President's Desk

Dairy Dynamics: Opportunities and Challenges

The world dairy scenario presents a dynamic landscape with both opportunities and challenges that shape the industry's trajectory.

The Indian dairy industry stands as a cornerstone of the nation's agrarian economy and cultural fabric, playing a pivotal role in livelihoods, nutrition, and socioeconomic development. With a rich history dating back centuries, dairy farming in India has evolved from traditional practices to a modern, technology-driven sector. Boasting the world's highest milk production, Indian dairy sector's growth not only addresses nutritional needs but also empowers rural communities and supports the livelihoods of millions. In this exploration, we delve into the multifaceted realm of the Indian dairy scenario, the global and domestic trends as well as look at its contemporary challenges and innovations.

As per the previous projections, global dairy prices have continued to fall amid softening demand from China. In the recent Global Dairy Trade auction held on 15/sup> Aug, Dairy prices crashed to their lowest levels in nearly five years. From a macroeconomic perspective, there isn't any indication that supply is easing anytime soon, and with less confidence in Chinese buying power, there's very little to indicate a lift in commodity prices soon.

Contrary to this, India's organized dairy industry is set for a strong revival as strong demand for value-added products and stable consumption of liquid milk expected to lead to a 14-16% revenue growth for the sector this fiscal year. The last year saw major disruptions in raw milk supply that led to multiple hikes in retail milk prices. Milk procurement prices had risen 14 per cent on account of several challenges such as significant increase in fodder cost, impact on yields due to lumpy skin disease etc. It is anticipated that the price hikes will be much less intense in the current financial year. This will be primarily because of factors like improvement in raw milk supply on better availability of fodder and timely vaccination. Continuing the previous trends, this year also, the growth will be led by Value Added Products, with demand from both retail and institutional segments expected to remain strong.

One of the most pertinent issues being faced by the Indian dairy industry is the imposition of GST on value added product like Ghee and Butter. Both cooperatives and private dairies have consistently raised this issue with the government and made numerous representations on this matter.

The ghee and butter market in India is valued at approximately Rs.1.25 trillion, with the organized sector accounting for Rs. 30,000 crore. If ghee is placed under the luxury product category, under a 12% GST slab, it pinches pockets of consumers as well as farmers. India is meeting 70% of its edible oil consumption by importing palm oil, which is placed under a 5% GST slab. A 12% GST translates to Rs. 70 per kg, and to make a kg of ghee, it requires 15-17 litres of milk. Where farmers could get Rs. 4-5 more on milk price, they end up spending more because of the 12% GST on ghee. The GST on ghee and butter should be equal to cooking oil, which is 5%, so that farmers get the right price for their produce.

Lowering GST on ghee would not only benefit farmers but also help arrest the upward trend in inflation. A reduction in ghee prices would also help curb adulteration and allow farmers to reduce retail prices for milk.

Another notable trend in the global dairy industry has been the rise of plant-based dairy alternatives. Leveraging on increasing consumer inquisitiveness, many products made from sources such as soy, almond, coconut, and oats have gained popularity. This trend has led to increased competition and innovation within the dairy sector. The ongoing debate is influenced by various factors, including nutritional content, environmental impact, ethical considerations, and individual health needs. Historical and scientific evidence have made it clearly evident that, in terms of nutritional values and health benefits, dairy based milk and milk Products have unparalleled advantage over the alternatives.

While many alternatives of Dairy based milk are fortified to match the nutritional content of cow's milk, some may still fall short in terms of protein content and other nutrients. Cow's milk is a natural source of complete protein and various vitamins and minerals like calcium, vitamin B12, and riboflavin. The industry giants are playing on the consumer misconception of plant-based beverages being healthier as compared to pure dairy products and are even charging a premium for these substitutes.

The onus then lies on the dairy industry giants - private as well as co-operative players - to appeal to the conventional and traditional instinct of the consumers. It is now crucial for the dairy industry to strategically work with the stakeholders and policy makers to device strategies to popularize the proven benefits of dairy products.

Products like Ghee and Milk have numerous health benefits and edges over any alternate sources of fat and protein. Milk protein, found in dairy products like milk, yogurt, and cheese, is considered a complete protein source because it contains all the essential amino acids required by the body which is crucial for muscle protein synthesis and repair.

Most of the alternatives of dairy products aim for short term gains, by unfairly criticizing or maligning traditional dairy products through misinformation or exaggerated claims rather than focusing on the merits of one's own product. In some cases, they are selectively presenting information to make alternative products appear superior to dairy products without a fair comparison.

Mostly it is argued that the alternatives of dairy based products are always more sustainable than dairy products. The sustainability of these alternatives versus dairy is a complex and debatable topic, and it's important to consider various factors before reaching to a conclusion that the plant-based substitutes are inherently more sustainable.

The world dairy scenario presents a mix of opportunities and challenges that require proactive industry responses. By embracing innovation, sustainability, and consumer preferences, the dairy industry can navigate challenges while capitalizing on the growing demand for its products. Through the integration of technology and the adoption of sustainable practices, industry can transform its landscape, ensuring a nutritious and responsible supply of dairy products to meet the needs of a changing world.