The Government is considering allowing further duty free import of skimmed milk powder (SMP) and fat (butter oil) under the tariff rate quota (TRQ) regime. This is even as when the domestic dairies are seeking preference over imports in supply of SMP.
Milk availability
On Friday, the Department of Animal Husbandry & Dairying is convening a meeting with representatives of private dairies, including Parag Milk Foods, Dynamix Dairy Industries, Sterling Agro Industries, VRS Foods and Bhole Baba Dairy Industries, and Mother Dairy to gauge the overall milk availability and SMF/fat stock position ahead of the winter season, which is the peak period for procurement.
Last week, the Department held a similar exercise with the cooperative dairies. “We are waiting for the Department's assessment. Depending on what it has to say, we will decide whether or not to further augment the existing TRQs,” a senior Government official told
Currently, the Government allows duty-free imports of up to 50,000 tonnes of powder (both skimmed as well as whole) and 15,000 tonnes of fat (butter oil, white butter and anhydrous milk fat) under the TRQ. Imports beyond these attract higher customs duty of 60 per cent (on powder) and 30 per cent (on fat).
Meanwhile, domestic dairies are seeking preference over imports in supply of skimmed milk powder (SMP) to the National Dairy Development Board (NDDB)-owned Mother Dairy. “The Government should give preference to SMP produced from our own milk rather than that coming out of New Zealand or European farms,” said the Managing Director of a Delhi-based private dairy company.
COSTS
According to him, buffalo milk containing 6.5 per cent fat and 8.5 per cent solids-not-fat is today landing in northern dairies at around Rs 30 a litre. At this price, 100 litres or 103 kg of milk, from which it would be possible to produce 6.7 kg of fat (ghee) and 8.75 kg of SMP, would cost Rs 3,000. If to this, one adds a manufacturing cost (inclusive of labour, energy and packing charges) of Rs 14/kg for ghee and Rs 20/kg for SMP, the total cost of procuring and processing 100 litres of milk would now be close to Rs 3,270.
“This is a bare manufacturing cost exclusive of salary, administration and marketing overheads or financing and depreciation charges,” the company official pointed out.
Revenue
On the revenue side, dairies are currently realising roughly Rs 250 a kg on sale of ghee, which, on 6.7 kg, translates into Rs 1,674. Therefore, even to cover basic milk procurement and processing costs, the realisations from SMP would have to be Rs 1,596. On 8.75 kg, this would work out to Rs 182 a kg. “This is the minimum price I need to be in a position to pay Rs 30 a litre for buffalo milk. The alternative is to pay less and depress prices for farmers. It is for the Government to take a call on whether it wants us to do that”, the official added.
“Today, imported SMP from New Zealand is quoting at $3,150 a tonne, which, after adding freight and port handling charges, will cost not more than Rs 165 a kg. That makes it cheaper for Mother Dairy to sell milk in Delhi or Chennai using imported material rather than sourcing SMP based on milk from Uttar Pradesh and Tamil Nadu. We hope the Government will not make India a dumping ground for dairy imports the way it has happened in edible oils,” the official said.