Thanks to the shortage, SMP prices had also touched the Rs 300 per kg mark in domestic markets. (Representational)

The stock of skimmed milk powder (SMP) in the country has increased from practically nil to 1.5 lakh tonnes (lt) in the last three months, since lockdown was imposed. Dairies have pointed out that as sale of the product remains low, the decision of the central government — — to allow import of 10,000 tonnes of SMP at 15 per cent import duty — will cause further piling up of stocks, resulting in dip in procurement price for farmers.

Ironically the decision came even after the Union budget decided to impose 60 per cent duty on all SMP imports.

Dairies convert excess milk stock into anhydrous SMP and white butter to be supplement their needs. Prior to the Covid-19 lockdown, dairies had reported a shortfall in daily procurement and SMP stock had almost dropped to zero. Thanks to the shortage, SMP prices had also touched the Rs 300 per kg mark in domestic markets.

Since the begining of the lockdown in March, the situation underwent an almost overnight change, with dairies, especially the cooperative ones, reporting excess procurement of milk, which they were forced to convert into SMP and white butter. The Gujarat Cooperative Milk Marketing Federation Limited (GCMF), the holding company for the popular dairy brand Amul, has nearly 80,000 tonnes of SMP and 30,000 tonnes of white butter in its stock. The SMP stock nationwide is estimated to be around 1.5 lakh tonnes, with cooperative dairies holding most of it.

As hotels, restaurants and catering businesses remained shut during lockdown, the demand for milk from sweetmarts, ice-cream makers and tea stalls dipped to almost zero. Coupled with this, dairies which supplied milk for mid-day meals in schools across states also reported significant dip in their sales.

R S Sodhi, managing director of Amul, said they used to supply nearly 3-3.5 lakh litres of milk daily to schools in Gujarat. “With schools shut, that milk has become excess stock for us,” he said.

Demand will continue to fluctuate as the pandemic continues in the country, said dairy owners. Now, the central government’s decision to reverse its earlier decision of imposing a stiff 60 per cent duty on import of SMP irrespective of Tariff Rate Quota (TRF) has been opposed by dairies. On June 23, the central government allowed import of 10,000 tonnes of SMP at a concessional 15 per cent duty, which, dairies say, would further weaken sentiments in the market.

As against the cost of production of Rs 260 per kg, SMP price in domestic markets is around Rs 200 per kg, while in international markets, it is available at cheaper rates of Rs 170-180 per kg. “While the quantity might not be much, it will surely have a negative impact on SMP prices, which will force dairies to revise the procurement price of milk from farmers,” said an official of a cooperative dairy in Maharashtra.

At present, most dairies are paying their farmers Rs 20-22 per litre for milk. With the monsoon setting in, milk production is all set to increase in the coming months.

Both Amul and the Maharashtra Milk Producers and Processors Welfare Association, the umbrella body of private and cooperative dairies in the state, have already written to the central government, asking it to reconsider its decision of reversing the import duty. Amul has also asked for an export incentive of Rs 50 per kg for exporting nearly 50,000 tonnes of SMP. This, Sodhi and others said, will allow them to reduce their stock and increase payment to farmers.