Milk prices are rising and the causes are manifold

Rising diesel prices have directly hit transport costs of raw materials

Milk prices have been increased, much to the dismay of Indians for whom it is a household staple, but the causes are manifold.

Supply or demand has not been hit but the path leading up to the final product reaching people’s home has undergone changes. Inflation and fodder prices have affected procurement and packaging, and fuel prices being hiked have burdened the cost of transportation, reports Moneycontrol.

Under revised costs, a household purchasing 1 litre of milk every day will have to spend Rs 60 extra in a month and Rs 1440 extra in a year.

Read more: Gokul to hike milk prices by Rs 2 in Maharashtra

New prices will come into force from July 11 and witness the Gujarat Cooperative Milk Marketing Federation raising prices by Rs 2/litre in in Ahmedabad and Saurashtra (Gujarat), and Delhi-NCR. GCMMF markets the popular dairy brand Amul.

Mother Dairy has also initiated a hike of Rs 2 per litre.

Kolhapur District Co-Operative Milk Producers Union, which owns the milk brand Gokul, decided to hike milk prices by Rs 2 per litre in Maharashtra, except in Kolhapur, Sangli and Konkan.

Meanwhile, in a press statement, Mother Dairy said, “The company has been experiencing inflationary pressure on overall input costs which have increased multifold in the last one year, accompanied by the distress in milk production due to the ongoing pandemic. In the last one year, farm prices have increased 8-10 per cent, coupled with mounting operational costs of processing, packaging, logistics, etc”.

Cost of raw materials have increased and industry estimates say farm expenses, including fodder cost, has risen 10-20 per cent in the past year.

Soya DOC (used in fodder) has risen from Rs 40-45/KG last year to Rs 75/KG now, according to data provided by animal feed manufacturers.

Cotton seed oil cake has witnessed a 40 per cent rise in prices. Rising diesel prices (Rs 90-100 in many cities presently) have directly hit transport costs of raw materials. At the same time last year, diesel was retailing at Rs 60-70 in cities, the report said.

A dairy company executive said transportation cost has increased by 50 per cent.

Read more: After Amul, Mother Dairy hikes price of milk in Delhi-NCR, other cities by Rs 2 per litre

All of these miscellaneous reasons have resulted in companies hiking milk prices to combat the production costs.

However, buyers would find relief in knowing that milk prices are possibly not going to witness further hikes in the near future.

The last time milk prices noted change was in December, 2019.

Natasha Trikha, Research Analyst at Care Ratings, said, “Going forward, milk prices are not expected to see any further increase as it is usually revised once a year and it does not necessarily happen every year”.

Anuj Sethi, Senior Director at CRISIL Ratings echoed similar sentiments while speaking to Moneycontrol.

“We don’t expect further increase in retail milk prices this fiscal, beyond what has been done already”, he said.

Products which require milk as raw material, however, might see hikes. These include products like butter, cheese, and Indian sweets.