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Harish Damodaran

NEW DELHI, March 13

DOMESTIC dairy producers fear that large-scale `dumping' of old stocks of butter oil is taking place, especially from New Zealand, following the five per cent customs duty reduction announced in the Union Budget.

According to Mr Deepak Jain, Director of the Baramati-based Dynamix Dairy Industries Ltd (DDIL), his company recently received a quote from Sterling Agro Industries Ltd here, offering butter oil/anhydrous milk fat manufactured by the New Zealand Dairy Board at Rs 74 per kg ex-Nava Sheva port.

``If the butter oil is being offered to me at Rs 74 per kg, it has obviously been imported at a c.i.f (cost, insurance, freight) price of around $950 per tonne or nearly Rs 47 per kg. At this rate, the importer has enough margin left even after coughing up the effective import duty of 35.2 per cent and port handling charges of about Rs 3 per kg'', he said.

The latest Budget has brought down the basic customs duty on butter oil from 35 per cent to 30 per cent. Together with the 4 per cent special additional customs duty, the effective duty reduction is from 40.4 per cent to 35.2 per cent.

``But more than the duty reduction, what is a matter of concern is how butter oil from New Zealand is landing at our ports at about $950 per tonne, when current international prices are ranging from $1,300-1,450 per tonne. In fact, we have been getting offers for anyhydrous milk fat of Australian origin at $1,300 per tonne c.i.f Mumbai'', Mr Jain noted.

He said a detailed chemical analysis of the imported butter oil offered by Sterling had revealed a `peroxide value' of 4.17 Meq/kg, which was way above the maximum level of 0.8 Meq/kg specified by the Bureau of Indian Standards (BIS). ``The extremely high peroxide value is indicative of rancidity, i.e the butter oil is oxidised and is probably from old production. The presence of free radicals in the product could even be a health hazard'', he added.

Interestingly, the Prevention of Food Adulteration Act does not lay down any peroxide value stipulations either for ghee or butter oil. ``Our case is simple. Even if the PFA is silent on peroxide values, the customs authorities can refer to the BIS specifications on the same. Any imported product should ultimately meet our health standards, whether it is prescribed by the BIS or PFA'', Mr Jain said.

Both butter oil and ghee are prepared by melting butter — the former at temperatures not exceeding 80 degree celsius and the latter at 100-140 degree. However, butter oil has a bland taste with very little aroma, whereas ghee possesses a characteristic pleasant and sweet aroma and wholesome flavour. Further, the crystal size of butter oil is very small, unlike the distinct granular texture of buffalo ghee.

``What importers of butter oil usually do is to add butter oil to strong aroma ghee and then cool the mixture slowly, which helps in granulation. Once this is done, the end-product can pass off as ghee'', Mr Vijay Sardana, Executive Director of the Centre for International Trade in Agriculture and Agro-based Industries (CITA), here pointed out.

The prospects of large-scale imports of butter oil has severely dampened sentiments, with ghee prices in major marketing centres such as Jodhpur crashing by Rs 10 per kg in the last couple of weeks alone. In Delhi, a 15 kg tin of benchmark Milkfood desi ghee is now selling at Rs 1,540 (around Rs 103 per kg), compared to Rs 1,640 a month ago.

The markets are rife with speculation of `5,000 to 10,000 tonnes' of butter oil landing in from New Zealand over the next 2-3 months, coinciding with the beginning of the traditional lean period when domestic supplies of milk dry up and ghee prices normally exhibit a seasonal upward trend.

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