Dairies seek extension of milk subsidy to private players

Subsidy burden could rise to Rs 1,200 crore

The Karnataka State Dairy Association (KSDA) has sought the extension of milk subsidy of Rs 2 per litre to all districts and private dairies in the state.

In a memorandum to chief minister Siddaramaiah, the KSDA has welcomed the recent move of the state to extend Rs 2 per litre subsidy to milk producers only in the districts of Mandya, Mysore, Bangalore, Hassan, Shimoga, Tumkur and Kolar, which account for 80 per cent of the milk production in the state. These districts get 80 per cent of the subsidy extended by the government and do not benefit small and marginal dairy farmers belonging to the 23 other districts, KSDA said.

The KSDA has, however, suggested alternatives of spending the same money to benefit all farmers including small and marginal dairy farmers in Northern Karnataka.

"The state has failed to attract private investments to the dairy sector because subsidy is given only to farmers supplying milk to the co-operative sector depriving the private dairy sector of a level- playing field to compete, impeding the ability of the private sector to establish processing and milk powder plants in the state," Dinesh R Pai, President of KSDA, said in a memorandum.

The adjoining states of Tamil Nadu and Andhra Pradesh have 16 private milk powder plants as opposed to none in Karnataka. Therefore, the excess milk in Karnataka gets transported to the adjoining states for processing, resulting in heavy losses due to the additional cost of logistics, he said.

"The private sector's share of the national milk procurement volumes in the dairy sector is 60 per cent and that of co-operatives is 40 per cent. However, in Karnataka, the private sector has a share of only 16 per cent and rest controlled by co-operatives. This has happened primarily because of the Rs 2 per litre subsidy, which made it unviable for private firms to procure milk from Karnataka as a result of which Karnataka has failed to attract private investments," the memorandum said.

The enhanced subsidy of Rs 4 per litre announced by the government will make it unviable for private firms to operate in Karnataka, the KSDA said.

The subsidy burden on the state exchequer last year for a milk procurement volume of 5 million litres per day amounted to Rs 1 crore per day resulting in an outgo of Rs 365 crore per annum. Additionally, a subsidy of Rs 50 per kg of milk powder for a volume of 18,000 tonnes of milk powder added another Rs 90 crore subsidy burden to the state. An additional interest subsidy of Rs 25 crore resulted in a total subsidy burden of Rs 480 crore per annum. This year the total subsidy burden could increase to Rs 1,200 crore if the proposed subsidy at Rs 4 per litre for a milk volume of 6 million litres of milk per day is implemented.

The KSDA has asked the chief minister to extend subsidy to all the dairy farmers irrespective of their affiliation. This would benefit an additional 280,000 dairy farmers who supply milk to private dairy farms, it said.

It has also urged the government to consider provision of cattle subsidy on purchase of high yielding cattle to farmers across all districts in the state.