ECONOMIC HIGHLIGHTS

New Delhi, November 10, 2005

India’s White Revolution

Dairy Industry Should be Global Player

By Dr. Vinod Mehta

Thanks to the Operation Flood Programme, India has today emerged the largest producer of milk in the world and will retain this position in the coming years.  In 1950-51 the country was producing only 17 million tonnes of milk, while in 2003-2004 its production reached the level of 92 million tonnes; the projection is 114 million tonnes in 2010 and 138 million tonnes in 2015.

However, behind this dry statistics lies the fact that this increased milk production has also brought about a social change in the rural sector by way of dairy cooperatives which put reasonable earnings in the hands of the poorest of the families owning one or two cattle only.   There are more than 77,500 Dairy Cooperative Societies organized in more than 170 milk sheds involving over 10 million farmer members.  A major feature of our white revolution is that the Government has ensured that a large percentage of the total milk produced in the country is made available to the general public as fresh liquid milk.

With the opening of the agricultural sector under the WTO agreement, fears were being expressed that all these achievements may be in danger if the Government did not take appropriate measures to protect the consumer as well as the farmer from the “unjust competition” and “unjust practices” of the milk exporting countries.  The multi-national corporations already operating in India in the fast moving consumer goods sector or the multinational companies that may be thinking of entering the country may change rules of the game and the gains made in the rural sector in the form of social change may be lost. 

If one goes by the experience of the past two years, the fears appear to be unfounded. The Indian Dairy Industry need not worry about multinational companies, but should concentrate on capturing a slice of the international market, especially for milk-based products like cheese, dahi, ice cream etc.

Though India is the largest producer of milk today in the world, yet it is not the largest exporter of milk.  According to the data available for the year 2001, India produced 80.5 million tonnes of milk (the projection for 2002 is 82 million tonnes), followed by USA 75 million tonnes, Russia 33 million tonnes, Germany 28 million tonnes, France 25 million tonnes, New Zealand 15 million tonnes, Australia 11 million tonnes, China 10 million tonnes and Japan 8.3 million tonnes.

Since milk is a perishable item it is converted first into milk powder to increase its shelf life.  The powder is again reconverted into liquid milk and some chemicals added to prolong its shelf life.  Apart from conversion of fresh liquid milk into powder, liquid milk is also converted into various dairy products like butter, cheese, butter oil, ghee, ice cream, flavoured milk and so on.  All these are value added products that fetch high prices to the manufacturer and not for the producers.   This is the normal practice in the developed countries.

With the opening of the agricultural sector multi-national corporations may   enter the dairy sector in a big way in the coming years and two of them, which are already in India, are trying to get a foothold in the Indian dairy market. The cooperative milk sector, led by Gujarat Cooperative Milk Marketing Federation (GCMMF) has taken the competition seriously and pushing ahead in a very big way.  However, to ensure level playing field, the multi-national corporations should also be asked to ensure the supply of fresh liquid milk to the Indian consumers before they can market the reconstituted milk or milk products.  The proportion of fresh liquid milk to be marketed by the multinational corporations must be clearly defined.  Again while marketing fresh milk, they must be asked clearly to state on the carton or pouch whether the milk is fresh milk or reconstituted milk. 

In a situation where MNCs are likely to enter the milk sector, it is essential to protect the interests of the consumers.  It is common knowledge that most of the multinational corporations, especially in the fast-moving consumer goods sector resort to various kind of undesirable practices to sell their products.  Many a time they resort to play of words to mislead the public. 

This is most of the time true with many products.  For instance, the reconstituted milk in tetra packs is either described as pure milk or natural milk, which clearly means that it is not fresh liquid milk.  Since people cannot distinguish between fresh liquid milk and reconstituted milk they buy the reconstituted milk as if it is fresh milk.  Again the milk powder they use to reconstitute milk comes from various sources. 

Therefore, the time is ripe to put in place strict quality control norms for the sale of milk and milk products, both for the domestic and the international market. It is thus important that, as a first step, the Government makes it mandatory that every packet of milk and milk product should carry the exact information whether a particular product is made from fresh milk or reconstituted milk etc. 

After having met the liquid milk needs of the consumers, the domestic milk producers are now going in for value added products like butter, cheese, curd, ice cream in a big way. It was feared that such a move will lead to increase in the prices of milk and milk products, but surprisingly the prices of milk and milk products in India have remained relatively stable in the past three years.  This is to the credit of our dairy The cooperative and private dairy sectors should slowly look  at the foreign markets where the prices are quite remunerative for products like butter, cheese, ice-cream etc.  The GCMMF has already taken a lead by exporting large quantities of liquid milk to Singapore every day. It is now eyeing the milk markets of Thailand, Malaysia and Indonesia. The day may not be far when India may export milk to China also. They should also enter the international market for dairy products.

It should also be understood that in most of the countries the farmers get large amounts of subsidies to maintain the production of milk at a certain level.  This factor should be taken into account while allowing foreign companies to sell milk and milk products in India by levying appropriate customs duties.

Now the project patent regime has come into force from  January 1, 2005 and all dairy processes and products will become patentable and we should move fast to patent our processes and products so that we are not edged out our own market.  For instance, it is India which has perfected the processes of producing milk powder and cheese from buffalo milk, which needs to be patented immediately if not done so far.

In the new WTO regime, India must keep its edge over milk production and should aim at to emerging as largest exporters of milk and milk products. For this we need not rear more cattle but increase the milk yield through better feed to cattle and by improving the pedigree of cattle stock.  Moreover, we must enforce stringent quality norms that conform to international standards for the marketing of milk and milk products, both in India and abroad.  We must also move fast to obtain patents for our processes and products. This is very important if we have to develop and sustain international markets for our milk and milk products. – INFA

(Copyright, India News and Feature Alliance)