Reimagining Dairying in Maharashtra: A Call for Sustainable Solutions

As per Sh Dashrath Mane CMD Sonai dairy, today the Maharashtra State government has given orders to dairies in Maharashtra for the implementation of ₹5/L milk subsidy to farmers directly subjected to the mandatory condition of base rate of ₹30/L to be paid by dairies. Dairies were paying ₹27.00/L to the farmer earlier which shall be paid ₹30.00/L; means ₹3.00/L added by dairies. Now new rate effect to the farmer will be ₹30.00+ Govt subsidy ₹5/L =₹35.00/L.

To compensate this milk rate hike, state government has declared ₹30.00/Kg subsidy on milk powder being exported by the dairies. Since dairies have to pay ₹3.00/L hike to farmers, the net transfer prices of SMP for domestic market will be increased by ₹20.00/Kg wef tomorrow 3rd July 24. All buyers may please note this change.

This announcement has come at a time when global dairy market prices crashed by 6.9% and AMF, Butter and SMP prices were down by 10.7%, 10.2% and 6.1% respectively . The prices in Indian Rupees for three commodities become around Rs 540 for Ghee and Butter and Rs 213 for SMP (USD:Rs::1:82.5). The local SMP prices are from Rs 210-Rs 300 per kgs. The biggest question to be asked is whether Rs 30 per kgs subsidy will be able to support the processor at this level of global prices. Let us delve into the past and see what happened exactly six years back when under similar situation milk subsidy as well as export subsidy for SMP was introduced.

SMP export Subsidy in the past- A glimpse of history

(Excerpts from the news item "Centre plans export sops for milk to end dairy farmers’ agitation in Maharashtra" by Sayantan Bera on July 19th 2018 in HT Mint)

"To address the ongoing agitation in Maharashtra by dairy farmers seeking better prices, the agriculture ministry requested the commerce department on July 19, 2018, to raise export incentives on milk and milk products.

The ministry had also been encouraging state governments to include milk in welfare schemes for school children and daycare centers to boost domestic demand and manage excess milk supplies. Additionally, a ₹300 crore fund was established to provide working capital to dairy cooperatives.

"Considering the current situation, the agriculture department requested the director general of foreign trade (DGFT) to increase export incentives for milk, milk products, and casein from 10% to 20% for the benefit of farmers," an official statement said.

These incentives would enable dairy companies to export surplus skimmed milk powder (SMP). Industry estimates indicated that dairies across various states were holding around 140,000kg of unsold SMP stocks.

The agriculture ministry stated that the incentives would be provided under the Merchandise Export from India Scheme (MEIS), including exports to neighboring countries like Nepal and Bhutan. Whether this move would improve farmer prices in states like Maharashtra remained to be seen.

Since July 16, farmers in Maharashtra had taken to the streets demanding a direct subsidy of ₹5 per liter of milk supplied to dairy firms and cooperatives. At that time, farmers received between ₹16 and ₹23 per liter of cow milk, while retail prices exceeded ₹40 per liter.

"The state government previously announced incentives to dairies for SMP exports, but these did not improve price realization for the farmer," said Yogesh Pande, spokesperson of the Swabhimani Shetkari Sanghatana (SSS), the state's largest farmer organization leading the agitation. The protests disrupted supplies to cities like Mumbai and Pune, with farmers stopping milk tankers, pouring supplies on highways, and distributing milk for free.

To resolve the crisis, Pande indicated that the state government was likely to hold a meeting with Raju Shetti, member of Parliament and head of SSS, late Thursday evening.

India, the world's largest milk producer, had an estimated output of 165.4 million tonnes in 2016-17. Maharashtra ranked seventh among Indian states in milk output."

Did that subsidy improve the farmers condition ?

History is repeating itself. There has not been much of difference in GDT global price index on 3rd July 2018 versus 2nd July 2024. It was 986 in 2018 and 1077 today on 2nd July 2024. The global prices of Ghee , butter and SMP were Rs 410,Rs 375 and Rs 145 (USD:Rs::1:69)respectively. Below was the situation of dairy commodities prices in India in July 2018. SMP was again ranging from 150-200 as against Rs 145 at global levels.

--Courtesy Market watch Indian Dairy man July 2018 edition

What is the difference in the situation now ?

The timing, the milk price challenge, farmers' despair, massive SMP stockpiles, the price parity of dairy commodities, particularly SMP, with global prices, and the GDT index drop 5% on July 3, 2018, compared to 6.9% down today, July 2, 2024—nothing has changed.

Despite receiving similar sops in 2018, we find ourselves in the same position today, pleading for milk subsidies for farmers and export subsidies for the industry. The government is repeating the actions it took six years ago, offering a ₹5 subsidy based on a minimum price and a ₹30 per kg export subsidy, compared to ₹50 per kg in July 2018. The milk subsidy lapsed in April 2019 after around 10 months and export subsidy was taken back in October 2019.

It's time for all farmers and dairy processors in the state to introspect on how beneficial the 2018 subsidy scheme truly was. The situation remains unchanged.

How can we expect different results by doing the same thing? If the combination of milk subsidy and export subsidy was a solution in 2018, why is the industry standing at the same crossroads again?

It's high time for policymakers to rethink their approach, realizing that sops are not the solution to all problems. Maharashtra is one of the most progressive states in the dairy sector. Our farmers are highly skilled, and most of our plants have state-of-the-art technology for producing value-added products. We need to reimagine dairying in Maharashtra, bringing all stakeholders together to find a plausible solution. While subsidies might offer short-term relief, they are not sustainable, as evidenced by the outcomes of the 2018 subsidy.

The time has come for everyone to step forward and join hands with the government to find a long-term solution to the perpetual milk price crisis in Maharashtra. Let's harness our collective strength, innovation, and determination to create a thriving, sustainable dairy industry for the future in Maharashtra state.