January 7, 2008

Milk producers threaten to cut off supply in India's Kerala state

Milk producers in India's state of Kerala has threatened to cut off the state's milk supply if the government does not allow an increase in milk prices.

The Kerala Cooperative Milk Marketing Federation (Milma) has proposed that the price of milk be increased by Rs.3 per litre.

Milma argued that in the last 20 months, the price of milk had gone up across the country by Rs.6, hitting Rs.19-21 per litre. Some milk  brands are also sold at Rs.18 per litre.

At present, milk is being sold in the State at Rs.17 per litre, while farm gate price is Rs.13.19.

Even though Milma had proposed a price hike of Rs.2 in November last year, the government had cut it back by Rs.1.

Milma has proposed that the price be increased Rs.3 and to pass on at least an additional Rs.2 to the farmer as an incentive for increasing milk production.

The current shortage has forced a restricted supply and Milma now has to buy 2.6 million litres from a neighbouring state to meet demand.

Recent milk price hikes in Karnataka in December, caused Milma to incur losses of up to Rs 700,000 daily.

The state government persuaded Milma to buy milk for the state, promising to compensate the organization later. So far little has been heard on the compensation, raising the possibility that Milma may have to be shut down, according to  a senior official.