Oct 16, 2020
By every 10 liters of milk accumulated by the dairy co-operatives during this pandemic period got transformed into one kilo of milk powder.
At the onset of Covid-19 lockdown, many private farmers suffered. Hence, the government instructed GCMMF and its 18 member unions to buy milk from these desperate milk producers who were unable to sell the milk. This purchase had led to a 15% increase in milk procurement by GCMMF.
In Gujarat, these milk cooperatives are facing difficulty to sell 90,000 MTs of skimmed milk powder that they stocked worth Rs. 1,850 crore. On October 13th 2020, the state government came forward to offer export assistance of Rs. 150 crore which will provide Rs. 50 for every kilogram of milk powder exported by the cooperatives under the GCMMF, the Amul brand.
“During the lockdown period, on the instructions of the government, we had purchased 35-40 lakh liters of additional milk on a daily basis. Of the 90,000 MTs excess stock of milk powder we have, 50,000 MTs is from the Covid lockdown period,” said R.S. Sodhi, MD, GCMMF. “Secondly, due to Covid, the consumption of milk and milk products was less, as the hotels and restaurants were closed. There were hardly any weddings and milk demand during the festivals, even for desserts, was low”, added Sodhi.
Seeing the present piled stock, export is seen as the best solution to tackle the surplus. Every day GCMMF procures 200 lakh liters of milk from the villages. Of these 160-170 lakh liters are either sold as fresh milk or converted into various milk products. The excess 30-40 lakh liters gets converted into skimmed milk powder, cited Sodhi.
Adding on, he further said, “Once the surplus quantity of milk powder gets exported, the remaining stock will fetch a good price. Moreover, despite the low prices which exist in the world market, 60,000-70,000 MTs of milk powder is sold on monthly basis. Hence, selling the surplus is not a problem.
To state the point home is, the cost of manufacturing milk powder is Rs. 250-260 per km. If GCMMF sells now, the milk will book a loss, as the domestic prices of milk powder is Rs. 160-170 and the prices in the international market is around Rs. 190 for a kilogram. To counter this loss, the milk cooperatives will have to reduce the prices of milk in the upcoming festive season. If GCMMF does not export it now then they would have to reduce the milk prices by Rs. 4-5 per liter in Gujarat. But with the state government intervention, this problem can be averted. This move to provide export assistance is important as in the coming winter months, the market will be flush with more milk. Production is expected to increase from the present 200 lakh liters per day to 250 lakh liters per day during winters.
“The prices of skimmed milk powder decide the farm gate prices. Any drop in milk prices will have a direct effect on the farmers from whom we buy milk,” explains Sodhi.
Explaining the stability in the price of the milk, Sodhi informs that the prices of milk sold by GCMMF have never fallen since 2014. The prices of full cream milk (Amul Gold) pouches sold in May 2014 stood at Rs. 46 per liter. After four price corrections in last five years, it rose by 21 percent to Rs. 56 per liter. Similarly, the prices of toned milk which stood at Rs. 34 in May 2014, rose to Rs. 44 per liter.
With the surplus prediction incoming flush season, GCMMF is targeting to export 50,000 MTs of milk powder. In 2019, because of scanty demand, the export was merely 12,000 MTs. Milk powder from Gujarat is exported to 50 different countries, mostly the importing countries are Middle-east, Africa, South-East Asia and even to our neighbours including Pakistan, Afghanistan, and Bangladesh. The assistance being provided by the state government for exports begins in November and will continue for six months till April 2021.
“In 2018, a similar surplus of milk powder took place. The state government had promised to provide export assistance of Rs. 300 crore. We had managed to export 30,000 MTs and had used up the assistance of Rs. 140 crore. During that year, the domestic price of skimmed milk powder was Rs. 135-145 per kilogram. As soon as we started exporting, the domestic prices increased to Rs. 300 per kilogram. The move also had a ripple effect on the prices of milk in other states. For instance in Maharashtra, farmers who were earning just Rs. 18 per liter of milk, started getting Rs. 22 per liter. The move also led to increasing in prices of milk in Maharashtra, Uttar Pradesh, Punjab, Haryana, and Rajasthan by Rs. 8-10 per liter… It is a smart move by the state government, where the Return on investment will be more than 20 times,” Sodhi said.