Milk down the drain

A ban on exporting skimmed milk powder has hit dairy farmers in Tamil Nadu. They are now left with surplus milk that nobody wants to buy

It was a routine policy decision that ended up with a lot of milk flowing down the drain in Tamil Nadu. In February, a severe shortage of milk forced the Centre to ban the export of skimmed milk powder SMP. Six months on, milk production stabilised but the ban stayed and the state doesn8217;t know what to do with its overflowing milk supplies 8212; reports say some farmers are dumping their stocks into rivers.

The only way to preserve surplus milk is to convert it into milk powder. But this is where Tamil Nadu8217;s problems begin. The state has a poor SMP processing capacity. While its milk output is 54.74 lakh tonnes a year, its SMP capacity is only 100 tonnes a day. Gujarat, with an output of 69.6 lakh tonnes, has a processing capacity of 160-200 tonnes in each district.

8220;We used to sell our surplus to dairies in Andhra, but now even they don8217;t want it since their milk powder stocks are piling up,8221; says Suresh, manager at Winner Dairy in Pondicherry.

On February 9, following a shortage of milk and milk powder in north and western India, the government banned the export of SMP. The shortage was brought about by heavy rains in some parts of India last year. In the months that followed, producers tackled the shortage by converting milk powder into liquid milk. The milk industry relies heavily on milk powder during lean seasons.

All this while, SMP prices climbed steadily in the international market, spurred by a shortage of skimmed milk powder. India, whose milk powder exports touched a high of Rs 41,844 crore in 2005-6, had to stop its exports as stocks of milk powder at home were fast depleting and SMP prices went up to nearly Rs 145 a kg in January.

The ban stablilised prices somewhat. But it is the present flush season that has created a glut in the domestic market, pushing SMP prices down to Rs 122 a kg.

Government sources say they have begun talks on reviewing the ban. 8220;So far, there has been no consensus among dairy cooperatives and federations,8221; said S. Rawala, the joint secretary in charge of dairy in the Ministry of Agriculture.

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The ban was to be in force till September 30 and there are little indications that it will be reversed sooner than this deadline 8212; despite reports of good milk supply.

8220;I lost Rs 7,800 today when I donated 550 litres of milk that I usually supply to the company,8221; says Govindasamy, a dairy farmer from Kargonam in Tiruvannamalai.

SMP production is a capital-intensive business that requires an investment of nearly Rs 6 crore. Large operators, fearing an SMP glut, do not convert milk from smaller operators into SMP, even for a fee. 8220;We don8217;t run the SMP plant at full capacity since piling stocks and low demand are blocking working capital,8221; said the manager of the largest private SMP producer in TN and the third largest exporter in India, exporting nearly 7,000 tonnes before the ban.

But smaller producers like Suresh say they have no option but to get the surplus converted from dairies in Andhra, 8220;which process our milk at the rate of one tanker every three days8221;.