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Tuesday, June 02, 2020

Demand hit, dairy co-ops pay less for milk they buy

In Maharashtra, private dairies in districts such as Pune, Solapur and Osmanabad were paying a procurement price of up to Rs 32.50 per litre for cow milk with 3.5% fat and 8.5% SNF until early March.

Written by Harikishan Sharma , Parthasarathi Biswas | New Delhi, Pune | Updated: May 21, 2020 7:42:23 am
coronavirus, coronavirus latest updates, covid-19, coronavirus lockdown, coronavirus effect dairy sector, excess milk supply in dairies, indian express According to a statement by the Union Ministry of Fisheries, Animal Husbandry & Dairying last week, cooperative dairies are now procuring around 560 LLPD of milk, compared to 510 LLPD a year. (File Photo)

The Centre has claimed that cooperative dairies have not only stepped up procurement of milk in the post-lockdown period amid a demand collapse, but continued to pay farmers the “earlier declared rates”, or even increased their prices.

However, ground reports from at least two major states — Uttar Pradesh and Maharashtra — suggest quite the opposite: Not only private dairies, but even cooperatives have sharply slashed procurement prices in the last two months.

Read| Explained: How Covid has flattened prices, shifted demand curve for agri-commodities

Take the Mathura Dugdh Utpadak Sahakari Sangh Ltd (MDUSSL). This cooperative dairy union in Mathura district of UP was until March 8 procuring buffalo milk containing 6.5% fat and 9% solids-not-fat (SNF) from farmers at Rs 46 per kg.

That price, as per orders issued by MDUSSL accessed by The Indian Express, was reduced to Rs 44/kg effective from March 9 — and then to Rs 42 on March 14, Rs 40 on March 18, Rs 37 on March 23, Rs 34 on March 30 and Rs 30 on April 3. Only on April 25 was the procurement price raised marginally to Rs 31 per kg.

MDUSSL’s current procurement price of Rs 31/kg or Rs 31.93 per litre (the average weight of one litre of buffalo milk is about 1.03 kg) for milk with 6.5% fat and 9% SNF content is way below the Rs 55/litre that consumers are paying for full-cream milk.

Read| COVID-19 has taxed dairy farmers in many ways, also given them new insights

The latter, in fact, contains less fat (6%) and the same 9% SNF. MDUSSL incidentally, is also a supplier to major pouch liquid milk retailers such as Mother Dairy.

In Maharashtra, private dairies in districts such as Pune, Solapur and Osmanabad were paying a procurement price of up to Rs 32.50 per litre for cow milk with 3.5% fat and 8.5% SNF until early March.

At that time, the district cooperative milk producers unions of Pune (Katraj Dairy) and Kolhapur (Gokul Dairy) were procuring the same milk at Rs 31 and Rs 29 per litre respectively.

But after the announcement of the lockdown from March 24 — which led to the closure of hotels, restaurants, and tea shops along with no offtake from institutional consumers such as caterers, ice-cream makers and sweetmeat sellers — the same private dairies brought down prices to as low as Rs 19-20 per litre. While the Kolhapur union continued to pay Rs 29, the Katraj Dairy reduced its procurement rate to Rs 22/litre.

Subsequently, following the Maharashtra government coming out with a scheme to procure up to 10 lakh litres per day (LLPD) of milk from dairies for conversion into skimmed milk powder (SMP) and white butter, the Katraj Dairy as well as many private dairies started paying Rs 25 per litre.

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The Maharashtra government’s scheme was conditional upon dairies procuring at this minimum price from farmers.

Gokul Dairy is paying a slightly higher rate of Rs 27/litre. Again, this rate for milk with 3.5% fat and 8.5% SNF is much lower than the retail price of Rs 45 per litre for toned milk containing only 3% fat and 8.5% SNF.

“No dairy, private or cooperative, has raised procurement prices. If at all, they are paying less than what they were before lockdown. Only Amul (Gujarat Cooperative Milk Marketing Federation) is still giving farmers a rate of Rs 650-680 per kg fat, which translates into Rs 43.5-45.5 per litre for milk with 6.5% fat and 9% SNF milk,” sources in the dairy industry said.

According to a statement by the Union Ministry of Fisheries, Animal Husbandry & Dairying last week, cooperative dairies are now procuring around 560 LLPD of milk, compared to 510 LLPD a year.

At the same time, their liquid milk sales have dropped from 360 LLPD to 340 LLPD.

With private dairies cutting down on procurement due to the collapse of institutional demand, the surplus milk is going to cooperatives.

They are being forced to convert this excess milk into SMP, white butter and ghee, which, in turn, is resulting in a blockage of working capital.

To enable cooperatives to keep procuring milk and not reduce procurement prices, the Centre has decided to provide a 2 per cent interest subsidy on working capital loans taken by them from banks between April 1, 2020 and March 31, 2021.

They are also eligible for an additional 2 per cent subvention in case of timely repayment and servicing of interest, the statement said.

Till about mid-March, dairies were selling SMP at Rs 310-320, butter at Rs 290-310 and cheese at Rs 350 per kg. But these have now plunged to Rs 170, Rs 230 and Rs 225 /kg levels.

“The cheese market is roughly worth Rs 1,500 crore annually. Out of this, only Rs 250-300 crore is marketed in consumer packs and the rest sold to the likes of Domino’s Pizza, KFC/Pizza Hut and McDonald’s. Their businesses have been severely hit by the lockdown and, in turn, impacting dairies,” the sources said.— With Harish Damodaran

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