Citing the example of skimmed milk powder (SMP) of which India is an exporter, Sodhi said, "SMP prices in the international market are currently quoting at Rs 150-160 a kg as against a prevailing price in India of Rs 280-300 a kg. If import is allowed, Indian dairy companies would have to cut SMP prices by half. Similarly, other products like cheese, butter and other derivatives would also come down sharply. This would force dairy companies would have lower the procurement price paid to farmers by Rs 10, which works out to cut a 40 per cent cut in the current scenario. Such a development would render animal husbandry unviable in India."
India produces about 170 million tonnes of milk a year with winter being peak and summer lean supply season. During winter, therefore, Indian dairy companies produce SMP for meeting the country's ever growing full-year demand of liquid milk.
Sodhi was responding to a proposal made by the Ministry of Commerce for signing a Regional Comprehensive Economic Partnership (RCEP), a proposed Free Trade Agreement (FTA), with New Zealand and Australia, the world's two largest producers and exporters of milk and dairy products.
Headquartered in Anand, Gujarat, Amul has developed a cooperative model for sharing a part of its profits with farmers, making it the highest paying company in India for milk supply from farmers.
On the other hand, dairy companies in other states such as Maharashtra, Karnataka and Tamil Nadu eye government subsidy for compensating farmers adequately for milk supply.
Meanwhile, Parag Milk Foods, producer of Go, Gowardhan and other brands of milk and milk products, believes the government will not let Australia and New Zealand farmers gain from Indian market access.
"Australia and New Zealand have been attempting to enter the Indian dairy market for years. So far, they have failed. We are confident the government of India will not allow their entry at the cost of domestic farmers," said Devendra Shah, Chairman, Parag Milk Foods.
Analysts, however, believe that cheap import of milk derivatives from these two nations would badly affect the top line and bottomline of Indian dairy companies. It would also hit inorganic and organic growth of dairy companies, with no fresh capital investment in the entire value chain.
Dairy firms in both New Zealand and Australia can afford to sell their produces at prices much lower than those prevailing in Indian markets due to low cost of production there.