India loves its milk, making it an essential part of the average household's diet. But as Indians feel the pinch of the 'milk inflation', four in every 10 households are directly affected by the multiple increases in milk prices over the last 12 months.
According to a survey by LocalCircles India, "many Indian households have simply given up on purchasing milk."
However, the bad news is that even as this food group has become pricier, there is no relief in sight yet. In fact, just last week, Reserve Bank of India Governor Shaktikanta Das said that milk prices are expected to remain high.
"Milk prices are likely to remain firm going into the summer season due to tight demand-supply balance and fodder cost pressures."Shaktikanta Das
Moreover, the Centre has reportedly been considering the import of butter and ghee. The last time India imported major dairy products was in 2011.
So, is the world's largest milk producer facing a demand-supply crisis? How long will prices continue to remain high? We explain.
Explained: Why Are Milk Prices on the Rise in India?
1. Some Look at the Figures
To put things into perspective, it is crucial to delve into some numbers. According to data released by the Department of Consumer Affairs, as of Monday, 10 April, a litre of milk costs Rs 56.91 on an average. The price of milk on the same date last year was Rs 50. 56 per litre.
Average price is based on the average of all areas (340 market centres) that the price monitoring division reviews. According to Reuters, milk prices have gone up by more than 15 percent over the past year. This is the fastest rise in a decade.
The last time there was such a hike in milk prices was between April 2013 and November 2014.
RS Sodhi, president of the Indian Dairy Association and former managing director of Amul India, told The Quint that over the past few months, milk prices have been hiked by 14 percent to 15 percent – much more than inflation.
"But if you look at the past three years, it is less than 7 percent," he said.
Big players such as Amul and Mother Dairy have increased milk prices several times over the last one year. Since 2021, till February of this year, Amul had had its fifth hike.
Among other reasons they have cited are higher fodder cost, a surge in demand, and impact due to reports of lumpy skin disease.
Expand2. Impact of COVID Lockdowns
One among the multiple factors responsible for the hike in milk prices, as Sodhi pointed out, has been the COVID pandemic.
Following the COVID-induced lockdown in 2020, demand for milk contracted as hotels, restaurants, sweetshops shut down and weddings and other public functions got cancelled or curtailed.
As a result of this, the prices of milk, cheese, butter, and skimmed milk powder also dipped.
"As a result they were left with less money in their hands – and it was not sufficient for the upkeep of the cattle. There were not enough healthy cattle, impacting the overall milk output," he added.
Expand3. Lumpy Disease Effect
Milk production has also been hit due to the spread of lumpy skin disease among the livestock population.
Major milk producing states, including Punjab, Gujarat, Uttar Pradesh, Maharashtra, Madhya Pradesh, and Uttarakhand, were affected by this disease. It led to the deaths of over 1,00,000 cattle.
Animal Husbandry and Dairy Secretary Rajesh Kumar Singh last week said that the country's milk output has remained stagnant due to the impact of lumpy skin disease.
"The impact of lumpy skin disease on cattle can be felt to the extent that total milk production is somewhat stagnant," he explained.
Singh added that normally, milk production has been growing at 6 percent annually. "However, this year, it will be either stagnant or grow at 1-2 percent," he said.
Expand4. Fodder Has Become Dearer
The other reason behind the price hike is the increase in fodder prices and cattle itself.
Feed and fodder cost has a 70-75 percent share in milk production. The cost has shot up 20-25 percent due to higher exports of fodder crops such as wheat, barley, and maize amid a supply dip in the global market due to Russia's invasion of Ukraine.
The annual rate of fodder inflation based on the all-India Wholesale Price Index increased to 24 percent in February 2023 from 28.66 percent in December 2022. In January 2022, fodder inflation was recorded at 7.14 percent, and since then, it has been rising steadily.
Pushan Sharma, director of research at Crisil Market Intelligence and Analytics, told The Quint that the expected El Nino drought conditions in financial year 2024 could bring down Kharif crop production, thereby limiting fodder availability and affecting milk production and yields.
"Thus, milk procurement prices are expected to increase in FY24 as well which would trickle down to milk retail prices," he added.
Sodhi said there will be a price stability only by October-November, and added that a reduction in milk prices is not expected until Diwali.
Expand
Some Look at the Figures
To put things into perspective, it is crucial to delve into some numbers. According to data released by the Department of Consumer Affairs, as of Monday, 10 April, a litre of milk costs Rs 56.91 on an average. The price of milk on the same date last year was Rs 50. 56 per litre.
Average price is based on the average of all areas (340 market centres) that the price monitoring division reviews. According to Reuters, milk prices have gone up by more than 15 percent over the past year. This is the fastest rise in a decade.
The last time there was such a hike in milk prices was between April 2013 and November 2014.
RS Sodhi, president of the Indian Dairy Association and former managing director of Amul India, told The Quint that over the past few months, milk prices have been hiked by 14 percent to 15 percent – much more than inflation.
"But if you look at the past three years, it is less than 7 percent," he said.
Big players such as Amul and Mother Dairy have increased milk prices several times over the last one year. Since 2021, till February of this year, Amul had had its fifth hike.
Among other reasons they have cited are higher fodder cost, a surge in demand, and impact due to reports of lumpy skin disease.
Impact of COVID Lockdowns
One among the multiple factors responsible for the hike in milk prices, as Sodhi pointed out, has been the COVID pandemic.
Following the COVID-induced lockdown in 2020, demand for milk contracted as hotels, restaurants, sweetshops shut down and weddings and other public functions got cancelled or curtailed.
As a result of this, the prices of milk, cheese, butter, and skimmed milk powder also dipped.
"As a result they were left with less money in their hands – and it was not sufficient for the upkeep of the cattle. There were not enough healthy cattle, impacting the overall milk output," he added.
Lumpy Disease Effect
Milk production has also been hit due to the spread of lumpy skin disease among the livestock population.
Major milk producing states, including Punjab, Gujarat, Uttar Pradesh, Maharashtra, Madhya Pradesh, and Uttarakhand, were affected by this disease. It led to the deaths of over 1,00,000 cattle.
Animal Husbandry and Dairy Secretary Rajesh Kumar Singh last week said that the country's milk output has remained stagnant due to the impact of lumpy skin disease.
"The impact of lumpy skin disease on cattle can be felt to the extent that total milk production is somewhat stagnant," he explained.
Singh added that normally, milk production has been growing at 6 percent annually. "However, this year, it will be either stagnant or grow at 1-2 percent," he said.
Fodder Has Become Dearer
The other reason behind the price hike is the increase in fodder prices and cattle itself.
Feed and fodder cost has a 70-75 percent share in milk production. The cost has shot up 20-25 percent due to higher exports of fodder crops such as wheat, barley, and maize amid a supply dip in the global market due to Russia's invasion of Ukraine.
The annual rate of fodder inflation based on the all-India Wholesale Price Index increased to 24 percent in February 2023 from 28.66 percent in December 2022. In January 2022, fodder inflation was recorded at 7.14 percent, and since then, it has been rising steadily.
Pushan Sharma, director of research at Crisil Market Intelligence and Analytics, told The Quint that the expected El Nino drought conditions in financial year 2024 could bring down Kharif crop production, thereby limiting fodder availability and affecting milk production and yields.
"Thus, milk procurement prices are expected to increase in FY24 as well which would trickle down to milk retail prices," he added.
Sodhi said there will be a price stability only by October-November, and added that a reduction in milk prices is not expected until Diwali.