Dairy in Doldrums: Turning milk crisis into an international ‘gift’ opportunity

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Mains Paper 3: Agriculture | Transport & marketing of agricultural produce & issues & related constraints

From UPSC perspective, the following things are important:

Prelims level: White Revolution, National Dairy Development Board

Mains level: Declining prices og milk and other agri commodities and measures required to arrest the slide in prices


Context

Recent incidents of milk spilling

  1. Early this month, the media was awash with images of farmers throwing vegetables and pouring milk on the roads
  2. The primary motivation behind them was falling producer realizations

White Revolution

  1. The White Revolution in India happened thanks to a fundamental technological innovation in 1956
  2. That was when Amul, for the first time in the world, manufactured powder from buffalo milk
  3. The breakthrough enabled the dairy cooperative in Gujarat’s Kaira district to accept all the milk that its farmer-members poured, especially during the ‘flush’ winter months when production by buffaloes rose one-and-a-half times or more
  4. The powder plant guaranteed that all the milk poured by farmers got procured, making dairying a sustainable income-generating activity

Effect on industry

  1. Technological and processing innovations such as the above, along with organized procurement and marketing of milk, gave an impetus to India’s dairy industry
  2. Milk production rose from 20 million tonnes (mt) in 1960-61 to 53.9 mt by 1990-91
  3. It has grown even more after liberalization, reaching 165.4 mt in 2016-17
  4. Milk is today the country’s biggest agricultural ‘crop’, with its output value in 2014-15 even exceeding that of all cereals and pulses put together

Why a slowdown in recent years?

  1. The last 3-4 years have seen India reel under a skimmed milk powder (SMP) glut
  2. In the pre-powder days, the problem was of a seasonal surplus of milk with farmers
  3. Now, it is of a structural surplus of the powder itself with the dairies
  4. The collapse of exports has to do with global prices
  5. After peaking at $ 5,000-$ 5,200 per tonne in April 2013, international SMP prices have fallen to $ 1,800-$ 2,000 levels (Almost one third)

Factors responsible for the global crash

  1. A bursting of the Chinese import bubble in 2013, after whey protein concentrate consignments from the New Zealand dairy giant Fonterra tested positive for Clostridium botulinum bacteria
  2. The Russian embargo on western food imports as a retaliation to sanctions that followed tensions in Ukraine in 2014
  3. The European Union dismantling a three-decade-old milk production quota regime in 2015

Risks this year and beyond

  1. Every year of not exporting one lakh tonnes of SMP has  meant the accumulation of stocks with dairies, forcing them, in turn, to slash both milk procurement and prices paid to farmers
  2. The situation will be more serious after October when the next flush season starts
  3. The very innovation that triggered the White Revolution — milk powder production — is ironically threatening to burn the barn down

Possible solutions

  1. A subsidy of up to 20 percent on SMP exports can be given
  2. The government can also procure SMP stocks from our dairies at a subsidized  price and “gift” these to low-income, milk-deficit nations, thereby spreading goodwill and cementing India’s international relations
  3. This job can be entrusted to the National Dairy Development Board, which can also provide the technical assistance to establish dairy plants and procurement infrastructure in these countries

Impact of these measures

  1. A programme on the above lines will cost Rs 2,000 crore-2,500 crore annually, which is a pittance compared to the Centre’s budgeted food subsidy of Rs 169,323 crore for 2018-19
  2. By providing an external market for our surplus powder, it will help arrest the current slide in prices and incomes of dairy farmers here
Animal Husbandry, Dairy & Fisheries Sector – Pashudhan Sanjivani, E- Pashudhan Haat, etc
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