Milk powder exporters face credibility issue

Indian skimmed milk powder exporters face credibility issues in the export markets after seeing two bans in the past few years

Even though the government lifted all restrictions on exports of milk products last month, milk powder exports are hit by credibility issues.

Earlier, cotton exports were marred by credibility issues when the government was forced to correct measures to ban exports of cotton completely last year.

Indian skimmed milk powder (SMP) exporters face credibility issues in the export markets after seeing two bans in the past few years. Between February 2007 and now, exports were banned twice for a total period of 22 months. A 14-month ban was lifted in June this year. In February 2007, exports were banned for eight months. Companies are giving huge discounts to lure back buyers as they face pressure on domestic prices.

While exports resumed in June this year, companies are struggling to ship the surplus in the domestic market, which is acting as a price dampener. “Indian suppliers are no longer being seen as credible. The international trading community is sceptical about the export contracts with us. Indian suppliers are being forced to offer high discounts for securing export contracts. There is a trust deficit that will not end soon,” said Jitendra Agarwal, director of Bhole Baba, which sells milk powder and products under the Krishna brand. “Not every importer is ready to buy Indian SMP, but we have been able to sell in countries like Pakistan, Bangladesh and in West Asia,” he said.

Others in the industry echo the view. Sandeep Agarwal, director of SMC Foods, which sells milk powder under the Madhusudan brand, said the ad hoc policy on export of milk powder creates problems for the exporters. “We are not treated as genuine and reliable suppliers. In today’s situation, we are in the lowest rung in the international milk powder trade and have lost pricing power. Our price is as low as $2,600-2,700 per tonne against the price of $3,400, which is being commanded by suppliers in countries like New Zealand and Australia,” he said.

India used to ship 60,000-70,000 tonnes of SMP a year before the 14-month ban. Agarwal said domestic prices are depressed since the country has unusually high SMP stocks of 80,000 tonnes, compared to normal stocks of around 30,000 tonnes. Domestic price rules in the range of Rs 140-150 per kg and, down sharply from Rs 175 per kg in April-May.