Trade churn: Who will milk the benefits?

Updated: October 31, 2019 1:39:29 AM

According to the Agriculture Skill Council of India report, around 8.4 million small and marginal dairy farmers’ directly and indirectly depend on dairy sector for their livelihood, out of which 71% are women.

India should look at import duty structure of other countries such as Canada, Japan, Pakistan and South Africa. Canada imposes a 208% protection duty on dairy products (Illustration: rohnit phore)India should look at import duty structure of other countries such as Canada, Japan, Pakistan and South Africa. Canada imposes a 208% protection duty on dairy products (Illustration: rohnit phore)

By Harekrishna Misra & Yashobanta Parida 

India’s livestock sector ensures food security, provides employment, which leads to a reduction poverty and, more importantly, rural inequity. This is also evident from the increasing dependence of Indian farmers on livestock. Share of livestock sector to Gross Value Added (GVA) increased from 4% in 2011 to 4.6% in 2016. While share of agriculture and allied sector to gross value added consistently declined from 18.5% to 17.9%, during this period share of livestock in agricultural and allied gross value added increased from 22% to 26%. Among the livestock products, milk and milk product consist the highest share (67%) in the value of output from the livestock sector. Besides, this sector has been growing 11%, compounded annually, whereas the agricultural and allied sectors have grown 9% over this period. In recent years, milk and milk products are the largest agricultural commodity generating 32% more output than combined output of paddy and wheat.

According to the Agriculture Skill Council of India report, around 8.4 million small and marginal dairy farmers’ directly and indirectly depend on dairy sector for their livelihood, out of which 71% are women. Moreover, of total workforce engaged in dairy activities, 92% are from rural areas. Further, around 69% of dairy workers belong to socially and economically disadvantaged communities.

Another critical aspect is that while the crop production employs rural workforce for 90-120 days in a year, the dairy sector plays an important role in providing alternative employment opportunities.

According to the situation assessment survey of Agricultural Household’s report, 2013, the average monthly receipts per agricultural household was Rs 5,542 for those engaged in cultivation activity and Rs 2,604 for households engaged in animal farming. Moreover, 69% average monthly receipts were derived from production of milk. Marginal and small agricultural households holding less than 0.01 hectares of land reported a higher share (78.3%) of income from the production of milk compared to the all-India average (69%).

According to the Food and Agriculture Organisation 2017, India is the largest milk producer in the world which contributes 21% to the world milk production followed by the United States (12%), Pakistan (5.3%), China (4.2%), Brazil (4%), Germany (3.9%), Russia (3.7%), New Zealand (2.5%), Netherlands (1.7%) and Australia (1%). In terms of numbers of dairy farmers, India is followed by Pakistan (7 million), the United States (0.038 million), China (0.013 million), New Zealand (0.012 million) and Australia (0.005 million).

India has around 73 million dairy farmers mostly holding one or two milch animal per farmer. Also, in India, farmers share in the retail price of milk is around 60%, the highest amongst other countries (International Farm Comparison Network, Dairy Report, 2018). Whereas, in the case of New Zealand and Australia, where average holding is 430 and 263 milch animals per farmer, respectively, price share is only 23% and 24%. Similar is the situation in the United States, Germany, France, and Denmark, where farmers receive only 43%, 45%, 34% and 43% of consumers’ price on milk and milk products, respectively.

Milk yield, though, is highest in the US followed by Canada, Denmark, Netherlands, India and Pakistan. In terms of farmer milk price as a percentage of world market price, all countries’ milk prices are above the world market price except New Zealand and Australia. The cost of producing milk in India is lower than Russian, Canada, Japan, the United States, Italy, and China but above Germany, New Zealand, and Australia. Still, India is more comfortably placed in terms of milk production, that too, at cheaper rate. It would, thus, be unfair to compare India’s small holder dairy farming system with that of developed countries’.

India’s milk production is expected to increase to around 330 million metric tonnes in 2033-34 as per NITI Aayog working group report 2018 from the current level of 176 million metric tonne (2018-19). India has enough potential market to utilise surplus milk and also increase the trade balance in dairy products. Countries like New Zealand, Denmark, Netherlands Australia, France, Germany, and the USA have milk self-sufficiency of more than 823%, 202%, 192%, 117%, 116%, 111%, and 105%, respectively. These countries, particularly New Zealand and Australia, are looking to push their surplus milk and milk products to India through Regional Comprehensive Economic Partnership (RCEP) trade negotiation.

According to the industry estimates the market share of Indian value-added milk products is estimated to be around 0.5 million metric tonne. If we allow imports of all value-added dairy products from New Zealand that is equivalent to 5% of their total export and volume of 0.133 million metric tonne, New Zealand alone will capture almost one-third of domestic market. This will not only adversely affect Indian economy, but also affect the socio-economic condition of millions of rural small, marginal and landless farmers particularly and economically disadvantaged communities.

Indian government should look at import duty structure of other countries such as Canada, Japan, Pakistan and South Africa. Canada imposes 208% protection on dairy products, which are the highest trade protection among the countries followed by Japan (101%), Pakistan (100%), South Africa (92.3%) and Australia (4%).

Further, Australia, South Africa, Mexico, Venezuela, and Chile do not import dairy products from India.

Thus, the county needs to take a guarded approach in terms of joining the Regional Comprehensive Economic Partnership. Dairy is the backbone of the rural economy, any move to allow unrestricted imports of dairy products would spell disaster for the farmers.

Misra is chair Professor, and Parida is Reseach Fellow; Verghese Kurien Centre for Excellence, Institute of Rural Management, Anand, Gujarat. Views are personal

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