During the last week there are many changes that the new government has carried out are likely to support cheaper milk production. The changes include the announcement by the government to remove a 15% customs duty on oil cake and oilmeal, removal of 15% customs duty on de-oiled soya extract, scrap the incentive on export of oil cakes and other ingredients used in manufacture of cattle feeds, scrap the incentive on export of skimmed milk powder (SMP), scrap the incentive on export of buffalo meat. These would impact the improvement in productivity of cows and buffaloes, improve milk production and reduce the cost of milk production. The fear of failing monsoons is lurking heavy on inflation on food products and the government seems determined to take all actions that can tame inflation.
In the past there has been substantial increase in the cost of oilcakes and other ingredients used in manufacture of cattle and poultry feeds. It is well known that more than 60% of cost of producing milk comprises the feeds and fodders given to cows and buffaloes. As a result of increase in the cost of cattle feed ingredients, the cost of production of milk has been increasing. The combined action of scrapping the incentive on export of oilseeds and oilmeals plus the removal of customs duty on oil cakes, and deoiled soya extract will help improve the supply of animal feed particularly at a time when the market anticipates lower rains to hurt oilseed production. The Finance minister has proposed to lift the duty on groundnut oil cake, sunflower oil cake, canola oil cake, mustard oil cake, rice bran oil cake and palm kernel cake until the end of this year. Importers of de-oiled soya extract, groundnut oil cake meal, sunflower oil cake meal and mustard oil cake meal, deoiled soya extracts will get the benefit. These will bring down the market sentiment and make these products cheaper in the country. Thus India can expect the imports to increase and exports to decline. This would help bring down the prices of feeds for cattle, buffaloes, poultry and fish and thus reduce the cost production of milk, eggs, poultry meat and fish.
The Cabinet Committee on Economic Affairs (CCEA) decided to withdraw 5 per cent incentive offered to SMP exporters but has not completely banned the export of SMP. It was in June 2012 that the previous government had lifted the ban on SMP exports and included this product under Vishesh Krishi and Gram Udyog Yojana under which exporters can avail five per cent duty credit scrip on export value. During 2013-14 India exported about 1.2 lakh tonnes of SMP valued at about Rs 3,000 crore. As a result these export the consumer prices of liquid milk had increase between Rs. 2 and 4. Major milk suppliers, including Amul and Mother Dairy, had raised prices of various varieties of milk across India. The withdrawal of incentive on export is not likely to have any impact on exports because the international prices of milk are much lower as compared to the milk price in India.
The combined impact of increase in the cost of cattle feeds and export of large quantities of SMP had forced the dairies in India to pay higher price to the milk producers. While the consumers of milk did suffer, the milk producers were very delighted at this change. Consequently, it is also expected that the rate of growth in milk production in the last fiscal was higher than it was the previous year. It is expected that milk production during the fiscal 2013-14 was between 139-141 million tonnes. As the largest producer of milk in the rate of growth of more than 4% in a year in milk production is very significant as compared to the world growth being less than 2% per annum.
During the forthcoming year the farmers are likely to face a drought like situation. If India can keep ensure easy availability of feed ingredients and that too a cheaper cost, sure the milk producers would be able to survive the bad weather. Cost of producing milk being cheaper, it would not be necessary to increase the prices of milk payable to the milk producers. This would control the inflation in milk and milk products and bring some cheer to the consumers.