Why World’s Largest Milk Producer India Hasn’t Cashed In On Rising Global Demand For Dairy Products

In the 2018-19 financial year, India’s dairy exports increased by over 50 per cent to 1.80 lakh tonnes from 1.02 lakh tonnes the previous year. The value of exports rose to $481.55 million from $303.05 million during the period.

India’s dairy export performance was despite a slump in prices in the fourth quarter of 2018 and the European Union skimmed milk powder (SMP) ruling at a 16-year-low last year.

According to the US Dairy Export Council, SMP exports from India increased 153 per cent between January and November 2018 to 23,974 tonnes.

According to industry experts, a major factor that helped Indian dairy exports was an increase in incentive for exports under Merchandise Exports from India Scheme (MEIS) from 10 per cent to 20 per cent last year.

Rising demand in the global market is seen as another factor helping shipments from India. Lower production in some regions such as the EU and the Americas also helped.

However, the rise in 2018-19 dairy exports isn’t being cheered by the industry since it feels there is ample room for improvement. Exports of value-added products such as cheese and yogurt items, particularly lassi, are considered important for India to make a mark in the global market.

According to the National Academy of Agricultural Research Management, the export value of Indian dairy products is less than 0.5 per cent of the value of agricultural shipments.

At less than 18 US cents for a kilogram, Indian milk production costs are one of the lowest in the world. The dairy sector accounts for two-thirds of the animal husbandry production value in India at 68.2 per cent.

In 2015, India had a cattle population of 1.24 billion with milk production at 134 million tonnes. This increased to 176.3 million tonnes during 2017-18 with the per capita availability rising to 375 grams.

In its 2018-19 annual report, Chennai-based Hatsun Agro Product Ltd --- producer of Arogya milk and Arun Ice Creams --- said that India has the largest bovine population in the world but its milk production per animal is the significantly low compared with other major dairy producers.

According to the IMARC Group, the value of the Indian dairy market in 2018 was Rs 9.16 lakh crore.

These statistics make one wonder why India lags behind in the 75 million tonnes global dairy export market. This is despite India shipping abroad SMP, whole milk powder, butter oil, ghee, whey products, dairy spread, cheese, and fermented products.

Milk productivity among bovines in India is low as the average milk production of cows is the lowest in the world. (In the case of buffaloes, milk production is among the top in the world).

Most of the dairy products produced in the country are consumed domestically and this has resulted in the export potential not being tapped. According to Hatsun, fluid milk makes up a major part of dairy consumption.

According to experts, when domestic consumption is vibrant an industry often doesn’t look out for export opportunities.

The dairy sector is disadvantaged by many producers being small farmers, who make up nearly 70 per cent of the total milk production. These farmers lack skill in handling milk commercially.

Poor veterinary health, transportation hurdles, small dairy herd and lack of policy reforms are hurting the dairy industry. Indian exporters also need to improve food safety hygiene, while the supply chain has to be modernised.

In addition, not many dairy firms barring Amul are looking to tap the demand for Indian dairy products abroad, especially from the diaspora.

Again, Indian exports are looking at markets such as Bangladesh, United Arab Emirates, Oman, Yemen, Saudi Arabia, Singapore, South Korea, the Philippines, Nepal, Kuwait, Bahrain and Afghanistan. Only a couple of companies such as Amul have reached out to the developed nations.

Private firms such as Hatsun have come up with innovative business strategies that will economically benefit farmers, the company as well as the country. These companies have installed chilling plants in villages and are continuously expanding their reach in remote areas.

With private participation in the dairy industry on the rise, key export factors such as efficient procurement, storing, testing, and maintenance of quality are expected to improve.

Until then, dairy exports are expected to be erratic, cashing in on deficiency in global supply and shrinking of production glut.