This Is What The Dairy Industry Thinks About Milk Export Incentives
A farmer’s cat reaches for fresh milk at a dairy farm in Hebei Province, China. (Photographer: Nelson Ching/Bloomberg News)

This Is What The Dairy Industry Thinks About Milk Export Incentives

India’s dairy products makers are divided on how the government’s decision to provide 10 percent export subsidy will help.

The incentives are “too little, too late”, Hatsun Agro Products Ltd.’s RG Chandramogan told BloombergQuint. Prabhat Dairy’s Vivek Nirmal, however, said the move, coupled with state incentives, may have a positive impact on the industry.

India will give a 10 percent incentive to boost exports of dairy products, Union Minister Nitin Gadkari said yesterday. The government is also considering distributing milk through mid-day meals and anganwadis to ensure better returns to producers.

This comes at a time dairy farmers across the country are facing low global milk prices, excess supply and high cost of production at home. Milk procurement prices have fallen to as little as Rs 20 a litre in some areas, mainly because of a build-up in stock, forcing farmers to sell the product at extremely low prices.

Here’s how the companies reacted:

Hatsun Agro Product

The 10 percent incentive will not help the dairy industry in any way, said RG Chandramogan, chairman and managing director of India’s largest listed pure-play dairy products maker.

“Rs 134 is the present price of New Zealand powder as of yesterday. If that is the case, the cost of milk production here is Rs 180. What do you do with 10 percent subsidy?” he said. “Again, this is on the export price and if you haven’t been exporting since the last two years you have to pay a competitive entry price of Rs 125. Even if you enter around the market with incentive, you will be lingering around Rs 130-140, which will not really help.”

Instead, the government needs to focus on getting the 2 lakh tonne of excess milk powder out of the market by gifting it to SAARC or African countries, Chandramogan said. Unless the excess supply is moved out, giving subsidies to farmers will not help, he said.

Prabhat Dairy

Gujarat-based Prabhat Dairy’s Managing Director Vivek Nirmal said the incentives are “definitely a good move” as they will help bridge the gap between India and global milk prices.

“Apart from the central government a lot of state governments are also extending incentives—some have been declared and some are in the pipeline,” he said. “It will improve the sentiment.”

The incentives will stop milk export prices from falling further to an unsustainable level, he said.

Parag Milk Foods

The incentives provide a “golden opportunity” to India’s milk farmers, said Parag Milk Foods Ltd.’s Chairman and Wholetime Director Devendra Shah. The Pune-based company sells milk, cheese and other dairy products under the ‘Gowardhan’ and ‘Go’ brands.

The milk glut is a temporary phase and the situation will change in a few months as consumption rises during the festive season, he said. “Raksha Bandhan, Ganesh Chaturthi, followed by Diwali will increase milk consumption.”

The government is also trying to divert the excess supply to the railways and the defence consumption sector, he said.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.