Role
of Dairy in Doubling Farmers’ Income
By S.R.Asokan and H.K.Mishra[1]
The din of the
elections is nearing an end. Come May 23 we will know who get the majority to
form the government. Whoever comes to
power in Delhi are going to face the daunting challenge of revitalizing the
stuttering economy. Falling
investments, faltering consumption, rising crude prices, weakening of rupee,
rural distress the list is long. There were reports that the Prime Minister confident
of winning had asked the bureaucrats to chalk out plan of action for the first
hundred days. What they are working on
we have no idea. To revive the consumption story addressing the rural distress
is vital. The ambitious target of doubling farmers’ income is just three years
away. As drought is looming on many
parts of the country and the crop based economy is facing the brunt, it is
dairying that offer some hope. While the Dalwai Committee on doubling farmers
income had devised strategy to address the supply side issues in dairy sector the
demand side aspects had not been properly dealt with.
The
annual income of the Indian farmer both from farm and nonfarm activities in
2015-16 was estimated to be Rs 96,703 by the Dalwai committee. The objective of
the government of India is to double this income in real terms by 2022-23. In
order to achieve this, it was calculated that the real income of the farmer
should rise to Rs 1,72,964 per annum and the nominal income to Rs 2,42,938.
The
farmers’ income of 96703 accrued from different activities such as crop
cultivation, livestock rearing, nonfarm business and wages and salaries. The
respective contribution of these activities was in the ratio of 47, 12.8, 7.96
and 31.8 percent. The share of livestock to the farmers’ household income per
year was Rs. 12422. As per the NSSO data income from dairying alone was 84 per
cent of the revenue from livestock. Between 2002-03 and 2012-13 the share of
crop cultivation in the farmers’ income rose from 45.8 to 47.9 percent. During
the same period the share of dairying rose much higher from 4.3 to 11.9 percent
whereas the contribution from both non-farm business and wages and salaries
declined. Dairy activities thus could play a major role in doubling farmers’
income.
Further,
in case of the small and marginal farmers the share of livestock was 14.8
percent of their income. They constitute 85 percent of farmers but only own 44
percent of land whereas they own 75 percent of the cattle. The distribution of
animal holding is more equitable as compared to land holding and therefore
could be a significant factor in raising the income of these peasants.
The Dalwai committee unlike the
earlier ones focused on the ways of increasing the income rather than just
production. It suggested a three pronged strategy viz., i) increase production through enhancing
productivity ii) reduce cost by better resource management and iii) ensure
remunerative prices for the output. In case of dairying the focus on increase in
productivity is to improve the genetic potential of the animals, addressing the
fodder shortage, providing nutrient balanced feed and providing curative and
preventive health services at the farm itself. Since most of the milk is marketed through
unorganized sector involving a series of middle men, the committee calls for
increased role of organized players in getting remunerative prices. The committee also felt that the village
level Self Help Groups could be promoted consisting of farm families to make
value added products to increase the share of consumer rupee to the primary
producer. To address all these supply side issues different government departments
and agencies are identified and their responsibilities spelt out.
The committee unfortunately has
not examined the uncertainties on the demand side which could adversely affect
the farmers. The demand for milk by 2050 is forecasted to be in the range of
350 to 380 million tons. It seems the committee has erroneously assumed that
the growing population and their rising income will automatically lead to more
consumption of milk and thus absorb the higher production leading to higher or
better income for the farmer. However, it need not be true. Events in the past
indicate there are times when consumption was below production resulting in
gluts of milk supply leading to distress of farmers. For example, in mid 2018
farmers in large parts of the country and especially in Maharashtra witnessed a
sharp drop in procurement prices for their milk. When consumption was growing
at 2 percent production was clocking 6 percent growth. Dairy companies slashed
the prices of milk leading to large scale agitation in Maharashtra prompting
the government to step in and promise additional Rs 5 per litre. Therefore, it
is pertinent to clearly assess the demand side problems and spell out the measures
to obviate or alleviate the situation should be made the part of the strategy
in increasing farmers’ income and Pavlovian reflexes to the events must be
avoided.
Further, the committee had not paid
any attention to International market scenario as well. Most of our dairy
products are not competitive in the global market. However, at times of surplus
production milk was converted into skimmed milk powder (SMP) and exported. When
international prices of SMP crashed and was much lower than the Indian SMP in
2018 it necessitated the government of India to announce an incentive of 10
percent on exports of the milk powder. Instead of reacting ad hoc to the
situation a set of mechanism need to be in place to respond to such situation
in a much more robust manner.
While the
Indian dairy products are not export competitive, there is a huge threat from
cheaper imports threatening the livelihood of millions of people. India imposes
a tariff in the range of 40 to 60 percent on import of several milk and milk
products thus giving protection to domestic industry to remain competitive. Apart from tariff protection India is
restricting dairy product imports on religious grounds from US demanding assurance
that the milk products do not originate from cows that were fed with animal offal.
However, the National Milk Producers Federation and Dairy export council of US are
contending that India has not complied with the WTO obligations by requiring
unscientific dairy certificate and call for restoring trade in dairy between
the two countries. The Trump administration seems to have acceded and is
pressuring India.
Further, the
proposed free trade agreement with ASEAN, which includes major dairy producers
New Zealand and Australia, it is apprehended would result in elimination of
current tariff levels and harm our dairy industry. Most of the countries in the
proposed Regional Comprehensive Economic Partnership (RCEP) such as China,
Indonesia, Australia and New Zealand restrict dairy imports from India on one
pretext or the other. While China follows tedious
procedures with regard to certification and inspection requirements, Indonesia
and Australia classify India as foot and mouth disease affected country and
demand additional safety requirements thus raising technical barriers to trade.
The negotiation of RCEP is now extended till end of 2019. Senior officials of
the 16 member group are meeting on May 24th in Bangkok to sort out
the differences. India must ponder the ramifications of joining RCEP free trade
agreement on the livelihood of our farmers.
The committee on doubling farmers’ income had done a
great job in identifying the supply side constraints of milk production and
came up with a set of recommendations. The demand side issues had been
completely ignored. Further, the international market dynamics would have a
huge impact on Indian dairy sector which the committee had not looked into.
Unless, measures are put in place to give sufficient safe guards against such
vagaries dairy which could play a crucial role in raising farmers’ income might
fail to live up to its potential.
[1]
Faculty members of Institute of Rural Management, Anand and part of Verghese
Kurien Centre of Excellence.
