The dairy industry accounts for 25 percent of the country's total farm produce. It is estimated that landless and marginal farmers earn about 25 percent of their household income from dairying and about 63 million households, primarily small and marginal, are associated with the sector.

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However, there are fears about the stand the Indian government would take in the forthcoming Regional Comprehensive Economic Partnership (RCEP) talks in Bangkok. The RCEP has a proposed free-trade agreement and for countries like Australia and New Zealand, this deal would mean entering Indian market to export their dairy products. A decision to reduce the tariff barrier would encourage import of cheaper milk powder into the country and this could adversely impact the domestic industry.

If dairy is included in RCEP deal, the industry will face major headwinds, says Amul Managing Director RS Sodhi.

“Indian dairy industry is the source of livelihood for 100 million farmers. We are not only the world’s largest producer but also the largest market. If we globalise Indian dairy industry, and if New Zealand starts exporting milk powder to India, they will export at Rs 180 per kilogramme. Indian dairy processors are selling it at Rs 280-300 now. They will be forced to sell at New Zealand price. So we will be getting Rs 100 less, which means Rs 10 less on a litre. If we pay Rs 100 less to the farmers it will be unremunerative to them. The cost of production of milk today is around Rs 23-25. If we reduce Rs 10 it means we will be paying Rs 20 to the farmers. Who will continue dairy farming, all will leave,” he said.

Sodhi pointed out that none of these dairy-rich countries is growing. In India, the cost of production is slightly more than New Zealand because there farmers own huge farms and they have got thousands of acres of free land, where cows are left for grazing. Indian framers have to feed cows cattle feed, green fodder or dry fodder.

Talking about demand outlook, he said, “Any festival in India increases demand for milk and milk products by 15-20 percent. We prepare ourselves in advance whenever we see any festival date is coming. This year, Amul has launched a lot of sweets in the western part of India and some parts of north.”