Oct 29, 2020
The Indian government is cautious to allow free access to dairy products from several countries, including The U.S., the EU, and the U.K., due to strong opposition from politically-influential dairy farmers.
India’s effort to wrap up bilateral trade deals with major economies after pulling out RCEP has hit a major stumbling block — it is the dairy industry.
There are disagreements over a range of goods, but India feels more strongly about milk products on worries that their imports could destroy the livelihood of millions of farmers as most of them are small and lack the economy of scale.
Trade negotiations are also being explored with Australia, while New Zealand has expressed its interest in a bilateral agreement. The dairy industry is a major component of the proposed India-European Free Trade Association, which includes Iceland, Liechtenstein, Norway and Switzerland, they added.
The latest casualty of domestic opposition is a proposed ‘limited’ India-U.S. trade deal, which is being negotiated since 2018 to resolve pending issues, the people said. The pact, which was almost firmed up, is stuck on the insistence of the U.S. on more dairy concessions and India’s reluctance to do so due to the industry’s aversion.
“We will never allow it and will oppose it tooth and nail,” said R.S. Sodhi, managing director of Amul brand.
India will become a milk-surplus nation, Sodhi said. “Why do we need imports that will destroy the livelihood of 100 million people? It’s not just trading, it’s about their lives,” he said, referring to Indian farmers engaged in the dairy business.
Issues related to the domestic dairy sector were one of the major reasons last year for the Modi government to pull out of the Regional Comprehensive Economic Partnership talks. Powerful groups representing millions of farmers opposed any liberalization in the sector.
Tens of millions of people, mostly small and marginal landless farmers, are engaged in milk production in the South Asian nation. With the sector generating livelihood for a substantial rural population, opening up the market has become a thorny issue for the government already struggling with a contracting economy, surging coronavirus infections, and unemployment levels that touched multi-decade highs.
The industry is also worried that it will have to follow stringent standards and sanitary and phytosanitary regulations to compete in domestic and global markets.
Any trade deal with countries such as the U.S. and Australia, which have become strategically important following India’s worst border standoff with China in four decades and reorienting supply chains amid the coronavirus pandemic would impact India adversely, Sodhi said. Any such deal will kill the domestic industry and reduce dairy farmers’ income by half.
India’s largely unorganized dairy sector, with a significant presence of women labor, complicates the decision-making process for the government. The organized sector, comprising dairy cooperatives, private firms, and government companies like Mother Dairy, accounts for just $30 billion of the $110 billion dairy industry in the country. Farmers in the country earn about 67% of their total animal farming income from dairying.