State sponsored subsidies for dairy farmers is like a cancer

At a time when India collectively opposed the dumping of subsidised dairy products from overseas, there is also a big threat to the dairy trade from within through the State-sponsored subsidies. A few States have subsidies for dairy farmers which experts feel is a cancer that weakens the dairy trade from the core, making it inefficient.

The captains of Indian dairy industry with one voice denounced the use of subsidy by the States to distort the market and choke the sector, at a panel discussion on the topic of ‘Making Indian Dairy Industry Competitive,’ held the Food Conclave 2023 at Hyderabad on Saturday.

“As the representative of Indian milk producers, we always oppose zero-duty imports of dairy products from foreign countries. They want to dump their subsidised products to India at lower prices and as a result our farmers would go out of the dairy market because it would not be viable. Same is true when subsidised dairy products of one State are dumped into other States. Ultimately, it is impacting the growth of the Indian dairy sector,” said RS Sodhi, President of Indian Dairy Association.

A few States including Karnataka and Rajasthan are providing subsidy support to dairy producers for each litre of milk produced. This is believed to keep milk prices artificially low thereby impacting the overall market. “These States start controlling the end-product prices also, which reflects on the overall market across India. Therefore, the way we oppose the dumping of subsidised milk products from other countries, we also have to oppose the dumping of subsidised milk products in the other State,” Sodhi said.

choing similar sentiment, RG Chandramogan, Chairman of Hatsun Agro — a leading private dairy brand — said, “Most of the subsidy amount goes to consumers and not farmers. We believe that the States that provide subsidies are not investing even 10 per cent of the subsidy amount into infrastructure development for dairy. On the other hand, the private sector is also hit due to drop in prices. Now from where is the investment for the future going to take place?”

According to Sodhi, these States pay subsidies worth ₹5,000 crore every year, which would work out to ₹50,000 crore in a decade. “If these funds were invested for infrastructure development, it would get far bigger benefits. This is to strengthen our farmers to stand on their feet,” he said.

“Milk subsidy is causing a lot of trouble to growth in this sector. We have a lot of scope for consumption growth within India to grow production. But the subsidy support is like a big cancer. This way they are covering up the inefficiencies,” said BVK Reddy, Chief Executive Officer, Dodla Dairy.

CP Charles, ex-President of Shakti Dairy commented, “By accepting the subsidy, you lose your freedom. Secondly, you become inefficient in the market. Eventually, the subsidy will make the entire trade inefficient. Private players are able to compete even though their selling cost is high. This means they are competitive. Co-operatives are getting subsidies and becoming less efficient.”

Moderated by Subramani MR, Head of Commodities and Agri-business, businessline, the panel session also covered aspects of making Indian dairy globally competitive with quality products and addressing the issues of animal health and feed. The dairy leaders also underlined the policy guidelines and government support required for sustainability and growth of the dairy sector.

Sodhi highlighted the need of providing dairy sector benefits like agriculture. “Why not include dairy in the definition of agriculture? Dairy doesn’t get agriculture-like benefits when it comes to income tax, interest subvention, concessions or even transportation by railways. Neither the dairy is considered as agriculture nor it has an industry status. Dairy sector is an orphan,” he said.