Milk production in India rises by a historic 6.25% in 2014-15: a boon or a bane?

Abstract

Milk production in India has risen by a historic 6.25% in 2014-15, reaching 146 million tonne. This increase is indeed a boon if it can be sustained as there is an urgent need to increase the growth rate in milk production, to meet the growing domestic market for milk and milk products and ensure that India remains self-sufficient in milk. However, this high incremental growth rate was limited to only three states while the largest milk producing state Uttar Pradesh showed a constant but below the national level of growth. Further, growth in population of adult female bovines seems to be tapering off with a very low increase in productivity per animal. Hence, this is a good time and opportunity to analyse the growth in milk production. We analyse the growth in terms of supply, demand and price of milk as well price and buffer stock of skim milk powder and its role in maintaining the price at consumer and farmer end. In the short-term, with no immediate market for the incremental quantity within or outside India, much of the incremental quantity is being processed and stored as skim milk powder and butter. This is causing financial strain on the milk purchasers forcing them to reduce their demand and price for fresh milk. As a result, this high growth may be only strengthening the oligopolic market power of milk processors and/or marketers the market structure gives them, over both consumers and milk producers. The constant increase in consumer price is also not expected to be transmitted to the producer, as in a perfectly competitive market. Therefore, this high rate of growth in milk production is boon in the long term helping India remain self-sufficient in milk. However, as the farm gate prices have not only reduced but also become highly volatile making dairy animal rearing high risk venture with uncertain, it is a bane in the short term.