Thursday, November 16, 2017

What is the relationship between export subsidy on SMP and consumer price of market milk ? (49th DP, 1 to 15 Nov, 2017)

Dear Friends,

Last fortnight I happen to travel in around 4-5 states and got an opportunity to talk with dairy farmers and dairy consumers. The state of farmers is not good at most of the places as there has been a drop in milk prices as well as quota fixing of milk procurement quantities at VLC by the dairy companies. On one side the input cost is increasing along with production of milk at farmer level (due to seasonality) while on other hand he has been asked to pour less milk at lower prices.

I tried to probe more and found that due to fall in Skimmed milk powder prices in local market along with its demand after festival season, large dairies are in a state of dilemma to produce SMP in large quantities or more. If they have to make SMP for next season then they are trying to wriggle maximum out of farmer's pocket so as to hedge their risks     ( Greed is good).

Butter and ghee are getting good prices in exports so their is an upsurge in exports of these products from India. Amidst all these market dynamics , I started to think about poor consumers who is supporting industry by consuming the products at any price offered to her. I belong to a generation which has seen strikes due to increase in milk prices by certain paisa only in Delhi. Now a days dairies are increasing their milk prices in multiple of two rupees at a time. 

We also saw reduction in milk prices for consumers in winter but since last few years we have seen increase in milk price even as a new year gift in North India. 

In Maharashtra farmer groups are agitating and asking for export subsidy on Skimmed milk powder as the prices have dropped down below Rs 20 also in certain areas which I mentioned in my last to last edition of Dairy Pulse. Maharashtra is amongst top 10 milk producing state and interestingly private sector procures over 70 % of total milk produced as against cooperative sector. 

Suppose government agrees to their demand and offer export subsidy. This will lead to better prices for farmers and diversion of milk for making skimmed milk powder. Butter and ghee is already getting good price. This will lead to a situation where dairy companies would be unable to meet the requirements of market milk selling so it would end up in increase in milk prices for consumers in winters.

Can we have a consumer price regulated in the way Petrol/Diesel by linking it to the raw milk procurement price ? I would like this august group to think over it. As a consumer I consider it to be my right to get a price reduction of at least 50 % of the price being reduced at the farmer level. 

You all must also block your diary from Feb 8 to 10th for attending 46th Dairy conference at Kochi to be organized by IDA ( south zone) and anchored by IDA Kerala chapter.

Happy elearning

yours truly 
Kuldeep Sharma
Chief Thinking Officer
Suruchi Consultants (ISO 9001:2008 Company)

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