Retail consumers are expected to face the heat as the Punjab government increases the procurement price for milk, following a protest by dairy farmers.

Chandigarh, Punjab: The Punjab State Cooperative Milk Producers Federation Limited, popularly known as Milkfed, currently sells its packaged full-flat milk at Rs 60 per litre, medium fat milk at 54 per litre and low-fat milk at Rs 44 per litre. 

However, the chances of a revision in the rates appear imminent, given that the Punjab government has increased the procurement price for its four lakh milk suppliers, as a direct result of the spike in the cost of fodder.

The hike at the rate of Rs 55 per kg of fat, which translates to a per litre procurement rise of Rs 3 to Rs 4, was introduced after hundreds of milk producers — under the banner of the Progressive Dairy Farmers Association (PDFA) — protested in Mohali district on May 21, demanding an increase in Milkfed’s procurement rate.

The federation, which sells packaged milk and other dairy products under the label ‘Verka’, gets nearly 20% of its milk supply in the market — 30 lakh litres per day — through some 4 lakh milk producers associated with 7,000 cooperative societies, reveals government data.

While Punjab Cooperation Minister Harpal Cheema clarified that they would not pass on the hike to retail consumers, a senior Milkfed official, requesting anonymity, said it would not be possible for Milkfed to withhold the hike for long. 

“Sooner or later, we will have to increase the price of our retailed milk. Otherwise, Milkfed will be left in a major financial crisis and not able to maintain its quality,” he added. 

Why are milk producers in trouble?

Atma Singh, a dairy farmer from Punjab’s Bathinda district, owns 25 buffaloes and 20 cows. He told 101Reporters that his dairy business had been unprofitable for over six months now.

“An increase of over 200% in fodder expenses is the primary cause of concern,” he said, highlighting that the price of wheat straw fodder, which he mainly uses to feed his milching cattle, began to rise in November last year. “I was hoping that the rate would drop once new stock of wheat fodder would become available in the market after the harvest in April, but this did not happen.”

Wheat fodder that was available at Rs 350 per quintal (q) at the same time last year, Atma Singh said, is now being sold at over Rs 1,000 per quintal. 

“I need roughly 100q of wheat fodder to feed my cattle. My earlier expenditure was around Rs 40,000 per month, but that’s increased to over Rs 1 lakh a month now. I never experienced such a volatile market in the past. This has killed my whole profit margin,” the dairy farmer rued.

According to PDFA President Daljit Singh, the overall input cost of dairy farmers had doubled in the past eight to 10 months — primarily because of the increase in the cattle feed expenses. 

And this extends beyond wheat fodder. Soybean, another stable diet of cattle, was available for Rs 3,200 per quintal a year ago, and its market rate today is Rs 6,500 per quintal. 

“The cost of maize, which is also used as cow feed, has risen from Rs 1,500 per quintal in the past season to Rs 2,500 per quintal today,” the PDFA chief added. “We want a hike of at least Rs 7 per litre in Milkfed’s procurement price. Hopefully, they will revise the rates soon, as the minister assured us during our meeting on May 25.”

Moreover, according to the Department of Agriculture of Punjab, the increase in the cost of wheat fodder is directly related to the decline in wheat production.

Agriculture Director Gurvinder Singh told 101Reporters that the yield of wheat in Punjab was significantly affected by the high temperatures in March and April, which caused a drop of at least 20% in wheat and wheat fodder production. 

“Besides, a huge quantity of wheat fodder is being sold to Rajasthan, as well. This added to the scarcity of fodder in the local market and hence, increased the market rate,” he explained.

A volatile unorganised market

To provide a clearer picture with data, Milkfed Director Kamaldeep Singh Sangha said that every day, Punjab produces between 3 to 3.5 crore litres of milk. Of the total production, the milk that’s available for sale in the market is approximately 1.5 crore litre per day. Large agencies like Milkfed and Nestlé purchase half the supply, while the remaining 50% is sold to the unorganised sector, including households, hotels, restaurants, dhabas, etc. 

However, the dairy farmers who deal in the unorganised sector, are in major trouble, as Rajpal Singh, a dairy farmer from Ludhiana, explained to 101Reporters: “The market rate in the unorganised sector is at the mercy of wholesale milk purchasers… I produce nearly 1 quintal of milk. I am compelled to sell it within a few hours at any cost because milk is a fragile item. There’s no provision for me to store it for two days and wait for the right purchaser who would pay me more.”

“That’s why we are at the mercy of market forces who exploit the end-users and may even charge them more,” he further explained their plight, adding that there must be some mechanism put in place “where the interest of dairy farmers working in the unorganised sector are also protected”.