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Jitender Gupta
Whiteout A Mother Dairy outlet in Delhi
Half Pints And Full Points
Amul, the iconic brand of the Gujarat Cooperative Milk Marketing Federation (GCMMF), is the latest to have raised prices, by Rs 2 per litre. Reports from different states indicate that other major cooperatives, public and private sector dairy majors are set to follow suit. Reason: rise in input costs as also the higher remunerations to farmers. “We are continuously paying high prices to farmers...there is no shortage of milk provided you are paying the right price,” says R.S. Sodhi, managing director of GCMMF, which has been recording upward of 15 per cent annual growth in the quantum of milk it handles.
But apparently this isn’t enough. Against the desired government target of 5 per cent annual growth in milk production, India has been able to chalk up only around 3.9 per cent growth. The consequent mismatch between demand (projected at 6 per cent increase annually) and supply creates a concomitant scare: the old nightmare about adulteration in milk and milk products sold in the country. “What is needed today is a second White Revolution and that too in half the time taken by the first. In the coming years, Indian dairy products will have to compete not only globally but with imported products in the domestic market as well,” says Sharad Gupta, publisher and editor of Dairy India Yearbook.
How real are these concerns? Well, the Planning Commission’s mid-term appraisal report admits market linkages between milk producers and buyers—either through cooperatives or the private organised sector—“are not expanding at the expected rate, and therefore, sustainable high growth rates in milk production remain a challenge”. Even now, only about 18 per cent of the estimated 127.9 million tonnes (mt) of milk produced in the country is being processed through the organised sector, which is divided equally between cooperatives and the private sector.
“Consumption is growing—6-7 per cent is the assumption—but it may not be so high. If it had been, we would have been in a serious problem,” admits dairy sector consultant Dr R.S. Khanna. Instead, India exported 60,000 tonnes of skimmed milk powder last year due to surplus supplies (despite the drought in Maharashtra). In the last three years, Khanna contends, inflation in the dairy sector was higher than average because farmers have been paid more. To be sure, there also has been a 15 per cent rise in animal feed prices. But better remuneration is always an incentive to improving production.
Similarly, R.G. Chandramogan, CMD of Chennai-based Hatsun Agro Product Ltd, one of the largest private players in the country, does not agree with the prognosis of milk shortage. He points to the fact that over the last five years India only imported 0.12 million tonnes (mt) of milk solids, which is equivalent to hardly one mt of milk. On the other hand, India exported 0.6 mt of powder and casein during this period, equivalent to 5 mt of milk. “Could the country have really been in a position to export five times the milk that it imported if there was a shortage? The concern about shortage is mismatched by the actual scenario,” he says.
Even the increase in price of milk, according to him, is not due to any shortage. In fact, he points out that the cumulative increase in the wholesale price of milk since 2004, at 110.4 per cent, is lower than the 113.8 per cent for all food articles or 115.9 per cent for foodgrains.
And how real then are the fears of milk adulteration? It’s a mixed picture. K. Chandramouli is chairman of Food Safety and Standards Authority of India (FSSAI), which had last year brought out an alarming survey report on the quality of milk sold in the country based on 1,791 samples collected from urban and rural areas. But he now downplays the bad parts (the report had even called reconstituted milk adulterated). He clarifies that the “problem is with the unorganised sector. Most of the samples examined pointed to substandard quality (mostly dilution with water) but not unsafe milk.” Khanna adds that while reports of adulteration may be justified, only a minuscule percentage of supplies are affected, more so during festive seasons when there is increased demand.
The share of the organised sector has meanwhile doubled—from 15 per cent a decade back to around 30 per cent now. This is seen as an encouraging sign, with most big players assuring quality checks at multiple points. The fast expanding private sector investment and entry of global players is also intensifying competition—Fonterra, Danone, London Dairy, Dairy Lite and Baskin Robbins, among others, have already entered the high-end milk products segment in India. Many other foreign brands—including New Zealand Dairy Board and the Irish Dairy Board—are reported to be looking for partners to enter the Indian market.
Alongside, the number of private sector biggies entering the field is growing with the likes of Reliance Dairy Foods, Kishore Biyani’s Fresh and Pure and Jaypee Group joining the ranks of Hatsun Agro, Paras, Saras, Britannia and Nestle among others. Today, the share of private players in the organised milk processing sector has risen to around 40 per cent. Which is good news. As the organised sector expands, experts are pinning hopes on competition to ensure better quality delivery. Of course, be prepared to pay a higher price for it too. As an industry veteran put it: “What is inflation for consumers is income for farmers.” That’s what they call milk for thought.
outlook.com
- Consumers hit by rising milk and milk product prices, up 60% in the past three years
- Milk production growth below desirable levels of 5% per annum
- From Reliance to Danone, private/ global players looking at organised milk market in India
- Higher prices make adulteration —from water to detergent/chemicals —a lucrative business
- No monitoring, risk of adulteration more in the unorganised sector
***
While petrol and food hog all the headlines, a quiet crisis has been simmering and coming to a boil in a pan near you. Milk and some of your favourite milk products (ice-cream, yoghurt, lassi, cheese) have been in the red list of major contributors to the continuing food inflation in the country. Since 2009, the price of milk across the country has been raised more than a dozen times—each time by Rs 1 to even Rs 4—by different brands. Put together, the data is striking: all-India average milk prices have risen from Rs 21.33 per litre to Rs 34.50—a jump of about 62 per cent in 54 months.Amul, the iconic brand of the Gujarat Cooperative Milk Marketing Federation (GCMMF), is the latest to have raised prices, by Rs 2 per litre. Reports from different states indicate that other major cooperatives, public and private sector dairy majors are set to follow suit. Reason: rise in input costs as also the higher remunerations to farmers. “We are continuously paying high prices to farmers...there is no shortage of milk provided you are paying the right price,” says R.S. Sodhi, managing director of GCMMF, which has been recording upward of 15 per cent annual growth in the quantum of milk it handles.
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How real are these concerns? Well, the Planning Commission’s mid-term appraisal report admits market linkages between milk producers and buyers—either through cooperatives or the private organised sector—“are not expanding at the expected rate, and therefore, sustainable high growth rates in milk production remain a challenge”. Even now, only about 18 per cent of the estimated 127.9 million tonnes (mt) of milk produced in the country is being processed through the organised sector, which is divided equally between cooperatives and the private sector.
“Consumption is growing—6-7 per cent is the assumption—but it may not be so high. If it had been, we would have been in a serious problem,” admits dairy sector consultant Dr R.S. Khanna. Instead, India exported 60,000 tonnes of skimmed milk powder last year due to surplus supplies (despite the drought in Maharashtra). In the last three years, Khanna contends, inflation in the dairy sector was higher than average because farmers have been paid more. To be sure, there also has been a 15 per cent rise in animal feed prices. But better remuneration is always an incentive to improving production.
Similarly, R.G. Chandramogan, CMD of Chennai-based Hatsun Agro Product Ltd, one of the largest private players in the country, does not agree with the prognosis of milk shortage. He points to the fact that over the last five years India only imported 0.12 million tonnes (mt) of milk solids, which is equivalent to hardly one mt of milk. On the other hand, India exported 0.6 mt of powder and casein during this period, equivalent to 5 mt of milk. “Could the country have really been in a position to export five times the milk that it imported if there was a shortage? The concern about shortage is mismatched by the actual scenario,” he says.
Even the increase in price of milk, according to him, is not due to any shortage. In fact, he points out that the cumulative increase in the wholesale price of milk since 2004, at 110.4 per cent, is lower than the 113.8 per cent for all food articles or 115.9 per cent for foodgrains.
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The share of the organised sector has meanwhile doubled—from 15 per cent a decade back to around 30 per cent now. This is seen as an encouraging sign, with most big players assuring quality checks at multiple points. The fast expanding private sector investment and entry of global players is also intensifying competition—Fonterra, Danone, London Dairy, Dairy Lite and Baskin Robbins, among others, have already entered the high-end milk products segment in India. Many other foreign brands—including New Zealand Dairy Board and the Irish Dairy Board—are reported to be looking for partners to enter the Indian market.
Alongside, the number of private sector biggies entering the field is growing with the likes of Reliance Dairy Foods, Kishore Biyani’s Fresh and Pure and Jaypee Group joining the ranks of Hatsun Agro, Paras, Saras, Britannia and Nestle among others. Today, the share of private players in the organised milk processing sector has risen to around 40 per cent. Which is good news. As the organised sector expands, experts are pinning hopes on competition to ensure better quality delivery. Of course, be prepared to pay a higher price for it too. As an industry veteran put it: “What is inflation for consumers is income for farmers.” That’s what they call milk for thought.
outlook.com