India's COVID-19 Crisis Has Placed Its Dairy Farmers at a Crossroads

The recent crisis of low milk prices is due to the destruction of demand in the hotel, restaurant and catering sectors, which consume about 25% of the total marketable surplus.

Last month, videos of Maharashtra dairy farmers dumping their milk on the streets went viral.

If the milk producers, who have been hit badly by COVID-19 and the lockdown, had not protested, it appears likely that the country would have taken little note of the problems being faced by them. Much like poultry farmers, who are also similarly hit by low prices, they would have also perished.

However, thanks to the symbolic protests, their travails have been covered by mainstream media and some relief may be under consideration by the government.

The dairy and animal husbandry sector contributes around 4.2% of India’s GDP. It is a primary source of income for about 7 crore rural families. Most of the milk producers are landless or small and marginal farmers. For more than two decades, India has been the largest milk producer in the world. In 2018-19, India produced 176.4 million tonnes (MT) of milk, about 20% of the world’s milk production. The Compounded Annual Growth Rate (CAGR) in the last 20 years was 4.5%. The world’s milk production in the meanwhile grew by around 2%.

As per National Account Statistics 2019, the value of the output of milk in 2017-18 was Rs 7.01 lakh crore (at current price) which was higher than the total value of output from paddy (Rs 2.72 lakh crore) and wheat (Rs 1.73 lakh crore). India’s agricultural and allied sector’s total value of output is around Rs 28 lakh crore. It means that the contribution of milk was more than 25% of the total value of output.

Crests and troughs

In the last six years, the animal husbandry sector has seen many ups and downs. The vaccination programme of foot and mouth disease (FMD) was completely funded by the Centre till 2014-15. In 2015-16, it was decided that the states will have to contribute 50% of the expenditure. Later, on the recommendation of a committee headed by the chief minister of Madhya Pradesh, Shivraj Singh Chouhan, the states’ share was reduced to 10% for North Eastern and Himalayan states and 40% for other states. This flip flop had an adverse impact on FMD immunisation programme and in Maharashtra, at least two rounds of vaccination were missed. Other states may have also similarly missed FMD vaccination.

Also read: Small Dairy Farmers Across India are Struggling for their Livelihoods

Another key policy change was carried out by the Ministry of Environment and Forests when it notified rules under the Prevention of Cruelty to Animals Act on May 23, 2017. The sale of cattle, bulls, cows, bullocks, buffaloes, steers, heifers, calves and camels for slaughter in open markets was banned. It was also mandated that these animals could only be sold to agriculturists. The purchasers were not permitted to sell their animals for six months from date of purchase. The rules also provided that no animal markets could be set up within 25 km of a state border and 50 km of an international border.

These rules meant that even out-of-milk and ageing buffaloes could not be sold by farmers for slaughter. In the process, they would have suffered a loss of Rs 20,000 to Rs 30,000 per animal as the farmers normally use the money from such sales for purchasing in-milk buffaloes, which can add to their income.

A villager milks a cow in Rajasthan. Photo: Wikimedia Commons

Fortunately, the Supreme Court intervened and the government revisited its position and issued modified Prevention of Cruelty to Animals in Animal Market Rules on March 22, 2018. Restrictions on animal trading in markets were withdrawn. The rules, however, rightly banned the sale of pregnant, infirm, diseased, injured as well as young animals, below the age of 6 months.

As a result of this, better availability of fodder and efforts of artificial insemination, the production of milk did not suffer and it reached 187.7 million tonnes in 2018-19.

The FMD vaccination programme was revived in 2018-19 under a new scheme – National Animal Disease Control Programme for Foot and Mouth Disease and Brucellosis. An outlay of Rs 13,343 crore was provided for five years (2019-20 to 2023-24) for vaccinating 100% cattle, buffalo, sheep, goat and pig population. It is estimated that loss of Rs 50,000 crore will be prevented by this. If successful, it can bring new export markets to Indian dairy and meat products.

In the third tranche of her speeches, the finance minister repeated on May 15, 2020, that the government has launched the FMD vaccination programme and 1.5 crore cows and buffaloes have been vaccinated. Once India is declared free of FMD by the Paris based intergovernmental World Organisation for Animal Health (OIE), Indian dairy and meat exports will not face non-tariff barriers. This can open up export markets for Indian dairy and meat.

A suggestion here is to vigorously take up FMD vaccination in nine major milk and meat producing states and obtain an OIE certificate that these areas are free of FMD.

Also read: Mapping the Consumption of Milk and Meat in India

A recent paper of FICCI (Development of Dairy Sector in India: July 2020), documents that nearly 55% of India’s milk production originates from buffalos which have an average milk yield of 6.2 kg per day. The buffalo milk has relatively high fat content, for which farmers realise a better price as milk price is determined by volume, fat, and solids-not-fat (SNF) content.

It is estimated that the marketable surplus of milk is about 52% and this is available for sale in urban areas. Out of marketable surplus, only about 40% of the milk is handled by the organised sector. There are about 1.90 lakh dairy cooperatives.  The cooperatives have a milk processing capacity of 882 lakh litres per day (LLPD) which implies that the cooperatives process about 32.19 million tonnes of milk in a year. The milk processing capacity of the organised private sector is not known but it is estimated that private sector capacity is now more than that of the cooperative sector.

Current woes

The recent crisis of low milk prices is due to destruction of demand in the hotel, restaurant and catering sector (horeca), which is estimated to consume about 25% of the total marketable surplus. The farmers are forced to sell milk at about Rs 30 per litre while they were getting Rs 45 per litre before the lockdown in March 2020. If milk producers had a clout similar to that of sugar mill owners (in the name of sugar cane farmers), the government would have come out with a relief package, including the creation of buffer stock of skimmed milk powder (SMP).

Another impending cause of concern for dairy farmers is India’s ongoing trade talks with the US for a ‘quick deal’. It is feared that in order to get market access for textiles and information technology etc., the government may agree to bring down the import duty on milk from 60%. This will enable import of higher value milk products as well as SMP from the US. If that happens, milk producers will be subsidising IT and textile exports from India and perhaps influencing the presidential elections in the US!

In 2019-20, India earned just $86.73 million from the export of dairy products. In the next 5-10 years, if India can get FMD free status, several products like buffalo mozzarella cheese, ghee etc. can be exported to the US and the European Union. China is also a big market for dairy products but due to recent border disputes, trade with China may be under a cloud.

There is a large scope of attracting private investment in the milk sector. For that, the government should release data on existing capacity in each district of India. Food Safety and Standards Authority of India (FSSAI) collects this data from both cooperatives and private companies. The FICCI paper argues that FSSAI should take professional help to compile, collate and release this data to the public.

Also read: How Did We Go From ‘Food Surplus’ in 2018, to Five-Year High Retail Inflation Now?

For the vast majority of Indians, milk is the major source of protein. Milk producers are therefore providing nutritional security to India. Once schools reopen, states must consider providing milk and eggs to students under the mid-day meal scheme so that locally produced and unadulterated food is made available to children of the poor, who form the majority of students in government schools.

Siraj Hussain was Union Agriculture Secretary. He is Advisor, Food Processing to FICCI.