Time to rescind the ban

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Time to rescind the ban

Business Standard / New Delhi September 11, 2007

The suggestion mooted by the Confederation of Indian Industry (CII), to extend the ban on milk powder exports till March, is bizarre. The ban was ill-advised in the first place because milk production has steadily and consistently been growing at more than double the rate of population growth, and there was no fear of any shortage of milk. The milk price index, too, has historically remained lower than that of all food items taken together, and also of individual major food items grouped as cereals and pulses, fruits and vegetables, and eggs, meat and fish. If the government’s decision to ban exports, taken last February, which is the beginning of the seasonal lean phase in milk output, was meant to ward off any abnormal rise in prices, that threat (if it ever existed) is now over. The flush season has already begun because of abundant fodder in the wake of good monsoon rains throughout the country. In fact, there are reports of a milk surplus in several pockets, notably in the western and southern regions. So the time is ripe to lift this ban, and there is certainly no call for a counter-cyclical extension throughout the flush season, till the next lean season is about to start.

The global milk scenario has changed dramatically in the past couple of years and India, as the world’s largest and most cost-effective producer of milk, should capitalise on the new trends. International milk prices have almost doubled in the past couple of years on account of a rise in feed costs and normal demand growth. Milk powder prices, too, have soared during this period. Any continuation of the export ban at this point of time would be to repeat the mistake made in the case of sugar by mis-timing the imposition and lifting of a ban on exports. If this happens, the country’s dairy industry and its millions of milk producers, mostly small and marginal farmers and even landless labourers, would suffer the same way as the sugar industry did and cane growers have done. As it is, the domestic prices of milk powder have declined sharply. The prices paid to milk producers may follow suit, if the demand for milk is not allowed to pick up by extending the export ban.

Policy-makers should note that milk producers are turning restive over the price issue. This is evident from the protests being staged in several areas for better returns on milk, including Agriculture Minister Sharad Pawar’s home state of Maharashtra. The co-operative sector milk giant, the Gujarat Cooperative Milk Marketing Federation (GCMMF, which sells milk products under the Amul brand), representing 2.5 million milk producer members, has chosen to not accept the APEDA export award in protest against the shackles on milk powder exports. It is worth noting that the country’s peak milk powder exports have been only around 50,500 tonnes (in 2005-06), which consumed barely 1.5 per cent of the country’s total milk output of close to 100 million tonnes. In view of all this, it would be wise for the government to do away with this needless and thoughtless ban, in the interest of millions of milk producers and a growing dairy industry.

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