November 21, 2011


India's milk price hike due to input cost


The price hike in milk is not due to milk insufficiency in the country but the function of increasing input cost, said India's Agriculture Minister Sharad Pawar on Friday (Nov 18).


However, Pawar contradicts the 2010-11 Economy Survey on demand and supply gap. The survey says there is a wide gap in demand and supply of milk.


The country is not able to keep pace with the demand which is growing at about six million tonnes, while the annual incremental milk production over the last 10 years has been about 3.5 million tonnes - a gap of 42%.


With surging economic growth and consequently more money in consumers' hands, demand for milk and milk products has been going up constantly. According to Planning Commission estimates, the demand for milk is likely to be 172.20 million tonnes by 2021-22. Currently the country produces 112 million tonnes of milk. According to rough estimates in 2010-11 the country produced around 116 million tonnes of milk.


Full-cream milk now costs INR38 (US$0.74) a litre, up from INR30 (US$0.58) in March 2010.


Overall cost of producing milk is going up drastically. For instance, cost of feed and fodder, which constitutes 69% of the input cost, has gone up significantly in the last few years due to the minimum support price (MSP) phenomenon.


Farmers are focusing only on cash crops like wheat, rice and cotton which are leading to shortage of fodder crops. In addition, the cost of labour has gone up due to MGNREGA scheme, leading to unavailability of labour for dairying. Labour constitutes 20% of the cost of production of milk. Labour crunch due to NREGA has also led to mechanisation of harvesting which is resulting in less dry fodder for animals, major reason for high cost of dry fodder.

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