Budget: Protection makes dairies happy

February 2, 2020

Parthasarathi Biswas | IE

PUNE — Finance Minister Nirmala Sitharaman’s second Budget has received a thumbs-up from the dairy industry as well as cooperatives. The Budget has done away with the concessional basic customs duty of 15 per cent on imports of up to 10,000 tonnes of skimmed milk powder (SMP) in any financial year. That concession under the existing so-called tariff rate quota (TRQ) regime has been withdrawn and all imports will henceforth attract a uniform 60 per cent duty. The latter rate was until now applicable only on imports beyond the TRQ limit of 10,000 tonnes.

But it isn’t SMP alone. The Budget for 2020-21 has also raised the basic customs duty on whey (anhydrous milk protein powder), cheese, butter, butter oil and ghee from 30 per cent to 40 per cent. “They have basically hiked the import duties on all dairy products to the maximum allowable bound rates under the World Trade Organisation rules. This will help us pay better procurement prices to farmers,” a cooperative dairy industry official told The Indian Express.

The increase in import duties, interestingly, comes at a time when there is pressure from ice-cream makers and even some private dairies to slash the import duty on SMP. Domestic SMP rates have more than doubled in the last one year to Rs 300-320 per kg, even as dairies are now paying Rs 31-32 for a litre of cow milk containing 3.5 per cent fat and 8.5 per cent solids-not-fat, compared Rs 21-22 to a year ago.

“We welcome the Budget decision, as it will stop dumping of imported SMP in the country when milk prices are looking up after a protracted period of low realisations for farmers. The usage of whey powder in milk adulteration will also come down,” the official added.

Cooperative dairies have further welcomed the move to bring cooperative societies at par with corporates in terms of levying tax on profits. Instead of the current rate of 30 per cent (net of the 10 per cent surcharge and 4 per cent education cess), cooperatives will henceforth be taxed at 22 per cent (plus surcharge and cess, which takes the effective rate to 25.17 per cent) provided they seek no exemptions or deductions. Sitharaman has also exempted such cooperatives from the Alternative Minimum Tax just as corporates under the new tax regime are exempted from the Minimum Alternative Tax.

Right now, village-level cooperative societies are exempted from paying taxes on their income (profits) from handling milk and other primary produce bought from farmers. However, district-level unions (which source from the village cooperatives) and state-level federations such as the Gujarat Cooperative Milk Marketing Federation (GCMMF, better known as Amul) are being taxed at 30 per cent. “We have now been granted level playing field, which is most justified,” said R S Sodhi, managing director of GCMMF.

In her Budget speech, the Finance Minister also mentioned about the government’s plan to eliminate Foot and Mouth Disease, brucellosis in cattle, and peste des petits ruminants (PPR) in sheep and goat by 2025. The Budget has made a provision of Rs 1,300 crore towards this goal in 2019-20, on top of the Rs 811.07 crore spent as per the revised estimates for 2019-20. This intervention is expected to both boost domestic production of milk and also promote export of dairy and meat exports from the country.

Sitharaman also announced the government’s intention to expand artificial insemination coverage to 70 per cent of India’s breedable bovine population (from the present 30 per cent) and leverage MGNREGA monies for developing fodder farms. The government will further “facilitate” doubling of organised milk processing capacity in the country from 53.5 million tonnes to 108 million MT by 2025, she added.
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