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Wallet to feel the pinch of milk crisis

Calcutta, Sept. 28: In 1998, it was onion. In 2003, will it be milk'

Milk shortage, first felt in Delhi — where elections are scheduled in November — has spread to the east, west and the south, forcing hectic crisis management that will possibly stave off an election disaster for the ruling party.

But prices are unlikely to be the same again, though some 6,500 tonnes of milk powder is being imported by the National Dairy Development Board (NDDB) to tackle the shortage.

While drought in parts of the country — mainly in north India — squeezed supply, industry observers question the rationale for the Gujarat Cooperative Milk Marketing Federation’s (better known as Amul) decision to export milk powder despite a domestic shortage.

Data with the director-general of commercial intelligence and statistics shows that Amul — producer of over 50 per cent of the country’s milk powder — exported more than 119 lakh kg of the powder in 2002-2003.

“It’s difficult to explain Amul’s decision to export milk powder at lower (than domestic) prices. This not only created a shortage, milk producers were forced to pay higher prices for the powder from domestic or international markets. It seems their only intention was to push up prices,” said an industry observer.

In less than two months (August-September), milk powder prices rose from Rs 67 to around Rs 110 per kg, inflicting losses on milk producers who are now contemplating a price increase as well.

Countering the charge, an Amul spokesperson said: “Exports of milk powder in April-August 2003 were 40 per cent lower than in the same period of the previous year.”

He added: “The federation was forced to export milk powder in bulk since NDDB’s Mother Dairy Delhi stopped buying its requirement of 18,000-20,000 tonnes of milk powder earlier this year.”

He said Amul has decided to defer all export shipments till the situation returns to normal. But the damage has already been done, say industry observers.

Amul is launching its Tetra Pak milk, Taaza, in the festival season. “Amul has flooded its agents with Tetra Pak milk when there is a shortage of competing products. If they are allowed to operate like this, we will have to shut down,” said a dairy-owner in Bengal.

“There is no link at all between the crisis and the launch,” said an Amul spokesperson.

With a longer shelf life than competing products, Taaza will cost (price of double toned in Bengal) Rs 18 a litre compared with Rs 12-16 for other packaged milk.

In Delhi, milk prices have gone up by Re 1 to Rs 2.

“With NDDB’s imports and increase in supply of fresh milk, we expect the crisis to be over in the next 15 to 20 days,” said Brajesh Goyel of Haryana Milk Foods, a leading dairy in north India.

The imports are expected in the first week of October. “But it will be consumed in a day or two. Delhi Mother Dairy and Delhi Milk Scheme have together requisitioned for 6,800 tonnes, dairies from Mumbai want around 1,400 tonnes and the demand from Bengal is 1,000 tonnes. Besides, northeastern states, Kerala and Rajasthan also want milk powder at the earliest,” said an industry source.

A section of the industry, led by Amul, is opposing import, saying it would hurt domestic producers. “The flush season has just started, importing now would go against the local dairies,” said an Amul spokesperson.

Those advocating imports brush aside the argument, explaining that the impact of the peak production season would not be felt before November because of the time lag between collection of fresh milk and turning it into powder.

The Amul spokesperson said the “man-made crisis due to Mother Dairy Delhi’s failure in managing its inventory” can be averted since Amul is capable of meeting the demand.

Bengal had sought 1,000 tonnes of powder from Amul which agreed at first to supply that amount but has now said would provide only 300 tonnes, according to Anisur Rahaman, the animal resource development minister.

While no one knows how long the crisis will last, industry expects milk powder prices to settle around Rs 90, up from the earlier level of Rs 70, pushing up packaged milk rates as well.

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