This year has so far failed to bring cheer to the dairy industry in Maharashtra. The extended flush season has added to the woes of the industry already reeling under low commodity prices. With around 10 per cent more milk being produced as compared to last year, dairies are now worried about further reduction in the farmer’s price. For the last few months, procurement prices of milk has become a bone of contention between farmers and dairy firms in Maharashtra. Dip in international prices of skimmed milk powder (SMP) and white butter has seriously corroded the profitability of the firms who have started slashing procurement prices of milk at the farmers’ end. None of the dairies in the state are currently paying the government decided rate of Rs 27 per litre for 3.5 per cent fat and 8.5 SNF (solid not fat) milk. Procurement prices range from Rs 19-21 per litre in Pune, Ahmednagar to Rs 25 per litre in Kolhapur and Sangli.
To add to their woes, dairy farmers are now reporting almost a 10 per cent increase in milk production despite the start of summer. At the onset of the summer season, milk production normally goes down by about 15-20 per cent, as animals stop lactating naturally. This shortage in supply normally comes due to higher demand for dairy-based frozen products. Dairies, normally, use conserved store of SMP to meet this demand. Farmers, too, normally get a premium for milk in view of the increased demand. On an average, Maharashtra reports more than 1 crore litre of milk procurement in a day.
However, this year, the summer months have not seen any reduction in milk production. Vishwas Patil, chairman of the Kolhapur district milk union(owner of the brand Gokul), said the 10 per cent excess milk has upset many calculations. The union, which reports procurement of 10.64 lakh litre per day, is by far one of the better pay masters as they are still paying Rs 25 per litre to dairy farmers. Patil, however, said going forward things do not look very optimistic given the low prices of SMP and white butter.
SMP rates at globaldairytrade — the online auction platform of New Zealand’s dairy giant Fonterra — are currently averaged at $2,051 per tonne. This shows a slight improvement from the $1,913-per-tonne it fetched last March. However, dairy owners said the present price that translates into below Rs 150 per kg does not make export sense, as the production cost of a kg of milk powder is about Rs 180.
Vinayakrao Patil, president of the Maharashtra Cooperative Milk Producers’ Union, said without subsidy exports are not possible. Patil particularly rued the lack of government support towards the dairy sector. Citing the example of neighbouring state Karnataka, Patil said they had asked for a Rs 5 per litre subsidy for the dairy farmers to help dairies tide over the low prices. “However, the state government has failed to respond to it,” he said.
Similarly, Patil added that the Rs 5,000-crore corpus created by NABARD to help cooperative dairies has failed to help any player as the proposals were yet to be finalised. “The corpus will be charging interest of 6 per cent to the beneficiaries but the proposals are yet to reach New Delhi. Like other promises, this one, too, is yet to see the light of the day,” he said.
Some of the dairy players, however, said the time had come to redefine the way they did business. Rajiv Mitra, managing director of the Phaltan-based Govind Milk and Milk Products, said they would be stressing more on products than commodities. “Backed by a robust pan-India distribution, the chain we will be focusing more on products,” he said.