Dairy cooperatives hope new fund to help them cut cost, become more competitive
HYDERABAD: Dairy cooperatives can now hope to regain some of the market share they lost to domestic and global private players, thanks to budgetary support announced on Wednesday by finance minister Arun Jaitley.
India is the world’s largest producer of milk, accounting for nearly a fifth of global production.
Analysts and industry participants expect the allocation of Rs 8,000 crore over three years towards milk processing infrastructure, as announced in the Budget for 2017-18, to help cooperatives reduce costs. However, they said, it would also disturb the level playing field in the Indian dairy ecosystem with undue advantage to state-backed dairy cooperatives.
The Dairy Processing and Infrastructure Development Fund would come within the National Bank for Agriculture and Rural Development, with an initial corpus of Rs 2,000 crore, the Budget said.
According to a report by research firm IMARC, in 2015, cooperatives held a 45% share in the local industry, where private dairies dominated with the remaining 55%. Except for Amul and Mother Dairy, cooperates have been steadily losing their market share, even as private firms, both domestic and global, with deep pockets gained by capitalising on the gloomy condition of economically weak cooperatives that couldn’t add fresh milk processing capacities or invest on value-added products.
K Nirmala, managing director of the Telangana Dairy Development Cooperative Federation that markets milk under the Vijaya brand, said creation of processing and chilling facilities would help bring more dairy farmers into the organised cooperative dairy fold.
At present, only about 30% of India’s dairy sector is organised.
“The proposed fund should help maintain milk quality and also reduce the transportation costs as currently farmers in several regions have to travel long distances,” said Nirmala.
Some analysts viewed that the proposed fund could help only state-backed cooperatives, and that too to cover up inefficiencies.
Kuldeep Sharma, chief thinking officer at dairy advisory firm Suruchi Consultants, said: “If it is only to support public sector and government cooperatives, then it would just be another subsidy to them to cover their cost inefficiencies and it will disturb the level playing field within the dairy ecosystem.”
Farmer associations that ET contacted do not see much benefits from the proposed fund. “This move may not have any major impact on farmers’ income. We were looking at more support on the input side since animal feed accounts for large part of our input costs,” said Nageswara Rao, joint secretary of the Progressive Farmers’ Dairy Association. “Though the government provides feed at subsidised rates, it is of inferior quality and we end up buying quality feed at market rates.”
Source: ECONOMIC TIMES