Skimmed milk

Published: Monday 31 December 2007

The government ought to defend the interests of the small producer

international milk prices are spiralling, so one assumes now is a good time to be a dairy owner in India, the world's largest milk producer. But it is not. Milk prices in the Indian market are controlled through informal political interference, which works through cooperative dairies. Most have politicians, bureaucrats and technocrats on their boards. There's nothing wrong with that--not as long as they lend their weight to the general purpose of cooperatives: defending the interests of small producers in the ever-expanding market.

It's no secret that petty politicking has ruined India's cooperative movement, the only exception being the dairy sector. Milk demand has increased rapidly over the past three decades due to increasing consumption of processed dairy items. Because milk is perishable, an elaborate chain exists for cold storage and transportation, helping the small producer reach the market. Hence, dairying has escaped the corruption of the wider cooperative movement. Nevertheless, these are worrying times for the small producer.

The cost of milk production has increased sharply over the past decade, especially in the past two years. For the producer to earn profits, milk prices would have to reflect this, transferring the increased cost to the consumer. But milk prices--like the prices of essentials like onions, potatoes and tomatoes--are highly political. The smallest hike becomes news, with tv channels flashing images of distressed consumers forced to pay extra. If prices fall, ruining thousands of farmers, the self-christened National Media never bothers. The fate of the small milk producer is the same.

Most milk producers in India are in the small and marginal category. A high proportion has no land to till. Unfortunately, the government has done precious little to address the fodder crisis or address the increasing costs of medical treatment--actually, most government interventions make it much harder for cattle-rearers. The least it can do is ensure they get a decent price. But what does it do? It controls price in the interest of the consumers. Recently, large dairies approached the government to allow milk export--they can make a killing on the international market. If the profits from this are transferred to the small producer, it may not be a bad move. But for how long? When New Zealand and Australia emerge from the current drought and flood the market with cheap milk, the small producer will take the hit again. Would milk prices increase then? A question worth pondering.

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