. The current production rebound, in turn, is said to reflect better feed-cum-fodder availability as well as stabilisation of the reproductive-cum-lactation cycle of animals that got disrupted from the 2009 drought.

> vishwa@thehindu.co.in

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