Keep Dairy Out of RCEP Negotiations

“ Dairy industry representatives and the IDA have been pleading with the Ministry of Commerce against the move by presenting some hard facts. IDA has submitted a memorandum against this move to the Prime Minister of India, Shri Narendra Modi. Niti Ayog in their working group Report (February 2018) have shown the demand projections for milk in 2033 as 291 Million Metric Tones (MMT), against which India will produce 330 MMT milk. Thus, India will be a surplus nation in milk and milk products and the question of imports shall not arise. NDDB and International organizations such as FAO have also projected a similar milk production trend in India. The signing of the RCEP will be a blow to the dairy farmers as it will lead to reduction in the milk procurement prices against the cheap imported milk powder from the RCEP countries.

The small and marginal dairy farmers supplying milk to organized dairies in both the cooperative and private sectors in India have expressed reservations over the inclusion of dairy products in the Regional Comprehensive Economic Partnership (RCEP) is a proposed Agreement, to be signed with 10 ASEAN countries and six other countries having business collaboration with them. Japan, South Korea, New Zealand and Australia are negotiating very hard with India to reduce duty on dairy products so that they can get an access to India – the world’s largest market for dairy products. It is ironical that the officials handling Regional Trade under the Ministry of Commerce have been supporting the proposal for reducing tariffs on milk and milk products by wrongly projecting huge shortage of milk in India in coming 10 years. They are also showing shortages of fodders, feeds and water needed for rearing the animals.

Dairy industry representatives and the IDA have been pleading with the Ministry of Commerce against the move by presenting some hard facts. IDA has submitted a memorandum against this move to the Prime Minister of India, Shri Narendra Modi. Niti Ayog in their working group Report (February 2018) have shown the demand projections for milk in 2033 as 291 Million Metric Tones (MMT), against which India will produce 330 MMT milk. Thus, India will be a surplus nation in milk and milk products and the question of imports shall not arise. NDDB and International organizations such as FAO have also projected a similar milk production trend in India. Estimates suggest that stipulated increase in crop production will ensure availability of additional roughages and agro by-products for milch animals in 2033. Milk surplus countries like New Zealand and Australia are trying to push their milk products into India at reduced import duties.

Dairy farmers apprehend that import of cheaper milk and dairy products under FTA would adversely affect the livelihood of more than 10 crores of farming families in India as the importers and traders will dominate the market. New Zealand produces 24 MMT of milk and exports 93 per cent of it. About 10000 New Zealand farmers are engaged in mass production of milk. Same holds true for Australia where 6000 farmers produce 10 MMT milk and they export more than 60 per cent of the total milk produced to countries deficient in milk. On the contrary, milk is the largest agricultural crop of India producing nearly 180 MMT per annum. Indian consumers get milk at the cheapest rates in the world. Our milk producers get more than 80 to 85 per cent of consumer rupees as against 30-40 per cent paid in other RCEP countries.

The signing of the RCEP will be a blow to the dairy farmers as it will lead to reduction in the milk procurement prices against the cheap imported milk powder from the RCEP countries. Only 5 per cent of New Zealand milk production that may be allowed to enter India works out to about 30 per cent of India's production. Knowledgeable sources indicate that Government of India is weighing the option of whether to insist on keeping dairying out of the negotiations for the time being to protect the interest of the farmers. Not only dairy sector but also the textiles, metal and apparels and MSMEs have turned vocal against the pact fearing a flood of Chinese goods to India.

Notwithstanding the competitiveness of the domestic industry and self reliance and need for expanding international trade relations for securing a healthy future, farmers interest should remain foremost as far as any pacts or negotiations are concerned. There are indications that India could look at staggering the removal of tariff barriers on dairy and agro products. If imports are allowed, the progress graph of the Governmental schemes at the centre and state like doubling farmers' income will be adversely affected. In the long run, India will be pushed to become dependent on imports for dairy products. India had a trade deficit with 11 of the 16 RCEP negotiating countries in 2018-19. The trade deficit was to the tune of US$ 104 billion in the previous year and more than half of this was with China.

At present India produces about 180 MMT of milk per annum as against 168 MMT in EU countries and 95 MMT in the United States of America. India in value terms contributes nearly 26 per cent share in total agricultural production which is amongst the highest in the world. Milk is produced by masses in India and not by mass production as in New Zealand, Australia and EU countries. Milk, as the largest agricultural crop of India, contributes to ₹7 lakh crores per year.

Dairying provides a sustainable livelihood to 70 per cent of the rural households, helps in employment generation and poverty alleviation and ensures nutritional security. In recent years, maximum growth in rural India has come from the livestock sector.

We have about 300 million bovine population which is the largest in the world and 10 crore rural household depend on dairying. It may be noted that 77 percent of India’s total milk production is contributed by small, marginal and landless farmers. Whereas, the world milk production of 849 MMT has witnessed a 2 per cent CAGR, India’s milk production has registered a growth of 4.5 CAGR which has been growing at this rate during the last 20 years.

Dairying in India is considered to play an important instrument for doubling the farmer’s income. The proposed Free Trade Agreement (FTA) between the 10 member states of the Association of South East Asian Nations (ASEAN) and their six FTA partners — China, India, Japan, New Zealand, South Korea and Australia with entry of imported milk powder will play deterrent to the growth of dairying in India.

The meeting of the Trade Ministers in Bangkok INDIAN DAIRYMAN NOVEMBER 2019 6 FROM THE President’s DESK Major Exporters Major Importers failed to break the logjam in parleys. India has demanded that the base year for tariff cuts under RCEP Free trade agreement should be advanced from 2014 to 2019, since in the last five years period, tariffs were increased on many thousand products. To protect interest of the domestic industry, India raised the issue of spike in imports from China due to free trade pact. Another contagious issue that was raised by India was regarding an automatic trigger mechanism of import duties in case of spike in foreign shipments from RCEP nations. India also demanded that if any RCEP member lowers duties for a non-RCEP nations under the trade pact, similar benefits should be automatically offered to the RCEP countries.

India has not agreed to provide most favoured nation (MFN) status to all the partners in so far as investments or service concessions are concerned as this status should be settled bilaterally.

The issues which could not be settled in the second round of negotiations will be discussed by the Heads of States during the third RCEP Leadership Summit scheduled to be held next month in Bangkok. In the meantime, Swadeshi Jagran Manch is holding a nationwide protest against the proposed RCEP highlighting the adverse impacts of this deal on the economy of Indian farmers.

There is too much domestic pressure on the Government to exit RCEP. Safeguards remain a crucial part of India's negotiations as industries have expressed fears that subsidized dairy products from New Zealand and Australia may flood the Indian market. Industry sources believe that the opportunity costs for not joining RCEP might be higher than the costs of joining.

Milk meets the requirement of animal protein and fat of large proportion of our population that is mostly vegetarian. It is a superior food with income elasticity of demand greater than one. This means that as incomes rise, demand for milk goes up showing upward mobility. With sustained production increases in milk, the country has not only become self sufficient but marginally surplus in wide range of milk and milk products.

Under this situation, if India allows members of RCEP nations, greater access to its markets through phased duty reduction or more liberal tariff rate quotas, it will adversely influence not only the production of milk but also diminish the share of profits earned by the milk producers of India. This will also result in approximately 50 million rural people losing their jobs as they will be forced to quit dairying because of lower or no profits earned. Women engaged in dairying in rural India will get greatly hurt.

Access to Indian market will obviously benefit exporting dairy countries like New Zealand and Australia as these countries are eyeing on the Indian markets for selling commodities like milk powder, UHT milk, butter fat and to some extent cheese and other dairy products. We should not accept milk produced by cattle fed on blood meal, bone meal and other non-vegetarian stuffs. Central Minister of Animal Husbandry, Dairying and Fisheries, Shri Giriraj Singh has asked the Commerce Minister to keep dairy out of RCEP trade deal. The Indian Dairy Association at its Central Executive Committee Meeting held on 19 October, 2019, have also opposed the move of the Commerce Ministry to reduce import duties on milk and milk products and to allow unjustified flow of milk to India. Many state Governments have also expressed apprehensions in opening up of imports of dairy products to India.