Karnataka Milk Federation, the second largest government-run cooperative milk federation in the country after Gujarat Cooperative Milk Marketing Federation, will soon increase milk procurement and retail prices, a top federation official said. KMF is expected to increase the price in another 15 days after getting green signal from the state government. The proposed hike is because of rising production cost for farmers in the state, KMF chairman Somashekara Reddy said. It would, in turn, be passed on to consumers, leading to increase in milk prices by Rs 3-Rs 4 a litre.
KMF has more than 22 lakh farmer members attached to 10,600 milk cooperative societies across Karnataka. Presently, the cost of producing milk has increased by 55-60% to around Rs 15.50 a litre compared with Rs 8- 9 a litre in 2009 owing to a spike in cattle feed rates. Though in June 2009 the Karnataka government had prohibited KMF from arbitrarily increasing milk prices by invoking rule 3B of Cooperative Rule 1959, officials said the provisions of the Act could be withdrawn now as the cooperative has valid reasons to increase prices.
In a recent note, Citgroup said rising milk and dairy products prices are a potential pressure point for food inflation. The government data on wholesale price index-based inflation has pegged the annual rise in milk and dairy at 13.4% in December from 6-7% the previous year. KMF, which owns the popular Nandini brand of milk, procures milk from the farmers at Rs 13.50 to Rs 14.50 a litre.
According to officials, if KMF hikes the retail price, the federation will also increase the procurement price to Rs 16.50 to Rs 17 a litre. ?Around 80% of the hike on retail price will be passed to the consumers,? KMF chairman said. The price hike in Karnataka is also expected to affect the milk price in Kerala that procures milk from Karnataka.
According to KMF managing director MN Venkataramana, Karnataka supplies around 2.5 lakh litre milk to Kerala every day at an average price of Rs 17 a litre. KMF also supplies approximately 50,000 litre milk to Andhra Pradesh at an average price of Rs 17 a litre.
Karnataka, the second largest milk producing state in the country with production of 40-lakh litre a day, is the only state in India offering support price of Rs 2 a litre to farmers. The support price is offered to farmers directly by the government on top of the regular procurement price paid by KMF.
In the past 18 months, the state government has paid Rs 450 crore as support price to milk farmers in the state while releasing another Rs 150 crore for future payments as support price, he said. KMF claimed that milk price in Karnataka are far lower as compared to other states.