Why this fuss over the price of milk?

There is intense debate in Tamil Nadu following the State’s decision to hike the sale price of the Tamil Nadu Cooperative Milk Producer Federation’s Aavin milk by ₹10 a litre with effect from November 1. The Gujarat Cooperative Milk Marketing Federation-owned Amul has been hiking milk prices periodically; twice this year alone.

Another leading milk supplier, the National Dairy Development Board’s wholly owned subsidiary, Mother Dairy, hiked its milk price this year.

This January, most private dairy companies operating in Tamil Nadu hiked the retail price of milk citing a substantial increase in cost of production particularly in cattle feed and labour.

Nobody raised a voice against at that time, but the hike in the price of Aavin milk has evoked strong reactions among the public and the politicians.

Describing the move as “unavoidable”, Tamil Nadu's chief minister O Paneerselvam said the price hike was intended to ensure remunerative prices to over 23 lakh dairy farmers.

The Tamil Nadu Milk Producers’ Welfare Association (TNMPWA) that has been spearheading the agitation to increase the procurement price of milk owing to the rising cost of production has lauded the hike.

Why is there so much agitation only in Tamil Nadu? Since April 2013, Amul has hiked its price four times. The Karnataka Milk Federation’s Nandini hiked the price thrice in two years. In comparison, the Aavin price hike comes after a gap of three years and that, when also with the procurement price has having been increased only by ₹5 a litre. Isn’t this hue and cry unjustifiable?

It is also reported that 87 paise out of every rupee the consumer pays for Nandini milk goes to its farmers. When the neighbouring government in Karnataka is able to pay its dairy farmers handsomely, why is there such a noise in Tamil Nadu? When the hike seeks to improve the income earning capacity of dairy farmers, why is there so much opposition?

Most milk producers in India are poor. The Working Group on Animal Husbandry and Dairying for the 12th Plan (2012-17) has indicated in its report that about 70 million rural households are engaged in milk production, of which about 75 per cent are landless, marginal and small farmers who live on the edge of poverty.

The Committee on Statistics of Agriculture and Allied Sectors (2013) appointed by the Union Government has also made a similar point in its report. So, won’t this price hike provide a fillip to the resource-poor small and marginal farmers facing serious livelihood problems in the recent years?

The World Bank’s (1999) review report on India’s livestock sector categorically pointed out that dairy farming can reduce the vulnerability of farmers when they encounter problems in crop production. Won’t such a price hike augment farm income at a time when spiralling prices of foodgrains and non-foodgrains crops have pushed farmers to the wall? Are opponents of the price hike anti-poor?

Milk is an indispensable staple food in every household, rural and urban. The Anand-style dairy cooperative transformed the country from being a milk importer to one of the world’s largest milk producers; it provided remunerative price to its farmers.

About 24 State-level federations of dairy cooperatives across the country have brought over 15 million dairy farmers into their fold. Studies on Operation Flood showed that over 70 per cent of small, marginal and landless farmers were able to double their income through cooperatives.

However, in recent years, all has not been well with dairy farmers. Across the country, they have been demanding a hike in milk procurement prices from their respective State-owned milk federations, citing the increase in cost of milch animals and feed, among other things.

A report by NDDB underlines that production expenses include about 70 per cent fodder and about 30 per cent medical and labour costs.

Because of reduced grazing lands and vanishing small water bodies, fodder cost in recent years has skyrocketed, making it costlier than milk. Between 2004-05 and 2013-14, the wholesale price index (WPI) of milk increased from 101.01 to 220.63, an increase of about 117 per cent.

But the WPI of fodder has increased from 108.86 to 272.89, a 150 per cent hike during the same period. How can dairy farmers afford such a price escalation?

Credible studies point out that drought and excessive pressure on land for cultivating food and cash crops has led to the decline in the cropped area under fodder. So grave is the issue of soaring fodder costs, that the dairy farmers of Andhra Pradesh are reportedly observing a ‘milk holiday’.

There are also reports that dairy farmers in certain parts of the country find it more profitable to send their cattle to slaughter houses than pay a higher price for fodder.

If the loss suffered by farmers due to the escalation in fodder prices can be compensated by a price hike, why are opponents blocking it?

When dairy farmers do not see any relief in fodder prices, a retail price hike is the only possible route to prevent their margins from getting wiped out. Since the policymakers have failed miserably in combating the soaring input prices, they should at least allow farmers to reap the benefits from the proposed hike.

In the name of the poor consumers, a section of political parties in Tamil Nadu are vehemently attacking the hike without knowing that most of the milk producers also belong to the poorest sections.

Are they against poverty alleviation in rural areas?

As established by various studies in India, this price hike in milk is expected to alleviate rural poverty. If any attempt is made to prevent small and marginal farmers from receiving a narrow slice of a larger cake, poverty and deprivation will continue to plague the farming sector.

Milk production involves huge labour and lots of sacrifices which must be honourably compensated. If not, a mass exodus of farmers from dairy farming cannot be ruled out in the near future. This will have serious implications on the price and quality of milk.

Narayanamoorthy heads the department of economics and rural development, Alagappa University, Karaikudi. Alli is an assistant professor in the social sciences division of the Vellore Institute Technology