By Savvy Soumya Misra
Published: Sunday 15 March 2009

EU subsidy may hurt the Indian dairy industry

to shield its dairy industry from the pinch of global economic meltdown, the European Commission has decided to reinstate export subsidies on dairy products, which it suspended in 2007. The move may adversely impact India's dairy industry.

Under the plan, the executive body of the EU will reduce export duty on skimmed milk powder, butter and butter oil by about 15 per cent from March 1. It will also support the dairy producers through intervention purchases.

"These subsidies and intervention programmes will affect the Indian dairy industry," said N R Bhasin, president of the Indian Dairy Association. As the bloc starts exporting products at a much lower rate, India will not be able to compete. India may lose its stronghold in the world dairy market since the EU suspended its export subsidy, he said. In the year ending September 2008, India exported about 75,000 tonnes of skimmed milk powder worth Rs 1,000 crore. "Though in the long run we might be able to retain the South East Asia market, due to problems with Chinese dairy and inability of Australia to meet demand, we may lose the Middle East market," Bhasin said.

"The EU is protecting their farmers and transferring their problems on to us," said R S Sodhi, general manager, Gujarat Cooperative Milk Marketing Federation. The domestic dairy industry now fears a flood of imports into the country. To protect our farmers, Sodhi said, the government should restore import duties on skimmed milk powder to the earlier level of 15 per cent. The Centre had reduced import duty on skimmed milk powder to 5 per cent in April 2008 following concerns of shortage of milk products in the country.

The Indian Dairy Association has submitted proposals to the Centre to take action to protect farmers. The dairy industry also wants a subsidy of 15 per cent.

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