Amul object proposal of industry to import SMP at zero percent duty

January 21, 2020

Madhvi Sally | ET

NEW DELHI — Amul has objected the proposal mooted by an industry association to import 50,000 tonne of skimmed milk powder (SMP) at zero duty. In a representation to the government, it said that any such move will hurt the dairy farmers.

“We very strongly object the views and fear expressed by private players and ice-cream manufacturers of shortage of milk in the country as it is purely motivated for their own benefits as they want cheap raw material and is not in the interest of the farmers or consumers,” said RS Sodhi, managing director of Amul brand owner Gujarat Cooperative Milk Marketing Federation (GCMMF) in a letter addressed to Pushpa Subramanyam, secretary, Ministry of Food Processing

The proposal was given by industry body – CII in the backdrop of firm SMP prices at Rs 280-300 per kg, compared to last year prices of Rs 150 per kg. In summer, when milk production drops, the dairy manufacture liquid milk and other products by diluting milk powder. Ten tonnes of SMP are used to make one lakh litre of milk.

Sodhi said that imports of any quantity are detrimental to the domestic milk producers, in the short and long run. “Price fell in domestic market for more than one year after we imported 80,000 tonne SMP at zero duty during 2011-12,” he said.

The government should not bother about commodity prices of milk powder which is being used by industry at market rate as it barely represents 5% of total milk powder consumption of the country and it does not have any impact in consumer prices of milk which is critical daily consumption item, he said. The total SMP consumption of the country is not even equal to 10 days of country’s milk production, he added.

In 2018, India produced 186 million tonnes of milk, which was 22% of that year’s global total milk production of 843 million tonnes, according to the UN’s Food and Agriculture Organization (FAO).

Niti Aayog says India will produce 300 million tonnes of milk by 2033.

According to Sodhi, historically at the start of any flush season, the country has the lowest stock of milk powder which slowly starts building up with onset of winter and reaches its peak by April. During May to August, this powder gets consumed and by June the flush season begins from southern India and stocks start getting built up.

Amul estimated growth in milk production in the country at 6%. While, there may be some downfall seen in procurement by major co-operatives in this year due to exceptional weather conditions, high input costs and low procurement prices, but it must be looked into totality, said Sodhi adding that since last one month, the climate in the country has become very conducive for milk production and they have started getting good growth in milk procurement.

Since last year SMP prices was Rs 150 per Kg, the private players (sweet makers, khoa makers, ice-cream manufacturers etc) were using SMP instead of sourcing milk and as a result all milk was diverted to co-operatives (private milk processors were not buying milk due to lower powder prices), said Sodhi. Whereas this year the situation has reversed with SMP price nearing Rs 300, all the private players have started using milk instead of SMP and hence co-operatives are getting lower milk as compared to last year, he said.

“Last year, when they got cheap SMP, none of the private players passed on any price benefits to consumers by reducing prices of ice-cream or dairy products and left the milk producers at the mercy of co-operatives which were under huge stress of large inventory of SMP. It was only with government export incentive of 20% and state governments of Gujarat and Maharashtra (Rs 50 per Kg on SMP exports), the country was able to export about 60,000 tonne SMP,” he said.

Consumer price of milk was not increased since March 2017 by dairy cooperative and it was increased by Rs 4 per litre in two steps during last 6 months. “Thus, if we look at CAGR of price increase over last 3 years it is about 3% which is much below average inflation in CPI / WPI. It may also be noted that there is no shortage of pouch milk anywhere in the country and all consumers are able to get milk at reasonable price and ensuring that maximum share of their rupee is going back to the farmer,” said Sodhi.

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