The Indian Dairy Association (IDA) extends its heartfelt gratitude to the Government of India, the GST Council, the Ministry of Finance, and the Central Board of Indirect Taxes and Customs (CBIC) for addressing the longstanding issue of GST classification for milk cans. The recent Notification No. 02/2024-Central Tax (Rate) dated July 12, 2024, brings much-needed clarity to the industry by explicitly mentioning "Milk cans made of Iron, Steel, or Aluminium" under HSN codes 7310, 7323, 7612, or 7615. This decision aligns with our industry's viewpoint and the previous judicial pronouncements, including the Supreme Court judgment in the case of Krishna Industries.

While the GST rate remains unchanged, this clarification ensures uniform classification across the country, reducing confusion and potential disputes. We commend the government bodies for this pro-industry decision, which will contribute significantly to the smooth functioning of India's crucial dairy sector.

The IDA, along with industry representatives, has been actively pursuing this matter. A delegation, including various milk can manufacturers, met with the GST Council to address the milk can HSN code issue. We are pleased to report that this matter has now been successfully concluded with this clarification.

Hon’ble Union Finance Minister Ms. Nirmala Sitharaman presented the national budget on July 23, 2024. The Indian dairy industry, valued at Rs.14 lakh crore and contributing 5% to the GDP, had high expectations for substantial government support. While the Finance Minister announced a commendable provision of Rs.1.52 lakh crore for agriculture and allied sectors, the allocation for dairy remains underwhelming at Rs.4,521 crores, despite its significant role in the food sector. This stark discrepancy highlights the need for a more balanced distribution of funds to support the growth and sustainability of the dairy industry, which plays a vital role in India's economy and rural livelihood.

The Indian dairy sector is currently grappling with an unexpected and significant surplus problem, particularly in the realm of skimmed milk powder (SMP). As of the start of the production year, which spans from July to June, cooperative and private dairies are holding an estimated 3-3.25 lakh tonnes of SMP stocks. This situation demands urgent attention and strategic intervention to prevent detrimental impacts on both farmers and consumers.

In a typical production year, Indian dairies generate between 5.5 to 6 lakh tonnes of SMP. Of this, a substantial portion-approximately 4 lakh tonnes-is used during the lean season for recombining. The remaining 1.5-2 lakh tonnes find their way into various applications, including the manufacture of ice cream, biscuits, chocolates, sweetmeats, baby formula, and other food and industrial products.

The year 2023-24 has been characterized by abundant and continuous milk supplies, with virtually no lean period-a stark contrast to the severe shortages experienced in 2022-23. This previous shortfall saw unprecedented prices in Maharashtra, where dairies fetched record rates of Rs. 430-435 per kg for yellow (cow) butter and Rs. 315-320 for SMP during FebruaryMarch 2023. Farmers were incentivized with prices of Rs. 37-38 per litre for cow milk containing 3.5% fat and 8.5% solids-not-fat (SNF), leading to enhanced production through improved feeding practices and the introduction of new animals.

The augmented milk availability, including during the typically lean summer months of April to June, has led to an under consumption of SMP for reconstitution purposes, with only about 2.5 lakh tonnes being utilized. Consequently, instead of starting July with the usual stock of 1.5-1.75 lakh tonnes, dairies are now burdened with 3-3.25 lakh tonnes of SMP. With the new flush season underway and expected to peak post-September-when buffaloes too contribute significantly to milk supplies-the surplus issue is likely to exacerbate.

It is imperative that we recognize the critical need for government intervention akin to the buffer stocking mechanisms employed for other crops and commodities, including onions. Historically, India maintained buffer stocks of SMP until the 1990s, a practice that safeguarded both farmers and consumers from market volatility. It is high time, we revisit and reinstate such measures.

I urge the Government of India to establish a buffer stock of SMP in the range of 50,000 to 100,000 tonnes. Such a move would involve the government purchasing SMP from dairies and also covering the costs associated with its storage. This intervention would stabilize prices for producers in the present, ensuring that farmers receive remunerative prices for their milk. Without such support, farmers might reduce their feed inputs, adversely affecting milk production and potentially leading to inflationary pressures in the dairy market in the following year.

A buffer stock would not only support producers now but also act as a protective measure against future inflation, benefiting consumers in the long run. By ensuring price stability and supply continuity, we can create a more resilient dairy sector capable of withstanding fluctuations in production and demand.

As the President of the Indian Dairy Association, I am writing to emphasize the critical need for a reduction in the Goods and Services Tax (GST) on ghee from the current 12% to 5%. This adjustment is essential not only for the prosperity of our farmers but also for the overall health of our consumers and the sustainability of the dairy industry.

Benefits to Farmers: Ghee production is a cornerstone of the dairy industry, which is predominantly supported by small holder farmers. A lower GST on ghee would directly increase their profitability, enabling better financial returns and promoting sustainable agricultural practices. Currently, the high GST rate reduces their income, creating a financial strain. By alleviating this burden, we can support millions of dairy farmers, fostering rural development and agricultural sustainability.

Consumer Advantages: Ghee, a staple in Indian households, is deeply embedded in our culinary heritage. However, the current GST rate makes it relatively expensive, limiting accessibility for many consumers. Reducing the GST to 5% would make ghee more affordable, ensuring this nutritious product reaches a broader segment of the population. This would not only enhance consumer health but also increase demand, ultimately benefiting farmers through higher sales.

Industry Impact: The dairy industry, a significant contributor to the Indian economy, is hampered by the high GST rate on ghee. A reduction would stimulate industry growth, encourage investment, and foster innovation. Moreover, a lower GST would help formalize the ghee market, addressing issues of adulteration and ensuring consumers have access to pure, high-quality ghee.

Discrepancy in GST Rates: There is a notable discrepancy between GST rates on different cooking mediums, with most at 5% while ghee is at 12%. Aligning the GST on ghee with other cooking mediums promotes fairness and equity in taxation. Encouraging the use of healthier fats like ghee over vegetable oils aligns with the government's goals of promoting public health.

In conclusion, reducing the GST on ghee from 12% to 5% is a win-win for farmers, consumers, and the industry. It supports agricultural sustainability, improves public health, and stimulates economic growth. We urge the Government of India to reconsider the GST rate on ghee to foster a healthier and more prosperous nation.

At the First IDF Regional Dairy Conference held in Kochi from June 26-28, I had the privilege of discussing the pivotal role of smallholders in India's dairy success. My session, titled "Farmer-Centric Interventions in Milk Aggregation and Ensuring Transparency," emphasized how India's Small Holders Milk Collection System has propelled us to global leadership in dairy.

The backbone of our dairy industry is the millions of small holder farmers whose collective efforts ensure a steady supply of high-quality milk. By focusing on transparency and farmer-centric interventions, we have not only boosted milk production but also ensured fair prices and sustainability. This model, which integrates advanced technologies and cooperative principles, can serve as a blueprint for other nations aiming to strengthen their dairy sectors.

Empowering our farmers remains the cornerstone of our strategy, ensuring their prosperity and the continued growth of the Indian dairy industry.