Why White Revolution’s ‘boon’ has suddenly become a ‘curse’ for milk farmers in India

By: |
New Delhi | Updated: June 28, 2018 6:23 PM

One of the highlights of the While Revolution was a technological innovation in 1956 that helped Amul manufacture powder from buffalo milk.

dairy farmers crisisFarmers spilling milk on the road during protest in Maharashtra. (PTI File)

One of the highlights of the While Revolution was a technological innovation in 1956 that helped Amul manufacture powder from buffalo milk. The innovation helped in converting surplus milk into powder and store it for use during summer, when production is usually low. This also enabled farmers to sell all their milk to the dairy cooperative in Gujarat, even in the winter when production usually peaks.

In pre-White Revolution days, farmers often faced trouble in selling milk during the “flush” winter season. However, the dairy cooperatives’ ability to convert milk into powder helped in turning dairy farming into a sustainable income-generating activity in the following decades. In between, India’s milk production capacity took a gigantic leap. According to data of Ministry of Agriculture, Government of India, total milk production in India in the 1960s was around 17-22 million tonnes. This increased to 163.7 million tonnes in 2016-17.

Union Agriculture Minister Radha Mohan Singh said early this month that at present, milk production rate is at 6.3 per cent. “Annual increase in milk production is 6.3 per cent during 2014-18 period while annual increase in milk production during the period 2010-14 was 4 per cent,” PTI quoted Singh as saying at a World Milk Day event in Delhi. The minister further said that between 2014-18, milk production in the country increased 23.69 per cent and the actual rate is expected to rise to 9 per cent by 2022.

A number of factors has led to this increase in milk production, including improved dairy husbandry practices by farmers, increasing replacement of buffaloes with cows by farmers, as well as some government initiatives for the dairy sector. However, despite an increase in production, milk farmers are suffering because of a sharp decline in prices at which they sell milk to dairies. The reason is both peculiar and ironical – rising stock of skimmed milk powders (SMP) at dairies.

Dairies complain that prices of SMP have plummeted. The Indian Express reports that one Gokul Dairy in Kolhapur, Maharashtra alone has around 5000 tonnes of SMP in stock, while the “flush” production season for 2018 is yet to arrive. A dairy official told IE that SMP prices have come down from Rs 170-180 per kg to Rs 130-135 in one year itself. In view of the unusually high stock of SMP, dairies have reduced prices at which they buy milk from farmers.

At Kolhapur’s Gokul Dairy, farmers were getting Rs 27 per liter last year. This has now come down to Rs 23.

The sharp decline in the price at which dairies procure milk has triggered agitations by farmers. In recent months, farmers have been routinely seen spilling milk on roads during protests. Their grievance is that they are forced to sell milk at low prices. But, why?

India’s dairy sector has suffered from a SMP glut in the last 3-4 years. SMP rates have plummeted from Rs 240-250 per kg to Rs 130-135 in the last 3-4 years. B M Vyas, former managing director of Gujarat Cooperative Milk Marketing Federation (GCMMF), and Manu Kaushik, management professional, recently wrote in The Indian Express that India’s export of SMP has declined from 1.30 lakh tonnes in 2013-14 to 11,476 tonnes in four years.

“In the pre-powder days, the problem was of a seasonal surplus of milk with farmers; now, it is of a structural surplus of powder itself with the dairies,” they wrote.

According to the experts, the SMP exports collapse has been because of a crash in global prices. It peaked at $5000-5200 per tonne in 2013 but came down to as low as $1400-1500 tonnes in August 2015. At present, the global price is at $2000 per tonne (around Rs 136/kg).

The global crash took place because of three factors, according to Vyas and Kaushik. First, protein concentrate consignments exported to China from New Zealand’s Fonterra had tested positive for Clostridium botulinum bacteria in 2013. Second, in 2014, reacting to sanctions following tensions in Ukraine, Russia had embargoed import of western foods. Third, in 2015, a three-decade-old milk production quota regime was demolished by the European Union.

The effect of the global glut is visible not just in India, but elsewhere too. It triggered the distress sale of Murray Goulburn, Australia’s biggest dairy in May this year. In India, the accumulation of SMP stocks has forced dairies to cut prices paid to farmers, and even slash procurement.

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1India receives $64 billion FDI in 2020, fifth largest recipient of inflows in world: UN
2Impact on Indian economy after the COVID-19 second wave
3Commerce ministry to seek duty relief for SEZs