Development and growth of dairy sector in India has been the most successful of all the agro-economic programmes ever undertaken anywhere in the world. It is truly a case of nursing a seedling today and eating the fruits for the rest of life. There have been two most important investments made by Government of India in the dairy sector. One the funds invested through the dairy cooperatives between 1970 and 1998 – the life period of Operation Flood and the decision – a policy investment – to liberalise the dairy sector that had until 1991 been restricted. These have contributed to the consistency in growth of milk production that has averaged 4% during the last three decades. While the government had invested through Operation Flood programme the private sector has more than matched that investment. It has made India proud of being #1 milk producer in the world….and we are continuing to grow more milk. Livestock sector accounts for 28-30 per cent of GDP of agriculture.
Milk contributes close to the third of gross income of rural households and in the case of those without land, nearly half of their gross income. An estimated 68 million rural households, of which about three-fourth are landless, marginal or small farmers are engaged in milk production. The distribution of rural income, as reflected in the gini coefficient (the measure of inequality) is very low for the dairy sector, indicating that the ownership and the income is more evenly distributed and the progress in this sector will result in a more balanced development of rural economy. Milk ensures food security and nutritional security and security for life in the rural India. Owning a cow or a buffalo and producing milk, acts as an efficient barrier against farmer suicides.
Exempt Investment and Income from Dairy Farming
The government needs to pay more attention to this sector than it has done during last decade. There is one serious weakness in the activity of milk production. Indian cows and buffaloes are amongst the least productive. Thus we produce large quantity of milk from a very large population of cattle and buffaloes. To improve per animal productivity the government needs to give incentive to investment in income from organised dairy farming. In the Budget for 2016, the government should consider investment made in the organised dairy farming sector as part of the Corporate Social Responsibility as provided in its circular lF. No. l/l8A/2013-CL-V] dated Feb 27, 2014. It would make large corporates to invest in tech-backed dairy farming in a big way. This would in the long run help the small farmers to learn the newer techniques and technologies of dairy farming and channelise the smallholders to medium scale. The Budget should also consider declaring income from such mechanised dairy farms as the ‘income from agriculture’ as provided under the Income Tax Act.
In India income from agriculture is exempt from Income Tax but organised farms that produce milk are not. It is to be noted that the government does not get any income from milk production because most of it is from the small-holders and others somehow evade it. It is important that milk production from organised dairy farming is declared as agricultural income. While government has nothing to lose, this would incite investment in technology and equipment required by large farms in milk production and animal breeding and farming activities.
Grant for Liquidating Surplus Milk Powders
During 2013, the dairy farmers got the best price for their milk ever in the history. This was because of an international boom resulting in large dairy exports from India. This has proven two facts of the dairy sector. One, dairy exports on a large scale benefit milk producers but do not hurt the consumers. Two, the dairy sector is moving towards creating temporary market surplus of SMP and other dairy products. The government has admitted this fact with the Central Department of Dairy Development having granted Rs 176 crore to the cooperative dairies, during October 2015, to reprocess the SMP nearing expiry. While the cooperatives would get relief, the sector would accumulate more surplus of SMP and lead to fall in prices that would ultimately hurt the dairy farmers. It would be better if the Budget 2016 provides the same amount of subsidy to revive exports.
Concern arises because there is no mechanism in place to support the dairy sector. Most advanced dairy countries have support programmes whenever there are milk surpluses. The annual subsidies paid to milk producers in the United States are estimated US$15 billion in the European Union US$11 billion and in Canada US$6 billion. Just for these three nations put together the subsidies would total to US$32 billion. Compare it to the value of 141 million tonne of raw milk produced during 2014-15 in India is estimated at US$65 billion. In India all agri-produce is supported through “minimum support price” but milk is left out. Budget 2016 must pay attention to this issue. Agreed, it may be difficult to declare and operate and MSP mechanism for milk, the market intervention through creation of a buffer stock of SMP and butter should not be very difficult to operate. Considering that occurrence of surplus might be a regular phenomenon in the future, government should consider appointing the National Dairy Development Board (NDDB) as an intervention agency to create a stock of 50,000 to 60,000 tons of SMP and 8,000 to 10,000 tonne of white butter.
Another way of liquidating surplus SMP is to purchase surplus milk and powders from dairy plants and channelise it to the ‘Mid-day Meal Scheme.’ Some state governments have already taken this initiative.
Exemption of Excise Duty on Dairy Equipment and Machinery
Milk is highly perishable. Therefore processing, packaging and conversion of milk to long life products is more a necessity than a luxury. Processed milk products e.g., milk powders, butter, ghee, and cheese extend the life of milk that would otherwise perish. This also makes the setting up of facilities for milk processing and manufacture of dairy products highly capital-intensive. Similarly, handling of dairy products requires highly reliable and unbreakable cold chain that requires heavy capital investment in the network for sales and distribution. Therefore all machinery and equipment used by dairy industry should be exempt from payment of Excise duty (IHS Code - 84341000, 84342000, 84349010 and 84349020). Some examples are as follows:
Bulk Milk Cooler (Village level milk chilling plant); Milk Chiller; Road milk tanker; Milk tanker weigh scale; Milk weigh scale and bowl; Milk cans; Milk dump tank
Milk Pasteuriser; UHT milk Processing Unit; Milk clarifier; Milk transfer pump; Cream separator; Bacteria Removing Centrifuge (Milk Separator); Cream Pasteuriser; Cream Storage tank; CIP System; Milk Silo; Pasteurised milk Storage Tanks; Pasteurised milk Transfer Pump
Milk & Milk Product Analyser
Milk packing-pouch form, fill & seal machine; Asceptic milk packaging machine; Milk Vending Machine; Milk Silo with Agitator; Bottling plant-bottle washer crate Washer
Cream Transfer Pump; Ghee Kettle; Ghee Settling Tank; Ghee Packing Machine; Ghee Clarifier; Cream tank without agitator
Butter churn without agitator; Butter packing machine; positive Displacement Pump
Separator; Evaporator; Dryer; Packing Machine
Standardisation Tank; Transfer Pump; Culture Tank; Transfer Pump; Packaging Machine
Multiple Effect Evaporator; Spray Dryer; Powder Conveying System; Powder Milk Silo; Fluid Bed Dryer; High Pressure Pump; Powder Packing Machine
Aluminium Milk can with lid in 5 L to 50L Capacities; Aluminium milk can spares; Stainless Steel Milk cans with lid in 5 L to 50 L capacities; S.S Milk can spares; Stainless Steel Milk testing equipment for village level societies
Reduction in Taxes on Milk Products
The Central Sales Tax presently charged at 2 per cent on dairy products should be reduced to 0 per cent. Some of the dairy plants are manufacturing low cholesterol ghee which is a healthy option for cooking medium and milk fat. The technology for manufacturing this product is developed by National Dairy Research Institute, Karnal, and licensed by National Research Development Corporation. At present, low cholesterol ghee is similar to regular ghee. The taxes are varying from state to state and are in the range of 5 to 12.5%. It is suggested that the low cholesterol ghee should be exempt from tax to promote healthy and innovative product in the national health campaign and to be affordable for the consumers of ghee as such. At present VAT is charged at 5 per cent on skim milk powder and chakka (basic raw material for shrikhand) and at 12.5 per cent on milk products like table butter, cream, etc. It has been suggested that all milk products should be charged at a uniform rate of 5 per cent.
There is no tax on milk but VAT is charged on UHT milk. This milk is used in the remote areas like hilly areas, where availability of milk is poor and refrigeration facilities are not available, as this is the only method to store milk for a longer period. Due to its longer shelf life, the UHT milk is best catered to the requirement of defence forces on the border areas and the people living in remote areas. In order to provide relief to these users it is requested that VAT on UHT milk should be withdrawn.
