Maharashtra’s milk subsidy, its effects and its political fallout

Pawar, while presenting the supplementary budget, talked about the Rs 5 per litre subsidy which would continue from July 1. “An amount of Rs 223.83 crore has been distributed as subsidy to 2.93 lakh registered milk producers at Rs 5 per litre. The remaining subsidy will also be disbursed immediately. I announce that the Rs 5 per litre subsidy will continue from July 2024 onwards to support milk producing farmers,” his speech read. The earlier subsidy was announced when farmers led by the All India Kisan Sabha–the farmers’ wing of CPI (M)–had protested against low realisation of milk. The new production subsidy does not have an end date, but the dairies are waiting to read the fine print to see how this would be implemented.

Also read : Reimagining Dairying in Maharashtra: A Call for Sustainable Solutions

Production subsidy is not new to Maharashtra–during the 2020 Covid-19 subsidy, the then Uddhav Thackeray-led government had announced a similar subsidy. The subsidy was linked to a certain procurement price to be paid by dairies. Subsidy was to be paid directly to the bank accounts of the dairy farmers.

So why was this announced now?

The first reason has to be the drubbing faced by the MahaYuti government in the Lok Sabha elections. In areas where dairy is a major side-business, the MahaYuti candidates have lost. Barring the Hatkanagale seat in Kolhapur district, where Dhairyasheel Mane, the Shiv Sena (Eknath Shinde) candidate managed to win, in all other seats the MahaYuti candidates contested were lost. Low milk procurement price–the price paid by dairies to their farmers–has been a sore point with the farmers.

At present, dairies in Maharashtra are paying their farmers Rs 24 to 26 for milk with 3.5 per cent fat and 8.5 per cent SNF (Solid Not Fat). The subsidy would push the procurement price to Rs 30-31 per litre–much less than the Rs 40 per litre that protesting farmers are asking for. On Tuesday, dairy development minister Radhakrishna Vikhe-Patil announced that the subsidy would be given over a base price of Rs 30 per litre. Also, Rs 30 kg subsidy would be given for conversion of excess milk into Skimmed Milk Powder (SMP).

Dairies point out that at present their realisation would not allow them to buy milk over Rs 26-27 per litre. A dairy owner from Pune said 100 litres of milk (which equals to 102.5 kg of milk) would produce 3.598 kg of fat and 8.738 of SMP (considering 3.5 per cent fat and 8.5 per cent SNF). SMP realisation at present is nearly Rs 210 per kg while yellow butter is trading at Rs 350 per kg. Thus gross realisation for a dairy from processing 100 litres of milk would be Rs 3,371 (Rs 1,835 from SMP and Rs 1,536 from realised fat). Deducting Rs 7 per litre as processing and transportation cost, dairies would be able to pay Rs 26.71 per litre as the maximum price for milk.

“The production subsidy would help in increasing the realisation of farmers,” pointed out the private dairy owner.

Will dairies be able to pay Rs 30 per litre as procurement price?

Most dairies have said they would be not be in a position to pay the Rs 30 base price. Dairies point out that at present their realisation would not allow them to buy milk over Rs 26-27 per litre. A dairy owner from Pune said 100 litres of milk (which equals to 102.5 kg of milk) would produce 3.598 kg of fat and 8.738 of SMP (considering 3.5 per cent fat and 8.5 per cent SNF). SMP realisation at present is nearly Rs 210 per kg while yellow butter is trading at Rs 350 per kg. Thus, gross realisation for a dairy from processing 100 litres of milk would be Rs 3,371 (Rs 1,835 from SMP and Rs 1,536 from realised fat). Deducting Rs 7 per litre as processing and transportation cost dairies would be able to pay Rs 26.71 per litre as the maximum price for milk.