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Milk prices will remain firm due to inflationary pressures: MD Amul

Dairy major Amul feels prices will remain “firm” going forward due to increased pressure from energy, logistics and packaging costs, a top official said on Tuesday.

“Prices will be firm, I can’t say by how much. They can’t go down from here, can only go up,” Amul MD RS Sodhi told PTI when asked about his outlook on milk prices.The cooperative has hiked prices by 8 per cent in the last two years, including the Rs 2 hike in milk prices per litre last month, Sodhi said.

Headline inflation is big worry policymakers are grappling with and the same is being blamed as one of the major reasons which have restricted growth-enhancing measures like rate cuts. The six-member rate-setting panel of the RBI has started a bi-monthly review meet from Wednesday.

Stressing that inflation in his industry is not a cause for worry per se because the farmer is getting benefitted through higher prices for the produce, Sodhi said the hikes by Amul and the broader dairy sector are very limited as compared to others or when compared to the rise in input costs.

He said energy prices, which impact cold storage expenses, have gone up by over a third, logistics costs are also up by a similar measure and the same is the case with packaging.

There is an increase of Rs 1.20 per litre of milk because of these pressures, he said, stressing that farmers’ income per litre has also gone up by up to Rs 4 per litre during the pandemic.The cooperative has implemented technology interventions, especially on supply chain management, to reduce its costs, Sodhi said, adding that companies in the sector have seen a compression of profit margins because of such pressures.

Amul is unfazed by such pressures because profit booking is not the core objective for the cooperative, he said, adding that 85 paise in every rupee booked as revenue goes to the farmer.
Global developments like the war in Ukraine are good for the Indian dairy sector, Sodhi said, pointing out that as the global supply chains get disrupted, they help Indian exports.

Even without the war, the pandemic-related disruptions alone helped Amul’s export revenues grow by three times to over Rs 1,400 crore in a single year, he said.The cooperative recorded a top line of Rs 61,000 crore, growing at 18 per cent, Sodhi said, attributing 3 per cent of it to price rise and the rest to volume growth.

He said the cooperative will continue to invest as per its usual yearly rate of between Rs 800-1,000 crore in FY23 as well.
Amul is gearing to enter the organic foods business and test running the same currently, he said, pointing out that it is interested in any activity which is allied to farming and agriculture.

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