Date:22/01/2007 URL: http://www.thehindubusinessline.com/2007/01/22/stories/2007012200310500.htm

Back Govt mulls ban on export of skimmed milk powder

Harish Damodaran

Seeks information from all co-op federations on their existing commitments

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New Delhi Jan. 21

Having successfully deployed the export ban route to contain price increases in sugar and pulses, the Centre has set its sights next on milk. According to reliable information, a move is under way now to ban export of skimmed milk powder (SMP).

The Agriculture Ministry has already sought information from all State co-operative dairy federations on their existing export commitments and stock position of SMP as well as whole milk powder (WMP).

The communiqué, dated January 18, has also asked the federations to furnish details of their SMP/WMP production this year vis-à-vis the previous three years, besides the likely demand-supply scenario in the coming months. A copy of the letter has also been sent out to the National Dairy Development Board (NDDB) and its subsidiary, Mother Dairy.

"This could be the precursor to a ban on SMP exports," sources said.

Bulk SMP prices in Delhi are currently ruling at Rs 125-126 a kg, against around Rs 90 at this time last year. Since 2001-02, prices have doubled to converge towards world levels.

SMP of Western Europe origin is now quoting at $3,050-3,200 per tonne free on board, a $950 per tonne jump over last year. The main triggers have been drought conditions in Australia and lower-than-projected milk volumes in New Zealand, coupled with the phased reduction in farm subsidies by the EU.

Global prices

Hardening global prices have, in turn, provided a boost to domestic dairies and farmers. During 2005-06, 47,334 tonnes of SMP worth Rs 420 crore were shipped out. In addition, 10,903 tonnes (Rs 282 crore) of casein - a milk protein powder concentrate - was exported.

While volumes have slowed down this year, the prevailing high international prices have provided a support level, from where domestic rates are unlikely to nudge down. "Even if no exports take place, the very possibility of exports is keeping prices here high. And since it is impossible to import at current world prices, there is no threat of imports either. Banning exports would basically sever this link," the sources noted.

The major SMP/casein exporters include the Delhi-based Sterling Agro Industries, VRS Foods and Mahaan Proteins, Dynamix Dairy Industries at Baramati and Cepham Milk Specialities, Patiala. The co-operative federations in Tamil Nadu (Aavin), Karnataka (Nandini) and Rajasthan (Saras) also undertake limited SMP exports.

"When the exporters are mainly private dairies, why is the Government asking only co-operatives to provide sensitive information on stocks and production?" a federation official complained.

The country annually produces roughly 1.5 lakh tonnes (lt) of bulk SMP/WMP, with Amul alone accounting for some 40,000 tonnes.