The Indian dairy sector is currently navigating a phase in which global developments are directly influencing domestic realities. What we are witnessing today is not an isolated increase in input costs, but a cascading effect of geopolitical disruptions translating into operational challenges across the dairy value chain. In such a scenario, the sector's ability to respond with agility – supported by timely policy intervention – becomes critical.

The ongoing geopolitical tensions in West Asia, particularly the emerging conflict involving the United States and Iran, have triggered volatility in global energy markets. Rising crude oil prices are not just a macroeconomic concern-they are now feeding directly into the cost structures of industries dependent on petrochemicals, fuel, and logistics. The dairy sector, with its deep linkages to all three, is experiencing this impact in a very tangible manner.

However, timely intervention by the Government of India –particularly through calibrated reductions in excise duties on fuel – has played a crucial role in cushioning the impact of rising global crude prices. This has helped maintain relative stability in domestic fuel prices, thereby preventing a sharper escalation in transportation, packaging, and processing costs. The dairy sector – farmers, processors, and institutions such as the Indian Dairy Association – acknowledges and appreciates this proactive measure. This intervention has also contributed to maintaining relative stability in milk prices across many regions, at a time when global cost pressures could have otherwise led to significant volatility.

One of the most immediate outcomes of this global disruption has been the sharp escalation in packaging costs. Products such as milk packaging polyfilm, laminates used for butter and milk powder, PET and HDPE containers, ice cream cones, and even plastic crates used for milk handling have all witnessed cost increases in the range of 20 to 30 percent in recent months. This has increased the cost of production by around 2-3%. These increases are closely tied to higher petrochemical prices and energy costs, both of which are directly influenced by global crude oil trends.

This is a critical development for the dairy sector. Packaging is not a peripheral cost – it is integral to the functioning of the entire value chain. Milk, being highly perishable, depends on continuous packaging availability for procurement, storage, transportation, and retail distribution. Any disruption in packaging supply or sharp increase in its cost immediately affects processors, distributors, and ultimately farmers.

What makes the current situation particularly significant is that the cost escalation is not limited to single component – it is systemic. From raw material production to the manufacturing of packaging inputs, and from transportation to cold chain operations, energy costs are influencing every stage. This has effectively created a cost-push environment across the dairy industry.

Recognizing the seriousness of these developments, the Government, through the Department of Animal Husbandry and Dairying (DoAHD), initiated timely consultations to assess the impact of the West Asia situation on the sector. The Indian Dairy Association actively participated in these discussions, with me personally engaging with policymakers to present a comprehensive view of the challenges faced by the industry.

A key outcome of this engagement has been a strong and coordinated policy response. The Government has formally recognized packaging material availability as a critical issue for the dairy sector and has taken steps to ensure continuity of supply. Industry stakeholders were requested to provide detailed data on requirements for essential packaging materials – including polyfilm, laminates, containers, and logistics-related materials-so that appropriate interventions could be designed.

More importantly, the Government has taken proactive steps to address the root cause of the issue. Efforts are underway to facilitate priority allocation of raw materials, particularly polymers and petrochemicals, and to ensure uninterrupted fuel supply (LPG/PNG/diesel) for packaging manufacturers. This is a significant development, as it directly targets the supply constraints that are driving cost escalation.

This coordinated response highlights an important shift in how the dairy sector is being viewed at the policy level.

"Dairy is no longer just an agricultural activity – it is a critical food and manufacturing system that requires integrated policy support."

At the domestic market level, these cost pressures are beginning to reflect in pricing behaviour. In recent months, several regions – particularly in western and southern India-have witnessed moderate increases in both procurement and retail milk prices. These increases are not demand-driven alone; they are increasingly influenced by rising input costs, including feed, energy, logistics, and now packaging.

Another important development that requires careful consideration is the recent judgment of the Delhi High Court concerning the regulatory scope of the Food Safety and Standards Authority of India (FSSAI) over animal feed. The Hon'ble Court has clarified that under the Food Safety and Standards Act, 2006, FSSAI's jurisdiction is limited to food meant for human consumption and does not extend to animal feed . While this brings legal clarity and addresses concerns regarding regulatory overreach, it also raises a deeper and more fundamental question for the dairy sector: how do we ensure food safety when a critical upstream input – animal feed – directly impacts the quality of milk consumed by humans?

This concern is particularly relevant in the context of aflatoxin contamination, which remains one of the most serious food safety risks in dairy. It is well established that aflatoxin M1 found in milk is directly derived from aflatoxin B1 present in contaminated cattle feed. Evidence from national surveys has shown that aflatoxin contamination is not an isolated issue but a systemic concern affecting a measurable proportion of milk samples. It was precisely for this reason that the industry had earlier supported the move toward bringing animal feed under a more structured regulatory framework, recognizing that "milk safety begins with feed safety."

While we fully respect the judgment of the Hon'ble Court, it is equally important to ensure that this does not create a regulatory vacuum in addressing contaminants that enter the human food chain through animal feed. The responsibility for managing such risks must now be clearly defined and effectively implemented-whether through BIS standards, strengthened state-level enforcement, or a coordinated multi-agency framework.

Ensuring robust monitoring of aflatoxin levels in feed ingredients, compounded feed, and silage must therefore remain a national priority. As a sector that directly impacts both nutrition and public health, dairy industry cannot afford gaps in upstream quality control. A balanced, science-based, and clearly accountable regulatory mechanism is essential to safeguard both farmers and consumers.

Looking ahead, the priorities for the sector are becoming increasingly clear. First, managing input cost volatility-particularly in energy, packaging, and feed – will be essential for sustaining farmer incomes and industry viability. Second, strengthening supply chain resilience through better coordination with policymakers and allied industries will be critical. Third, accelerating the transition toward value-added and high-quality dairy products will determine long-term competitiveness.

The current phase is one of transition. With the right balance of policy support, industry action, and technological progress, it can also become a phase of strengthening – laying the foundation for a more efficient, resilient, and future-ready dairy ecosystem.