Inflation, diminishing returns drive dairy sector into crisis

Notwithstanding a strong cooperative presence, inflation has hit the dairy sector like never before. Record high input costs are driving the sector into a crisis despite the advantages of organised procurement and marketing and a relatively smooth production process.

Prices of all sorts of cattle fodder have been increasing. For example, the price of a 50 kg bag of wheat straw has increased from Rs 850 before the pandemic to Rs 1,200 now. Oil cakes cost Rs 1,600 for 45 per kg, and hay grass price has increased from Rs 12 for 5 kg in 2019 to Rs 25 for 2 kg now.

“Buying fodder is not viable. A cow can give a maximum 3,000 litres of milk a year, the value of which is around Rs 90,000, and its fertiliser around Rs 5,000. But for this, a farmer has to invest more than Rs 90,000, including fodder, labour, medicines and other expenses,” says Prashanth Jayaram, a farmer in Mysuru.

Rajagopal, a dairy farmer in Chikkaballapur, adds, “Farmers have to feed all their cattle, but not all of them yield milk.”

The procurement rate of milk from farmers has barely increased. Dairy cooperatives across Karnataka are giving a maximum of Rs 34 per litre (minimum Rs 27), inclusive of a Rs 5 government subsidy. Dairy farmers are urging the authorities to increase the price to a minimum of Rs 50 per litre to match the current rates.

Farmers who are solely dependent on the market for fodder incur heavy losses. Rajagopal says many farmers around his place sold their cattle and switched to other professions at the beginning of this year as Karnataka Milk Federation (KMF) did not increase the price of milk.

Prasanna K, a farmer in Dakshina Kannada, stopped selling milk to KMF six years ago as it was not viable. “I switched from crossbred cattle to indigenous breeds whose expenditure is much lower. The only reason we are rearing cattle is for personal consumption of milk, and for fertilisers,” adds Prasanna.

Prakash Kammardi, an agricultural economist, notes that fodder has become expensive because of the decreasing production of cereal crops in the last decade.

“The number of crossbred cattle has been increasing but no attention has been given to organised fodder farming. An inadequate emphasis on commercial cattle fodder production has created the issue now,” says Kammardi.

He suggested that the government mandate dairy cooperatives to set up fodder production units right from the lower level.

Lalith Achoth, a retired professor of dairy economics, says that the burden of giving a good procurement rate to farmers should be transferred from the government to the consumers. He notes that farmers should get a fair price of Rs 40 a litre immediately.

This will be possible if KMF, taking a lesson from its Gujarat counterpart Amul, diversifies milk products and improves efficiency in the competitive market.

The 14 milk unions of Karnataka had, a few months back, formally requested KMF for Rs 5 hike in milk prices. Sucharitha Shetty, president of a district milk union, tells DH, “KMF president Balachandra Jarkiholi had spoken about this proposal to the government. We were expecting an increase of at least Rs 3, but the government has not taken any step in this regard.”

Speaking to DH, Prabhu Chavan, Minister for Animal husbandry, says, “We have increased the subsidy from Rs 3 to Rs 5 per litre now. I am aware of the recent demands to increase the price. I have not discussed this with the KMF president and the chief minister yet. We are planning to have a discussion in the coming Assembly session as well.”