Karnataka Milk Federation has created history in procuring more than 90 lakh litres of milk per day. During Covid-19 , the federation has seen a sharp decline in demand of its milk and milk products. KMF interestingly is a amongst the few federations who have been giving price subsidy to dairy farmers since a long time.
The Unions belonging to the state federation have been reducing the milk prices since last few weeks. Recently, Bengaluru Milk Union Ltd. (BAMUL) reduced the procurement price by ₹2.5 from July 16th a litre and the same union had reduced the price by another ₹2.5 a litre. Currently the farmers are getting Rs 24 as against Rs 29 in pre covid times. Other district unions in Hassan, Shivamogga, Dharwad, and Mandya have also slashed the procurement price to around ₹24 a litre.
More subsidy to make more losses
BAMUL has a huge stock of skimmed milk powder (SMP) and butter lying with them. There has been steep reduction in prices of SMP and butter in the market since February 2020. The union has to purchase higher quantum of milk under lower market demand. This triggers a negative spiral in complete dairy value chain.
Daily procurement of milk by Bamul has gone up from 14 lakh litres to 19 lakh litres. The sales on the other side has reduced from about 11 lakh litres to 8 lakh litres. As the demand for products such as SMP, butter, ghee, and cheese going down, BAMUL is facing a cash crunch.
The cash-starved milk unions are resorting to sought the government’s intervention to bail out farmers by increasing the current incentive from its side from ₹5 to ₹8 a litre. Most unions have written to KMF about the hike in incentive, and BAMUL has also written to the government.