The recent announcement by the Tamil Nadu Government to increase milk procurement prices has come at a time when prices of milk and milk products are crashing in other markets, including international markets. This may not augur well for farmers as at this rate, private milk processing units, which procure bulk of the milk produced in the State, may turn to neighbouring markets for their requirement, say industry experts.

According to them, the farm-gate price of milk (of comparable quality) is lower in most other States, including Karnataka, Maharashtra, Delhi, Haryana and Rajasthan. Besides, since October-December is the flush season, milk is available in abundant quantity in those States now. Hence, private processors may procure from these States, leaving Tamil Nadu farmers high and dry.

The Tamil Nadu Government recently announced an increase in price by ₹5 and ₹4 for cow and buffalo milk, which will take the procurement price to ₹28 a litre for cow's milk and ₹35 for buffalo's milk. Private milk processors pay at least ₹25 a litre to the farmer. Though the revision is done with good intention, the timing seems inappropriate, says R Rajasekaran, Secretary, Tamil Nadu Dairies Association.

In Tamil Nadu, the government procures less than 25 per cent of the total milk produced in the State, with the rest being absorbed by private players. “If farmers in the State demand even the similar price the Government has agreed to pay, we would not be able to do it as it will not be commercially viable for us at this time,” he said.

If brought from other States in tankers, it would work out to less than ₹27 a litre now, Rajasekaran says.

According to Vivek Nirmal, Managing Director and CEO, Prabhat Dairy Pvt Ltd, Maharashtra, the farm gate price of milk in Maharashtra is ₹24 a litre. Last year prices started going up and the rally continued till recently. “But, we are now considering to reduce the price to ₹22 a litre, since prices in neighbouring markets are down and also this being flush season, every market has excess supply.”

He added that with the realisation value coming down, as the international prices of milk solids and fat are crashing and there is no recovery in sight, it may not make sense to increase inventory to process for exports. For example, he says, the price of skim milk powder in the international market is hovering around ₹150 a kg, while the same is being sold for upwards of ₹200 in India.

According to him, in the northern states such as Delhi, Haryana and Rajasthan, the procurement price is still lower. Since it is buffallo milk, which is high in milk solids, the prices are not directly comparable. But, diluted to comparable solid level, it would be around ₹20-21 a litre.

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