Private dairies await clarity on move to double milk processing capacity

February 4, 2020

Rutam Vora

AHMEDABAD — Even as Finance Minister Nirmala Sitharaman announced in her Budget speech an aim to double the country’s milk processing capacities by 2025, there remains some areas of concern for small and big private players in terms of policy support for building up additional capacities.

While the dairy sector was upbeat over the announcement to double the milk processing capacities from the current 53.5 million tonnes a day to 108 million tonnes by 2025, nervousness persisted over the uneven treatment given to cooperatives and corporate dairies in terms of incentives and support.

‘No clarity on funding’
BusinessLine spoke to several mid and large private dairy players, who hailed the government’s intention to strengthen the dairy economy, but were sceptical of the achieving that target without government support.

“The government plans to double processing capacities but there is no clarity on where the investments are going to come from. Is it from the cooperative dairies or private dairies? Is there going to be some help from the government or infrastructure support to build new capacities? Will there be any incentives to encourage private investments in dairy? These questions remain unanswered,” said a dairy sector source, requesting not to be named.

The concerns are not unfounded. Last year, when skimmed milk powder (SMP) was overproduced in the country, cooperative dairies, including Amul, were “bailed out” with subsidy support to export the surplus SMP. The private dairies, who had no such subsidy support, had to bear the losses.

‘Welcome resolve’
However, corporate dairy players have welcomed the overall thrust on the dairy ecosystem. “The aim of 108 million tonnes (processing capacity), is possible in a country like India. The government’s resolve to eradicate the foot and mouth disease (FMD) and Brucellosis in cattle is also in the right direction. But for the capacities to attract corporate investments, there should be a level playing field,” said veteran dairyman and Chairman of Hatsun Agro RG Chandramogan.

Echoing similar sentiments, Devendra Shah, Chairman of Parag Milk Foods welcomed the government’s resolve for breed improvement by way of eradication of cattle diseases as well as increasing the coverage of artificial insemination from 30 per cent to 70 per cent.

“It is a big deal to achieve these measures and it will improve India’s milk production significantly. But at the same time, there is a need to support processing infrastructure through private sector because they handle over half of India’s milk. The target of doubling the processing capacities can’t be achieved without a sustainable private sector,” Shah said.

Interestingly, the National Dairy Development Board (NDDB), through the second phase of the National Dairy Plan (NDP-II) for the first time looks to cover (with some riders) the private dairies for assistance to set up processing facilities under same terms and conditions as for cooperatives.

In his comments on the Union Budget, NDDB Chairman Dilip Rath said, “To build on the achievements of National Dairy Plan Phase I (NDP I) and strengthen the entire dairy value chain, a second phase of National Dairy Plan (NDP II) will be implemented across the country, especially in less dairy developed areas, North-Eastern States, hilly regions and backward districts. This project will strengthen procurement, processing, marketing & ICT infrastructure. Approval of this project needs to be expedited.”

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