Private dairies demand subsidies to survive competition from India
KATHMANDU, July 1: Private dairy producers have threatened to impose milk holiday and lower their production from mid-August citing dwindling competitiveness of their products compared to Indian dairy products available in the domestic market at far cheaper prices.
“We were already facing a shortage of milk and operating with less than 35 percent of the total production capacity of our plants. But now we have no option but to announce milk holiday as we are not in a position to continue the production at this scale,” said Pradeep Maharjan, president of Dairy Industries Association (DIA), at a press conference on Sunday.
Maharjan said skimmed powdered milk produced by Nepali dairies is not selling in the domestic market as it is flooded with cheaper Indian products. Nepali dairies are facing a deficit of 450,000 liters of milk every day which has prompted big dairies such as state-owned Dairy Development Corporation (DDC) and Chitwan Milk Ltd (CML) to import around 100,000 liters of fresh milk from the southern neighbor.
Nepali farmers will lose market for around 30,000 liters of fresh milk per day if milk holiday is announced immediately, according to Maharjan. However, if the milk holiday continues through the flush season that starts from mid-August, dairy farmers stand to lose market for a staggering 120,000 liters per day.
Maharjan demanded that the government waive the VAT on dairy products such as paneer, ice cream, butter and skimmed milk powder to boost competitiveness of Nepali dairy products. “We also need 50 percent waiver in electricity charge as enjoyed by agriculture cooperatives, and 70 percent discount on VAT so that we can compete with Indian dairies that enjoy heavy subsidies,” said Maharjan.
Sujal Dairy of Pokhara and CML of Bharatpur were producing around 20 tons of skimmed milk powder in a bid to replace similar products from India. CML and Sujal have halted production and have been holding back around 250 tons and 120 tons of skimmed powdered milk that have failed to find market with cheaper Indian products widely available in the stores across the country.
“We can´t continue to produce milk as we are compelled to hold skimmed powdered milk worth over Rs 300 million in our storage. Expensive electricity and imposition of VAT have pushed up our production cost and weakened our capacity to compete,” said Niranjan Shrestha, managing director of Sujal Dairy.
CML, which was established a couple of years back to tap into the growing demand for skimmed milk in the domestic market, is planning to export its 250 tons of unsold stock to Pakistan at a price lower than the cost of production in a bid to avoid more loss.
“We are making final preparation to export around 100 tons of skimmed milk powder to Pakistan at a throwaway price,” said Rajesh Babu Shrestha, managing director of CML.