Milk prices are again within the news and this point the low realizations at farmer ends have brought them on the streets. Dairy farmers in Maharashtra have started a series of protests from Monday against the low prices dairies are paying them at the present. As farmers fancy dumping their milk on roads and stopping milk supply to urban areas, dairies blame the COVID-19 pandemic and therefore the frequent lockdowns because of the reason behind the recent price corrections.
A look into the matter and why a fast solution doesn’t seem to be within the offing.
How the COVID-19 pandemic has soured the dairy business
Since the last week of April dairies in Maharashtra have started slashing procurement prices they pay to farmers for his or her milk. In May, dairies in Tamil Nadu had effected an identical cut in procurement prices with the Karnataka dairy unions also announcing price correction by Rs 2 per liter.
In the case of Maharashtra, farmers who were paid at the speed of Rs 30 per liter for his or her milk with 3.5 percent fat and eight .5 percent SNF (solid-not-fat) saw a gentle decline in their realizations with dairies now paying between Rs 17-22.50 per liter. This steady decrease in their prices has led to this protest with multiple farmer organizations taking to the streets. The opposition BJP in Maharashtra has also joined the fray with the party calling for state-wide agitation from Lammas during this regard.
Dairies claim the pandemic has severely affected their capacity to pay. During the initial days of lockdown, dairies saw products like ghee, cheese, butter, ultra heat-treated milk (sold in cartons) fly off the shelves as people stocked up.
However, the closure of institutional buyers like frozen dessert manufacturers, sweet shops, etc saw dairies reporting a pointy dip in their milk sales. Excess milk is converted by dairies into skim milk powder (SMP) which they either trade on commodities platforms or reconvert into liquid milk when their collection goes down. Estimates by the dairy industry have pegged that at the present the country has around 2 lakh tonnes of SMP which is further hitting their bottom lines.
Members of Swabhimani Shetkari Sanghatna stopped the transportation of a milk van in Sangli early Tuesday morning.
The rapid spread of the pandemic has seen many urban centers and states again choose a lockdown. Further social distancing norms have put brakes on marriages and other social gatherings. Festivals normally see dairies doing brisk business as sales of ghee, sweets, etc peak, but the pandemic hangs over both the upcoming Raksha Bandhan also because the Ganesh Chaturthi later in August.
Before the lockdown, SMP within the domestic market was around Rs 270-300 per kg but since then prices have collapsed to this Rs 160-170 per kg which has seen dairies having no other option but to incur storage cost thereon. Also, the return of the lockdown has seen businesses like sweetshops, roadside chaiwallahs, industrial canteens again closing down which has led to an extra decrease in milk demand. a mixture of both lower sales and unsold commodities has led to this crisis with dairies not ruling out further price correction within the days to return.
At present farmers are demanding an immediate subsidy starting from Rs 5-10 per liter which can ensure their realization is between Rs 25-30 per liter. this may catch up on their cost of production which is around Rs 22-23 per liter not taking into consideration labor charges.
The government of Karnataka features a scheme that sees the govt paying a subsidy of Rs 6 per liter directly into the account of farmers which cushions them for drastic price corrections. Farmers in Maharashtra have asked for the introduction of an identical scheme within the state. Dairies have asked for an export subsidy which can enable them to dump their unsold stock of SMP and thus enable them to make more demand and hence pay farmers a far better price.
(with inputs from indianexpress)