Why are milk prices so high, and what can be done about it?

Source: The post is based on the article “Why are milk prices so high, and what can be done about it?” published in Indian Express on 30th January 2023

What is the News?

Since last year, the Gujarat Cooperative Milk Marketing Federation has raised the maximum retail price (MRP) of its Amul brand full-cream milk from Rs 58 to Rs 64 per litre. 

The National Dairy Development Board(NDDB)-owned Mother Dairy has also raised the price from Rs 57 to Rs 66 per litre.

Why are milk prices increasing?

Demand Supply mismatch: The pandemic-hit dairy industry has reported a complete recovery. This year, the demand for liquid milk is also high compared to previous years. But most dairies in the country are short on their supply of skimmed milk powder (SMP) and white butter.

Rise in cattle feed cost: The reduction in milk yield has come on the back of the rising cost of cattle feed. Cattle feed cost alone has gone up by over 25%.

Disease in cattle: Some major milk-producing states have seen a rise in cases of disease among cattle. Lumpy Skin Disease, which leads to falling in milk output, has been reported in Gujarat, Punjab and Haryana.

Rise in logistics cost: There has also been a rise in transport, logistics, manpower, and energy costs. Due to the rise in input costs, milk procurement rates have increased by 15-25%.

What can the government do now?

A shortage of milk, more specifically fat, is a concern when dairies would ordinarily be building up stocks for the summer. Since that’s not happening, it makes sense to allow duty-free imports of butter oil and SMP. 

Hence, the government can permit the National Dairy Development Board(NDDB) to import fat and SMP at zero duty for building up a buffer stock necessary for the summer when milk supplies will dry up in the normal course.