Nepal's Dairy Industry Struggles as Unpaid Dues Rise
Around 1,100 dairy farmers in Dhankuta and Tehrathum in the eastern hill districts have not been paid by the state-run Dairy Development Corporation (DDC) for the past ten months, leaving them in deep trouble. These farmers rely on their dairy income to cover household and other necessities.
The DDC owes more than Rs140 million to the farmers in these two districts.
The state-owned DDC has been collecting over 3,000 litres of milk through different collection centres in Hile Bazar and Sagarmatha Dairy Cooperative in Chhathar Jorpati Rural Municipality in Dhankuta.
When the DDC established its units in the districts a decade and a half ago, farmers were attracted to milk production by rearing improved breeds of cows.
Each farmer has invested between Rs1 million and Rs5 million, with most having taken out bank loans, said Prem Bahadur Darlami, a dairy farmer.
Bhim Mahatara, a farmer from ward 9 of Mahalaxmi Municipality in Dhankuta, said he was in trouble as he had not received payment for the past ten months.
DDC promise not fullfilled
“The DDC has called us multiple times, promised to pay, but no money has come our way,” said Narad Bahadur Katuwal, president of Dhankuta Dairy Association. He said farmers had organised a sit-in protest and submitted a memorandum to the chief minister of Koshi province.Dairy farmers of Murtidhunga, Marekkatahare and Parewadin of Dhankuta and Phulek, Dangapa, Basantapur, Aangdim, Shukrabare, Myanglung of Tehrathum have yet to receive payments.
The DDC unit in Biratnagar said it is struggling to sell dairy products and this has delayed payments to the farmers.
According to the Veterinary Hospital and Animal Service Center, Dhankuta, there are 125 cow farms and 84 milk collection centres. The district produces 44,098 milk, of which 32,100 litres go to the market.
Dairy farmers in Lumbini are having similar problems.
Khagishwar Pandey, who depends on earning from milk to meet his household expenses, said his debts to relatives and other lenders are piling up.
According to Pandey, the DDC owes him Rs300,000.
He said that without income, it’s difficult to cover livestock expenses, too.
“I expanded my herd hoping for better income, but now even feeding the cows has become difficult.”
Like Pandey, farmers associated with the Siddhartha Dairy Producers Association are also in financial distress.
Farmer's switching profession
“The government makes lofty promises to encourage farmers. But farmers are being compelled to switch to other businesses,” Pandey said. “Everything is expensive, from straw to feed. How can we survive if we are not paid for our products?” he asked.Bhoj Raj Pandey of Tikuligadh in ward 14 of Tilottama Municipality in Rupandehi district, shares a similar story. He has been running Jesan Krishi and Pashupanchhi Kendra for over a decade, with more than 15 cows.
The DDC owes him Rs400,000 in unpaid dues.
“I sell 125 litres of milk a day. But there is no support for farmers like me who want to do business in our own country,” Bhoj Raj said.
Lekh Nath Pandey, president of the District Dairy Producers Cooperative Association in Tilottama, said the country is not farmer-friendly.
“The Lumbini Dairy Distribution Project in Rupandehi owes Rs120 million to farmers in Nawalparasi and Kapilvastu districts,” he said. “Private dairies owe another Rs30 million to the farmers.”
Pandey said that despite the potential to be self-sufficient in milk, farmers are not getting paid on time.
Yogendra Shah, chief of the Lumbini Dairy Project, said that the plant has been unable to sell its dairy products. “Yet the dairy farmers put pressure on us to keep buying their milk.”
“Not all the collected milk is consumed, which is why we have been converting it into butter and powder,” Shah said. “We now have a stock of butter and powdered milk worth Rs1 billion,” Shah said. “If the government provides us a loan equal to the value of these stocks, it would be a huge relief.”
600 Mill NRS Loan sanctioned to DDC
Meanwhile, the government has decided to release a Rs600 million loan to the DDC to pay the farmers. The Cabinet meeting held on Thursday approved the fund.This was in response to the DDC’s request to the Ministry of Agriculture and Livestock Development for a subsidised loan. The DDC had requested the ministry to put the powdered milk and butter stock as collateral and release the money to settle its debts with farmers.
As dairy companies struggle to sell milk in the market, they have started converting it into powder and butter. However, demand for both has dropped, leaving tonnes of the products piling up in warehouses.
Both state-owned and private dairy companies said the ongoing economic slowdown has dampened dairy demand, resulting in stopped cash flow and rising liabilities to farmers with products unsold for the past five months.
Since December, the state-owned Dairy Development Corporation and private dairies have not paid farmers, and according to rough estimates by the National Peasants’ Coalition Nepal, a group of farmers, the collective dues have now piled up to Rs6.5 billion.
Most farmers pay their children’s school fees, hospital bills, and food bills with income from selling milk. Some of their earnings go into buying animal fodder.
The country currently produces over 6 million litres of milk daily. The corporation buys around 25 percent of this, while the rest is purchased by the private sector.