Duty-free imports to cap milk price rise

The central government’s decision to allow duty-free import of milk powder and butter oil will help contain milk and milk products prices, which usually rise in the summer season due to lower milk procurement.

However, dairy industry players are of the view that this move may not result in an immediate fall in prices.

The Director General of Foreign Trade (DGFT) has recently permitted duty-free import of 30,000 tonnes of skimmed and whole milk powder, milk food for babies, and 15,000 tonnes of white butter and butter oil.

“We do not see milk and milk prices going down immediately, as the landed cost of imported milk powder and butter oil is more or less the same,” said a senior official of the Gujarat Co-operative Milk Marketing Federation (GCMMF), which owns and markets Amul brand of milk products. The domestic price of skimmed milk powder in Gujarat is at present Rs 160 per kg, while the landed cost of imported skimmed milk powder works out to be Rs 145 per kg. “If we take local taxes and other expenses into account, its market price may come around Rs 150 per kg. In case of butter oil, the current price in local markets is Rs 200 per kg as against a landed cost of Rs 190 per kg,” he added.

The dairy industry fears that this move will keep the prices under check during summer. “Milk prices generally increase by Rs 1-2 in summer and they are unlikely to firm up due to zero-duty imports, which will ultimately affect the village-level milk producers,” another GCMMF official said.

“Duty-free imports will certainly help meet supply shortage, but dairies will not be in a position to pay higher to farmers,” said Devendra Shah, chairman and managing director of Maharashtra-based Parag Milk Foods, which owns Gowardhan brand of dairy products. Milk producers in villages are already facing a problem of higher cost of cattle feed, which has increased by 40-60 per cent within a year. As compared to this, milk prices in Gujarat have surged less than 10 per cent. DGFT has also permitted the import of 5,00,000 tonnes of maize (corn) at a concessional duty of 15 per cent.

Maize industry players believe that maize import at 15 per cent duty is not viable. “It will not affect the domestic market, as the cost of imported maize will be higher due to 15 per cent duty,” said industry sources.