At the outset I would like to thank you all for reading this blog with patience and correcting us wherever we commit some mistakes. In one of our blogs a few weeks back we mentioned about the huge pile of SMP to the tune of 200000 MT and we mentioned it to be as 12 % of total milk production. Actually it was around 2% of total milk production and we acknowledge the mistake. Pl do write back to us for any thing which needs our attention.
Last fortnight we saw government taking a few good decisions related to offering export subsidies so as to relieve cooperatives disposing off huge piles of powder stock. Thsi would help them , making rooms for forthcoming milk floods, post monsoon from the farmers. There have been suggestions by some other dairy expert on certain social media forums, that let government offer these huge piles of smp as donation or gift to other under developed nations which demand it.
Let us examine on how apt and sustainable such strategies are from the perspective of sustainability of dairy farming business in the country. May be for current situation it might be considered as a temporarily relief to the sector.
I believe that use of Iodex or any other such pain reliever is good enough for sprains but not for fractures.
Current pathetic situation of dairy farmers has not evolved over night. This crisis is an outcome of a series of neglect which the policy makers are keeping their eyes closed on for a long period now.
Let us look at all the game changing moves by the government starting from importing different varieties of wheat seeds from Mexico in late sixties , decision to import SMP/Butteroil to make Operation flood happen and in this millennium to try out Genetically modified crop for cotton ( BT cotton). All these moves were too painful and faced a lot of objections and debates but later changed the horizon of Indian agriculture. The first move made India self sufficient in around 5-7 years time, the second move made India largest producer of milk in around 4 decades and the last move made India almost second largest producer as well as exporter of cotton in two decades.
During crisis the government makes better policies.
(I have borrowed these thoughts from Dr Ashok Gulati a noted agriculture expert from IFPRI.)
So last week I thought that why not to enroll farmers to start thinking about what is best for them and let them prepare a draft agenda to be submitted to the government for designing a better policy. A few of the points in the agenda may be as weird as getting BT cotton to India but let it be. Atleast we must stop watering the stem (by providing subsidies or support for short term gains to the processors) and not to the roots(dairy farmers) of the plant (dairy farming in this case).
If you get some time then watch this video which I have shared with a subscribed group of around 30000+ dairy farmers and dairy entrepreneurs across the nation. However I am listing the same points below also for your kind perusal and further suggestions.
The key policy changes which might support farmers in long run may be as follows :
a. Change in milk pricing structure in the country. Currently it is fat based. This way Cow milk producer is at a loss at most part of the country. The other problem with this structure is that high perceptual cost of ghee makes it easier for a large number of market players to produce adulterated ghee by mixing it with edible oils or to charge very high rates for cow based ghee. If cow based ghee fetches higher prices then why cow milk does not fetch that premium by default ( barring those few players who without even having farms are selling cow milk at Rs 100 + per lietr and cow ghee @ Rs 2000+ per kgs).
b. Introduction of Minimum support price for milk on seasonal basis ( we have raised this issue at least 3 times in last two years). I am surprised to see that government has enacted a daily basis formula for diesel and petrol wherein the beneficiaries are public sector, government (revenue deptt) and large oil companies. It is being done so that not even a single paisa loss is incurred to all these three stakeholders. However when it comes to the farmers no such formula is there to protect them (even atleast 2-3 times an year) when the season changes and under market dynamics of highly fluctuating (normally upwards only) input costs. As a rule of thumb the farmer must be able to purchase atleast 2 kgs of balanced ration cattle feed out of selling 1 kg of milk to make some profits ( at 1.5 Kgs formula he will be breaking even only in most of the cases). This way if the cost of balanced cattle feed is Rs 18/kg for a cow and Rs 22/kg for buffalo then the msp for milk must be Rs 36.kg and Rs 44 per kg for cow and buffalo milk respectively. The economists may be used to evaluate regional costs of production of balanced feed so as to avoid any mistake.
c. Based on land holding or number of animals holding the farmers may be given some kind of compensation for the period of crisis as is done in the case of natural calamities like drought and floods. A suitable group may be used to apply acturials to find such compensatory packages.
d. On the lines of FCI(food corporation of India) we may have another FCI which is Fodder corporation of India. This institution may be used to collect and store hay blocks and silage from around the country. This corporation will help in taking care of all the gaps arising out of our agri diversity and thus would provide silage and feed ( inputs ) to the dairy farmer at a reasonable cost or by using Kissan credit cards. This will help them to atleast sustain their animals at low cost and thus would sustain even at low prices.
e. There could be a system aligning the farmers and processors and giving an opportunity to the farmers to become part of the real value chain of the dairysector. In case of access milk the farmers may provide milk free of cost to the processors and the processors in turn would convert that milk into value added products like SMP, cheese, UHT milk etc. These processors would act as a bank to the farmers and the farmers may be able to insure their produce for a future date gain. The government may act as a guarantor to the system and would ensure a minimum assured price to the farmers at a future date. This way farmers will get a good price for their routine production and invest their surplus milk like SIP in commodities . The processor would also be able to run his plant at full capacity without any liability to make immediate payments to the farmers in case of a glut. The government would act as a moderator and ensure true governance so that interest of everyone remain intact.
These are just couple of thoughts..howsoever weird they are but we will have to think , deliberate, share and make it reach to the policy makers.
Please share your thoughts which we would love to collate and make a list of suggestions for the government to implement. We shall be collecting the suggestions from the farmers also which I would be sharing with you all in some forthcoming issue.
In last edition we promised you that in this edition we shall be sharing details on how an upsurge in analogue dairy product segment will be ruining the opportunities of dairy farmers to sell more milk in the country. However we have postponed that to next edition and focussed more farmer's centric discussion this time.
Happy e learning.
with best regards
Chief Thinking Officer
Suruchi Consultants (ISO 9001:2008 Company)