Budget 2020 receives mixed response from dairy companies

Budget 2020 receives mixed response from dairy companies

One of the reasons the government would have given importance to the dairy sector is because of the shortage of milk and drastically low levels of SMP (skimmed milk powder)

The Union Budget announced a host of incentives to benefit the dairy industry. Apart from talking about doubling milk processing from the current 53.5 million metric tonnes to 108 million metric tonnes by 2025, the Union Budget has announced initiatives such as Kissan Rail, which will have refrigerated coaches to transport perishable goods such as milk. While Kissan Rail has been lauded by the industry, there is mixed response about the announcement of doubling the milk processing.

"Doubling milk processing needs back-end and technological inputs to the dairy sector such as investment in small dairy farms with mechanisation, sileage production and milking machine along with investment in improving breeds. We can't double the production without doubling the productivity as India has most number of cattle and livestock with minimal productivity," points out Rahul Kumar, CEO Lactalis India. He says that the government should instead have a special cattle loan scheme. "There is no issue of making investment in dairy processing, the issue is how to produce double the milk with same resources," he adds.

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Similarly, a senior dairy industry expert wonders whether the government will allocate funds to step up milk processing facilities or would merely give the dairy companies a loan. "If it's the latter, I am not too sure if it will work. NABARD offers a loan for milk processing and there are hardly any takers as the cooperatives or private companies need to mortgage their property, which they aren't prepared to."

One of the reasons the government would have given importance to the dairy sector is because of the shortage of milk and drastically low levels of SMP (skimmed milk powder). While the early part of 2019 saw a surplus of SMP (India had exported 2 lakh metric tonnes of SMP) and a dip in milk prices, in the latter half there has been a shortage and prices have increased from Rs 120 per kg to Rs 350 per kg. The prices of raw milk have also gone up by Rs 4-5 per litre. "Unseasonal rains and drought have led to a shortage," explains the dairy industry expert. In fact, several private dairies are also considering exporting milk powder from New Zealand as there is a distinct price advantage.

However, R.S. Sodhi, MD, Amul, rubbishes the chatter around shortage of milk or SMP. "There is no shortage," he says. Milk prices according to him have now reached realistic rates. "The only people who are crying are the milk processors because they got used to buying SMP at rock bottom prices at the expense of the farmer. In the last three years, most of them have made good money, but now when the prices have reached realistic levels they are complaining. There is no shortage, the private dairies are cooking stories so that they can import."

The independent dairy expert says that the stronger cooperatives such as Amul and Nandhini are against import of SMP as a significant part of their revenue comes from selling SMP to the private dairies.

Commenting on the Budget, Sodhi of Amul said that it is a huge positive for the farm sector. "The doubling of artificial insemination and elimination of FMD and Brucellosis by 2025 will increase the productivity and reduce the cost of production. That's an excellent move. It will bring more investments into the dairy sector, which will increase farmer's bargaining power to get better prices for their produce. If done properly, it will create 80 lakh jobs in rural India and 16 lakh jobs in urban India."

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