ON THE BOIL

Why are milk prices rising when the supply is healthy?

- SANJEEB MUKHERJEE

Earlier this month, Mother Dairy and Amul, two of India's leading milk brands, increased their prices by ₹2 per litre. The jump, which coincided with the end of the 2024 general elections, marked the first price increase in nearly 15 months.

Days later, the Karnataka Milk Federation, selling under the Nandini brand and a significant player in the southern state, also announced a ₹2 per litre increase.

While private milk players had increased their prices earlier, cooperatives and statesupported enterprises had managed to maintain stable prices. Interestingly, some dairies in southern India have reduced their retail rates.

Meanwhile, in Maharashtra, milk farmers protested, demanding subsidies as procurement rates fell from ₹30-32 per litre last year to around ₹28 per litre. In response, the state government extended a ₹5 per litre subsidy to milk producers, disbursing around ₹224 crore to 300,000-odd farmers, according to Maharashtra Finance Minister Ajit Pawar. The remaining will be covered soon.

Amid these developments, the central government allowed the import of 10,000 tonnes of skimmed milk powder (SMP) under a tariff-rate quota system, to be managed by the National Dairy Development Board. The quota, however, has been seldom used in the last 20 years.

The last time Amul and Mother Dairy raised milk prices was in February 2023. In the year before that, Mother Dairy had increased prices by 10 per litre between March and December 2022, while Amul had hiked prices thrice in 2022.

The recent price hikes come at a time when milk supply in India, previously impacted by a Covid-induced production decline and high fodder rates, is stable.