States keep a lid on milk prices during election season

March 19, 2019

It is likely to be a win win for producers as well as consumers in the dairy sector during the poll season with political pressures keeping milk prices in check and states doling out bonus to the farmers.

Milk production may be 2% lower this summer compared to last year and various states have started giving a bonus of Rs 2-5 a litre to the farmers to ensure steady supply of the commodity without a price hike, according to cooperative dairy sector officials.

The additional cost will not be passed on to the consumer till the end of the election season in May, they said. Dairy cooperatives that dominate the Indian market had in December anticipated an increase in milk prices because of lower supplies amid rising demand and higher cost of animal feed. The prices were raised last time in 2017 by Rs 2 a litre. “Cooperative dairies are giving bonus or grant to their farmer members and not increasing the retail prices due to political compulsions,” said an official of a private dairy brand, refusing to be quoted. The dairy farmers constitute a significant vote bank and the ruling parties in states and the Centre are trying to balance the interests of urban and rural voters by subsidising the farmers, instead of letting the prices go up.

The BJP-Shiv Sena government in Maharashtra is giving Rs 3 per litre to the dairy farmers, while Rajasthan is giving Rs 2 a litre and Uttarakhand Rs 4 a litre. In Karnataka, the JDS-Congress alliance is doling out Rs 4-5 a litre to the farmers and Telangana Rashtra Samithi is paying Rs 4 a litre in Telangana. “We are giving Rs 25 a litre for cow milk, which includes Rs 22 a litre from the dairy cooperative and Rs 3 a litre from the state. The consumer price remains unchanged,” said an official of the Maharashtra Dairy Development Department.

In Gujarat, there is no direct benefit to the farmers, but cooperative dairies are claiming subsidies on export of skimmed milk powder. “There is no plan to increase the milk prices. We are trying to ensure remunerative rates to farmers to ensure steady supply of milk,” said RS Sodhi, managing director of Gujarat Cooperative Milk Marketing Federation, which owns the Amul brand.

Market leader Amul is procuring 240 lakh litres a day now — 2% less than the previous year. “Factors like increased cost of milk production and the beginning of the lean season (when milk supplies fall due to the onset of summer), has led to a fall in production,” said Sodhi. Karnataka Milk Federation, which markets its products under Nandini brand, handles 75 lakh litres of milk every day, with the daily bonus amount coming close to Rs 3 crore. Maharashtra, where the dairy cooperatives procure 40 lakh litres of milk every day, will be giving Rs 1.2 crore of bonus per day, said officials. The Haryana government plans a bonus of Rs 4-5 a litre, depending on the quality of the milk, from April 1 to September.

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