WTO CHALLENGES FOR INDIAN DAIRY FARMERS
Dr. N.G. Hegde
BAIF Development Research Foundation
Pune 411 052
Background
While coping up with the problems of food insecurity, India is also facing a new challenge posed by
the World Trade Organisation (WTO), which can turn our country into a dumping ground for all the
commodities from the surplus nations, thereby ruining the economy of our local industries and
agriculture. We have already started feeling the effect in the form of a variety of fruits and
merchandised goods available in our retail outlets, causing tremendous confusion in the minds of the
common customers.
Blood red in colour, shiny apples from New Zealand or China, purchased by paying 100% more over
the native varieties have disappointed many of us due to their poor taste. In this process, both the
consumers and the native apple producers have suffered, while the benefits have gone to the farmers in
other countries and a few importers who had their share of sales commission. The time has now come
for us to act unitedly and efficiently to face the threats posed by the WTO and establish our supremacy
in the International market.
Way back in 1947-48, the developed countries in the world had established a working understanding
for export and import of various commodities through a common agreement called the General
Agreement on Tariffs and Trade (GATT). Over the past 50 years, there have been eight round of talks
to modify the agreement. The last agreement was in Uruguay in 1994. In 1995, a permanent trade
organisation known as World Trade Organisation was established, represented by 124 countries to
facilitate fair trade between the member countries. As India was a signatory of GATT, she
automatically became a member of WTO.
Membership of WTO was unavoidable as our country had been depending on export and import for
coping up with the domestic needs of technology, machinery and consumer goods. In the absence of
the WTO membership, we had to negotiate separately with each and every country, which could have
placed us at a disadvantageous position. Thus there was no harm in becoming a member of WTO, and
it did provide us a strong base to participate in international trade. However our inability to put forth
our demands strongly during the WTO negotiations worked against us.
Impact of WTO on Dairy Sector
Dairy is one of the sectors affected by WTO. During the negotiations in 1985, we failed to bargain and
agreed to allow import of milk and milk products under zero percent bound duty. Subsequently, our
new Exim Policy which brought some essential milk products under Open General Licence, further
facilitated import. Initially, there was no threat from import, as the international price for milk and
milk products was high compared to the prevailing price in India. Subsequently, many developed
countries were able to exert pressure on their governments to provide subsidy to dairy farmers which
helped them to lower their price of dairy products. Furthermore, new technological interventions and
improved management practices helped the farmers in the Western Countries as well as in New
Zealand to bring down the cost of milk production. Thus the price for dairy products in the
international market fell far below the price paid by consumers in India. This provided good
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opportunities for the traders to import cheaper milk products and thereby earn high profits, at the cost
of Indian Dairy Farmers.
This is the background of WTO and its impact on our farmers. As long as we continue to remain a
member of WTO, this threat will continue to bother us. In 1999, Indian traders imported 10,000 metric
tons of milk powder and in 2000, we were threatened by the arrival of fresh milk from New Zealand at
the landed cost of Rs.9 in Mumbai. Fortunately, the Government of India in its budget of 2001 has
imposed heavy duty on milk and the problem has been halted temporarily. This duty will have to be
abolished before the year 2006, as per the WTO agreement. Hence we have 5 years to gear ourselves
for international competition. This is probably the last chance for our farmers to organise themselves
and convert this challenge into an opportunity.
Our Concern
What are our problems? Why are we threatened by the international dairy market? The main problems
are high cost of milk production, high cost of milk processing and marketing and poor quality milk
due to unhygienic milk handling. Hence we need to address these problems on priority.
Reducing the Cost of Milk Production : The cost of milk production in India is high because the
average milk yield of Indian cows is only 987 kg as compared to 6273 kg in Denmark, 5289 kg in
France, 5462 kg in United Kingdom, 5938 kg in Canada, 7038 kg in USA and 11000 kg in Israel.
Naturally, the European farmers do not have to spend five times more on their cattle just because they
produce five times more milk over the cows in India. We often argue that it is easy for the European
farmers to produce more milk because of cold weather which is conducive for the cattle. Israel has
proved us wrong. The weather conditions in Israel are worse than India. The temperature in summer
exceeds 470C-480C, while the temperature in winter is as low as 40C-50C. Inspite of such bad weather
and severe water shortage, the average milk production of dairy cows is 11000 kg / lactation. This has
been achieved through proper housing, feed and water management, apart from superior quality
germplasm. The only disadvantage of Israeli cows is low butter fat. With increasing awareness on the
health problems related to high fat diet, the western countries have started focussing on breeding cows
for high milk protein. In this process, they have reduced the importance of butter fat. Israel has gone
in for selection of cows for high milk and protein, while sacrificing butter fat. Today, the average fat
content of milk in Israel is about 3.3 – 3.4%. The dairy farmers and consumers are happy that they get
healthy milk at lower cost. Although fat content is low, the total butter production per cow per
lactation is significantly higher than that of the cows in any other country in the world.
India is still trailing behind in this area. We are still thinking of milk with 5% or 6% butter fat. We
need to come up with a policy of encouraging low fat milk for general consumption and use buffalo
milk only for a selected category of customers who insist on high butter fat. Then the cattle production
can be specialised for healthy, high protein, low fat milk, at low cost through cross breeding of nondescript cattle owned by small farmers.
Reducing the Cost on Milk Handling : Presently, our dairy farmers get about Rs.7-8 per kg at their
village cooperative. This milk is handled at several levels by co-operatives or private agencies till it
reaches the mother dairy located in a large city for pasteurization. The milk is then sent to consumers
through various outlets. In this process, the consumers have to pay almost twice the farmgate price i.e.
around Rs.14-16. The present system is not only unhygienic but also expensive. There is good scope
for reducing the number of agencies handling the milk to reduce the cost of handling.
It is also necessary to look for an alternative model of milk processing by encouraging small dairies at
taluka and district levels. Small dairies of 8000-10000 litres of milk capacity which can handle fresh
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milk distribution and processing for Indian and Western dairy products will reduce the cost of
handling, maintain hygiene and add value to the product. Decentralised processing can create
additional demand for the milk and generate employment at the grassroot level. A small dairy of this
size should be able to generate year round employment for about 40 persons. A primary step in this
direction is to set up a few such dairies on a pilot scale and study the advantages. With reduction in the
cost of milk handling, the retail price of milk can be reduced significantly and this can help us to face
the challenge of imported milk products.
Clean milk production : Unhygienic conditions at the dairy farms are the reasons for poor quality
milk in India. Such products cannot be exported even if there is good demand and surplus production
in the country. Indian milk products have often been rejected in the export market due to unhygienic
milking resulting in high microbial count. The quality of milk in India is affected by poor animal
health, polluted food and water and unclean surroundings in the farm. It is therefore necessary to
emphasize on all these aspects in the near future.
Presently, most of the milch animals are not regularly screened for diseases and as a result, there is a
great danger of some diseases being transmitted to human beings. Milking of cows and buffaloes
which are often administered with antibiotics and chemical drugs will also affect the quality of milk.
These problems can be prevented by taking up regular screening of livestock against various diseases.
Emphasis should be given on preventive health care as well as curative aspects well in time using safer
medicines. The quality of the feed should be checked regularly. Feed and water used in the dairy
farms should be free from pollutants. This can be done through awareness and treatment of water
wherever necessary. Keeping the animals clean, maintaining clean surroundings, use of clean vessels
for milking and storage of milk are essential to maintain the quality of milk. There is also scope for
introducing a small scale bucket type milking machine which is cost effective and helpful to produce
clean milk without any direct contact with the farmers and the surroundings.
Conclusion
There is very little time for Indian dairy farmers to face the challenge of imported milk and milk
products under WTO. Our farmers are not yet prepared to solve this problem. It is necessary to take
immediate steps to reduce the cost of milk production by increasing the productivity of our animals.
We also need to reduce the cost of transportation, storage and processing of milk by reducing
intermediary agencies and by adding value to the produce at the block or district level. The quality of
the milk should be of international standard which can be attained through screening of the livestock
against important diseases and maintaining clean surroundings in the dairy farm. The policy of
promoting the production of low fat milk for general consumption and high fat buffalo milk with high
butter fat for selected purposes should also be considered in the general interest of the public, which
will enable the farmers to improve their profitability. Finally, an effective Animal Husbandry
Extension Service should be established to facilitate close dialogue with the farmers to understand
their problems and solve them from time to time. Simultaneously, dairy farmers’ associations should
be established and strengthened to acquire new technologies, understand the milk marketing scenario
at the international level and find suitable solutions. Hopefully the task will be within our reach and so
all we need is to work in this direction.