Amul’s milk price hike was 2 years in making; MD Sodhi explains why milk has to get costlier

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Published: May 21, 2019 11:26:24 AM

The indications for milk price increase were already there before Amul announced the hike.

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Amul, India’s forerunner in the dairy industry, has increased milk prices by Rs 2 per litre, stating that the cooperative has farmer interest in mind. As the milk prices have been stable for two years, the price increase was impending for long now. The same was hinted at by Amul MD RS Sodhi earlier this month, who had said that the farmers were not incentivised to produce more since last two years while the milk production costs have been high. While farmers were getting Rs 28 per litre for cow milk in 2014-15, these prices were hit by recession and the raw milk prices declined to Rs 18 in 2015-16, RS Sodhi said on 7 May 2019.

“In the last two years, there has been no increase in the milk product prices, whether it be cheese, butter or milk. The price paid to farmers has not increased vis-a-vis inflation. There were fewer incentives to the farmers to produce more,” he added. Amul had also realised that the investments in dairy farming by the farmers were reduced in the last year whereas the consumption is on a hike. “India is not just the world’s leading milk producer but also the leading consumer as well,” he said.  

The rising competition in the dairy market and the presence of several regional and national players had ensured that the prices will be kept at the minimum. In fact, to capture a larger market, several players had drastically cut their rates. This was witnessed in Maharashtra where the dairy cooperatives “collectively decided to reduce their prices by a small amount, because their volumes were reducing,” N Chandramouli, CEO of Trust Research Advisory had told Financial Express Online recently.

The indication for milk prices was there before Amul announced the increase. The companies who had been buying milk from North India had been getting the milk at very cheap prices. Now with raw milk prices gradually getting better and with listed companies not getting the milk at previous prices, it was evident that the prices will increase. However, the same could translate to a considerable hike by other companies as Amul prices were at the market level all the time. “We have not reduced the price after 2014-15. So our price will be at par with the inflation,” RS Sodhi had told reporters.

Meanwhile, Amul has said that the rising costs to feed the cattle and labour “have raised the cost of milk production,” Amul said in a statement. It also said that the price increase will directly flow to the farmers and is meant to relieve them of the financial strain. Amul MD RS Sodhi had previously said that what is good for farmers is good for Amul; it being a cooperative.

Amul has revised the price of its Amul Gold 500 ml packet to Rs 27; 1-litre pack to Rs 53, and; 2 Litre pack to Rs 103. The Amul Taaza variants have seen a hike as well. Amul will now retail 500 ml SKU at Rs 22, and 1 litre at Rs 42. Amul’s premium milk range Amul Diamond will now be sold at Rs 28 for 500 ml pack and 1 litre at Rs 55.

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