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Sunday, July 15, 2018

White Truth: Milk turns sour for farmers on back of record powder stocks with dairies

The dairies are blaming the current situation on the crash in international skimmed milk powder (SMP) prices.

Written by Parthasarathi Biswas | Puntamba (maharashtra) | Published: January 18, 2018 2:48:39 am
Dairy farmer Nitin Dhanvate from Puntamba village of Ahmednagar district, Maharashtra. (Express Photo: Partha Sarathi Biswas)

Since early September, Nitin Dhanvate’s dairy farm business has gone for a toss. Till around then, the 33-year-old from this village in Ahmednagar district’s Rahata taluka was receiving Rs 28 per litre for the milk containing 3.5 per cent fat and 8.5 per cent SNF (solids-not-fat) he was supplying to Prabhat Dairy Ltd. But today, that price has dipped to Rs 22.50 per litre.

Dhanvate’s four cows give him an average 40 litres daily, which, at Rs 22.50 a litre, generates a monthly revenue of Rs 27,000. “But I spend Rs 24,000 towards dry fodder, feed concentrate and supplements for my eight animals, including calves and young heifers. What does it leave me with?” asks this farmer, who also grows lucerne and alfalfa green fodder on two out of his four-acre holding. “My losses would have been more had I been purchasing green fodder, too,” he notes.

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Dhanvate was among the many who participated in the “Shetkari Sampa” or state-wide farmers’ strike that rocked Maharashtra in early June. He, along with other farmers of Puntamba — the village that spawned the week-long stir — stopped supplying milk to Prabhat Dairy’s local collection centre. Farmers were actually getting Rs 28 per litre then, though the rate had fallen as low as Rs 18 only six months earlier. The strike was called off when the state government agreed to implement a minimum procurement price of Rs 27 per litre. “It looks we will have to strike again,” says Dhanvate, who had to sell one of his cows last month. “If prices don’t improve, I may have to further reduce my herd strength,” he sighs.

Dhanvate is relatively lucky. Dairies in Pune districts are paying Rs 19-21 per litre for the same milk of 3.5 per cent fat and 8.5 per cent SNF. The Kolhapur district milk union is procuring at Rs 25, but only from its farmer-members; non-members are getting Rs 21-22. Most cooperatives are offering Rs 21-23, below the government’s declared Rs 27 rate.

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The dairies are blaming the current situation on the crash in international skimmed milk powder (SMP) prices. SMP rates at globaldairytrade, the New Zealand milk processing giant Fonterra’s online auction platform, averaged $ 1,818 a tonne on Tuesday, compared to $ 2,612 a year ago and the record $ 5,142 on April 2, 2013. It has made SMP exports from India — these have plunged from 1.3 lakh tonnes (lt) to 16,100 tonnes between 2013-14 and 2016-17 — unviable.

“We annually produce 5 lt, of which 4 lt is consumed domestically. The balance one lt was getting exported, which has now virtually stopped. The surplus powder is getting accumulated, forcing us to either curtail milk procurement or slash prices,” observes Vinayakrao Patil, chairman of the Rajarambapu cooperative dairy near Sangli. Indian dairies are expected to have about two lt of carryover SMP stocks in March-end, which, Patil fears, will put further pressure on prices in the coming fiscal.

But global prices apart, there is a significant “domestic” factor as well. And that has to do with the Karnataka government’s Rs 5-per-litre “incentive” to farmers supplying to cooperative dairies in the state. It has led to procurement by unions under the Karnataka Cooperative Milk Producers’ Federation (KMF) more than doubling from 32.47 lakh kg per day (LKPD) in 2008-09 to over 72 LKPD in the current fiscal. While benefiting an estimated 24 lakh-plus milk producers of Karnataka, the subsidy has, however, hit the industry in other states — and farmers like Dhanvate.

“Because of the Rs 5/litre subsidy, KMF unions are paying Rs 20-20.5 to farmers and, in turn, depressing milk prices elsewhere. The Karnataka farmer is getting Rs 25-25.50 per litre inclusive of the subsidy, but we are able to pay only Rs 21 or so. The subsidy is also allowing KMF to sell toned milk (3 per cent fat and 8.5 per cent SNF) to consumers in Bangalore at Rs 35/litre, whereas it is retailing at Rs 37 in Chennai, Rs 40 in Mumbai and Ahmedabad, and Rs 42 in Delhi,” avers a Pune-based private dairy industry source. The incentive to milk producers is estimated to cost the Siddaramaiah-led Congress government in Karnataka over Rs 1,300 crore in 2017-18. Besides, another Rs 700 crore has been budgeted for Ksheera Bhagya, a scheme that provides 150 ml of free milk for 5 days of the week to 1 crore-plus schoolchildren across the state.

“All this may come useful for the Assembly elections (scheduled in April-May), but why should farmers in other states suffer? If the Karnataka government wants to pay Rs 5 per litre more, why can’t it simply increase the retail price to consumers? The beggar-thy-neighbour policy has not only enabled KMF to produce SMP Rs 50/kg cheaper and depress prices overall, but even sell two lakh litres of pouch milk daily in Mumbai within a short time span,” alleges the source.

While expecting the Siddaramaiah administration to change its dairy policy may be too much, R S Sodhi, managing director of the Gujarat Cooperative Milk Marketing Federation (Amul), believes that the current glut situation is serious enough to warrant the creation of a Centre government-funded buffer stock. “It has been done in the past through the National Dairy Development Board. A buffer stock of 40,000-50,000 should help stabilise market prices,” he states.

However, R G Chandramogan, chairman of India’s largest private dairy company Hatsun Agro Product Ltd, feels that buffer stock alone isn’t enough. “Prices will not go up if the procured SMP remains within the country. The Centre should, instead, buy one lt of surplus powder from cooperatives at Rs 175-180 per kg (as against the market price of Rs 135-140) and this entire quantity be given to neighbouring countries free of cost. What I am proposing will hardly cost Rs 2,000 crore, which a single state (Karnataka) is already now spending,” he points out.

With additional inputs from Harish Damodaran in New Delhi

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