Mother Dairy, one of the biggest sellers of milk in north India, resorted to repeated increase in price of milk, followed by hike in rates by private dairy Gopaljee Ananda right in the middle of flush season of 2013-14.
This has divided the Indian milk sector with private sector putting the blame on inefficient procurement by state-run firms as well as cooperatives, and the other camp attributing it to incentives given on exports of skimmed milk powder (SMP).
Some private milk companies alleged that the hike was because of mismanagement on part of Mother Dairy. Mother Dairy and others charged that incentivised export of SMP has pushed up the procurement cost of milk forcing them to increase retail prices in the year when production is expected to be around 133 million tonnes, more or less same as the record in 2012-13 .
Mother Dairy increased its retail price of all milk variants by Rs 2 per litre in October 2013 and further hiked it by another Rs two a litre in the National Capital Region last week. Gopaljee Ananda, one of the leading private milk companies, too raised its retail price by a similar amount on Tuesday.
Typically, supply of milk is at its maximum during October-March. The period also provides a window to milk producers to purchase fresh milk and convert it into SMP for the lean season which starts from April.
However, this year around, officials said procurement price of milk mainly in North India has risen to almost Rs 35-40 per kg against expected Rs 29-30 per kg forcing them to hike the retail rates.
Last year during the December-January period procurement price of milk in North India was around Rs 25-26 per kg.
“All this is because of sharp increase in SMP exports. This year we expect SMP exports to be around 150,000-170,000 tonnes, much more than last year which is why procurement price is seeing a considerable increase,” a senior official from a leading North India based state-run Milk Dairy said.
He said the 5% export incentive announced by the government in February 2013 should be immediately withdrawn as it is encouraging private companies to procure milk at higher prices.
Contesting the view, Kuldeep Saluja, managing director of Sterling Agro Industries, makers of the Nova brand of milk, said India will become a net importer of milk, if companies hesitate in paying a good price to farmers as domestic production is growing annually at 4-5%, while demand for milk is rising in the country at the rate of 10-11% per year.
“It is solely because of inefficiency of some state-run companies that they are paying higher price for milk and feeling the pinch,” Saluja said.
He said good SMP exports have helped farmers get fair prices or else prices would have dropped to around Rs 16 per kg in the flush season. “State-run companies should have purchased milk in June and July and not in November and December. Moreover, milk procurement prices increase almost Rs 4 per kg every year in North India and 2013-14 is no different,” Saluja said.
R G Chandramogan, Chairman and Managing Director of Hatsun Agro Product Ltd said it is a false notion that SMP exports is pushing up milk procurement prices as exports are just 0.6% of the country’s total milk production which is estimated at 133 million tonnes in 2013-14.
“The increase in milk procurement price is mainly due to high fodder cost for the farmer. Inflation in all items has seen an increase in 2013-14 and milk is no different,” Chandramogan said. He said if export incentives are withdrawn from SMP, normal growth in India’s annual milk production might suffer.
Source: Business Standard