Wednesday, February 16, 2011


Milk production in India has reached heights, from a volume of 17mn tons in 1951 to 110 mn tons in 2009 and expected to reach 115 mn tons in 2010-2011.. The Indian dairy market is currently growing at a annual growth rate of 7 %. Dairy production is an important and direct source of income for around 75 million families at National level of which only 11 million families are enrolled into 1 lakh village dairy cooperative societies. The milk production has increased, thanks to Operation flood and relaxation in MMP0 (Milk and milk products order) in 2002, which opened gateway for private sector investment. On the other hand, deregulation of Indian dairy Industry by termination of licensing requirements for setting up of milk processing and product manufacturing under the MMPO 2002, is likely to lead to social and economic problems, primarily to the small dairy farmers. Even after operation flood and new reforms, 80 % of dairy activity still remains in the unorganized sector. Currently dairy cooperatives and private players, form the organized sector to cater the needs of urban population. Hence the dairying activity is moving from villages to peri-urban areas, to have a cost advantage. With respect to Tamilnadu, it accounts for around 36 % of cattle population in the country.

The return of investment for the poor dairy farmers (small and marginal), who are the major stake holders in the industry is on downward side. The dairy farming once which was dependent on crop residues, natural resources and open grazing, is on declining trend and therefore if milk production is to increase, additional feeding should come from modern systems based on stall feeding and use of more concentrates. This has increased the cost of production considerably to small and marginal farmers. On the other end, milk price has not increased proportionately. The cost of concentrated feeds has increased by 20 % in the past two years and it is likely to increase further. 

At small holder level, inadequate feeding of animals due to escalating cost, more of disease incidence due to lack of sufficient knowledge and also due to inadequate health care services by existing systems, low genetic potential of animal since the farmers/existing system do not have the practice of maintaining the track record of animal at small holder level, exploitation of dairy poor by intermediaries, delayed payments and above all the high production cost remains as a big issue. 

In the past two years the cost of concentrated cattle feed is increasing at a rapid speed. The procurement price of cow milk with 4.3% fat and 8.2% solid not fat (SNF) is currently at Rs 15.54 per litre while it is Rs 23 per litre for buffalo milk with 7% fat and 8.8% SNF content with respect to aavin. The last revision in prices was made in September 2009. Though there has been only a Rs 5.50 per litre increase in procurement prices in the last five years, the retail price increase to the end customer has risen to nearly Rs 11 per litre. The Rs15.54 price is the price given to the procurement center which keeps a margin of 0.50 paise and hence the real producer gets only Rs15/litre of milk
Though Private players procure milk at comparatively higher rate, the calculation of Fat and SNF content is in their hands and any minor deliberate variation may cause dairy farmers dearly.

I have direct experience of working with poor women In Alanganallur block of Madurai district. Alanganallur is known for its famous bull taming festiveal “ Jalli Kattu”. The agricultural families used to depend on dairy as a additional source of income. But this is no more a scenario. Many a women has given up dairying or reduced the number of cattle they owned, mainly because increased cost of maintenance. The land for grazing has diminished and the cost of cattle feed has gone up by 20 to 50% in the last four years. For the past two years, the manufacturers of cattle feed is hiking their price, at least every two or three months. The price is highly volatile. Addition to this, the increase is petrol and diesel price, forces the wholesalers and retailers to fix more margin and ultimately the poor farmer suffers.

The productivity of cattle is another serious concern. The productivity directly is related to the amount of feed given, apart from the genetical efficiency of the cow to yield milk. The increased cost has made farmers to reduce the feed and this has led to high demand. More over apart from Jersey and HF cross bred cattle, no other alternative breeds got introduced, which shows our failure in research front. Progeny testing to maintain the yield of Jerseys and HF remains a distant dream due to failure of our extension machinery, which failed to reach the technology at farmers door step. Many farmers were ignorant about basic facts, that contribute to the yield of the cattle they purchase. Third generation and fourth generation crossbred’s, will no way be remunerative to the poor farmer, since the milk yield gets decreased.
Now the demand for milk is high, but the production is low. There is huge competition between the cooperatives and private players, to procure raw milk.
Surprisingly the demand vs cost ratio does not work for poor dairy farmers. The cost of transportation of raw milk to processing cost is already making a dent in the profit earned by the manufacturers of processed milk. They are forced to keep the market price on par with that of the competitors so that their market is not affected.

Now since things has gone worse, with milk producers demanding a higher price for the produce and started staging demonstrations, there is no way far the government, but to increase the procurement price of the The decision to hike procurement price of cow''s milk by Rs1.36 and 80 paise for buffalo''s milk was arrived at the end ofa meeting between the government and different milk producers''association.

The government has announces that there will be no change in the price of milk at the consumer end, which means that Aaavin has to take the burden. The state elections to commence in few months, the government do not want to displease the farmers and the consumers.

The hard fact is the milk is going to cost dearer to the consumers very soon in Tamilnadu. For instance Amul, the country’s major milk brand, has decided to increase the prices of its two top-selling brands, Amul Taza and Amul Slim and Trim , by Rs 1/litre from February 17 across Maharashtra. Other dairies have decided to increase the price by Rs 3/litre. Amul is the leading dairy brand in Mumbai. It procures about 40% of its milk requirement locally while the rest is imported from Gujarat. This is due to the decision of the Maharastra government increase in procurement prices by Rs 2.00 and Rs2.50/litre from 16.02.2011. The ultimate consumer price for amul brand of milk ranges from Rs30 to Rs38/litre.

The Karnataka government also has increased the milk procurement price by Rs2/litre.

Does this price hike going to benefit the farmers? Definitely not. The cost of production has increased many folds and this price hike is just an eye wash. This is not going to solve the problem permanently.

The economic policy of the government is the root cause for all these problems- the after effects of liberalization. The government has given more focus on industrial development rather than agricultural development. Does the policy makers not aware of this emerging crisis? They are aware but they will pretend blind. Even now they know pretty well that this procurement price is not sufficient to meet the cost of production of milk to the poor farmer. But they have no other go. They have to keep the consumers happy.
Beware. Milk prices are going to cost dearer than ever before. The ultimate price to the consumer may even reach Rs40/ in a span of two years. This is not a projection made by a economist. But by a person who knows the ground reality. Considered to be the important supplier of major nutrients for growth to children, the cost hike will lead to less consumption of milk by the poor people, which is going to add to the malnutrition problem.
And there is a no end to this. The similar thing is happening to agricultural commodities. The recent price hike of vegetables and onion is not a one time phenomena. The prices are never going to come down and even if they come down, that will be for a shorter period. Soon  the price of Onion will reach new heights.

Who is going to get affected. It is the poorer section of the people and the middle income group.

Our Nation got sold to super powers and the MNCs behind them when we resorted to structural adjustment in the name of liberalization and other demands to avail IMF loan. The fruits of liberalization were sweet, as the country’s overall economic growth was green. Now time has come for the  same fruit to turn sour and even rotten.  The development was at the cost of agriculture and the poor people.

Indians are surprisingly soft to the problems they are facing from exorbitant price hike to mammoth scams.  Probably they are more selfish to the core like politicians. Why we take unnecessary trouble while others keep mum? A day will come when people will realize that how much it has cost them. The wealth of the poor is getting swindled by MNCs. The politicians never mind about this since they care only about accumulating money in their Swiss bank accounts. Bribing as become a accepted norm in some countries like France where balance sheet can reflect money given as bribe. No one in India thinks that giving bribe is wrong when going to a government office. It has become a culture. India now is a land of different culture- corruption culture. Poor voters gets satisfied with the money given to them for voting, free Televisions, free meals at temples etc. They do not know that each and every one of us has a huge debt in his head, borrowed from an international lending agency.

Our selfishness and irresponsibility is going to cost more, more and more. 

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