March 24, 2015


End of EU milk quota system may hit India's exports



India's dairy exports are set to fall, with the European Union scrapping its 30-year milk quota system from April 1, the Economic Times reports.

However, more dairy products available for domestic consumption could stabilise prices of milk, cheese and butter.

The milk quota system was introduced by the EU in 1984, to address the issue of overproduction. The EU allocated milk production quotas to member-countries, which distributed them among individual farmers.

According to the system, a member is subject to a levy if it exceeds its quota.

The EU is of the view that the milk quota system has outlived its usefulness with globalisation of dairy markets and increased consumption of dairy products outside the EU.

"With the lifting of the quotas, many lower-cost producers like Ireland and Poland will increase milk production and this can lead to a drop in global prices," said S Nagarajan, managing director of Delhi-based dairy producer Mother Dairy. "A ripple-down impact on India will mean stable milk and milk product prices and a drop in exports."

However, increased availability of dairy items could also mean lower remuneration for dairy farmers in India, said RS Sodhi, managing director at Gujarat Cooperative Milk Marketing Federation, the maker of Amul milk and butter. "We are watching the evolving global development. In India, the demand for milk products is increasing and we might not see a huge impact."

India Ratings & Research said in a recent study that the demand for milk and dairy products remains high in India due to changing dietary habits and rising purchasing power. The study expects the Indian dairy sector to grow at 15.6% in 2015-16 from 12.6% in 2012-13.

Dairy companies said negotiating better terms for duties on Indian dairy products was a way to go. "Pakistan has reduced import duty on Indian dairy products by 5% to 20%. Other Saarc countries like Bangladesh and Sri Lanka that are big importers of dairy products, could also do so," said Kuldeep Saluja, managing director, Sterling Agro Industries, the maker of Nova dairy products.

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