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RSTV: THE BIG PICTURE-DAIRY INDUSTRY & FTA


RSTV: THE BIG PICTURE-DAIRY INDUSTRY & FTA


Introduction:

            A few days ago India decided against joining the Regional Comprehensive Economic Partnership – RCEP which is a free trade agreement between more than dozen counties. In the run up to the RCEP meet, the domestic Dairy Industry has been vocal about its apprehensions regarding this FTA. India has been the leading producer and consumer of dairy products with a sustained growth over the years . Estimated production of milk in 2018-19 was 187 million tonnes. Milk is equally important to both farmers and consumers.

 

            With India deciding against joining the Regional Comprehensive Economic Partnership (RCEP), a China-backed free trade agreement (FTA) among 15 nations, dairy farmers are a relieved lot. It is not that the (dairy) industry alone would be affected, it will be affecting basic agriculture. Several women dairy farmers, had written to Prime Minister Narendra Modi last week, concerned over the outcome of the RCEP trade deal. The dairy industry is the ATM card for the villagers. The dairy sector is one of the few success stories in India’s recent agriculture history. The country’s milk output has so far more than doubled from 79.66 million tonnes in 2000, making it the world’s largest producer and consumer of milk. As the deal offered zero-duty imports of cheaper dairy products, the sector was concerned about heavy competition in both price and technology. Indian farmers are paid an estimated 60% of milk prices whereas it is only 23% and 24% in New Zealand and Australia respectively.

 

Milk Production in India:

  • India is the largest producer of milk.
  • The value of milk is more than that of rice and wheat combined.
  • So, it is India’s biggest agri-produce.
  • It is a source of income to small and landless agri-hou
  • 70 per cent of those earning their livelihood from milk are women.

 

What makes milk and milk products such a big deal for India?

  • Milk is the country’s largest “crop”.
  • In 2018-19, the estimated production of milk, at 187.75 million tonnes (mt), was more than that of paddy (174.63 mt) or wheat (102.19 mt).
  • Milk is, moreover, a source of liquidity for farmers, as it is sold daily and generates cash to take care of routine household expenses, unlike other crops that are marketed only once or twice a year.
  • But milk matters equally to consumers in India, because it meets the animal protein/fat requirements of a significant portion of the population that is vegetarian.
  • Milk, in the Indian context, is also a ‘superior’ food with income elasticity of demand greater than one. This means that as incomes rise, the demand for milk goes up even more.

 

Challenges faced:

  • Indian cattle and buffaloes have among the lowest productivity.
  • Similarly there is a shortage of organized dairy farms and there is a need of high degree of investment to take dairy industry to global standards.
  • Improving productivity of farm animals is one of the major challenges
  • Crossbreeding of indigenous species with exotic stocks to enhance genetic potential of different species has been successful only to a limited extent.
  • The sector will also come under significant adjustment pressure to the emerging market forces. Though globalization will create avenues for increased participation in international trade, stringent food safety and quality norms would be required.
  • Access to markets is critical to speed up commercialization. Lack of access to markets may act as a disincentive to farmers to adopt improved technologies and quality inputs

 

So, where does the RCEP come in?

  • Global dairy trade takes place not in milk, but in the solids that derive from it — mainly milk powder, butter/butter oil, and cheese.
  • 50 million will be jobless if RCEP comes into picture.
  • RCEP would affect small holders because Indian dairy industry is totally in their hands.
  • India isn’t a major player in the world market.
  • Till the eighties, it used to import up to 50,000-60,000 tonnes of skim milk powder and 10,000-15,000 tonnes of butter oil annually, largely channelised through the National Dairy Development Board.
  • Over the past couple of decades, with sustained production increases, the country has become self-sufficient, or even marginally surplus.
  • This is evidenced by its dairy product exports surpassing imports in most years, although their values are insignificant relative to both domestic output and global trade.
  • One reason for India’s imports being low is the high tariffs, especially on milk powder (60%) and fats (40%).
  • If dairy products are covered under an RCEP deal, India may have to allow members of the bloc greater access to its market, whether through phased duty reductions or more liberal tariff rate quotas (TRQs).
  • There is an already existing TRQ for milk powder, which enables import of up to 10,000 tonnes per year at 15% customs duty, and quantities beyond that at the regular rate of 60%.
  • The Indian dairy industry is resisting any enhanced TRQs or other import concessions, even if extended only to RCEP countries, as opposed to the US or European Union.

 

Government initiatives:

  • National Programme for Bovine Breeding
  • Rashtriya Gokul Mission
  • National Bovine Genetic Centre
  • Quality Mark
  • National Kamdhenu Bredding Centres
  • E-Pashuhaat portal
  • National Programme for Dairy Development (NPDD)
  • Dairy Entrepreneurship Development Scheme (DEDS)
  • National Dairy Plan-I (NDP-I)
  • Dairy Processing and Infrastructure Development Fund (DIDF)
  • Supporting Dairy Cooperatives and Farmer Producer Organizations engaged in dairy activities (SDCFPO)

 

Way Forward:

  • Dairy industry must modernize itself with a focus to export our milk and milk products.
  • Balance between FTA and dairy industry & between interest of farmers and consumers.
  • The supply glut that has caused the milk price crash is an opportunity to create a skimmed milk powder buffer stock and incentivise investment in milk products.
  • Incentivise investments in value-added products in the organised sector — like curd, buttermilk, cheese, ice-cream and even chocolates.
  • Bring down cost of production to the farmers and improve the quality and quantity of milk.
  • This can help farmers stabilise their milk prices.
  • Expand domestic demand for higher milk consumption through concerted campaigns, especially in the 115 aspirational districts where malnutrition is high.
  • In these districts, the government could introduce milk in mid-day meal schemes and under NFSA.
  • Use the SMP buffer to supply large quantities to the armed forces, hospitals and other large institutional players.
  • In order to cut down costs of milk production, India needs to increase the productivity of its milch animals, that is far below the global
  • Cross-breeding with high-productivity animals of foreign breeds and pure indigenous breeds is the way forward.
  • The country needs to ramp its R&D and agriculture extension department to transform this sector into a vibrant, competitive and more remunerative sector for farmers.

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