Ghee Prices Surge: 4 Hard Reasons India's Dairy Fat Crisis Is Worsening

Ghee prices in India are rising sharply, and the reasons go deeper than festive demand. In a detailed analysis for The Indian Express, Harish Damodaran describes a "fats crisis" in Indian dairying, driven by slowing milk output, El Niño, enforcement raids and tax changes. Recent price revisions by Amul and Nandini show how quickly the squeeze is reaching consumers.

1. Milk Production Growth Is Slowing

India's milk production rose from 165.1 million tonnes in 2016 to 216.5 million tonnes in 2025, a compound annual growth of about 3%, according to the US Department of Agriculture (USDA). That growth is now expected to slow to about 2.5% in 2026, taking output to 222 million tonnes, and to 2% in 2027, reaching 226.5 million tonnes.

When milk growth slows while demand keeps rising, milk fat becomes scarce first. Ghee, butter and other fat-rich products are the most exposed, which is why ghee prices tend to react faster than liquid milk prices.

2. El Niño Is Tightening Feed and Fodder

The USDA attributes the slowdown to tightening feed and fodder supplies and weaker animal productivity, caused by El Niño-induced drought in key milk-producing states. Lower fodder availability reduces both milk yields and fat content, cutting the volume of fat available for ghee and butter. Our report on drought slowing India's milk production looks at these projections in detail.

3. Exports Have Drawn Down Fat Stocks

India exported 56,578.64 tonnes of ghee, butter and anhydrous milk fat worth Rs 2,663.05 crore in 2024-25, and 37,167.33 tonnes worth Rs 2,034.78 crore in 2025-26, according to figures cited in the Indian Express analysis. While exports fell in the latest year, earlier shipments reduced the buffer stocks that dairies normally rely on to steady ghee prices during lean months.

4. Raids and Tax Changes Add Pressure

The Indian Express analysis also points to enforcement drives by the Food Safety and Standards Authority of India (FSSAI) and changes in GST as factors in the fat crisis. Crackdowns on adulterated and analogue ghee remove cheaper supply from the market and push demand towards branded products, while tax changes affect how dairies price fat-rich products.

Amul and Nandini Raise Ghee Prices

The pressure is already visible on shop shelves. According to Business Today, the Karnataka Milk Federation (KMF) raised Nandini prices from 4 November:

• Ghee, 1-litre sachet: Rs 715 to Rs 850
• Paneer, 1 kg: Rs 408 to Rs 485
• Unsalted butter, 500 g: Rs 285 to Rs 390

Amul also increased ghee prices, with its 1 kg carton rising from Rs 640 to Rs 680 and its 1-litre cow ghee pouch from Rs 695 to Rs 735. Amul butter went up from Rs 310 to Rs 325 for a 500 g pack. KMF had earlier raised milk by Rs 8 a litre and curd by Rs 14 a litre from 1 November.

Why Ghee Prices Matter Beyond the Kitchen

Ghee is a high-value product for Indian dairies and an important source of margins, especially for cooperatives that convert surplus milk into fat and powder during the flush season. When fat is scarce, dairies must choose between supplying liquid milk and making ghee and butter. Higher ghee prices also hit sweet makers and the food service sector, which use large volumes during festivals.

For consumers, rising ghee prices make branded ghee less affordable and can encourage purchases of cheaper, unbranded products, raising the risk of adulteration. That makes strong enforcement and clear labelling even more important, as seen in recent cases such as the Hassan Milk Union's warning on losses.

What Lies Ahead for Ghee Prices

With milk growth expected to slow further in 2027 and El Niño effects lingering, the outlook for milk fat remains tight. Dairies are likely to protect fat for high-value products, and ghee prices may stay elevated until the next strong flush season rebuilds stocks. Policy measures such as fodder support, better feed management and careful export decisions could help ease the pressure.

The key takeaway: Ghee prices are rising because India's milk fat supply is tightening, not just because of festive demand. Slower milk growth, El Niño, exports and enforcement are combining into a structural squeeze.

Read the analysis in The Indian Express and the price details in Business Today.

Source: The Indian Express, Business Today | DairyNews7x7